Incentivizing Environmental Improvements in Supply Chains through Data-Driven Governance

Abstract

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.