EUGENE, Ore. — Oct. 24, 2023 — New research from the University of Oregon and a Canadian partner has shed more light on the social effects of large corporations working directly with smaller, overseas manufacturers to make their processes more climate friendly.
Such partnerships, known as buyer collaborations, are sometimes used by businesses like Amazon and Walmart to increase energy efficiency and reduce environmental impacts. The research by the UO and Western University in Canada evaluates economic and social effects of such partnerships and finds mixed benefits.
“Buyer collaboration enhances energy efficiency investments, but through our analysis we found that the impact on social welfare varies,” explained co-author Behrooz Pourghannad, assistant professor of operations and business analytics at the UO’s Lundquist College of Business.
Pourghannad conducted the study alongside Jason Nguyen from the Ivey Business School at Western.
As the effects of climate change[BP1] become an increasingly urgent challenge, large corporate buyers are actively collaborating with their manufacturing partners to make their processes more energy efficient. Such partnerships aim both to reduce energy consumption and improve social welfare.
Pourghannad and Nguyen developed a model to help governments and third-party organizations that support energy-efficient improvements assess the effectiveness of their policies and practices.
Sometimes, efforts to improve energy efficiency can have unexpected negative effects on small manufacturers, the researchers found. For example, after partnering with manufacturers directly to share knowledge and adopt energy-efficient practices, large buyers could use the knowledge gained to negotiate lower prices and ultimately decrease the revenue to the manufacturer. They may even switch to another manufacturer if they do not find the current manufacturer to be cost-competitive.
“These can lead to small-to-medium manufacturers failing and taking local jobs with them,” Pourghannad explained. “This is particularly the case when there are no long-term contracts.”
However, such partnerships can be beneficial when long-term contracts are in place between large buyers and small-to-medium manufacturers. This allows enough time for the manufacturers to recoup the costs of their efficiency investments, resulting in increased revenue for the manufacturer and a reduction in carbon dioxide emissions.
-Laurel Hamers, University Communications
For more information about the research paper, please visit: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4577708
About the Lundquist College of Business
The University of Oregon’s Lundquist College of Business empowers an engaged community of students, faculty, staff, and stakeholders who create, apply, and disseminate knowledge that contributes significantly to their professions, communities, and society. The college delivers a dynamic learning environment where world-class professors engage and get to know students, where students gain hands-on experiences working on projects for real companies, and where alumni go on to high-powered jobs worldwide. It boasts top-ranked programs in sports business, entrepreneurship, sustainable business, marketing, finance, and accounting, and is housed in the nation’s first certified environmentally friendly business school facility.
Lundquist College of Business, University of Oregon
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