United Nations Secretary-General Ban Ki-moon recently spoke of a tectonic political shift of wealth and power from the North toward the new global players in the South. The implications of this shift are starting to be felt within the field of Corporate Social Responsibility (CSR), as evidenced in the strong engagement of developing and emerging economies in the ISO 26000 standard-setting process. However, this is an emerging trend with a number of dynamics that have yet to fully play themselves out. Given the critical importance of the world’s fastest-growing economies to meaningfully incorporate the universally agreed Principles embedded in the United Nations Global Compact into their developmental pathways, how the various initiatives operating within the field of CSR respond to this changing geo-political landscape will determine their future and that of our global society and our planet.
Standards Systems: the Current Picture
Sustainability Standards Systems – such as the Forest Stewardship Council (FSC), the Roundtable on Sustainable Biofuels, or Social Accountability International with its SA 8000 standard – represent the practical, hands-on dimension of the CSR landscape. With consensus-based voluntary standards defined through global multistakeholder processes, and with enterprise compliance assessed through independent third-party certification, these market-based tools provide clear pathways for producers to improve sustainability practices. They also provide reliable benchmarks for supply chain buyers and consumers to make informed purchasing decisions and signal to institutional investors and lenders that good social and environmental practices are being upheld.
Sustainability standards now cover over 10 percent of global production in key commodities and sectors such as wild-capture fisheries, tea, coffee, and bananas. With an increasingly visible presence in global markets, the demonstration effect of pioneering initiatives – such as the Marine Stewardship Council (MSC), Fairtrade, UTZ Certified, and the Rainforest Alliance / Sustainable Agriculture Network – provides solid ground to expand the application of sustainability standards into new commodities and sectors, from soy, palm oil, sugarcane, and other food and biomass crops into cattle, tourism, and electronic waste, among others. Business champions are increasingly recognising the value that these tools can play in supply chain management and in ensuring long-term access to supply and are making major commitments that will affect entire sectors and value chains.
This particular tool within the field of CSR is at a critical point of inflection where it has the potential to make a significant contribution to transforming global markets. Sustainability standards are market-based mechanisms. Whether they will reach their full potential as important CSR tools to transform markets toward labor and human rights and ecological sustainability will depend on how future market leaders engage with them and use them to accomplish their own sustainable development and competitiveness objectives. As power drivers behind global markets start to shift, demonstrating value and building support among emerging economy leaders will be a critical requirement for any CSR tool, including sustainability standards.
Initial Steps into Emerging Economies
While the shift in power and wealth toward new global players in the South – as outlined by Ban Ki-moon – is indeed fundamentally changing the CSR landscape, it is important to note that this is current and dynamic, with the implications yet to be fully understood or even determined. The preferences of an increasing number of actors are shaping how social and environmental considerations are expressed in global markets. Initial introductions of CSR in emerging economies have largely been shaped by supply chain pressure to address human rights, labour, and environmental issues. For example, with 60% of Wal-Mart’s suppliers in China, its continued focus on sustainable supply chains will have a significant effect on how Chinese businesses and regional governments adopt sustainability tools, including standards.
Global brands such as Tetra-Pak and Nespresso have created strong demand for sustainably certified pulp and paper and coffee respectively, leading to significant investments in certified operations in Brazil and other countries. Such pressures will continue to influence key emerging economy markets for many years to come. The power dynamics – and therefore the social and environmental values that are expressed in shaping such markets – will vary commodity by commodity and sector by sector. This will depend on whether such markets are characterised by North-South trade, regional trade, or domestic interests overlaid with growing global, regional, and national pressures to address critical social and environmental hotspots. The case of soy is an interesting illustration. China is now the world’s largest importer of soybeans by far, with up to 55 - 60 percent of total world trade. Argentina and Brazil have emerged as the world’s largest exporters of soybean meal and oil. Stakeholders from each of these countries are powerful players in often highly contested discussions to define sustainability standards for soy production and trade.
Increased Demand for Sustainable Products
A new factor that will increasingly shape the future of sustainability standards is the burgeoning appetite for sustainable products and services in the domestic markets of emerging economies. Consider the case of Indian tea consumption. A 2010 study in India by Solidaridad and Partners in Change found that 40% of consumers surveyed would be willing to pay 10% more for purchasing sustainable tea or coffee. As domestic tea consumption in India dwarfs export production – representing 22 percent of global tea consumption and 80 percent of Indian production – and given that the national market leaders (Tetley owned by Tata and Unilever) are experienced sustainability standards users, there is a tremendous opportunity for domestic market-led sustainable development that could improve the livelihoods of hundreds of thousands of workers and their families.
Likewise in Brazil, a public prosecutor campaign to drive consumer awareness and supply chain pressure toward carne legal, or beef produced in accordance with national legislation, has been supported and even amplified by efforts of environmental NGOs and consumer groups pushing for compliance with stronger sustainability performance standards. Given that the expansion of the cattle industry in Brazil to meet largely domestic demand is a major cause of the deforestation of the Amazon, such awareness-raising campaigns are critical first signs of an increasing appetite for sustainable domestic consumption.
Whether existing global standards, which have been highly successful in North American and European consumer markets, can meet such nascent and expressed demands – and exactly what kinds of adjustments or adaptations to the model are needed – are new and open questions.
Opportunities in Emerging Economies
Emerging economy leaders need sustainability standards. They provide a clear and effective way to access increasingly mainstream international markets. They can also provide tools to address growing domestic demand for socially and environmentally responsible products and services. Yet, while they are currently standards takers, they will increasingly become standards makers, thus changing the future of how sustainability standards evolve.
As emerging economies strengthen their engagement with standards systems, a number of changes will take place in the sustainability standards landscape. First, the commodities and sectors addressed by standards systems are likely to evolve to become more relevant to emerging economy markets. While strong growth is expected in the traditional sectors of tea, coffee, and timber – as these become important not only for export markets but also increasingly domestic markets – new standards will evolve that will focus on their priority markets, as is already happening with soy, cattle, and sugarcane in Brazil. One could expect strong emerging economy engagement in the development of sustainability standards for the oil and gas sector, water stewardship, and low-carbon standards across manufacturing activities, among others.
Second, new types of players will participate in driving the future direction of this CSR tool. While the sustainability standards movement has historically been led by partnerships between business champions and NGO leaders, new actors will become involved as these tools gain ground in emerging economies.
Financial sector representatives in emerging economies such as Brazil, Mexico, and South Africa are among those exposed to the greatest social and environmental risk in their portfolios. It is no surprise that they are already among the most engaged with sustainability standards. The use of sustainability standards as key lending, investment, and trade finance tools will only continue to grow, to be led by emerging economy financial institutions.
In addition, the relationship between sustainability standards and governments is set to evolve, especially as China strengthens its engagement with sustainability standards. While governments around the world are demonstrating increasing interest in using private voluntary sustainability standards to achieve their own policy objectives – as evidenced in sustainable public procurement and timber or biofuels regulatory frameworks – China’s engagement will likely set new parameters for how governments engage with what have historically been CSR tools developed by industry and civil society, largely without government participation.
Third, a central principle of credible sustainability standards as outlined in ISEAL’s Standards Code is the importance of sustainability standards being both globally applicable but locally appropriate. Where sustainability standards have the potential to influence and affect stakeholders in other countries, they need to be conceived of as global standards at the outset to avoid creating unfair barriers to trade and ensure that all affected stakeholders are able to participate in the standard-setting process, thereby addressing their needs and perspectives.Pioneering sustainability standards have created important mechanisms to bridge this international-national divide.
In the case of the Forest Stewardship Council, this includes balanced governance structures that ensure Northern and Southern representation across social, environmental, and economic stakeholder categories, and a guided process to develop national standards based on the overarching FSC Principles and Criteria.
For the Sustainable Agriculture Network linked to the Rainforest Alliance Label, national guidelines are developed by a local workgroup to interpret how the standards criteria apply for local conditions or a specific crop. However, as the universe of stakeholders engaged in developing and implementing sustainability standards expands further, evolution of this model is likely necessary to ensure that emerging economy leaders feel that such standards meet their own needs and values as well as meet the needs of international clients and stakeholders. The alternative is a whole host of competing national sustainability standards that create new barriers to trade, exacerbate stakeholder confusion, and waste resources on reinventing the wheel instead of on achieving tangible sustainable development results.
How the ISEAL Alliance is Working with Emerging Economies
As part of a collective strategy to scale up the environmental and developmental impacts of the sustainability standards movement, the ISEAL Alliance will support and strengthen existing networks of national sustainability standards leaders in emerging economies and, with partners, build capacity on best practices in the design and use of credible and effective international sustainability standards to meet national needs as well as international stakeholder demands. ISEAL will also support emerging economy leaders in engaging in global normsetting so that both sustainability standards and the global rules that define them are co-owned by emerging economies and reflect their values and expectations.
To find out more about the 2011 Global Compact International Yearbook and to order your copy visit the Global Compact International Yearbook website.