The SA8000 social certification standard: Literature review and research directions

Marco Sartor , Guido Nassimbeni, Guido Orzes, Francesco Pasquon

Dept. of Electrical, Managerial and Mechanical Engineering, University of Udine, Via delle Scienze 208, 33100 Udine, Italy

E-mail: [email protected]

Abstract Social 8000 (SA8000) is nowadays considered the most important worldwide auditable certification in the field of Corporate (CSR). After about ten years of research on SA8000, this paper provides the first comprehensive literature review on this topic. We identify and classify 39 scientific papers and books, highlighting and discussing four main issues: strengths, obstacles, relationship with ISO standards and comparison with other CSR codes. Building on this, we point out some theoretical, methodological and thematic gaps and propose suggestions for future research.

Keywords: Social Accountability, Social Responsibility, Systematic Literature Review

Introduction Since the first introduction of the social responsibility concept in the second half of the 20 th century (e.g., Bowen, 1953), Corporate Social Responsibility (CSR) has received an increasing attention from managers, scholars and politicians (Baumana and Skitka, 2012). During the last decades, there has been also an increasing pressure towards responsibility from both primary stakeholders (owners, employees, customers and suppliers) and secondary stakeholders (non- governmental organizations, governments, activists) (Waddock et al., 2002). Almost all Fortune 500 companies are directly involved in CSR initiatives. Moreover, thousands of papers have been published and some special issues has been devoted to this topic (e.g., “Corporate social responsibility, irresponsibility and corruption” in the Journal of Business Research, “Corporate Social Responsibility: Strategic Implications” in the Journal of Management Studies, “Corporate Social Responsibility” in International Journal of Management Reviews). The European Commission has designated 2005 as the year of corporate social responsibility and the UK has created a Ministry for the role. A number of definitions of CSR has been developed. The most cited is: “the social responsibility of business encompasses the economic, legal, ethical and discretionary expectations that society has of organizations at a given point in time” (Carroll 1979, p. 500). McWilliams and Siegel (2001) specify that it involves “actions that appear to further some social good, beyond the interests of the firm and that which is required by law” . A number of codes of conduct and management systems have been developed that allow firms to show their commitment to one or more aspects of CSR and their fulfillment of demands coming from stakeholders. In particular, as far as ethical initiatives are concerned, examples of these are: AccountAbility 1000, Social Accountability 8000 (SA8000), Global Compact, Global Reporting

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Initiative, ISO 26000, FLA Workplace Code and CSC 9000 T. Among these initiatives, SA8000 standard is of particular interest due to its increasing diffusion that has made it the most widespread CSR standard. From 8 certified organizations in 1998 (one year after standard’s introduction), in the first half of 2012 the number of certified firms amounted to 3083 located in 65 countries, with an annual growth rate around 18% during the last 4 years (SAI, 2012). SA8000 differs from others ethical codes for being a certifiable standard which calls for third- party monitoring to verify compliance with the requirements and for its wider scope; it can be in fact adopted by firms of every dimension, both private and public, and both in developing and developed countries (Leipziger, 2001). SA8000 standard has been discussed by many works since 2002. Despite the relevance of the topic, the increasing number of certifications, the standard’s changes and improvements, the knowledge about SA8000 is rather fragmented. There is therefore the need to make the point of the situation, highlighting the issues so far discussed and pointing out theoretical, methodological and thematic weaknesses of existing literature. The aim of this work is to develop the first literature review on SA8000, classifying existing works, identifying and defining the main issues and highlighting research gaps to guide future analysis. This paper is organised as follows. After a brief description of the literature review approach, the analysed works are classified by year of publication, publication outlet, research purpose and methodology. Afterwards the main issues are presented: strengths and obstacles regarding implementation of SA8000, compatibility with ISO standards (9000 and 14000) and comparison with other CSR models. Finally, we highlight some lacks of literature and suggest specific research directions.

Literature review approach This work is based on a systematic review (see for example: Tranfield et al., 2003; Rousseau et al., 2008) and a content analysis and synthesis (see Seuring and Gold, 2012) of literature on SA8000. The review covers all articles published in English in academic journals or edited books. Since SA8000 is a multidisciplinary topic that might be addressed across several disciplines (and journals), the keyword search without any reduction of the scope of journals seemed the most suitable approach (Seuring and Gold, 2012). Thus, we searched the major electronic databases (i.e. ABI Inform Global Proquest, Academic Search Premier EBSCO, Emerald, ISI Web of Knowledge, JSTOR Business and Science Direct). The keywords used were “SA8000”, “SA 8000” and “Social Accountability 8000”. Finally, the search was complemented by cross-referencing for further relevant publications (i.e., snowballing approach). This way, we identified 306 works. We excluded the ones which just simply cite the SA8000 without any analysis/discussion. The final list includes 39 contributions: 36 scientific papers and 3 books. The coding process followed a deductive-inductive approach: categories were defined a priori by the research team (deductive approach) and adjusted during the coding process (inductive approach). In order to ensure inter-coder reliability, the coding was carried out independently by two researchers (Duriau et al., 2007). Despite inter-rater reliability was quite high, different judgments were individually accessed and resolved through a discursive alignment of interpretations. Appendix shows the outcome of search and coding process. It provides a comprehensive view of the works we have included in this review, classifying them by year of publication, publication

2 outlet, research approach, research type, underpinning theory, unit of analysis, sample dimension, industry, country (of headquarters and subsidiaries) and topic analysed (i.e., strengths, obstacles, compatibility with ISO standards (9000 and 14000), comparison with other CSR models.

Descriptive findings In this section, we present some descriptive analyses of the reviewed works concerning distribution over time period, publication outlet, research approach and type, underpinning theory and geographical area.

Chronology The first scientific papers about SA8000 were published in 2002, five years after standard’s introduction (1997). During the following years there is an average of 3.6 contributions a year, without any special oscillations, except for a peak in 2009 (9 works). The delay between standard’s introduction and the first contributions on the topic is a typical phenomenon; it takes in fact some years for the diffusion of a new certification and the consequent development of scientific studies focused on it. The recent growing interest towards the standard can also be attributed to the attention that companies are increasingly placing to labor conditions in emerging countries, particularly after the scandals related to child labor exploitation by suppliers of important multinational companies (e.g., Adidas, Apple, Microsoft, Nike, Samsung, Wal-Mart).

Publication outlets SA8000 represents an interdisciplinary topic. The research domains covered by the journals are in fact: ethics, operations management, sustainability, quality management and international business. However, despite SA8000 has drawn the attention of scholars belonging to different disciplines, it is quite rare to find an interdisciplinary perspective within single studies. Moreover, it may be noticed that the main part of works address issues related to SA8000 from an ethical-philosophical point of view (e.g., Beschorner and Müller, 2007; Gilbert and Rasche, 2007 a, 2007 b; Reynolds and Yuthas, 2008; Zutshi et al., 2008; Ciliberti et al., 2011), while only a few contributions deal with the impact of the standard on management aspects (e.g., Rohitratana, 2002; Miles and Munilla, 2004; Ruževičius and Serafinas, 2007; Hiscox et al., 2008; Ramasamy and Garriga, 2009; Rasche, 2009, 2010 a).

Research approach and type More than half of contributions is exploratory in nature (56%), less significant parts are oriented to theory building (28%) or theory testing (13%), while 3% aims at theory extension/refinement. The predominance of exploration-oriented works could be in part related to the relative newness of the topic. As far as the adopted methodologies are concerned, 61% of works is conceptual, 26% case study, 8% survey and 5% relies on other methods. We notice that research on SA8000 has been mainly theoretical and that empirical studies represent only a minor part of the analysed literature (e.g., 10 case studies, 3 surveys). The predominance of theoretical-descriptive contributions and the consequent low number of empirical studies is one of the most significant weaknesses of the literature and opens up interesting possibilities for future research.

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Underpinning theories As far as theoretical foundations of scientific works are concerned, only three works (Christmann and Taylor, 2006; Ciliberti et al., 2011; Gilbert and Rasche, 2007) are built on existing management theories . Christmann and Taylor’s (2006) paper is grounded on transaction cost economics (TCE). The authors identify two predictions of theory: (1) monitoring reduces information asymmetries between customers and suppliers (Balakrishnan and Koza, 1993) and opportunistic behaviors of exchange partners (Lal, 1990); and (2) sanctions reduce the likelihood of opportunistic behaviors (Williamson, 1996). They apply these statements to predict the level of quality of implementation (symbolic vs. substantive 1) of international certifiable standards (i.e., ISO 9000, ISO 14000 and SA 8000), hypothesizing and empirically testing that the monitoring of suppliers’ performances and the importance of the issue addressed by the standard for the customer (and the consequent sanctions imposed for symbolic implementation) enhance the level of quality of implementation. Ciliberti et al.’s (2011) work is built on principal agency theory (PAT). It shows as the adoption of codes of conduct, in particular third-party certifications such as SA 8000, reduces the information asymmetry between the firm (principal) and its partners (agents). This leads to attenuate the two key problems in agency relationships, i.e., moral hazard and adverse selection, since they are mainly caused by information asymmetry. Finally, Gilbert and Rasche’s (2007 a) paper draws from the theory. The authors adopt the three perspectives proposed by Donaldson and Preston (1995), i.e., descriptive (how organization take into account stakeholder interests), instrumental (whether it is beneficial for an organization to engage with its stakeholders) and normative (why organizations should take into account stakeholder interests), to identify opportunities and problems of social standards/certifications (e.g., UN Global Compact, Global Reporting Initiative and SA 8000). Three further papers (Rasche, 2010; Reynolds and Yuthas, 2007; Rasche and Esser, 2006) are instead grounded on philosophical theories . Rasche’s (2010 a) work relies on the three aporias of justice proposed by Derrida (1992) to highlight some limits of SA8000. Drawing from the first aporia, the “éphokè of the rule”, the author argues that managers and accreditation bodies should adapt SA8000 to each specific context, or using Derrida’s (1997) words, they have at the same time “ to follow the rule and to invent a new rule ” (p.6). Another problem related to this aporia concerns the “softening” of the interpretation of the standard by accreditation bodies and auditors to increase their number of customers. The second aporia, “the ghost of the undecidable”, is instead adopted to discuss the “supplier squeeze” issue (i.e., the fact that suppliers are forced to comply with a standard). Finally, applying the third aporia, “the urgency that obstructs the horizon of knowledge”, Rasche (2010 a) claims that managers who implement SA8000 face with two opposite forces: the urgency and pressing need to do responsible actions on time and the necessity to reflect and consider the context of application of the standard. Reynolds and Yuthas’s (2007) and Rasche and Esser’s (2006) papers are built on the Habermas’s (e.g., 1984) theory of communicative action. The first contribution analyses how CSR models (e.g., SA8000) address the four “basic universal assumptions of communication” (i.e., truth, sincerity, understandability and appropriateness), contributing to the effectiveness of CSR reports as a form of communication. Furthermore, it studies to what extent corporate communication is reflective of moral discourse, examining whether it satisfy the principles of discourse ethics (i.e., generality,

1 Substantive implementation refers to the case in which the procedures proposed by the standard are actually used, while symbolic implementation refers to the case in which the company obtains formal recognition by the certification body but the management system is not actually used in operations. 4 role taking, autonomous evaluation, and power neutrality). Rasche and Esser (2006) develop instead a discursive decision framework to achieve stakeholder consensus, drawing from the theory of communicative action, and apply it to an ethical standard (i.e., AA1000).

Geographical area As far as the geographical diffusion of the standard is concerned, in the third quarter of 2010, 34% of certified companies were headquartered in Italy, followed by India (23%), China (15%) and Pakistan (6%); while considering the number of employees of certified companies, at the first place there is India with 26%, followed by China (19%), Italy (15%) and Pakistan (5%) (SAI, 2012). Two reasons can explain the fact that Italy is the first country in the world by number of SA8000 certified companies: first , local incentives which have driven companies towards this certification (Ciliberti et al., 2008); second, the fact that an important Italian firm (Coop Italy) was the first European company to obtain the SA8000 certification (in 1998) and pushed a large number of its suppliers (over 330 companies) to get certified (Tencati and Zsolnai, 2009). As far as the empirical studies considered in this paper are concerned, most of them analyse companies located in Western countries (e.g., Italy, Germany, Spain and the USA) which have offshore operations in other countries such as China, India and Turkey. Only a minority of the studies analyse instead companies whose headquarters and production facilities are both located in Asia. We observe that emerging countries are understudied. We might think that Western companies that offshore production to emerging countries face a series of problems and situations different from companies headquartered in those areas. It thus might be interesting to further analyze the obstacles faced by these firms.

Thematic findings We have identified four main topics: strengths determined by SA8000 adoption (discussed by 17 works), obstacles (14 works), relationship with ISO 9000 and 14000 standards (13 works) and comparison with other CSR models (25 works). Although there are some interdependencies among the considered issues, each of them identifies a specific line of research and debate. Due to space limitations, we will focus only on the results concerning the first two topics (i.e., strengths and obstacles), leaving out the issues of relationship with ISO standards and comparison with other CSR models.

Strengths We decided to group the strengths of SA8000 according to the functions they relate to: purchasing, production, marketing, research & development, finance and human resources.

Purchasing The implementation of SA8000 seems to lead to a deeper knowledge of the supply chain (3 works) and a consequent greater easiness of control (5 works). and compliance inspections required by the standard seem in fact to provide a more detailed view of the whole supply chain. This strength seems to foster greater collaboration and communication between the stakeholders, enabling organizations to more effectively establish strategic relationships (Leipziger, 2001; Tencati and Zsolnai, 2008). Suppliers’ compliance with ethical requirements leads to the reduction of the information asymmetry between the parties and, as a further benefit, to the reduction of the risk of opportunistic behaviors (Ciliberti et al., 2009, 2011; Christmann and Taylor, 2006).

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Some authors also argue that SA8000 leads to the reduction of management costs of global supply chains , in particular transaction costs, thanks to third-party monitoring, reducing the need of direct audits done by the customer. It also contributes to the increase of the competitiveness within the supply chain (Ciliberti et al., 2009; Christmann and Taylor, 2006).

Production Leipziger (2001, 2009), Rohitratana (2002) and Salomone (2008) highlight that process improvement is one of the most important strengths of SA8000. Several authors agree that SA8000 certification can also lead to the increase of productivity (Rohitratana, 2002; Miles and Munilla, 2004; Henkle, 2005; Gilbert and Rasche, 2007 b), thanks to better working conditions, to the increased attention towards training courses for the personnel 2 and to the aforementioned process redesign. Another strength related to the production is a better workplace safety, in particular a decrease of work accidents (mentioned by 7 paper). The standard requires companies to proactively identify possible sources of danger, facing the risks before they happen: the drawing up of verification, prevention and improvement plans required by SA8000 seems to produce a reduction in the number of accidents (Stigzelius and Mark-Herbert, 2009; Leipziger, 2001). Finally, a further strength concerns the better punctuality of delivery (Henkle, 2005; Leipziger, 2009): SA8000 requires certified companies to conduct inspections of compliance on their supply chains that often lead to an improvement of delivery times.

Marketing The respect for the workers’ rights, the defense of child labor (still current practice in many developing countries) and the guarantees of safety and health in the workplace lead to an improvement of corporate image . Several studies (9 works) report that SA8000 certification helps to create a positive company image in the market and to increase the respectability of the brand. It also reduces the risk of being exposed to scandals linked to unethical behaviors (Rohitratana, 2002; Miles and Munilla, 2004; Zutshi et al., 2008). Some authors observe that SA8000 has a strong commercial impact, facilitating market expansion (Miles and Munilla, 2004; Christmann and Taylor, 2006; Salomone, 2008; Stigzelius and Mark-Herbert, 2009). The adoption of SA8000 allows to overcome the entry barriers to segments characterized by a high customers’ sensitivity to ethical/social issues (e.g., ethical consumers). The improvement of the relationship with stakeholders is another benefit highlighted in the literature (e.g., Beschorner and Müller, 2007; Rasche, 2010 b). Some authors talk specifically of improvement in the relationship with customers, pointing out that certified companies establish a trust relationship with them, leading to a corporate brand loyalty (Rohitratana, 2002; Miles and Munilla, 2004; Ruževičius and Serafinas, 2007; Ciliberti et al., 2011). More generally, SA8000 implementation allows companies to increase the involvement of all stakeholders interested in CSR issues, in particular labor regulating agencies, investors, non-governmental organizations (Miles and Munilla, 2004). Rasche and Esser (2006) emphasize the need of changing the approach to stakeholders, from "stakeholder management" to "stakeholder accountability", going beyond the simple communication of the results of CSR initiatives, creating instead a channel of dialogue with all involved parties to define CSR activities and their goals.

2 The key principle of the 3 rd requirement of the standard SA8000, i.e., “Health and Safety”, argues that the company should provide a safe and healthy workplace and take measures to prevent accidents (Leipziger, 2001). 6

Research & development Another strength determined by the adoption of SA8000 is a more effective development of new products , due to a close collaboration with stakeholders. Leipziger (2009) states that ethically responsible companies need to be aware of the sensibility of involved parties, in order to develop appropriate solutions. This is the enabling condition for shared advanced new product development activities.

Finance According to Leipziger (2001), SA8000 certified companies generally show an easier access to credit , thanks to better relationships with financial institutes. Compliance with social responsibility requirements also facilitates relationships with the institutions in charge of monitoring specific requirements (e.g., public welfare and assistance bodies, control agencies for safety). Furthermore, certification seems to allow firms to more easily attract new investors .

Human resources The observance of ethical values related to SA8000 implementation seems to generate a higher enthusiasm of the employees (e.g., Rohitratana, 2002; Ruževičius and Serafinas, 2007; Gilbert and Rasche, 2007 b). In a context in which the company is committed to the continuous improvement of working conditions and to compliance with professional ethics, workers feel protected and more involved in the achievement of goals. All these elements positively affect the relationship between employees and the company, promoting longer-lasting ties, leading to positive effects for the company in terms of staff turnover and absenteeism reduction (Henkle, 2005; Stigzelius and Mark-Herbert, 2009). Finally, thanks to SA8000 certification the company is able to more easily attract skilled workforce (Rohitratana, 2002; Miles and Munilla, 2004).

Obstacles A second research issue concerns the obstacles associated with obtaining and maintaining the SA8000 certification, classified into the three main areas described below.

Obstacles to implementation An obstacle which belongs to this category – highlighted by 8 works – is the high certification cost (Ciliberti et al., 2011; Miles and Munilla, 2004; Rohitratana, 2002; Stigzelius and Mark-Herbert, 2009). Companies typically incur high costs to comply with the requirements of the standard; these costs depends on the gap between the requirements of the standard and the initial situation of the company (Leipziger, 2001, 2009; Miles and Munilla, 2004; Rohitratana, 2002; Ciliberti et al., 2011). Rohitratana’s (2002) work shows as this obstacle (i.e., high certification cost) is particularly critical for small and medium enterprises (SMEs) since they are often characterized by the lack of financial resources. Some works examine the factors affecting the certification costs (Miles and Munilla, 2004; Leipziger, 2001). These studies show as certification costs tend to be lower if the firm is already ISO 9000 or ISO 14000 certified. The geographical location of the company is another factor influencing the certification costs. The costs to comply with the standard are in fact often higher for plants located in developing countries, due to the larger gap to fill between the requirements of the standard and the practices required by law. The difficult data management related to obtaining and maintaining SA8000 certification is another problem. The continuous monitoring expected by the standard requires the storage and management of a large amount of documents; such activities are complex and costly both in terms

7 of time and resources. A possible solution to this problem is the use of data management software, but not all the companies (in particular SMEs) can afford the costs of these systems. Leipziger (2009) describes the Tata Steel case, highlighting the difficulties initially experienced in managing the paper documentation related to audits. The company overcame the problem creating the "Tata Steel SA8000 Vendor Assessment Protocol" which automatically generates the assessments related to every requirement of the standard.

Strategic obstacles According to Miles and Munilla (2004), SA8000 certification seems to be antithetical to a low cost strategy , given the high costs that companies sustain to obtain and maintain the certification. The SA8000 is more compatible with differentiation and premium price strategies than with a low cost strategy, both in consumer and in industrial markets (Miles and Munilla, 2004; Rohitratana, 2002).

Other obstacles The SA8000 imposes limits in supplier selection (Rohitratana, 2002; Christmann and Taylor, 2006). Certified companies require in fact their suppliers to sign a formal agreement in which they undertake to comply with some standard’s requirements. This limits the number of potential suppliers to only companies that want to (and are able to) meet the requirements of the standard (Leipziger, 2001). Other obstacles are the lower flexibility of suppliers and the increase in delivery times . As argued by Rohitratana (2002) and Leipziger (2009), the certification imposes working practices (e.g., rest periods, limits to overtime) that reduce the flexibility and hinder companies in quickly responding to the changes of external environment and in solving forecasting and planning errors. Many cases described in the literature show that certification lead to the increase of the average delivery time, due to the rigidities imposed by the standard and the frequent inspections (Leipziger, 2009). Another problem is the difficult interpretation of local laws and their match with the requirements of SA8000 (Rasche, 2009, 2010 a; Gilbert and Rasche, 2007 b). For example, some aspects established by the standard can be in contrast or overlap with national laws and regulations. Some authors (Gilbert and Rasche, 2007 b; Rasche, 2010; Rohitratana, 2002) highlight the problems related to religion and local customs . Gilbert and Rasche (2007 b) show for example that some cultures have customs in striking contrast to the standard requirements (e.g., caste based system). A further obstacle is the possible lack of attention by the employees to the protections guaranteed by the standard (Leipziger, 2009). As shown for instance by some studies about the Chinese context (e.g., Nassimbeni and Sartor, 2007), in certain emerging countries the employees (often immigrant) might be interested to work in bad conditions to maximize their earnings (and be able to rejoin their families). Finally, in some areas the need to work for survival leads to different assessments about the concept of "child labor": what in Western contexts is considered regrettable, in developing countries is rather a widespread and well received practice, contributing to the livelihood of the family (Miles and Munilla, 2004). In these contexts, certified companies may appear less appealing for workers and encounter greater difficulties in recruitment.

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Directions for future research The extensive review of literature on SA8000, presented in the previous sections, allows us to highlight some methodological and theoretical weaknesses and gaps of research on the topic. This leads to the identification of some directions for future research. First , as far as the methodological aspects are concerned, more than 60% of the reviewed works is conceptual in nature. This challenges the validity of the results. Existing literature, for instance, points out a number of possible strengths of SA8000 (e.g., reduction of management costs of global supply chains, increase of productivity, decrease of work accidents), but many of these are not supported by empirical data. Therefore future researches could try to analyze advantages of SA8000 through empirical data and more in general to identify antecedents (i.e., motivations and drivers) and consequences (i.e., impact on delivery time, cost, quality, flexibility, brand, social and economic performances) of SA8000. Similarly, further empirical researches will be able to deepen the knowledge about the obstacles faced while obtaining and maintaining the SA8000 certification and to confirm or refute what scholars reported until now. Furthermore, we cannot forget that the present (few) empirical contributions seem to be characterized by a geographical bias. Despite the diffusion of the certification among firms located in emerging countries (e.g., China, India and Pakistan), nearly all the analyzed samples consist of firms headquartered in Western developed countries. Future empirical analyses should overcome also this limit. Second , only six (out of thirty-nine) contributions are grounded on well-established management (i.e., TCE, PAT and stakeholder theory) or philosophical (i.e., theory of communicative action and aporias of justice) theories. SA8000 literature is thus lacking of theoretical foundations. Future scholars might more extensively draw from the aforementioned theories. For example, it might be interesting to study the impact of the implementation of SA8000 on transaction costs. Christmann and Taylor (2006) argue that SA800 reduces the information asymmetry and the likelihood of opportunistic behaviors; however, a number of arguments might be adduced to sustain that SA8000 leads to an increase of transaction costs (e.g., less potential suppliers, reduced bargaining power by the firm). In addition, SA8000 might be compared to ISO certifications (e.g., 9000 and 14000) in a TCE perspective. Other theories might also be employed in future researches. Institutional theory highlights for instance a number of coercive, normative, and mimetic effects to explain the diffusion of organizational practices. It might be adopted to deal with the cross-national diffusion of SA8000 (see for example Guler et al., 2002 on diffusion of ISO 9000). Third , a number of specific thematic gaps exists. The analysis of the literature highlighted the scarcity of information about the costs incurred to obtain and maintain certification (some exceptions are: Ciliberti et al., 2011; Leipziger, 2001, 2010; Miles and Munilla, 2004). Moreover, the implementation process is another under researched area (with the exception of the analysis of some implementation problems). Future research might focus on this topic highlighting the timing, the main phases and the activities to be performed. The choice of the certification body and the financial benefits might also be deepened. Finally, future studies could analyse the effect of some factors (e.g., geographical area, company size and industry) on strengths and obstacles related to SA8000 certification.

Appendix and references are available on request.

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