Pricing and distribution in global value chain regulation

Abstract Global value chains (GVCs) function as a distributive arrangement at a global scale, generating and relocating wealth while often exacerbating inequalities across and within countries. The recent rise in GVC-related regulation must hence also be assessed in its distributive implications. Human rights due diligence, the current heart of the playbook of GVC regulation, largely refrains from challenging lead firms’ business models, pricing strategies, and sourcing practices. Given thick evidence that sourcing squeeze translates into vulnerabilities on the ground that are conducive to rights violations, this lacuna significantly limits the potential of human rights due diligence to address wrongful conduct deeply entrenched in economic inequality, such as modern slavery. This article argues that human rights due diligence is marked by a ‘distributional self-restraint’, i.e., a self-inflicted reluctance to engage with deeper underpinnings or root causes of human rights violations. This self-restraint has a pedigree in the intellectual history of the United Nations Guiding Principles on Business and Human Rights (UNGP) and of human rights more broadly, as well as in the naturalizing narrative from neo-classical economics around ‘free markets’ and price formation that have immunized prices in value chains from being seen as conducive to harm. It also manifests itself in the legislative texts and debates around the EU Corporate Sustainability Due Diligence Directive. To overcome such limitations, this article develops the notion of a reflexive governance of pricing and sourcing practices that requires companies to assess and reflect, with stakeholders at different tiers, the impact of lead firm pricing down the chain, especially on living wages and incomes.