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Have Sustainability Labels lost their way?.
In their bid to build a brand, Sustainability Labeling organizations are sacrificing their mission.More and more consumers want to know that an outside, independent party confirms that the claims made by brands are true, that the products are safe, good for the environment and deliver on some core promises. In a world where it has become almost impossible to consistently deceive consumers about the attributes of a product, and where exaggerated claims are quickly deconstructed and ridiculed in Facebook and Twitter, the rise of the sustainability label confirming product claims seems inevitable.
Because the rise of third party certification and product labeling has happened gradually, it has seeped into the collective consciousness slowly, and now it is simply part of the shopping landscape in many consumer markets. Our eyes have grown so used to seeing the organic, dolphin friendly, fair trade, 100% recycled paper labels, that most of us never pause to think about the impact these labels have on the brands they appear on. We never stop to think how this slow rise of sustainability labeling and the certification systems behind the labels has changed entire industries. We also don´t see how the labels themselves became brands that compete with each other, and we are blind to how this competition limits the growth of sustainable product supply.
There has been significant positive change, yes: Sometimes, for those of us working in this industry, the achievements become difficult to see because we are stuck in the detail of keeping up with the fast growth, we are crunching the numbers and getting things done. The truth is that sustainable product labeling and the supporting third party certification systems have introduced dramatic changes:
According to the State of Sustainability Initiatives (SSI) 2014, growth has been spectacular. Here are some of the headlines:
"The average annual growth rate of certified production across all commodity sectors (excluding biofuels) in 2012 was a stunning 41%, outpacing growth of 2% in the corresponding conventional commodity markets. Growth in certified production was strongest in the palm oil sector which experienced 90% growth in 2012. Other leading sectors were sugar (74%), cocoa (69%) and cotton (55%). Research found that compliant production attained significant market penetration in several major commodity markets. Certified coffee, which led in terms of market penetration, reached a 38% market share of global production in 2012 (up from 9% in 2008). Other certified commodities with significant market share for sustainable production in 2012 include: cocoa (22%); palm oil (15%) and tea (12%)."And yet...if you walk into a major supermarket in almost any consumer market in the world it becomes clear how much of a niche certification and product labeling still is. Beyond the marketing and the hosanna´s sung to celebrate the growth of the niche (sorry SSI....), sustainability is still nothing more than a couple of products at the bottom of a shopping basket. The real breakthrough in bringing sustainability to the no-name-brand juice, the cheap toilet paper, the discount chocolate chip cookies or the millions of other products lining supermarket shelves across the world has not happened yet.
If you have attended enough sustainability conferences and summits it becomes difficult to understand why not all products are sustainable yet: CEO´s of leading brands make sweeping sustainability promises, the labels report on stunning growth and best practice examples are presented for everyone to marvel at. Only in the breakout sessions does it become clear that there is a lot of frustration with the sustainability labels, the biggest companies, that want to "convert" as much as possible to sustainability find that they can´t. They see a landscape of sustainability labels that compete with each other, they find huge inefficiencies because of a lack of collaboration between the labels and they find their march towards a sustainable tomorrow halted by these inefficiencies. The business community understands that in order to really make a sea change, to really line the shelves with sustainable products, there needs to be a high level of pre-competitive collaboration. This is absent in the world of the sustainability labels.
The (perverse) competitiveness conundrumOne of the principal ingredients to breaking out of the niche is pre-competitive certification. At the moment, sustainable certification of supply is linked to consumer-facing labels that compete with each other. One of the main competition points between labels covering the same product category is that the certification of one system is better: more stringent, more transparent, achieves greater impact, leads to more sustainable development, etc. Having worked in this area for more than 20 years, we can attest to how exaggerated these claims of differentiation are (both in terms of the standards and assurance processes). Differences between systems are smaller now because all systems are trying to address the same issues in the same commodities, creating overlaps and costs for all.
The major industry players know that the differences between competing systems have become – to a large extent – meaningless and they have therefore been urging the labels to work closer together, to collaborate and to reduce differences. As the differences between the underlying standards reduce, the labels that own the standards have moved the competition to a marketing level, expending resources and inching ever further away from their missions.
From the perspective of the farmers who need the higher income and improved productivity that comes with the sustainability market, or the endangered environment that needs better agricultural practices and land management, this turf war is perverse: almost all of the major sustainability labels are owned by NGO´s that profess to have development and conservation as their guiding principles. Yet they are fighting like brands for market space and self preservation. And to stretch the comparison even further – like brands making a similar product, refusing to share recipes. Vast amounts of resources are being poured into the marketing fight, resources that could be put to much better use in moving towards achieving the goals of sustainability.
Case in point - cocoaSince we worked closely with the cocoa industry, we chose it as an example to show how the lack of collaboration between labels damages the mission they purport to work towards : the leading sustainability certification systems in cocoa (Fair Trade, UTZ Certified, Rainforest Alliance) have been working in this industry – with a heavy focus on Western Africa – for many years now. Together they represent about 90% of all certified cocoa coming from the region. The issues that plague the industry have not changed – child labor, poverty, poor productivity, outdated farming practices – and the certification systems have been working hard to develop strategies to address these issues. The result is that the differences between these systems are now almost non-existent. They would of course argue fiercely (like brands) that this is not true, that they are very different and of course much better than each another. They will highlight a specific standard requirement here, or a slightly more frequent audit routine there, however real meaningful differences are few and far between. Independent analysis has also shown that the differences between the systems are less than are often claimed.2 KPMG was commissioned by ICCO (International Cocoa Organization) to look at the costs, advantages and disadvantages of certification of cocoa n Western Africa. The report is public3 and makes interesting reading. However, a brief summary is that certification is good for sustainability, but the differences between the different certification schemes are negligible.
The same report also outlines a significant market development currently taking place: multi-national chocolate brands want to buy 100% sustainable cocoa, but the fragmented certification market makes that almost impossible. So, to make things more complex and even less sustainable...some brands feel forced to develop their own sustainability code so that they can go 100% sustainable! More resources being invested, more time lost in bringing the benefits of sustainability to all parts of the supply chain, more inefficiency because sustainability labels are acting like brands.
ConclusionThis is not an attack on sustainability labels – as we mention earlier, these labeling systems have introduced major changes to the market. But they are losing their way and the systems and organizations that own and manage these labels should change course. They should find ways to make sustainability pre-competitive, to make it possible for business to pull sustainability out of its niche. This week is an important one for sustainability labels – it is the annual ISEAL conference in London. With this article we hope to give some food for thought and we look forward to discussing these important issues with the sustainability labels and brands during the conference this week.