Kiel Institute Research Seminar by Finn Ole Semrau on Firms’ Global Value Chain Positioning and Clean Production

How to improve sustainability in global value chains (GVCs) is a key question that has been intensively addressed not only in coordinated multinational efforts like G20 but also by national policy engagement like Germany’s Supply Chain Law. Many firms and actors have been involved in GVCs to produce goods and services for the world demand. They have been responsible for specific tasks along the GVCs. Due to firms’ different GVC positions, they may be confronted with challenges to different extents while being required to improve, for example, their environmental performance to help achieve higher environmental sustainability in GVCs.

Against this background, Finn Ole Semrau (Kiel Institute and KCG) recently studies the relation between a firm’s GVC participation and its environmental performance by shedding light on the role of stakeholders’ demand in foreign markets. Using granular data of Indian manufacturing firms for the analysis, he finds that firms in downstream GVC position – being closer to final consumption – produce in a relatively cleaner manner compared to firms in upstream GVC position. More information about his key research findings will be presented at his seminar titled “On the Drivers of Clean Production: Firms’ Global Value Chain Positioning” on January 18 (Tuesday), 2022. The seminar is co-organised by the Kiel Institute for the World Economy and KCG.

Abstract: Industries occupying upstream positions in global value chains emit proportionately more CO2. But firms are heterogeneous even in narrowly defined industries. I empirically investigate if the negative relation between upstreamness and clean production, the latter measured as direct energy consumption and CO2 emissions in absolute and relative terms, holds at the firm-level. Using granular data of Indian manufacturing firms, I confirm the industry pattern in different specifications and the use of a 2-SLS instrumental variable approach – using advertisement expenditures over sales among firms producing a similar main product as an instrument. Notably, exposure to stringent market-related environmental policy in export destination markets negatively moderates the relation between upstreamness and dirty production, linking to the importance of regulation-push, demand-pull and learning-by-exporting for dirty producers in upstream position, characterised by a higher distance to the technology frontier.

The seminar will take place via Zoom at 12:30-13:30 on January 18, 2021 (Tuesday). More information can be found here.