Over the past couple of decades, voluntary sustainability standards (VSS) have taken on increasing importance in working to ensure that agriculture, and agricultural supply chains, are environmentally and socially sustainable.
The International Trade Centre, which tracks 465 eco-labels in 199 countries and 25 industries, recently published a report, “Social and Environmental Standards – From Fragmentation to Coordination”. The authors highlighted 239 voluntary standards operating in 90 agricultural markets, many of them over-lapping.
Cocoa producers in Cote d’Ivoire now contend with up to ten different standards. Coffee producers in Honduras have nine standards. Tea producers in China have thirteen. Soy producers in Brazil face 21 voluntary standards.
As the report authors write, different buyers use different standards and, in many cases, their own proprietary, non-transparent auditing scheme. This leaves their suppliers struggling to comply with several voluntary standards at the same time. The associated audit processes can quickly push up costs, both in time and money. Competition between standards can also result in what the authors call “a race to the bottom”, where producers or buyers may be tempted to choose the most lenient standard.
It has been shown that consumers trust eco-labels more than they trust brand sustainability claims. This increasingly translates into a business opportunity, especially with Millennials and Generation Z. However, too many standards can also confuse consumers and undermine their trust in the whole system.
And on the production side, it is a bit tough to ask a farmer to go through a whole new audit process just because he wants to grow soy this year rather than sugarcane.
A reduction in the number of voluntary standards would:
- Reduce audit costs along the supply chain
- Enable more small-scale producers to become certified.
- Empower buyers to ensure that what they source is environmentally and socially sustainable.
- Give more credibility to the certifying agencies and reduce their costs through economies of scale across different commodities and geographies.
- Increase transparency and make it easier for civil society to “call out” any bad actors
- Create brand company clarity in marketing
- Reduce hidden transaction costs
- Allow certification organizations to focus more on supporting their stakeholders
- Allow value chain partners to focus more resources on improvement rather than multi-standard compliance
This is obviously a case of “less is more”. The sector is ripe for consolidation. But how do we get from where we are now to where we want to go?
The report authors suggest that a first step would be to get the various standard-setting organizations to talk with each other to explore ways of aligning standards, audit procedures and management structures. Benchmarking and mutual recognition of standards would be an important part of that process. Stacked audits to combine key different elements of standards/company specific audits into one audit would reduce the reporting burden.
The authors also suggest that international organizations and conventions could play a key role. They rightly point out that within the sector social sustainability is less fragmented than environmental sustainability. This is largely because most schemes follow the International Labour Organization (ILO) Conventions on child and forced labour, employment, and working conditions. Although there are numerous international conventions on environmental protection, there is less of an international consensus on environmental issues.
The authors therefore suggest the development of core, universally applicable environmental criteria. Companies are increasingly pledging to go deforestation free and this could be expanded to cover key international environmental conventions, as well as the United Nations’ Sustainability Development Goals.
These are all good suggestions.
The idea of companies working together would be unthinkable in the commercial sector; anyone who tried would be hauled up in front of the competition authorities, and accused of forming a cartel. However certification agencies are mostly non-for-profit organisations. Their goals, by definition, are not to make a profit, or to increase their share prices. Non-for-profits are not interested in market share; they are interested in “the greater good”.
Working together, whether in the form of partnerships, shared standards, benchmarking or outright mergers should therefore not only be possible, it should be welcomed. Working together would help the certification agencies to better achieve their goals, and make the world a better place.
The views expressed in this blog are my own and do not necessarily represent those of Bonsucro.