Melanie Williams

For the past half-century, non-governmental organisations (NGOs) such as Greenpeace and Oxfam have played a positive role in alerting public opinion to the damage we are inflicting on our planet and our fellow human beings.

Over time, the NGOs developed a strategy of naming and shaming food companies into cleaning their supply chains. This strategy reached a climax in 2010 with Greenpeace’s campaign against Nestlé’s use of palm oil in their Kit Kat chocolate bars; a short video showed an office worker unwrapping a Kit Kat chocolate bar only to find the severed, bloody finger of an Orangutan.

Agricultural commodities have historically been defined by physical properties: weights, moisture content, foreign matter, broken pieces and other physically verified attributes. Suddenly, consumers began asking commodity traders to address the social and environmental issues in their supply chains and to verify traits they had never verified in the past.

The food supply sector had long argued that governments in producing countries should implement social and environmental standards: no child or slave labour, no deforestation, minimum pollution, etc. It quickly became apparent that many governments—especially in developing countries—could not do this effectively—or at least to the standard now demanded by consumers and NGOs.

The food industry was unsure how to react to these new demands and turned to outside participants for help. Gradually, a range of voluntary sustainability standards and certification agencies emerged, stepping in to fill the role that governments, traders and food companies were ill-equipped to play. The trade houses and the NGOs, most notably WWF, supported and encouraged these agencies.

At Kingsman, we were often involved in developing these standards, particularly in the biofuels sector. When I retired, I was briefly Chairman of Bonsucro, the certification scheme for sugar cane. During this period, I often turned to Melanie Williams for advice.

Melanie has a PhD in chemistry from the University of Cambridge. She got into sustainability after thirteen years in process development in the refinery and chemicals industry (BP and BP Chemicals) and ten years at the UK’s National Physical Laboratory, mainly in certified environmental measurements. For the past ten years, she has worked as an independent sustainability consultant, helping companies implement sustainability schemes and write standards for some schemes themselves.

I contacted Melanie to discuss certification schemes in light of new EU regulations, but first, I asked her to explain what certification schemes do.

“Certification schemes develop sustainability principles and standards containing specific requirements that can be audited for compliance,” she explained. “They train and approve auditing companies to carry out independent audits within the supply chain and certify those who pass those audits.

“Although certification isn’t perfect, it has had a beneficial effect. It allows concerned consumers, NGOs and commentators to ask questions about the provenance of commodities. It has brought the issues of deforestation and people’s rights to a broader audience. It allows consumers to choose more sustainable products.

ISCC (International Sustainability and Carbon Certification) was launched in about 2011 and is the most significant, meaningful, and influential of the EU-approved biofuel sustainability schemes. It has since expanded into food, feed and materials.

“There are also single commodity schemes, such as RSPO, Bonsucro, and RTRS, and those targeted at higher value food commodities, such as Rain Forest Alliance. (The ITC Standards Map gives a good idea of the scope of the different schemes.)

“The EU is trying to reduce the number of certification systems,” she continued. “They are bringing in a registration requirement that excludes schemes without third-party auditing. However, auditing companies are developing their own standards for responsible agricultural practices and supply chain traceability to comply with the EUDR (The EU Deforestation Regulation).”

“Some argue that complying with certification schemes increases production costs for farmers,” I said. “Will EUDR increase them even further?”

“The EU believes it won’t,” Melanie replied. “The EC (European Commission) argues that increased transparency will reduce the number of operators in the supply chain and free up more money available for farmers. Retailers and supply chain operators will pay for the geolocation data, and taxpayers will fund verification by EU countries.

“It will still leave farmers with extra work, and it may be that only the large farmers can afford to comply,” she added.

“Only a small percentage of agricultural production is certified,” I argued. “Many importers (China, MENA) don’t care about certification, which makes it difficult for certification to gain critical mass. Is the certification industry losing momentum?”

“It is a problem,” she replied. “But the developed world can only control its own production and its imports. There will be more developments, such as the CSDDD (Corporate Sustainability Due Diligence Directive), which will require companies operating in the EU to assess the risk of their suppliers impacting human rights or the environment. It applies to agriculture and other sectors, too. These types of measures should boost the demand for certification.”

“Food companies often leave certification logos off their retail packaging,” I said. “I never understood why.”

“Some don’t want the schemes to gain recognition as this increases the risk that suppliers will ask for a premium,” she replied. “Others don’t want to reduce the visual impact of their corporate logos, or they think too many logos will confuse consumers.”

“Traders often argue that certification reduces trading opportunities and substitution,” I said. “Does it result in a less efficient supply chain?”

“The world is moving towards shorter supply chains in general,” she replied. “Mutual recognition of certification systems increases flexibility, but inevitably, there will be more friction.”

“How can we be sure that production comes from certified farms and not their neighbours?” I asked.

“Geolocation data helps, and some providers offer services to interpret satellite data to show, for instance, land use change. You can prevent other types of fraud with national databases that track transaction volumes between operators.”

“Big companies such as Starbucks and Nestlé set up in-house sustainability programmes,” I said. “Do company-based systems work better than commodity-based ones?”

“Company sustainability programmes can be effective,” she replied, “particularly when the company bears the operational costs. However, I don’t think they are better than independent schemes. Moreover, they will likely disappear when the EU’s Green Claims Directive comes into force, as they are not multi-stakeholder schemes with third-party auditing.”

“Mass balance” was your expression of 2023,” I said. “What does it mean – and why did you choose it?”

“Mass balance describes a system in which sustainable and conventional commodities are mixed during storage, processing, and transport. Some sustainability schemes indicate this with the terms ‘Mix’ or ‘Mixed’, but they are not referring to real mixtures. They have had sustainable content attributed or allocated to the mixture. The sustainable component is not guaranteed to be physically present in the’ Mix’ product.

“Most consumers do not understand this concept. I chose ‘Mass Balance’ as my ‘word of the year’ because consumer brands are becoming more transparent, and the EU will require accuracy in green claims. The words’ Mass Balance’ will increasingly appear on products and packaging.”

“Hopefully, consumers will ask what it means and why their products can’t contain real mixtures. It may prompt brand owners to buy more sustainably certified commodities.”

“The new EU regulations, such as EUDR, exclude mass balance,” I said. They are what I call ‘all-or-nothing regulations.’ Some argue that the mass balance method allows a gradual move to sustainability rather than an all-or-nothing approach. Is that better?”

“The EU has been brave to exclude mass balance,” she replied. “It sends a message that the EU is serious about reducing its impact on the world’s forests, so I hope it succeeds. Also, the EU is a large importer of commodities and has the power to force through change. Time will tell if there are unintended consequences.”

“If you were the world’s dictator,” I asked, “What measures would you take to deal with deforestation, declining biodiversity, and global warming?”

“I would educate and support the world’s women,” she replied. “It would lead to a more just society and population stability. Better decisions happen when politics and business are mixed with an equal representation of both sexes and with people from different backgrounds.”

“Are you optimistic or pessimistic about the future?” I asked.

“I am optimistic that we will overcome the challenges of climate change, mainly with new technology but also with some changes in behaviour.”

“Last question,” I said. “What would your 18-year-old self think of your career so far?

“She would be pleased that I had been able to work and pursue my career when childcare was not the norm and some employers discriminated against women. She would also be pleased I was an example to my children.”

© Commodity Conversations® 2024

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