Science

Research finds companies that self-regulate to curb harmful practices increase profits

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Chinese companies that self-regulate to reduce harmful social practices are more likely to attract reputation-conscious buyers and increase exports to the Western world, a new Cornell University study finds.

Activism in recent decades has led many companies and sectors to develop codes of conduct, certification schemes, and other types of self-regulation to control harmful environmental and social practices in their supply chains and protect their reputations. Associate Professor Duanyi Yang said ILR School’s Department of Global Labor and Work.

“There is significant skepticism within academia regarding the integrity of certification bodies and the potential for corruption in the certification process, especially in developing countries,” and “Self-Regulation for Reputation-Sensitive Buyers: SA8000 in China.” said Yang, co-author of the book. This was published in Management Science on November 25th.

“While private regulation did attract high-wage firms, we found that it did not raise wages and was not seen as a substitute for collective bargaining or public regulation,” Yang continued.

SA8000 is an international certification standard that encourages organizations to develop, maintain and apply socially acceptable practices in the workplace. SA8000 companies, considered the best-in-class standard for working environments in China, surprised researchers by showing higher wages for pre-certification workers compared to similar non-adoptive companies across the country. The adoption of SA8000 certification has also increased sales to overseas markets where reputation-conscious buyers reside.

To conduct the study, the authors obtained records from Social Responsibility International and collected the names and certification dates of all SA8000 certified companies in mainland China from 1998 to 2008. They matched 199 certified companies with those listed in the annual Industrial Enterprise Survey. The survey was conducted by China’s National Bureau of Statistics and measured workers’ wages and income from foreign exports.

In addition to measuring revenues from exports to the Western world, Yang and her co-authors Greg Distelhorst of the University of Toronto and Judith Strole of the University of St. Gallen in Switzerland Although workers’ wages were initially higher, the company’s initial profits did not improve over time.

“Companies typically work hard to overcome the hurdles of obtaining certification, but once they do, they have increased exports to the Western world, but they have also increased their “We’ve found that they’re not making a lot of effort to continue to raise wages for people who are socially responsible companies,” Yang said.

Further information: Greg Distelhorst et al., Self-regulation of reputation-sensitive buyers: China’s SA8000, Management Science (2024). DOI: 10.1287/mnsc.2020.01306

Provided by Cornell University

Citation: Companies that self-regulate to curb harmful practices have higher profits, study finds (November 25, 2024) https://phys.org/news/2024-11-companies-curb-profits. Retrieved November 25, 2024 from html

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