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Certifiably Sustainable?: The Role of Third-Party Certification Systems - Report of a Workshop 3 The Landscape of Certification Schemes The field of certification programs, sustainability standards, and ecolabels has grown substantially since the early 1990s, and it now encompasses several complex and often interrelated issues ranging from labor and production processes to end-use impacts and recycling considerations. New terms have entered the lexicon, such as “fair trade,” “product take-back,” and “smart packaging,” while other terms, e.g., “environmentally friendly” have started to play a more prominent role in marketing campaigns. Certification is an effort to communicate information to purchasers (including business-to-business transactions), and though it is a useful tool in highlighting potentially desirable but unseen attributes, it has also contributed to green noise and confusion in the marketplace. As certain standards gain market share, it is not clear whether they are contributing to a market transformation, or certifying a small parallel universe at the top of the market. This chapter highlights some of the key issues participants raised in regards to the emergence of certification schemes, specifically, the recent proliferation of standards, the uneven application across and within sectors of the economy, the experience of leading programs, and some of the impacts and unintended consequences of these programs. PROLIFERATION OF STANDARDS Certification standards and the labels they underpin are a response to consumer expectations about products. Therefore it is no surprise that an increase in social and environmental awareness on the part of consumers has led to this concomitant increase in efforts to communicate socially and
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Certifiably Sustainable?: The Role of Third-Party Certification Systems - Report of a Workshop environmentally preferable attributes. All of this activity in the marketplace is sometimes mistaken for consumer demand, but as Chapter 5 explores further, the demand for certified sustainable products is not nearly as concrete or pervasive as some might think. Instead, the rise of certification can be traced to the efforts of NGOs, industries, and sometimes governments, to develop voluntary, market-based mechanisms that help reduce adverse social or environmental impacts. The donor community has invested hundreds of millions of dollars to establish and support certification programs around the world. This has been a critical factor in establishing many certification programs, but it also points to some vulnerability in these programs. There tends to be a prejudice within the donor community towards innovation, and thus certification programs represented the “cutting edge” a decade or so ago. Donors, including philanthropic foundations and large NGOs like the Rainforest Alliance and WWF, have continued to support these programs and fund new programs in other sectors. However, several participants questioned the staying power of the donor community if programs take decades to achieve tangible impacts. Other participants emphasized that in almost all cases, the roles for government and the private sector have not been well defined. In other words, the process has been initiated by NGOs without fully considering how government and industry could help scale up impacts. Several participants described the resultant field of certified products as a cluttered landscape. Given the apparent success of some certification programs in terms of penetrating the global market, certification is now a tool that is being considered in more and more industries. However, producers do not always know where to begin when searching for a credible scheme, or when seeking to establish one in industries not currently certified. The International Social and Environmental Accreditation and Labelling (ISEAL) Alliance is one body that has emerged as a “hub” for different standards systems. It was established in 1999 as a way for certification organizations to collaborate across systems, recognizing the high degree of overlap and complementarity among their individual efforts. Despite this degree of overlap, the field is still highly variable, and there are substantial differences across certain sectors (e.g., fisheries as compared to electronics) and within sectors, particularly as competing standards develop. Many participants noted that the energy being devoted to establishing new and competing standards systems could be more effectively applied to enhancing the impact of existing programs, or taking a broader, industry-wide approach. In some sectors there does appear to be convergence—the Common Code for the Coffee Community (4C) was cited as one example where stakeholders throughout the coffee value chain have been working together to raise the bar throughout the industry, rather than con-
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Certifiably Sustainable?: The Role of Third-Party Certification Systems - Report of a Workshop tinue supporting and marketing competing standards. This does not suggest that each industry ought to promote one particular set of standards, or, as one participant proposed, market one label that could be applied across industries. It does, though, highlight the desire for overarching principles, or basic rules of the game, to help establish the baselines for standards systems and separate the wheat from the chaff. SECTORAL COVERAGE Certification of sustainable products has emerged sector by sector, often as a response to conditions within a segment of an industry, rather than some collective movement or demand for certified goods. The Forest Stewardship Council (FSC) came about after other approaches to improving environmental management failed. Boycotts on forestry had proven unsuccessful because they did not distinguish between responsible and irresponsible producers. NGOs then attempted to negotiate a set of sustainability standards that the International Tropical Timber Organization could adopt and enforce, but this also faltered (see Box 2). Thus the FSC was created as a private initiative to implement the voluntary standards that had been created. The market penetration of certified products remains small, with few exceptions. There are examples, such as the Underwriters Laboratory1 label for electrical appliances or prescription pharmaceuticals, where certification has achieved essentially universal acceptance in the United States. The harmful material consequences of purchasing uncertified products in those cases fall directly on purchasers, however, unlike products claiming benefits to the environment, human rights, or future generations. It is this claim of unseen benefits that a certification system attempts to convey. The business case for certifying products as sustainable is important, because a firm’s engagement in private, voluntary programs is strategic. As a result, certification has enjoyed the most success in sectors with large-volume producers and large-scale purchasers. These large-volume producers have tended to be in vertically integrated primary industries, like forestry or commoditized agriculture, sectors vulnerable to public pressure, with firms that are able to bear additional costs to certify their products. More recently, standards and certification systems have been developed for a host of manufactured goods and services. This may be influenced by retailers, who are constantly assessing risk on consumables. Incidences of contamination and other events have caused many retailers to be more proactive in addressing supply chain risks, and moving upstream to work 1 UL has established UL Environment (http://www.ulenvironment.com/ulenvironment/eng/pages) as a source specifically for validating environmental claims.
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Certifiably Sustainable?: The Role of Third-Party Certification Systems - Report of a Workshop BOX 2 Sustainable Forestry Certification The forest sector has arguably developed the most extensive certification schemes, nationally and globally. This has occurred, in part, because of the engaged efforts of many governments, nongovernmental organizations (NGOs), and forest industry representatives over the past 15 years. Forest certification schemes are implemented in order to achieve a variety of goals such as preventing deforestation, forest degradation, and the maintenance of biodiversity. Additionally forest certification efforts attempt to guide the forest sector toward a more holistic concept of sustainable forest management (SFM), with emphasis on the analysis of global environmental, economic and social implications of management practices (Rametsteiner and Simula, 2003). Over time, one program, the Forest Stewardship Council (FSC), has emerged as the most well-documented sustainability certification program. Though the FSC is the often-cited industry leader, many other forestry certification efforts exist worldwide. Some worth noting include The Canadian Standards Association (CSA), the American Forest and Paper Association’s Sustainable Forestry Initiative (SFI), the African Timber Organization (ATO) and the Program for the Endorsement of Forest Certification Schemes (PEFC, formerly the Pan European Forest Certification). Additionally, countries such as Malaysia (FSC member, but not endorsed) and Indonesia (in accordance with PEFC criteria) have attempted to adopt their own certification standards. After observing the reluctance of the International Tropical Timber Organization (ITTO) to adopt sustainable certification and labeling standards, the World Wildlife Fund (WWF), along with a host of other environmental NGOs, began to develop a private initiative to adopt standards, rather than general principles or guidelines for SFM. This ultimately let to the creation of the Forest Stewardship Council (FSC) in 1993. Not only did the WWF and environmental NGOs take part in the creation/development of the FSC, but additional stakeholders were involved, including representatives of the timber industry, indigenous peoples’ groups, organizations representing forest workers, etc. (Auld et al., 2008b). with their suppliers. Retailers also have the leverage to push back on their suppliers and demand that products be certified as a means of reducing their exposure. So consumers’ desire to “go green” could be a short-term preference, but firms are also considering the longer-term eventualities, from labor protests to greenhouse gas regulation. Participants were quick to point out, though, that even in sectors where certification is achieving a tangible market share, it does not indicate that the market is transforming, or that it is approaching a tipping point. Instead, existing programs tend to benchmark the best practices for a sector without penalizing the worst performers. Top performers may find an incentive to pursue certification to differentiate their product from less sustainable competitors. But rather than changing the market by crowding
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Certifiably Sustainable?: The Role of Third-Party Certification Systems - Report of a Workshop The FSC comprises three “chambers,” each of which represents one-third of the generally assembly—which is charged with approving and recommending changes on various forest certification standards, both at the national and subnational level. The three chambers, economic, social, and environmental, represent stakeholders from developed and developing countries and a variety of sectors. The FSC uses global criteria which includes 10 principles and 56 criteria. These criteria/principles relate to a various SFM issues, including landuse rights, protecting high conservation value forests (HCVFs), and the use of forest products and services. Because global standards may not adequately meet each country/state’s needs to sustainably manage forest land, the FSC approves national and local forest certification schemes so long as they adhere to the general principles of the FSC’s global certification scheme (Auld et al., 2008b). Sustainable Forest Management (SFM) schemes, such as the FSC criteria and principles, attempt to bring together various interests among stakeholders. Stakeholders’ values often diverge, especially within the forestry sector, where interests can derive from very different sides of the SFM equation. For example, environmental NGOs may be interested in biodiversity/conservation of forests, while timber companies may be interested in achieving high profits from the sale of forest products. Stakeholders also differ based on cultural and geographic differences. The SFM of tropical rain forests in Brazil differs greatly from sustainable management practices within the boreal forests in Russia (Rametsteiner and Simula, 2003). The challenge for certification schemes and organizations like the FSC is marrying very different, and sometimes oppositional, stakeholder interests. Incorporating social, environmental, and economic principles into the design of certification schemes is crucial to bringing various stakeholders together in agreement on implementing the most sustainable forest management practices. out noncompliant parties, these standards systems may instead be creating a “parallel universe,” whereby the top performers continue to raise the bar for only a small segment of producers. This does not diminish the importance of those improvements, but it calls into question whether or not certification alone can transform entire markets. LEADING AND EMERGING STANDARDS Though the landscape of certified products is crowded, and environmental claims abound, there are but a handful of certification programs that have emerged as industry leaders. The FSC is perhaps the best documented, as it has been in existence for over 15 years and now claims to
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Certifiably Sustainable?: The Role of Third-Party Certification Systems - Report of a Workshop certify a tangible share of the market for certain products, e.g., 24 percent of industrial roundwood. However, most FSC coverage has been in the United States (32 percent) and Europe (52 percent), with a much smaller share being covered in tropical forests in the developing world (Ellis and Keane, 2008). This seems to suggest that FSC has served as a benchmark for industry leaders in the temperate forests of the developed world. Nonetheless, the FSC offers a model to its competitors in the forestry sector, and to other sectors. Most notably, the Marine Stewardship Council (MSC) was based on the FSC model as a way to certify sustainable fisheries management. Like its predecessor, though, the MSC has been criticized for exhibiting uneven geographical coverage (e.g., 89 percent of MSC-certified exports contain Alaskan salmon or New Zealand hoki [Ellis and Keane, 2008]). Chapter 4 discusses how the implementation of these sorts of standards systems has not had the desired effect of dramatically changing practices in many parts of the world. The International Organization for Standardization (ISO) 14000 series is another set of well-known environmental management standards. It is not a market-driven tool in the way that other certification programs are, because firms can determine their own baselines for performance, and then implement an environmental management system to reduce their environmental footprint. An external audit is conducted by an accredited body, and compliant firms receive a certificate. Products and processes themselves are not certified, nor is there typically consumer demand for ISO certification, but participants noted that ISO-14000 is becoming a necessary part of doing business in many sectors worldwide. Additionally, larger firms are establishing their own, internal certification programs which are distinct from third-party programs. Examples include GE’s Ecomagination and S.C. Johnson’s Greenlist. Such programs are often accompanied by a marketing campaign, though they are not necessarily developed in response to consumer demand. Because these internally developed schemes are not transparent, it is difficult to assess their impacts. Large retailers, who deal with a bevy of products sourced from all over the world, are now developing their own “scorecards” in an attempt to put pressure on their supply chains. These scorecards may make use of existing certification standards, such as requiring all seafood products be MSC-certified, or they may be based entirely on a retailer’s preferences. It should be noted, however, that a product-by-product certification approach would not necessarily indicate that a retailer’s sourcing practices overall are sustainable. IMPACTS AND UNINTENDED CONSEQUENCES Unintended consequences of certification programs have been both positive and negative. On the positive side, participants mentioned that
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Certifiably Sustainable?: The Role of Third-Party Certification Systems - Report of a Workshop there is anecdotal evidence that having the bar raised in a sector motivates other actors, even if they do not pursue certification as a means to improve their performance. It will not guarantee that all actors improve their performance, or that these changes amount to measureable social or environmental outcomes. It can, however, provide a bit of leverage and then momentum, as was the case of 4C in the coffee industry (Keunkel et al., 2009; NRC, 2009). LEED’s standard for green buildings has been a contributing factor in developers giving more consideration to building performance. Several participants highlighted LEED as an example where developers saw incentives in building green and were taking steps to build green, even if they opted to avoid the additional expense of being formally certified. However, participants also remarked that many certification programs are based on weak theories of change—the logic models that are used to design and evaluate long-term programs. When developing certification programs, stakeholders must make some critical assumptions about the outputs and impacts of a standard, if implemented, and the outcomes that would be achieved over the long term. Chief among these assumptions is the size and shape of the market for certified products. Programs have focused on delivering certified sustainable products to the market, with considerably less consideration of who the targeted consumers might be, how added costs might be distributed, and how this emerging market might grow. Household consumers, as one participant pointed out, do not get to internalize the benefits of buying green because many of the benefits accrue to a distant ecosystem or the global commons. Therefore they are merely being economically rational by not doing so. Programs are also criticized for not using a wide enough lens when considering the problem they are intended to address. They tend to overlook cumulative effects of a certification program, because they are product or producer oriented. Such a temporal and spatial scale misses the longer-term and ecosystem-wide effects. This has been a fundamental challenge for these programs to measure their impacts. At best, most programs are focused on obtaining an increasing share of the market. Several participants pointed out that this may be used as a proxy for environmental and social improvements, but without more work to connect these programs to measureable, on-the-ground changes, market share alone is an imperfect metric. Certification also does not provide guidance on the appropriateness or need for a product in the first place. The relevant debate in fisheries, for example, is in how countries can sustainably manage their resources to avoid overexploitation. This does not suggest that certification programs should be designed to address every problem associated with consumption, but it does highlight the need for these programs to be linked to other, macro-scale efforts, such as sustainable land-use policies or recycling cam-
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Certifiably Sustainable?: The Role of Third-Party Certification Systems - Report of a Workshop paigns. Moreover, certification programs typically do not have exit strategies. As Chapter 7 explores further, this has serious ramifications because most programs are heavily dependent on subsidies, and are expected to eventually be able to scale up to cover global markets. One additional consequence of certification programs is that they tend to, unwittingly, favor developed countries. From a consumer’s perspective, this might not be surprising, since certification seems to be favored by societies with a high degree of consumer awareness and ecological sensitivity. However, from a production standpoint, new standards have also been perceived in the developing world as yet another barrier to international markets. In the developing world, many livelihoods are dependent upon some degree of exploitation of a local resource. This complicates efforts to reduce exploitation, because it is perceived as being in direct conflict with sustaining livelihoods. Certification programs then face a conundrum—requirements cannot be so high as to put potential supporters at a disadvantage, but so low as to allow everyone to easily achieve and thus diminish the authority of the standard.