N o 4 Ernährung Sustainable Sourcing in the Food Industry Global Challenges and Practices

Similar documents
Sustainability Initiatives in Other Tropical Commodities Dr. Jean-Marc Anga Director, Economics and Statistics Division

Sustainable Coffee Challenge FAQ

Memorandum of understanding

Albertine de Lange UTZ Ghana. Cocoa Certification: challenges and solutions for encouraging sustainable cocoa production and trade

Fairtrade. What it has to offer and how we can use it

Coffee Eco-labeling: Profit, Prosperity, & Healthy Nature? Brian Crespi Andre Goncalves Janani Kannan Alexey Kudryavtsev Jessica Stern

Sustainable Coffee Economy

IDH Programs in Vietnam

Certified Coffees, current market and a vision into the future.

Draft Document: Not for Distribution SUSTAINABLE COFFEE PARTNERSHIP: OUTLINE OF STRUCTURE AND APPROACH

FREQUENTLY ASKED QUESTIONS (FAQS)

4C Association: the global platform for sustainable coffee November 14th, 2014 Sintercafe 2014, San Jose, Costa Rica

Hilary Parsons Nestlé SA

Fairtrade Designation Endorsement

REFIT Platform Opinion

UTZ Cocoa Statistics Report 2017

UNIVERSITY OF PLYMOUTH SUSTAINABLE FOOD PLAN

Fair Trade C E R T I F I E D

Ideas for group discussion / exercises - Section 3 Applying food hygiene principles to the coffee chain

UTZ Coffee Statistics Report 2017

HONDURAS. A Quick Scan on Improving the Economic Viability of Coffee Farming A QUICK SCAN ON IMPROVING THE ECONOMIC VIABILITY OF COFFEE FARMING

From bean to cup and beyond: exploring ethical consumption and coffee shops

Productivity. Farm management. Third

Oregon Wine Industry Sustainable Showcase. Gregory V. Jones

FAIR TRADE WESTERN PURPLE PAPER

COFFEE THAT HELPS FARMERS, THEIR COMMUNITIES & THE ENVIRONMENT.

Fairtrade and The FAIRTRADE Mark: Mark Varney Fairtrade Foundation

Tackling with driver of deforestation in partnership with private sector: Case study from Alto Mayo, Peru

CHAPTER 7.3 FOCUS ON FAIRTRADE PRODUCTS COCOA

ETHIOPIA. A Quick Scan on Improving the Economic Viability of Coffee Farming A QUICK SCAN ON IMPROVING THE ECONOMIC VIABILITY OF COFFEE FARMING

Work Sample (Minimum) for 10-K Integration Assignment MAN and for suppliers of raw materials and services that the Company relies on.

donors forum: Project development/ funding AND Partnership Fair

PRELIMINARY FINDINGS AND INTRODUCTION TO THE CASE STUDY OF ETHIOPIA

SMALLHOLDER TEA FARMING AND VALUE CHAIN DEVELOPMENT IN CHINA

Tea Statistics Report 2015

2. The proposal has been sent to the Virtual Screening Committee (VSC) for evaluation and will be examined by the Executive Board in September 2008.

J / A V 9 / N O.

CERT Exceptions ED 19 en. Exceptions. Explanatory Document. Valid from: 26/09/2018 Distribution: Public

Fairtrade a sustainable choice

LIVE Wines Backgrounder Certified Sustainable Northwest Wines

Is Fair Trade Fair? ARKANSAS C3 TEACHERS HUB. 9-12th Grade Economics Inquiry. Supporting Questions

The Secret to Sustainability of the Global Tea Industry

GI Protection in Europe

Fairtrade Finland Jatta Makkula 1

Enjoyment with a good conscience

PJ 26/ January 2012 Original: English. Projects Committee/ International Coffee Council 5 8 March 2012 London, United Kingdom

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S.

Fairtrade International

Overview of the International Framework of Organizations and Agreements

Economics and Poverty

Agenda for today. Demand as driver for a mainstream sustainable coffee sector. Introduction to Sara Lee

CASE STUDY: HOW STARBUCKS BREWS LOGISTICS SUCCESS

Reaction to the coffee crisis at the beginning of last decade

Commitment of all. parties enables. high-quality table. grape production. The Moroccan Table Grape Project

Economic Role of Maize in Thailand

Streamlining Food Safety: Preventive Controls Brings Industry Closer to SQF Certification. One world. One standard.

How we re making a difference revitalizing the Malawian tea industry for workers to earn living wages. How we re making a difference - Malawi

KOREA MARKET REPORT: FRUIT AND VEGETABLES

Leverage the Rising Sustainability Wave

Western Uganda s Arabica Opportunity. Kampala 20 th March, 2018

Making the Case for Fair Trade.

ENVIRONMENT INDUSTRY PEOPLE. Corporate Citizenship. do well, so we may do good

COMMISSION IMPLEMENTING REGULATION (EU) No /.. of XXX. on the traceability requirements for sprouts and seeds intended for the production of sprouts

COMMITTEE ON COMMODITY PROBLEMS

M03/330/S(2) ECONOMICS STANDARD LEVEL PAPER 2. Wednesday 7 May 2003 (morning) 2 hours INSTRUCTIONS TO CANDIDATES

Board of Management Staff Students and Equalities Committee

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S.

Louisiana Crawfish Action Plan

CASC 28 May Copyright Presentation by Claudia Sanchez Bajo 2014

On the margins: Third Party Certification among Papua New Guinea smallholder coffee producers

City of Lund. Sustainable procurement

COMMISSION DELEGATED REGULATION (EU) /... of XXX

How do standards collaborate in the coffee sector? What are the goals?

Make Tourism FAIR FAIRTRADE in the Hotel, Restaurant and Catering (HORECA) Industry. A Presentation by Nicole Rudy, FAIRTRADE Austria

FAIRTRADE FOUNDATION UK SUPPORTERS CONFERENCE, LONDON 7TH OCTOBER 2017 GEORGE KPORYE FAIRTRADE OFFICER GEL, GHANA

Business Opportunities in Natural Capital Cases of Public-Private-non Profit Partnership for Conservation of Critical Natural Capital

Palm Oil Q&A. 1. What is palm oil? 2. Why does Ferrero use palm oil? 3. Does palm oil have adverse health effects? 4. Why don't you replace palm oil?

Canada-EU Free Trade Agreement (CETA)

Contesting the Meaning of Fair Trade Policy and Practice:

UKRAINE Climate conditions and soil in Ukraine are suitable for growing nut trees.

ICC October 2012 Original: English. Plan for Promotion and Market Development

CHAPTER 7.1 FOCUS ON FAIRTRADE PRODUCTS COFFEE

UNIVERSITY OF PLYMOUTH FAIRTRADE PLAN

WP Board 1035/07. 3 August 2007 Original: English. Projects/Common Fund

Company name (YUM) Analyst: Roman Sandoval, Niklas Podhraski, Akash Patel Spring Recommendation: Don t Buy Target Price until (12/27/2016): $95

Outlook for the World Coffee Market

Fair Trade Certification

Thought Starter. European Conference on MRL-Setting for Biocides

History of Distant Lands Coffee

Exportadora de Café California. Exportadora de Café California. Finance resilience in Coffee.

Improving Enquiry Point and Notification Authority Operations

Resolution Relating to

5 th AFRICAN COFFEE SUSTAINABILITY FORUM

FACTFILE: GCSE HOME ECONOMICS: Food and Nutrition

The Weights and Measures (Specified Quantities) (Unwrapped Bread and Intoxicating Liquor) Order 2011

Crisis Communications Protocol for the Wine Industry

Pushing at the Boundaries of the Fair Trade Movement: An International Business Perspective

Chile. Tree Nuts Annual. Almonds and Walnuts Annual Report

Global survey on Voluntary Sustainability Standards (VSS) Key figures

UTZ Tea Statistics Report 2017

Transcription:

N o 4 October 2010 scientific press service - publisher: prof. dr. r. matissek lebensmittelchemisches institut der deutschen süsswarenindustrie, cologne Sustainable Sourcing in the Food Industry Global Challenges and Practices Oliver von Hagen, International Trade Center (UN/WTO), Geneva, Switzerland Prof. Dr. Stephan Manning, University of Massachusetts Boston, College of Management, Boston, USA Juliane Reinecke, University of Warwick, Warwick Business School, Coventry, Great Britain Pages 1 9 editor and queries :relations gesellschaft für kommunikation mbh mörfelder landstr. 72 60598 frankfurt/m. Phone: ++49 69 963652-0 fax: ++49 69 963652-15 e-mail: wpd@relations.de publication with source lci ernährung reprinting free of charge please send sample copy

N o 4 - October 2010 Page 1 Sustainable Sourcing in the Food Industry Global Challenges and Practices Abstract The trend towards sustainable production of foods continues. In the meantime there are more than 400 sustainability standards competing for adopters, consumers and public attention. While these standards are all based on the three pillars of sustainability (economic, social and environmental responsibility) they have different weightings. In a comparison of the four best-known standards at present (Fairtrade, Rainforest Alliance Certified, UTZ Certified, Organic/Bio) these are seen to vary in terms of their reach and objectives. There are also major differences regarding the scope of the offering of certified commodities and products. Germany and other Western economies rank among the largest buyers of agricultural produce such as coffee, tea and cocoa a large percentage of these commodities is sourced from developing countries. Figures from the Federal Statistical Office suggest that the dependence of the German food industry on exports from such countries has increased. Thus, the mutual dependence of the food producers and exporters, on the one hand, and the buyers, on the other hand, is increasing. At the same time, more and more consumers are becoming aware of their responsibility. For the food industry the development and implementation of sustainability standards is thus gaining in significance, with more and more companies actively participating in the design of sustainable solutions as a consequence. The diverse sustainability initiatives are evidently involved in a competition as to which criteria a standard needs to fulfill in order to effectively promote sustainability. This has led to a lack of security among experts and consumers alike. Cooperation between the differing sustainability standards would be desirable. In this respect it is less important to agree upon one standard. Much more important is that transparent, independent standards are implemented which are regularly monitored by equally independent bodies, and are in turn certified by other independent organizations. Just as important is awareness that certification requires considerable endeavors on the part of all the actors along the value chain in order to guarantee sustainable development together with the producers. Oliver von Hagen, International Trade Center (UN/WTO), Geneva, Switzerland Prof. Dr. Stephan Manning, University of Massachusetts Boston, College of Management, Boston, USA Juliane Reinecke, University of Warwick, Warwick Business School, Coventry, Great Britain What is Sustainability? Sustainability refers to the long-term prosperity of businesses in harmony with the ecological and social systems in which their economic activity is embedded. In 1987, the World Commission on Environment and Development (WCED) defined sustainable development as development that meets the needs of the present without compromising the ability of future generations to meet their own needs [1]. According to the United Nations 2005 World Summit, sustainable development is defined as the triple bottom line of economic prosperity, environmental quality and social equity. Overview of Voluntary Sustainability Standards 1. Emergence of voluntary standards Voluntary, non-state standards have a decisive, positive impact on the general development of responsible corporate conduct. They are legally non-binding and voluntary commitments made by companies so as to promote sustainability along the entire value chain.

N o 4 - October 2010 Page 2 The development and adoption of these standards are increasingly stimulated and supported by governments and international organizations [2]. The UN s Rio Earth Summit in 1992 recognized sustainability standards as a principle instrument to promote sustainability, for example by improving the livelihoods of farmers, by limiting environmentally damaging practices, and by offering new opportunities for product marketing. Initial driving forces for sustainability standards were environmental groups that fostered the development of organic standards in the 1970s. In the late 1980s, the Rainforest Alliance began certification in forestry and a first version of the Fairtrade standard was developed by Mexican farmers and their Dutch importing counterparts. Over the past two decades an increasing number of other voluntary or private standards have emerged. However, rather than consolidating into a single solution, standards have started to compete for adopters, consumers and public attention, thereby positioning themselves and their rival definitions of sustainability in different ways. Researchers estimate that there are now more than 400 sustainability standards and the number is still growing [3]. Multiple standards have not only increased costs and administrative burdens for producers, but also led to substantial confusion in terms of the meaning, stringency and legitimacy of these standards. As a consequence, there is increasing skepticism about whether standards of this nature deliver on their promises or whether they merely help companies to enhance their environmental image and to divert criticism away from their other, non-sustainable business practices [4, 5]. Critics also describe this as green-washing. In our opinion such general, negative criticism is not justified, however. But why do multiple standards co-exist in the first place? One driver has been the shift from governmental to private regulation of global business practices. Today, corporations are increasingly held responsible by consumers and society to reduce environmental damage and improve the livelihood of producers and workers. In the absence of state regulation, many standards that exist today have been initiated by diverse private sponsors e.g. NGOs, firms, alliances of stakeholders with often very different interests, ideologies and constituencies which are hard to reconcile within a single standard [6]. There is some controversy, however, as to which standard is the most effective in promoting sustainability. This is partly due to the fact that the notion of sustainability itself is subject to different interpretations by researchers, international organizations, activist groups and standardization bodies. While all sustainability standards refer to the three acknowledged pillars of sustainability (economic, social, and environmental responsibility), they utilize the ambiguity of what this requires in order to position themselves vis-à-vis other standards. Competitive behavior might further explain the lack of collaboration, since no standard provider has an interest in seeing its own standard decline in significance. 2. Standards in comparison Today s major sustainability standards share a number of similarities, but vary in scope and objectives. Also, some specialize in particular products, regions, or target groups; others provide a diversified portfolio for different commodities and adopters across regions. We briefly present some of the most well-known sustainability standards (see Table 1, p. 3). Fairtrade has its origins in the world shops set up in the late 1950s and in the solidarity trade initiatives in the 60s and 70s. The Fairtrade label was developed in the late 1980s by a Dutch development agency in collaboration with Mexican farmers. The initiative performs development work and promotes its political vision of an alternative economy, seeing its main objective in empowering small producers and providing these with access to and improving their position on global markets. The most distinguishing feature of the Fairtrade label is the guarantee of a minimum price and a social premium that goes to the cooperative and not to the producers directly. This seeks to provide cost-covering prices for marginalized producers in order to provide protection from the price fluctuations of conventional markets. Part of the premium is destined for community development activities to ensure that the wider community benefits from Fairtrade. In order to use the label on raw products 100 percent of the ingredients have to be certified. This can be sub-

N o 4 - October 2010 Page 3 Table 1: Overview of major sustainability standards Main objective No. of countries with certified operations Products certified* Certified producer organizations Fairtrade Rainforest Alliance UTZ Certified (formerly: UTZ Kapeh) Improve the trading position of farmers with a guaranteed minimum price as main attribute Improve environmental and social conditions in tropical agriculture, focus on biodiversity 65 70 (forestry and agriculture) Wide range of agricultural products, composite and manufactured goods 827 certified farmer and worker organizations Wide range of forestry and agricultural products, e.g. tea, cocoa, coffee, banana, citrus fruits, avocado, grapes, guava, kiwi, vanilla, cattle farming 78,000 Farmers (2009) Standard launch* 1988 1989 (wood: FSC) 1992 (agriculture: Rainforest Alliance Certified) Initiator* Target groups* *Description by the authors Social movement/ NGO Primarily small farmers organized in cooperatives Social movement/ NGO Producers of all sizes Achieve sustainable supply chains, meeting needs of farmers, industry and consumers 21 113 Coffee, cocoa, tea. Offers traceability systems for RSPO*)- certified sustainable palm oil *) RSPO = Roundtable on Sustainable Palm Oil Organic/Bio Develop standards for organic agriculture and facilitate its adoption. Unite the organic movement The IFOAM norms cover a wide range of products including crop production, livestock, wild products, processing, aquaculture Not available About 470,000 farms (2008) 1997 1972 Firm Large and medium-sized operations Social movement/ NGO Producers of all sizes stantially lower in the case of composite products, where products are eligible to bear the label if at least 20 percent of a significant ingredient originates from a certified source. Ultimately, Fairtrade is also a trading firm, marketing the fair goods in alternative channels and also increasingly in the classical retail food trade. In doing so Fairtrade retains a portion of the revenue from each product sold or a license fee. Rainforest Alliance Certified is based on the standard for sustainable agriculture of the Network for Sustainable Agriculture SAN. The Rainforest Alliance was also created in the late 1980s from a social movement and is committed to conserving rainforests and their biodiversity. One key element of the standard is the compulsory elaboration and implementation of a detailed plan for the development of a sustainable farm management system so as to assist wildlife conservation. In this respect the main objective is to put a stop to the expansion of agricultural areas through the extension of life-cycles and to the associated gradual deforestation in the tropics. Another objective is an improvement in workers welfare by establishing and securing sustainable livelihoods. Producer prices may carry a premium. Yet instead of guaranteeing a fixed floor price, the standard seeks to improve the economic situation of producers through higher yields and enhanced cost efficiency. Unlike the trade partnership Fairtrade, which targets small farmers and cooperatives (at least in some of the key product categories), the Rainforest Alliance does not discriminate between producers in terms

N o 4 - October 2010 Page 4 of their size and reaches out to small producers and large plantations alike. The standard also covers the interests of hired labor and seasonal workers. In order to encourage the entry of new adopters, the label can already be used if at least 30 percent of the product is certified. UTZ Certified has a similar target group as the Rainforest Alliance. But unlike social movement standards, it was co-founded by the Dutch coffee roaster Ahold Coffee Company in 1997. It aims to create an open and transparent marketplace for socially and environmentally responsible agricultural products. Instruments include the UTZ Traceability System and the UTZ Code of Conduct. The traceability system makes certified products traceable from producer to final buyer and has stringent chains of custody requirements. The UTZ Code of Conduct emphasizes both environmental practices (e.g. biodiversity conservation, waste handling and water use) and social benefits (e.g. access to medical care, access to sanitary facilities at work) elements which are also found with Rainforest Alliance Certified. The Organic- oder Bio-Standard was developed in the 1970s and is based on IFOAM Basic Standards. IFOAM stands for International Federation of Organic Agriculture Movements and is the leading global umbrella organization for the organic farming movement. The IFOAM Basic Standards provide a framework of minimum requirements which other private certification bodies or governments can use to develop and adapt their own organic standards to particular country needs or consumer demands. This explains the variety of organic labels. The IFOAM standards have a few social and economic requirements and focus on environmental criteria. Thus, no agrochemicals such as pesticides and no chemical-synthetic fertilizers may be used. The use of animal feeds is also strictly regulated. Genetic engineering and the use of genetically modified organisms (GMOs) are forbidden as is also the case with Fairtrade and Rainforest Alliance Certified. The European Union laid down the rules for organic farming in 1991 in the EU Organic Directive, and thus the Organic/Bio standard is publicly regulated in contrast to Fairtrade and other private movement concepts. In Germany the government-approved Bio seal is used to denote organic agricultural products produced in compliance with legislation. The EU Commission has also approved a new European logo for organic products and published this in the Official Gazette of the European Union (ABl. L 84/19 from 31.03.2010, p. 19). This has been binding since July 1, 2010 for labeling and is being launched on the market for a transitional period of two years. Germany s Bio seal may continue to be used in parallel. Promoting Sustainable Sourcing: Responsibilities and Challenges 1. Responsibility along the food value chain Germany and other Western economies rank among the major consumers of commodity food products such as coffee, tea and cocoa; a large portion of these commodities is sourced from developing countries. According to the UN Food and Agriculture Organization (FAO) roughly 2.5 billion people in developing countries work in agriculture. About one billion of these generate a considerable part of their income from export commodities. Overall, 95 developing countries depend on food commodities for at least 50 percent of their export revenues. In Africa, about half of the countries derive over 80 percent of their export revenues from food commodities. At the same time, Germany s imports from developing countries increased from 12 percent in 1995 to 17.6 percent in 2007. According to the Federal Statistical Office, 35 percent of these imports are agricultural commodities [7]. These figures suggest that the German food industry has become more dependent on exports from developing countries. In turn, livelihoods of food producers have become more tightly connected to German industry and consumer demand. Consumers in Germany are increasingly aware of this responsibility. As a reflection of this, Stiftung Warentest has added criteria for sustainable sourcing to its catalog of product quality indicators. Developing and adopting sustainability standards is becoming an increasingly important vehicle for firms to respond to this call for responsibility along the global food value chain. At the same time, more and more companies are actively participating in the design of sustainable solutions.

N o 4 - October 2010 Page 5 2. Challenges in the promotion of sustainability Sustainability standards epitomize a new form of partnership between society and companies, which, in contrast to traditional state-governed developmental aid, mobilize resources from the private sector to address poverty alleviation and sustainable development. These initiatives call for a rethinking of development policy in ways potentially beneficial to all actors involved. Consumers can contribute to sustainable development through their purchases, companies can market themselves as responsible contributors to a global society, and producers can improve their economic position. While these new approaches are undoubtedly promising, promoting sustainability along the value chain remains a challenging task [8]. A major challenge is the multiplicity of standards itself. For industry experts and the lay consumer alike, it seems that initiatives waste their energy on trying to win the standards war, rather than joining forces to work towards the goal everybody seems to agree on: sustainable development. One major driver of the standards war is a lack of agreement on the very criteria a standard has to meet to effectively promote sustainability. For example, how stringent should a standard be to make an impact? Part of the complexity of this question stems from the variety of problems standards have to solve in different contexts (the environment, social matters, economy). For example, in cocoa sourcing unacceptable labor practices (such as the worst forms of child labor) have become a pressing issue in some of the cocoa-farming countries (social sustainability). With palm oil the main concern is irreversible damage to the environment such as deforestation and loss of biodiversity, as well as soil contamination (environmental sustainability). With coffee it was the fall of market prices to record lows during the global coffee crisis at the beginning of the new millennium. Various factors, such as the collapse of the International Coffee Agreement (1989), which since 1962 had laid down quotas for each country producing coffee, led to an escalation. Moreover, in the 1990s the World Bank supported the expansion of coffee cultivation in Vietnam. The consequence was global overproduction. The coffee crisis thus exposed the dependence of producers on global price dynamics (economic sustainability). 3. Establishment of standards In addressing these issues, standards vary in stringency or the degree to which they require certain environmental, social and economic practices to be adopted. Fairtrade and Organic are often portrayed as the most stringent standards, and rightly so in many respects within their respective areas. This does not mean, however, that they always place the highest demands. And: this stringency contrasts with a certain exclusivity. Fairtrade and Organic raise the bar, but this also means making entry a difficult and costly endeavor for standard adopters. Standards providers that target the mainstream argue that only a small percentage of producers are able to comply with these highly demanding standards and not every buyer is willing to submit to the Fairtrade pricing policy. Standards with lower entry requirements may play an important role in increasing the coverage of certified production. 4. Compliance with standards Another, related problem is standards compliance. Sustainability standards should provide real developmental benefits to producers, workers, and their communities. But often they are experienced as a costly, regulatory burden. In many cases, producers take considerable risks when adopting standards due to the lack of a purchase guarantee. Also, they often bear a significant proportion of the costs of certification and do not always manage to sell certified products at a price premium. In addition, many producers in developing countries lack the education to understand and implement the various requirements of standards [9]. The ability of producers to adopt a standard also often depends on the size of their operations. For example, the majority of producers adopting the standards of Rainforest Alliance, UTZ Certified or GlobalGAP 1 are large-scale producers. While some argue that these standards have been designed specifically to suit large producers, others emphasize that these producers often find it easier to cover upfront costs of certifica- 1 GlobalGAP (Global Good Agricultural Practices) was developed on the basis of the previous EurepGAP standard and is a business-to-business standard (not communicated directly to consumers) focusing on processes along the entire value chain to manage mainly health and safety risks. As it is merely a basic standard, GlobalGAP has not been considered in detail here.

N o 4 - October 2010 Page 6 tion and to generate returns on investment through economies of scale. They are often more experienced and have better access to information about market trends. Even though most standards offer assistance in terms of business consulting and education, small and medium-sized producers have more difficulty successfully implementing standards. For example, setting up a farm management system poses an organizational challenge for many firms. Also, traceability becomes a major obstacle for small producers obliged to share processing facilities. Nevertheless, in the meantime 90 percent of the Rainforest Alliance Certified producers are small farmers, for example. They are able to form producer communities and share the costs of certification. Thus, in 2009 a community of 12,500 tea farmers was successfully certified in Kenya. In contrast, complying with the organic standards proved to be relatively easy for small producers as most of them cannot afford to apply chemicals to their crops and thus meet one of the most important organic requirements [10]. 5. Multiple certification As the number of standards grows, producers also face the increasing challenge of multiple certification. For example, according to Fairtrade, 50 percent of Fairtrade certified coffee was also awarded the Organic label in 2009. To tackle this issue and lower certification costs, certification bodies have started to offer joint audits. But this practice only works for standards that are similar or in part related in their requirements, and often the devil is in the detail, as both standard adopters and certifiers experience. In addition, some standards with compatible requirements are starting to endorse each other in such a way that producers certify against one of the standards and automatically attain certification against another standard. For example, producers complying with the UTZ Certified standard are also compliant with the GlobalGAP standard. Certification, implementation and evaluation 1. The certification process how does it work? In order to guarantee the credibility of standards and avoid charges of so-called green-washing, independent certification and verification is now considered to be indispensable. Certification is typically conducted by accredited, independent third-party certification bodies. Upon request, this certifier first provides an estimate of potential investment costs and the time needed. Some standards also require the submission of a self-assessment report prior to certification. During the audit, local inspectors check the facilities and assess compliance with standard requirements. Based on the data collected during the audit the certification body decides whether a certificate will be issued or corrective actions need to be taken. Certification typically needs to be renewed every three to five years. Costs for certification range widely depending on the respective standard and the size of the producer organization. In order to meet certification requirements the adopting firm might further bear indirect costs such as administrative costs or investment in facilities, such as health and safety, and new technologies. Costs of adopting standards also vary by experience, size of operation, location, infrastructure in place, and administrative and technical capabilities. 2. Evaluating the impact of certification In recent years, standardization bodies and research institutes have increasingly tried to measure the performance of sustainability standards. Findings indicate that producer organizations may benefit from adopting standards through price premiums, reduction of inputs, increased productivity, better resource management and improved product quality. For example, in the case of cocoa, studies conducted in the Dominican Republic, Peru and Uganda in 2008 conclude that organic premiums may range from 14 percent to 141 percent. Another study by Consumers International in 2005 found that 28 certified farms (Fairtrade, Organic, UTZ Kapeh [now UTZ Certified], and Rainforest Alliance Certified) generated higher revenues and use more environmental practices than the control group of 10 non-certified producers [11]. However, in some cases, producers were unable to sell certified products for a higher price and, consequently, were forced to sell them as conventional goods at a considerable loss. Demand for multiple certifications from diverse buyers potentially exacerbates these problems.

N o 4 - October 2010 Page 7 When certification does result in a higher net income for the producer, additional revenues have been found to enhance business prospects as they are in turn invested in productive infrastructure, improve access to loans, enable the transition to organic agriculture and facilitate technical improvements, which in turn lead to higher productivity. This suggests that the attainable price can, if at all, only be one criterion for measuring the success of sustainable development. Improved incomes through a higher yield also have to be evaluated positively. In addition, some certified producers have improved management and monitoring systems and adopted good farming practices. A recent study by Blackman and Naranjo [12] based on 6,000 coffee farms in Costa Rica found that organic certification contributes to environmental protection by reducing chemical input and increasing the adoption of environmentally-friendly management practices, such as soil conservation measures and wind protection measures, the planting of shade trees, and the use of organic fertilizers. A similar study in Brazil found that Rainforest Alliance certification promotes environmentally-friendly practices, such as the use of less toxic agrochemicals [13]. While certification enhances the framework conditions and lays much of the groundwork, in all these cases it is not certification per se that brings about improvement. Social, environmental and economic sustainability remains the result of extensive, costly and continuous developmental work that requires the joint effort of producers, certifiers and the buying corporations alike, often with further assistance of development agencies and NGOs. Market trends and their implications Sustainable sourcing and certification in the food industry is a growing trend. Most major buyers have started to engage with the question of certification as they aim to diversify product lines and strengthen corporate responsibility policies. As of today, the total share of sustainably sourced commodities is still relatively low, however. For example, certified cocoa ranges from 3 percent (TCC Cocoa Barometer 2009) to 9 percent (FAO 2009) of global sales (depending on the statistics used); similarly, only about 6 percent (TCC Coffee Barometer 2009) of world coffee production is certified against voluntary standards [14-16]. However, numbers can be expected to rise. In cocoa, a major player recently committed to certify its entire cocoa supply by 2020. The Tropical Commodity Coalition (TCC) expects demand for certified cocoa to reach 40 percent of world production in the near future. Similarly, the sugar sector is experiencing increasing sales of certified products thanks to demand from global chocolate and confectionary brands. For instance, Fairtrade certified 89,628 metric tons of sugarcane in 2009, which represents a growth rate of 57 percent compared to 2008 [17]. Additional certification organizations for sugar that are experiencing significant growth rates include the Rainforest Alliance (since 2009) and Organic. As a consequence, voluntary standards are likely to gain in significance. For example, in the case of fruits and vegetables, standards compliance has become essential for producers seeking to sell to particular buyers: European retailers, who account for about three quarters of fresh fruit and vegetables sales, ask suppliers to comply with the GlobalGAP standard. While de juris GlobalGAP remains a voluntary standard, it has become de facto mandatory [18]. Outlook To conclude, the trend towards greater social, environmental and economic sustainability along the food value chain cannot be ignored. In order to remain competitive in the future, it is invaluable to become familiar with standardization offerings and certification practices. Yet certification should not be regarded as an uncomplicated and straightforward solution to responsible sourcing. If certification represents responsibility, then it may well be less important which standard is formally adopted. Of key significance is rather that transparent, independent sustainability standards are implemented, tat these are regularly monitored by equally independent institutions, and in turn ultimately certified by other independent organizations. It is more important to recognize that certification requires a substantial commitment and effort from various actors in the supply chain to assist producers on the long and bumpy path towards sustainable development.

N o 4 - October 2010 Page 8 Address for correspondence Sources: [1] WCED (1987): Report of the World Commission on Environment and Development: Our Common Future. Available under: http://www.un-documents.net/ ocf-02.htm [2] Henson S., Reardon T. (2005): Private agri-food standards: Implications for food policy and the agri-food system, Food Policy 30 (3): 241-253 Oliver von Hagen (M.A.) International Trade Center (UN/WTO) Geneva, Switzerland Phone ++41 22 730 0519 Fax ++41 22 730 0577 Email hagen@intracen.org [3] Giovannucci D. (2008): How New Agrifood Standards are Affecting Trade. In: Trade What if? New Challenges in Export Development. ITC World Export Development Forum [4] Boiral O. (2007): Corporate Greening Through ISO 14001: A Rational Myth? Organization Science 18: 127-146 [5] Gulbrandsen L. H. (2008): Accountability Arrangements in Non-State Standards Organizations: Instrumental Design and Imitation. Organization 15: 563-583 Prof. Dr. Stephan Manning University of Massachusetts Boston College of Management 100 Morrissey Boulevard Cambridge, MA 02125, USA Phone ++1 617 287 7734 Fax ++1 617 287 7877 Email stephan.manning@umb.edu [6] Giovannucci D., Ponte S. (2005): Standards as a new form of social contract? Sustainability initiatives in the coffee industry, Food Policy 30 (3): 284-301 [7] Statistisches Bundesamt (2008): Nachhaltige Entwicklung in Deutschland. Indikatorenbericht [8] Ponte S., Gibbon P. (2005): Quality standards, conventions and the governance of global value chains, Economy and Society 34: 1-31 [9] Bacon C. (2005): Confronting the Coffee Crisis: Can Fair Trade, Organic, and Specialty Coffees Reduce Small-Scale Farmer Vulnerability in Northern Nica ragua? World Development 33 (3): 497-511 Juliane Reinecke (M.Phil) Warwick Business School University of Warwick Coventry, CV4 7AL, Great Britain Phone ++44 2476 524962 Email Juliane.Reinecke@wbs.ac.uk [10] Bolwig S. et al (2008): Economic Effects of Organic Contract Farming in Tropical Africa. World Develop ment, 37 (6): 1094-1104

N o 4 - October 2010 Page 9 [11] Consumers International & International Institute for Environment and Development (2005): From bean to cup: How consumer choice impacts upon coffee producers and the environment. Available under: http://www.consumersinternational.org/ Shared_ASP_Files/UploadedFiles/FDB0EF2-14FE- 4558-B219-A7FD81E089FB_CIcoffeereport.pdf [12] Blackman A., Naranjo M. A. (2010): Does eco-certification have environmental benefits? Organic coffee in Costa Rica. Working paper. Washington DC: Resources for the Future [13] Barbosa de Lima A., et al. (2009): Does certification make a difference? Impact assessment study on FSC/SAN certification in Brazil. Available under: http://www.imaflora.org/arquivos/does_certification_make_a_difference.pdf [14] Tropical Commodity Coalition (2009): Cocoa Barometer. Available under: http://www.teacoffeecocoa. org/tcc/publications/our-publications (viewed on July 20, 2010) [15] Food and Agriculture Organization of the United Nations Organic Monitor (2009): Assessment of the European and North American Market for Organic Cacao, Coffee and Vanilla [16] Tropical Commodity Coalition (2009): Coffee Barometer. Available under: http://www.teacoffeecocoa. org/tcc/publications/our-publications (viewed on July 20, 2010) [17] Fairtrade Labelling Organizations (FLO) International, Annual Report 2010 [18] Webber M., Labaste, P. (2009): Building Competitiveness in Africa s Agriculture. A Guide to Value Chain Concepts and Applications. World Bank Publications