Between Certifications and Sustainable Consumption Choices

After Part I of our article series on product labels we delve into Part II on certifications and standards to continue answering our main question on “what available information allows a consumer to make an informed choice about the sustainability of a product?”. A major takeaway from part I was that there are two types of labels, mandatory and non-mandatory. Currently, there are no standard and mandatory labeling requirements when it comes to the sustainability performance of the product, mainly because there is no international or national consensus on sustainability principles and criteria that could be translated into specific mentions on products. This is where voluntary certifications come in. While certifications are also present on packaging, similar to labels, Part II aims to assess the pros and cons of certifications and standards which are often used by companies to substantiate their product’s sustainability performance claims. 

Part II: Between Certifications and Sustainable Consumption Choices

A Brief History on Certifications

The first eco-label promoting environmentally friendly practices, The Blue Angel, was launched by West Germany in 1978. This governmental standard is still used as a guide for more sustainable consumption.

In 1988, the first Fairtrade label by Max Havelaar, was applied to packs of Mexican coffee sold in Dutch supermarkets. At the time, using a product label to say something about standards in a supply chain was revolutionary, but today it is routine. When Fairtrade first emerged, it was about product differentiation, giving consumers a vehicle for choosing a more equitable, sustainable supply chain over the standard one.

Certifications have grown exponentially since the 70s but the most notable growth spikes in new-comer standards occurred in the 1990s and then between 2007 and 2010. Indeed, the OECD compiled a dataset of “environmental schemes'' or certifications covering 544 certification schemes worldwide between 1970 and 2012. The best-known certifications are part of ISEAL, a global membership organisation for credible sustainability standards. Today, some initiatives such as The Ecolabel Index provide a platform that regroups and structures data on ecolabels worldwide that consumers and brand-owners alike can access. The Ecolabel index currently lists 463 certification schemes in 199 countries. 

Setting-up Standards or Certifications

Let us dive a little deeper into understanding how Sustainability Standards work. First you need a Standard Setter. It could be a NGO, like Fairtrade or Rainforest, targeting various soft commodities such as coffee, cocoa, tea or timber and their supply chains. But it could also be a group of organisations wanting to address sustainability issues for a specific raw material and its complex supply chain. The Roundtable on Sustainable Palm Oil, Bonsucro, Better Cotton Standard System and the Roundtable on Sustainable Biomaterials are examples. We also have governmental standard initiatives like the Indonesian Sustainable Palm Oil (ISPO) Standard, introduced in 2011 by the Government of Indonesia, and International Standards set up and managed by international organisations such as ISO.

In all cases, the Standard Setter will determine its vision of sustainability and transparency by setting principles and verifiable criteria. One could ask, where do they get the legitimacy to define what corresponds to sustainable development? This is a very good question indeed and it is for this reason that standard setting shall always be an open exercise involving a broad range of stakeholders. The criteria also need to be reviewed on a regular basis.

Next, to be credible, a standard must be endorsed by a recognized Accreditation Body. It could be an organisation like ISEAL, or a group of stakeholders having stakes and interests in the supply chain. Accreditation of Independent Auditors is also required to give the assurance that the operations of certified organisations comply with the Certification Program Guidelines.

The Certification Program Guidelines include different documents specifying what needs to be done for an organisation to obtain and maintain its certificate, they include considerations such as:

• ·   What are the criteria and requirements?
• ·   Who are the supply chain actors and who must be certified?
• ·   How compliance against the requirements will be assessed and by whom?
• ·   Which Internal Management System is required?
• ·   What is the traceability system to implement?
• ·   What are the conversion factors?
• ·   How to make a product claim?

Certifications and Supply Chain Transparency

Upstream of the supply chain, producers of cocoa, coffee or sugar cane are certified as are their farming practices. The traders, exporters, processors and manufacturers are part of the certified chain. This certification process is under the patronage of a brand owner that has invested massively and, consequently, retailers can then offer consumers a certified product identified by the logo of an independent certifier. Everything seems well put together, but when we hold the product which contains a certified ingredient in our hand, we could then wonder how can we ensure that our chocolate ice cream contains only cocoa beans produced by certified farmers on certified farms? As we mentioned in Part I, the origins or components in a given product can be hard to trace if we only rely on the label’s information. This is when the foundations of the system’s shake and cracks appear.

Indeed, your item might not contain any certified material and despite this the brand owner can claim their product as certified. Even more surprisingly, there are cases where the brand owner is not part of the certified chain but has purchased the right to put the logo on a quantity of their product from the certifier.

How is this possible, you may ask? The answer is simply because there is not enough certified materials to feed large supply chains and consumer demand that many certification bodies allow the mixing of certified and non-certified materials. This is the ‘Mass/Balance Model’. In this model, physical mixing or volume reconciliation of certified and non-certified material is allowed at any stage in the production process provided that the quantities are controlled in documentation within a predefined timeline. We must say that for most standards, physical mixing or volume reconciliation is only allowed when the raw materials are dispatched to a processor and subsequently. Before that, raw materials must be kept segregated.

For other models like the ‘Book and claim’ and ‘Credit trading’ a brand owner can buy the right to use the logo just as a greenhouse gas emitter can offset its emissions by purchasing credits.

These practices, questionable to say the least, are associated with low traceability requirements. The goal of traceability is to guarantee the integrity of a product and its ingredients or components by ensuring that there is no substitution or contamination. Certification schemes don’t require a Product Traceability System, instead they use Chain of Custody Systems. Chain of Custody Systems connect a continuous sequence of certified organisations trading products coming from sustainable sources. What is important is that not only the organisations must be certified, but the product itself must be declared as certified on sales documentation to subsequent customers. Here, what matters is not the product integrity, but that the different tiers in the chain maintain a ‘paper trail’ of the various transactions and processes showing that the initial quantity of product at the source equals the quantity of the product claimed certified at any tiers of the chain.

These systems and the conversion factors used in them are the result of compromises between certifiers and actors in the supply chains and essentially aim at three things: (1) not to hinder operations, (2) not to market more certified products than there is originally certified material, (3) that the certifiers receive the fees that have been agreed between the parties. Based on those compromises and if the standard allows percentage and content claims or ‘Group-level mass balance’ claims, you could be buying a product with no certified material at all but still bearing a standard’s logo.

Okay, but by buying your ice cream you will at least tell yourself the cocoa farmers are getting a fairer price and/or a premium. Unfortunately, the traceability of payments and premiums is not a transparent process. Very often, these transactions are not or poorly documented.

When certification applies to groups of farmers, such as co-ops, premiums are rarely paid to farmers but to their organisations who will decide whether a share will be paid to members.

In this business model, the certifiers take almost no risks, but it is not the case of the certified organisations, especially the organizations operating upstream. Despite all the efforts and costs they incurred, there is no assurance that certified products will find a buyer willing to pay the price. Certified organisations are taking the risk themselves which might dramatically increase their operating costs. This is the case, for example, with groups of coffee producers who keep two or three different certificates to ensure at least one outlet.

Obtaining sustainable certifications is a complex and costly process and remains a voluntary choice for organizations. Organizations must maintain their certifications on an ongoing basis through additional maintenance costs; this is especially true for brand owners.

Limits and Challenges Ecolabels

Certainly, certification standards have done a lot to make supply chains more transparent over the past couple of decades, but many people and organisations are now questioning their role and the real impact that they have.

Moreover, it can quickly become confusing for a consumer to evaluate which certifications are trust-worthy, to begin with. With a rapid growth of numbers and types of certifications, risks for green-washing is another issue. But the biggest difficulty with certifications is faith. If you have faith in the standard, you will certainly be reassured about your consumption choices. If you doubt the standard, your faith will be shaken and you will make hesitant choices. We are at the level of mysticism and religion. One may say that the certifier, like the evangelist and the guru, have not yet succeeded to prove that their principles and their preaching give convincing and demonstrable sustainable outcomes.

Sustainability standards are so complicated that it is very difficult for the uninitiated to navigate. Consumers trust the presence of the logo on the product they buy without understanding the scope and meaning.

Frank Mars, from the Mars company, said in an opening keynote speech at a World Cocoa Foundation Partnership Meeting held in Washington in 2010, that ‘the only thing we succeeded to certified is poverty’.

So, with the reservations we have expressed about certifications, why would brands still use this path? Some seek a form of credibility and recognition, others get rid of the problem of responsible sourcing by paying for an insurance policy in the event of problems and scandals in their supply chains, but for the majority it is a question of communication and marketing. If one of your consumer goods competes on shelves with certified products, your marketing team will probably recommend engaging in a certification process for this good. But does offering certain certified products among a wide range of consumer products make a brand more sustainable?

Whether the majority of consumers may or may not be prepared to pay more for a sustainable product, they will tend to choose a certified product over an uncertified product which has the same price. We will address this aspect further in Part IV which covers consumer responsibility.

In summary, and to further analyze the pros and cons of certification models, the following general categorizations and distinctions can be made: (1) single-issue vs holistic certifications, (2) government-owned vs private-owned. If we take the previous examples of coffee, sugar cane or cocoa supply chains, the stakeholders will likely choose a ‘single-issue certification’ model as they are only concerned with one part of the supply chain focusing on farming practices and farmers’ livelihood. However, there are other models taking a holistic approach by looking at the full value chain of production, such as the Higgs Index for the textile and apparel industry. You also find multi-sectoral certification models assessing the whole performance of the organisation like BCorp. 

The effectiveness of each model can be disputed. For example, on one hand, while single-issue labels only tend to cater to one environmental/social issue, they usually follow more effective and stringent requirements although this is not always the case (OECD, 2016). On the other hand, as these single-issue or “partial” certification schemes only focus on one issue or part of a supply chain they can constitute a “barrier to improving overall sustainability by creating a ‘halo effect’, whereby a certain company or product is considered sustainable simply because a small part of its production has improved.” (Brad et al., 2018).

Furthermore, as indicated in the “Certifications and Supply Chain Transparency” section above, materials can be introduced at any point in time into the supply chain and can easily be mixed with non-ethically sourced materials. This presents another issue not only for the consumers, but it is a major challenge for several companies sourcing highly-in-demand commodities with not enough supply to meet the demand. A commodity that illustrates this challenge well is cotton. China is the second producer of cotton in the world (20% of the global production) with 85%of its cotton suspected to be produced in the Xinjiang region using Uyghurs forced labor. Hence only 15% of the cotton can be considered responsibly sourced, from a human rights perspective. Therefore, for a brand owner to achieve maximum sustainability performance, they may have to look at using multiple types of certifications, further adding another layer of complexity. This may also lead them to use the multi-sectoral models.

Although certifications can be created, owned, and governed by government entities, the majority are formed by private, non-profit (or a collaboration of both) with 70% of the growth occurring in the B2C private sector (OECD, 2016). These can increase the risk of bias and conflicts of interest if not well monitored by strict auditing and verification purposes from a third-party organisation which in turn has been verified and unbiased and free of any conflict of interests. Currently, platforms such as the aforementioned Ecolabel Index Platform, does not take into account the different distinctions in the different types of models (single-issue vs holistic), at least not publicly.

Therefore, there needs to be an easily accessible way for consumers to distinguish not only what each certification entails, but also how trustworthy it is. One idea that could make it easier for a consumer would be to create a ranking system that takes into account the distinction points. The ranking system would then attribute a score to a given certification for consumers to understand the true implications of the labels they see on their products. However, this system would need to be backed by national or international institutions that can regulate this ranking system. 

“The general problem with certification is that all these schemes come in the context of growing demand for commodities and insufficient national and international regulation to protect the environment and safeguard human rights.” 

(Source: Brad et al., 2018- Changing Markets Foundation)

Lastly, there are more and more brands that decide to invest in creating their own standards or initiatives rather than paying for an existing logo. Is it better for consumers? This is the subject of our third article to be posted next week.

Sources:

ISEAL ALLIANCE, Version 1.0 - September 2016. Chain of custody models and definitions: éa reference document for sustainability standards systems, and to complement ISEAL’s Sustainability Claims Good Practice Guide.

Brad, A., Delemare, A., Hurley, N., Lenikus, V., Mulrenan, R., Nemes, N., Trunk, U., & Urbancic, N. (2018, May). The False Promise of Certification—How certification is hindering sustainability in the textiles, palm oil, and fisheries industries. Changing Markets Foundation. https://changingmarkets.org/wp-content/uploads/2018/05/False-promise_full-report-ENG.pdf

OECD. (2016). Environmental labelling and information schemes. OECD-Policy Perspectives.https://www.oecd.org/env/policy-persectives-environmental-labelling-and-information-schemes.pdf