The value of sustainability standards

In 2015, ISEAL Alliance conducted a survey of over 100 business leaders as to how they perceived the benefits of environmental and social sustainability certification to their businesses.

In terms of the business value of certification, the interviewees referred most frequently to the final benefits of improved reputation (60%), improved profitability (53%), cost reduction (30%), growth in production (30%), and improved supply security (23%)

The survey found that certified businesses found value in:

• Improved working conditions with positive impacts on worker’s health and livelihood, as well as attention to sustainability in the supply chain
• Reduced conflicts with local communities
• Improved performance of (small-scale) producers and improved short and long-term supply security
• Enhanced sustainable forest and fishery management which contributes to the preservation of the resource and thus long-term supply security.

However, last month Andre de Freitas, the executive director of the Sustainable Agriculture Network (SAN) wrote that it is time to recognize that certification has its limits in agriculture.

Earlier this year his organisation came to the conclusion that although they have seen many positive impacts from certification for workers, producers and the environment, it was not the best way to improve the sustainability of most farmers in the world. SAN took the decision to stop working with certification in agriculture.

Mr de Freitas argues that certification has four main interrelated limitations:

1. Certification standards are complex. This means that the gap between producers’ reality and what is required by certification is often too wide. Most farmers in the world lack the technical and financial resources to be able to bridge this gap.
2. Certification can be costly. This pushes certification to higher-end products and developed country markets, which usually can better absorb the increase in the price of raw materials. The author cites coffee as an example: certification can be feasible for the more niche premium products, but not be attractive for the higher volume used in price-sensitive categories. Another example is rice, a staple food in much of the developing world, where certification is virtually nonexistent.
3. The high complexity and cost hinder the ability to scale up and go beyond low double digits in terms of penetration in a given sector. This is a typical low-hanging fruit situation, where, after an initial period of fast growth, every subsequent increase in uptake becomes more difficult than the previous one.
4. SAN found that in their experience certification had been shown to have limited effectiveness to deal with some of the more intractable problems in agriculture, such as child labour, poverty, sexual harassment, sanitation, and others.

The author argues that these limitations mean that certification will work for farms that are already reasonably well-managed, have access to resources, have markets that are able to better value their products, and encounter fairly well-functioning local governance structures. He adds that these conditions are very specific and are not the reality most farmers in the world live in.

How we can reconcile these two opposing views was one of the main topics of debate at last week’s Sustainable Sugarcane Forum in London.

One of the biggest challenges highlighted at the event was in getting consumers to pay a premium for certified products.  If consumers refuse to pay a premium, producers have no choice but to recover the cost of certification through the productivity and reputational gains that ISEAL listed in their report. If producers can’t recover their certification costs, then they actually end up worse off financially.

One of the presenters at the event presented a possible solution to this conundrum: an actively traded credits market where industrial food manufacturers, in their efforts to reach their 2020 sustainability goals, buy credits rather than sugar. Credits already provide some limited extra income to producers and this is likely to expand significantly over the next few years.

Having said all that, Bonsucro’s increasing number of certified mills and our expanding membership suggest that stakeholders do find value in certification. There appears to be a real momentum building.

Not only that, but  in discussions with stakeholders at the event, and at other times over the past year,  both producers and consumers have highlighted to me many of the benefits that the 2015 ISEAL survey also highlighted. Of course producers would consumers like to pay a premium for certified product, but even without one, certification is worth it.

But what about SAN’s other criticisms? Many are valid, but you need to remember that voluntary sustainability standards are just one of the tools in the development toolbox. They cannot do everything. They are not the silver bullet that will kill the vampire twins of human rights abuse and environmental degradation. But they do help to keep the monsters at bay.