ISEAL Alliance

After the physical assets of a company are taken into account (offices, factories, merchandise of the company itself) a company’s brand often represents more than 50 per cent of the value of the company. Three years ago Michael Conroy’s book Branded! showed how this most precious asset of a company could be targeted by NGOs to force a company to change its practices. Conroy’s book charts the success of NGO campaigns in changing corporate behaviour. Much has happened since the book’s publication and this interview previews some of the topics to be included in the revised edition out early next year. 

Let’s start with the basics, why did you write Branded!?

I worked for the Ford Foundation in supporting the development of new civil society-led techniques for transforming the practices of corporations. When I left Ford I realised that I had connections with many ISEAL members including FSC, the Fairtrade movement, MSC, as well as the emerging Tourism Sustainability Council. I had a wealth of information because I’d been privileged to sit in many meetings in many places around the world talking about the creation and formation of these systems and watching the rapidly growing effectiveness they had in changing global practices.

I was also aware that there was relatively little writing going on that chronicled this approach to corporate accountability. Most NGO activists had no time to document what they were doing and so reconstructing these campaigns and recording the impacts they had had on businesses was going to be more difficult the longer we waited.

So I set about gathering material that would not only understand the history of what I call the certification revolution but also to analyse the dynamics. Why were NGOs suddenly able to have a much more powerful impact on the practices of companies? As an economist I soon realised that there was a whole new dynamics in global business. The more effectively a company can get its brand out globally, the more vulnerable it is to attacks if the brand can be associated with inappropriate, unjust, non-sustainable practices in its supply chains. The only way to protect its reputation from attack was to participate in some kind of civil society-led process that assured consumers that companies were abiding by the highest standards verified by third party independent certification or at least standards higher than those of conventional practices.

How did civil society have such a dramatic impact? 

More and more people are coming to recognise the vulnerability that corporations have to well-constructed attacks on their brands. By well constructed I mean that a casual fling of information that can’t be verified is unlikely to have much success but NGOs from the grand like Greenpeace and WWF to the smaller Global Exchange, Global Witness, Rainforest Action Network, Forest Ethics are able to develop the information in clever ways which can seriously embarrass a company, damage its brand and bring it to the table to change its practices.

As a result you have more and more companies increasingly aware of the potential risk they are facing and actually coming forward and approaching the NGOs and saying “help us set up some kind of a certification system”.

I understand that Branded! wasn’t necessarily giving a blueprint for NGOs on how they should campaign but social media is currently the biggest campaigning tool for NGOs, will that feature in the revised edition?

Social media emerged in its fullness after I’d written the book. I didn’t focus on it that much but many steps in the process of campaigns are greatly accelerated by the availability of social media. The examples I used in the book are relatively old fashioned campaigns where you would coordinate the press releases and hope that they would be picked up by the print and TV media. Social media charges way ahead of old media in the impacts that it can have.  One of the interesting dimensions of social media is that the certification systems themselves have to learn how to use social media both to get their message out and to defend themselves. It will play an increasingly important role and personally I think the guerrilla warfare campaign image that I use in Branded! for the old fashioned kind of campaign will work even better in the social media context because you can get the message out more quickly and much more widely using Facebook and Twitter and YouTube than you could five or ten years ago.

A good example is the recently concluded campaign called Kleercut by Greenpeace against the tissue paper giant in the US Kimberly Clark.

Greenpeace was brilliant in using amateur film makers to establish the link between Kleenex and forest devastation. YouTube didn’t just show the winners of this competition but also the runners up who didn’t even have a Greenpeace endorsement, so you had a proliferation of uploads campaigning specifically against Kimberley Clark. The result was that the world’s largest producer of tissue products has now made a firm commitment to convert to FSC and recycled sources.

Another recent criticism levelled at certification schemes/standards is that they’re too confusing, there are too many of them.

People talk about the proliferation of standards as being one of the downsides of the certification revolution but we have examples now of how one standard can rise to the top as the most credible. In forestry, FSC certification had a head to head confrontation with PEFC originally and in the US SFI (Sustainable Forestry Initiative) which were industry created lower bar standards. Now the FSC is clearly dominating and that’s not because consumers know the difference between PEFC/SFI and FSC, it’s because companies recognise the difference.

And I can give you one very concrete and I think quite public example of that. In Chile, which is a very large forest supplier to the world, two companies dominate the entire forestry sector. Between them Arauco and CMPC control 80 per cent of Chile’s forestry products industry and they resisted FSC certification. They went so far as to get Chilean government support to establish an alternative system called CERTFOR which claimed to be as good as FSC but was the Chilean national system. In September 2009 despite the global economic crisis or maybe because of it, both Arauco and CMPC sought full FSC certification for all of their forestry operations. And when asked by a group – of which I was a part – why they were doing this, both argued that firstly it was the right thing to do, the internal morality was there, but they also admitted that the markets were asking for it. Their principle market – an export market – wanted FSC certification as a condition for their continuing to be able to ship their products into those markets.

A company wishing to protect their reputation and the reputation of those it sells on to does not want to be associated with devastating the Amazon, destroying pristine forests in Chile or boreal forests in Russia and Canada, and so it will ask for FSC because there is no higher standard. 

FSC currently has about 15 per cent of world forest certified. There is some way to go before it reaches 100 per cent. What sort of landscape does the future hold for certification models in general? 

You can find that world on the back of the mouse of the computer you’re using right now.  Turn it over and you’re going to find the CE or UL label, that’s a system that begun 100 years ago and it’s a system that says this product is not going to give you an electric shock. And you can’t find electric goods that don’t have a UL or a CE or an equivalent mark in the US or European markets and increasingly in markets around the world. 

I suspect that organisations like FSC/MSC will be the minimum standard for producing forest products/ocean caught seafood into circulation in 30 or fewer years. So the business differential will have to come from elsewhere.

There might be an FSC Plus where companies can not only abide by FSC standards but set aside five per cent of profits to create protected areas in forests for wildlife or biodiversity. So there will always be possibilities of raising the bar voluntarily plus the fact that the probability is that the standards will rise through time.

UL has consistently raised its standards through time as new techniques like double insulation have become possible and as more complicated electronics with theoretically greater possibilities of failure have entered on the electronic market. So for example, technological change will allow greater traceability – I wouldn’t be surprised if we found an ID on every log taken out of Kalimantan, Indonesia which can be read at the port where it is being delivered.  An ID that says it came from this particular forest, logged on this particular day and as it goes through Rotterdam it will be recorded.

What effects have the global financial crisis had on the certification movement?

I’ve seen some indicators with Fairtrade and organic that show that the movement hasn’t necessarily slowed significantly. Though global sales fell generally in 2009 and have not recovered in 2010 you’ll find a slight slowing in the rate of growth of almost all certification programmes but definitely no decline.

We were very worried in October 2008 about the global financial crisis with what was going to happen to these products that do carry slightly higher prices and do require that the consumer spends a little bit more and do involve a certain amount of risk on the part of the companies retailing them. But what we have is fairly good evidence that many companies have recognised that certification is a very interesting strategy for combating an economic downturn. And the reason’s very simple.

If you’re a banana producing company and sending them into a US or European market  and there is  a decline in the economy what happens is that the price competition of conventional bananas is so brutal that the profitability in those bananas shrinks as rapidly as the demand and sometimes more rapidly. But if you had a differentiated product, one that has either a Rainforest Alliance or Fairtrade claim or FSC claim, you are no longer competing head to head in a conventional product market. In fact you’re offering to your clients and ultimately their customers a differentiated product that has a higher price and has a higher profit margin built into it that can actually protect you from some of the worse of the competition of conventional products. So what we’ve seen in the US is that consumers reduce their consumption by making it more responsible.

So companies are benefiting from these certified products?

We’ve seen major companies like Nestlé, like Cadbury, like Kimberley Clarke making full fledged commitment to go for a certified product right at the heart of the global crisis. These are companies that are large enough to have the best analysts in the world looking at what the future source of profitably is going to be.

But I also think that when statisticians look back at 2008/2009 they’ll find that retailers have raised their expenditure on certified and differentiated products. And that has also helped because they make a differentiated profit. The consumer demand is still enough that these companies recognise that if they pay a little bit more including a social premium like Fairtrade products, consumers will pay it, and will keep the profitability higher than the profitability line of a conventional product.

Which means it becomes a favourite product line?

Exactly, which is why you see rapid expansion in many, many companies when they experiment with a Fairtrade or FSC product and the demand continues to outgrow the supply. They want to get on because they see their competitors doing it. Walmart jumped into the Fairtrade market because its competitor Costco launched a series of Fairtrade products and Walmart is now moving more rapidly than many.

Whole Foods, the organic retailer in the US and UK, started out with only three lines of Fairtrade products but now have nearly a thousand.  This is a company that carefully measures revenue ratio per centimetre of shelf space. They introduce a product only when they’re confident that it will raise profitability. 

There’s a lot of evidence that consumers are continuing to make that certified choice and it is the ultimate victory of the certification revolution and why many other sectors are now also attempting to do some sort of certification.

Branded! was about the vulnerability of companies to attacks on their brands by well organised campaigns. You could consider many in the certification movement to be brands now, aren’t they vulnerable too?

Yes, they are brands and they have to make their brand stronger and more credible over time. That’s easier and to the advantage of the high bar brands, such as those that are members of ISEAL. Those brands that are industry-led with low bar standards and low levels of inspection are more likely to be caught with their pants down because of inadequate traceability, inadequate standards and relatively little credibility.

An additional benefit is that businesses like co-branding with a supporting system. So for example companies that adopt and promote Fairtrade are implicitly co-branding with Oxfam, Twin Trading, Christian Aid and other groups that are publicly and strongly associated with it - that has real positive business value.

What else will feature in the revised book?

There will be the success story of ISEAL itself. ISEAL has matured into a very powerful and important player in the field of voluntary certification. Many people raise the question in talks that I give, “who certifies the certifiers?” and ISEAL plays a very important role there on a variety of levels. On the one hand the new revised 2010 Code of Good Practice is the best available guideline for fully transparent production and consultation of new certification systems. The upcoming ISEAL Impact Code is extremely good and very important because certification systems have been around long enough that people can legitimately ask “Ok, what are their impacts? How are they changing things on the ground? What conditions that they are attempting to affect?”

ISEAL is extraordinarily important in terms of continuing to raise the bar on the minimum standards that credible standards need to meet. And its value to all in the system that try to use the ISEAL standards is that ISEAL is not only there to promote those standards and implicitly accredit standard-making systems by offering them membership in ISEAL but making that membership relatively difficult to obtain. So I think that as a complementary activity that strengthens what’s going on on the ground, in terms of building on the systems, avoiding redundant or unnecessary systems, ISEAL plays a very important role in the future.

Readers might be interested in a talk Michael gave at Policy Innovations , a publication of the Carnegie Council. His book Branded! was published in 2007 by New Society Publishers.

Dr. Michael E. Conroy is a former academic, funder, advocate and analyst of the emergence of new systems for corporate social and environmental accountability.  For the past fifteen years he has been at the forefront of the movement to build systems that encourage and reward higher standards of corporate accountability in a wide range of industries, from sustainable forestry and sustainable tourism and ecotourism to certified Fair Trade, and responsible mining.

Building on a 25-year academic career as a Professor of Economics at the University of Texas at Austin and later as a Senior Research Scholar and Senior Lecturer at Yale University, Dr. Conroy has taught about, researched, and written about the “certification revolution” that has created unprecedented transformation of global corporate practices on social and environmental fronts over the past 15 years.

He has also spent a dozen years outside academia in the philanthropic world, first at the Ford Foundation and then with the Rockefeller Brothers Fund.

In 2009 Dr. Conroy served as Board Chair of Transfair USA, the Fair Trade certifier and promoter for the US market; as a member of the Supervisory Board of FLO-Cert, the international Fair Trade certifier; as a member of the board of FSC-US, the US national initiative of the Forest Stewardship Council; and as a member of the board of Earthworks, Inc., the nonprofit that is leading the development of the Initiative for Responsible Mining Assurance.

Dr. Conroy is, finally, co-founder of Colibrí Consulting – Certification for Sustainable Development, a firm dedicated to the intersection of certification systems, corporate accountability, and global sustainable development.  A charismatic speaker on the full range of issues covering corporate engagement with sustainability issues, market campaigns, and certification systems, Dr. Conroy is available for presentations, trainings, and consultation on these most critical issues of the 21st Century.

For further information, please contact him at: michael [at] colibriconsult [dot] net, or +1-914-374-0631.