Why VSS (Standards, Certification and Labels) are failing

And here’s a longer description of each step:

Addition of burdensome elements. VSS were introduced to deliver change through existing markets. Although they were undeniably based on good principles, the approach used was the addition of burdensome elements for every level in the market: labels, inspections, audits, standards and certification.

Becoming complex and expensive. Although meant to inform consumers that some ingredients were sourced in a sustainable manner, the same market actors are standing in between consumers and producers. These are manufacturers and traders who compete in earning bigger profits by reducing costs. The most damaging effect to the principles of many certification organizations is that traders source from those who offer the cheapest prices. They also take part in the commodities exchange market where the international prices of commodities are set. These prices don’t take into account the true costs of production and the living standards of farmers. The complex market system which so far kept the majority of smallholder farmers, farm workers, and their families living in poverty, is still relied upon. VSS tried to improve a broken system, but it only made it more complex.

One cost reduction practice of large traders/manufacturers is to mix certified and non-certified commodities, as it is cheaper to process them together. Companies also transfer the certification fees to consumers, as part of the final product’s price. But the farmers who are not organized and don’t perform well already have to suffer the most. Certification is expensive: ‘The cost of the evaluation may be prohibitive or unduly burdensome for smallholders or small- to medium-sized cooperatives seeking to be licensed.’1

Meeting the standards also requires certain knowledge of good agricultural practices, so without help such as trainings or coaching, the only farmers or coops that can become certified are those which are part of a supply chain, or the ones with a high level of professionalism.

Enabling sourcing from agribusinesses and large plantations. In the beginning some certification organizations started by working with small farmer groups. The consumer market was small, so small volumes of commodities such as coffee and cocoa were needed. With mainstreaming of certification many traders quickly got involved and started sourcing from larger plantations and agribusinesses who already performed well and who easily got certified. Small farmer organizations are not able to compete and supply the same quality and volumes anymore. Even the initial smaller farmer groups regret not having direct relationships like in the past. “Instead of empowerment and partnership, there is a culture of surveillance and sanction.”2 The people most in need are currently not helped by certification.

Therefore small farmers suffer. Certification is obtained by farmers in producer organizations (POs). In the case of Fairtrade, the management of these POs decides in what to invest (agricultural inputs, social projects, etc) and only 17% of the Fairtrade premium goes to farmers as higher prices paid for their crops. A 2014 impact study on UTZ certification of cocoa farmers showed that farmers always vote in general assemblies for the premiums to go directly to them. “The premium setting process is not seen as transparent and does not appear to be linked to actual costs at farmer, cooperative or trader level.”3

It’s good to have more teachers and classrooms in schools, but if families do not have the money to send their children to school, it doesn’t help anyone.

If you ask the labels they will say that if demand would increase, all the farmers would be certified. But first of all, they are not the ones helping the poorest people in the first place. Other organizations sponsor the certification of farmers. Here is where standards and certification failed. They didn’t react fast enough in setting up programs to certify enough small farmers. They allowed the profit-oriented market to take over.

The initial principles are ignored. Organizations like Fairtrade and UTZ Certified started by setting up principles such as ‘strong, direct consumer-producer relationships’ and ‘helping the small farmers’ who don’t have access to markets and are most affected by current systems’. These principles are currently eroding. Does anyone know their cocoa or tea farmers? Is the focus on the most vulnerable smallholder farmers and workers? As this recent report from Tulane University shows (the number of child laborers are still increasing), the answer is no.4

Very limited impact.

What needs to be pointed out is that almost every impact study on the effects of certification will show positive impacts. If farmers were trained, offered agricultural inputs, better prices or premiums, some positive effects on these farmers will be easy to show (although impact evaluation experts always say it’s complicated and expensive to actually prove it). Many times not all certified produce is sold as such and the extra value promised initially is lost. But the bigger picture is important here. Are the poorest farmers included in certification schemes? No. Are the farmers living under the poverty line lifted over it upon certification? No, they receive a maximum of 10% over market prices and maybe benefit from the purchases that a producer groups makes from the premium. But they are still poor. A price that would enable them to reach a quality of life similar to that of consumers in developed countries should be minimum 300-400% higher.

There are some impact studies which tell the story as it is. One study on 4C , a coffee certification scheme, found that “membership in 4C had not produced any increase in income for farmers, and that in one of the three sample countries, 4C farmers were “performing worse” than non-4C farmers.’1

BBC reports in September 2015 on Rainforest Alliance certified tea (namely sourced from McLeod Russel and Assam who supply it to Twinings, Liptons, Tetley and PG Tips): ‘Living and working conditions are so bad, and wages so low, that tea workers and their families are left malnourished and vulnerable to fatal illnesses. There was also a disregard for health and safety, with workers spraying chemicals without protection, and on some estates, child labour being used.’, ‘pickers often have to endure long working hours and insanitary conditions, leading to poor health and high levels of maternal and infant mortality.’5

 

Leading to increased competition. Because it doesn’t cost companies anything to buy certified commodities, as they just do so to sell to customers who are willing to pay higher prices, they compete against each other for the wrong reasons. Companies selling certified products don’t do so in accordance with sustainability principles. Even the ones investing in trainings and agricultural inputs for farmers, are only worried about having a continuous supply and about covering as many market segments as possible. The socially and environmentally conscience consumer segment is just one of them, for which unfortunately (yes, sarcasm), the big agri-traders and processors need to do some extra efforts.

More products and distribution channels. When companies compete they try to differentiate from each other. This leads to the creation of many different products and their distribution through many channels. As we have seen recently, certified products can be found in almost any supermarket.

 

more to come…

 

1. 2013 MSI EVALUATION REPORT Working Draft Common Code for the Coffee Community (4C). http://www.msi-integrity.org/wp-content/uploads/2013/04/4C-Working-Evaluation-Report-FINAL.pdf
2. Griffiths, P. Ethical objections to Fairtrade. Journal of Business Ethics. 2011.
3. Ingram, V., Waarts, Y., Ge, L., van Vugt, S., Wegner, L., Puister-Jansen, L., Ruf, F. and Tanoh, R. Impact of UTZ Certification of cocoa in Ivory Coast. 2014.
4. http://www.childlaborcocoa.org/index.php/2013-14-final-report
5. http://www.bbc.com/news/world-asia-india-34173532