Toward SuSTainabiliTy: The roleS and limiTaTionS of ... - Resolve

PrefaceIn 2008, the David and Lucile Packard Foundationand the Walton Family Foundation were bothseeking to understand the impacts and efficacy oftheir support of the Marine Stewardship Council(MSC)—which certifies wild-caught fisheries—and related nongovernmental initiatives. Bothfoundations had made substantial investmentsin the MSC in an effort to move seafood marketstoward greater sustainability. Although itwas clear that MSC-certified seafood was gainingmarket share, the impact of that shift on marineecosystems and fishing communities remainedanecdotal.At the same time, Mars, Incorporated—one ofthe world’s largest food companies—was lookingfor ways to encourage environmentally andsocially sustainable production practices acrossits diverse, agriculture-based supply chain. InApril 2009, the company also announced its commitmentto purchase 100 percent of its cocoafrom sustainable sources by 2020. They believedthat certification—a means of providing assurancethat the cocoa they purchased complies withagreed-upon sustainability criteria—would be acritical tool for helping to achieve that goal andultimately to improve the lives of cocoa farmers.As representatives of these organizations, webegan to talk with each other and realize thatwe shared the belief that certification can anddoes play an important role in transformingmarkets. We also agreed—given the proliferationof certification systems and ecolabels and theapparent lack of any existing systematic review ofthe on-the-ground impacts of these systems—that important questions regarding standardsand certification could benefit from collaborativestudy. In particular, with the rising uptake ofcertification, we believed it essential to provideproducers, supply-chain actors, and the environmentalcommunity with a solid assessment ofwhat is known and not known about this meansof moving toward sustainable use.We thus joined forces in late 2008 and early 2009around a common interest in an independent,robust assessment of the state of knowledgeregarding voluntary standards and certificationsystems that promote product sustainability.Our organizations provided grant support forRESOLVE, a respected nonprofit mediation andfacilitation organization, to serve as Secretariatfor the assessment. We worked with RESOLVE torecruit a balanced Steering Committee composedof representatives from business, civil society,and academia. The Steering Committee commissionedanalyses of the literature by academicresearchers, in addition to drawing on their ownknowledge and deep experience with standardsand certification.We asked the Steering Committee to design anddirect the Assessment. The findings, conclusions,and recommendations of the resulting study arethose of the Committee. Committee membersToward Sustainability: The Roles and Limitations of Certification i

Preface iiserved without pay, and they participated asindividuals, rather than as representatives oftheir organizations. As we observed the discussionsand read drafts, it was clear to us that theAssessment was indeed the work of persons withstrong views and deep expertise, who listenedto one another and reached vigorously debated,well-founded conclusions. We thank the membersof the Steering Committee for their generosity oftime and intellect.We believe this final Assessment report is asignificant contribution to a field that is alreadymaking tangible contributions and could bringabout significant progress toward a sustainableeconomy. The report provides usable knowledgethat can inform firms, governments, and civil societyin their continuing search for more sustainablepractices. In particular, the report helps to answerquestions such as the following:▪ What factors do businesses, governments,NGOs, foundations, and consumers take intoaccount when using or deciding whether touse or support certification?▪ What is known about the environmental,social, and economic impacts of voluntarystandards and certification systems?▪ How do other forces—such as governmentregulation—interact with certification systems,and how do those interactions affect outcomes?Our intent in publishing this Assessment reportis for businesses, governments, foundations, andNGOs to make use of its findings and recommendationsin their decision making and investments.We also hope the Assessment spurs research thatwill further expand learning, leading to better useof certification and other tools to induce moresustainable production and consumption.Signed,Scott Burns michael Fernandez Kai N. LeeWalton Family Foundation Mars, Incorporated David and Lucile Packard FoundationToward Sustainability: The Roles and Limitations of Certification

AcknowledgementsThe Steering Committee wishes to thank themany individuals who contributed to this report.We especially wish to thank the funders—KaiLee of the David and Lucile Packard Foundation;Scott Burns and Sheree Speakman of the WaltonFamily Foundation; and Michael Fernandez ofMars, Incorporated—for making this Assessmentpossible, and for their ongoing support, encouragement,and wisdom. Similarly, without theimmense commitment of Abby Dilley, JenniferPeyser, and Taylor Kennedy (RESOLVE) in facilitatingthis process and keeping us on track throughour deliberations, we would not have been able todeliver this report.Ruth Norris (Resources Legacy Fund) committedmany hours of writing and many nuggets ofwisdom in preparation of the Assessment, and LisaMonzon (David and Lucile Packard Foundation)offered particular insight on the evaluation ofcertification systems. We wish to thank them bothfor lending their time and expertise.Many other colleagues provided logistical supportand assistance, and we thank Emily Anderson andAJ Becker (Mars), Allegra Brelsford (World WildlifeFund), Ria de Groot (Unilever), Leanne Rivett(Marks & Spencer), Kristen Vissers (RainforestAlliance), Will Walker (Yale University), andChristine Williams (Soil Association).We commissioned research by several excellentscholars and practitioners. We are grateful for thecontributions made by: Shishir Adhikari (WrightState University), Amy Mathews Amos (TurnstoneConsulting), Graeme Auld (Carleton University),Volker Bahn (Wright State University), OliverBalch (journalist for Ethical Corporation andThe Guardian), Tim Bartley (Indiana University),Tim Benton (University of Leeds), Claude Boyd(Auburn University), William Crosse (RainforestAlliance), Matt Elliott (California EnvironmentalAssociates), Julia Jawtusch (FiBL), Aaron McNevin(Mansfield University), Joshua Miller (WrightState University), Valerie Nelson (Universityof Greenwich), Deanna Newsom (RainforestAlliance), Urs Niggli (FiBL), Bogdan Prokopovych(University of Rhode Island), Tracey Roberts(University of Louisville), and Anne Tallontire(University of Leeds). We also thank David Steeleand Jeremy Mullem of Duke University for theirassistance in reproducing Tracey Roberts’ article,which was published in the Duke EnvironmentalLaw and Policy Forum.Elizabeth Kennedy (Rainforest Alliance), in additionto contributing original research, also spentmany hours with the Steering Committee discussingthe challenges of and research prioritiesfor evaluating methodologies and measuringimpacts. We thank her and her team for theirinsights and continuous support.For sharing their time, experience, and candidfeedback, we thank all who participated in meetingswith the Steering Committee on September29, 2010, in London and on October 14, 2010, inWashington, DC.We thank our peer reviewers, whose thoughtfuland constructive critiques challenged the SteeringCommittee to produce a better report: ChristopheBéné, Allen Blackman, Nadine Block, Hank Cauley,Michael Conroy, Abigail Daken, Andre de Freitas,Toward Sustainability: The Roles and Limitations of Certification iii

Acknowledgements ivRebecca DeWinter-Schmitt, Dominique Gautier,James Griffiths, Aldin Hilbrands, Alison Kinn, KateLewis, Peter MacQuarrie, Errol Meidinger, KatrinaNakamura, Dara O’Rourke, Charlotte Opal, BenPackard, Jason Potts, Carsten Schmitz-Hoffmann,Philip Schukat, Yalmaz Siddiqui, Dan Vermeer,and Oliver von Hagen.We wish to thank graphic design consultants CatSanders and Quinn Peyser for their wonderfulsuggestions and work to translate hundreds ofpages of text into final layout. We are also gratefulto Niki Belkowski of World Wildlife Fund for donatingmany hours and immense creativity towardthe design of the report’s infographics. We thankMelanie Dougherty (Melanie Dougherty Design)for her graphic contributions early in the reportdevelopment process.We wish to express our gratitude to our Chair,Patrick Mallet, for his above-and-beyond contributionsand for all he did to maintain our momentumin decision making and report development.Last, but certainly not least, we are grateful to ourfantastic editor, Jennifer Thomas-Larmer (LarmerConsulting), whose skillful hand turned our workinto a significantly more readable narrative.Toward Sustainability: The Roles and Limitations of Certification

IntroductionOver the past ten years, the supply chains of multinational companies and retailers havebecome ever-more complex, with raw materials and other product inputs being sourcedfrom producers in every corner of the globe. At the same time, concerns about climatechange, natural resource scarcity, and labor practices have made sustainability andcorporate responsibility the watchwords of the day for many firms. Voluntary standardsand certification systems have emerged as a promising means for addressing sustainabilityand corporate responsibility in today’s complex global marketplace.Certification systems typically evaluate andaudit—according to environmental and/or socialsustainability standards—the processes or methodsby which products are produced. The aimof these systems may be, for example, to helpconserve scarce resources, preserve biodiversity,or provide a living wage for workers. When combinedwith “ecolabels,” these systems can provideconsumers (and business-to-business customers)with information by which to make more informedchoices in the marketplace.Standards and systems for certifying ecologicaland social sustainability have been in existence fordecades and have been developed for a wide arrayof goods and services. They can provide firmswith the information and incentives they needto change their product offerings. Forest products,for example, may be grown and producedin accordance with the standards of the ForestStewardship Council (FSC) or the Programmefor the Endorsement of Forest Certification(PEFC). Agricultural products may be producedaccording to one of the many organic standardsschemes, or in line with the standards of theRainforest Alliance’s Sustainable Agriculture program,UTZ Certified, or the Fairtrade LabellingOrganizations (FLO), among others. Similarly,seafood harvests may be managed according tothe Marine Stewardship Council (MSC) certificationsystem, the Friend of the Sea program, orother schemes. Standards schemes have beencreated for everything from biofuels to buildings,and some standards—such as those of SocialAccountability International (SAI)—cover a broadrange of products in multiple industries.The standards mentioned here are among thebest known, but many others exist. Indeed, suchschemes have proliferated in recent decades. TheWorld Resources Institute and World BusinessCouncil for Sustainable Development track thedevelopment of standards and certificationsystems for wood and paper products, and inJuly 2011 they reported nearly 50 approaches tothe sustainable procurement of forest products,including forestry and procurement standards,certification programs, ecolabels, and green procurementprograms. 1 More broadly, the EcolabelIndex included 425 labels in 246 countries and 25industrial sectors, as of the end of 2011. 2Many standards and certification systems areorganized and overseen by multi-stakeholdergroups involving nongovernmental organizations(NGOs) and industry. Others may be driven solelyby industry, NGOs, or government agencies.Standards and certification systems often utilize1 www.wbcsd.org/pages/edocument/edocumentdetails.aspx?id=183&nosearchcontextkey=true2 www.ecolabelindex.comToward Sustainability: The Roles and Limitations of Certification 1

Introduction 2third-party verification and monitoring to ensurethat standards are met.Businesspeople, NGO representatives, and philanthropicfoundations have viewed standards andcertification systems as a promising means forpromoting sustainability practices in supply chainsand even transforming markets altogether, especiallyacross international boundaries. Among thestrengths of these systems is that they can movewhen the science is not settled or clear, and/orwhen government action is inadequate or absent.For these and other reasons, companies, NGOs,governments, and foundations have investedhundreds of millions of dollars in the past twodecades to support the creation and implementationof standards and certification systems. Forfoundations, these investments have been particularlylarge and sustained over a long periodof time, compared to most philanthropic efforts.Despite these investments, concrete, consolidatedinformation about whether certification isachieving its stated goals has been somewhatscant. Thus an array of observers—includinglarge companies who are questioning whether ornot to take part in these systems, as well as thephilanthropic foundations funding the systems—have sought more information on the actualenvironmental and social impacts and potentialof these systems, i.e., how well they are workingand how they could work better.The State-of-Knowledge Assessment of Standardsand Certification was organized to analyze thecurrent state of knowledge regarding certificationsystems. The Assessment was a two-and-a-halfyear, multi-stakeholder, deliberative process led bya 12-member Steering Committee, which soughtto answer the following questions:1. What is known about the environmental, social,and economic impacts of certification andlabeling?2. What is known about whether standards andcertification systems are effective tools forpromoting sustainability, and if so, under whatconditions?The Assessment also sought to assist interestedstakeholders in making informed and strategicdecisions about the use and value of certificationsystems. Stakeholders, in this case, refers tobusinesses considering taking part in certificationschemes, institutions considering fundingsuch schemes, and NGOs seeking to determinewhether to launch, or continue supporting, suchschemes. Steering Committee members soughtto make recommendations for these stakeholdersthat were grounded in published, peer-reviewedscholarly research on certification schemes; theyalso drew on other published reports and theirown extensive experience with such systems.Steering Committee members were interestedin exploring whether, when, and how certificationsystems have, or might, ameliorate resourcestewardship challenges. Members neither viewcertification as a “silver bullet” nor mean to encouragethe uptake of such systems for their ownsake. Rather, they are committed to promotingsustainability, broadly, and sought to determinehow well standards and certification systems havebeen contributing to that end, both independentlyand in combination with other tools. In addition,they sought evidence of the performance of standardsand certification systems as compared toother viable alternatives—not against hypothetical“perfect” alternatives. Committee memberssee certification as one tool of many, and onethat should be used in an incremental, step-wisefashion along with other forms of public, private,regulatory, and voluntary systems to achieve thebest results.Origins of the AssessmentIn 2008, with support from the David and LucilePackard Foundation, the National ResearchCouncil’s Roundtable on Sustainability organizedan expert consultation on the role of certificationin promoting more sustainable productionand consumption. The science director for Mars,Incorporated—one of the largest chocolatemakers in the world—co-chaired the discussion.(Mars had committed to sourcing 100 percentof its cocoa from sustainable sources by 2020and was seeking a certification system that couldToward Sustainability: The Roles and Limitations of Certification

Introduction 3work at the scale required.) As a follow-up, Marsand the Packard Foundation—together with theWalton Family Foundation—joined forces tosupport the organization of a multi-stakeholdercollaborative analysis of the state of knowledgeregarding standards and certifications systems.This analysis eventually came to be known asthe State-of-Knowledge Assessment of Standardsand Certification. The three organizations providedgrant support for RESOLVE, a nonprofitmediation and facilitation organization, to serveas Secretariat for the Assessment.In September 2009, RESOLVE and the Assessmentorganizers convened 34 experts, representing abroad array of interests and sectors, to providefeedback and ideas on the Assessment processand approach. Subsequently, the organizersinvited a small but diverse group of individualsto form the Assessment’s Steering Committee.The first Steering Committee call took place inDecember 2009, at which time the Committeeitself took responsibility for the process and workplanand proceeded to invite several additionalparties to join.ParticipationThe composition of the Steering Committeeis diverse, with representatives from corporations,environmental organizations, certifyingorganizations, and academia. (See Appendix N.)The Committee sought to include governmentrepresentation as well, but the agency officialsapproached said they preferred to stay informedof the proceedings but not involved.ProcessThe Steering Committee met in full plenary sessionfive times: in March and October 2010, andin March, July, and November 2011. They alsomet numerous times in conference calls andworking groups. (See Appendix M for a completeAssessment timeline.)Working groups organized early in the processcommissioned literature reviews to explore whatis known about certification in three specificindustry sectors: agriculture, wild-caught fisheries,and forestry. Another group exploredcross-cutting issues, such as drivers for uptakeand a typology of private governance systems.Later, a sector review on aquaculture was alsocommissioned. Ad hoc groups addressed issuesrelating to business drivers for pursuing certificationand pathways for the evolution of certificationsystems. As the process drew toward a conclusion,working groups were formed around eachof the chapters of this report.The literature reviews, as well as other researchand analysis commissioned from external consultants,significantly helped to inform the SteeringCommittee’s discussions and conclusions. In particular,the papers in the Appendices—includingthe sector reviews in Appendices D, E, F, and Gand other research contained in Appendices B,C, H, I, J, K, and L— were either developed by,or with the assistance of, consultants who wereexternal to the Steering Committee and are listedas authors.Throughout the process, Steering Committeemembers worked to build agreement on theproject’s vision, scope, process, and work plan;discussed in depth the relevant substantiveissues; drafted and reviewed report sections;and ultimately forged consensus around keyinsights and recommendations and the contentsof the six main chapters of this final report. TheAppendices, while commissioned by the SteeringCommittee, are independent products writtenby other authors. These materials should thusnot be construed as necessarily representing theSteering Committee’s views, even when the authoris a Steering Committee member, a funder, or theSecretariat. Committee members were guided byan agreed-upon terms of reference that outlinedthe roles and responsibilities of members. (SeeAppendix N.)By design, the Assessment was undertaken byindividuals who were actively involved in certificationsystems and who, during the course ofthe deliberations, were thinking and speakingfrom their own experience as well as analyzingpublished academic and nonacademic literature.Toward Sustainability: The Roles and Limitations of Certification

Introduction 4The diversity of perspectives and opinions at thetable enabled rich, in-depth discussions and wellconsidered,thoroughly vetted conclusions.The Committee also sought to gather inputfrom parties external to the process whoseexperience with certification would contributeto the Assessment. In September 2010, membersheld an outreach meeting in London withmore than 40 stakeholders from businesses,NGOs, certifying organizations, and universities.An October 2010 meeting in Washington, DC,engaged business and NGO leaders in a discussionabout how these sectors decide whether toparticipate in certification systems. In addition,the Committee published a brief project descriptionin the European Tropical Forest ResearchNetwork’s annual journal; maintained a wikiwebpage containing background informationabout the Assessment; and held informal phonediscussions (about potential opportunities forcollaboration) with representatives of governmentagencies, NGOs, companies, and foundations.Finally, Steering Committee members chose to havethe Assessment report peer reviewed by expertsexternal to the process. First, each of the majorchapters was reviewed by individuals with specificrelevant expertise. Then a revised version of thefull report was reviewed by two additional experts.After both review periods, Steering Committeemembers considered each of the reviewers’comments and addressed them in the text asthey determined appropriate. More detail on thepeer review process, including the names of thereviewers, can be found in Appendix O.ScopeThe Assessment focused primarily on private,voluntary standards and certification systemsthat address food and natural resources, inparticular systems in agriculture, forestry, wildcaughtfisheries, and aquaculture. Also, the scopecomprised primarily multi-stakeholder standardsinitiated by environmental and social NGOs, inpartnership with business interests, and involvingthird-party assessments of performance. Whilethe Assessment did explore programs with otherhistorical origins—including those initiated andrun by business interests—the Assessment’semphasis was on the multi-stakeholder model.Also falling outside the Committee’s scope weresystems such as GreenSeal and TerraChoicethat address the full lifecycles of manufacturedproducts.This scope was determined in part because manyof the multi-stakeholder natural resource systemshave the longest track records and, therefore,were more likely to have a body of research availablefor review, and in part because they bestreflected Steering Committee members’ collectiveexpertise and interests.Framework for theAssessment and This ReportThe figure on the next page provides a frameworkfor understanding the Assessment and organizingthe conclusions that follow. The green boxesdown the left side describe the key questions theAssessment sought to answer. The items in thecenter, in orange boxes, align with the chaptersin this report. And the blue boxes at the rightdescribe the inputs and methodologies used toanswer the questions in those chapters.Per the orange items in the graphic, this report isorganized into the following chapters:▪ Chapter 1 sets the context by describing thestructure, evolution, and current status ofkey standards and certification systems, inaddition to challenges they face. (This chapteris not shown in the graphic.)▪ Chapter 2 discusses the various actorsinvolved in certification systems—notably civilsociety, government, and businesses—andtheir respective roles and interests and driversfor participating.▪ Chapter 3 describes what is known aboutthe direct (and to a lesser degree, indirect)impacts of certification systems, drawingprimarily on the sector-specific literaturereviews conducted.Toward Sustainability: The Roles and Limitations of Certification

Chapter1Setting the ContextTo set the stage for the chapters that follow, this chapter describes briefly the emergenceof the standards and certification movement, the current status of some of the leadingstandards and certification systems, the components or design features that make up mostsystems, and some of the challenges those systems face today.But first, some definitions. Standards are adefined set of social, environmental, and/or economiccriteria. By complying with these criteria,enterprises translate a standard into concretepractices. Certification is a means of providingassurance that products or services comply withthe criteria. Standards and certification systemsmay have many objectives, but at their most basicthey provide a framework through which differententities (e.g., nongovernmental organizations(NGOs), businesses, government, etc.) can cooperateusing a common language to deliver moresustainable practices.The Emergence of Standardsand Certification SystemsPrivate, voluntary standards for sustainable productionemerged long before a link was madeto certification. In fact, standards for organicagriculture were developed as early as the 1920s.These standards represented the translation of aphilosophical approach to agriculture into a setof standardized growing practices. The standardsemerged from bottom-up, local standards thathad developed independently around the world,led mainly by groups of farmers themselves.Over time, these local standards were broughttogether, and a more unified, though not identical,interpretation of organic agriculture and theprinciples and criteria underlying it emerged. TheInternational Federation of Organic AgricultureMovements (IFOAM) was established in 1972 asa communications network among the variousorganic agriculture initiatives. 1This approach to standards development—wherein multiple, locally developed standardscoalesced to create a common standard—wasa product of the early stages of the standardsmovement and occurs in only a couple of otherinstances, notably fair trade (Colitt, 1995) andsustainable tourism. The fair trade movementevolved in the early 1990s from a well-establishedEuropean network of shops that specializedin direct trading relationships. The FairtradeLabelling Organizations International (FLO) wasestablished in 1997 to bring together variousnational initiatives under one roof. Fair tradecertification focused initially on agricultural commoditiesthat were critical to small farmers andworkers, including coffee, tea, cocoa, and sugar. Ithas been expanding to include other agriculturaland non-agricultural commodities.In contrast to these examples, most other sustainableproduction standards emerged as the resultof a conscious effort by a small group of nonprofitorganizations to convene and engage a crosssectionof stakeholders within a given sector,most notably bringing retailers and manufacturersto the negotiating table. The first attempt toimplement this new approach came with theestablishment of the Forest Stewardship Council(FSC) in 1993. The FSC built in part on the workof the Rainforest Alliance’s SmartWood program,which had been established a few years earlier1 www.ifoam.org/about_ifoam/inside_ifoam/history.htmlToward Sustainability: The Roles and Limitations of Certification 6

Chapter 1: Setting the Context 9Box 1.1 Current Status of Key CommoditiesForests• Percent of global forests managed to FSC or PEFC standards: 9• Hectares covered: 341,703,696• Percent of these forests that are temperate or boreal (nottropical): 93• Price premiums for certified forest products: vary widely, from0 to 56 percent above uncertified productsCoffee• Percent of global coffee exports that are sold as compliant withsustainability standards: 8 (UTZ Certified, Rainforest Alliance,4C, Fairtrade, organic, CAFÉ Practices, Nespresso)• Percent of global coffee that is produced in compliance withthese standards: 17• Percent of this coffee produced in Latin America: 77• Price premium, per pound, for this coffee: US$ 0.05–0.10Tea• Percent of global tea produced for export that is compliant withsustainability standards: 7.7 (Fairtrade, organic, Ethical TeaPartnership, Rainforest Alliance, GlobalG.A.P., UTZ Certified)• Percent of this tea that is produced Africa: 70• Price premium, per kilo, for this tea: US$ 0.50–1.38Cocoa• Percent of cocoa in global trade that is compliant withsustainability standards: 1.2 (UTZ Certified, Rainforest Alliance,Fairtrade, organic)• Percent of this cocoa that comes from the major cocoaexporters: 3 (Ghana, Ivory Coast, the Dominican Republic,Peru)• Price premium, per kilo, for this cocoa: US$ 0.07–0.29Fish• Percent of global wild landings of fish for human consumptionthat are certified: 7• Percent of aquaculture production that is certified: 2.6• Percent of U.S. fishery landings that are certified: 60• Number of global fisheries that are certified: 252• Price premium: small to nonexistentWild fisheries data are from Appendix E. Aquaculture data arefrom Appendix D. All other data are from Potts, van der Meer, andDaitchman (2010).Current Market Status of KeyStandards SystemsBox 1.1 provides data on the current market statusof key voluntary standards and certification systemsrelating to forestry, fisheries, and food.The data on forests, coffee, tea, and cocoa in Box1.1 come from a report by Potts, van der Meer,and Daitchman (2010), and it should be notedthat all of the initiatives examined in that reportwere experiencing rapid growth at the time ofits publication. For example, sales of certifiedsustainable cocoa and coffee grew 248 percentand 433 percent, respectively, over the five yearspreceding the report’s release. The production ofcertified tea grew 2,000 percent during that samefive-year time period. At the time of this writingthen (some two years later), it is highly likely thatthe data in Box 1.1 underrepresent actual currentmarket share and total volume.Going forward, the supply of certified coffee andtea is set to increase even more due to variousbuyer initiatives. For example, Tetley, Unilever,Twinings, and Mars have either sourced or committedto sourcing tea from sustainable supply,and Kraft, Nestlé, Sara Lee, and Mars all havemade commitments to increase the sustainablesupply of coffee (Potts, et al. 2010). 8Components of Standardsand Certification SystemsThe private, voluntary standards and certificationsystems that are the focus of this Assessment aimto improve the sustainability of production andconsumption through market-based incentivesfor compliance with socially and environmentallypreferable practices. 9 As noted at the outset ofthis chapter, at the core of any voluntary standardssystem is the standard itself—a defined set ofsocial, environmental, and/or economic criteria.8 See also www.marsdrinks.com/mars-drinks/en/Sustainability/News/FLAVIA-Rainforest-Alliance-Certified-coffee.htm.9 See Appendix L for an Assessment-commissioned paperby Tracey Roberts comparing standards and certificationsystems to other common forms of voluntary, privategovernance.Toward Sustainability: The Roles and Limitations of Certification

Chapter 1: Setting the Context 10Certification then provides assurance to customersthat the certified products or services meetthe criteria.Although there are many variations in the structureof standards and certification systems, mostsystems have the same basic components carriedout by a similar set of organizations:▪ The standard setter is responsible for settingthe standard and often has responsibility forthe management of the standards system.Other stakeholders are often engaged directlyin the governance of the standard setter. (SeeChapter 2 for a discussion of some of the keystakeholders.)▪ A certification body is responsible for makingdecisions about compliance based on theresults of audits—i.e., reviews or assessmentsto confirm whether the practices or servicesestablished to meet the standard are beingimplemented. Auditors often work for certificationbodies and are responsible for carryingout the audits.▪ An accreditation body is responsible forevaluating the competence of the certificationbody and the auditors.▪ Logo licensing and the marketing of thestandards system are sometimes carried outby a legally separate but linked organization ororganizations.▪ Capacity building of enterprises for certificationis carried out by a range of organizations,some linked to the standard setter and othersindependent.▪ In addition to these activities, organizationsthat participate in the development andimplementation of a standards system engagein a variety of complementary activities, fromadvocacy and awareness-raising to researchand policy making.These types of organizations are illustrated inFigure 1.1. Their key functions and challenges aredescribed in more detail in the remainder of thischapter.Setting the StandardA standards system is built around the standardand the performance requirements containedwithin it. Sustainability standards have traditionallyprescribed the management practices mostlikely to deliver on the desired sustainability results(Tollefson, Gale, & Haley, 2008). For example,where biodiversity conservation is a desired outcomeof a standards system, the standard mayrequire practices such as conservation set-asides,natural vegetation coverage, and buffer zones toachieve that result.Typically, the content of a standard is developedthrough a process of negotiation and compromisebetween subject matter experts and interestedstakeholders. For example, forestry and fisheriesexperts in the FSC and MSC, respectively, participatein technical advisory bodies, translatingconsultation input from nontechnical stakeholdersinto language suitable for inclusion in anauditable standard.In some standard-setting processes, the level ofperformance to be achieved is explicitly definedat the outset. 10 In other cases, general objectivesare set at the beginning and then refinedand finalized by the stakeholders that make upthe standard-setting authority. Either way, standardsetting involves consultation processes thatenable interested stakeholders to participate inthe development of and decision making aroundthe content of the standard. Many sustainabilitystandards systems use the ISEAL Alliance’sStandard-Setting Code of Good Practice as aguideline for setting standards. 11In addition to the content of the standard, akey part of standard setting is determining thestructure or design of the standard. The structurehas significant implications for how the standardis implemented and, by extension, the potentialsustainability impacts resulting from compliance10 e.g., the Common Code for the Coffee Community11 www.isealalliance.org/our-work/codes-of-good-practice/standard-setting-codeToward Sustainability: The Roles and Limitations of Certification

Chapter 1: Setting the Context 11Figure 1.1standardwho sets it?compliancewho verifies it?certificationbodyconstituentsauditorsstakeholderscertifiers1owner of standardgovernance bodyobjectives & principlespractice/performance criteriacompliance indicatorsapplication guidance2accreditorsVoluntary standards:adopters or third partiesStandards as a condition of access:business associations, market gatekeepersMandatory standards:regulatory agencieswhat’s in it?who has authority?revisionevaluation ofimpacts and practicesfeedback fromstakeholders4sustainabilitylabel3Toward Sustainability: The Roles and Limitations of Certification

Chapter 1: Setting the Context 12with the standard. The decision about whetherthe standard should set performance requirementsor outline management practices is themost obvious example of two different structures,but structural decisions can also be madeabout scoring mechanisms, critical criteria, andpass/fail levels. Options range from managementsystem standards to threshold standardsand from continuous improvement models to“traffic light” systems. A threshold standard, forexample, requires the certified entity to meet allof the critical or mandatory criteria as well as aset percentage of the other criteria. The MSC hassuch a standard; it requires a threshold score of80 out of 100 for each of its three principles. TheCommon Code for the Coffee Community (4C)scheme has a traffic light system in which “red”criteria must be met and an average “yellow”must be achieved overall. FLO has a continuousimprovement model in which producer groupsmust meet entry requirements at the outset andthen additional criteria over time.Assuring ComplianceOnce a standard has been defined and is beingapplied by participating enterprises, the marketusually requires some form of assurance that theenterprise is actually meeting the requirementsin the standard. For systems with market-facinglabels, assurance also serves to support consumerconfidence in the legitimacy of the label.This assurance often takes the form of a qualifiedauditor visiting the enterprise and assessing theircompliance with the standard by looking at boththe practices and documentation of the enterprise.The audit can range from a simple checklistapproach to a more in-depth assessment thatincludes interviews with management, workers,and local community members.The assurance process can take a number offorms, including verification, certification, andaccreditation, each with varying levels of independenceand rigor. Verification is the act of assessingcompliance with a standard and is usually carriedout by assessors or auditors. Certification is whena formal decision on compliance is made basedon the results of an auditor’s report. Accreditationis then another layer of assurance consisting of anassessment of the competence of the certificationbody to determine compliance with the standard.No matter the form used, there is a typologyof assurance models ranging from less to moreformal and from less to more independent, asfollows:▪ First-party assessment—a self-assessment▪ Second-party assessment—an assessmentby an interested party (e.g., a producer group,trade association, or buyer)▪ Third-party assessment—an independentanalysis conducted by a party not related tothe entity being assessedThese models can also be combined, to thebenefit of both accessibility and rigor. Group certificationmodels, for example, which are prevalentin agriculture, combine a second-party internalaudit and a peer-review process among anorganized group of producers with a third-partyindependent assessment of the group’s managementsystem. This approach enables small-scaleproducers to enter into certification through aproducer group, thus sharing the costs of externalverification. Standards systems are now looking atinnovative ways to combine self-assessment withsecond- and third-party audits to streamline thecertification process.The systems addressed in depth in this reporttypically use third-party assessments, though theyhave the capability to integrate this with groupcertification models for small and medium-sizedenterprises.Auditor CompetenceThe role of auditors or assessors in a standardssystem is critical (Courville, 2004; Morimoto,Ash, & Hope, 2005; Power, 2003). These arethe individuals responsible for assessing compliancewith the standard and, as such, need tobe competent at their jobs. Auditor competencederives from a combination of skills, knowledge,and personal attributes. Standards systems takedifferent approaches to auditor oversight, includingthe training and professional development ofToward Sustainability: The Roles and Limitations of Certification

Chapter 1: Setting the Context 13auditors, the qualification or approval of auditors,and calibration between auditors. Most standardssystems require that auditors have some formaltraining, often defaulting to ISO 9001 QualityManagement System auditor training. Somesystems, recognizing that this is insufficient,are beginning to take a more hands-on role inqualifying auditors. 12 Others already have trainingand testing programs in place that auditors arerequired to complete before they can undertakeassessments. 13GovernanceStandards systems generally have governancestructures based on one of two models: amembership-elected governance body, or anappointed, representative governance body. Bothmodels have strengths and limitations. The electionof governance bodies by members is the mostdemocratic, assuming no significant limitationsexist on entry to membership. If the governancestructure is done well, then stakeholders are lessconcerned about whether they have an adequatevoice in the process and are more focused on thefunction of governing the organization. Appointedgovernance bodies can include representationfrom key stakeholder groups and are often morestreamlined. However, more effort is required inthis model to ensure that all stakeholders feelrepresented. Beyond the core governing bodies,most standards systems also appoint technicalcommittees that are responsible for managingdiscrete components of the work of implementinga standards system (Domask, 2003).FinancingAlmost all sustainability standards systems relyto some extent on donor funding to supportthe delivery of core services, particularly in theirstart-up and early growth phases (Bartley, 2007a;Potts, et al., 2010). In the start-up phases, theseinitiatives have typically used donor funding tohire management and staff to produce policiesand standards at the global and regional levels.These capacity-building, standards-drafting, andnetwork-building processes are nonprofit activitiesthat are a natural fit for funding by foundationsand other philanthropic institutions.Standards systems have then used strategic planningto shape organizational growth. Strategicplanning completed for Boards and funders in thefirst few years of a certification system’s existenceis likely to produce medium-term plans for thedesign and delivery of services for certification,accreditation, membership, and stakeholdereducation, as well as commercial services suchas licensing. These revenue-generating activitiesare what move an organization toward increasedfinancial sustainability. Other governance tasks—including data collection, analysis, and reporting,as well as marketing and advocacy—are critical toinstitutional effectiveness but unlikely to be otherthan cost items for the system over time.Efforts to achieve long-term financial stabilityand reduce dependence on donor funding haverequired an evolution of income sources overtime. Most established standards and certificationsystems derive income from licensing fees fromon-product labels or from certification activitiesor training. Given the increasing number of labelsin the marketplace and reduced philanthropicsupport for newer systems, newer systems areless likely to benefit as much from label-relatedrevenues. Other funding sources do exist, suchas fees charged on certificates issued or volumescertified, but these have yet to produce meaningfulcontributions to revenue lines. In the mediumand long terms, the structure of a sector and thedesign of a standards system will influence thesystem’s strategic options for revenue growth andsustainability (Cabarle, Hrubes, Elliott, & Synnott,1995; Elliott & Donovan, 1996; Wenban-Smith &Elliott, 1998).12 e.g., the Forest Stewardship Council and the Roundtableon Sustainable Biofuels13 e.g., Social Accountability International and GlobalG.A.P.Toward Sustainability: The Roles and Limitations of Certification

Chapter 1: Setting the Context 14Challenges Faced by Standardsand Certification SystemsWithin each of the functions of a standardssystem discussed above are inherent challengesand trade-offs. This section elaborates on someof those challenges and describes questions andideas that Steering Committee members believestandards systems ought to consider.Challenges regardingSetting the StandardSustainability standards have traditionally prescribedthe management practices most likelyto deliver on the desired sustainability results(Tollefson, et al., 2008). The shortcoming of thisapproach is that it is based on the assumptionthat the practices lead to the intended results.As Chapter 3 will show, the implementation ofthese management practices has varied, and it isdifficult to firmly attribute observed sustainabilityimpacts to certain practices, and thus to determinewhether standards systems are achievingtheir intended objectives.More recently, the content of some standards 14has shifted to include desired outcomes (alsoknown as performance-based measures), allowingcertified enterprises more flexibility in howthey reach those outcomes. For example, a standardthat aims to ensure the integrity of waterresources may include a criterion that sets thelevel of acceptable water turbidity, but remainssilent on the practices required to achieve thatlevel. In addition to providing flexibility, thisapproach improves the ability of standards systemsto measure and report on the sustainabilityimpacts of compliance.This outcome-driven approach has some limitations,however. These limitations include theincreased costs involved in measuring someoutcomes, the subjectivity involved in choosingwhat outcomes to measure (e.g., which speciesto count as a measure of biodiversity conservation),and the inability to isolate the impacts of acertified enterprise from impacts at the landscapelevel. Using the water turbidity example, an enterprisemay implement better water managementpractices but be situated downstream from a pollutingfactory, thus leaving the enterprise unableto be certified. In addition, performance-basedstandards may not be appropriate for single-issuestandards (as opposed to those that look at broadmeasures of sustainability). Ultimately, standardsmay evolve over time to include a combinationof practice-based and outcome-oriented criteria.Little research has been done to determine whichstructural models are most effective in terms ofperformance and resulting impacts. Standardscan be set explicitly with a high performance bar,a low performance bar, or multiple tiers of performance.15 The level of performance establishedwill affect the ease with which enterprises canachieve certification, but will also influence thesocial and environmental impacts that result.This does not necessarily mean that higher-barstandards cannot be broadly accepted; some havealready begun to reach significant market scale. 16Ultimately, the market for certified productsand services is large enough to accommodate anumber of different systems. The critical issueis to determine what incentives need to be inplace to encourage enterprises to continue toimprove their performance over time rather thansettle at the level of a low performance bar. Moreinformation is needed to understand the differentapproaches, to see which have effective incentivesin place to drive producers at a lower performancelevel toward a higher level.Challenges regardingAssuring ComplianceGiven the costs associated with certification, theassurance process is sometimes viewed as aconstraint to the achievement of the system’s sustainabilityobjectives rather than a benefit. Whilethird-party, independent certification is usually themost rigorous assurance approach, it is also oftenthe most costly. The suitability of an assurance14 e.g., Bonsucro, a standard and certification system forsugar cane15 For example, 4C is explicitly an entry-level standard.16 For example, RA-SAN, the FSC, the MSC, and FLOToward Sustainability: The Roles and Limitations of Certification

Chapter 1: Setting the Context 15model depends on its fitness for purpose—thatis, does the model meet the assurance needsof the intended audience at the least cost andbureaucracy? End users of a standards systemoften influence the type of assurance required; themore direct the message to consumers, the moreformal the assurance model required. 17New tools, such as risk-based modeling, areemerging as a means of reducing the assuranceburden. In risk-based modeling, risk assessmentis introduced at a number of stages in the certificationprocess as a tool to first identify thepotential risks of noncompliance and then assesswhere those risks are most likely to occur. Theresults of the risk assessment can be used toguide more-efficient sampling at different pointsin the assurance process, from determining thefrequency and intensity of audits to the auditorchoosing which aspects of standards complianceto pursue in greater depth. 18Some standards systems are also consideringoptions for rebalancing the cost-to-benefit ratio,often by increasing the benefits of certification toparticipating enterprises. For example, standardssystems could encourage auditors to engagein capacity building during audits. This is oftencounseled against, given the potential conflict ofinterest of an auditor as both advisor and assessor.But in these cases, the auditor plays the roleof “extension agent” for enterprises that mightnot otherwise have access to technical support. 19It is worth noting that certification is only oneroute toward standards-compliant practices.Becoming certified is a choice made by individualenterprises, typically for market recognition andreward, assessment of their performance, a roadmapfor improvement, or a strategy for managingrisk. However, enterprises can be fully compliantwith a standard and choose not to certify. Interms of impacts, there is very little differencebetween a standards-compliant enterprise thatis certified and a standards-compliant enterprisethat is not, apart from the potential financial ormarket incentives for the certified enterprise tostay compliant over time. Similarly, standards canbe used as a framework for capacity building oras implementation criteria for meeting certainregulatory requirements.Going forward, it would be useful to betterunderstand the range of existing models of assurance,their relative strengths, weaknesses, andlimitations, and stakeholder expectations aboutwhich models are appropriate for what purposes.In managing these expectations, a significanteducation component is required. Standards systemsneed to have a clearer and more rigorousunderstanding of the levels of assurance that canbe delivered through their respective assurancemodels, based on their use of risk analysis andsampling methodologies. End users of standardssystems need to understand that certificationis not a guarantee of 100 percent compliance,and that it is more important to understand howthe standards system responds to instances ofnoncompliance. The ISEAL Alliance is facilitatingthe development of an Assurance Code of GoodPractice, to be published in 2012, that will start toaddress these issues.Auditor Competence andIntegrity ChallengesGiven the diversity of socio-cultural and environmentalcontexts in which auditors operate,combined with relatively high levels of subjectivityin the auditing process, the ability of auditorsto make consistent assessments is essential. Ina recent ISEAL Alliance survey on priorities foran Assurance Code of Good Practice, respondentsranked auditor competence as the mostsignificant challenge to be addressed. 20 Despitestandards systems having recognized and workedfor years to address this issue, auditor competenceremains one of the most significant challenges to17 www.isealalliance.org/online-community/resources/background-research-for-the-assurance-code-project18 Ibid.19 Ibid.20 www.isealalliance.org/our-work/our-codes-of-goodpractice/assurance-codeToward Sustainability: The Roles and Limitations of Certification

Chapter 1: Setting the Context 16the integrity and credibility of voluntary standardsand certification. 21In the auditing of social and environmental performance,it is usually not sufficient that auditorshave completed the required training courses,have the requisite knowledge about the standardand the sector, and know how to carry out anaudit; auditors also need skills in stakeholder consultationand interviewing. Certification bodiesare often able to identify early on who will makea good auditor based on the “soft” skills that theindividual possesses. These personal attributescan make the difference between a good auditorand a great one. 22Among the key challenges faced by standardssystems in ensuring competent auditors is thevariability of the contexts to which the standardis applied. Given that many of these standardsare intended to apply globally but need to takeinto account local social customs and norms aswell as ecological realities, it is not surprising thatauditors have a hard time being consistent in theirinterpretations of the standard. This has as muchto do with the process in place to develop localinterpretations of standards as it does with thecompetence of auditors.In addition, comparatively few certification bodiesare based in developing countries, where a lotof certification takes place. In some cases, thereare not enough auditors who have a good understandingof local social and ecological contexts.Another challenge is that the volume of work insome countries is quite limited (particularly wherestandards systems have only recently expanded),so it is difficult to retain qualified auditors. Thus,certification bodies may not invest adequately inauditor training and professional developmentuntil the quantity of work and income justifiesthe investment (personal communication, ISEALmembers).A final key issue relating to auditor competenceinvolves integrity and conflicts of interest. In eventhe most rigorous assurance system, involvingthird-party assessments, auditors may becometoo friendly with their clients, or they may havefinancial incentives for maintaining the certificationstatus of the client. Outright fraud andcorruption, though infrequent, is also a risk.Experts in the field have a relatively good understandingof what is required to ensure thatauditors have both integrity and competence.It involves identifying individuals with the rightcombination of skills, knowledge, and personalattributes and supporting them with adequatetraining, professional development, oversight,and work. The challenge lies in transforming thisvision to reality. Most standards systems do nothave the economies of scale to support auditorsin these ways, as it can be prohibitively expensive.It may be useful for standards systems to exploreopportunities for coordination, such as the deliveryof joint training programs or shared auditorregistration, which starts to get at the efficienciesthat scale can bring (personal communication,ISEAL members).Governance ChallengesStakeholder engagement is a core tenet in manysocial and environmental standards systems, withstakeholders playing central roles in standardsdevelopment and governance. While this driveslegitimacy (Cashore, 2002) and buy-in, it can alsomake the standards system bureaucratic and slowto respond (Cashore, et al., 2004).Standards systemshave been accused of not being responsiveto changing market needs and, more importantly,have seen other sustainability tools innovate andevolve faster to meet changing expectations.The challenge for standards systems is that theyare required to combine stakeholder-driven processessuch as standard setting with operatinga business. The limitations of this model arisewhen stakeholders put their own interests firstin considering decisions related to the running21 www.isealalliance.org/online-community/resources/background-research-for-the-assurance-code-project22 Ibid.Toward Sustainability: The Roles and Limitations of Certification

Chapter 1: Setting the Context 17of the business. Often, the stakeholders involvedearly on in a standards development process havea continuing role in the implementation of thesystem over time.Stakeholders have legitimate and important rolesto play in standards development, interpretationsof the standard, and governance of these processes;and on the certification side, stakeholdersshould have input into certification assessmentsand comment on and react to certification decisions,where they are an interested party. However,when it comes to business decisions around pricingpolicies, how and where to expand the system,the relative emphasis on different strategies, andso forth, the multi-stakeholder model has createdchallenges for some standards systems interms of responsive and timely decision making(personal communication, FSC).Financing ChallengesFinancing is probably the most significant internalchallenge to the viability of standards systems andtheir ability to bring about sustainability impacts(personal communication, ISEAL members). Thelegitimacy of the private governance role played bystandards systems comes into question if they donot have successful business models underpinningtheir operations. Investors—whether donorsor companies seeking certified products—mustask themselves whether their investment in astandards system is secure.In 2010, the ISEAL Alliance conducted a firstphasestudy of the business models of standardssystems, in an effort to provide the understandingneeded to improve these models. The studyincluded interviews with standards system leadersand their key stakeholders. Among the challengesidentified in the study was the need to prioritizecustomer segments and to clearly define the“value proposition” of the standards system ormarket label. 23 According to demand-side actors,23 In this context, the value proposition is the commonunderstanding of why a company might want to take partin a certification system or why a foundation might wantto support that system—i.e., the value that would begained from doing so.such as retailers and consumers, major factorsthat would create value include:▪ credibility, i.e., reduction in reputationalrisk (in the value of the label or the nameof the organization); 24▪ a sufficient and reliable supply fromcompeting sources;▪ clear messages with regard to thesustainability mission;▪ cost-effectiveness; and▪ good marketing opportunities towardend consumers (ISEAL Alliance, 2010c).Standards systems must learn how to set theirpricing structures to reflect these value propositions,if they are to ensure the uptake of the systemand its financial viability over time. A recurringchallenge is how to adjust pricing at differentstages in a system’s development to better reflectthe market growth of the system and cover theoperating costs. As a standards system grows andthe security of investing in the system increases,so does the value proposition and, therefore, thefees that can be charged. However, adjusting feelevels is complex and has negative repercussionsfor existing clients. More research is needed onhow and when to increase fee levels along withincreases in the value propositions.With this information as context, the next chapteridentifies and discusses the major types of actorsinvolved in standards and certification systems.24 It is important to note that perceived credibility mayrelate to financing. That is, a system funded solely by theprivate sector may be perceived as less credible (or morebeholden to corporate interests) than one funded by amix of corporate, nonprofit and/or foundation sources.Multi-stakeholder governance may help to amelioratethese concerns.Toward Sustainability: The Roles and Limitations of Certification

Chapter2Why and How Actors Engagein Standards and CertificationIt is sometimes assumed that standards and certification systems are increasinglypopular largely because companies have discovered that certified goods can commanda price premium in the marketplace. However, consumers’ willingness to pay pricepremiums is in fact only one reason among many why businesses might choose toengage in certification—and it may be a weak or even nonexistent factor in some cases.As noted in Appendix E for instance, only about 10percent of fish certified by the Marine StewardshipCouncil are labeled as such—which means thatconsumers often do not know that they are buyingcertified fish, and thus that some factor other thanconsumer willingness to pay must be driving businesses’participation in that certification system.During the Assessment process, SteeringCommittee members explored the drivers thatmotivate certain types of organizations to engagein standards and certification systems—specifically,drivers for large brands and retailers, aswell as for civil society (nongovernmental organizations(NGOs) and foundations, primarily),and governments. 1 Committee members alsodiscussed the diverse roles these actors may playin such systems. Exploring the roles and driversof these types of actors was useful in helping togain a better understanding of the impacts thatstandards and certification systems have had andcould have in the future, and in setting the stagefor the development of recommendations.In this chapter, the first section discusses theroles and motivations of nonprofit organizationsthat have advocated for and been involved instandards and certification systems, as well asthe private foundations that have funded suchsystems. The second section focuses on key waysin which governments have played an importantrole in certification. And the third section looks atthe roles and drivers for large brands and retailersto engage in certification systems—i.e., thosecompanies that are using standards and certificationsystems as a way to promote environmentallyand socially responsible behaviors within theirsupply chains.In identifying drivers in this chapter, the SteeringCommittee does not mean to imply a direct causalconnection between a driver and the resultingbehavior of firms and other stakeholders. Theliterature supporting the Committee’s conclusionsmostly describes historical associations,correlations, and anecdotal cases.1 Several important types of actors were not addressed inany detail, due primarily to the need to have a manageablescope for the Assessment. Those not analyzed in depthinclude small producers, indigenous groups, traders, ratingsagencies, and national organizations for standardization,among others.Toward Sustainability: The Roles and Limitations of Certification 18

Chapter 2: Actors – NGOs and Civil Society 19Chapter 2, Section AThe Roles and Drivers ofNGOs and Civil SocietyCivil society organizations have been a driving force in the establishment andimplementation of many standards and certification schemes. These organizations includeissue-focused and advocacy groups and charitable foundations, as well as the organizationsthat own or “hold” standards systems.This section describes the roles that these typesof organizations have played and continue to playin the standards and certification arena. It thenoutlines the drivers impelling their engagement,and ends with questions that civil society organizationsmight ask themselves when consideringwhether or not to engage with standards andcertification systems.The Roles of Civil Societyin Standards andCertification SystemsCivil society organizations have been involvedin creating and developing standards and certificationsystems, implementing such systems,catalyzing consumer influence and demand forsuch systems, and engaging with industry to helpbuild stronger markets for certified products. Thissection describes each of these key roles in turn.As discussed more fully in the Business section, akey finding of this Assessment is that many businesseshave embraced standards and certificationin recent years as part of their core business operationsand thinking, and advocacy groups havefocused on inducing firms to join and complywith the requirements of standards and certificationprograms. This shifting of roles has in turnmodified the relative weight of civil society in suchsystems. This is not to say that civil society hasbecome less important, but rather that the rolesand focus of such organizations have sometimeschanged, as discussed in this section.Creating Standards andCertification SchemesCivil Society as Catalyst, Convener,and FunderThe first model of social change used in the conservationarena was articulated by Rachel Carsonin Silent Spring (1962), the book that launched themodern environmental movement. In this model,scientists would diagnose and warn of environmentalthreats. Those warnings would sparkpublic outcry, to which political leaders wouldrespond with new laws. Engineers, lawyers, andbusiness managers would respond to the newlegal mandates via technological and institutionaladaptations, removing or mitigating the threat.This model did bring about legal, technological,and institutional changes, with striking benefitsin cleaner air, more advanced sewage treatmentplants, protection for endangered species, anda widening protection of land and waterways innational parks, wildlife refuges, and other similarbiological reserves.Yet by the early 1990s there was a growing sensethat this legal and policy model was inadequate tobring about important environmental objectives.Transboundary problems such as climate change,the depletion of ocean resources, and the loss ofbiological diversity in tropical countries could notToward Sustainability: The Roles and Limitations of Certification

Chapter 2: Actors – NGOs and Civil Society 20be tackled solely through national-scale policiesand regulatory systems. Tropical forests were stilldisappearing. And, the political environment hadshifted toward a preference for smaller government,freer trade, and resistance to regulation.Also, a rapid increase in economic globalizationmeant that pollution constraints could easilybe allayed by transferring production to foreigncountries.Two decades after Silent Spring, nongovernmentalorganizations (NGOs) such as Friendsof the Earth, the Rainforest Action Network, andGreenpeace were running boycott campaignsagainst unsustainably harvested tropical timberand other environmentally harmful practices, whilean array of socially focused NGOs led boycotts ofNike over labor practices in Asia (Donovan, 1996;Locke, 2002). (These actions followed successfulboycotts in the 1970s of table grapes becauseof farmworker issues, Shell Oil products due toinvestments in South Africa under apartheid, andNestlé for its marketing of baby formula (Murtagh& Lukehart, undated)).While these groups gained political leverage anddrew media attention, productive operating alternativeswere difficult to identify. In the forestryarena, legislative bans on the import of unsustainableforest products ran afoul of rules aboutunfair discrimination against tropical timber. Atthe international level, attempts to embed forestrystandards in the International Tropical TimberOrganization (ITTO) and to pass a global ForestConvention through the United Nations bothfell short, due to global North–South conflictsand opposition from the tropical timber trade(Cashore, Gale, Meidinger, & Newsom, 2006).It was against this backdrop that some NGOsbegan to promote sustainability-focused certificationsystems as a new and sometimesless-confrontational form of environmentaland social activism. As described in Chapter 1,a group of NGOs in the early 1990s, buildingon earlier efforts, coalesced to build the ForestStewardship Council (FSC) as a powerful formof nonstate market governance, regulating andmanaging resource use and trade (Cashore, Auld,& Newsom 2004). In most cases these effortsdid not supplant more confrontational efforts,but instead existed alongside them (McAdam,McCarthy, & Zald, 1996; Morton, 2002).Bartley (2007a et seq.) contends that the engagementof NGOs in certification, at least in theseminal case of the FSC, was shaped by a group offoundations acting collectively to build the field ofcertification. Bartley also notes that this approachto environmental problem solving coincided bothwith significant new barriers to the regulationof global commerce by national actors (e.g., theWorld Trade Organization (WTO) prohibitionon discrimination against tropical timber on thebasis of production issues, as well as rules of theITTO), and with a period of phenomenal growthin foundation assets.In the case of certification, the foundations thatmade the bulk of the investments 1 already hadin place a basic framework—the SustainableForest Funders Network—for collaboratingtoward a collective result. These foundations alsoshared certain key characteristics, including aliberal to moderate ideology, a history of fundingenvironmental organizations, and importantly,existing relationships with the World Wide Fundfor Nature (WWF), which was a central player inthe development of the FSC and similar models(Bartley, 2007a). Foundations strongly favored theFSC over its industry-sponsored competitors, butrather than merely fund the FSC itself, they usedtheir grants to build a larger field around thisorganization and to “make a market” for certifiedwood. Although a similar network did not emergeto promote the Marine Stewardship Council(MSC), major funding from foundations suchas the David and Lucile Packard Foundation andWalton Family Foundation enabled the MSC togrow, and complementary programs supporting1 Nine foundations—The Ford Foundation, Doris DukeCharitable Foundation, Rockefeller Brothers Fund,Surdna Foundation, Pew Charitable Trusts, MacArthurFoundation, Moriah Foundation, Wallace Global Fund,and Merck Family Fund—accounted for $33 milliongranted to forestry certification from 1995 to 2001(Bartley 2007a).Toward Sustainability: The Roles and Limitations of Certification

Chapter 2: Actors – NGOs and Civil Society 21public awareness of sustainable seafood havehelped to build its market.All told, foundations have been more importantto the development of U.S.-based certificationschemes than those in other parts of the world—particularly Europe, where other sources of fundinghave contributed significantly to the developmentand scaling up of certification. 2 Over a span ofnearly 20 years, donors have collectively investedmore than $150 million in the leading certificationorganizations and processes (Clay, 2005).Conroy (2007a) identifies several factors favoringfoundation and NGO leadership in developingthe standards and certification movement. Thesefactors include greater efficiency, in the contextof globalization, of working with standards thatcan be applied across national boundaries ratherthan with regulatory agencies in many countries,as well as a preference for private standards asless susceptible than national regulations to theWTO’s prohibition on process and productionmethods standards in international trade. Conroyalso notes that foundations and NGOs did notnecessarily make a decision to choose betweenactivist campaigns and certification initiatives, butrecognized the symbiotic relationship in whichsome groups raised public awareness of a problem(thereby raising the issue of reputational riskfor the company as well as consumer pressurefor action), while other groups leveraged thoseefforts by allying themselves with companies topress for certification as a solution.NGOs as Standard DevelopersAs the primary founders of many certificationschemes, NGOs have held a central seat at thetable to identify and set standards. The WWF tookthe lead in organizing the initial exploratory meetingfor the FSC in 1992 with other environmentalNGOs, social actors, retailers, government officials,and some forest company officials. A WWF2 Sources have included corporate allocations and publicfunding, including bilateral, multilateral, and guaranteedmarkets through favorable public procurement policies.While there is no central data source to cite, it is believedthat the bilateral and multilateral sources of funding combinedrepresent total investments that are three timesthat of all foundations combined.representative served on the FSC’s interim board,and the WWF continued to play a leading role inthe 1993 founding meeting in Toronto (Bartley,2007b; Cashore, et al., 2004). The RainforestAlliance had at that time already developeda forest certification standard and tested it inIndonesia, and so they worked with the WWF andothers to design the FSC standard. These playersdeveloped the FSC’s nine (later ten) principles forresponsible forest management and a governancestructure that gave equal weight to environmental,social, and business sectors. The structure didnot include government representatives.In the case of the MSC, numerous NGOs, industryplayers, and consultants came to the table todevelop its principles and criteria in meetingsaround the world starting in 1996. The processultimately involved more than 300 organizationsand individuals in workshops in Australia, NewZealand, Germany, the United States, Canada,South Africa, and Scandinavia over three years(Gulbrandsen, 2009). This initial NGO participationproved crucial to the MSC’s credibility lateron, when some NGOs were critical of early certifications.Although some felt the application ofthe principles and criteria was weak, few attackedthe standards themselves.NGOs from the global South have also playeda role in the formation of certification systems.For example, Southern NGOs, together withthe Rainforest Alliance, created the SustainableAgriculture Network in 1991. They first developeda standard for coffee, then moved to bananas;today the standard covers more than 25 crops inthe tropics. These groups own the standard, andthe Rainforest Alliance owns the trademarked sealthat signifies certification on a product package orlabel. The Rainforest Alliance also worked with theUnited Nations and a broad stakeholder groupto set up the Sustainable Tourism StewardshipCouncil and a global standard for sustainabletourism. 33 http://sdt.unwto.org/en/content/sustainable-tourismstewardship-council-stscToward Sustainability: The Roles and Limitations of Certification

Chapter 2: Actors – NGOs and Civil Society 22More recently, NGOs have played a leading rolein setting standards through multi-stakeholderroundtables. Since 2004, for example, the WWFhas hosted the Aquaculture Dialogues. More than2,000 people—including producers, NGOs, academics,and others—have participated in thesediscussions to date, which seek to identify theprimary environmental impacts associated withaquaculture and agree upon standards to minimizethese impacts. Of the eight dialogues started(for farmed shrimp, salmon, tilapia, bivalves, abalone,pangasius, trout, and cobia and seriola), fourhave been completed, with standards approved bythe multi-stakeholder steering committees. 4 Tomaintain the standards and recognize accreditedcertification bodies, the WWF (in partnership withIDH, the Dutch sustainable trade initiative) hascreated the Aquaculture Stewardship Council—afarmed fish alternative to the wild fisheries certificationprogram of the MSC. 5In some cases, NGOs have responded to standardsthat were first created by government or industrybodies. For example, NGOs have been leaders increating one of the first certification schemes forcarbon offsets—the CDM Gold Standard—basedon standards outlined in the Kyoto Protocol forthe Clean Development Mechanism (CDM). TheGold Standard is discussed more fully in Chapter4; it is essentially a means to create an additional,more rigorous standard above the “floor” establishedby the Protocol.Implementing Standards andCertification SystemsNGOs as Standard System OwnersAs discussed in Chapter 1, standards typically arehoused in an organization created specifically toown or hold the standard. For maximum credibility,this organization usually is independentof the NGOs that might have driven its creationand from the industry players that will be evaluatedagainst the standard. So, for example, theFSC was created as a separate organization to4 www.worldwildlife.org/what/globalmarkets/aquaculture/aquaculturedialogues.html5 www.ascworldwide.orgown the forest standards developed by NGOsand interested industry players. Similarly, theAquaculture Stewardship Council recently wascreated to own the standards developed throughthe multi-stakeholder Aquaculture Dialogues.Standards system owner organizations often arefunded by donors that also support environmentalNGOs, and NGO representatives and industryrepresentatives typically serve on their governingbodies, but the organizations maintain separateidentities.The responsibility of the standards system owneris to maintain the integrity and credibility of thestandard and to engage a network of other players,including auditors, certification bodies, andaccreditation bodies, as discussed in Chapter 1.These roles are not always separate; some standardsystem owners do auditing and certificationin house, while others may contract out for theseservices (Gilbert, Rasche, &, Waddock, 2011). Thestandard system owner may also license a logoor label for use by certified entities. The systemowner also is responsible for reviews or updates ofthe standards over time to maintain credibility, asscientific understanding and technology improve.Civil Society Organizationsas Governance ParticipantsThe governance of standards systems typicallyincludes decision-making bodies such as boardsthat run the organization and the system, as wellas technical bodies that focus on maintainingmeaningful standards. Including a broad range ofstakeholders in standard setting and governanceincreasingly is considered a fundamental componentof credible third-party certification schemes,to minimize bias (Cashore, 2002; Mena & Palazzo,forthcoming). The ISEAL Alliance, introduced inChapter 1, recognizes multi-stakeholder governanceas a core principle necessary for effective,credible certification schemes. 6NGOs are actively engaged in governance roles.For example, the FSC’s three-chambered GeneralAssembly includes two chambers dominated byNGOs—the environmental and social chambers6 www.isealalliance.org/our-work/defining-credibilityToward Sustainability: The Roles and Limitations of Certification

Chapter 2: Actors – NGOs and Civil Society 23(Cashore, et al., 2004). At least 50 percent of theCDM Gold Standard Foundation Board is madeup of NGO representatives. 7Similarly, NGO representatives have servedon the MSC’s Board of Trustees, its TechnicalAdvisory Board, and the advisory StakeholderCouncil, along with industry, academic, andgovernment representatives. Although the MSCstrives for a multi-stakeholder approach, only oneof its three governing bodies—the StakeholderCouncil—specifies how balance is to be achievedand requires NGO participation. The StakeholderCouncil, which provides nonbinding advice to theBoard, consists of a Commercial Chamber madeup of interests from the catch, processing, supply,retail, food service, and other commercial sectors,and a Public Interest Chamber made up of interestsfrom academia, science, management, andenvironmental NGOs. Technical Advisory Boardmembers are appointed by the Board based ontheir expertise. 8 Most environmental NGO representativeson the MSC’s Board of Trustees havebeen associated with the WWF.In some cases, NGOs participate in industrydrivencertification schemes. For example, theAquaculture Certification Council (ACC) hascreated a Standards Oversight Committee composedof NGOs, academics, and industry expertsto oversee the work of Technical Committees,which develop proposed standards. 9 For the ACC,expanding its governance to include a broaderrange of stakeholders is a key part of enhancingits credibility (personal communication, MichaelTlusty, New England Aquarium), particularly withthe launch of the rival NGO-created AquacultureStewardship Council. However, the Board of theGlobal Aquaculture Alliance, an industry tradeassociation, still has final say over approval of theACC’s standards.7 www.cdmgoldstandard.org/about-us/governance8 www.msc.org/about-us/governance/structure9 www.gaalliance.org/bap/oversightcommittee.phpNGOs as Certifiers/VerifiersMost standards systems employ one or morecertification bodies (or “certifiers”) to assesscompliance with their standards. These certifierscan be either for-profit or nonprofit entities, andthey work under contract to the entity wishingto become certified. The work of the certifiersis often overseen by an accreditation body thatassesses the competence of the certifiers toevaluate compliance with the standard. Under theFSC system, for example, NGO certifiers includethe Rainforest Alliance and the Soil Association.Under the Sustainable Agriculture Network, NGOcertifiers include Imaflora, Fundación Natura-Cert,ProNatura Sur, and several other NGOs. Organiccertification includes many nonprofit certifiers,including the Soil Association. The RainforestAlliance and the Soil Association also provide verificationand validation for several carbon-offsetprograms.NGOs and Civil Society as StakeholdersAs advocates for environmental protection, NGOshave a significant stake in decisions to grant aproduct a “seal of approval” indicated by a logoor label. Certification schemes thus often seekinput from NGOs and other stakeholders. Suchinput may include comment on draft reports oraudits and the appeal of certification decisions.Indeed, NGOs routinely provide input on auditsand comment at critical stages in the evaluationprocess. These practices are recognized by theISEAL Alliance as core principles necessary foreffective, credible certification schemes. 10At times, NGOs have objected to and appealeddecisions by certification bodies. For example,MSC certification of the New Zealand hoki in2001 was appealed by the Royal Forest and BirdProtection Society, with support from multipleNGOs, on the basis of concerns about fur sealand seabird bycatch and questions about compliancewith the New Zealand Fisheries Act.The certification (and recertification in 2006, inwhich WWF joined the appeal) was upheld bythe MSC’s appeals board because all procedural10 www.isealalliance.org/our-work/defining-credibilityToward Sustainability: The Roles and Limitations of Certification

Chapter 2: Actors – NGOs and Civil Society 24requirements were met (Highleyman, Amos, &Cauley, 2004). In another example, a challengeto the MSC’s certification of South Georgiantoothfish by the National Environmental Trust(NET), along with Greenpeace, the Sierra Club,and other organizations, was upheld (Highleymanet al., 2004) based on its potential to confuseconsumers. NET was conducting a campaign topersuade consumers to “take a pass on Chileansea bass” (the name under which toothfish wasmarketed). Despite the evidence that the smallSouth Georgian fishery was well managed, mostof the global catch of toothfish remained unsustainableand illegal.Engaging Consumers andStrengthening ConsumerInfluenceCivil society organizations serve to represent andgive voice to consumers as citizens, stakeholders,and owners of public goods and resources; toeducate and mobilize consumers to build demandfor certified products (or not—see Box 2.1); andto exert indirect influence over companies’ decisionsto use certification.Consumers who buy environmentally friendly orsocially responsible products presumably expecteither private benefits from the products (forexample, health benefits from organic or naturalfoods and products) or an altruistic “warm glow”associated with contributing to public well-being(Andreoni, 1990). They may place a high value onthe marginal improvements in social problemsmade through their own actions. As noted in theBusiness section of this chapter, many consumersindicate a preference for natural and sustainableproducts and rely on a broad range of civil societyorganizations, including those engaged instandards and certification, to ensure that thesepreferences are met.However, consumers can also express theirpreferences through collective action, not onlyin the public sector (e.g., through demands forlegislation and regulation) but also in the market,shaping both demand and supply through tactics(aimed at a company or its brands) such asshaming and blaming, mobilizing “good cop/bad cop” pressures, and campaigning to enlistfellow consumers in punishing bad performersand patronizing good ones. Civil society organizationsare often at the forefront of these campaigns(Lyon, 2010).When Greenpeace in 1994 campaigned againstShell Oil’s plans for disposal of the Brent Spar oilstorage platform, it initiated a boycott in Germanythat reduced Shell’s sales of gasoline by 20 to30 percent (Diermeier, 1996). Not all boycottsare that successful, but the threat of a boycottis a very powerful tool in the hands of NGOsseeking to influence corporate behavior. Indeed,Conroy (2007a) argues that the use of certificationsystems typically begins with a campaign byan NGO against a particular corporate behavior,often backed by a boycott threat. After a companyaccedes to the NGO’s demands, a certificationsystem is created to facilitate monitoring andcompliance with the company’s commitment.NGOs have also learned that they can raiseconcerns about a company’s brand image evenwithout a specific boycott threat—especially companieslike Coca-Cola and Nike, for whom brandimage is a large portion of overall shareholdervalue. As discussed in the Business section,companies will often respond quickly and evenproactively to protect the reputations of theirbrands in the marketplace.The exact processes through which NGO communicationsaffect brand image remain poorlyunderstood, but it appears such communicationscan help to drive individual consumer purchasedecisions, collective action by citizens and consumers,changes in investment practices byinstitutional investors, and/or increased politicalpressure from elected officials. 11Soon after the MSC was formed, a new NGOcalled SeaWeb began using strategic communicationsand social marketing to raise the profile ofocean conservation issues. It conducted marketresearch to determine what messages resonatedand began educating consumers about the11 See Lyon and Shimshack (forthcoming) for an attempt toidentify the channels through which Newsweek’s GreenCompany Ratings affected shareholder value.Toward Sustainability: The Roles and Limitations of Certification

Chapter 2: Actors – NGOs and Civil Society 25Box 2.1The Marine Aquarium CouncilThe failure of the Marine Aquarium Council (MAC) illustrateshow NGO-generated demand can influence certificationschemes. MAC was created in 1998 by the WWF and The NatureConservancy in partnership with leading industry players, topromote the sustainable management, collection, and handlingof animals used in the marine ornamental industry, includinghome aquaria. Most of these animals are collected fromvulnerable coral reefs in Pacific Island nations, many of whichlack the legal, scientific, management, and financial resources tomanage their take. With a stated goal of ensuring sustainabilityfrom “reef to tank,” MAC hoped to provide hobbyists a productthat also protected coral reefs. But NGOs in consuming nationsfailed to engage, and none worked to create demand for certifiedproducts. Moreover, due to supply chain challenges and qualityproblems, consumers had little faith in the label. Although manyfactors contributed to MAC’s decline, the lack of demand meantthat producers had no incentive to become or stay certified. Aftermore than a decade, few certified products are available, andMAC is no longer active (Amos & Claussen, 2009).connection between ocean conservation and thefood on their plates . It then engaged high-profile“gatekeepers,” such as famous chefs, to get theword out. SeaWeb also worked with the NaturalResources Defense Council in a successful marketingcampaign for improved management ofAtlantic swordfish. Other conservation groups,such as the National Audubon Society andMonterey Bay Aquarium, created seafoodguides for consumers (Boots, 2008). Similarly,the Rainforest Action Network led a campaignto engage consumers in demanding disclosureand ethical practices by lenders who supportedprojects resulting in tropical deforestation; 12 TenThousand Villages and Oxfam raised banners forfair trade; 13 and the Rainforest Alliance and othershave made tourists aware of more sustainablechoices. 14The linkages between the various channels thatinfluence corporate behavior remain an importanttopic for further research. For example, certificationand labeling schemes may in principleeither strengthen the demand for more stringentregulations or undermine it. Unfortunately, thereis limited knowledge about the conditions underwhich certification and government regulation arecomplements or substitutes, although it likely differsdepending on the context. Adding urgency tothe question, Heyes and Maxwell (2004) showedthat whether certification schemes are sociallydesirable depends critically upon its answer.Certification is beneficial when it works hand inhand with regulation, so that certification raisesthe standards for market leaders while regulationforces up the standards for laggards. In contrast,certification is harmful if it saps political demandfor legislation that would impose minimum performancestandards. These linkages are discussedin more detail in Chapter 4.Engaging with IndustrySome NGOs seek out industry partners that arenot targets of negative campaigns but present anopportunity to bring about meaningful change.NGOs work with these businesses to help themimprove practices and increase the supply of certifiableproduct on the market. For example, theNGO Sustainable Fisheries Partnerships (SFP)actively seeks out restaurant chains, retailers, andseafood distributors who source from problematicfisheries but have an interest in “greening” theirsupply. These businesses then create pressureon their suppliers to become MSC certified, andthe SFP advises the fisheries on improvementsneeded to obtain certification. 15The Tropical Forest Trust (TFT) plays a similarrole in the forest sector. The TFT collects feesfrom retailers for connecting them to responsiblesupply chains. These fees subsidize producers12 http://rainforests.mongabay.com/1024.htm13 http://fairworldproject.org/intro/history14 http://www.theurbn.com/2012/03/sustainable-tourismat-the-rainforest-alliance/15 www.sustainablefish.org/about-usToward Sustainability: The Roles and Limitations of Certification

Chapter 2: Actors – NGOs and Civil Society 26who want to move toward certification and providethem with technical assistance to do so. Althoughthe supply may not be fully certified at first, thegoal is to provide retailers with access to timberand wood products generated by forests that areactively and demonstrably working toward certificationand to provide a long-term responsiblesupply once they are certified (Overdevest, 2004).NGOs also have created buyers’ groups to helpretailers find responsible suppliers. The first suchgroup was the 1995 Plus Group in the UnitedKingdom, and later the Certified Forest ProductsCouncil in the United States. Today, the WWFGlobal Forest and Trade Network (GFTN) is amajor player in this role. These organizationsare nonprofit NGOs that pool FSC retailers andproducers to help retailers meet their demandfor certified product. The GFTN, for example,strives to develop trading networks by creatingregional organizations that maintain informationabout producers of responsible forest products,including where they are located and the speciesthey sell. Buyers identify the product lines andsource needs of the retailers seeking certifiedwood (Overdevest, 2004). The GFTN providestechnical guidance to companies on how to buyresponsible forest products and to forest ownerson how to move toward forest certification. 16Drivers of Civil SocietyParticipation in Standardsand Certification SystemsNGOs, foundations, and other civil society organizationsare highly diverse in their interests, values,and norms, and have been driven to participatein the development, implementation, criticism,and evolution of certification systems at differenttimes and in different ways. Perhaps the primarygeneral conclusion that can be drawn is that theirparticipation and support is conditional: Theysupport and engage with certification not becauseit is the norm, but because they see it as a potentialtool for advancing and accomplishing theirgoals. However, they will withdraw or respondif or when it fails to prove useful. At the sametime, a surprising portion of the NGO communitydoes not engage with certification at all; it simplyhas not been part of the strategic focus of manyNGOs.Like businesses, NGOs need to survive. Becausethey are mission-oriented rather than profit-oriented,there may be a tendency to think of NGOdrivers only in terms of achieving their overallsocial and environmental goals. But to surviveand thrive, NGOs must balance their substantivegoals with fundraising, membership, and branding(Clifford, 2002; Elkington & Beloe, 2010).Indeed branding, or distinguishing themselvesfrom each other, is a major factor in NGO survival(Elkington & Beloe, 2010) and thus perhaps animportant driver of engagement with certification.Targeting well-known companies for their harmfulpractices often draws significant media attention,which can help NGOs bring in funding andmembers as well as stimulate change. Groupssuch as Greenpeace might focus heavily on thesetechniques and maintain their brand by doing so.Others, such as the WWF, focus more on “solutiondesign” with consumers and businesses,include businesspeople on their boards, andestablish formal partnerships with corporations(Elkington & Beloe, 2010; Hoffman & Bertels,2010). Corporate funding (Hoffman & Bertels,2010) might influence an NGO’s preference for avoluntary rather than regulatory approach. By contrast,NGOs that have marketed themselves asconfrontational and attract supporters favoring a“take-no-prisoners” approach may have a hardertime engaging with certification as tool. In reality,many NGOs include aspects of both roles in theirbrands (Bartley, 2007a; Elkington & Beloe, 2010).A related aspect affecting NGO engagement withcertification is staff expertise. NGOs that primarilyemploy lawyers, scientists, and/or environmentaladvocates may not have the business or otherexpertise necessary to engage with large, multinationalcompanies on issues of supply chainsustainability and corporate responsibility.16 http://gftn.panda.orgToward Sustainability: The Roles and Limitations of Certification

Chapter 2: Actors – NGOs and Civil Society 27Box 2.2Key Questions for NGOs Considering CertificationStrategic Goals• What are the prospects for adopting a certification program asopposed to inducing government to act?• What are the strategic objectives of the certification system andhow closely do they align with your own mission and goals?• What role does market transformation play in your theory ofchange? (i.e., do you believe that market transformation canhelp to drive sustainable production?)Relevance of the Standards System• Do any of the existing certification systems address yourpriority issues (whether social, environmental, economic)?• If yes, does the certification system reach the geographic areasand types of resource use you need to reach?Impact of the Standards System• Is the system positively perceived by key stakeholders? Does itmeet global credibility standards? Who else is involved?• Can the system impact the issues you are working on atsufficient scale?• What level of recognition of the certification “brand” is there byconsumers or other end users?• Does the certification system have positive impacts on theproblem you are trying to solve?• How sustainable is the business model of the certificationsystem? How dependent is it on donor funds?NGO Role• If there is an existing certification system that will help you meetyour goals, how do you best direct it toward your priorities?• If there is not an existing certification system, do you want toplay a role in establishing one? What do you need to know inorder to make that decision?• Do you want to help to define and structure the certificationsystem? Do you want to ensure the credibility of the certificationsystem in implementation? Do you want to support market developmentfor certified products or help to build the supply base?• How much time and resources do you have to engage with acertification system? What is the most strategic use of thoseresources? How likely is it that you will have sufficient resourcesto continue to engage over time?• What kinds of coalitions can you build within the certificationsystem with organizations that have similar objectives so as tobe most strategic?See Box 2.2 for a series of questions for NGOsto consider when making decisions regardingwhether or not to take part in a certificationsystem.Drivers for FoundationsFoundations, too, are a heterogeneous group, withan array of motivations driving (or discouraging)their involvement with certification. Foundationstend to concentrate on the start-up and capacitybuildingphases of new approaches to socialproblems, rather than on long-term operatingsupport. And they prefer to fund organizationsthat can demonstrate results in a particular program,after which they move to other issues. Thishas proven a particular challenge with regard tostandards and certification systems, since—asdiscussed in Chapter 1—few such systems havesuccessfully developed self-sustaining businessmodels.Foundation funding for certification has moveddown the value chain to projects that help localcommunities and producers become certified.Some foundations established this support asa means to help local groups avoid being leftout as a result of certification programs in whichthe benefits could easily be captured by larger,wealthier producers. For other donors, certificationwork has shifted to local communities as partof a poverty-alleviation strategy (Taylor, 2005).In recent years, the shift in foundation dollarsaway from direct support of certification organizationsreflects a growing understanding ofthe context in which next-generation certificationprograms must adapt their strategies in order toinfluence markets more broadly.Funders recognize that even when consumers andbusinesses indicate a willingness, in principle, tomove toward more environmentally responsiblebehavior, the inertia in the system is immense.The resources of donors, which had proved sufficientto launch and nurture a new way of doingbusiness, may now seem inadequate to transformmarket behaviors in an entire sector. Key playersin the certification movement tend to comefrom environmental and science backgroundsToward Sustainability: The Roles and Limitations of Certification

Chapter 2: Actors – NGOs and Civil Society 28rather than business backgrounds and have hadlittle understanding of or stomach for the difficultdecisions involved in crafting standards andsystems that are feasible and practical enough tomake more than modest headway in establishedmarkets.Foundations have also begun to grapple with keyquestions and issues highlighted in other chaptersof this report and documented in the supportingbibliographies. These issues include, for example:▪ the cost and difficulty of acquiring and analyzingevidence of the impact of standards andcertification and how it was achieved;▪ the different circumstances and strategiesrequired for certification to gain a foothold inthe developing world and South–South trade;▪ finding appropriate balance and coordinating“carrots and sticks” to move producers towarda “gold standard” rather than fragmenting themarket with competing standards;The foundation sponsors of this Assessment hopeto use and share the results of the Assessmentto address key issues and to evolve their strategiesas they shift their role away from supportingthe established certification systems and towarddeveloping further innovation and strategies topromote large-scale sustainability in producerand consumer behaviors. Newer strategies mayinclude support for (a) better understanding anddocumenting the business case for sustainabilitystandards and more sustainable practices;(b) public/private assessment of and strategiesfor managing the impacts of market transitions,when improving practices for the long termcauses short-term displacement; and (c) definingsystems to achieve measurable results, to encourageinnovation and continuous improvement ofmanagement practices.▪ the critical work of public policy and governmentengagement;▪ evolving sustainable governance models forcertification;▪ balancing the “pull” of certification at the mostsustainable end of a market with a “push” toeliminate those practices that are illegal or themost damaging; and▪ how to approach key actors that resist oroppose the very concept of sustainabilitystandards.Toward Sustainability: The Roles and Limitations of Certification

Chapter 2: Actors – Government 29Chapter 2, Section BThe Roles and Driversof GovernmentStandards and certification systems often appear to emerge in response to perceivedgovernment failure to address environmental or social problems. The rapid growth ofthese systems in the 1990s coincided with a rise in global trade and an accompanyingshift toward private solutions to societal issues (Bartley, 2010; Bernstein & Cashore, 2007;Carey & Guttenstein, 2008).Yet government actions—from the most fundamentalfunctions such as establishing a legalframework, to more focused policies directedspecifically at promoting certification—cansignificantly affect certification schemes. Fromthe start, governments have played a role in thedevelopment of these systems, and over timegovernments have broadened their engagementto influence such systems through a variety ofmechanisms.This section of Chapter 2 addresses four key topicsrelating to government and standards and certificationsystems. First, the section provides a briefbackground on the involvement of governmentwith such systems. Then it addresses the rolesgovernment may play relating to these systems,the primary drivers of government involvement,and the implications of certification for democraticprinciples.Much of the discussion focuses on governmentsin the global North, which reflects thefact that much of the activity around certificationsystems (especially historically) has takenplace in the North. Examples from the Southhave been included where possible, however, andthe Steering Committee recognizes the growingimportance of government involvement in thedevelopment of certification systems in the globalSouth.Governments and theRise of Certification SystemsOne of the first certification systems based onenvironmental standards—the Blue Angel program—wascreated by a national government.The German government launched Blue Angelin 1978, and it is still in existence today. BlueAngel provides manufacturers with an economicincentive to develop products in which the rawmaterials, production processes, and productuse and disposal are less harmful to the environmentthan conventional products. When initiallyconceived in 1971, Blue Angel reflected strongpublic interest in the environment. By the time itwas launched seven years later, the oil crisis andsubsequent price shocks had weakened publicsupport for environmental policy and regulation.So, the voluntary Blue Angel program providedthe German government with a palatable alternativeto regulation (Müller, 2002).Organic agriculture certification sprouted througha very different route. As discussed in Chapter 1, itemerged from the ground up, through the effortsof farmers themselves. But governments had anincreasing influence over time. California gaveorganic standards a boost in 1979 by passing theOrganic Food Act, which codified the standards ofthe California Certified Organic Farmers (CCOF).In 2002, the U.S. Department of AgricultureToward Sustainability: The Roles and Limitations of Certification

Chapter 2: Actors – Government 30(USDA) launched national organic standards,requiring any producer using the word organicto be certified by accredited agencies, includingthe CCOF. 1 The USDA standards differ from theoriginal CCOF standards, and some organic proponentsfeel that government involvement at thefederal level weakened the label overall. Othersmaintain that federal involvement has strengthenedthe concept of organic labeling by applying alegal framework for using the term organic.Part of the reason behind the proliferationof certification schemes in the 1990s was theemerging global trends favoring free marketsand private enterprise over government action(Bartley, 2007b; Bartley, 2010; Bernstein &Cashore, 2007; Cashore, 2002; Cashore, Auld,& Newsom, 2004). This new thinking frustratedefforts to adopt government regulations andintergovernmental agreements. The developmentof the Forest Stewardship Council (FSC)in 1993—described in Chapter 1 and the CivilSociety section of this chapter—illustrates thissituation. The FSC emerged, in part, from theashes of failed efforts to agree to a binding internationalforestry convention. The program cametogether when concerned industry players, seekingto distinguish their product, joined forces withnongovernmental organizations (NGOs) suchas the World Wide Fund for Nature (WWF) andthe Rainforest Action Network (Bartley, 2007b;Cashore, et al., 2004; Meidinger, 2006).Yet as Bartley (2007b) and Cashore (2002)note, governments played a crucial role in theFSC’s initial success. Several European cities andcountries—as well as some American cities andstates—passed restrictions on the import of ecologicallyunsound timber. When Austria’s ban waschallenged by timber-exporting states as a tradebarrier, Austria rescinded the law but redirectedgovernment funds for implementation to thenascent FSC, giving it a substantial boost at a crucialtime. It also encouraged other nations, suchas Switzerland and the Netherlands, to providefinancial support to the FSC, in response to publicpressure for action (Bartley, 2007b). The FSC alsoreceived a boost when state governments pursuedFSC certification for some of their publiclyowned forests. In the United States, for example,Pennsylvania was an early adopter of FSC certification,and today 2.2 million acres of state-ownedforests in Pennsylvania are FSC-certified. 2The certification of labor practices in theapparel industry also benefited from significantgovernment support and funding in the1990s. According to Bartley (2007b), the ClintonAdministration first proposed, and then helped toestablish, the Apparel Industry Partnership/FairLabor Association. It also provided vital financialsupport for Social Accountability International’scertification systems in their early years. WhileNGOs played a leading role in developing andadvancing these schemes, the U.S. federal governmentprovided the initial creative impetus andsupport—even though these certifications aroseas an alternative to binding government action.The government of China has acted far beyondfunding; like the German government, it hasestablished its own certification schemes. As anexample, China’s Ministry of Agriculture (MOA)oversees two certification schemes establishedby the Chinese government during the 1990s—Green Food and Hazard Free Food—as well asorganic certification to international standards.The MOA’s China Green Food DevelopmentCentre owns the Green Food logo, develops andmaintains the standard, is responsible for certifications,coordinates inspections and monitoring,and obtains revenue for certification fees. GreenFood certification is a stepping stone towardorganic certification to international standards,and production in all of these “eco-categories”has grown tremendously since its inception.Green Food production alone jumped from 6.3million tons in 1997 to 72 million tons in 2007,with export value increasing from $70 million to$2 billion in 2006 (Paull, 2008).1 www.ers.usda.gov/data/organic/.2 www.fscus.org/news/index.php?article=23Toward Sustainability: The Roles and Limitations of Certification

Chapter 2: Actors–Government 31Government Rolesrelating to CertificationAs Vandenbergh (2007) and others note, thegrowing globalization of trade in recent decadesincreasingly has constrained governments’ abilityto regulate. Goods consumed in one countryoften are produced in another country that maynot have the expertise, resources, or desire toregulate production. Governments in consumingcountries have no say over the sovereigndecisions made within extracting countries, andinternational arrangements such as the WorldTrade Organization (WTO) make establishingimport standards challenging. But governmentsare not powerless. As this section discusses,governments play fundamental roles through theestablishment of legal frameworks and domesticregulatory and procurement policies that caninfluence the development and trajectory ofcertification systems. Government policies andpractices also may affect or interact with suchsystems directly.Government as Provider ofLegal FrameworksOne of the most fundamental roles of governmentis to establish and enforce laws. Private, voluntarystandards are often designed to be more stringentthan local public law, but they nonetheless maybenefit from a strong legal foundation. Conversely,certification may be hindered by a legal foundationthat is unclear, corrupt, not enforced, or runscounter to the goals of certification.Resource Management RegimesThe standard of the Marine Stewardship Council(MSC), for example, relies heavily on the effectiveimplementation of government fisheries regulationsto ensure that public fisheries are managedin an environmentally responsible way. The MSCrequires that “the fishery is subject to an effectivemanagement system that respects local,national, and international laws and standardsand incorporates institutional and operationalframeworks that require the use of resources tobe responsible and sustainable.” In most cases,this regime is managed by a government agency.The geographic pattern of certified fisheriesmay reflect the influence of strong governmentmanagement: The vast majority of MSC-certifiedfisheries are found in developed countries withrobust management systems. (See Appendix E.)Conversely, one of the many reasons cited forthe decline of the Marine Aquarium Council (discussedin the Civil Society section of this chapter)was the lack of a sufficient legal and managementframework in source countries such as thePhilippines and Indonesia to limit the take of coralreef animals (Amos & Claussen, 2009).Property RightsUncertainties over land tenure, property rights,and community rights may undermine certificationsystems. Corruption and poor enforcementadd to this shaky foundation. Indonesia is a casein point. All forest lands in Indonesia are ownedby the state, unlike some other Asian islandnations, which recognize customary rights toforest products for local people. Recent policiesacknowledge traditional and customary rights,but these rights have neither been clearly definednor enforced. Some NGOs have withheld supportfor certification in Indonesia because theyview the legal framework as inadequate to protectcommunity rights. Others have questioned thevalidity of certification because of the high levelof illegal activity in the country along with localgovernment complicity in this activity. AlthoughIndonesia has developed its own certificationscheme and joined this system with the FSC,few forests have become certified (Muhtaman &Prasetyo, 2006).Laws Banning Illegal ProductsGovernment policies on illegal products inimporting nations can also affect certification.As discussed in Chapter 4, for example, policiesadopted in the United States and the EuropeanUnion to address the import of illegal forestproducts have indirectly promoted forest certification.The Lacey Act in the United States and theForest Law Enforcement Governance and TradeInitiative in the European Union both requireToward Sustainability: The Roles and Limitations of Certification

Chapter 2: Actors – Government 32that importers show they are not importingillegally harvested wood. Certification schemesthat encompass chain-of-custody requirementsto verify the source of imported products haveemerged as an effective way to demonstrate thisdue diligence (Cashore & Stone, 2012).Antitrust LawsAs discussed in Chapter 1, “roundtables” thatbring industry competitors, NGOs, and otherstogether to seek agreement on environmentaland social issues have been an increasinglycommon route for developing standards and, insome cases, certification systems. Roundtablesare often described as “precompetitive” discussions,based on the idea that the sustainability (orunsustainability) of raw material production andsupply affects all businesses in a sector. To minimizeconcerns about anti-competitive behavior,roundtables have established antitrust policiesthat explicitly state the topics that can and cannotbe discussed, and these policies are intended toensure compliance with national antitrust laws(Roundtable on the Application of Antitrust Lawto State-Owned Enterprises, 2009).International Trade AgreementsIntergovernmental free-trade agreements caninject legal uncertainty into the internationalarena. Carey and Guttenstein (2008) observethat, despite analyses indicating that certificationschemes are legal under international tradeagreements, debates continue regarding whethersuch schemes promote protectionist interestsor allow nations to impose their own policieson other nations. Bernstein and Hannah (2008)argue that the more widespread the supportfor certification becomes, the more likely it isto conflict with the international trade regime.For example, the European Union and othergovernments and intergovernmental agenciesincreasingly are developing sustainable procurementpolicies that can promote certification.Yet some governments and commentators viewthese standards as a veiled way to discriminateagainst developing countries’ products. As longas certification is voluntary, or is limited to nichemarkets, it is less likely to be subject to tradedisputes. But as governments increasingly recognize,favor, or require it, exporting countries aremore likely to claim that certification is mandatoryin practice and is therefore a de facto barrier totrade (Bernstein & Hannah, 2008).Voluntary standards considered to be mandatoryin practice have been the subject of severaltrade disputes under WTO law already. In thesecases, the determination of whether a standard ormeasure was de facto mandatory depended uponwhether it had the effect of being legally bindingand whether there was a trade consequencefor failing to adhere to it. These concerns onlyapply to a standard adopted and implementedby a WTO member government; those operatedindependently of governments are less vulnerableto trade challenges (Bernstein & Hannah, 2008).Government as PolicyMaker and EnforcerRegulatory PoliciesGovernments can stimulate certification indirectly,most obviously by failing to regulateenvironmental or social practices and therebycreating incentives for the emergence of privatecertification schemes. Some believe that such afailure to regulate stimulated the creation of theFSC, the MSC, and others (Cashore, et al., 2004).Conversely, the threat of government regulationin the absence of certification might also spurthe development of private schemes (Meidinger,2006). If a critical mass of industry players participatesin a certification scheme (or creates theillusion of participating), political pressure forgovernment regulation might be alleviated, andregulation avoided. The risk for governmentsin these cases is that industry might establishstandards that are perhaps better than existingconditions but not as high as what the governmentor others would prefer. Moreover, sincecertification is voluntary, a subset of industryplayers—potentially the worst players with themost significant environmental impacts—maynot participate. An alternative for governmentsmight be to provide companies taking part incertification schemes with favorable treatmentToward Sustainability: The Roles and Limitations of Certification

Chapter 2: Actors – Government 33under the regulatory regime, while maintainingrequired minimum standards for all players.Policies Adopting CertificationIn some cases, governments incorporate standardsdeveloped by private certification systemsinto their own regulatory regimes. Adopting suchstandards allows governments to promote internationallyrecognized standards within their owncountry while potentially opening up or maintainingoverseas markets that value those standards.For example, when Bolivia passed a requirementthat forest concessionaires meet certain standards,the FSC was the only certification bodythat met those standards. It became the de factoauditor for Bolivia while the government workedtoward developing its own auditing scheme (Carey& Guttenstein, 2008). Similarly, Tunisia has basedits national organic agriculture policy on the standardsof the International Federation of OrganicAgriculture Movements (IFOAM), because itdetermined that these standards representedbest global practices and would be recognizedin favored markets (Carey & Guttenstein, 2008).In addition, numerous jurisdictions in the UnitedStates have incorporated the U.S. Green BuildingCouncil’s Leadership in Energy and EnvironmentalDesign (LEED) standards for green building constructioninto their building codes. (See Chapter4 for more on this example.)In some cases, governments create their ownstandards, just as the German governmentcreated the Blue Angel program. For example,nations in East Africa developed and adopted theEast African Organic Products Standard (Carey& Guttenstein, 2008). Mexico created a CleanIndustry Certificate that outlines requirements forwaste management, air emissions, water supply,and water discharge (Rainforest Alliance, 2009).And Indonesia and Malaysia both created theirown forestry certification schemes, which theyhave revised in recent years to conform moreclosely to the FSC’s, at least in part to help openup international markets (Muhtaman & Prasetyo,2006). In addition, the Malaysian scheme has beenendorsed by the Programme for the Endorsementof Forest Certification (PEFC).Import/Export PoliciesGovernments can also acknowledge and favorcertified products through their import or exportpolicies. For example, certification for the farmedfish pangasius received a significant boost in 2010when the Vietnamese government committed toincreasing its exports of certifiable pangasius to25 percent of production by 2015 and 75 percentby 2020, in exchange for NGO recognition ofenvironmental improvements (Fish Site, 2011).Governmentas Large PurchaserOne of the most powerful tools governments haveis their substantial purchasing power. Procurementpolicies that support or require certified productsfor government purchases are frequently citedas a primary way for governments to supportcertification (Carey & Guttenstein, 2008; Cashore,et al., 2004; Smith & Fischlein, 2010). Many governments,for example, require or rely on FSCcertification to satisfy their sustainable procurementpolicies; government bodies that do thisinclude the Alberta Ministry of the Environmentand the government of Manitoba in Canada, aswell as the governments of Denmark, Japan,and New Zealand. Similarly, all coffee served inSwedish administrative offices must be certifiedorganic per IFOAM standards, and many schoolsin the United Kingdom serve MSC-certified fish(Carey & Guttenstein, 2008). In Switzerland, thegovernment created and now operates a website 3that provides public procurement agents withinformation about sourcing sustainably producedgoods. The fair trade movement has also madesignificant headway with government purchasingvia the “Fair Trade Towns” initiative, in whichlocal governments pass resolutions to buy fairtrade products for government-sponsored events.Nearly 900 communities are now designated asFair Trade Towns. 43 http://oeffentlichebeschaffung.kompass-nachhaltigkeit.ch/4 www.fairtradetowns.orgToward Sustainability: The Roles and Limitations of Certification

Chapter 2: Actors – Government 34Government as FunderPublic funding and tax breaks are other powerfulgovernment tools that can influence certification.As mentioned previously, the governments ofAustria, Switzerland, and the Netherlands provideddirect funding to the FSC at a crucial pointin its development, and the U.S. governmentprovided funding for the development of laborstandards in the apparel industry. In the environmentalarena, the U.S. also provided federalfunding to support the development of LEEDstandards for green building construction in itsearly years (Smith & Fischlein, 2010). In addition,the IDH (a Dutch government-funded sustainabletrade initiative), together with the WWF, foundedand has provided substantial financing for theAquaculture Stewardship Council, which is developingstandards for aquaculture-grown fish. 5Governments can also provide financial assistanceto producers seeking to get certified.Belgium, for example, provides financial supportto producers and traders in developing countriesthat get certified to the Fairtrade LabellingOrganizations’ standards, or are members ofthe International Fair Trade Association. Rwandahas financed the costs of certification to the EastAfrican Organic Products Standard for severalexport companies, and provided 100 percent taxbreaks on the purchase of equipment used fororganic farming (Carey & Guttenstein, 2008).The Tuscany Regional Government supportssmall and medium-sized enterprises seeking tobecome certified to the SA8000 standard forsocial accountability by paying up to 50 percent ofthe costs of certification and providing tax breakson national insurance and regional tax payments(Carey & Guttenstein, 2008). And, for a time in2007 and 2008, the government of Cote d’Ivoireexempted certified cocoa from export duties (personalcommunication, Rainforest Alliance staff).Government as Opinion ShaperGovernment endorsement of certification systemsmay help add to their credibility and legitimacy asa solution to environmental or social problems.Conceptual SupportGovernments have given official support forprivate certification through international intergovernmentalbodies that have incorporated thissupport into key documents. For example, theUnited Nation’s program of action for sustainabledevelopment, Agenda 21, calls for governmentsto encourage ecolabels as a way to influenceconsumer choice. Similarly, the Commission onSustainable Development and the Organisationfor Economic Co-operation and Developmentboth identify ecolabel programs as an importanttool in several of their policy papers (Müller,2002). More indirectly, Sweden’s requirement thatthe forest industry promote ecological as well aseconomic goals seems to have increased industrysupport for the FSC as a way of meeting governmentrequirements (Cashore, et al., 2004).Marketing SupportGovernments’ considerable outreach capabilitiescan also advance certification systems. Forexample, Tuscany undertook a concerted publicawareness and information campaign that facilitatedthe rapid uptake of social accountabilitystandards by its regional businesses. The governmentof Rwanda used its convening power to bringtogether civil society organizations and create theRwandan organic agriculture movement, whichled to the development of the East Africa OrganicProducts Standard (Carey & Guttenstein, 2008).Also, the U.S. Department of Agriculture’s organicstandards program is run out of the department’sAgricultural Marketing Service, as the standardsare considered marketing standards (as opposedto safety standards, for example).5 www.idhsustainabletrade.com/what-we-do and www.ascworldwide.org/index.cfm?act=faq.faq&lng=1Toward Sustainability: The Roles and Limitations of Certification

Chapter 2: Actors – Government 35Government as ExpertSimilarly, governments often have considerabletechnical expertise to contribute to the developmentand maintenance of certification schemes.For example, Belgium’s support for fair trade producersin developing countries includes technicalassistance to help them get certified. Pakistanprovides training to small and medium-sizedenterprises to meet the Social Accountabilitystandard SA8000. Tunisia contributes to IFOAMstandards by sharing information, expertise, andresearch results from its Technical Centre forOrganic Agriculture with other IFOAM members.And the government of South Georgia’s fisheryresearch program enables it to fulfill the conditionsrequired for certification by the MSC (Carey& Guttenstein, 2008). In addition, the Germangovernment’s GIZ Programme Office for Socialand Environmental Standards serves as an advisorto the development and implementation ofsustainability standards. 6Government as UserAs noted previously with FSC-certified stateownedforests in Pennsylvania, governmentsthat own or directly manage natural resourcessuch as fisheries and forests can become certifiedthemselves by private certification systems.In another example, the government of SouthGeorgia and the South Sandwich Islands certifiedits Patagonian toothfish fishery through theMSC process to distinguish its fishery from otherunsustainable, and often illegal, toothfish fisheries(Carey & Guttenstein, 2008). Also, the certificationof state forests by the FSC is a commonpractice in many eastern European countries withlarge tracts of state-owned land, such as Estonia,Latvia, and Poland (Cashore, Gale, Meidinger, &Newsom, 2006).Government as CompetitorIn some cases, government officials may viewcertification as a threat to their power, which canhave a negative ripple effect through a range ofgovernment policies. In Zambia, for example,government officials have looked at forest certificationas a potential threat and have beencautious in their approach. The governmentowns all forests and issues licenses to privateentities for timber harvest. Yet it provides almostno management and has no official policy oncertification, making it difficult for private managersto meet certification requirements. This lack ofgovernment policy has slowed efforts toward certification,despite private interest in certificationto increase international markets and alleviatepoverty (Njovu, 2006). Similarly, resistance tocertification from some parts of Brazil’s nationalforest regulatory agency reportedly is one obstacleto greater certification there (May, 2006).In some cases, governments can impede theprogress of private certification efforts by competingwith government certification systems.Malaysia, for example, developed its own certificationprogram, the Malaysian Timber CertificationCouncil (MTCC), in 1995 in an effort to controlthe development of certification in the country ata time when private schemes were emerging. Thisscheme failed to reflect key FSC components promotedby NGOs and indigenous groups, includingadequate consultation among stakeholders andthe consideration of social and environmentalissues. Although the government has sought tocoordinate and link its program with the FSC overtime, it refused to adjust its system sufficiently.MTCC-certified wood is now sold through thePEFC program, but in some cases, companiesshifted their certification plans from the governmentsystem to the FSC (Mohd Shawahid, 2006).All of these examples of government roles capturecertain moments in time and specific ways inwhich governments have influenced certification.But the nature of engagement can change overtime, reflecting the different needs of a nation’sindustries, the changing political climate, or theevolution of the certification scheme itself. Thesetypes of interactions are discussed in Chapter 4.6 www.gtz.de/en/themen/laendliche-entwicklung/28456.htmToward Sustainability: The Roles and Limitations of Certification

Chapter 2: Actors – Government 36Drivers of GovernmentInvolvementDifferent social science disciplines apply differenttheories to describe why institutions engage inpublic policy. For the purposes of this section,we simplify this thinking into three broad categoriesof drivers: (1) strategic or self-interest (itbenefits the government agency to participate)(2) values (participation is consistent with thevalues espoused by the agency and its staff) and(3) norms (the cultural pattern of behavior orexpectations supports certification) (Cashore,2002; Suchman, 1995).Strategic or Self-InterestGiven the increasing globalization of trade,the focus on free markets as solutions to society’sproblems, and the accompanying failureof governments to adopt “hard” regulations,some governments have embraced certificationschemes as a way to achieve public policy objectivesstrategically. Unable or unwilling to usetraditional command-and-control tools in the newglobal culture, agencies seem to embrace the pathof least resistance springing up around them:private governance mechanisms. Certificationmight be a particularly attractive option becauseit requires verification by a third party, providinga compliance component that is normally part ofgovernment’s purview. Even when certificationsystems are public (that is, created by government)rather than private, they adopt the philosophyof private systems, namely, relying on voluntaryparticipation in response to market pressuresrather than the coercive power of government.The voluntary nature of certification schemes isconsistent with the idea of “captured” agencies,in which, because of political pressures, regulatoryagencies are considered more responsive tothe desires of the industries they are purportedto regulate than they are to their social welfaremission.According to Müller (2002), many policy makersand politicians around the world support certificationbecause they recognize it as less controversialthan other policy tools such as taxes or bindingregulations, and therefore easier to adopt. Manyalso believe that private certification may allowgreater flexibility for innovation than governmentscan provide, and they see certification as a selfsustainingsystem requiring few public resources.Developing countries with fewer resources (suchas expertise and funding) to develop robustregulatory regimes may find private certificationparticularly attractive as a way to open orretain markets in developed countries for theirown countries’ products. In short, many considercertification systems an option that allows governmentagencies to avoid controversy amongpowerful political players, be more effective, andspend less money—all outcomes that promotean agency’s self-interest.ValuesBut strategic drivers alone cannot fully explainthe emergence and promotion of certificationsystems (Bartley, 2007b; Bernstein & Cashore,2007). Not all agency action is based on industry“capture,” and environmental and socialissues inherently reflect values of some kind.Ideologies and approaches may differ, but at itscore the mission of environmental agencies isvalue-laden. The people who work for these agenciestypically share those values and promotegovernment efforts that advance them. Thosevalues may include conservation, public health,sustainability, international recognition, expandingmarkets, or economic development, amongothers. Regardless, agencies have missions, andcertification schemes may help them fulfill thosemissions, particularly if politicians and industriesthwart traditional regulatory approaches or budgetsare limited. Carey and Guttenstein (2008)note that governments can find it easier to meettheir goals and adopt widely recognized internationalstandards by drawing on the structureprovided by private schemes rather than trying tocreate requirements in-house.NormsMoreover, all institutions—perhaps democraticgovernments in particular—operate withina broad context of social values and normsToward Sustainability: The Roles and Limitations of Certification

Chapter 2: Actors – Government 37(Cashore, 2002). They gain their legitimacy fromsocial systems that provide a basis of appropriateness,or that make the purposes, goals, orrationale of an institution understandable andjustifiable to the relevant audience. Thus, legitimacyis enhanced when the norms and rules oforganizations conform to existing social structure(Bernstein & Cashore, 2007). Existing and emergingglobal norms have favored the emergenceand promotion of certification systems as sociallylegitimate solutions for governments (and others)to use to address environmental and social issues.Bernstein and Cashore (2007), Bernstein andHannah (2008), and Bartley (2010) identify severalof these norms, including: (1) respect fornational sovereignty (as certification addressesfirms, not states), (2) the emergence of marketmechanisms as a solution to environmental andsocial problems (in the wake of failed governmentaland intergovernmental efforts and a shift inthe global focus), (3) the movement to democratizegovernance to include a broad range ofstakeholders (something integral to most crediblecertification schemes), and (4) growing concernabout environmental impacts and labor rights.Certification systems evolve out of political,civil, and market pressures, and the learning,compromise, and competition that result fromthese pressures (Bartley, 2007b; Bartley, 2010;Bernstein & Cashore, 2007; Smith & Fischlein,2010). As different stakeholders—businesses,NGOs, consumers, and others—come togetherto develop certification standards, expectationsabout responsible practices can often converge,and the results can gain legitimacy across sectors.Thus certification standards and structures canhelp shape, and embed, global norms. By adoptingor promoting these systems, governments areable to incorporate societal norms and legitimacyinto their programs. In effect, certification hasprovided governments a new means, beyondthe formal institutions of government—whetherelected (or unelected) officials, laws, regulatoryprocesses, or enforcement—to satisfy society’sshifting demands.Also, it is important to note that many standardssystems base their own norms on those of UnitedNations and/or International Labour Organizationconventions. This helps to ensure that thesenorms are based on “universal” values, instead ofinviting the perception that Northern consumersare imposing their own norms on developingcountries.The literature also asserts, nonetheless, that certificationsystems have not gained full “politicallegitimacy,” in which there is an acceptance ofa governance relationship in which commandsought to be obeyed (Bernstein, 2011; Cashore,2002). To date, many certification schemes mayhave moved beyond the initial strategic phases—in which obvious self-interest dominates players’involvement in certification—toward buildingmore widespread support, in which learning,negotiation, and convergence of values or ideasamong players emerge. A more embeddedlegitimacy—in which a full range of stakeholdersrecognizes a certification system as a legitimateform of private governance—has not yet developed(Bernstein & Cashore, 2007).The Implicationsof Certification forDemocratic PrinciplesThe emergence of certification schemes clearlyhas influenced government policies and practicesthroughout the world. In some cases, this influenceappears to have expanded opportunitiesfor basic democratic principles—including publicparticipation, transparency, effective adjudication,and accountability—to apply to environmentaland social issues. In other cases, transnationalcertification may displace truly democratic governancethrough local or national governments.Positive examples of certification expanding democraticprinciples are common in forestry, fisheries,and agriculture. Over time, certification programsin these sectors increasingly have expanded theirprovisions for public participation. These systemsmay engage stakeholders in standards developmentand revision, for example, and/or includestakeholders as participants in the assessmentprocess via notice and comment procedures.Toward Sustainability: The Roles and Limitations of Certification

Chapter 2: Actors – Government 38Other institutional structures consistent withdemocratic principles include documented rulemakingprocesses requiring meaningful responsesto criticism, structured adjudication by experts,and transparency (see for example Meidinger,2006). These systems seem to be stimulatingengagement in policy and practices from a widerrange of community participants than had previouslyparticipated in many locations. For example,a wider range of stakeholders are engaged inforest policy in Estonia, Latvia, and Russia due inlarge part to the increase in forest certification inthose countries. Potentially, certification may becontributing to new models for how policy shouldbe made (Cashore, et al., 2006).Meidinger (2006) notes that, in many places,forest policy traditionally was limited to governmentagencies working in close relationships withthe forest industry, foresters, and landowners.Policies reflected the needs and desires of thoseinterests, not others. Regulatory and legal challengeshad limited success. The FSC openedup that closed system by creating a parallelregulatory program and threatening the brandsof companies that depend on global markets(Meidinger, 2006). Such public participation andtransparency requirements are now a part of theISEAL Standard-Setting Code of Good Practice forstandards and certification schemes, reflectingthe practice of greater public participation in othersectors as well.By contrast, Vandergeest (2007) maintains thatthe transnational certification of shrimp farmingleaves local communities out of basic decisionmaking regarding resource management, suchas setting standards and certifying producers. Inthat respect, certification schemes can be lessdemocratic than community-based managementapproaches aligned with local governance structures.In southern Thailand, community-basedapproaches to shrimp farm management havedeveloped in response to national and provinciallaws allowing local zoning and decision makingthough village administrative units. Examiningthe regulation of shrimp farming in several districtsin southern Thailand, Vandergeest foundthat regulations varied, but often were tied tolocal ecological and social contexts, which meantdifferent environmental problems and hencedifferent solutions. In contrast, all of the transnationalcertification schemes for shrimp farming(including those of the Aquaculture CertificationCouncil, EurepG.A.P., the U.K. Soil Association,Naturland, and others) had immutable technicalstandards developed separately from communities,essentially by an overlapping network ofinternational technical experts. The technicalenvironmental standards of these schemes wereentirely distinct from their “social” standards,which were established to respect local laws,protect worker rights, and assure local access topublic resources. Despite the presence of socialstandards, the technical standards for practicessuch as siting and waste management did notinvolve local communities in formulating locallyspecific guidelines, monitoring, or enforcement.To many Southern NGOs, this lack of meaningfulinput into technical standards and decisionmaking is a major criticism of transnational certificationschemes, and a basis for their opposition(Vandergeest, 2007).Transparency, public participation, and effectiveadjudication are important democratic principlesthat may be applied, or enhanced, through acredible certification scheme. But the overarchingissue of how certification schemes are heldaccountable, and to whom, goes beyond theseprocedural requirements. Traditionally, accountabilitymay have implied a clear hierarchy withlegitimate decision makers at each level whoseconcerns must be addressed. But voluntary certificationsystems by their nature reflect a morenetworked approach to problem solving andaccountability. Accountability should be consideredat multiple levels, perhaps the most obviousbeing at the level of the certifiers who audit theperformance of firms claiming to meet a standard.Meidinger (2006) discusses accountabilityin the forest certification realm as a “package ofactors, norms, and institutions,” which cannotbe considered separately. This package includesNGOs, consumers, producers, retailers, governments,and others, which influence one anotherto develop new values and solutions over time.Toward Sustainability: The Roles and Limitations of Certification

Chapter 2: Actors – Government 39Market incentives, peer pressure, and reputationalrisk can be part of this package as well, and oftenplay a significant role in certification schemes(Vandenbergh, 2007). In effect, the combinedpackage can provide greater accountability thancould be achieved through the sum of its parts.Forest certification, for example, relies in part onevolving norms about what sustainable forestrymeans, combined with practical experience froma variety of actors and institutions. It relies heavilyon procedural requirements that provide publicexplanations for decisions and multiple avenuesfor public input and criticism. But perhaps equallyimportant, competition among certification programs—andeven among different actors withina single certification program—contributes toongoing public dialogue and scrutiny of standardsand procedures. According to Meidinger(2006), this mutual monitoring, criticism, andcompetition can create a kind of cross-disciplinaryself-governance system, within the framework ofthe overarching values and norms of sustainableforestry.Proponents claim that experimental, open-ended,multi-centered, competitive regulatory systemssuch as these can be thought of as “learningaccountability systems,” and that they are goodfor society because they are effective mechanismsfor articulating goals, testing them in practice,and revising them. Meidinger (2006) notes,however, that the accountability of these systemsremains unclear. He concludes that the extent towhich such systems are learning versus driftingis an open question, and a clear view of howthese systems answer to society remains to bearticulated. Regardless, the learning accountabilityargument reinforces the notion that animportant consideration in assessing the valueof certification systems is the effectiveness andaccountability of viable alternatives.Toward Sustainability: The Roles and Limitations of Certification

Chapter 2: Actors – Business 40Chapter 2, Section CThe Roles and Drivers of BusinessThe last three decades have witnessed a radical transformation in the global businessenvironment. In place of local labor markets and regional trade systems, large companiesnow operate through integrated networks that span the globe and transcend nationalboundaries. International companies now source, manufacture, and sell multiple productsin multiple markets across multiple time zones.In this environment, big brands and retailers experiencea range of new and often complex risks,opportunities, and responsibilities. In particular,operating in foreign markets presents companieswith new ethical issues, arising from the differingsocial and environmental conditions and normsin developing countries (Samuel & Douglas,1996). To manage ethics-related risks, companieshave developed a range of corporate responsibilitypolicies and strategies, including voluntaryenvironmental management systems, statementsof ethics, codes of conduct, and annual reportingof their corporate responsibility and sustainabilityefforts (Auld, Bernstein, & Cashore, 2008; alsosee Appendix L).Standards and certification systems are part ofthis context. Participating companies—especiallythose at the top of supply chains in the retailand fast-moving consumer goods (FMCG) 1 sectors—haveviewed such systems as a means ofimproving their suppliers’ environmental andsocial practices, ensuring access to sustainablesupplies of scarce natural resources, enablingmarket access to institutional or business-tobusinessbuyers, and providing assurance toconsumers. Such systems also have the potentialto help companies identify problems, build capacityfor change, increase the rate of organizational1 Fast-moving consumer goods companies manufactureinexpensive products that consumers buy on a regularbasis, such as supermarket foods and toiletries.learning, and facilitate the inculcation of newvalues and norms (see Appendix L).This final section of Chapter 2 describes the rolestypically played by firms in standards and certificationsystems (in addition to the obvious role of“participant”); four attitudes toward certificationthat businesses may adopt; the drivers for andbarriers to business involvement in standardsand certification systems; and key questionscompanies may want to ask themselves whenconsidering certification. Boxes 2.3–2.11 provideillustrative case examples. 2This section focuses primarily on large brandsand retailers. The motivations of enterprises thatproduce and supply certified goods and services,as well as those of the traders and other middletierplayers in the supply chain, are not coveredin detail. This bias reflects the current state ofknowledge regarding standards and certificationsystems—i.e., most studies have looked at toptiercompanies that are purchasers of certifiedgoods. Also, these are the types of businessesrepresented on the Steering Committee, uponwhose real-world experience the section is partiallybased.2 Many of the boxes describe certification programs initiatedand run by corporations or industry associations.These initiatives typically differ from the multi-stakeholderstandards and certification models, which are the focusof most of this report, in their form of governance. Theinformation for these examples was drawn primarily fromcompany sources, and their inclusion does not implySteering Committee endorsement.Toward Sustainability: The Roles and Limitations of Certification

Chapter 2: Actors – Business 41Box 2.3Internal Verification: Starbucks C.A.F.E. PracticesIn 2004, Seattle-based coffee retailer Starbucks launched apilot certification project in Central America. The Coffee andFarm Equity (C.A.F.E.) Practices initiative has since expanded to140,000 farmers in about 20 countries. By 2010, participatingproducers provided Starbucks with 84 percent of its coffeebeans—just shy of 300 million pounds. In 2008, the companycommitted to buy 100 percent responsibly grown and ethicallytraded coffee by 2015.Starbucks says that C.A.F.E. Practices is based on the principleof continuous improvement. Producers large and small (and 99percent of participating farms are 12 hectares or smaller) need topass a basic quality check. The applicants are then independentlycertified against a scorecard of environmental, social, andeconomic transparency criteria.According to Starbucks, the third-party certifiers involved inthis program operate entirely independently from the company.Starbucks works with California-based Scientific CertificationSystems to assess and train certifier organizations. Coffeeproducers then contract one of these verifiers to undertake anexternal assessment of their operations.While full compliance by producers does not form an initialrequirement, Starbucks says it has a number of zero-tolerancecriteria. The list includes practices such as underage or forcedlabor and payment below the minimum wage.Starbucks offers financial support in addition to a comprehensiveverification program, to help growers make the grade. Thecompany funds a loan scheme for small farmers to the tune of$14.5 million a year. It aims to increase this to $20 million in thenear future. It also provides technical advice to farmers throughfarm support centers in Costa Rica and Rwanda (with otherssoon to follow in Colombia and China). Starbucks’ agronomistsoffer training and advice in a range of environmentally friendlyand efficient farming methods. One illustrative example is afreely distributed software program that helps farmers betterinterpret soil and leaf analyses. This, in turn, helps reducereliance on chemical fertilizers and improve both crop yields andquality.The top performers in Starbucks’ rating system (those scoringmore than 80 percent on the C.A.F.E. Practices scorecard)receive a one-time, five-cents-per-pound premium for all thecoffee they sell to Starbucks. This is in addition to the extra thecompany was already paying its suppliers above market price. In2009, Starbucks paid a total of £2.5 million more than it would ifit paid suppliers strict market price.The Roles of Businessin Standards andCertification SystemsBusinesses have been instrumental in the creationand proliferation of standards and certificationsystems. In many cases, companies have workedtogether with civil society groups, governmentagencies, and other stakeholders to create orinform standards and certification systems. TheMarine Stewardship Council (MSC) and the ForestStewardship Council (FSC) systems, for instance,were created by—and continue to be overseenby—multi-stakeholder groups that include businessparticipation. Businesses have also developedtheir own standards and certification systems,often in partnership with nongovernmental organizations(NGOs), such as the C.A.F.E. Practicesstandards developed by coffee chain Starbucksand Conservation International (see Box 2.3) andmultiple standards systems developed by themining industry (Schiavi, 2005). In these lattercases, businesses themselves serve as the systems’standard-setters, implementers, monitors,enforcers, and funders.Arguably businesses’ most important role, however,has been in promoting and driving the growthof certification systems. Companies have oftendone this by making public corporate responsibilitycommitments (typically in response to externalor internal pressures) and then using certificationas a means to deliver on those commitments.In recent years, large companies have becomeincreasingly bold in setting sustainability targetsacross a range of social and environmental areas intheir value chains (Park & Koehler, 2011). Notableexamples include: Mars’ commitment to obtainall of its cacao from sustainable sources by 2020;Unilever’s pledge to source all of its renewableraw materials sustainably by 2020; PepsiCo U.K.’scommitment to reduce carbon and water emissionsfrom key growers by 50 percent by 2015;and Walmart’s new sustainable agriculture policy,which includes, among other targets, a pledge towww.starbucks.com/responsibility/sourcing/coffeeToward Sustainability: The Roles and Limitations of Certification

Chapter 2: Actors – Business 42Box 2.4Sustainable Agriculture Commitmentsby the World’s Largest RetailerIn October 2010, Walmart committed to buy a substantialpercentage of its agricultural products from certified sources.Its primary global and regional targets between now and2015 include:• Requiring sustainably sourced palm oil for all Walmart privatebrandproducts globally• Only sourcing beef that does not contribute to thedeforestation of the Amazon rainforest• In India, buying 50 percent of its fresh produce through thecompany’s Direct Farm Program• In China, upgrading 15 percent of Direct Farm products from“Green” to “Organic” certified• In Canada, purchasing 30 percent of the produce assortmentlocally• In the United States, doubling the sale of locally grown foodthrough its internal Heritage Agriculture programAccording to Walmart, these targets form part of a broadercommitment to promote sustainable agriculture that includes thefollowing procurement goals:• Selling $1 billion in food sourced from 1 million small andmedium farmers• Providing training to 1 million farmers and farm workers onsuch topics as crop selection and sustainable farming practices• Increasing the income of the small and medium farmers itsources from by 10 to 15 percent in the United States• Investing more than $1 billion in its global fresh supply chain inthe next five yearsonly source beef that does not contribute to thedeforestation of the Amazon rainforest (see Box 2.4).Certification systems can provide companieswith a credible way to implement, evaluate, andcommunicate their progress against such commitments.In 2011, for example, Walmart andSam’s Club updated their seafood sustainabilitypolicy to require that all of their wild-caught seafoodproducts be certified to MSC or equivalentsustainability standards. Similarly, U.S. grocerygiant Kroger has set a goal for 2015 of sourcingall of its top 20 wild-caught species from sourcesthat are either MSC-certified or involved in a “fisheryimprovement project” with the World WildlifeFund (WWF) (Marine Stewardship Council, 2011b).Unilever, with a supply chain consisting of morethan 200 different agricultural raw materials, optedto develop its own code of guiding principles forall crop types in all geographies. However, thecompany’s brands benchmark this code againstexternal certification standards. Unilever commitsto buy from certified or noncertified suppliersthat can show compliance with its internal codethrough a self-assessment process. 3Sometimes, commitments by individual companieshave a ripple effect across their sector.U.S. retailer Timberland developed an internalGreen Index in 2007 on the grounds that “widelyaccepted environmental standards do not exist.”This then led it to work with the Outdoor IndustryAssociation to develop an industry-wide index formeasuring the impact of outdoor products. 4 Theapparel industry as a whole is now drawing onthis initiative, together with other leading internalstandards such as Nike’s Considered Index, tocreate an industry-wide standard. This effort isbeing driven by the Sustainable Apparel Coalition, 5which, in turn, is informing the SustainabilityConsortium’s 6 work on a suite of consistent sustainabilitystandards.• Reducing food waste in its emerging market stores and clubsby 15 percent3 www.unilever.com/aboutus/supplier/sustainablesourcing4 www.ecoindexbeta.org(Walmart, 2010a, 2010b)5 www.apparelcoalition.org6 www.sustainabilityconsortium.orgToward Sustainability: The Roles and Limitations of Certification

Chapter 2: Actors–Business 43Box 2.5Promoting Fair Laborin the Toy IndustryIn the wake of consumer concerns about working conditionsin toy manufacturing plants, the international toy industry hasinvested heavily in recent years to develop a robust certificationsystem to prove compliance. The effort is being driven bythe International Council of Toy Industries (ICTI), an industryassociation.The ICTI developed its own “CARE Process” in 2004—aprogram aimed at ensuring manufacturing compliance withthe ICTI Code of Business Practices. The CARE Process seeksto guarantee the provision of safe and humane workplaceenvironments for toy factory workers worldwide. In addition tofactory monitoring, the CARE Process includes education andtraining about workplace standards. The initial focus is on China,Hong Kong, and Macau, where approximately four-fifths of theworld’s toys are manufactured.Under the CARE Process, annual audits are carried out byindependent third parties accredited by the ICTI CARE TechnicalAdvisory Council. One of the conditions of accreditation is thatan auditing firm must not maintain any consulting relationshipwith the same factory that it will audit on social complianceissues. If a factory is found to be noncompliant, it must reachan understanding with the audit firm on the findings of the auditand, if necessary, implement a corrective action plan. SinceSeptember 2006, the ICTI has made it obligatory for all membersto prove that they meet the agreed-upon social requirementsrelating to legality, safety, and sanitation.Four Attitudes of Businesstoward CertificationThe Steering Committee drew on publishedliterature and its own experience to identifyfour main attitudes that companies may adoptwhen thinking about certification: tactical riskmanagement, tactical opportunity, strategic riskmanagement, and strategic opportunity (seeFigure 2.1). These categories are intended todescribe the primary attitude of a company towardcertification. To an extent they are incremental,and companies may progress through them inphases. At present, the bulk of companies seemto be in the first phase while very few appear to bein the fourth. 7Attitude I:Tactical Risk ManagementCompanies in this first attitudinal phase considercertification from a “firefighting” or defensivepoint of view. This phase often includes those whoare the targets of stakeholder pressures or NGOcampaigns, who have typically reacted fastest inadopting certification as a tool. (See Box 2.5.)However, nontargeted companies may respondas well. Many manufacturers and retailers see abusiness-to-consumer (B2C) message as proofthat they are “doing something” to address publicconcerns.The U.S. seafood market provides a good example.As noted previously, retailers such as Walmartand Kroger have made sustainable seafood commitments;Costco, Aldi, Trader Joe’s, and othershave done so as well. All of these commitmentswere made in part due to advocacy pressure fromNGOs such as Greenpeace. Such advocacy campaignsessentially pit retail chains against oneother by holding up a spotlight to the industry’sprocurement practices as a whole (see AppendixE). This competitive dynamic, coupled with thewww.toy-icti.org7 These phases are based loosely on Hunt and Auster(1990) and also informed by Steering Committee members’own experiences and views. Hunt and Auster’s modelwas developed to assess company engagement withenvironmental management and included five phases:Beginner, First Fighter, Concerned Citizen, Pragmatist,and Proactivist. See also Zadek (2004).Toward Sustainability: The Roles and Limitations of Certification

Chapter 2: Actors – Business 44Figure 2.1: Four Attitudes toward CertificationPhaseTactical RiskManagementTacticalOpportunityStrategic RiskManagementStrategicOpportunityCommitment of organizationGeneral mindsetof managersCompliancedominatedCompliance andstrategy dominatedCommerciallydominatedStrategy andcommerciallydominatedResourcecommitmentSupport andinvolvement oftop managementHigh Moderate Moderate HighModerate Moderate High IntegralProgram designPerformanceobjectivesMinimize risksMarketing advantageStrategicmanagementSustainablebusiness successFunctionalinvolvementProcurement Marketing Marketing and sales All divisionsReporting to public Formal report Certification labelCertification labeland formal reportCreativecommunicationReporting structuresInvolvement with:Legal counsel Moderate Moderate Moderate HighPublic relations None Moderate Moderate HighProcurement High High High HighMarketing Minimal Moderate High Highthreat of having corporate brands tarnished, is thepredominant driver for companies with a “tacticalrisk” mindset.It is important to note that companies withoutvisible brands or that are exempt fromconsumer pressures, such as those in manybusiness-to-business (B2B) industries, are lessinclined to such an attitude.Attitude II:Tactical OpportunityHaving adopted a certification system for defensivereasons, a consumer-facing company mayToward Sustainability: The Roles and Limitations of Certification

Chapter 2: Actors – Business 45Box 2.6Whole Foods Market:Three-Tiered Labeling System for SeafoodWhole Foods Market has sold MSC-certified fish since 1999.Recently, the U.S. food retailer launched a set of guidelines forproviding information to customers when MSC-certified optionsare not available.The guidelines prescribe a three-tiered rating scale, rankingenvironmental impact with green, yellow, and red labels.The labeling system was designed in association with twoenvironmental nonprofits, the Blue Ocean Institute and MontereyBay Aquarium. The green or “best choice” rating signifies thatpopulations of the fish have not suffered due to overfishing, orthat fishers used relatively environmentally friendly means ofcatch. The yellow or “good alternative” rating means that someconcerns exist regarding the status of the fish, or that the catchmethods may be suspect. The red or “avoid” rating indicates thatthe species is currently overfished, or that fishing methods causedamage to the environment or other marine life. The companysays it will phase out all red-labeled fish by Earth Day 2013.This ranking system builds on Whole Foods’ existing standardsfor farmed seafood, which prohibit the use of antibiotics,added growth hormones, added preservatives like sulfites andphosphates, genetically modified seafood, and land animalbyproducts in feed. Aquaculture producers are also obliged toprotect water quality, wildlife, and ecosystems. The standardsrequire third-party audits and traceability from hatchery tomarket. Certified products are advertised under the “ResponsiblyFarmed” logo.Whole Foods Market also has a longstanding commitment notto sell especially vulnerable species, such as non-MSC-certifiedChilean sea bass, orange roughy, bluefin tuna, shark, and marlin.www.wholefoodsmarket.com/seafood-ratings/index.phpthen become aware of its marketing advantages.Brand differentiation is often seen as a tacticaladvantage to be derived from certification.(Although the competitive advantage of being afirst mover in adopting an ecolabel can be shortlived as other firms adopt similar labels.) Ecolabelscan help a company achieve brand differentiationby increasing consumer awareness of a productor by raising the visibility of a company’s sustainabilityinitiatives or commitments more generally(see Box 2.6). Of course, many companies donot track the relationship between labeling and aproduct’s purchase profile (Park & Koehler, 2011).Some products may exhibit a short-lived uplift insales (typically a single-digit percentage) in thefirst year after certification. In other cases, thelabel may help to avoid a loss in sales.Attitude III:Strategic Risk ManagementCertification systems are increasingly seen as animportant tool for strategic risk management.Future supply presents one such strategic risk,as access to resources becomes constrained.The food and agricultural sectors face supplyshortages due to climate change, populationgrowth, and changes in land use. Productivity,and consequently supply security, is affectedby governance, policies, and support systemsin many developing economies. Certification isone tool that companies can use to help improveproductivity and shore up supply. Companies thatprepare for supply chain risks place themselves ina stronger competitive position. Using certificationto address strategic risks in the supply chainresonates strongly with non-brand companies, asthey tend to face less short-term pressure fromconsumers. Life-cycle assessment is a step that acompany may adopt as a precursor or addendumto full certification, with the goal of better understandingits strategic risk profile.Attitude IV:Strategic OpportunityBusinesses increasingly recognize that operatingmore sustainably delivers considerable social,environmental, and economic benefits, includingsupply security; greater resource efficiency;stable, economically viable communities in producercountries; and the opportunity to connectwith employees who increasingly care aboutthese issues. While some companies are usingToward Sustainability: The Roles and Limitations of Certification

Chapter 2: Actors – Business 46Box 2.7Nike’s Considered IndexU.S. sporting apparel and footwear company Nike, Inc., hasdeveloped the Considered Index, a three-tiered standards systemthat rewards Nike designers who create sustainable designsolutions. The Considered Index uses a life-cycle approachto examine design and production factors such as materialselection, solvent use, garment treatments, and waste in theproduction of footwear and apparel. The Considered team isheaded by Nike’s former Innovation Director and is comprised ofemployees with backgrounds in business or design. According toNike, the Index has been a “key leverage point” for its designersand has successfully channeled internal competition towardsustainable design innovation. Nike shared the Index with thesports industry in 2009.Thus far, Nike has exceeded its own initial expectations for thenumber of products that meet Considered design standards.Its goals are to have all footwear meet the first-tier or “bronze”standards at a minimum by the end of 2011, all apparel by 2015,and all equipment such as balls, gloves, and backpacks by 2020.Nike says this would lead to a 17 percent reduction in waste anda 20 percent increase in the use of environmentally preferredmaterials across the company.http://nikeinc.com/pages/responsibilitycertification as a strategic driver, few have developedall the tools to do this (see Box 2.7).This attitudinal phase marks a shift from a compliancemindset to a more holistic approach. It seescertification not just as a tool to mitigate risks, butas a platform for addressing the causes behindsuch risks. This position necessitates difficultdecisions that may run contrary to short-termeconomic rationale. For example, a company mayneed to phase out key raw materials or businesspractices that will never be sustainable. As anexample, the recent commitment of the ConsumerGoods Forum to zero net deforestation by 2020is a substantive commitment that promises tochange the “rules of the game” (Consumer GoodsForum, 2010). This phase also views supplychain sustainability as a “precompetitive” issue.Precompetitive thinking is becoming more important,but understanding where it is possible towork collaboratively across an industry and whereto capture competitive value at various stages inthe supply chain remains a challenge.The Drivers and Barriers thatShape Business Engagementin CertificationA wide range of factors may drive a firm to engagein certification. Some may originate from withina company; others may impinge on it from theoutside.The degree to which a firm is influenced by anyof these factors varies (Park & Koehler, 2011), andin fact a firm’s primary drivers may evolve andchange over time. Whether a sector is regulated ornot is a crucial consideration, as is the question ofwhether the sector is primarily consumer-facing.Influences are also likely to vary with geography(see Appendix K). 8 Global companies operatingin different cultures will face different drivers indifferent places. Other variables include a company’sculture, risk management strategies, andcorporate responsibility portfolio.This section lists a number of key internal andexternal drivers and barriers in brief; a fullerdiscussion of each can be found in Appendix J.The drivers and barriers listed were drawn fromacademic literature as well as the expert opinionof the Steering Committee. The Committee didnot attempt to prioritize them, as their relativeimportance will differ from company to company.(For one take on prioritization, see Box 2.8 andFigures 2.2 and 2.3 for the results of the ISEAL100 survey.)8 For another perspective on business drivers, see Brown,Roemer-Mahler, and Vetterein (2010).Toward Sustainability: The Roles and Limitations of Certification

Chapter 2: Actors – Business 47Box 2.8A Prioritization of Driversand Barriers: Results ofthe ISEAL 100 StudyThere is no universal hierarchy ofdrivers or barriers for companiesconsidering taking part in acertification program. Differentcompanies will respond to thevarious factors in different waysdepending on their industry context,individual business strategy,corporate values, and operatinggeographies, among other factors.A recent survey conducted bythe ISEAL Alliance, however,provides one take on which driversand barriers may be the mostcompelling to business. ISEALinterviewed 100 thought leaders in17 countries about certification—80individuals from business and 20from government/civil society.One of the questions asked was:What are the main benefits thatbusinesses perceive in their useof standards? Figures 2.2 and 2.3summarize the answers receivedfrom the 80 business leaders. Asseen in Figure 2.2, 78 percent ofthe business respondents gaveanswers relating to operationalefficiencies; 60 percent notedmarketing-related benefits; and 56percent pointed to some aspectof sustainability performance.Another question was: What doyou consider the main frustrationsor limitations that standards bringto your organization? In that case,47 percent pointed to cost andcomplexity of use; 46 percentnoted the complex landscape of thesystem; and 42 percent cited lack ofeffectiveness.Visit www.isealalliance.org todownload the report and read thefull analysis.Figure 2.2: Perceived Benefits from Standards*% of respondents% of respondents50%45%40%35%30%25%20%15%10%5%0%35%30%25%20%15%10%5%0%50% 78%OperationalEfficienciesOperationalImprovements29%35%InternalCommunications47%Cost andcomplexityof use23%ProcurementScreening45%CustomerCommunications60%Marketing31%Reputation/Credibility37%SustainabilityOutcomes56%SustainabilityPerformance19%12% 12%Figure 2.3: Main Frustrations and Limitations of StandardsCost14% 14%ComplexityDifficult toimplement9%High informationneeds31%21%46%Complexlandscape16%16%4% 4%InsufficientsupportToo manyOverlapConfusionLow consumerawarenessCompetition20%19%Governanceprocess42%Lack ofeffectivenessStandard atwrong level13%Transparencymessages10%Issues withverification7%OthereffectivenessPerformanceEvaluationIndependentVerificationSource: ISEAL Alliance28%Relevance/other23%Limited scope10% 9%Not businessfriendlyOtherSource: ISEAL Alliance* Corporate respondents only. Respondents’ answers to this open question fell into three generalcategories. The graph details the breakdown of answers within each of the three categories.So, for example, “operational efficiencies” encompasses all responses related to operationalimprovements (mentioned by 50 percent of corporate respondents), internal communications(mentioned by 35 percent), procurement (mentioned by 23 percent), and screening (mentionedby 12 percent).Toward Sustainability: The Roles and Limitations of Certification

Chapter 2: Actors – Business 48Internal DriversThe primary categories of internal drivers are organizational advantage, supply-side pressures, and normative incentives.DriverDescriptionOrganizational advantageCompany learningHuman capitalOrganizationalrelationshipsFirms may engage with certification as a means of learning about social and environmental issuesin their supply chain and how to manage them, as certification can provide intelligence into asupply chain that cannot easily be obtained in any other way (see Appendix K).Participation in a credible certification process can increase employee morale and providenonpecuniary compensation. This in turn can assist a firm with recruitment and retention(Brammer, Millington, & Rayton, 2007).Certification can improve relationships with stakeholders—especially suppliers—that play a criticalrole in a company’s success.Supply-side pressuresSecurity of supplyIncrease insupply-side efficiencyTraceabilityReduction insupply-side costsCertification provides companies with a systematic way to identify social and environmental risksin their supply chains, and take corrective actions as needed to address them, in order to betterensure a sustainable supply of raw materials in the future.Certification can weed out supply-side risks and inefficiencies through compliance mechanisms,as it provides a means for firms to enforce requirements on other actors along the supply chain.Progressive certification processes also look to proactively strengthen supply chains through thetransfer of technology and management skills (Lyon & van Hoof, 2010; Vandenbergh, 2007*).Certification provides a means for companies to trace the origins of their product inputs, providing“chain of custody” assurance.Certification can reduce supply-related costs by increasing the efficiency of resource use andreducing waste, and by reducing resource-intensive business-to-business interaction, such ascontractual obligations and internal monitoring. (See the Barriers section for a discussion of thecosts of certification itself, however.)Normative incentivesPersonal normsSocietal normsIndustry normsThe personal norms and morally persuasive arguments of managers, directors, and keyshareholders may influence a firm’s decision to participate in certification.Social expectations and the potential for sanctions (or rewards) can play a powerful role in a firm’sdecision about whether or not to adopt certification. Certification can provide a firm with a “sociallicense to operate” and be used to demonstrate that a firm will be a good neighbor.Trade groups can play a key role in pushing their industry members to sign up for certificationand thereby create “safety in numbers.” Ancillary benefits of a collective industry approach includeshared learning and the legitimization of new practices.* Vandenbergh (2007) indicates that supply chain contracts containing environmental provisions are widespread, representing 50 percent of firms andmore than 70 percent of total sales in eight sectors.Toward Sustainability: The Roles and Limitations of Certification

Chapter 2: Actors–Business 49External DriversExternal stakeholders help to provide legitimacy for voluntary certification systems (Cashore, 2002), and pressure from thesestakeholders is a strong driver of company participation. The most influential stakeholders, which tend to operate on thedemand side, include buyers (consumers and companies), NGOs and citizen groups, government agencies, and investors.Another, less-important stakeholder is the certification industry itself, which operates on the supply side.DriverDescriptionBuyer pressures and incentivesB2CdemandConsumer demand for sustainable products is in some cases a driver of business behavior, although precisely howmuch of one marks an issue of considerable debate. (See Box 2.9) The market for certified products and services hasgrown steadily, moving away from small-scale organizations and specialist retailers to mainstream, multinational brands.B2BdemandDemand from large retailers, and the desire of manufacturers to differentiate their products with key customers,can often represent a driving force for supplier firms to certify. Also, institutional buyers—including governmentprocurement offices—are emerging as significant players. The driver in these cases may the promise of gainingmarket share or access to contracts, rather than a price premium.Market pressures and incentivesBranddifferentiationAn on-pack ecolabel identifying a brand as compliant with a standard can be attractive to firms, as it emphasizestheir membership in the “green” or “ethical” club. The influence of brand differentiation typically correlates withconsumer demand, especially in retail and other consumer-facing sectors. There is concern, however, that theproliferation of ecolabels will lead, or has already led, to consumer confusion and a consequent decrease in demand.BrandvaluePublic recognition of compliance with specific social and/or environmental conditions can improve a brand’sreputation. This is most evident when companies adopt certification in response to public criticism, although itcan form part of a nondefensive brand enhancement strategy as well.Civil society pressures and incentivesNGOcampaignactivismNGOs have led efforts ranging from “name and shame” campaigns to full product boycotts, both of which haveproven to have economic and reputational effects. For a company to be seen as “not good” by the public can actas a powerful motivator toward the adoption of certification systems. It is no coincidence that Nike, Gap, Levi’s,and other global retail brands that suffered consumer boycotts in the 1990s are now leaders in supply chaintransparency and monitoring.NGOengagementFirms’ relationships with the NGO sector are not all adversarial. NGO-led processes based on mutual learning andcontinuous improvement often influence companies to participate in standards development and engage in certification.The benefits of such an approach include communication, getting more certified supply, and capacity building.Regulatory pressures and incentivesPreemptionof regulationDecrease incompliancecostsRegulatoryconsistencyCreating barriersto entryReductionin tort liabilityBy adopting certification, companies sometimes hope to preempt mandatory regulation or the imposition of morestringent standards by governments (Lyon & Maxwell, 2004; Maxwell, Lyon, & Hackett, 2000; Prakash, 2000; Vogel,2008). Certification is no guarantee against the future creation of new regulations, however (Bartley, 2005).Companies sometimes perceive certification to be less expensive than complying with government regulations,which may drive them to adopt certification if the threat of new regulations exists (Khanna & Anton, 2002; Maxwell& Decker, 2006; Maxwell, et al., 2000). However, certification can result in additional compliance costs, particularlyin the audit process.International businesses often find themselves facing regulatory inconsistencies, weaknesses, and gaps when theyoperate across multiple national and sub-national jurisdictions. Most companies would prefer harmonized rules anduniversal standards across borders, in order to simplify compliance and “level the playing field.” Certification systemsrepresent a form of reputable private governance with consistent rules that can be applied across national boundaries.Firms might participate in certification with an eye toward influencing or participating in eventual regulatoryoutcomes in a way that makes it harder for new market entrants (Gupta & Lad, 1983).Certification may make firms less likely to cause harm, or more likely to have met standards of care to fight damageclaims. However, certification could also increase liability should a product be advertised or marketed as havingmet a standard’s criteria, if in fact it has not.Toward Sustainability: The Roles and Limitations of Certification

Chapter 2: Actors – Business 50External Drivers (Continued)Investor pressures and incentivesInvestorcommunicationsIncreasingly, companies may use certification as part of their broader communication efforts with investors—i.e.,to enhance company weightings with rating agencies and other firms assessing sustainability on behalf of sociallyresponsible or mainstream investors.ShareholderresolutionsAs a driver for certification, pressures from lenders are not generally judged to be significant (see Appendix L).A notable exception arises in the case of shareholder resolutions on topics such as human rights, environmentalissues, and labor practices; companies may adopt certification to address these types of resolutions.Box 2.9Consumer Demand and “Willingness to Pay”The academic literature estimating demand for green products is surprisingly thin. Some papers focus on “willingness topay” for green products, while others focus on the market share shifts engendered by a move toward greener products.Overall, these studies indicate that demand and willingness to pay vary widely.Kiesel, Buschena, and Smith (2005) for example, studied fluid milk, focusing on whether there is a price premium fororganic milk, and whether there is a premium for milk that is free of genetically modified recombinant Bovine GrowthHormone (rBGH). They found that organic milk accounted for about 13 percent of the market and sold for 63 to 90percent more than conventional milk. Milk that was labeled “rBGH-free” accounted for 28 percent of sales, and sold fora premium of 13 to 30 percent; unlabeled rBGH-free milk did not command a price premium.For organic cotton, Casadesus-Masanell, Crooke, Reinhardt, and Vasishth (2009) found a 10 percent increase inwillingness to pay for Patagonia’s organic cotton shirts compared to regular cotton; they pointed out that there were noapparent private benefits associated with the switch to organic cotton. In Europe and the United States, free-range eggsalso command a price premium.Kotchen and Moore (2007) did not study price premiums, but looked instead at what percentage of customers werewilling to sign up for electricity from renewable generation sources, at a given price. They found that for Detroit Edison’sSolarCurrents program, only 281 out of 80,000 customers (0.35 percent) subscribed, and for Traverse City Light &Power’s “Green Rate” program, only 122 out of 7,000 customers (1.74 percent) subscribed.Teisl, Roe, and Hicks (2002) studied market share changes following the shift to “dolphin-safe tuna” catch techniques.Because all the major tuna producers shifted to dolphin-safe tuna at the same time, the analysis studied market shareshifts toward tuna and away from substitute products such as lunch meats, potted meats, and other types of cannedseafood. The authors found an increase in tuna’s market share of roughly 0.9 percent after the shift, with a reduction inluncheon meat’s market share of about 1.4 percent, and a smaller loss for potted meats of about 0.26 percent. Oddlyenough, the market share of other canned seafood increased by 0.8 percent, almost as much as that for tuna, eventhough there had been no change in the production process for these products.Finally, Delmas and Grant (forthcoming) studied organic wines and found that ecolabels actually yielded a negative pricepremium. The apparent explanation is that the certification process for organic wine requires that there be no addedsulfites, which are required for producing high-quality wines that need to mature over time. Thus, many producersactually certify their production process, with the exception of the use of sulfites, and then eschew the organic label.The foregoing results illustrate the wide differences in consumer willingness to pay for environmentally friendly products.So, for example, organic agriculture occupies a significant, and growing, share of the market, while clean energy seemsto attract a very small market share. It may be that certified goods that promise a human health benefit are more likely tocommand a price premium than other products. Another key issue is that consumers’ professed willingness to pay (asstated in a survey, for instance) does not necessarily equate to actual behavior (Loureiro, McCluskey, & Mittelhammer, 2003).In many cases, even consumer awareness of certification (let alone willingness to pay more for certified product) ismodest, and varies by country and system (see Appendix F). And, multiple labels with different claims and sometimescontradictory advice can create uncertainty and confusion in consumers’ minds (Horne, 2009; Treves & Jones, 2010).A key implication, then, is that consumer demand alone is unlikely to support a large-scale shift toward the use ofcertification and labeling systems, especially in product categories outside of organic agriculture.Toward Sustainability: The Roles and Limitations of Certification

Chapter 2: Actors – Business 51BarriersA range of concerns might dissuade a company from participating in a certification system. The most common relate to marketconsiderations, issues of trust in certification, and consumer deterrents. Company-specific variables, such as geographiclocation and operating structure, can also play a role.BarrierDescriptionMarket issuesHigh cost ofcertificationConcernsabout scopeConcerns aboutability to executeLack of brandadvantageCertification bodies tend to charge on a straight volume basis, with no discount for companies that help todrive scale. Other substantial costs relate to auditing, product segregation in the supply chain, marketing,and changing other operating practices. A number of studies find that the transaction costs associated withenvironmental certification exceed the short-term gains (see Appendix K). However, a firm’s expectation ofassociated long-term gains may offset cost concerns (Khanna & Damon, 1999).Current standards often focus on one aspect or dimension of sustainability. Many firms would prefer aconsolidation of standards, or even one universal sustainability standard, rather than addressing individualissues piecemeal.Some companies may avoid certification due to the complexity of implementation. Such complexity maystem from flexible manufacturing processes; significant data requirements; lengthy or complex supplychains; a lack of dedicated manufacturing processes or sourcing systems; and/or product ranges thatinclude varying levels of multiple raw materials (Park & Koehler, 2011).A firm might question an ecolabel’s brand value, particularly if numerous other companies are using the sameecolabel, and/or if the ecolabel itself has more brand recognition than the product to be certified. Firms mayalso be concerned that an ecolabel could be controversial or otherwise dilute brand value.Issues of trustMethodologicalchallenges forverifying impact“Greenwashing”Lack of trust inthe certifyingorganizationConcern overthe rigor of thestandardsAs will be discussed Chapter 3, most certification systems have struggled, for a variety of methodologicalreasons, to conclusively prove success in mitigating negative environmental impacts, improving the lot ofindividuals within the supply chain over the long term, and/or contributing to supply chain sustainability.Some consumers perceive certification as an attempt by businesses to mislead the public about theirsustainability performance (Makower, 2011). (See Box 2.10)Multi-stakeholder governance structures give rise to questions of mutual trust, given the different prioritiesand cultures of participating organizations. Companies may believe certain nonprofit certification bodieshave an anti-business bias. NGOs and the public may express the same reservations in reverse, perceivingundue corporate influence in the certifying organization.Companies prefer certification systems to be as objective, scientific, multi-attributable, and dynamic aspossible. Where these characteristics are absent, companies may be wary of participation.Consumer-related deterrentsConsumerconfusionPriceproblemsThe proliferation of certification may confuse consumers, who might wish to reward the “best performers”but cannot easily determine which standards are most stringent. Concerns about consumer confusion mayact as a disincentive for some companies to participate.While consumer awareness of social and environmental issues has increased in recent years, this awarenessdoes not necessarily translate into changed behavior at the checkout counter (Espach, 2005; Loureiro, et al.,2003). Studies suggest that costs will need to be subsumed within the supply chain for certified goods to beattractive to a broad mass of consumers (Lenox, 2006; Sedjo & Swallow, 2002; see also Appendix K). Thismay deter companies.Toward Sustainability: The Roles and Limitations of Certification

Chapter 2: Actors – Business 52Important VariablesThough many drivers and barriers are generic to much of the business sector, a number of variables may alter the degree ofinfluence that these have on certain companies. In particular, geographic location and supply chain position may be significantdeterminants of behavior.variableDescriptionGeographySupply chainpositionGlobal companies operating in different cultures will have different drivers in different places, includingvarying levels of operating risks. Recent research found that U.S. companies with foreign parents are morelikely to adopt the ISO 14000 standard, for example (King & Lenox, 2000).Large corporate purchasers, particularly international retailers and FMCGs, can use their power to pressuresuppliers and other smaller, dependent players in their value chain to certify.* The more streamlined asupply chain, the more influence a buyer can wield.* Unilever provides an illustrative example. Through its collaboration with the WWF, this global company helped found the MSC and the FSC.In both cases, Unilever’s direct suppliers were encouraged to participate. Among other outcomes, this contributed to knowledge transfer, whichin turn reduced the costs of compliance.Box 2.10S.C. Johnson & Greenwashing LitigationIn July 2011, S.C. Johnson settled two class-action lawsuits bycustomers in California and Wisconsin who felt deceived by acorporate ecolabel. At issue was S.C. Johnson’s glass cleaner,Windex ® , which carried on the front a prominent, green-coloredlabel with a leaf-and-branch graphic and Greenlist insignia.Greenlist is a rating system used to evaluate and reduce adverseenvironmental effects of chemical ingredients. The insignia isconferred by S.C. Johnson itself. That fact, or the suggestion ofit, appeared less prominently inside of the clear bottles, visiblethrough the Windex fluid. The litigation contended that S.C.Johnson deceptively implied that Windex was tested by a neutralthird party and found to be environmentally friendly.The company holds a patent on Greenlist, which it says has helpedit eliminate nearly 48 million pounds of volatile organic compoundsfrom its products in the last five years. The American ChemicalSociety and the U.S. Environmental Protection Agency both praisethe scheme, but the company’s lack of clear disclosure as to itsconnection to Greenlist generated the litigation.In settling the lawsuits, S.C. Johnson agreed to stop using thelabels on its Windex bottles. Company chairman and CEO FiskJohnson was quoted as saying: “In retrospect, we could have donea better job at being more transparent and clearer with our labeland what it meant.”(Bardelline, 2011)Key Questions for BusinessesConsidering CertificationAlmost all companies considering taking part incertification programs will encounter a number ofbenefits as well as disadvantages from doing so.In addition to the drivers discussed above, firmsconsidering certification may be looking for:▪ Ways to engage in multi-stakeholder processes▪ Demonstration of improved environmentaland social performance▪ Enhanced presence on the ground, usingcertifiers as a proxy▪ Benchmarks for their internal systems▪ Information on emerging services andpractices▪ Increased market share▪ Reputational enhancementsFor any given company, the choice of certificationdepends on the immediacy and importance ofthe supply-chain-related risk or issue in question.A company needs an accurate picture ofits full supply chain and practices within it. Thismay require extensive investigation, as the mostsubstantial risks are often at the raw materialslevel, and in many supply chains large companiesToward Sustainability: The Roles and Limitations of Certification

Chapter 2: Actors – Business 53do not have direct contact with players at thislevel. Companies may also need to map theirstakeholders and evaluate their position withinthe four “attitudinal phases” described previously.Within a company, the question of whether tocertify affects both the sales and marketing functionand the procurement function. The salesand marketing function is interested in theexternal implications of adopting certification,while the procurement function is concerned withsupply security, cost, and operational complexity.Public affairs departments can also play a keyrole given their interactions and management ofexpectations with external stakeholders. A morefundamental decision about the strategic importanceof certification typically would be made byexecutive management, with possible input fromcorporate responsibility, environmental management,and legal experts.The Steering Committee offers the followingquestions for businesses to consider in thesekinds of internal decision-making processes. TheCommittee does not attempt to provide answersto the questions, but rather makes observationsand provides thoughts for consideration, basedon the Committee’s experience reviewing the literature,discussing the issues, and speaking withkey experts.Questions regardingCompany StrategyQuestion: Is our company a leader in its sector,and if not, do we want to be? Could certification playa role in differentiating us from our competitors?Observation: Some companies have been ableto move and create markets by taking part in certificationsystems and employing ecolabels, therebyaugmenting their competitive position. Certifyingcommodities with known issues may help tosecure supplies (by addressing and amelioratingkey environmental and social issues) and enablefuture growth. Also, certification has helped toengage B2B companies with large institutionalbuyers for whom certification is an increasingpriority.Question: Are key stakeholders concerned, orcould they become concerned, about negativesocial, economic, or environmental impacts inour company’s supply chain? Are these concernslegitimate and are they likely to pose a risk to ourreputation or operations?Observation: International media, internetenabledcommunications, and the growth ofsocial media mean that the global operationsof large business are under more scrutiny thanever. Public understanding of business impactson society and the environment have increased,and companies that make responsibility claimsmay find themselves charged with inconsistencyacross their operations.Decisions about whether or not to engage in certification,therefore, need to be made with a viewto (a) understanding the company’s full supplychain and the potential nonfinancial risks withinit, and (b) an appreciation of who the company’skey stakeholders are and where their concerns lie.With this information, a company is better able tojudge whether stakeholder claims are legitimateand whether certification will assist in mitigatingor eliminating them.Question: Could the long-term business opportunitiesderived from a fully sustainable supplyecosystem outweigh the financial and resourcecosts of implementing and managing certificationsystems?Observation: “First movers” in the certificationarena face many challenges, including buildingawareness, establishing a reputation, findingcertified or certifiable supply, finding credible certifiers,and added cost. For companies operatingwith small price margins, these challenges couldbe highly material. Of course, certification candrive efficiencies that reduce some supply-relatedcosts.In deciding whether to adopt certification, companieswill necessarily evaluate the potentialcommercial benefits against the expected costs.Sales benefits have generally been lower thanexpected. However, longer-term strategic opportunitiesfrom comprehensive certification can beToward Sustainability: The Roles and Limitations of Certification

Chapter 2: Actors – Business 54potentially significant. Companies are advised toconsider how their products and services mightplay in an operational and regulatory environmentbased on sustainability principles.Question: If we decide against certification,what alternative strategies for communicating thesustainability attributes of a product to consumersare available to us?Observation: Alternative strategies includeeducational campaigns to explain to stakeholdersthe sustainability attributes of products. Suchattributes can be communicated via advertising,brochures, social media, or corporate socialresponsibility reporting.It should also be noted that certification doesnot necessarily include consumer-facing communication.Indeed, certification appears to be ina transition period in which security of supply andproduction efficiency is becoming more importantthan consumer communication. Companiesadopting in-house systems, especially life-cycleassessments, are more likely to be motivated byoperational efficiency than by sales and marketing.The decision to participate in certification butnot ecolabeling is common. Some companiesmay also prefer to add sustainability informationto existing product labels rather than use aspecific ecolabel or certification logo.Questions regardingProcurementQuestion: Is there a risk that our supply of certainraw materials may become restricted in thefuture and, if so, could a certification system helpus address this risk?Observation: Supply security is becoming anincreasingly strategic concern. Companies arelooking at trends that impact the sustainability ofkey raw materials on which they depend—trendsincluding climate change, political stability, andthe economic viability of production, amongothers. Standards and certification systems havethe potential to address supply risks, as they couldmake the production of raw materials more sustainableover the long term, and they may enablecompanies to develop more direct relationshipswith producers.Of course, if certified alternatives are to substitute,the supply of them must be sufficient.Certification remains a new phenomenon in manyproduct sectors, and the supply of many certifiedraw materials is still limited. As demand forcertified products grows, more new suppliers willneed to be found, if availability is not to emerge asa major constraint on business growth. This is astrue for single-ingredient products with numeroussmaller suppliers around the globe as it is formulti-ingredient products. (See Box 2.11.)A related issue is product composition. Companiesneed to determine if the choice to certify a productmay restrict their ability to modify a product’sformula. Certification systems with a lower barrierto entry may help more companies that areintegrating sustainability into their supply chainsfor the first time.Question: Does our company have the internalcapacity to push certification down through oursupply chain and, if so, segregate certified andnoncertified raw materials?Observation: The ability of a company to pushcertification through its supply chain dependson its ability to influence the players within thatchain. Large retailers and fast-moving consumergoods firms typically occupy a key position withtheir supply chains. Such companies have leveragedtheir size and market presence to drivecertification in the past. However, shifting awhole commodity sector onto a certified footinginvolves collective action by major buyers to putpressure on intermediary traders and suppliers.This need for cooperation is the basis behind theroundtable initiatives for palm oil, soy, and sugarcane. Also, implementing certification can beeasier if a company owns considerable portionsof its manufacturing process and supply chain.Internal management capacity becomes importantfor companies sourcing certified raw materialsas opposed to buying certified finished products.Many agricultural commodities are bought fromthe open market with little or no traceability.Toward Sustainability: The Roles and Limitations of Certification

Chapter 2: Actors – Business 55Box 2.11Sustainable Palm Oil, GreenPalm, and a Test Case for AvailabilityTwo major hurdles face businesses that want to use certified sustainable palm oil in their products. One is keeping itsegregated throughout the supply chain. The other is availability. While many big brands have stated their intentionto switch to sustainable palm oil by a certain date—most commonly 2015—there is doubt as to whether their supplychains will be fit for this, and whether there will be enough sustainably produced material to go round.Palm oil is an ingredient in about half of all packaged supermarket products, including food, cosmetics, and householddetergents. For any major manufacturer or retailer with thousands of own-label product lines, switching to sustainablepalm oil is a mammoth task involving many parties and hundreds of thousands of tonnes of sustainable palm oil.To complicate matters, many products contain blends or fractions of palm oil that are not widely available fromproducers approved by the Roundtable on Sustainable Palm Oil (RSPO). In addition, palm kernel oil, commonly used incosmetics, confectionery, and biscuit fillings, involves additional stages in the production process, involving more partiesand an extra level of complexity.This raises important questions as to whether there will be enough palm oil producers, growers, and mills usingmethods approved and certified by the RSPO come 2015. To be certified by the RSPO, producers must show they meet aseries of principles and criteria, such as protecting rainforest and natural habitats, respecting human rights, and avoidingpolluting or harming the environment.In an attempt to encourage more producers to adopt sustainable practices, GreenPalm was established. This initiativeenables businesses to pay a premium to RSPO-certified producers, even if they do not buy RSPO-certified product. Aproducer earns one GreenPalm certificate for each tonne of palm oil certified as sustainable. The producer can then offerthe certificates for sale on GreenPalm’s online trading platform, where manufacturers and retailers who make or useproducts containing palm oil can bid for and buy them, to offset their use of noncertified palm oil.The WWF’s chief U.K. policy officer, Adam Harrison, described GreenPalm as a worthwhile “interim measure,” lettingbusinesses support sustainable production immediately while they tackle the long and costly job of changing their supplychains (Norman, 2010). In its first two years of operations, more than a million GreenPalm certificates were traded. Thatrepresents more than a million tonnes of palm oil produced using sustainable methods, financed through more than$9 million in premiums paid to producers. Certificate purchasers include multinational players such as Unilever, Cargill,Carrefour, Marks & Spencer, Cadbury, Nestlé, Kellogg, Asda, Boots, Tesco, and Waitrose, among many others.“Currently, change is not happening quickly enough,” warns Bob Norman, general manager of GreenPalm. Sustainablepalm oil production must increase five-fold to meet international demand by 2015, he asserts (Norman, 2010).Sourcing certified commodities requires distinctsupplier relationships that are more costly andtime-consuming to establish. Some certificationsystems may require segregated streams, adaptationsin factories, accreditation of factories, andclose coordination with the brand managementteam. As companies scale up the supply of certifiedproducts, the challenges are compounded,requiring some to create a dedicated global procurementteam.Companies without capacity to integrate certifiedmaterials must undertake a cost/benefit analysisto determine the viability of developing suchcapacity. Businesses recognize that certificationmanagement costs may increase as demandfor more scientifically rigorous labels grows.Maintaining compliance can be more challengingbecause companies must manage variablerenewal, audit, and fee schedules for differentproducts and labels. Costs are likely to be greaterfor capital-intensive industries. Companies operatingat a low price point could also face headwindswhen trying to charge a price premium comparedto companies at the higher end of the market.Questions regardingSales and MarketingQuestion: What impacts might certificationhave on the value proposition of one of ourindividual brands and on our company’s brandportfolio as a whole?Toward Sustainability: The Roles and Limitations of Certification

Chapter 2: Actors – Business 56Observation: Companies with low brandequity can use certification as a tool to drive valueand strengthen a stale brand. Companies thathave strong sustainability principles may find thatecolabels strengthen an established corporatebrand and maintain the brand advantage. Or,they may conclude that an ecolabel does not addvalue or can in fact threaten brand equity. Puttinga label on a product even if it does not strengthenbrand differentiation can represent a strategy tokeep up with the competition.Companies may also choose to certify a product,or source certified ingredients, without puttinga label on the product package. Doing so mighthelp to focus on and build the brand’s identity(especially with B2B customers), rather than puttingthe focus on the certification system.Finally, companies that have not pursued a comprehensivesustainability strategy should be awarethat the credibility of their adoption of an ecolabelcan be questioned. In such cases, companiesmay prefer to rely on other product attributes,such as trust in the company’s overall brand. Thisis a conceivable decision even when consumerdemand for ecolabeled products exists.Question: Is the certification system clear, credible,and attractive to consumers, or could it insome way jeopardize our brand’s relationship withconsumers?Observation: Attaching a company’s brandto an ecolabel can backfire. This is most likely insituations where the company has a poor reputationfor social responsibility or environmentalstewardship, or when the ecolabel lacks publiccredibility. Even credible, high-bar certificationsare no guarantee of 100 percent perfect practices,and with the increasing reach of social media,breaches of standards are more likely to appear.Companies should recognize the risks of certificationand tailor their communications accordingly.The external credibility of an ecolabel is crucialfor a company to determine at the outset. Manyfactors affect consumer trust. Ideally, an ecolabelshould be grounded in a diverse multi-stakeholderprocess that includes consumers. Companiesconcerned with public mistrust of corporationsmay be better suited opting for an NGO- orgovernment-sponsored label. For reasons of credibility,companies often prefer ecolabels with morerigorous criteria, even if these are more costly. Alabel’s external credibility is also affected by itsmonitoring process. Third-party verification andproper documentation are optimal. Indeed, thesemay become necessary to avoid legal claims insome countries, such as the United States. Andincreasingly, consumers will expect companiesto be able to demonstrate positive impacts fromcertification.Concluding RemarksAs seen in this section, businesses have hadsome involvement in the initial phase of certification(e.g., Unilever in the MSC) but not as muchas NGOs. In recent years, the commitment ofbusinesses to standards and certification systemshas accelerated in response to multiple drivers,despite multiple barriers.The many drivers and barriers have made it difficultto detect trends in business views on certification.In the last couple of years, however, sometrends have begun to crystallize. For instance, thebelief that there is a widespread price premiumfor certified products across the mass consumermarket has proven to be wrong (except for withorganic food, which almost always commands apremium). And, some businesses are now lookingat certification in a much more strategic way, shiftingwhole commodities to certified standards.This trend toward a more strategic approach islikely to accelerate, as economic, social, and environmentalpressures on supply chains intensifyand stakeholders (including investors), the media,and consumers get more access to supply chainknowledge via modern technology.Certification standards will have to develop inresponse to this, as businesses seek more supplychain transparency, a faster pace of change,greater scale, less bureaucracy, and more extensionsupport. And, it is likely that businesseswill collaborate more to drive these changes in ashared certification system, even as they continueto compete on the pace at which they implementstandards, for reasons of brand differentiation.Toward Sustainability: The Roles and Limitations of Certification

Chapter3The Impacts of Standardsand Certification on SustainabilityThe previous chapters have described the history and key features of voluntary standardsand certification systems and the roles and drivers of key actors in these systems.This chapter summarizes the state of knowledge regarding the impacts of these systemson sustainability.By impacts the Steering Committee meanschanges in the quality and resilience of ecosystems,changes in resource efficiency and livelihoods,and changes in social welfare within the workplaceand wider community. These types of impacts arepurported to be the consequence of changes inthe behavior of enterprises involved in producingproducts according to sustainability standards.The Steering Committee set out to determine thestate of the evidence for this presumption, andtheir findings are summarized in this chapter.This chapter was written for people who want aclearer idea about how to think about the impactsof standards and certification systems. Such readersmay be contemplating adopting an existingsystem or designing a new system or may bealready committed to such a system and trying tofigure out how to make it work better. The chapterdoes not claim the last word on whether suchsystems are worthwhile or not, nor does it provideprescriptive guidelines on how they should beimplemented.Approach to theAssessment of ImpactsThe Steering Committee’s approach to the assessmentof impacts involved in-depth and criticalreviews in four sectors: agriculture, forestry, fisheries,and aquaculture. In all of these sectors,concerns have arisen regarding the sustainabilityof natural resource use and ecosystem impacts.And, as these four sectors include some of theoldest and most well-developed standards andcertification schemes, they were also more likelyto provide an evidence base from which to assessimpacts. The inclusion of four sectors was animportant design feature of this Assessment, asit provided scope for structured comparisons andsome sense of generalizability of findings. Thatsaid, experiences in other sectors were not considered,and this is a constraint to making broadgeneralizations.Reviews of the existing literature in the fourchosen sectors provided most of the empiricalevidence on which this chapter is based. Thesector reviews, which were commissioned by theSteering Committee, can be found in AppendicesD, E, F, and G. The reviews tended to place moreemphasis on evidence about the environmentaldimensions of sustainability than on social oreconomic elements, as environmental issues aremore central to the aims of many of the standardssystems and, consequently, there is a comparativelymore extensive body of knowledge on thisdimension.An overview of the main standards systemsassessed in the reviews is included in Figure 3.1.The reviews focused on these systems primarilydue to the greater extent of research available.Toward Sustainability: The Roles and Limitations of Certification 57

Chapter 3: Impacts 58Figure 3.1: The Main Sustainability Standards Assessed in the LiteratureOrganicFairtradeRainforestAlliance/SustainableAgricultureNetwork(RA-SAN)ForestStewardshipCouncil (FSC)Programmefor theEndorsementof ForestCertification(PEFC)MarineStewardshipCouncil (MSC)“Owner”of theStandardVarious, but theInternationalFederationof OrganicAgricultureMovements(IFOAM)overseesFairtradeLabellingOrganizationsInternational(FLO)SAN FSC PEFC MSCWhenLaunchedIFOAM – 1972(first privateorganic labelwas Demeter in1924)1988(FLO wasfounded in1997)RainforestAlliance – 1987;SustainableAgriculturestandard – 19911993 1999 1999WhoInitiatedSocialmovement/NGOSocialmovement/NGOSocialmovement/NGOSocialmovement/NGONationalforest sectororganizationsWorld WildlifeFund (WWF)and UnileverMainObjectiveDefinedby the fourprinciples ofIFOAM: Health,ecology,fairness, andcareImprove thesocio-economicwelfare of thedevelopingcountry;guaranteedminimum pricean importantfeatureImproveenvironmentaland socialconditionsin tropicalagriculture,with a focus onbiodiversity andconservationPromoteresponsiblemanagementof the world’sforestsRecognizeand promotesustainableforestmanagementContribute tothe health ofthe world’soceansNumber ofCountrieswith CertifiedOperations15458developingcountries25tropicalcountries80 27 21Number ofProducers/Enterprises &Land Area1.4 millionfarmers,35 millionhectares827certified farmerand workerorganizations,representing 1million farmersand workers63,000small and largefarms andcooperatives1,114forestenterprises,147 millionhectares243millionhectares147fisheriesProductsCertifiedAll agriculturalproducts(thoughorganic is nota productstandard, but afarm standard)Wide rangeof agriculturalproductsWide rangeof tropicalagriculturalproductsForestsForestsWild-caughtfisheriesToward Sustainability: The Roles and Limitations of Certification

Chapter 3: Impacts 59Methodological Challengesin the Evidence BaseWhen voluntary standards and certification systemsbegan to grow in popularity two decadesago, the assumption was typically made that theimplementation of these systems would lead to thedesired positive impacts. At the same time, therewas limited demand from donors, the public, orthe press for impact evaluation, and only limitedcollection of monitoring data by standard bodies.Early on, then, few studies were conducted toassess the impacts of these systems. 1 Over timeit became clear, however, that “compliance” and“impacts” are not synonymous. And, the growthand mainstreaming of standards led to increasedexternal scrutiny from a range of sources. Thepast decade has seen an increasing number ofarticles by journalists, scrutiny from policy makersand standard bodies themselves, as well as studiesconducted by academics, researchers, andstudents. Therefore, much of the evidence baseis relatively new, and impacts in many cases havenot been studied over long periods of time.More recently, a rich set of studies has been conducted,and methods for assessing standards’impacts have been evolving and improving.Qualitative, snapshot studies have predominated,but increasingly studies have employed morerigorous qualitative and quantitative methods asnorms and approaches have been professionalized.There are still gaps in the evidence base, ofcourse, making generalizations about impacts difficult—asituation compounded by the complexityof social change processes, dynamics withinstandards and markets, and variances amongcommodities and value chain relationships.In addition, various methodological challengesexist in the design of studies assessing standardsand certification systems and thus in the literature.These challenges are not unique to studies of certification,actually, but exist for research on mosttypes of policy interventions. First and foremost is1 Organic agriculture is perhaps the exception, as it hasbeen in existence for longer and has been compared toconventional agriculture for many years.the challenge of identifying an appropriate counterfactual—thatis, what the impacts would havebeen in the absence of certification (Blackman &Rivera, 2010). Having a counterfactual is critical tobeing able to unambiguously attribute impacts tocertification, but in many studies in the literatureone does not exist. This is due in part to theinherent challenges and significant costs associatedwith experimental and quasi-experimentalstudy designs. In Appendix H of this report, forexample, the authors write:The low number of studies with credible counterfactualsis not surprising given the costs andlogistical challenges of using the necessary experimentaland quasi-experimental approaches.Such methods require assigning candidate operationsto “certified” and “non-certified” groups,measuring baseline information, conducting theintervention (certification), and then comparingperformance at an appropriate time periodpost-intervention. While the quasi-experimentalmethod is somewhat more flexible, as it doesnot require random assignment to treatmentgroups, it does require that treatment group be“matched” to similar control operations, whichcan be non-trivial. To compensate for introduceduncertainties in matched approaches, highsample sizes are needed to provide meaningfulresults. And large sample sizes typically come ata high financial cost.In addition to these logistical and financial barriersare questions regarding the appropriatenessof these methodologies in complex situations.Many rural development specialists suggest thatthe complexity of rural social and environmentalchange processes create multiple variables anddynamically interacting factors so that simplecounterfactuals are unworkable (Patton, 2010). Inthe field of international relations, some scholarsargue for conducting counterfactual analyses ina way that focuses on possible “scenarios” thatmight have ensued if the factor in question hadnot occurred (Fearon, 1991).In this Assessment, the Steering Committeeconsidered evidence from studies with beforeand-aftercomparisons, and from studies thatToward Sustainability: The Roles and Limitations of Certification

Chapter 3: Impacts 60were able to trace processes leading to impactsthrough detailed observation of particular cases.The pros and cons that different study designspose for interpretation and generalizations arenoted as appropriate.Second is the challenge posed by evolving systems.Standards and certification systems arecontinuously being adjusted and modified,making it hard to pin down exactly what effect isbeing studied. In practice the Committee had torecognize that studies of the “same” system in thesame location at different times could producedifferent findings, even if other contextual factorshad not changed much. Moreover, many new andinnovative systems are emerging, making it challengingfor any assessment to provide relevantand timely advice.Third is the limitation of observations from individualpairs or small sets of cases. Case studiesof a farm or a firm with and without certificationcan provide detailed understanding of changesin practices, but do not allow robust statisticalcomparisons or inferences about the wider populationof farms or firms. On the other hand, largersample sizes make observations of more complexchanges difficult, and, as noted previously, theyrequire more resources.Given these challenges and the significant andoften increasing complexity of standards and certificationsystems themselves, it should not comeas a surprise that, in the literature, unambiguous,clear attribution of on-the-ground impacts is rare.Overall, the evidence base remains limited, andsignificantly more research is required to understandwhat impacts are likely to result from anygiven certification and under what conditions.As the rest of this chapter will show, however,much has been learned about changes in managementpractices resulting from certification;the sustainability issues for which certificationsystems are more or less effective; and someof the critical factors likely to influence on-thegroundimpacts. Taken together, these insightsresult in an improved capacity to think about howto strengthen existing standards and certificationsystems, and design new ones, when and wherethey are an appropriate tool.The Evidence: Ecological,Economic, and Social ImpactsPotential impacts and outcomes of certificationare diverse and can be classified in several ways.First there is the question of scale: Impacts mayarise from changes in practices at the level ofindividual production units, as well as aggregatedaccording to the number of certified units, withimpacts at the landscape or seascape level. All ofthe standards and certification systems studiedaim to encourage changes at the production-unitlevel, and this is where most of the research onimpacts has focused and should focus. However,there is increasing interest in assessing the potentialto effect landscape-level change, particularlyregarding ecosystem services.Second, there is the issue of focus: Standardsand certification systems address a wide varietyof sustainability issues, a broad categorizationof which is included in Figure 3.2. Each systemhas different aims and objectives that dictate itssustainability focus. Evaluation of the impacts ofthese systems has first and foremost focused onthe extent to which they achieve their intendedobjectives. It is also possible to examine unintendedconsequences of production systems,though these have been less studied.This section organizes and summarizes thefindings of the Assessment according to impactdomain—ecological, economic, and social—recognizingthat these are not independent. It drawson the sector reviews in Appendices D, E, F, andG and uses indicative research results to illustrategeneral conclusions that can be drawn about theimpacts of certification systems.Ecological ImpactsThe findings regarding ecological impacts aredivided here into three classes: ecosystem integrity;biodiversity; and pollution and waste (water,air, and soil).Toward Sustainability: The Roles and Limitations of Certification

Chapter 3: Impacts 61Figure 3.2: Summary of Environmental, Social, andEconomic Issues Addressed in Agriculture, Forestry,Fisheries, and Aquaculture CertificationEnvironmentalIssuesLoss ofbiodiversityConversion ofnatural ecosystemsPollution/contaminationof air, soils,and waterSoil degradation,erosion, and/ordesertificationClimate changeSocial IssuesWorking and livingconditionsRights andbenefitsCommunitydevelopmentEconomic IssuesIncome andprofitabilityBusinessopportunitiesDescriptionBoth natural biodiversity and agro-biodiversity,including local varieties, geographic overfishing, anddisease transfer to wild speciesDestruction of forests, primary tropical forests andpeat land; closely related to biodiversity loss andclimate changeLeaching from pesticides, nitrates, and phosphatescontaminating water, land, and air; waste treatmentand disposal; water useIntensification of production leading to poor soilquality and infertilityIndirect contributions to greenhouse gas emissionsthrough deforestation and energy use; directcontributions from cattle, manure, nitrogen in soils,etc.DescriptionHealth and safety, housing, medical careFreedom of association, working hours, discriminationLand rights, food security, educationDescriptionChanges in income, price premiumsMarket access, access to credit, technical assistanceEcosystem IntegrityThe continuing integrity of an ecosystem is oneof the overarching environmental goals of manysustainability standards and certification systems.Ecosystem integrity results from the carefulmanagement of a resource and of the waste andpollution that result from resource extraction. Itis characterized by the continued delivery of ecosystemservices such as clean water and carboncapture. While ecosystem integrity encompassesthe two other environmental issues addressedbelow (biodiversity and pollution/waste), it isseparated out to highlight evidence from resourceextraction systems in particular.In the fisheries sector, a key principle of the MSCstandards is that “fishing operations should allowfor the maintenance of structure, productivity,function, and diversity of ecosystems…on whichthe fishery depend” (Marine Stewardship Council,2004). A study of the ten earliest MSC-certifiedfisheries, commissioned by the MSC in 2006,documented improvements to managementpractices and information; however, few on-thewaterimpacts were measured (see Appendix E).A more recent independent review commissionedby the MSC analyzed pre-certification reportsfrom 21 fisheries and post-certification reportsfrom 25 fisheries. Eleven of the fisheries had bothpre-certification and post-certification samples(Marine Resources Assessment Group, Poseidon,& Meridian Prime, 2011). Eight performanceindicators were assessed that measured impacts“on-the-water;” these were supported by 54 interviewsto help judge causality. The research foundthat the greatest quantified outcome changeswere being made in stock status, which is theperformance indicator that has been most closelymonitored and for which more information isavailable. The post-certification analyses showedthat 21 percent of fisheries increased their stockstatus performance indicator, while 18 percentdecreased. The authors state that many of thesedeclines are attributable to early fisheries thatwere required to meet new, updated assessmentmethodologies in their re-certifications (MarineResources Assessment Group, et al., 2011).Analyzing the stakeholder interviews, 35 percentof respondents suggested that the fishery hadimproved across all eight performance indicators,compared to only 7 percent of respondentswho said that the situation had deteriorated. Thethree outcomes that were identified most oftenas having improved were bycatch, biomass targetreference points, and the status of endangered,Toward Sustainability: The Roles and Limitations of Certification

Chapter 3: Impacts 62threatened, and protected species. In situationswhere stakeholders identified improvement, 49percent of respondents attributed the improvementto MSC certification, primarily due to therebeing new research or information or changesin management. With respect to stock status,changes in fishing effort were equally important(Marine Resources Assessment Group, et al.,2011).In forest certification, an important approach tothe study of impacts has been to assess “correctiveaction requests” (CARs) (Auld, Gulbrandsen,& McDermott, 2008). CARs are actions anenterprise needs to take before they can receivecertification or to maintain certification. The mostextensive research that has been conducted usingCARs was an analysis in 2005 by Newsom andHewitt of 2,099 preconditions and conditionsthat were given by the FSC certifier SmartWoodto 129 forestry operations in 21 countries. Bothcertified plantations and certified natural/seminaturalforests were reflected in the analysis, inboth more- and less-developed countries.The top three environmental issues addressedthrough the CARs were: the maintenance andimprovement of aquatic and riparian areas,including buffer zones (CARs on these topicswere present in 63 percent of forest operations);the identification and protection of sensitive sitesand high-conservation-value forests (62 percent);and the identification and protection of threatenedand endangered species (62 percent). Theresearch concludes that, “The specific wordingof over half of the 2,099 conditions required substantive,on-the-ground change to occur [versuschanges in procedures and processes]. Whenconditions involving environmental and forestmanagement issues were examined alone, thepercentage of conditions requiring on-the-groundchange increased to 76%” (Newsom & Hewitt,2005). While the results are promising, the limitationof any study of CARs is that it may skew ananalysis of impacts to those problems that thecertification system was successful in addressing.A study of CARs for seven plantation firms inArgentina and three firms in Chile showed thatfirms certified by the FSC and the PEFC underwentsimilar changes in practices; but this studyalso documented more changes in practicesthan were covered in the CARs (Cubbage, Diaz,Yapura, & Dube, 2010). These included manyitems related to planning, monitoring, and documentation.A study of Canadian forestry suggeststhat PEFC-endorsed certification systems—whencompared to FSC-endorsed systems—are moreoriented toward forest productivity and long-termeconomic returns to firms than social or ecologicalissues (Clark & Kozar, 2011).Some studies highlight the difficulty in correlatingmanagement improvements with long-term ecosystemhealth. For example, studies comparingPEFC and FSC operations in Norway and Swedenprovided some early indicators of changes in onthe-groundpractices, but also found that moreinformation was needed to judge the environmentalimpacts and effectiveness of certification(Gulbrandsen, 2005a). Likewise, a review of theFSC concluded that while the process led tomanagement improvements, the inability toattract sufficient numbers of producers or createincentives for protection in the tropics meant itwas unclear that pursuing certification was betterthan conventional approaches to conservation(Gullison, 2003).A more-recent study in Sweden combined forestryinventorying data with certification information toexamine changes in indicators of forest conditionsover time (Johansson & Lidestav, 2011). Overall,the study found only minor improvements, andconfirmed earlier patterns of greater prevalenceof improvements on smaller properties that werePEFC certified (see Appendix F). This study alsofound that certified plots were twice as likely to beharvested as noncertified plots, with likely negativeimplications for biodiversity. Despite the use ofmultiple lines of evidence, the methods were notsufficient to establish cause/effect relationshipswith certification (Johansson & Lidestav, 2011).Toward Sustainability: The Roles and Limitations of Certification

Chapter 3: Impacts 63BiodiversityThis section focuses on the results of studies thataddress field-level biodiversity as an indicatorof a healthy ecosystem. Numerous case studiesacross sectors provide evidence of positiveimpacts on target species. However, measuringthese types of impacts as well as understandingimpacts on nontarget species has often provedchallenging.The literature reveals that corrective actionrequests issued by the FSC may include actionsthat would benefit biodiversity, such as changesin practices around high-conservation-value areasand actions to address threatened and endangeredspecies (Auld, Gulbrandsen, et al., 2008;World Wildlife Fund, 2005). Several studies, varyingin breadth and quality of evidence, have beenconducted on this topic.A study in Estonia compared old-growth standswith FSC-certified stands and found evidence forconvergence on several indicators of ecosystemfunction, including tree species diversity, volumesof woody debris, and decomposition indicators(Lohmus & Kraut, 2010).Another study, based on field data of forest conditionsin Norway, found some clear differences ina few ecological variables measured before andafter certification. In this case, the forests werecertified to Norway’s national “Living Forests”standard, which is associated with the PEFC(Sverdrup-Thygeson, Borg, & Bergsaker, 2008).In the United States, reviews of two field-basedstudies also document how environmental practiceswere better under either Sustainable ForestryInitiative (SFI) or FSC certification than withoutcertification (Cubbage, et al., 2010).Evidence from research in developing countries ismore limited and usually more indirect. A study offorest certification in Bolivia, for example, documentedlimited improvement in specific forestmanagement practices following certification,with deforestation, overall, continuing (Nebel,Quevedo, Jacobsen, & Helles (2005).A 2009 study of plantation forests in thesouthern part of Brazil (Rio Grande do Sul andSanta Catarina) compared variables on sevenRainforest Alliance-certified operations and sevennoncertified operations, using a combination offield observations, interviews with owners, andinterviews with workers. Researchers found thatcertified forestry operations outperformed noncertifiedones in the following areas:▪ Invading species control plan (present in100 percent of certified operations and in33 percent of noncertified)▪ Studies on flora and fauna (71 percent ofcertified; 29 percent of noncertified)▪ Planting with native species (71 percent ofcertified; 50 percent of noncertified)▪ Legal reserves established or being established(100 percent of certified; 57 percent ofnoncertified)▪ Occurrence of hunting (57 percent of certified;71 percent of noncertified) (Barbosa de Lima,et al., 2009)In South Africa, as part of meeting anticipateddemand for certified forest products, some largeforestry companies have implemented FSC standardsand continue to seek voluntary certification,even as government regulations covering manyof the same principles have come into force. In aset of steps partly attributable to certification, theforest industry in South Africa has now allocateda third of plantation holdings—largely grasslands—ascorridors and nodes for conservingbiodiversity and ecosystem services (Samways,Bazelet, & Pryke, 2010).In fisheries, when the South African hake fisheryachieved MSC certification, it scored well on stockmanagement and fishery management principlesbut scored poorly with respect to ecosystemimpact (Ponte, 2008). Attention was drawn toseveral ecological issues, including bycatch management,ecological relations, trawling impactson benthic habitat, and seabird populations. Asubsequent review of the fishery indicated that notall conditions had been met—for example, withToward Sustainability: The Roles and Limitations of Certification

Chapter 3: Impacts 64respect to managing bycatch pressures. However,significant improvements had been made inreducing seabird mortality relating to bycatch,with a decrease in mortality from approximately18,000 to 200 birds per year.The 2006 review by the MSC of the impacts ofcertification found many process improvementsthat could lead to better biodiversity conservation,but only one example of a clear, major ecologicalimprovement that could be attributed to certification(Gulbrandsen, 2009). That example occurredin the tooth-fish fishery in the United States,where a reduction in the bycatch of an endangeredseabird was achieved. In some other cases,such as fur seal bycatch in the New Zealand hokifishery, the improvements achieved turned out tobe transitory.The 2011 MSC-commissioned review foundpost-certification improvements in 12 percentof performance indicator scores relating to ecosystemeffects (Marine Resources AssessmentGroup, et al., 2011). For example, the reviewconcluded there was evidence of reductions inChinook salmon bycatch in the Gulf of Alaskapollock fishery. In contrast, another study of 22MSC-certified fisheries concluded that certificationhad not led to major improvements inbiodiversity conservation (Ward, 2008a).One study of the impacts of a “dolphin-safe”tuna certification used a model to help comparepractices a decade apart; the study suggestedthat U.S.-flagged and certified ships changed theirtuna-fishing practices, resulting in fewer dolphindeaths (Hicks & Schneir, 2008). The change primarilyinvolved changing fishing grounds to avoiddolphins.In the agriculture sector, the bulk of the literaturefocuses on organic standards. Organic certificationis expected to have positive impacts onbiodiversity and soil conditions at the field level—for example, from reduced chemical use and themanagement of non-cropped habitats (Hole, etal., 2005). Organic farming is practiced acrossthe world in a wide variety of agro-environmentaland climate contexts, including temperate zones,and unlike the studies focusing on Fairtrade andRainforest Alliance, much of the evidence baseon impact originates from developed countries(Niggli, Jawtusch, & Oehen, 2011). Thus, extrapolatingfrom these results for developing countryor tropical contexts needs to be undertaken withcare, for agronomic and socio-economic reasons.In the literature, local environmental impactsstemming from the implementation of organicagriculture are almost always found to be positive(Bengtsson, Ahnstrom, & Weibull, 2005; Hole,et al., 2005). In a qualitative review of 76 studies,Hole et al. (2005) concluded that, broadlyspeaking, the management practices involved inorganic farming are beneficial for farmland wildlifeand biodiversity. They also noted, however, that itis difficult to prove and assess the scale effectsof environmental impacts of organic standards(Hole, et al., 2005).Similarly Bengtsson, Ahnstrom, and Weibull’smeta-analysis (2005) included 66 studies comparingorganic and conventional farming systemsand found that:Organic farming usually increases species richness,having on average 30% higher speciesrichness than conventional farming systems.However, the results were variable among studies,and 16% of them actually showed a negativeeffect of organic farming on species richness….Birds, insects and plants usually showed anincreased species richness in organic farming systems.However, the number of studies was lowin most organism groups (range 2–19) and therewas significant heterogeneity between studies.The effect of organic farming was largest in studiesperformed at the plot scale. In studies atthe farm scale, when organic and conventionalfarms were matched according to landscapestructure, the effect was significant but highlyheterogeneous.Studies of coffee have documented both increasedsoil conservation and higher levels of soil erosion,which may have been a consequence ofpreexisting site differences (Jaffee, 2008). A studyreviewed by Blackman and Rivera that comparedten certified organic and ten noncertified coffeefarms in Nicaragua found no differences in birdToward Sustainability: The Roles and Limitations of Certification

Chapter 3: Impacts 65diversity or bird abundance. A study by Gabriel etal. (2010) of certified organic farming in Englandis one of the few investigations to include a carefullyconstructed control group—in this case frompairing across 32 environmental variables. Theyfound that organic farms had better biodiversityoverall, but with effects that varied across taxonomicgroups.Researchers in El Salvador compared bird densityand use in five land uses: Rainforest Alliancecertifiedcoffee farms; sun-grown coffee farms;open farmland; small forest fragments; and largeforest areas. They found that the number of dispersingbirds in RA-certified farms was the sameas in the small and large forest areas and higherthan in sun coffee farms and open farmland. Theyalso showed that migrant bird species showed asignificant preference for RA-certified farms andthe small and large forest areas (Komar, 2010).Pollution and WasteThis section looks at the impacts of productionon key ecosystem services such as soil, water,and air, most notably through the management ofpollution and waste that result from production.While research on specific issues, such as agrochemicaluse and effects, are prevalent, and mostof the findings are positive, this area is generallynot well studied.Studies of organic certification schemes in agriculturehave frequently documented long-termpositive effects associated with changes in farmpractices—in particular associated with eliminatingthe use of most agro-chemicals (InternationalTrade Centre, 2011b; Tallontire, Dixon, Nelson,& Benton, 2012). Blackman and Naranjo (2010)used statistical matching techniques to addressselection bias in a sample of 6,000 farms in CostaRica to look at the impacts of organic certificationon the environment. They found clear evidencethat organic certified farms reduce pesticide andherbicide use and adopt environmentally friendlymanagement practices—for example, using soilconservation measures and shade trees.A review of ten years of Fairtrade studies alsosuggests that certification is often associated withthe use of fewer agro-chemicals, and the saferuse of them (Nelson & Pound, 2009). Researchin Ecuador compared 23 certified banana farms,including ten farms certified to Rainforest Alliancestandards, with 24 noncertified control farms.Using Likert-scale measures of environmental“risks” related to land management, waterquality, agrochemical management, and wastemanagement, the authors found that certifiedfarms generate lower environmental risks thannoncertified farms (Melo & Wolf, 2007).Researchers in Colombia conducted a StreamVisual Assessment Protocol (SVAP) on streamsoriginating in 27 Rainforest Alliance-certified and27 noncertified coffee farms. This protocol looksat the integrity of the aquatic ecosystem, alterationsto the water body, vegetation, and evidenceof contamination (among other things) and canbe considered an index of stream health. Theresearchers found that certified farms had significantlyhigher SVAP scores than noncertified farms(Hughell & Newsom, forthcoming).A few life-cycle assessments of the impacts oforganic standards have been conducted. Theyhave produced divergent results, including somethat suggest that, as a consequence of loweryields, some types of negative impacts may behigher than with conventional production (Niggli,et al., 2011; Tallontire, et al., 2012). On the otherhand, whole farm energy use appears to be lowerfor organic than conventional farms per hectareand per unit of product in most sectors, apartfrom poultry and fruit (Lynch, MacRae, & Martin,2011).In the aquaculture sector, few studies directlydemonstrate that the adoption of better practicesor entry into certification reduces these typesof environmental impacts, when compared tononparticipating farms. As most standards andrecommended best management practices inaquaculture are based on relatively sound science,there is a strong expectation that the adoption ofsustainability standards should reduce impacts atthe farm level. However, the evidence base is notyet there. That certification will reduce aggregatewaste and emission impacts at a larger scale, also,Toward Sustainability: The Roles and Limitations of Certification

Chapter 3: Impacts 66does not necessarily follow, as it depends on thenumber of farms and the assimilation capacityof the receiving ecosystem, the latter of which isoften poorly understood (see Appendix D).SummaryOverall, there is reasonable evidence that certificationhas had positive impacts on the environmentin particular cases. However, many authors notethe local variability in environmental conditionsbetween sites that will affect specific results. Inaddition, many studies are limited by their methodologicalapproach, not allowing extrapolation ofthe findings beyond the immediate cases underreview and not being able to attribute long-termchanges to the certification intervention.Some of the differences in types of impactsbetween sectors may arise from the nature of theresources. In forestry and fisheries, the harvestingof resources is tied most directly to ecosystemintegrity at a broad scale, whereas cultured orhuman-designed systems such as agriculture andaquaculture are more likely to focus on site-specificbiodiversity and pollution and waste issues.Economic ImpactsApart from Fairtrade and some other sociallyoriented systems, standards and certificationschemes place little overt emphasis on economicimpacts, recognizing that certification is inherentlya market-based tool. Fairtrade, by contrast,was established with the explicit purpose of givinga financial boost to small-scale farmers. Thatbeing said, there is actually fairly good data onthe economic impacts of various standards andcertification schemes, since it is comparativelyeasy to collect this type of information and conductanalysis.In this section, discussion of the evidence regardingeconomic impacts on certified enterprises isdivided into two categories: net enterprise income(encompassing price premiums) and businessopportunities.Net Enterprise IncomeProfitability is influenced by several interactingelements, including yield, quality, efficiency, cost,premium, price, volume, and market access. Ahigh premium for 10 percent of a harvest andno sales for the rest, for example, could createserious problems for an enterprise. Likewise, apremium may be insufficient to compensate fora lower yield. Reduced costs due to lower useof chemicals or less downtime for workers cancontribute to profitability. In some cases, the premiumpaid for a higher-quality product may bemore than that paid for a certified product. And,consumers’ preferences may change over timeand thus so may their willingness to pay more forcertified products. All of these factors may comeinto play for a given certification system, and theywill differ depending on the specific system andthe business environment.In one comparative study from ConsumersInternational, an analysis of environmental andsocial indicators in a sample of 28 certified coffeefarms (Rainforest Alliance, Fairtrade, organic, andUTZ Kapeh) and ten noncertified farms showedthat certified farms generate higher revenues anduse more environmental practices (ConsumersInternational & The International Institute forEnvironment and Development, 2005).In the Fairtrade system, the inclusion of minimumprices aims to ensure welfare benefits tosmallholder producers in developing countries(International Trade Centre, 2011b; Nelson &Pound, 2009). A review of 33 studies on theimpacts of Fairtrade certification concluded that,in almost all cases, there was some positive economicbenefit, most commonly through higherprices and improved economic stability (Nelson& Pound, 2009). In another study, guaranteedminimum prices for Fairtrade-certified farmersproducing Rooibos tea in South Africa were animportant buffer against fluctuations in worldprices for tea, especially during the sharp declinesof 2006 and 2007 (Raynolds & Ngcwangu, 2010).Toward Sustainability: The Roles and Limitations of Certification

Chapter 3: Impacts 67The switch to Fairtrade markets for Rooibos teatripled earnings for these producers.Blackman and Rivera reviewed three studies ofFairtrade-certified bananas in Peru, Costa Rica,and Ghana, respectively. In each case, the authorshad developed credible counterfactuals by matchingcertified and noncertified farming householdson multiple characteristics (Blackman & Rivera,2010). Three divergent outcomes were observed.The study in Peru found that Fairtrade farmershad higher net incomes than a control group withorganic certification. But the higher incomes weredue to higher productivity, not higher prices. Incomparison to farms without organic or Fairtradecertification, the Fairtrade-certified farms hadhigher incomes that could be attributed to higherprices. The study in Costa Rica found no differencein profits between households growingcertified and noncertified bananas, while the studyin Ghana found that households participating incertified cooperatives received lower salaries, butalso worked fewer hours.Blackman and Rivera also reviewed five studies ofFairtrade-certified coffee that had credible counterfactualsand dealt with economic indicators.Of them, only two found significant economicbenefits (Blackman & Rivera, 2010). One wasa study of Fairtrade cooperatives in Nicaragua,Peru, and Guatemala; it found clear evidence thatcertification generated a price premium (Arnould,Plastina, & Ball, 2009).Several studies illustrate the tradeoffs that mayresult from certification. One, for example, comparedthe impacts of Fairtrade, Rainforest Alliance,and C.A.F.E. Practices (Starbucks) certificationson 315 smallholder coffee producers in Nicaragua(Ruben & Zuniga, 2011). It found that althoughFairtrade provided better prices, farmers growingunder the other two labels had higher yieldsand better-quality products. Another study thatrandomly sampled conventional, organic, andorganic/Fairtrade-certified cooperatives, also inNicaragua, found that higher prices did not clearlytranslate into higher profitability, and that organicand organic/Fairtrade farmers had becomerelatively poorer than conventional producers overthe last decade (Beuchelt & Zeller, 2011).Price premiums for certified organic productsare frequently reported in the literature. In somecases, price premiums might also be attributableto superior product quality. Overall, the effects oforganic standards on quality and yield are variableand difficult to attribute to the standard perse, since most study designs are confoundedby possible differences in preexisting conditions(International Trade Centre, 2011b).Although engagement in fair trade or organicproduction may raise farmer incomes relativeto conventional systems, the low volumes ofcoffee produced in low-intensity systems meansthat, for most marginalized farmers, any gainsare insufficient to escape poverty (Valkila, 2009).In relative terms, farmers may receive a smallerfraction of the retail price for fair trade coffee thanthose who grow conventional product, though inabsolute terms, this is still usually greater (Valkila,Haaparanta, & Niemi, 2010). In certification systems,costs for distributors and retailers—forexample, for logistics—may be higher because ofmarketing costs and lower volumes (InternationalTrade Centre, 2011b).In the forestry sector, the impact of forest certificationon the profitability of forestry operationshas received little attention. But one recent studyattempted to assess the impacts of forest certificationon the short-term and long-term financialperformance of Canadian and U.S. firms (Bouslah,M’Zali, Turcotte, & Kooli, 2010). In the short term,forest certification had no significant impact. In thelong term, however, the study found evidence thatfinancial performance depended on the certifier:With non-FSC schemes, financial performancewas worse than for uncertified firms, whereaswith FSC certification there was no “penalty” ofcertification.In a study of the Rio Platano Biosphere forestrycooperative in Honduras, researchers measureda variety of socio-economic indicators beforeand after technical assistance by the RainforestToward Sustainability: The Roles and Limitations of Certification

Chapter 3: Impacts 68Alliance (Fortín, Butterfield, & Hodgdon, 2010).They found that:▪ With only a 33 percent increase in volume, thecooperative obtained a 128 percent increase inincome.▪ Sawmill performance improved by 12 percent,from 170 board feet/m³ in 2005 to 190 boardfeet/m³ in 2008.▪ Rejects decreased from 83 percent in 2005to 49 percent in 2008, while medium-qualityoutput increased from 2 percent to 36 percentover the same period and high-quality outputincreased to 15 percent.In aquaculture, the costs of certification usuallyfall on the farmer, and there are small or no pricepremiums. The main economic benefit, if any,appears to be access to market channels (seeAppendix D). In wild fisheries certification, thecosts are borne by the organization that representsthe users of the fishery—which may evenbe a government agency. Few studies have lookedat the impacts of fisheries certification on profitability.Certified wild-caught fish have occasionallycommanded a price premium (Ponte, 2008).Many certification systems require environmentalmanagement techniques that sometimes reduceyield. In some cases, the cost savings and any premiumearned (even through guaranteed-premiumsystems like Fairtrade) might not make up forthat loss in yield. Overall, the effects of standardson yield and quality are variable and difficult toattribute to the standard per se, since most studydesigns are confounded by possible differences inpreexisting conditions.Business OpportunitiesOften the primary economic benefit to producersof joining certification systems is stable andsecure market access (Asfaw, Mithofer, & Waibel,2010; International Trade Centre, 2011a; Nelson &Pound, 2009). The extent to which this holds truein coffee chains varies with buyers (that is, roastingfirms), as some establish durable relationshipswith producers, whereas others are much moremarket-oriented, switching back and forth andonly making short-term contracts (Raynolds,2009).Joining a certification scheme may enhance businessopportunities in other ways as well. Onestudy of fair trade coffee in Peru suggests thatfarmers in the certification scheme were moresatisfied with technical assistance and trade managementpractices compared to those in a controlgroup (Fort & Ruben, 2008a). After adjusting forconfounding variables using statistical matchingtechniques, significant effects on businessorganization and risk attitudes were also found(Ruben & Fort, 2011). Several other studies haveidentified technical assistance, credit access, andopportunities to diversify income sources as othereconomic benefits (Nelson & Pound, 2009). Inthe Peru case, changes in land and labor use overtime resulted in greater specialization in fair tradecoffee and reduced off-farm employment (Ruben& Fort, 2011).As an example of the various benefits that mayaccrue, a 2009 case study examined the opinionsof 11 Nicaraguan coffee farmers and their familieswho had been Rainforest Alliance-certified since2004 (Znajda, 2009). Farmers noted the followingdifferences since becoming certified:▪ Improved quality of coffee and higher yield▪ Better ability to get loans, and to use loans toexpand their farms with small parcels▪ Ability to reinvest money into the farm▪ Construction of a permanent coffee-processingapparatus (with the help of loans and supportfrom the cooperative)Another positive economic impact of fair tradeschemes is access to credit (Nelson & Pound,2009). Under FLO standards, for example, the prefinancingof production by buyers is an importantpotential benefit for small producers. In practiceit is not always available, however, especially inmarket-driven buyer relationships and for commoditiesapart from coffee (Raynolds, 2009).In the aquaculture sector, requirements fortraceability are believed to be one of the mainimpediments to small-scale producers joiningToward Sustainability: The Roles and Limitations of Certification

Chapter 3: Impacts 69certification schemes and markets, although thereare few clear studies of these impacts (Belton,Haque, Little, & Sinh, 2011; also see Appendix D).In fisheries, the relative costs of certification, data,and human resource requirements for assessmenthave the potential to discriminate againstsmall producers—in particular, those in developingcountries (Ponte, 2008; Standing, 2009). Fullcertification of fisheries can be time and resourceintensive (Gulbrandsen, 2009). As a consequence,comparatively fewer fisheries in developing countrieshave been certified.SummaryA common economic benefit of standards andcertification systems is better access to marketchannels as well as other related business opportunities.Price premiums are rarer, being mostconsistently available for high-profile consumergoods such as certified coffee and tea and foragricultural products grown under fair tradeschemes. Though not strictly speaking an impactof certification, the challenges faced by smallproducers in meeting certification standards isimportant to note, as it prevents access to somemarkets and points to a challenge in scaling up.Social ImpactsThe social impacts of standards and certificationschemes have been studied much less thaneither ecological or economic impacts. Here theevidence is organized into three broad categories:working and living conditions; rights and benefits;and relationships with the wider community.Working and Living ConditionsEvidence of the positive impacts of certificationand standards on living and working conditionscomes primarily from the study of fair tradeand ethical trade systems. These systems weredesigned, in part, with the objective of improvingthe welfare of farmers in developing countries. Afew studies of these systems have sound researchdesigns that enable clear attribution, and thesereveal mixed evidence.The study of Fairtrade-certified bananas inGhana reviewed by Blackman and Rivera, whichhad matched controls, found no difference inself-reported levels of job safety, satisfaction, orfairness (Blackman & Rivera, 2010). However,Arnould and colleagues’ study of small producersin Fairtrade cooperatives with matched controlsin Nicaragua, Peru, and Guatemala documentedsignificant positive impacts of certification oneducation and health (Arnould, et al., 2009). Thatstudy also showed that participation increasedthe likelihood that children would be in school.Associations for health were complex and relatedto other factors like wealth, but long-term participantsin the Fairtrade system had higher healthindices and were more likely to receive treatmentwhen ill (Arnould, et al., 2009). Another study offair trade coffee in Peru found that cooperativesinvested some of the premiums in scholarshipsfor students as well as roads and loans, but lessthan a quarter of farmers claimed to have receivedany benefits from the premiums (Ruben & Fort,2011). Overall, the impact on welfare measures atthe household level were limited and consistentwith a lack of differences in household income.In Kenya, a study of EurepG.A.P. (a voluntarystandard for food safety and farm managementpractices, now called GlobalG.A.P.) noted that,apart from financial benefits, adopters also benefitedfrom improved hygiene and safety on thefarm (Asfaw, et al., 2010). Although GlobalG.A.P.in general appears to help improve health andsafety on farms, questions have been raised aboutthe effectiveness of other certification programsin achieving this objective, especially for womenand temporary workers (Bain, 2010).As most studies of forest certification haveadopted a case study approach, with their ownsets of measures, generalization about socialimpacts is difficult (see Appendix F). Nevertheless,by tracing historical processes across multiplestudies, some consistent patterns emerge. Thesepatterns suggest, for instance, that certificationhas empowered previously marginalized indigenousgroups and farmers. For example, studiesin Brazil, Bolivia, and Mexico suggest that CARsin developing countries more frequently addressworkers’ rights (Auld, Gulbrandsen, et al., 2008).Also, forest certification has been shown toToward Sustainability: The Roles and Limitations of Certification

Chapter 3: Impacts 70improve worker health and safety in the field (seeAppendix F).Very little research has been done on the socialimpacts of fisheries and aquaculture certification(see Appendices D and E). In the case offisheries certification this is not surprising, as theMSC does not make any claims related to socialimpacts.Rights and BenefitsStandards differ in the extent to which theyaddress benefits and rights issues, and the detailsof how they do so. Claims that standards andcertification empower, expand benefits, or securerights are widespread, but evidence is limited andof modest quality.The social benefits of standards cannot beassumed to be equally distributed between menand women (Tallontire, et al., 2012). Distributionmay sometimes be improved by engagement infair trade compared to conventional coffee networks,but not invariably (Bacon, 2010; Ruben& Zuniga, 2011). A set of case studies of flowersin Kenya, fruit in South Africa, and flowers andvegetables in Zambia suggest that various codesof conduct (including EurepG.A.P. and the EthicalTrading Initiative) did not necessarily lead tobetter outcomes for women or informal workers(Tallontire, Dolan, Smith, & Barrientos, 2005).Women’s access to labor rights, for example, canbe constrained because of their “casual” statusand the use of third-party labor contractors(Barrientos & Smith, 2007).A comparative study of FSC certification inEcuador and Bolivia concluded that certificationis more likely to be successful (in the sense ofcompliance to standards) when governmentprovides land tenure security (Ebeling, 2009).Similar suggestions have been made with respectto oil palm (Lee, Rist, Obidzinski, Ghazoul, & Koh,2011). Standards and certification systems maymake land tenure more secure. In one study, forexample, certified organic and Fairtrade coffeefarmers in Nicaragua believed that their landtenure was more secure (Bacon, 2005). A keyincentive for actors in the Baja California red rocklobster fishery in Mexico to certify was to improvetheir chances of maintaining exclusive access(Perez-Ramirez & Lluch-Cota, 2010). Studies ina South African fishery also pointed to a set ofmotivations and consequences of certificationrelating to the control of key aspects of the fishery(Ponte, 2008).Community and DevelopmentSome voluntary standards aim to have positiveimpacts at the local community level (InternationalTrade Centre, 2011b). Under fair trade schemes,for example, some funds are directly assignedto local communities. Producer groups growingRooibos tea in South Africa receive a “social premium”per kilo, which differs depending on theirsize: small farmer cooperatives receive a $US0.66 premium per kilo, whereas on estates usinghired labor the premium is $US 1.57 per kilo, toreflect different production costs and ensure thatbenefits go to workers (Raynolds & Ngcwangu,2010). Social premiums are used to fund processingimprovements, local schools, and othercommunity projects (Blowfield & Dolan, 2010).A key issue for empowerment is whether growersor local residents have a say in how the social premiumsfrom fair trade schemes are spent. Herethe findings are mixed (Bacon, 2010; InternationalTrade Centre, 2011b). One study of Fairtrade tea inKenya characterized the allocation of premiums todevelopment as largely “by patronage and exclusion”(Dolan, 2010). Decisions on how benefitswould be shared were made by a Social PremiumCommittee—the composition of which was critical.Tea farmers themselves would rather receivehigher prices and resented that benefits went toothers living in the community who did not growtea (Blowfield & Dolan, 2010).Moberg (2005) describes how social premiumsfrom the sale of certified bananas were returnedto Windward Island communities and contributedto development projects. The funds were spenton weeding machinery to replace herbicides aswell as to build schools, improve roads, providetraining programs for youth, support travel toschool from remote areas, and provide healthinsurance. At the same time, farmers in thisToward Sustainability: The Roles and Limitations of Certification

Chapter 3: Impacts 71study noted that the higher prices received forcertified bananas were, at the individual level,largely offset by higher labor costs and in somecases lower yields. Less-tangible social benefitsincluded opportunities to be part of democraticcommunity organizations.Studies of forestry certification suggest thatCARs are more likely to address communicationand conflict resolution with stakeholdersand communities in developing than developedcountries. The majority of plantation firms inArgentina and Chile, for instance, responded toCARs with changes in social practices, includinghaving stakeholder meetings, carrying out socialimpact studies, and releasing management plans(Cubbage, et al., 2010). Studies of private plantationsin Australia also have documented positiveimpacts of certification on levels of communityengagement by plantation firms (Dare, Schirmer,& Vanclay, 2011).SummaryThe social impacts of standards and certificationsystems have been more comprehensively studiedfor those systems, such as fair and ethical tradeinitiatives, that target the social welfare of smallproducers. There is some evidence of improvementin working and living conditions, but theimpacts are highly system- and place-specific,making generalizations difficult.Looking ForwardStandards and certification systems are complexand dynamic. Many systems are relatively new, andstudies of them are in short supply. For the mostpart these systems were designed to influencethe practices of producers, not to affect impactsdirectly. Impacts are hard to compare, as studiesuse different indicators and make measurementsat different scales (Tallontire, et al., 2012). It istherefore not surprising that only very modestevidence exists in the literature of significantimpacts on the ground—that is, improvementsin the ecological, economic, or social dimensionsof sustainability.An issue about which very little is known is thedurability of impacts, or whether positive changesare maintained and likely to be secure over time orwhether they can be easily lost. This can be consideredat the level of a whole standards system,if it depends on donor support, or at the levelof an individual enterprise, if market demand isvariable.Another issue is the need for a common understandingof how to measure success. While mostresearch focuses on the extent of positive change,benefits are also derived where certification slowsor impedes harm, particularly in those caseswhere a resource is very much under assault.Under these conditions, certification may not fixthe problem, but it does buy time and, in combinationwith other interventions, may eventuallylead to positive change.In addition, impact measurement challenges arenot unique to voluntary standards and certification.Independent and peer-reviewed evaluationof the long-term, large-scale impacts of public andprivate policy instruments being deployed in pursuitof sustainability are also scarce. Measuringsuccess also is driven by expectations for a demonstrationof impact. While better data collectionis essential for voluntary standards systems, careshould be taken not to disproportionately makedemands of these systems relative to public, governmentalinterventions or programs.Overall, there is reasonable evidence in theliterature for positive changes in managementsystems and the practices of individual producers.However, the evidence for direct impactsfrom those changes is much smaller. In manycases it is possible to argue that these changesare likely to lead to particular ecological, social,and economic impacts, but that is not the samething as demonstrating that it is in fact the case.Difficulties in identifying appropriate counterfactualsimply that questions about attribution andrelative performance will often remain. Moreover,studies with more rigorous designs do not alwaysfind the impacts expected. This state of affairsis not unique to standards and certification systemsbut pertains to many public and privateToward Sustainability: The Roles and Limitations of Certification

Chapter 3: Impacts 72policy instruments being deployed in the pursuitof sustainability. There is clearly scope for moreresearch on impacts.Despite limitations in the current state of knowledge,existing research does provide some usefulinsights for thinking about the future of standardsand certification systems.First, it is unlikely that major gaps in understandingwill disappear before new certification schemesare proposed or old ones modified. The challengeof incomplete knowledge can be expectedto persist, even as some critical gaps may beclosed with targeted investments in research andassessment (as discussed in Chapter 6). In thesecircumstances it is important to acknowledge therole of learning and adaptive policy in improvingevolving certification and standard systems. Forthis process to even begin, it is important thatsystems document what they do and evaluatetheir own performance.So far this seems to have been rare, with mostsystems having gathered very little systematicevidence about their own outcomes and impacts.However, this is changing with the introduction ofISEAL’s Code of Good Practice for Assessing theImpacts of Social and Environmental Standards 2and a related program aimed at supporting itsmembers to implement monitoring and evaluationprograms. The Impacts Code offers a frameworkfor standards systems to provide evidence oftheir contributions to social and environmentalimpacts while learning about and improving theeffectiveness of their system. Compliance with theCode is an ISEAL membership requirement.dimension and adequate control groups areimportant. Finally, a common systematic methodologyis needed to avoid methodological biasesand to be able to better compare results.Third, the impacts of certification are not independentfrom government regulations, stakeholdersupport, or market development (Bartley, 2010;2011b). The design and reform of certificationsystems cannot be effectively undertaken withoutproper appreciation of interactions and pathwaysof change (as discussed in Chapter 4). Standardsand certification systems arise out of interactionsamong stakeholders in complex power relationsthat shift across diverse local conditions andpolitics. For example, certification arose in aquacultureas a response to criticisms of the industryby other stakeholders. But private voluntary standardsalso impact government regulations, thework of extension agents, and the developmentof markets. Attention to the governance issuesof transparency, accountability, and legitimacyremains critical for efforts aimed at improving theimpacts of standards and certification systems.Fourth and finally, a shift toward measuringperformance rather than practices and activitieswould make evaluating the contributions of standardsand certification systems to sustainabilityless ambiguous. While standards and certificationsystems will continue to have a mix of performancegoals that allow relatively more flexibilityin how producers address problems and morenarrowly prescribed practices, impact monitoringdata should focus on impacts on the groundrelevant to sustainability.Second, impact analyses of voluntary standardsare still insufficient and incomplete, and someimpact indicators have been studied much lessthan others. It seems that the extent of impactsdiffers considerably from case to case. Therefore,studies that identify the key factors driving successwould be helpful. Studies must involve morecases to ensure statistically relevant data for awhole sector or area. In addition, a longitudinal2 www.isealalliance.org/our-work/codes-of-good-practice/impacts-codeToward Sustainability: The Roles and Limitations of Certification

Chapter4Pathways to Impact:Synergies with Other ApproachesCertification systems do not work in isolation. Such systems influence, and are influencedby, the policies and strategy decisions of governments, nongovernmental organizations(NGOs), and businesses, as well as the workings of global supply chains.In this Assessment, the Steering Committeereviewed case examples of these mutual influencesfrom the sector reviews (on agriculture, forestry,fisheries, and aquaculture—see AppendicesD–G) as well as in the literature documentingthe evolution and interactions of standards andcertification systems in other sectors. In examiningthe interactions of voluntary standards andcertification systems with other kinds of regulationand governance—for products as diverse asbuilding materials, food, personal care products,and appliances—Steering Committee memberssought to understand certification’s role in the“toolbox” of approaches that can be used toenhance sustainability performance. Membersalso sought to explore how certification systemshave been, or could be, designed to interact withother governance systems to improve sustainabilitypractices and performance in ways thatcould not be achieved by a certification system (oranother system) alone.While research is beginning to address theseissues, it is more nascent than the study of certification’sdirect impacts, which were the emphasis ofthe preceding chapter. Some examples of indirectimpacts noted in the literature include spurringmanagers to improve practices, supporting alternativeproduction models, influencing dispersedinvestment or land use decisions, reconfiguringsupply chains, shaping government regulations,and providing points of leverage for challengers.Many of these types of impacts involve complexinteractions resulting in innovation, learning anddemonstration, proof of concept, and policy andmarket adaptation (see Appendix C).To those looking to evaluate the effects of certificationsystems, these indirect impacts can bemuch less obvious than direct impacts. They can,however, be quite significant. While they can arisein a variety of ways, they are often the result ofinteractions between certification systems andother existing governance regimes. These otherregimes can include traditional governmentalpublic policy and regulation, as well as industryorfirm-level governance.This chapter looks in depth at five case examplesthat illustrate how standards and certification systemscan affect sustainability indirectly throughinteractions with other governance systems.In two of the cases, certification and voluntarystandards have become embedded in or administeredby public regulatory agencies. In anothertwo cases, certification systems were designedas part of, or to reinforce, existing public policies.And in the final case, leaders at a multinationalcorporation interacted with a leading certifierto put policies in place for its own value chain.These cases support a finding that certificationand voluntary standards, in combination withother tools, have additional impacts comparedto either certification or the other approachesoperating alone.What are some of the mechanisms that lead tothese improvements in impacts? In some casesthe certification or standard provides proof ofToward Sustainability: The Roles and Limitations of Certification 73

Chapter 4: Pathways to Impact 74Figure 4.1: A Typology of InteractionsCertificationbodyCertificationbodySuperseding Symbiotic HybridIn some cases, another governance entity takes over, or supersedes, thecertification system. The system itself might persist—for example ifregulators require or create incentives for firms to adhere to practicesestablished by the certification system. Or the government itself mightbecome the owner of the standard and the certification system. The casesin this chapter suggest two potential causes worthy of further scrutiny:policy learning and norm generation. Symbiotic interaction occurs whena certification system interacts with another entity, with both maintainingindependence and autonomy, to address a policy problem in which theactions of each entity reinforce the legitimacy and authority of the other.This can occur when certification programs fill gaps in an existing policyarena. This is important because the earliest scholarship treated certificationas attempting to bypass governmental arenas considered to be slow,cumbersome, or not open to establishing sustainability standards. Butthese cases imply that certification can interact with government in mutuallyreinforcing ways. Hybrid interaction is characterized by an explicit orimplicit division and sharing of functions with another governance entity,as when a certification program ensures compliance to government policies.Given the complex array of policy ends and means, overall goals, andpreferences for different types of instruments, the possible interactions ofthis type are almost limitless.concept. This has involved demonstrating thattechnology exists or can be developed to improveperformance to a degree sufficient to meet anambitious standard; demonstrating the businesscase for enhanced sustainability performance bygenerating ancillary benefits such as reductionsin energy, packaging, or transportation costs, orenhanced supply chain security and brand value;and demonstrating that market demand exists orcan be created for the certified product. In somecases, management and production practicesthat were originally developed and disseminatedfor the purpose of complying with standards havebeen adopted even by those not seeking certification,based on observed benefits of the practices.Directly or indirectly, certification and standardssystems have enabled large private and publicinstitutions to implement “green” purchasing programsand “greener” buildings. These systemshave also fostered the growth of infrastructurethat supports “greening,” including designers,suppliers, accreditors, auditors, and watchdogs,among others.There is also evidence that certification has beena force in the governance of corporate supplychains, facilitating a transformation to “valuechains” and a shift from more direct control bybuyers over producers, to hands-off control, inwhich the third-party certifier enforces standardsthat may be set inside or outside the company.Perhaps most important, by mobilizing coalitionsof producers, wholesalers, retailers, scientists,and sustainability advocates, certification systemshave helped to create space for collaboration andnegotiations that identify feasible and beneficialsteps to take. There are also examples of certificationand standards systems that have failed tofoster sustainability, where performance does notimprove, or where competing values and interestsin the public and private arenas result in certificationthat recognizes one aspect of improvedperformance, such as the elimination of syntheticpesticides and fertilizers in organic food, whileoverlooking others, such as unsustainable practiceslike monocropping or aquifer overdrafts.By examining the interplay among certification,private governance within firms and their valuechains, and public regulation and incentives, thischapter aims to shed light on certification’s rolein the “toolbox” of public and private instrumentsapplied to promote more-sustainable productionand consumption.Although real-world cases do not always fit neatlyinto a typology, categorization is useful to identifykey questions and strategies, and so this chapterbegins with the typology in Figure 4.1. Eachcase that follows describes certification systems’interactions with other kinds of standards andregulation and discusses strategic implications forpractitioners. The chapter concludes with lessonsToward Sustainability: The Roles and Limitations of Certification

Chapter 4: Pathways to Impact 75Figure 4.2: Case ExamplesCase Example Type of Interaction OutcomesLeadership in Energy andEnvironmental Designgreen building certificationEnergy StarClean DevelopmentMechanism (CDM) GoldStandardForest product legalityverificationUnilever/Rainforest Alliancetea certificationSupersedingHybrid (government ascertifying body )SymbioticHybrid (government andthird-party certifier)Hybrid (corporategovernance and third-partycertifier)Has demonstrated the feasibility and benefits of improvedpractices, and has resulted in green building standardsbeing incorporated into building codes.Has effectively signaled to consumers the economic returnson investment in energy efficiency.Has “raised the bar” on environmental criteria for projectsqualifying for CDM emissions-reductions credits byproviding an additional certification that reduces risk andadds economic value to the credits.Has enabled certifiers to fill the verification/assurance rolefor compliance with developing countries’ own standards,in the process building alliances that strengthen globalcapacity for supply-chain tracking.For a major player in the global supply chain, has providedcredibility and capacity for the implementation andverification of sustainability standards and practices andhas assisted in maintaining differentiation of products in amarket that is becoming more commoditized.from the cases about the types of strategies mostlikely to foster interactions and positive indirectimpacts, and strategies and conditions that failto ameliorate the problem at hand, or end upcrowding out other approaches that might havebeen more effective.Empirical Examples: Real-World Pathways of InteractionThe cases presented here represent but a handfulof instances in which certification and voluntarystandards systems have interacted with government,business associations, and individualfirms. One study found more than 70 examplesof governmental use of voluntary standards,including cases in which governments adoptedstandards as part of their regulatory codes (Carey& Guttenstein, 2008). Figure 4.2 provides a snapshotof the case examples to follow.LEED CertificationThe Leadership in Energy and EnvironmentalDesign (LEED) building certification program,developed by the U.S. Green Building Council(USGBC), has grown dramatically since its introductionin 1993, with more than 4,000 projectscertified and another 23,000 registered. LEEDcertification verifies that a building, home, orcommunity was designed and built using strategiesaimed at achieving high performance in keyareas of human and environmental health, includingsustainable site development, water savings,energy efficiency, materials selection, and indoorenvironmental quality. The LEED standard, whichmandates elements of building and sustainabilitytechnology, is continuously updated by a groupof more than 2,000 volunteers who are experts ingreen building technologies and practices. 11 www.usgbc.org/DisplayPage.aspx?CategoryID=19Toward Sustainability: The Roles and Limitations of Certification

Chapter 4: Pathways to Impact 76LEED has garnered significant attention, althoughthe number of LEED-certified projects still representsa small fraction of construction each year.As more LEED-certified buildings have demonstratedeconomic, environmental, and healthvalue, jurisdictions that regulate building codesand standards have taken note, enacting or consideringmandates and incentives for meetingLEED or other green building standards, therebychanging the underlying paradigm of governmentbuilding regulations.In the United States, municipal building codesvary considerably. Until very recently, most codesfocused on reducing risks from infractions suchas the use of substandard or dangerous materials,or mandating technologies appropriate for therisks of a particular area (such as earthquakes inCalifornia or hurricane-force winds along the U.S.East and Gulf Coasts). LEED has contributed to achanging view of building standards, in that theenvironmental and health impacts of constructionand building use are increasingly consideredto be legitimate elements of building codes.Different municipalities have incorporated LEEDor LEED-like green building practices in differentways. In some locales, building codes nowrequire that new buildings (and in some cases,major renovations) obtain LEED certification. Aless-direct integration has occurred in places thatrequire adherence to LEED building codes (whichcan be verified during inspections), withoutactual third-party certification. Another popularapproach is to provide incentives, such as lowerfees or tax credits, for meeting LEED standards. Inother cases, building codes have been amendedto contain many of the concepts and practices inLEED, but without reference to the standard itself.To date, the policy goals and standards developedby LEED have been incorporated, in various ways,into the policies of 414 jurisdictions. 2 For example:2 www.usgbc.org/PublicPolicy/SearchPublicPolicies.aspx?PageID=1776. Jurisdictions include universities,school districts, towns/villages, cities, counties, states,and federal agencies, etc.1. San Francisco’s 2008 Green Building Ordinancerequires all new residential and commercialconstruction to use green building practices,documented either through “Green PointsRated” (for smaller projects) or LEED certification(for larger residential and commercialprojects). The ordinance also applies to interiorsand major alterations and is more stringentthan the newly enacted, state-level CALGreenStandard.2. In Florida, the construction and renovationof state buildings must now follow guidelinesfrom LEED or systems such as Green Globesor the Florida Green Building Coalition.Strategic ImplicationsThese approaches have differing implications,especially in terms of tradeoffs regarding whichinstitutions retain authority over the functionsinvolved in setting building code policies. Themore authority a municipality grants to the LEEDsystem, the less control that municipality has overthe content of its regulations and the changes tothat content over time as the LEED standard isupdated. On the other hand, LEED has a networkof trained inspectors and consultants that cansupplement the capacity of local governments,which may lack the expertise to develop or implementgreen building codes on their own. And, if amunicipality disagrees with changes in the LEEDstandards, they can always revoke their decisionto align with it. The use of LEED standards inbuilding codes also raises questions for LEEDitself. For instance, if LEED is formally adopted ona wide scale, will LEED auditors have the capacityto keep up with short-term spikes in demand?Or, if LEED concepts and practices are increasinglyincorporated into local codes but withoutnaming LEED or requiring certification, will thisdiminish the market demand for formal LEEDcertifications?LEED has also influenced policy by providing avenue for learning and enhancing regulatory capacity.The LEED program has demonstrated manyof the technologies required for green building,making it easier for governments to incorporatethe concepts into their regulatory structures. ItToward Sustainability: The Roles and Limitations of Certification

Chapter 4: Pathways to Impact 77has also verified the value of green buildings tocommunities, users, owners, and investors, andstimulated a growing market of individuals andfirms that can provide the goods and servicesrequired. A 2009 study by Booz Allen Hamiltoncalculated that the green building sector as awhole was directly responsible for 1.04 millionjobs and $57 billion in GDP from 2000 to 2008,and that LEED was directly responsible for 6,600of those jobs and $153 million in GDP. The studyalso estimated growth in the sector to reach 3.3million jobs (102,000 LEED) and $181 billion ($2.2billion LEED) from 2009 to 2013. This does noteven take into account indirect and induced jobsand GDP growth, both of which would be multipletimes larger than directly attributable GDP andjobs (Booz Allen Hamilton, 2009).As noted above, adoption of the LEED standardas a requirement provides an option formunicipalities and other jurisdictions that do nothave internal capacity to set or enforce their owngreen building codes. But this comes with a risk:Some aspects of the LEED standard may be inappropriatefor particular local conditions, or maydisadvantage certain groups, such as those withless ability to access the required technical expertise,within the regulatory context. Recognition ofsome of the limitations of LEED is spurring newefforts to further expand the paradigm to includemore of the social elements of sustainability. 3Energy StarIn the case of the Energy Star program, theregulator and the certification program reside inthe same government institutions. Energy Starwas launched in 1992 by the U.S. EnvironmentalProtection Agency (EPA); since 1996, the U.S.Department of Energy (DOE) has been a partnerin the program.Energy Star certifies that labeled products performbetter than market standards on specifieddimensions of sustainability (e.g., energy consumption,water consumption). Together, the EPAand DOE set energy-efficiency criteria for variouscategories of durable goods, including appliances,electronics, lighting fixtures, and new homes,among others. They then confer the Energy Starlabel on product models that meet or exceedthe criteria. In some cases, Energy Star-labeledproducts may be accompanied by other consumerincentives, such as tax credits or rebates.Many of the certified products are also subject tominimum efficiency standards that affect all suchproducts (certified or not).The EPA’s 2006 annual report estimated that,by 2016, the program will have saved consumers$202 billion (in 2006 U.S. dollars) in energybills and prevented the emission of 491 millionmetric tons of carbon dioxide. Consumer surveysshow that among those who knowingly boughtEnergy Star-labeled products, 75 percent said thelabel was an important factor in their choice (U.S.Environmental Protection Agency, 2007).Most experts agree that the Energy Star programhas improved energy savings, increasedconsumer awareness of energy efficiency, andprovided some impetus for manufacturers andproperty owners to improve energy efficiency.The program’s standards and processes have alsocome under fire, however, for being insufficientlyrigorous. There is also a question of whetherEnergy Star is “crowding out” more effectiveenforcement overall.Audits in 2009 and 2010 by the EPA and DOE themselves,as well as the Government AccountabilityOffice (GAO), highlighted these concerns (U.S.Department of Energy, 2009). Most EnergyStar-labeled products did, in fact, meet the program’sstandards, but so also did the majorityof noncertified products on the market, and thecalculated energy savings could not be verified.The GAO found the program highly vulnerableto fraud, citing evidence of the certification ofbogus products and lack of controls to preventlabels issued for one product from being alsoapplied to others. Responding to these issues, theprogram instituted third-party certification based3 For example SEED (Social, Economic, & EnvironmentalDesign). See http://socialeconomicenvironmentaldesign.com/.Toward Sustainability: The Roles and Limitations of Certification

Chapter 4: Pathways to Impact 78on testing in an EPA-recognized lab, and requiredEnergy Star manufacturing partners to participatein verification testing programs run by recognizedcertification bodies. The new requirements wentinto effect January 1, 2011, so it is too early toassess their impact.Strategic ImplicationsEnergy Star is a popular program that clearly signalsto consumers the economic return on investmentin energy efficiency. The lack of real differencebetween labeled and unlabeled products raises aquestion as to whether Energy Star has upgradedits standards quickly enough to keep pace withtechnology or even de facto market norms. Itssuccessful brand, official status, and public fundingcombine to form significant obstacles for new,competing standards. This case thus highlightsthe tensions between a positive effort to shift themarket’s expectations regarding energy efficiency,and the potential downsides if a relatively low baris set for continuous improvement in productdifferentiation.In terms of program structure, Energy Star beganas a purely government program and has becomemore of a hybrid, with certain functions, includingverification, being handed over to independent,third-party certifiers. The EPA and DOE are thusceding some of their authority in order to enhancethe credibility and the impact of the program,although government is still by far the most powerfulplayer in the system. There are challengeswith third-party certifiers, who have an incentive,due to their fee-for-service model, to give positiveresults. But the founding agencies still determineboth the minimum legal standards for energyefficiency and the enhancements that qualify aproduct for the label. They are thus responsiblefor setting the balance between standards thatmaximize the number of products labeled, andthose that would drive more rapid improvementsin energy efficiency.The Clean DevelopmentMechanism Gold Standard 4The Clean Development Mechanism (CDM) GoldStandard uses private certification to enhance, orfill gaps in, an intergovernmental agreement.The CDM itself was created as part of the KyotoProtocol, to enable developed countries to meettheir emissions-reduction targets by investing in“clean development” in less-developed nations.Such projects provide developed nations with acheaper alternative to reducing carbon emissionsin their own countries, with the additional benefitof improving conditions in developing countries.While well intended, the CDM was criticizedfor multiple shortcomings, including an eligibilityformula that included (and even preferred)large-scale hydroelectric power and monocropagriculture and forestry systems, with few benefitsand even adverse impacts to biodiversity andother environmental resources. The controversydamaged confidence in the integrity of the program,undermining investor tolerance for politicaland reputational risks, as well as the price of theCDM credits (Levin, Cashore, & Koppell, 2009).Rather than attempting to reopen CDM negotiationsto engineer a solution, which could haverisked derailing already fragile support, the WorldWide Fund for Nature (WWF) in 2002 initiatedthe CDM Gold Standard to address these concerns.The CDM Gold Standard aims to certifyCDM emission-reduction projects that adequatelyaddress non-climate environmental and sustainable-developmentconcerns (Levin, et al., 2009).The Gold Standard eventually became an independentorganization governed by an advisoryboard and a steering committee. To qualify forGold Standard certification, projects must generateemission reductions recognized by the CDMgoverning body, and then go beyond these tomeet the Gold Standard’s additional criteria. GoldStandard projects must, among other criteria,result in emission reductions that otherwise4 For more detail on the CDM, please see Levin, Cashore,and Koppell (2009).Toward Sustainability: The Roles and Limitations of Certification

Chapter 4: Pathways to Impact 79would not have occurred, avoid negative socialand environmental impacts, and, where possible,promote environmental and social benefits. Asof 2008, the Gold Standard had certified 200projects, representing a reduction of 15 millionmetric tons of carbon-dioxide equivalent emissions(Levin, et al., 2009).Behind the Gold Standard experiment was theidea that an existing governmental policy instrument—ahard-fought yet fragile intergovernmentalagreement—might be improved. The WWF drewon certification as a way to “fill in the gaps” ofthe agreement, somewhat ironically reinforcing,rather than detracting from, the legitimacy of thegovernmental efforts, even though those effortshad failed to yield the desired results. Withoutthe CDM, an independent certification wouldhave a difficult time recruiting investors to apurely voluntary credit system (Bozzi, Cashore,Levin, & McDermott, 2012). In other words, asthe CDM was made more attractive to investors,the impacts of the Gold Standard also increased(Levin, et al., 2009). Similarly, the Gold Standardhas made the CDM more attractive overall byaddressing its perceived gaps.Strategic ImplicationsIn this symbiotic relationship, each programbenefits from the existence of the other. If theCDM or a similar mechanism continues, thenthe Gold Standard or similar third-party standardwould likely also continue, with the possibility ofa “virtuous cycle” of uptake and a broadening ofthe impacts of the original CDM. 5 If successful,the Gold Standard certification system addressesweaknesses in the original policy instrument,which resulted from the compromises requiredto come to an agreement. It also provides thepossibility of building a more dynamic, continuous-improvementparadigm into policies thatmight otherwise be static.5 This also means that if the CDM were to disappear or bereplaced in a post-2012 climate regime, the Gold Standardwould either need to significantly change its orientationor cease to have any purpose.The Gold Standard also illustrates some of thepotential tradeoffs that occur when a formal institution(governmental or intergovernmental) anda third-party certification system work in tandem.The Gold Standard is setting sustainability goalsand verification requirements that go beyondthose negotiated by the parties to the originalagreement, assuming functions, authority, andresponsibility that otherwise would be the solepurview of those parties. While it is still possibleto have a program CDM-certified without meetingthe Gold Standard’s additional requirements, theGold Standard became the de facto requirementfor many projects during the 2000s. At the sametime, the certification program accepts the authorityof the CDM as a public policy mechanism(Cashore, 2002). In doing so, the certificationprogram avoided the need to establish legitimacy“from scratch.”Whether the Gold Standard can be credited with“on the ground” environmental or social improvementsis still an open issue and is in need ofresearch and analysis. However, a strong case canbe made that it has improved the existing systemand provided learning among stakeholders abouthow to link sustainable development with reductionsof greenhouse gas emissions.Forest ProductsLegality Verification 6“Legality verification” is becoming an importantpolicy instrument to combat illegal logging, especiallyin countries exporting to the United Statesand Europe (Gulbrandsen & Humphreys, 2006).Third-party certification systems are claiming acentral role, because they have the credibility toassure that wood products are legally compliant.In the United States, the Lacey Act, whichregulates traffic in illegally hunted animals, wasamended in 2008 to include illegally harvestedplants. The law requires importers to show “duecare” to ensure that wood products were harvestedin compliance with laws and regulationsin their originating jurisdiction. Failure to do socan result in fines and, potentially, the seizure6 As cited in Cashore and Stone (2012).Toward Sustainability: The Roles and Limitations of Certification

Chapter 4: Pathways to Impact 80and forfeiture of shipments. The European Unionhas legislated similar requirements. The E.U.’sForest Law Enforcement, Governance, and Trade(FLEGT) initiative also offers enhanced accessto E.U. markets to those countries with “goodforest governance,” as well as those that enterinto voluntary partnership agreements (VPAs)spelling out the terms of compliance (EuropeanUnion, 2005).In response, auditors of compliance with forestcertification standards are creating departmentsto provide legality assurance. The RainforestAlliance’s SmartWood program, for example,which audits compliance to the standards of theForest Stewardship Council (FSC), has launchedVerification of Legal Origin (VLO) and Verificationof Legal Compliance (VLC) standards. VLC incorporatesSmartWood’s social and environmentalexpectations, while the more basic VLO auditsonly the payment of fees, legal right to harvest, andchain of custody (Donovan, 2010). The FSC is alsomodifying its standards and auditing processesto reflect the language of the FLEGT initiative andthe Lacey Act (Cashore & Stone, 2012).This application of third-party certification as aninstrument for meeting “due care” obligationsillustrates an interesting interaction between theinfrastructure of voluntary standards and certificationwith standards established by governmentpolicies, including domestic forest policy indeveloping countries as well as regulations inimporting countries. The goals and content ofthe policies are established by sovereign governments,or in the case of the VPAs, through bilateralnegotiations. The general mechanisms for supplychain tracking are also set by government policy.However, the certification institutions fill certainpolicy enforcement roles, namely complianceauditing and the application of tracking methods.Strategic ImplicationsIn the case of legality verification, certificationsystems fill the role of verifying performance.Their authority to do so derives from their globallegitimacy and from performance records indicatingthat they can provide assurance, whichgovernment officials, who lack capacity or maybe undermined by corruption, cannot. Theacknowledgement that other policy roles, suchas standards development, remain the purview ofgovernments, avoids a conflict over policy functions,which might unravel the entire enterprise.That is, if the certifying organizations were toalso demand a role in improving the country’sstandards for legal harvest, it might result in aless-effective hybrid mechanism, because conflictcould lead to less support in the exporting countriesand hence reduce market relevance.The case of legality verification highlights the risksas well as benefits of hybrid models. Certificationsystems might end up providing assurances thatrelatively modest standards were met, while creatinga perception that environmental and socialproblems had been addressed when in fact theyhad not been. As Cashore and Stone note, however,even relatively modest standards for legalityverification may provide prerequisites to improvethe uptake and market share of products certifiedto more comprehensive environmental and socialstandards. They argue that the modest standardsrequired for legality verification should engendergreater support from firms and managers, andthus a stronger coalition working to build globalsupply chain tracking systems, since firms operatinglegally will benefit from weeding out theworst (illegal) practices from global markets. Thisin turn could reinvigorate third-party certificationsystems, because the difficulty of buildingglobal tracking systems is one of the key barriersto forest certification more generally (Cashore &Stone, 2012).Rainforest Alliance/Sustainable AgricultureNetwork Certification ofTea, in Response to UnileverCommitment 7Individual firms are a key element in the developmentand adoption of standards and certificationsystems. As discussed in the Business sectionof Chapter 2, a variety of motivations underpintheir involvement. Firm-level decisions regarding7 Adapted from Jay (2008).Toward Sustainability: The Roles and Limitations of Certification

Chapter 4: Pathways to Impact 81certification are an important determinant ofuptake and eventual impacts. But firms’ decisionsto engage with standards and certificationsystems take place in the context of their overall,internal systems of “private governance.” Systemsof private governance or regulation are consideredto be an increasingly important elementof environmental governance. For this reason,it is important to consider how standards andcertifications interact with governance decisionsmade by nongovernment actors outside of thetraditional public sphere.The work of Unilever and the Rainforest Alliance(RA) provides an illustration of the interactionbetween certification development and implementationand company self-regulation. In 2006,Unilever approached the RA for assistance withthe certification of tea. Unilever had been concernedabout the growing commoditization of tea,driven by cheap tea from China and other regions,as well as the low growth rate of its Lipton’s andPG Tips brands (which represent 12 percent ofthe black tea market). Their stated motivationfor pursuing certification by a major agriculturalproducts accreditor was to distinguish their teafrom competitors’, build the market for sustainablyproduced tea, and potentially push up pricesand improve environmental and labor standardsthroughout the industry.Unilever has asserted that lack of internal technicalexpertise was not a major driver in theirdecision to engage with a certification program(Jay, 2008). The company had been workingon sustainable agriculture initiatives in differentparts of its supply chain, including tea, fora decade. They considered the issue to be theneed for credibility in their operations. This credibilitycould, for example, prevent allegations of“greenwashing,” which have sometimes occurredwhen firms have relied on internal sustainabilitystandards systems. 8 Given that Unilever already8 One example is the recent controversy around S.C.Johnson’s Greenlist, which was discussed in Chapter 2,Section C. While this internal program has won awards,including the Presidential Green Chemistry Challengeaward, S.C. Johnson recently settled a lawsuit thatcharged that by labeling their products with the Greenlistlogo, they had misled customers (Bardelline, 2011).had an extensive set of internal standards aroundsustainability issues, the alignment of their internalgovernance policies with any potential teacertification program was a key constraint on theirchoice of systems.The eventual choice of the RA over otherestablished standards (including UTZ Certifiedand Fairtrade) was based on the fact that itsSustainable Agriculture Network (SAN) standardswere consistent with Unilever’s sustainable agriculturestandards, and because SAN incorporatedindicators applicable to both small farms andlarge estates—important because Unilever buyshalf its tea from external suppliers, which includeboth small farmers as well as large plantations.Also, any premium paid for RA-certified productsis optional. Because of Unilever’s concernabout commoditization, its managers were waryof certifications that set a fixed premium, whichthey felt could drive too many suppliers to certify,with oversupply further driving down prices (Jay,2008).The RA-SAN standard-setting process begins witha generic standard (applicable to any crop) forabout 80 percent of the requirements, and theninvolves developing requirements for a particularcrop through a stakeholder engagement processrecommended by the ISEAL Alliance and ISO 65,followed by additional consultations to produceguidance specific to each crop/country combination.RA-SAN experts worked with Unilever, theEthical Tea Partnership, producer groups, NGOs,and others to develop the additional guidance fortea, which was issued in 2007. The organizationthen developed country-specific tea guidance,which is necessary because of variations in howtea is produced in different continents, climates,and elevations. Unilever was involved with thedevelopment process, but once they had madethe decision to support its development, the processwas the same multi-stakeholder one that hasbeen used for other RA-SAN standards.Unilever leveraged its internal experience withsustainable agriculture to quickly certify a few ofits own large tea estates to this new standard.Work has also progressed with the certificationToward Sustainability: The Roles and Limitations of Certification

Chapter 4: Pathways to Impact 82of small producers. In Kenya, a tea producers’group with 500,000 members has had more than40,000 small producers certified to date. Workcontinues to certify the rest over the next fewyears. The RA-SAN tea certification system isexpanding quickly within a large, global supplychain involving about 2 million people. This rapidexpansion presents both an opportunity and achallenge for the certifying organization, whichis committed to maintaining high standards andquality staff as it grows.Strategic ImplicationsThis case is an example of the potential for alignmentbetween a firms’ internal governance systemand needs and the development and implementationof a standard and certification system. Thecommitment of firms that control large sectionsof the value chain, as Unilever does for tea, canbe an important driver behind the creation ofcertification systems for commodities that do nothave specific ones in place, and also in the speedof their uptake.The Unilever example illustrates some of thetradeoffs that occur when a single firm is theinitial impetus for the development a new systemthat may (or may not) drive the bar beyond thefirm’s own internal standards. This is a somewhatdifferent dynamic from that in which many differentparties, including NGOs, come together todevelop a standard, such as was the case for theFSC, or when development is driven by particularindustry groups, as with the Programme for theEndorsement of Forest Certification. Unilevercould have used other private governance mechanisms,such as contracting, to make sure that itssuppliers complied with its standards. However,to gain credibility and have a chance to achieve itsmarket goals, the firm decided to cede authorityover standard setting to a third party. Unilever didthis once it found a partner with whom its goalsand market strategy were aligned.One possible risk with this strategy is the potentialfor capture (or perceived capture) of the systemby corporate interests, which in turn can resultin allegations of greenwashing. Such allegationswould undermine the credibility that was animportant incentive for participation in the firstplace. Unilever’s response to this potential threatwas to work with an existing, respected standardsorganization, and to adhere to best practicedevelopment standards (ISO and ISEAL). The RAattempted to avoid the risks to its own reputationby adhering to its existing technical standardsand the ISO and ISEAL processes, including theaddition of other major stakeholders, in the finaldevelopment of the tea certification program.While Unilever was the driver behind the initialexpansion into tea, it ceded power to the processas it progressed, which helped to protect both itsown credibility and that of the standard.There is a second potential challenge to thecredibility of a standard that develops along thismodel. The RA faced the challenge of building thecapacity to develop and deploy a new standardin a very short time. If the standard were poorlyreceived, or if capacity proved unable to reliablymeet demand, the RA’s credibility would suffer(as would Unilever’s).While there are risks for both parties, this model,if successful, has the potential for substantialsustainability benefits, given the size and scopeof Unilever’s demand for certified tea. 9 Uptake,which has benefits in terms of both sustainabilityand the financial viability of the certification programitself, is faster when it is being supportedby a major market actor (as opposed to relyingon many smaller actors in the tea market to jointhe system). The commitment by a major brandcan also put pressure on other large tea suppliersto seek certification. 10 The danger, however, isthat certification and the end of market commoditizationcould crowd out smaller producers9 It remains unclear if the benefits are greater than theywould have been if Unilever had elected a different route(i.e., contracts plus extension work), or chosen a differentstandard and certification provider.10 This dynamic has been present in the chocolate industry,where several of the largest firms (including Nestlé andMars) have made commitments to certify their supplies(Potts, van der Meer, & Daitchman, 2010, and www.marsdrinks.com/mars-drinks/en/Sustainability/News/FLAVIA-Rainforest-Alliance-Certified-coffee.htm).Toward Sustainability: The Roles and Limitations of Certification

Chapter 4: Pathways to Impact 83Figure 4.3: Mechanisms of Interaction and Indirect ImpactsDirect impactsEnvironmentalimpactsSocialimpactsCertificationIndirect impactsLearning anddemonstrationCredibilityCapacitydevelopmentSupport/CoalitionbuildingInfrastructuredevelopmentOthergovernancethat are unable to afford the costs of complianceor certification.An important final note is that this particularmodel is most applicable for those products forwhich there are actors with significant marketpower, as opposed to those that consist almostentirely of small actors who require coordinationto reach a critical mass of the market. But ithighlights both the risks and opportunities thatoccur when firms, especially major players inglobal supply chains, consider the certification ofmajor inputs or products. In value chains with significantlylarge actors, the ability to find synergiesbetween internal corporate governance systemsand the certification systems’ elements can leadto the potential for important positive feedbacksbetween the two.Overview: Interactions andIndirect ImpactsThe cases suggest that when certification interactswith other forms of governance, the outcome isoften magnified beyond what either system couldaccomplish on its own. This takes place throughthe following mechanisms. (See also Figure 4.3.)1. Learning and demonstration: LEED and EnergyStar provide venues through which firms areexposed to best practices. Certified firmsthat have invested in greener technologies ormanagement programs can provide examplesof success—or at least of basic technical andeconomic feasibility—that others can emulate.Certified firms can also demonstrate the valuefor participation.2. Capacity development: Another impact relatesto the capacity of certifiers themselves, aswith LEED. Capacity development may alsospill over into other governance mechanisms,such as regulation or industry decision making.Some of the actual certification capacity canbe used by governments who may lack this ontheir own. This effect can be seen in legalityverification.3. Credibility: Interactions can increase the credibilityof systems and/or their participants. Forexample, the CDM Gold Standard has improvedToward Sustainability: The Roles and Limitations of Certification

Chapter 4: Pathways to Impact 84Figure 4.4: Roles for Public and Private GovernancebetterperformersPrivateGovernancesets additionalvoluntary standardsto pull betterperformers towardgold standardSUB-standardGOLD standardMINIMUM standardSslowadoptersPublic Governancesets minimum standards to raisethe bar and set barriers to entryweeds outworstoffendersthe credibility, and thus the attractiveness, ofthe original CDM program.4. Support/coalition building: Certification providesa venue through which actors can buildsupport and coalitions for action that can leadto even more formal regulatory processes. Forexample, when regulators combined a voluntarystandard such as Energy Star with less-strict(but continuously improving) minimum standards(regulations), the regulatory action wasless contentious than it might have been ifthe stricter product standards were mandatory.By allowing firms to participate voluntarily,eventually a de facto industry minimum willbe set by market expectations. Governmentscould face less resistance to regulation in caseswhere involvement with certification can createa coalition of supporters.5. Infrastructure development: Interactionsbetween certification systems and other governancemechanisms can create the politicaland technical infrastructure to support futurecertification. This could be an important outcomeof legality verification, where the trackingcapabilities required to enforce legality, if developed,will make certification much easier in thefuture. It also demonstrates to government andindustry that this infrastructure is possible, andpotentially can be created without large costs.These cases also show that end consumers (individualsor firms) do not always drive the marketpenetration of a standard or its core practices.Governments may adopt components of certificationsystems in regulatory approaches, to theextent that certified products come to dominatethe market (as with Energy Star). Or, voluntarystandards may establish a “gold standard” forbest performance while regulators set minimumstandards or barriers to entry to weed out theworst. (See Figure 4.4.)The cases here are certainly not the only examplesof significant impacts that result from differentinteractions. For example, the fisheries sectoroffers an interesting example of how intersectingpublic and private policies, standards, and initiativescan interact in ways, that, over time, end upreinforcing sustainability goals. (See Appendix E.)Most of the initial fisheries certified by the MarineStewardship Council (MSC) were located withinjurisdictions that exercised relatively strong managementpolicies and were already well managed.They therefore required few changes to meet thestandard. The MSC has acknowledged the relativeimportance of drawing problematic fisheries(which would require more substantial improvements)into certification, noting that this is wherethe system will deliver its greatest contributions toenvironmental sustainability.The driver of this is not so much the MSC itself,but rather new, market-based infrastructure tosupport fisheries in their transition toward sustainability,using the MSC as both an end goaland a framework for improvement. Sometimescalled “fishery improvement partnerships,” orFIPs, these efforts typically involve marshalingmajor actors in the seafood supply chain to applypressure to commit to the improvement of a particularfishery or set of fisheries. The WWF andToward Sustainability: The Roles and Limitations of Certification

Chapter 4: Pathways to Impact 85the Sustainable Fisheries Partnership (SFP) haveaggressively expanded the FIP approach over thelast five years. At the same time, industry leadersengage with certification and advance plans toassure long-term supply and gain other benefitsfrom improving sustainability, and regulatorscome under pressure to enforce and raise barriersto market entry by those whose practicesare farthest from the standard. This combinationof forces, pushing up from the bottom and pullingup the top, has the potential to improve thesustainability of all fisheries exploited for the internationaland developed country markets, whichaccount for 40 percent of global fisheries.In the past, market penetration has been seen theindicator for success for a certification system,because it suggested that high demand for certificationled to high impacts. As this fishery exampleillustrates, however, such a view does not takeinto account those working toward the standard,those practicing in accordance with the standardwithout seeking certification, the strength of thestandard, and the important interacting effectsthat may result in benefits for sustainability evenif “uptake” remains relatively low.Lessons from the CasesVoluntary standards and certification systems caninteract with other governance arenas to produceresults in many ways. This chapter has offereda framework to guide those designing or adaptingcertification systems to consider interactionsand indirect effects as part of system design, tomaximize sustainability benefits.Designing for Governmentto Take OverAs shown in this chapter, standard systems mayserve as a learning laboratory to test standards,verification systems, technologies, results, andother aspects at a reasonable scale, before broadmandatory application. By observing how thevoluntary standards work to solve a given problem,and how innovation, new technology, andinfrastructure develop or need to be developed,regulators and other stakeholder groups can testand adapt their approaches to achieve their goals.By demonstrating feasible solutions, a certificationsystem can also offer proof of concept for newnorms. (Of course, these are not, on their own,positive or negative outcomes. The test is whethernew norms and standards are sufficient to achievesustainability goals.) Certification programs canalso build consensus among stakeholders andhelp to identify key areas for improvement. Thisgives the government a focused starting pointfor its own regulatory actions, which will thenpresumably be supported by key stakeholders.Finally, government can provide a harmonizingfunction when there are a proliferation ofcompeting and potentially confusing standards.This occurred in the development of the U.S.Department of Agriculture’s organic standard inthe United States, as discussed in Chapter 1.Another key advantage is that the developmentof standards and certification systems can allowstakeholders to coalesce around a limited numberof key issues. For government actors, this providesa key function of defining the scope of theproblem and also a subset of potential actionsthat already enjoys support from key actors. Thisdynamic can make the policy-making processeasier from technical and political standpoints.Designing for Synergy andMutual ReinforcementThe cases illustrate the importance of understandinghow to nurture the legitimacy and authorityof certification systems and other governancemechanisms, and what types of policy gapsare best addressed by this strategy. Synergisticrelationships can be especially beneficial whenopening or reopening a public policy debateis either politically impossible or too risky (i.e.,because existing standards might be watereddown). If a certification system addresses policyproblems that governments have already agreedare important, and develops a limited range ofadditional standards that complement rather thancompete with what has been established, thesystem may gain strong support from governmentofficials whose programs gain legitimacyand support. The challenge is to analyze theToward Sustainability: The Roles and Limitations of Certification

Chapter 4: Pathways to Impact 86Figure 4.5: TradeoffsFunctional• Efficiency• Responsiveness• Capacity• Credibility• UptakeAuthority• Sovereignty• Independenceneeded and potential impact on the problem inquestion, and focus on the most critical gaps.Designing Hybrid ApproachesThe key to hybrid approaches is to understandwhat functions are best served by each entity,and how to share and administer them. Conflictover authority can undermine support for hybridmechanisms between government and the privatesector. Certification systems can provide assuranceof compliance to policy measures (such asestablished regulations) or can support policyends or goals by addressing gaps in the overallsystem’s functional capacity—for example,for enforcement, management, or monitoring.Certification can also be used to develop theinfrastructure useful for other regulatory actions.Greenwashing is a legitimate concern in hybridgovernance, if certification programs verify compliancebut the actual standards are insufficient toachieve sustainability objectives. The numerouspossibilities for hybrids means that strategistsmust ask the right questions and ensure that the“bar” is not set too low.Tradeoffs and TensionsImpacts, and their scale and scope, are at leastpartially determined by the division of responsibilityfor policy functions, and which actors in thesystem gain or cede authority. Tradeoffs ofteninvolve functional elements on one side, andaspects of authority on the other. For legalityverification, for example, governments give up, atleast temporarily, some of their sovereign powerin order to gain improvements in enforcementcapacity. Legality verification has been embracedmore easily in cases where those involvedunderstand this tradeoff and are careful to limitthe degree of authority that states are asked tosacrifice, or which balance the sacrifices withfunctional improvements that make the overalltradeoff beneficial.Of course, certification systems themselves, inaddition to governments and firms, face tradeoffs.For example, when governments regulateor adopt a standard, the increase in uptake maybe offset by a loss of independence or loss ofvoice on the part of certain stakeholder groupsinvolved in the certification system. Also, tensionsmay arise between different functions. Figure 4.5highlights some elements that have been “tradedoff” when certification interacts with other formsof governance.Most certification systems were not designedto interact with other governance mechanisms.(Energy Star, legality verification, and the CDMGold Standard are exceptions.) The next generationof certification systems may well be designeddifferently in order to take advantage of thestrengths of different actors to perform differentfunctions. The strengths of private certificationsystems (as opposed to ones that are wholly orlargely under government control) are credibility,the engagement of a cross-section of expertsand stakeholders, and flexibility—i.e., the abilityfor continuous improvement and responsivenessto changing external conditions. Voluntary systemsmay also be more effective in arenas wheretraditional regulation can be difficult (as withtransboundary and global environmental issues).Governments, on the other hand, have authorityand resources that may not be available toother actors. They can compel adherence, havea range of enforcement mechanisms, and oftenhave access to resources that are unavailable toprivate certification.Toward Sustainability: The Roles and Limitations of Certification

Chapter 4: Pathways to Impact 87Combinations ofTools and ApproachesThe case examples offer clues but do not answerentirely the question of which combinations,under which circumstances, are most or leasteffective. The contributions of standards andcertification in a system combining several toolsor approaches can be examined by asking firstwhether, and how, sustainability outcomes wouldchange if the of standards and certification hadnever existed, and second, whether, and how,sustainability outcomes would change if they weretaken away.Data from various EPA and other studies showthat Energy Star helped to drive energy efficiency.This could have been accomplished via a changein minimum product standards. But it is notclear how much of a change in these standardswould have been realistically feasible, since at thetime Energy Star was developed, environmentalregulations were highly contentious and difficultto implement. In this context, the EPA and DOEmade a decision to pursue a lower minimumregulatory standard and to drive the top of themarket by pairing it with a voluntary aspirationalstandard. The evidence indicates that EnergyStar played a key role in catalyzing widespreadimprovements in energy efficiency for consumergoods, including changing the expectations ofconsumers. And it is not clear that without EnergyStar, this change would have occurred (at least inthe absence of other actions).Addressing the second question, almost all productson the market, certified or not, now meet theEnergy Star requirements. So if the program wereto suddenly disappear, it would not be expected tosignificantly impact the status quo. This indicatesa need for different approaches going forward.One would be to update Energy Star so that itcontinues to move the market—for instance, bybenchmarking Energy Star minimums at the top20 percent of industry performers. A second routewould be to leave Energy Star unchanged, but toimplement a more stringent minimum efficiencystandard. A third option would be to develop anew standard aimed at incentivizing the top ofthe market.This example shows the importance of thedynamic impacts of a standard, and the needto be clear about the roles of different forms ofgovernance. For example, are local regulationsincorporating LEED standards being used to provideincentives for the best performers (such astax credits in Maryland)? Or are they being used toset minimum standards for anyone involved withbuilding projects? The answers to these questionshave very different implications for LEED, andfor regulators, about how the regulations will beformulated, how the certification will evolve in thefuture, and the nature of the relationship betweenthe two.Lock-In vs. ProgressionThe evidence of these cases neither confirms norrefutes the proposition that certification posesa risk of “locking in” suboptimal outcomes. TheCDM Gold Standard is an example of certificationkeeping governance programs from getting stuckin configurations that under-deliver. LEED is agood experiment in making a regulatory programless vulnerable to lock-in. If governments simplycopy LEED at a given time, and never update,they might lock in technologies that are no longerbest practice in 10 or 20 years. But a governmentregulation can also be indexed to LEED in sucha way that it incorporates LEED’s changes andupdates. While there are many contextual factorsto consider, the risk of getting stuck in anunderperforming or stagnant system appears tobe higher in cases in which certification replacesregulation, or where certification reduces thenecessity to regulate, such as was seen withEnergy Star and the fact that the success of thecertification program appears to have replacedimprovements in the government’s minimumstandards. The risk is higher if the certificationdoes not update or improve at a pace at least asrapid as what would be achieved by market forces.Toward Sustainability: The Roles and Limitations of Certification

Chapter 4: Pathways to Impact 88Box 4.1Strategic Questions for Decision Makers1. What kinds of interactive pathways are present, or can weanticipate developing, in this case?2. What kinds of impacts are desired from certification?3. Will the current trajectory support those impacts?4. Is there a way that changing the trajectory or types ofinteractions would change those impacts for better or worse,and what might cause those changes?5. What tradeoffs are present in the current interactionsbetween the certification system and other regulatorymechanisms?6. How will those tradeoffs influence the ability of certification todeliver the hoped-for sustainability impacts?ConclusionsThese cases, along with others presentedthroughout this report, provide enough insight toconstruct a set of key strategic questions that couldbe used by promoters and supporters of certification,as well as those considering whether to getinvolved with a particular program (see Box 4.1).Answering these questions will help decisionmakers understand their own goals, the kindsof impacts and challenges they should be lookingfor, and whether or not there are leverage orinfluence points that could make the certificationprogram more (or less) successful, as well asappropriate for their needs.The cases in this chapter demonstrate how theimpacts of certification can extend beyond thedirect environmental and social benefits of betterpractices. Earlier chapters demonstrated how thedifferent internal factors, including design, andthe range of actors involved, can influence effectiveness.But external context is also important.Certification systems interact with other policiesand regulatory regimes and are influenced bythem. This has implications at a number of levels,including how one thinks about, and measures,the impacts of certification, the goals appropriatefor certification in different areas, and even thestrategies taken by different stakeholders whenthey choose to engage (or not) with certificationprograms.These cases present examples of how the impactsof certification can be broader than the simplecalculation of the expected environmental and/or social benefit per certified good, multipliedby their market uptake. In many of the examples,certification has acted as a kind of laboratoryfor learning about, and demonstrating, differentkinds of best practices. It has also helped tobuild capacity, provided venues for dialogue, andaltered problem definitions. This, in turn, has ledto situations in which government bodies haveimplemented elements of certification into theirregulatory regimes, or have even chosen to takethe lead in developing third-party certification programsas part of their larger regulatory strategies.This kind of regulatory “pick-up” can increasea certification program’s impacts well beyondits market share, especially when governmentincludes elements of the standard in non-voluntaryprograms. Part of this process may also involvechanges in expectations and behavior, such aswhen Energy Star led consumers to pay moreattention to the energy consumption of appliances,with an accompanying shift in the overallefficiency of products on the market. In certaincases, the adoption of a certification system, or itsunderlying practices, by public or private regulatoryprograms can release such a system from theproblem of the need to increase uptake, and theneed for stringency. In fact, government pick-upmay even allow a certification system to increasethe speed or amount that it “ratchets up,” to alignwith the “ratcheting up” of minimum standardson the part of the government.Interactions between regulatory systems andcertification schemes can also improve regulatorysystems that are fractured, missing, or unableto meet their goals in their current forms. Thisappears to be a problem especially in internationalcontexts, where products move across borders,and there is no clear authority. Certification mayalso contribute to the creation of critical informationinfrastructure within a supply chain.Toward Sustainability: The Roles and Limitations of Certification

Chapter 4: Pathways to Impact 89An important note is that, in these cases, certificationis not replacing other regulatory programs.The different systems combine to result in betteroutcomes than either might have been able toachieve on its own. Certification always exists in aregulatory context of some sort, even where thoseregulations and their enforcement might be weak.That context is very important to understandingwhat kinds of additional, indirect impacts certificationcould have.Different impacts can be expected in differentsituations. For example, certification’s role infostering learning and demonstration are morein evidence when governments pick up certificationas part of their own strategy—either bydeveloping their own programs or by implementingpractices through other regulatory avenues.Improvements in regulation and enforcementseem to occur when certification and regulatoryprograms coexist, but remain largely independentfrom each other.There is evidence that while it may be difficult inmany contexts for certification to achieve transformativechange on its own, it may very well bean important element in a long-term dynamicstrategy of interacting governance tools. This canbe an important way to meet the goals of differentstakeholders that go beyond levels of uptake ofparticular practices or particular products, andaddress the need for broader, or even transformativechange.the sovereign authority of governments, oneresponse could be the development of competing,government-determined (and/or -mandated)standards. Certain kinds of interactions can alsopresent challenges to the legitimacy and even thefunctional capacity of certification. Understandingthe external context is important for certificationsystems, not just to identify leverage points forgreater impacts, but also to understand potentialvulnerabilities and the kinds of interactions, andchanges in these interactions, that could challengetheir viability and impact in the future.Moving forward, there is a need for further researchto better understand how different contextualfactors—including the sustainability problems,the nature of the supply chain, the governmentsin question, the economics, the social issues, andthe history of the certification systems—can beused to better anticipate some of the complexof outcomes that result from dynamic interactions.In particular, many of these cases are largelydrawn from examples in which the markets, andoften the governance institutions involved, werein wealthier, more developed countries. Moreresearch is needed on interactions that occurin areas where governance actors involved areweaker and the consumers involved are poorer.However, it is also important to note that thecases provided here are examples of positivesynergies, which are by no means guaranteed. Asmentioned in the beginning of this chapter, it isalso possible for certification to lead to much lesspositive outcomes, such as greenwashing or theuse of certification to deflect or replace stricterregulation. The goals and value of a certificationsystem may differ from those of the governmentswith which they are evolved, which can lead toconflicts. It also means that elements beyondjust a certification’s “business plan” could becrucial to its effectiveness. Changes to regulationscan make certification systems redundant.On the other hand, if certification threatensToward Sustainability: The Roles and Limitations of Certification

Chapter5TrendsThis chapter on trends is intended to shift the focus of this report from a review of thestate of knowledge and the Steering Committee’s analysis of the evidence base to offeringrecommendations (in the next chapter) for how to build upon this knowledge. As such, theSteering Committee did not approach this chapter as it did the preceding ones.While the Committee considered undertakinga more in-depth scenario-building effort, membersdecided, given limited time and resources,to draw upon what already is available (e.g., theMillennium Report (United Nations 2000)) andto identify or “spot” trends that Committee membersthemselves are experiencing, have observed,or have been told by others are already beginningto take place and may ultimately affect standardsand certification.All standards and certification programs operatein a complex global context and are influenced bya variety of economic, environmental, and socialtrends. This chapter identifies a number of potentialfuture trends that, if they come to pass, couldaffect certification directly by 2020 and beyond.Many of the trends discussed in this chapter arefar from certain, and they may reflect the perspectivesof only one or a few Steering Committeemembers. The Committee does not intend topropose these trends or observations as absolute,but rather to identify the types of trends that, ifthey come to pass, will have significant implicationsfor standards and certification systems. Inaddition, the Committee has not tried to prioritizethe trends identified in this chapter. And, the listis meant to be indicative rather than comprehensive.The purpose of contemplating possibletrends was to consider the information gatheredin reviewing the history and progression of thecertification movement and to consider how therole of standards and certification may change inthe future.The chapter identifies three types of trends thatcould affect certification or the context withinwhich certification programs operate: (1) shortertermtrends regarding the development ofstandards and certification systems themselves,or that may affect such systems directly, (2)shorter-term but more general global trends thatcould affect the context within which certificationprograms operate, and (3) longer-term globaltrends. Key trends in each category are identifiedin the tables below and then discussed in moredetail. The three types are split into two tablesaccording to the likelihood of their taking place,with Figure 5.1 showing those trends that aresomewhat likely to occur, and Figure 5.2 showingthose the Committee sees as less likely butpotentially impactful.Certification Trends—by 2020One overarching trend likely to affect certificationsystems is the increasing awareness that theEarth’s resources are finite. This, as much as anything,will likely be the primary driver of interestin sustainable production and use of resources,and in turn of the role certification could play inverifying sustainability.Given that the private sector buys and sellsresources daily, they will likely recognize the significanceof finite resources more quickly thangovernment. Lack of access to resources, as wellas increasing prices, could threaten companies’existence or at the very least change their businessmodels. For such companies, the increased pricesthat result from scarcity may be less importantToward Sustainability: The Roles and Limitations of Certification 90

Chapter 5: Trends 91Figure 5.1 Trends the Committee Sees as Somewhat Likely to Occur within the Timeframe IndicatedCertification Trends—by 2020 Global Trends—by 2020 Global Trends—by 2050Concerns are increasingly raisedregarding the proliferation ofcertification programs.Concerns are raised thatcertification does not guaranteemeasurable reductions innegative impacts; the privatesector seeks stronger verificationof sustainable performance.Focus continues to shift frompractices to performance.Certification is increasingly usedto address supply chain securityand transparency issues.Increased efficiency and provenbusiness cases are pivotal for theexpansion of certification globally.Harmonization begins acrosssome standards.Standards are routinely revisitedevery 3 to 5 years to reflectlearning, new issues, and science.Governments become moreinvolved in certification (e.g.,through purchasing, helpingproducers become certified,and addressing the lowestperformers).More programs move from nicheto mainstream.Population, economic growth,income, and consumptionincrease, especially in the globalSouth.Prices for food and energyincrease and, as a result, globalawareness of resource scarcityincreases.The private sector realizes thatresource scarcity is an issue andadopts supply chain managementstrategies that better assureaccess to raw materials.The sector shifts from spotmarketpurchases of commoditiesto longer-term contracts.Shifts are made toward moretransparency, traceability, andinformation availability generally.Consumers in the global Southbecome more concernedabout health and safety issuesassociated with the food they eat.Companies see sustainabilityas “precompetitive” 1 and worktogether more extensively onissues such as illegal productsin the supply chain, disease, andproductivity.Growth slows in Europe andthe U.S.Population increases.Per capita income increases.Consumption increases, and theconsumption of animal proteinincreases even more quickly.Climate change has a significantimpact on what can be grown andwhere it is grown.International trade in food andcommodities more generallyincreases.South-to-South trade increases.China once again is the world’slargest economy.There are increased concernsabout food security, while at thesame time pressure increases todivert food to other uses (e.g.,animal feed, biofuels, bioplastics).Information technology is inevery village globally and providescommunications as well as healthand market data and informationon better management practices.1 Many companies are beginning to see sustainability, particularly within the procurement of raw material supplies, as being a precompetitiveissue—one on which they need to cooperate together and work as groups of companies or even entire industries if they are to address itsatisfactorily. For such companies, the products they make, how they position those products and advertise them, as well as their brandsand brand reputations, are still competitive issues. However, whether raw materials are available for any/all companies is a precompetitiveissue. Some reputational risk issues can also be seen as precompetitive too, as they need to be addressed at an industry level (e.g., child laborin cocoa production). The same is true for disease issues that no single company is big enough to solve on its own (e.g., citrus greeningdisease in the orange juice industry). As procurement becomes more global and the finite nature of the planet becomes better understood,several other supply chain management issues that have previously been seen as competitive issues are likely to be addressed as precompetitiveissues by the companies affected.Toward Sustainability: The Roles and Limitations of Certification

Chapter 5: Trends 92Figure 5.2 Trends the Committee Sees as Less Certain but that Could Have Considerable ImpactCertification Trends—by 2020 Global Trends—by 2020 Global Trends—by 2050Companies develop their owncertification programs, reducingthe influence of third-partysystems.China develops its owncertification standards.1 percent of food globally iscertified.Governments use certificationprograms to address health andsafety issues.Certification programs beginto address larger-scale, landscapelevelissues (e.g., water, climate).The development of metastandardsis a likely outcome ofprocesses aimed at harmonizingacross standards or creatingstandards for other globallysignificant commodities.Productivity and nutrition areincluded in standards.Companies begin to worktogether on sustainability.Climate change is taken seriously,and carbon emissions-reductionprograms proliferate.Global information access andawareness of reputational risksincrease.5 to 7 countries produce most ofthe food surplus for export eachyear.The use of open-source datasystems increases as companiesattempt to manage “common”resources.The business case forrehabilitating degraded,underperforming, or abandonedland is proved.Programs are tested to reducewaste and increase efficiency,as ways to reduce the need toproduce more food or producemore with less.Countries open up politically andeconomically (e.g., China).Increased political instabilityreduces the ability of countries toact decisively on economic issues(e.g., India).Currency woes and financialinstability occur.Food shortages unleash politicalupheaval and pushback onnon-food uses of food as well assustainability more generally.The World Trade Organizationrules on the issue of voluntarystandards as a trade barrier.Climate change and climatevariability result in shifts in wherekey commodities are produced.10 crops account for more than70 percent of calories globally.Global efforts take placeto rehabilitate degraded,underperforming, or abandonedland.Codex planetarius is created. 22 The proliferation of third-party ecolabels, standards, and certification programs, as well as the independent development of corporate andindustry-wide standards and government sustainability requirements, has led some observers to question whether society is at a point intime similar to 60 years ago when the proliferation of food-related health and safety standards by companies, industries, and various levelsof government resulted in the creation of a single set of such standards—the Codex Alimentarius. Clearly, if we are to successfully managethe planet for 9–10 billion people and still have biodiversity and basic ecosystem services, then one way to achieve that would be to developa set of minimum standards—a Codex Planetarius—that is used to evaluate the production of food and fiber and other renewable products.Toward Sustainability: The Roles and Limitations of Certification

Chapter 5: Trends 93than an overall lack of resources globally. Thislack can result from a decline in either renewableresources (i.e., those that are no longer beingproduced sustainably and thus are becomingmore scarce) or nonrenewable resources. Also,state-owned enterprises may have a significantadvantage in a resource-constrained world.Companies are already responding to increases inglobal consumption and demand for renewableraw materials by shifting from one-off, spot-marketpurchases and toward longer-term contractswith specific producers (Jason Clay, personalcommunication). This issue was brought homein the period from 2005 to 2008 when manycompanies (e.g., large players like Kraft and SaraLee as well as much smaller bakers and candymakers) were unable to buy sugar and some otherkey commodities (or where high prices reducedtheir overall profitability by 10–20 percent) andhad to shut down production facilities in marketsas diverse as the United States and Pakistan (SunJournal, 2005; Schmeltzer, 2005). Today, companieswant to know where their raw materials andother supplies are coming from, and increasinglythey are working closely with producers to ensurethe long-term viability or sustainability of thosesupplies. The transactional costs of spot-marketpurchases and the risks from not having rawmaterials in a timely way are simply too high on aplanet where increased population and consumptionare beginning to outstrip the ability of theenvironment, much less producers, to produceproducts sustainably over time.Forward-looking companies want to use theirpurchases not only to ensure access to rawmaterials in the short term, but also to help lineup sustainable supplies in the medium to longterm. For such companies, the implicit promiseof certification is that it will help them do justthis—i.e., certification will ensure that producersare more sustainable than they might have beenotherwise or, at the very least, that they are moresustainable than their noncertified competitors.However, if these companies are going to investmore in certification programs—or even go “allin” in terms of sourcing mostly or only certifiedraw materials—they will most likely require someproof that the certification programs are measurablyreducing key environmental, economic,and/or social issues on the ground and makingproducers more efficient.This trend has three key implications: first, thatproducers of certified products must measurablyreduce the negative impacts of production relativeto a credible baseline; second, that certifiedproducers must be more efficient and productivethan their noncertified counterparts; and third,that certified producers should be more profitableas a result of increased productivity, increasedefficiency of resource use, and/or the adoptionof better practices to reduce impacts. To date,no certification program addresses these issuesdirectly through their standards, nor monitorsthese impacts separately.Governments are also beginning to look at theirroles vis-à-vis certification. Initially, many governmentswere skeptical or even hostile towardcertification programs, as they feared suchprograms would usurp the role of the state inmaintaining renewable resources. Indeed, somecertification programs (the Marine StewardshipCouncil (MSC) in particular) explicitly judgedthe effectiveness (or not) of government-runprograms to manage common resources. Morerecently, however, governments have come to realizethat certification programs can complementand even encourage more sustainable behavioron the part of producers than government alone(as reported by the Steering Committee throughvarious personal communications). In some partsof the world, certification programs have becomede facto extension agents, working directly withproducers to improve their performance. As virtuallyevery government in the world has reducedits extension services, and this situation is likelyto deteriorate further, successful certification programsmay be able to help fill this void.Governments are becoming more directlyengaged with certification in several ways. In somecases, they support certified products throughgovernment procurement programs that targetthem—for example, through the purchase ofpaper certified by the Forest Stewardship CouncilToward Sustainability: The Roles and Limitations of Certification

Chapter 5: Trends 94or coffee certified to Fairtrade or organic standards.Governments are also exploring whetherthey can use regulations to support certificationsystems. In India, for example, nongovernmentalorganizations and the private sector are pushinggovernment to reduce by half (to about 4 percent)the import tariff on palm oil certified according tothe standards of the Roundtable on SustainablePalm Oil (RSPO), relative to noncertified palm oil.Vietnam has recently stepped in to assure globalmarkets that 50 percent of exported pangasiuswill be certified against Aquaculture StewardshipCouncil (ASC) standards by 2015 and 75 percent by2020. The government is now exploring whetherit should take the same approach with shrimpand other products destined for lucrative exportmarkets. The U.S., Brazil, and Mozambique havereached out to the World Wildlife Fund to ensurethat aquaculture regulations in those countries areharmonized with the ASC standards, so that producerscan begin a stepwise approach to ensureimprovement, gain access to markets, and eventuallybecome certified (Jose Villalon, personalcommunication). This trend is likely to expand toother countries and across multiple commodities.Another key certification trend is the proliferationof standards and certification programs, which isbecoming an increasing problem in both producerand consumer countries. In producer countries,the existence of multiple programs often increasesthe costs of compliance due to multiple monitoringand reporting requirements. And, suchprograms appear to be more about access tomarkets than sustainability. For example, bananaproducers in Central America need to be certifiedagainst eight standards in order to sell into differentmarkets globally (David McLaughlin, personalcommunication). In consumer countries, thenumber of competing programs has increasedat such a rapid pace that there is confusion inthe marketplace. Retailers in Europe have evenconsidered putting charts on the wall to identifyand explain each of the different food certificationprograms (Jason Clay, personal communication).To the extent that government or other actorswant to independently verify certification claims inorder to protect consumers against, among otherthings, product health and safety issues or fraud,then the proliferation of systems will also makeindependent verification more expensive. Onetrend, then, might be that government will step into the field to take over and harmonize competing(and sometimes conflicting) standards, as theU.S. government did with the creation of a singleorganic agriculture certification program. It is alsolikely that governments will begin to take a harderlook at health and safety and truth-in-advertisingissues related to certification programs.The largest increases in consumption globally,beginning now and over the next 40 years, willbe in the global South. It is not clear that thecertification programs that dominate today will berelevant to consumers in the South. To date, consumersin the South have not been as concernedabout environmental issues as those in the North.Consumers in China are beginning to be moreconcerned about health and safety, but so farthese issues are not addressed in most standards.It is possible, perhaps even likely, that certificationin the global South might be dominated by a mixof private and public labeling and certificationsystems (Marimon, Casadesús, & Heras, 2010).China appears to be taking a lead on this issue sofar. It would be insightful to track market growthfor certified products not only in China but incountries such as Brazil, Chile, India, Indonesia,and Russia.To date, no government is known to be collectingdata about the percentage of products thatare certified (i.e., certified products producedfor domestic markets, those for export, or thoseimported). China has said that it intends to dothis in 2012, and officials in the Netherlands haveexpressed interest in undertaking a similar survey(Jason Clay, personal communication). Given that“we manage what we measure,” it is possible thatthe mere documentation of trends in certificationwill create not only a baseline of information aboutcertified products but also general awareness ofthe importance of certification.Another trend of note is the increasing importanceof global trade—in commodities in generaland food in particular. Global trade of foodstuffsToward Sustainability: The Roles and Limitations of Certification

Chapter 5: Trends 95Figure 5.3governmentregulationvoluntarystandardsnumber of producersperformanceshiftworse performanceaverage performancebetter performancehas doubled in recent years from 6 percent ofglobal production in 2002 to 12 percent (Foodand Agriculture Organization, 2007). As internationaltrade has increased, the amount of productoriginating in developing countries and being soldthrough South-to-South trade has also increased(Ahmad, 2011; Canuto, 2011; Lynn, 2009;Mohindra, 2011). This trade is being stimulatedby economic growth in China, but India is alsoplaying a role and is the largest importer of palmoil and gold globally. By 2011, nearly three dozeneconomies had GDP growth rates of 7 percent ormore per year, and none of these economies werein North America or Europe (World Bank, 2012).To a lesser extent, there has also been an increasein the quantity and value of certified productsthat are produced in developing countries anddestined for developed country markets. It is logicalto expect these trends to continue.Historically, certification programs have focusedon rewarding the best producers. However, mostof the issues that certification programs wereestablished to eliminate or reduce do not resultfrom the actions of the better producers butrather from the worst ones. As governments seethat certified producers can be more efficientand actually reduce their costs and increase theirefficiency, government agencies may begin toexplore ways to “move the bottom” through regulations,permits, and licenses. Governments maynot require performance levels that are equal tocertification programs (or there would be no needfor certification), but they can start a stepwiseapproach “upward” and at the very least takeillegal products off the market by focusing regulationson reducing the same impacts as thosetargeted by private voluntary programs. This trendwould allow the entire performance curve to beshifted toward more sustainable production (seeFigure 5.3).The nature and scope of certification systemsthemselves may also change going forward. SomeSteering Committee members report “fatigue”regarding the development and implementationof additional standards for agriculture and foodproducts, in particular. Large, science-based,multi-stakeholder standards-setting processestake years, cost a million dollars or more, andToward Sustainability: The Roles and Limitations of Certification

Chapter 5: Trends 96involve tough, prolonged negotiations. There isthus a growing perception that the lessons learnedacross the different standards-setting processesto date should be combined into some sort of“meta-standards.” Meta-standards would focuson the common impacts that have been identifiedthrough multiple credible processes. Thoseinterested in applying certification to additionalcommodities would then have to identify relevantperformance-based standards against those keyimpacts, as well as perhaps one or two more thatmight be unique to the commodity.Finally, three other significant trends regardingcertification programs are worth noting. The firstrelates to the impacts of certification systems.Some Steering Committee members perceive anincreasing desire on the part of many parties todemonstrate the impact of improved producerperformance beyond the level of the individualproperty. This means shifting the focus to includecumulative impacts at the watershed or landscapelevel. The MSC already focuses on cumulativeimpacts rather than individual producer-levelimpacts, but land-based certification programshave focused on the farmer or individual landownerrather than on watershed-level impacts. Asa result, such programs could not measure theimpact of their standards beyond the individualproperties even if they wanted to.The second issue is that, on a finite planet, itis increasingly important to produce more withless: higher-quality, more-nutritious food usingless water, less land, and fewer inputs such asfertilizers and pesticides. None of the certificationprograms to date actually have standards forproductivity, and none address nutritional qualitydirectly either. Increases in productivity are importantfrom an environmental perspective, as theyare an indication of efficiency. Productivity is alsorelated to producer income, well-being, and evenpoverty alleviation. (While increased productivitydoes not guarantee increased income, it is oneindicator. At the least, flat or declining productivitysuggest that producers may not be improvingtheir overall viability.) And, quantity is not the onlymeasure of a productive sustainable agriculturalsystem. Certainly, the nutritional quality of cropsmust be maintained or increased in order to meetthe nutritional needs of a growing population.The third issue is that the Earth will not be ableto “subsidize” production indefinitely. What haveto date been seen as environmental externalities(e.g., habitat and biodiversity loss, soil erosion,by-catch, greenhouse gas emissions, water take,pollution, etc.) cannot simply be passed on tonature (or future generations); they will need tobe incorporated into pricing. At this time, noneof the certification programs bundle these costsinto the price of the product being produced,although Fairtrade does attempt to include thecosts of sustainable production into its minimumFairtrade price calculations, including requirementsthat might raise costs, such as switchingto more expensive but less dangerous chemicals(Fairtrade International, 2012). Few programsmeasure water use, greenhouse gas emissions, orwater or air pollution, either in absolute terms orper unit of production. Some Steering Committeemembers expect this will have to change.Global Trends—by 2020 and 2050In addition to the certification-specific trendsoutlined above, certain global trends could shiftthe political and economic context in whichcertified products and certification systems operate.Perhaps the most significant such trendsare increased population, increased per capitaincome, and increased per capita consumption.Population could reach 9+ billion by 2050 and 10billion or more by 2100 (Kaiser, 2011). Per capitaincome is expected to increase 2.9 times globallyby 2050, but in many developing countries theper capita increases in income are expected to bemore than five times what they are today. In themeantime, individual consumption is expected todouble by 2050 and continue to increase until theend of this century (Clay, 2010).Population increases will not be spread evenlyeither. Population growth and consumptionincreases are expected to be most pronouncedin Africa and the Asian subcontinent, as thosepopulations are also generally younger. China willToward Sustainability: The Roles and Limitations of Certification

Chapter 5: Trends 97once again be the world’s largest economy (it hasbeen for all but 200 to 300 years of the last 2,500).India’s population and consumption should alsogrow considerably. Brazil, Indonesia, and Russiawill produce considerably more exports. In all, onlya few countries—e.g., Australia, Brazil, Canada,New Zealand, Russia, Thailand, and the UnitedStates—are expected produce sufficient food inexcess of domestic consumption to consistentlymeet variable food production and deficits inother countries each year (Clay, 2010). Addedto this issue, and in spite of global food securityissues, there will likely be some pressure to divertfood to other uses (e.g., animal feed, biofuels,bioplastics, etc.).In terms of food consumption, some 15 differentfoods currently represent 70 to 80 percentof global calories each year. All are plants. Thatis unlikely to change (Clay, 2011). In fact, it ispossible that the number of crops that providemost calories globally may decline. In addition,while animal protein is likely to increase as a percentageof calories consumed, it is unlikely toexceed 15 percent by 2050 (Kruse, 2010). Beefproduction (not including grains grown for feed)represents about 60 percent of all land used byhumans to produce food, and yet beef is lessthan 2 percent of global calories (Clay, 2010; Foodand Agriculture Organization, 2007; Kruse, 2010).While fish consumption is likely to increase itsshare of total calories, projections suggest thatit will move from 0.9 percent of calories in thediet to 1.0 percent (Kruse, 2010), though in someregions seafood accounts for a larger proportionof calories and certainly a larger portion of protein.Globally, fish protein represents less than 15percent of all animal protein and has been declining.As of 2011, about half of seafood consumedby humans was produced from aquaculture, notwild-caught fisheries (Clay, 2010; Simpson, 2011).Also, 80 percent of all seafood is consumed indeveloped countries, and 50 percent is exportedfrom developing countries, with that percentagerising. Thus far, consumers in developed countrieshave more disposable income to pay morefor the food, particularly the protein sources, theywant to eat. This will not change any time soon.As food prices increase—and a number of analystsbelieve that the rise in commodity, food, andenergy prices is not a bubble, but rather a permanentresponse to resource scarcity (Grantham,2011a; 2011b)—it will be more feasible to bringdegraded or abandoned land back into production.This could probably happen on a large scaleand with relatively low investments in EasternEurope and Russia, where, after the collapse of theUSSR, much farmland was abandoned as individualschose to move to cities and pursue differentcareers. In many countries, it will also likely becost effective to rehabilitate degraded, underperforming,or abandoned lands. Tens of millions ofhectares have already been rehabilitated in Brazil,China, Ethiopia, Indonesia, and South Africa andhistorically in Australia, the Netherlands, andthe United States as well (Food and AgricultureOrganization, 2005; New Agriculturalist, 2008).The increasing transparency of supply chains isanother large-scale trend. Three factors will likelycontribute to this trend: the integration of commodityproduction and trade into the informationage, the scarcity of global resources, and increasingconcerns about health and safety. The impetusfor increased transparency will likely come fromthe private sector. It is the private sector that, forexample, defined specifications for each commodity(such as the exact color of yellow corn andwhite cotton) 50 to 100 years before governmentsbegan to regulate them. There is no reason toassume that the private sector will not step intoglobal trade issues, anticipating and shaping subsequentgovernment actions. While the precisetypes of data to be collected about supply chainsand the availability of that data (e.g., open sourceand public vs. rigidly controlled and private) arestill to be determined, it will probably includeinformation such as the location and volume ofproduction, inputs used, costs of production,key impacts, nutritional information, health andsafety factors, productivity and efficiency perunit of inputs, and so forth. The shift towardmore transparency and information availabilitywill require some fundamental rethinking, notonly about the role of certification systems andthe information generated in those systems, butToward Sustainability: The Roles and Limitations of Certification

Chapter 5: Trends 98also about the role and transparency of tradersin company supply chains. In fact, the biggestchanges in business models for a more sustainablefuture will most likely need to be with traders,as they have traditionally made money by tradinghomogeneous commodities and taking positionsin markets that are, simply put, not transparent.It’s also likely that climate change will increasinglydominate our world and our thinking. Climatechange may affect where and when commoditiesare planted, how much it costs to producethem, and how much is produced. Growers todaymay not be growers tomorrow. Even countriesthat dominate the production of some commoditiestoday will probably not dominate thosesame commodities by 2050. Studies have alreadyshown shifts in wild populations of plants andanimals in response to climate change (Chen, Hill,Ohlemuller, Roy, & Thomas, 2011; Rosenzweig, etal., 2007). In coffee production, climate change isalready affecting land values, in that the value ofhigher-elevation land is increasing faster than thevalue of what used to be prime land. Such trendscould require adaptation, along with increasedfood prices. Also important are weather variabilityand the extremes that may accompany climatechange—e.g., too wet one year, too dry the next—and the associated instability of crop production.Climate change may also force us to address carbonemission and sequestration issues. Some certificationprograms do this (e.g., the RSPO is nowbeginning to measure greenhouse gases (GHGs)in both production and processing facilities, andBonsucro is beginning to develop GHG measuresas well), but the majority of standards still donot. The UN Framework Convention on ClimateChange system has only recently embraced forestrythrough REDD (Reducing Emissions fromDeforestation and forest Degradation), and hasdecided to define the parameters for how itwill work on agricultural carbon by 2012. Thosecertification programs that already address theissue of carbon and greenhouse gas emissionsuse different carbon calculators with differentmethodologies and boundaries. These issues willneed to be clarified and addressed.A bigger issue may be the development ofcarbon taxes and full carbon accounting, whichmay undermine markets for products that mightheretofore have been thought of as sustainable.For example, the MSC does not currently includecarbon as a sustainability criterion. Yet there maybe considerable carbon emissions associatedwith catching, processing, and refrigerating manykinds of seafood. (And this would most likely bean issue with all sources of animal protein, notjust seafood.) In short, certification programs thatignore carbon footprints or push people in thedirection of sustainability only if climate is ignoredwill likely be disfavored over those systems andproducts that acknowledge and incorporatecarbon as a criterion.As 2050 draws closer, a number of other trendsand uncertainties could well affect certificationsystems. And while these are harder to predict,their impact could be as significant as anythingelse raised in this chapter. Such trends couldinclude, for instance, global trade contractions,particularly in the North where developed countryconsumers have shown a modest willingnessto pay for certified products. If the dynamismand growth in global trade shifts more to Southto-Southtrade, then the ability of Northernconsumers to drive the uptake of certificationprograms sufficiently for them to become moreglobal in nature is likely to decrease. This is alreadytaking place with palm oil, wherein the E.U. andU.S. combined represent only 13 percent of globalproduction. This potential erosion of the influenceof markets in developed countries to drivecertification and standards could be lessened,however, if Northern-based multinationals see abusiness-to-business advantage in using certificationto gain access to more sustainable productsas well as financially viable long-term producerpartners, or if they see certification as a way todifferentiate their brands in the rapidly expandingmarkets of the global South.Another possible trend that could affect certificationis that global awareness of a single issuewill overshadow others. In short, one issue mayso overshadow public opinion that there will bean attempt to maximize one issue rather thanToward Sustainability: The Roles and Limitations of Certification

Chapter 5: Trends 99optimize several. Climate change is but oneexample. As the risks from the impacts of climatechange become more apparent, GHG emissionsmay trump all other issues, and labeling systemswill have to respond to demands from consumers,brands, and governments.Financial instability could also have a range ofimpacts on global trade and certification programs.Such instability might reduce the demandfor higher-end products. It could also lead to currencyvalue fluctuations, which could raise costsin some producer countries, while consumingcountries find that their money purchases lessthan it did in the past. As mentioned previously,economies in the global South are heating up.China has posted around 10 percent growthrates for a decade (World Bank, 2012). This typeof growth will eventually be accompanied byincreased currency values relative to other globalcurrencies like the dollar. Similarly, the U.S. dollarcould lose value due to the country’s inability toaddress its debt issues and credit rating. A weakerU.S. dollar would make imports more expensive.Since the U.S. is the single-largest consumer ofcertified products, this could dampen overalldemand.Political instability is another uncertainty that isvery hard to respond to in a timely way, muchless anticipate or predict with any accuracy. Givenfinite resources such as arable land and freshwater,combined with more people and increasedconsumption, food security could very likelybecome a key issue that could topple governments.For example, rising food prices causedby drought and the closing of wheat exportsfrom Russia (along with inflation and other grievances)were thought to be one important triggerof the political upheaval in Tunisia, which thenspread across the Middle East in 2011 as theArab Spring (International Food Policy ResearchInstitute, 2011; 2012). Developing country governmentscould come under increasing criticism forallowing the export of luxury foods and flowers iftheir own citizens are without food. It is likely thatincreasing incomes in the South will generallyoffset these issues. However, sudden shifts infood availability due to drought or the reductionof exports from major exporters could result inmore violent reactions and political unrest. Thisissue could be accentuated by the fact that mostprojections suggest that at least 70 percent of theglobal population in 2050 will be living in cities,where only a week or two of stored food suppliesoften exist.ConclusionThe only certainty is that things will change. Whileno one can predict what changes are likely in thenext 10 years, much less the next 40, anticipatingchange and reacting to it more effectively areimportant. The goal of this chapter is to helpidentify the types of issues that are likely to affectcertification and standards systems directly, aswell as those that are likely to affect the overallpolitical, social, economic, and environmentalcontext in which certification systems operate.The intent of this discussion is to help readersunderstand how to think about certification andthe factors that will likely affect it going forward,rather than what to think about them.The key trends that will have the most indirectimpacts on certification programs are likely to bepopulation growth, economic growth, increasesin income, and concomitant increases in consumption.And, climate change has the potentialto rewrite the ground rules for most certificationsystems. However, if per capita consumptiondoubles globally as many analysts predict (Clay,2010), and production does not expand accordinglyaround the world, then production perunit of input will need to be intensified. Thusproductivity will be a key indicator of sustainability.And as yet no certification program hasproductivity as a criterion. In the near term, to bemore sustainable and to protect natural habitat,we will have to produce more with less. This is thechallenge not only for certification programs butfor all production.Toward Sustainability: The Roles and Limitations of Certification

Chapter6RecommendationsThis final chapter of the Assessment report begins by articulating the Steering Committee’sobservations about how standards and certification systems can and do drive change. Itthen sets forth recommended actions that actors can take to improve the performance ofstandards and certification systems directly, as well as to improve the environment or contextin which these systems operate. Finally, the chapter concludes with recommendations onpriority areas for future research.All of these recommendations build on Chapters1–4 of this report, which highlighted the SteeringCommittee’s findings, and Chapter 5, whichshifted the focus from a historical review towardexpected future trends.Many of the proposed recommendations regardingstandards and certification systems areincremental in nature. This reflects the fact thatno single or simple answer exists to the questionof when and how certification systems canbe deployed most effectively, given the complexcontext in which such systems operate. Also, theSteering Committee does not believe that suchsystems are in need of major overhaul, but ratherthat they can benefit from continued innovationand incremental improvements.The recommendations regarding research needsare broader in scope, reflecting the major gaps inknowledge that exist about the direct and indirectimpacts of certification and the conditions underwhich standards and certification can be effective.The lack of solid, quantitative evidence speaks tothe importance of collecting impacts data moresystematically.Of course, it is unlikely that the gaps in understandingwill disappear before new certificationschemes are proposed or old ones modified.The challenge of incomplete knowledge can beexpected to persist, even as some critical gapsmay be closed with the targeted investments inresearch and assessment proposed in this chapter.It is thus important to acknowledge the roleof learning and adaptive policy in improving standardsand certification systems, and to promotethe dissemination of findings for evaluation andintegration.How Standards andCertification SystemsCreate ChangeAs discussed in Chapter 1, voluntary standardsfirst appeared in the early 20th century but beganto proliferate about 20 years ago. At that time,coalitions of civil society groups and businessesset out to use standards and certification toaddress unmet public demand for the governanceof natural resources and social concerns. Issuesranging from protecting old growth forests to promotingsafer working conditions to stopping thedecline of fish stocks spurred the establishmentof these systems. By participating in such systems,enterprises seeking certification expectedto receive a benefit, such as a price premium orincreased market share, or at least to prevent anegative effect or competitive disadvantage.As participating companies realized these typesof benefits, it was expected that more businesseswould be encouraged to join in these systems.In the best-case scenario, increased consumerdemand for certified products would entice moreToward Sustainability: The Roles and Limitations of Certification 100

Recommendations 101and more companies to join, followed by an associatedincrease in the supply and overall marketshare of certified products. The increasing marketshare would result concurrently in improvementsin the social or environmental conditions targetedby the standard—for example, increasedfish stocks, more hectares of old growth forestsprotected, or a reduction in child labor. The continued“scaling up” of participating enterprisesand market share would lead eventually to a tippingpoint, after which products and servicesderived from businesses not compliant with thestandard would be at a competitive disadvantagein the marketplace. For this dynamic to occur,certified products had to be differentiated andrecognizable in the marketplace. Thus, standardsand certification systems spent extensive timeand resources distinguishing certified products,primarily through on-product claims and labels.In recent years, many experts and practitionershave come to understand that the context in whichstandards and certification operate is in fact muchmore complex than that scenario would suggest.In fact, findings from the Steering Committee’sinvestigation indicate that changes resulting fromstandards and certification are far more dynamicand diffuse than anticipated even at the beginningof this study, and involve the interaction of thesesystems with the policies and strategy decisionsof governments, nongovernmental organizations(NGOs), and businesses, as well as the workingsof global supply chains. Innovative NGOsand businesses are already leveraging the indirectimpacts of certification, such as using it in combinationwith government standards to improve thepractices of both market leaders and the lowestperformers.Based on their analysis of the evidence base,Steering Committee members hypothesize thatinnovation by practitioners has outstripped theunderstanding of how standards and certificationsystems create change, and that an updatedtheory of change reflecting the current state ofknowledge has not yet been articulated. TheSteering Committee believes that a new theoryof change is critical for guiding future action,and thus offers the following observations abouthow standards and certification systems canand do create change on the ground and in themarketplace:▪ Evidence of the direct impacts of standardsand certification systems suggests significantthough not universal positive changes innear-term social and economic well-being andenvironmental practices.▪ The evidence also suggests that indirectimpacts are substantial and probably greaterthan the direct impacts. Sustainabilitystandards have been adopted broadly throughintegration into company supply chainrequirements and government regulations.▪ The evidence reveals cases of direct financialbenefits for businesses engaging in standardsand certification through market share or costsavings attributable to increased supply chainefficiencies. Businesses are also increasinglycooperating to address supply chain risk andassurance of supply.▪ To scale up the positive impacts of standardsand certification, enterprises must have thecapacity to meet the standards and strongincentives to do so. Scaling up also requiresexploiting interactions or synergies withcomplementary market and regulatory tools.▪ Certification together with on-product labelscontinues to communicate the benefits of astandards system to consumers. However,on-product labels and price premiumsare neither as essential nor as universalas previously assumed. New models ofcertification are emerging that do not rely onconsumer-facing labels or marketing.▪ A more appropriate measure of the scale ofimpact may be the level of adoption of bettermanagement practices (whether certified ornot), rather than the market share of certifiedproducts or the number of participatingcompanies. However, even this is just a proxyfor impact that may eventually be replacedby concrete data showing on-the-groundsustainability outcomes.Toward Sustainability: The Roles and Limitations of Certification

Recommendations 102These observations helped to inform the SteeringCommittee’s recommendations for action andfuture research, which are discussed in theremainder of this chapter. Generally, these recommendationsfocus on improving the performanceof standards systems through increased efficiency,innovation, and continuous improvementand expanding knowledge about impacts and theconditions under which standards are more orless successful.Recommendations forImproving the Performanceof Standards and CertificationSystemsThis first set of recommendations is directedtoward specific actors, including standards andcertification systems themselves, businesses,NGOs, foundations, and governments. The recommendationsfocus on actions these actorscan take to improve the internal operation of, andexternal enabling conditions for, standards andcertification systems, and thereby improve theperformance of such systems.Recommendationsfor Standards andCertification Systems1. Standards and certification systems can mosteffectively contribute to positive outcomesif they include the following components ordesign principles:▪ A clear standard that spurs better managementpractices and incorporates measurableoutcomes▪ Certification processes that provide theappropriate level of assurance while helpingto build capacity for achieving betterpractices and outcomes▪ Governance and stakeholder engagementstructures that foster buy-in, while enablingthe efficient operation of the standards andcertification system▪ A sustainable financial model▪ An ability to reach and engage small andmedium-sized enterprises as well as largeones▪ Transparency in decision making, implementation,and evaluation, and mechanisms forpreventing or addressing conflicts of interest▪ A strong monitoring and evaluation systemthat contributes data to measure impactsand that feeds learning and continuousimprovement▪ Clear policies on claims and labeling thatensure the accuracy of claims being madeStandards and certification systems shouldtake account of these design principles whendeveloping and improving their operationsand should incorporate new principles as bestpractice evolves over time.2. Certification systems should make a moreconcerted effort to collect information on theirresults. This information should include dataregarding impacts on the ground that couldthen be evaluated by external parties (see nextrecommendation). Open-source (but anonymous)data-gathering and reporting systemsshould be created to facilitate the availability ofthe necessary data. Also, a shift toward measuringperformance rather than practices wouldenable an easier evaluation of the contributionsof standards and certification systems towardtheir sustainability objectives. While standardsand certification systems will continue to havea mix of performance goals and more narrowlyprescribed practices, the monitoring of performanceshould focus on actual impacts relevantto sustainability.3. To be most credible, and to avoid conflicts ofinterest, evaluations of standards and certificationsystems should be conducted by partiesexternal to the system. However, this shouldnot discourage standards systems from measuringand analyzing their own progress, asthis is critical for continuous improvement.Both internal and external evaluators shouldToward Sustainability: The Roles and Limitations of Certification

Recommendations 103follow protocols similar to those suggested forresearchers (below), including establishing anappropriate comparator (i.e., a best alternative,as opposed to a perfect scenario) andmeasuring meaningful indicators or metrics.The resulting data and information should beused to improve the system. Of course, a keychallenge will be balancing the need for anassessment of impacts with the need to keepthe costs of the assessment reasonable.4. Standards systems should also explore opportunitiesfor coordination with each other, toencourage broader benefits—such as sharedauditor registration—which starts to get at theefficiencies that scale can bring. Also, opportunitiesshould be expanded for learning acrossthe different sectors in which standards andcertification systems are active. Experienceregarding information management, multistakeholderprocesses, and other institutionaldesign issues would be valuable to share acrossdomains.5. In some cases it may be appropriate to developsystems that move supply chain actors in anincremental (or stepwise) fashion towardhigher standards and certification. In thesesituations, it may make sense for companiesto focus on capacity building, so that they canimprove their operations with a goal of gettingcloser to higher standards at a steady pace. Itis critical, however, that incremental or stepwiseapproaches integrate strong incentives orrequirements for participants to continue topursue the higher standards—otherwise, thesesystems may fail to meet their sustainabilitygoals and may even mask “greenwashing” byfirms.6. The next generation of standards and certificationsystems should be designed from theoutset to interact with government bodies asappropriate, as well as with other sustainabilitytools, to take advantage of the strengthsof these actors and tools to stimulate greaterimpact and thereby achieve transformativechange.Recommendations for Business1. Companies are key drivers for scaling up standardsand certification systems. As such, theyare in an influential position to drive innovationand continuous improvement in standards.Also, companies are interested in efficienciesboth within and between standards systems.They should use this position of influence toencourage efficiency gains through greatercooperation and harmonization among standardssystems. Companies can also productivelyshape, influence, and inform standards andcertification systems by engaging directly intheir development.2. In considering whether or not to take part in acertification system, companies should evaluatethe full range of benefits comprising theoverall value proposition, including capacitybuilding, risk management, increased efficiencies,and brand distinction in the marketplace,among others. Should they choose to take partin such systems, companies should also seekinnovative ways to maximize this full range ofbenefits.3. Retailers and brand companies should be clearabout the structure of their value chains andwhere standards and certification systems needto be applied to improve social and environmentalperformance. They should also understandwho the participants are in their value chainsand what their capacity and willingness is toengage with standards and certification. Thiswill ensure that the right standards and certificationsystems are selected and implementedand that social, environmental, and economicbenefits are maximized.4. Traders and other enterprises in the “middle”of supply chains play a key role in those supplychains, as they typically have much more directaccess to farmers, fishers, loggers, and otherproducers than retailers. Knowledge drawnfrom the evidence base is limited concerningthe interests of traders and other “middlemen”and needs to be better developed. Companiesengaged with certification systems shouldToward Sustainability: The Roles and Limitations of Certification

Recommendations 104look for incentives and opportunities forencouraging traders to consider using certificationas a means of supply chain verification.Recommendationsfor NGOs1. NGOs play an array of key roles relating tostandards and certification systems. Toimprove the performance of such systems, acritical role for NGOs is to help ensure therobustness of individual certification audits andimprove the quality and effectiveness of thestandards and certification systems throughdirect engagement in their development andimplementation.2. NGOs should identify where their strategiesfor social and environmental change may beconsistent with the goals of standards andcertification systems and should engagewith these systems where there are overlaps.Where NGOs engage with the private sectorto improve companies’ practices, they shouldseek opportunities to encourage companies toadopt credible standards.3. NGOs should be careful not to simply encouragethe raising of standards on the highestperformers, as this carries the risk of punishing,rather than rewarding, those top producers.Instead, NGOs can provide market benefitsand recognition to these higher performers soas to signal to lower performers the benefits ofimproved sustainability practices.Recommendationsfor Foundations1. Foundations played a key role in the establishmentof standards and certification systems,and they have continued to play essential rolesin support of the evolution of these systems.Going forward, foundations should focus on:▪ helping systems to develop innovativeand effective financial models so they canbecome self-sustaining;▪ helping to clarify the “business case” forsustainability standards and more-sustainablepractices;▪ managing the impacts of market transitions(i.e., when improving practices for the longterm causes short-term displacements);▪ supporting the development of systemsfor measuring the impacts of standards,to encourage innovation and continuousimprovement in standards and certificationsystems;▪ identifying and mitigating constraints to thescaling up of standards and certificationsystems and the adoption of better managementpractices; and/or▪ supporting the research priorities identifiedlater in this chapter.2. In developing countries and the BRIC 1 countries,where governments and civil society may beskeptical of certification systems, foundationsshould provide greater support to producersand certification systems to communicate thebenefits of such systems.Recommendationsfor Governments1. Government agencies should look to certificationprograms for demonstrations oftechnologies, practices, and approaches thatcould be used in the government’s own regulatoryprograms.2. Governments should recognize and leveragethe fact that standards and certification systemscreate coalitions of support around areasof policy and regulation that can make it easierfor governments to regulate areas that mayhave been more contentious previously.3. Standards systems that focus on betterpractices often do not reach the lower performers.Governments can work to fill thisgap by developing public policies that regulatethose lower performers, and they should thusbe aware of when and how to play this role.Legality verification mechanisms can enhancegovernment capacity to implement regulationswith assistance from “baseline” certification1 Brazil, Russia, India, ChinaToward Sustainability: The Roles and Limitations of Certification

Recommendations 105systems. Noncertification activities, such asdirect capacity-building efforts, may also assistgovernments in improving the performance ofthese actors.4. If governments want to play a significant role inpromoting standards and certification systems,they should use their substantial purchasingpower to buy goods that have been certifiedthrough reputable systems. This will increasedemand for effective certification and increasethe positive impacts of the given certificationprogram.5. Governments should recognize when competitionamong standards is productive andshould ensure that consumers and purchasershave access to transparent and clear informationabout each system. If competition andproliferation contributes to confusion in themarketplace and/or greenwashing, it may beappropriate for governments to encourage harmonizationamong differing standards or evento develop government-sponsored standards.Future ResearchGiven the current state of the knowledge baseregarding the impacts of voluntary standardsand certification (described in Chapter 3), thequestions now are: Where are the most criticalknowledge gaps? What do we most need to know?What research is essential to advance our collectiveunderstanding of when and how to bestuse voluntary standards and certification systemsstrategically to improve sustainability?As noted above, developing methodologies andprocesses for the systematic collection, analysis,and application of impacts data is critical.Research is key and could provide rich insightsinto the impacts and performance of certificationsystems and into their role in promoting sustainabilityas compared with other interventions.This section describes the Steering Committee’srecommendations for future research.To begin, the Steering Committee offers the followingoverarching recommendations regardingresearch:1. The research community collectively and collaborativelyshould conduct the series of criticalstudies identified below and share their findingswith colleagues, practitioners, and othersinterested in learning more about when andhow voluntary standards and certification systemscan best contribute to sustainability.2. A consortium should be established to providean open source of data gathered from the studiescalled for in this section as well as otherrelevant work that will provide new insightsand, in turn, improvements to performanceand an increase in positive impacts.3. A collaborative effort among researchers andpractitioners, with support from leading companiesand foundations, should be establishedto develop systematic, low-cost impact-monitoringmethodologies to generate the data tobe shared in the open-source database.Furthermore, the Steering Committee recommendsthe following general considerations forconducting research:1. When research is conducted on the impactsof a standard and certification system, it isimportant to construct a counterfactual (i.e.,a comparative scenario) if possible. The counterfactualshould not be relative to a perfectworld, but to what would have happened in theabsence of certification.2. Research needs to consider how to address thefact that certification systems, and the contextin which they operate, are always evolving.As noted in Chapter 3, more is known about thepractices of certified enterprises than about theindividual or aggregate impacts of those practiceson the ground. The Steering Committee thus suggeststhat additional research on sustainabilityimpacts be a key priority. Specifically, the followingfour categories of research on impacts arerecommended as important:Toward Sustainability: The Roles and Limitations of Certification

Recommendations 1061. Basic Discovery. Questions of basic discoveryshould focus on assessing the current statusof relevant socio-cultural or ecological systemsto develop the scientific basis for monitoring,understanding, and predicting changes. Suchresearch might seek, for example, basic agronomicdata on the relationship between cropyields and prescribed management practices.A good deal of research of this type is alreadybeing conducted, so work needs to be done todetermine where specific gaps remain.2. Better Management Practices (BMPs). A greatdeal of research on BMPs has been and continuesto be conducted and disseminated.However, this information is not well integratedinto research on standards and certificationsystems, as there is no well-established orformal route for doing so. There is thus a needto identify and synthesize this research andmake it available to researchers focused oncertification and to standards and certificationsystems themselves. Specific recommendationson this point include:▪ Establish mechanisms to feed the resultsof existing BMP research into standardsdevelopment or revision processes.▪ Focus further BMP research on studies thatexamine the impacts of BMPs in tropicalecosystems, that are longer than one year induration, and that tackle complex biologicalvariables such as viability and fitness. Thesetypes of research have been underrepresented.▪ Create a systematic catalog of BMPs from thestandards of all relevant certification programsto use as the basis for expanding this methodologyto additional BMPs. Multi-programconsensus on the core or priority BMPs wouldbe a worthwhile result in and of itself.3. Cumulative, Interactive, and Indirect Impacts.This research should include a focus on impactsbeyond the certified enterprise, to determinewhether there are trade-offs between differenttypes of impacts, and what the indirect sustainabilityeffects of certification are. Questionscould include the following:▪ Are there important sustainability tradeoffs thatresult from the implementation of ecological,economic, and social standards or BMPs?▪ Are standards systems contributing to themaintenance and delivery of key ecosystemservices and, if so, how? And, whatinstitutional arrangements are requiredto incentivize payment for environmentalservices at a scale that is viable?▪ What are the tradeoffs between furtherimproving the performance of individualtop producers versus including many moreproducers in a less-stringent system?▪ What are the main causal pathways toimpact? How are these influenced bychanges within systems and competitionwith other schemes?4. Methodological and Process Questions. Becauseof the methodological challenges inherent inresearching the impacts of standards andcertification systems (and other policy interventions),investigations of methodologicalquestions themselves are needed. Issues thatneed to be investigated include self-selectionbias, the ethical establishment of crediblecounterfactuals, longitudinal analysis, measurementerror, the use of spatial analysis anddynamic modeling tools, the standardizationof methods for measuring core socioeconomicparameters at the production unit level, andhow to accommodate “independent variables”like sustainability standards that regularlyevolve in unpredictable but important ways. Inaddition, questions about processes that needto be improved include the following:▪ How should emerging science on climate,agronomy, fisheries, habitat restoration, andso forth be embedded into standard-settingprocesses?▪ What are the key challenges to consistent,systematic data collection, and how can theefficiency and quality of data be improved toallow more real-time analyses of importantvariables along a supply chain to addressdefined sourcing challenges?Toward Sustainability: The Roles and Limitations of Certification

Recommendations 107▪ What meta-data documentation is neededacross the certification community toimprove accuracy and options for crosssectorand longitudinal analyses?▪ What training guidelines are needed toensure that data for core sustainabilityparameters are collected in a consistent,systematic, and rigorous manner?▪ How can data collection and adaptive managementstrategies be better incorporatedinto production unit management practicesfor small and medium-sized enterprises?Finally, the Steering Committee recommends thatresearch be conducted on the following additionaltopics relating to standards and certificationsystems.1. Interactions with Other Systems of Governance.Research is needed into the ways in which certificationsystems can best interact with otherarenas of governance to address environmentaland sustainability challenges. Such researchwould require working backward from the onthe-groundproblems a certification system isattempting to ameliorate in order to determinewhat policies and roles are needed to helpaddress the problems.2. Contextual Factors. Research is needed tobetter understand how different contextual factors—includingthe sustainability problems,the nature of the supply chain, the governmentsin question, the economics, the social issues,and the history of the certification systems—can be used to better anticipate some of thecomplex outcomes that result from dynamicinteractions.3. Emerging Markets. Research should be conductedto determine the market uptake ofcertified products in China, Brazil, Chile, India,Indonesia, Russia, and other developing andemerging markets. There is also a need formore study on the engagement of developingcountry governments with voluntary standardsand certification, as well as with other sustainabilitytools.4. Incentives and Drivers. Research should beconducted to determine the conditions and/or incentives that could encourage traders andothers in the middle of supply chains to takepart in standards and certification systems.Information is also needed about drivers forimproved performance among the lowest performersin a sector.5. Small and Medium-Sized Enterprises. Researchis needed into how standards and certificationsystems can best reach out to small andmedium-sized enterprises and make certificationprocesses more accessible.ConclusionStandards and certification systems have introduceda new form of partnership between civilsociety organizations and businesses, shiftingthe landscape of sustainable production and consumptionin important ways. They have openedavenues for public and stakeholder interests toparticipate in defining standards that becomesocietal and even regulatory norms. They havecreated mechanisms for standards to adapt asscience and technology offer new insights andpossibilities, and to respond to unanticipated outcomes.They have offered regulators the ability topeg requirements to voluntary standards that areregularly updated. They have defined and tested“gold standards,” resulting in proof that raising thebar of existing norms is technically and practicallypossible. They have raised public awareness ofand demand for more sustainable products. And,they have put the missing pieces of a sustainablesupply chain in place, from technical assistanceand extension to supply chain tracking systems.Globalization and other forces are changing marketsat a rapid pace. Business decisions rely onbest-available knowledge. The movement thatcoalesced behind voluntary standards and certificationhas much to gain by working togetherto fill gaps in that knowledge, especially abouthow to improve the effectiveness of standardsand certification as one tool to achieve desiredsustainability outcomes.Toward Sustainability: The Roles and Limitations of Certification

TowardSustainabilityThe Roles andLimitationsof CertificationFor more information, please visit www.resolv.org/certificationassessmentor contact RESOLVE, the Secretariat organization, at 202.944.2300 orinfo@resolv.org.Citation information: Steering Committee of the State-of-Knowledge Assessment of Standards and Certification. (2012). Toward sustainability: The rolesand limitations of certification. Washington, DC: RESOLVE, Inc.