By Hans-Peter Egler, Head of trade promotion in the Economic Cooperation and Development Division at the Swiss State Secretariat for Economic Affairs (SECO)
Published in Bridges Africa Review, 4 July 2012 - Available here
Private voluntary standards: The instruments for a lasting trade policy in Africa?
Globalisation, the increasing complexity of production processes, as well as environmental and social challenges call for transparent and compelling guidelines at the global level. International rules are often ill-equipped to deal with these issues. With this in mind, the Swiss State Secretariat for Economic Affairs (Seco) supports, as part of its trade promotion, the establishment and implementation of private voluntary standards that, as instruments of sustainable policy focused on the market, fill the gap between the various international regulations.
Private voluntary standards - that is to say, guidelines defined by criteria that can be applied to processes and production methods, and submitted for independent certification - are successfully implemented all over the world. In 2010, 10 percent of the international trade in tea came from certified production. This rate was 8 percent in the coffee sector, a market that is worth 90 billion US Dollars. The rate for certified bananas has gone from 1 percent to 22 percent in the past ten years.
What impact does this have on producers?
Supporting the development of standards, Seco financed the first scientific analysis of the impact of the Committee on Sustainable Assessment (Cosa). One of the pilot projects conducted by the Cosa study within the coffee sector in Tanzania – a country where coffee allows over two million people to partially or completely sustain themselves – highlights the advantages of certified production compared to traditional methods. Success was reported in the three main areas of sustainable development. From a social perspective, implementing these standards reinforces education and therefore the producers’ social capital, and also raises the school attendance rate as well as the education level for children. From an environmental perspective, protecting biodiversity, preserving resources, fighting against erosion and avoiding water pollution are undeniable benefits. The economic advantages are demonstrated by the substantial increase of net disposable income. This is the direct result of better prices through a mark-up for organic or fair-trade produce and the indirect result of a higher level of efficiency connected to know-how.
Another study, conducted within the cotton sector in Burkina Faso, shows that organic farming helps reduce expenses by up to 90 percent, especially for the cost of fertiliser, and to lower not only production costs but also financial dependency linked to the purchase of fertiliser. Producers are also investing in diversification and are becoming increasingly self-sufficient while being less dependent on a single crop. The net income of producers of organic cotton is generally 30 percent higher. Non-monetary benefits are also accrued to those who switched to farming organic cotton including better health, a more fertile ground and – contrary to public opinion – less physical labour.
Private standards provide three main advantages to improve the situation for producers:
Standards: A key factor in gaining better access to markets
Private voluntary standards have developed in response to the high demand for goods produced according to social and environmental criteria. Therefore, in some situations, implementing these standards allows producers to gain better access to markets. The fair-trade label is a trailblazer: its concept of contractual relationships has enabled it to guarantee higher, more stable prices to producers in the South for over twenty years, as well as long-term, privileged economic links in a niche market. New initiatives relating to consumer goods have increased its impact. Using an “unbranded” approach, industry, trade representatives, local producers and non-governmental organisations have been developing sustainability standards together and making decisions pertaining to them in a democratic manner.
Implementing standards improves competitiveness
To enable the sustainability standards achieve the highest possible impact, producers in developing countries are being offered training and customised advice on topics from implementing standards to assessing them and becoming certified. Skills training is crucial in this regard as well-trained producers can shape their own destinies and improve their competitiveness on an international scale by developing the quality of their products as well as their efficiency and sustainability.
The Cosa (see box on next page) study unexpectedly showed that the main factor motivating coffee producers in implementing voluntary labels is not the high level of demand or the increase in price – which is between 5 and 80 cm per kilo – but the measures offered in terms of management skills. These measures allow farmers to develop their production, processing and marketing methods, and therefore take ownership of their future.
Information encourages awareness
Access to information is another key element. This starts by producers being made aware of the advantages provided by sustainable production methods and realistically weighing the costs and benefits of the various standards. Only then can they choose the option best-suited for them. Wide access to information allows producers and manufacturers to anticipate market developments on a local and international scale and adapt their production methods to the changing needs of consumers. These strong trade ties based on mutually constraining standards are what allow for the transfer of knowledge along the distribution chain.
What challenges need to be overcome?
Today, certification by independent organisations is mostly used by the farming sector. The processing industry is still lagging behind, even though the potential is there – and expected to bear fruit – at least at the same level in terms of the “green economy” and processes respecting social imperatives. The experience gained from the ISO management systems standards – especially pertaining to quality, environment, and social aspects – and from the SA8000 social responsibility standard – mostly based on the core conventions of the International Labour Organisation (ILO) – shows that the implementation of standards for industry is also profitable from an economic perspective: the efficient use of resources (energy and raw materials consumption, waste, water requirements, emissions and health risks) and an improved social atmosphere (motivated and accountable workforce, fewer accidents and fewer absenteeism) allow production costs to be significantly reduced.
Harmonisation strengthens its impact
The harmonisation of standards and education programmes as well as the mutual acknowledgement of certification criteria are likely to lower costs for producers, as well as education and transaction costs. The latter often prove to be a major obstacle for producers who want to take part in trade on a global level.
All of the market stakeholders involved in the added-value chain – producers, retailers as well as informed, critical consumers – can benefit from the “good practices” in terms of defining and implementing these standards for certification and accreditation. These good practices include the standards developed by the ISEAL Alliance, a collective of major organisations relating to labels. Trying to harmonise standards is crucial to strengthening the impact of these initiatives.
The impact depends on the context
The impact of standards, however, is still dependent upon both context and the various factors contributing and on various factors contributing to the achievement of the intended goals. The Cosa study showed that regional income disparities in the coffee sector are sometimes higher than those separating certified production from traditional production. Despite the success stories, it is still vital to carry out new impact analyses and to determine precisely which labels have the best impact on producers, bearing in mind the local conditions.
Technical barriers to international trade?
In order to prevent well-intentioned sustainability criteria from becoming new technical barriers to trade for producers, these standards must be adapted to producers’ needs. Furthermore, additional measures such as the transfer of knowledge or financial support to cover the costs of implementing these standards are needed.. This would allow small producers with lower income to take part in private standards and sustainable value-added chains.
The State: An ancillary driving force
Private voluntary standards cannot replace political policies that stimulate sustainable development. Furthermore, the governments of producing countries and of donor countries must ensure that private standards further the cause of sustainable economic development. When it comes to producers, a study of asparagus farming in Peru and of the fruit and vegetable sector in Kenya conducted by the World Bank showed that governments of producing countries that were actively involved in developing and implementing standards, and which invested in frameworks to ensure they were respected, were very successful.
Donor countries also play an important role by further supporting these standards. Regarding trade promotion, Seco supports private voluntary standards by working at different levels: providing core financing to develop standards; implementing them, transferring knowledge and providing certification in producing countries; and sensitising and informing both consumers and responsible buyers in the public and private sectors who sometimes need specific information in order to make good purchasing decisions.
Sustainability: A real success
Sustainable production processes and methods deliver a blueprint for producers and consumers. The ever-increasing interest in sustainable development processes has enabled the coffee, cocoa, tea, and banana producers who have followed this path to exhibit rapid growth in the past five years, recording double, sometimes triple, digit growth rates.
When it comes to demand, the implementation of private voluntary standards allows international buyers to trace producers without any difficulties, and limits any potential damage to their reputation that could be caused by not respecting internationally recognised environmental and social obligations.
While some producers see private voluntary standards as a market barrier, many who have pursued them see them as an opportunity to improve the commercialisation of their agricultural activities. Thus, the cost of implementing these standards should not be seen as an expense but as an investment in modern, competitive farming. It is therefore important for governments to create an environment that favours better implementation of these standards.