Incentivizing Environmental Improvements in Supply Chains through Data-Driven Governance

The Sustainable Apparel Coalition’s Facility Environmental Module (FEM) is one of the world’s most advanced “data-driven governance” initiatives. The FEM represents an important new strategy in the governance of Global Value Chains. This article reports on a multi-year study to evaluate how firms have implemented the FEM, and whether and under what conditions it leads to improvements in factory performance. It finds that while the FEM represents an important step in improving environmental measurement systems, the program currently acts like a “scale without a diet.” Companies are now better able to measure performance, but many have not implemented the mechanisms needed to motivate systematic improvements. This article offers recommendations for how to strengthen data-driven governance systems and explores their implications for managers.

Production-Integrated Compensation in Environmental Offsets—A Review of a German Offset Practice

Environmental offset schemes designed to compensate for adverse development impacts are found in countries worldwide, pursuing no-net-loss policy. In Germany, a practice combining environmental improvements with farming evolved in the early 2000s, known as production-integrated compensation (PIC) (Produktionsintegrierte Kompensation). This paper provides a review of PIC, presenting origins, legal and cost aspects, as well as examples of PIC practice. PIC key challenges are the complexity of environmental improvements of agrarian habitats and the high efforts for communication among diverse actors and for designing and monitoring PIC. Benefits for nature conservation lie in the protection of strongly endangered species and an increase of acceptance of compensation measures. Positive effects for farmers are the sustaining of arable farmland and involvement in setting up land management terms. Investors profit from the increased availability of sites. However, a specific legal framework for PIC is still developing and representation of PIC in offset registries in the German States is only very small. In conclusion, targeted design, continuous monitoring, and long-term financing provided, PIC may (a) increase offset efficiency by focusing on implementation while avoiding land purchase and physical investments and (b) increase offset effectiveness by high conservation benefits and a collaborative approach towards farmers.