Trust, Influence and Global Value Chains: What's Next for Certifications and Labels?

08 Oct 2010 – Patrin Watanatada

When he gives talks on certifications, Richard Perkins, senior advisor on agricultural commodities at WWF-UK, likes to show the audience an apple from the tree in his back garden.

He observes that this is the shortest supply chain in his life, and notes that: “I look for a certification to act as a trusted proxy – giving me the sense when I buy something that I have some influence over what happens at production, the same way I do when I pick an apple from my garden.”

Richard told this anecdote last week at the Certifications, Consumption & Change conference in London, which featured speakers from a number of the major independent standards and certifications, expert observers including ISEAL Alliance, Oxfam and WWF-UK, companies from Unilever to Dole, and related players such as Made-By UK, Ekobai.com, Terrachoice and Impactt, all asking: What is the future of certifications?

The shipping industry makes the world go round

Most of us have similarly global personal supply chains. In the last fifty years, global exports and imports have increased from less than a fifth to more than half of world GDP. A couple of years ago, a shipping container followed by the BBC went twice round the world in a year, hitting Scotland, Shanghai, Brazil and Los Angeles along the way.

Such geographic and conceptual distance between where a good is produced and where it is consumed brings plenty of benefits, to be sure – but also plenty of social and environmental problems. And alongside that remains the very human urge to know where our stuff comes from and what’s in it: a desire for provenance and for story.

A label is a multi-tasking story

So it’s not surprising that certifications – and consumer-facing sustainability labels more generally, from carbon to nutritional labels – are everywhere. The Ecolabel Index database currently lists 349 schemes from Italy’s 100% Renewable Energy to the Zque natural wool label, and an array of other labels are in various stages of development. Almost every major consumer goods manufacturer and retailer seems to be partnering with an independent labelling scheme.

What are all these certifications and labels trying to do? (I’ll call them eco-labels from now on for convenience.) As Richard’s apple anecdote illustrates, the basic purpose of an eco-label is to tell the consumer a story that he or she can trust about what’s happening in the rest of the value chain. This story serves to create demand for more sustainable products by influencing or affirming positive actions by consumers, retailers, manufacturers and producers alike.

As I listened to the speakers at Certifications, Consumption & Change, a few other themes came up again and again, and I jotted down a few of the more specific tasks that eco-labels are intended to perform in the service of sustainability:

• Set common definitions, guidelines and metrics for social and environmental impact.
• Engage stakeholders in decision-making and collaborating on solutions.
• Communicate good performance to consumers at the point of purchase.
• Provide assurance to consumers and other stakeholders.
• Increase sales for the better-performing product.
• Change social norms and expectations of a product category.

That’s a lot of very different tasks. How realistic is it to expect a single label to achieve all of these goals?

Communicating information, creating trust, influencing demand

Certainly, many eco-labels – from Energy Star to Fairtrade – have done a great deal to create a common framework for sustainability discussions and to change what society expects from certain categories. But using eco-labels – particularly independent or 3rd party schemes – comes with its own challenges and costs, and as a result, many businesses and stakeholders alike are asking questions such as:
What value are producers, manufacturers, retailers and consumers gaining from these schemes? Many independent eco-labels are powerful brands in their own right – how to manage this relationship? When are independent schemes the best option and when are they not? How might they be complemented by other tools for creating trust and influencing demand for more sustainable products, such as:

• In-house standards and labels (like P&G Future Friendly or Starbucks C.A.F.E. Practices);
• RFID, web and mobile technologies that connect consumers with the value chain (Fairtrade Foundation is testing direct SMS and video connections between producers and consumers);
• Aggregators such as GoodGuide and B Corp, which draw on other data;
• Tastemakers such as Vogue (which caused sales of Timberland’s Earthkeeper boots for women to spike);
• And – perhaps most of all – the power of trusted global brands (think Marks & Spencer or Patagonia, whose corporate brands in some sense serve as ‘guarantees’ of good sustainability performance for many consumers)?

And how should eco-labels evolve alongside all these influences to provide a greater return on investment for all concerned?

Is it a brand? Is it a product-level sustainability report?

At SustainAbility we are deeply interested in eco-labels – a fascinating hybrid of branding and sustainability reporting with an equal emphasis on disclosure and behavior change – because, as I realized in making my list of the tasks that eco-labels perform, they raise three tough questions that sit at the core of much of our work.

1. How do you define sustainability impact?
2. How do you measure sustainability impact?
3. How do you communicate the right kind and amount of sustainability information in a way that’s credible but also engaging – and, where appropriate, differentiating for the business?

SustainAbility has explored these questions most recently in our Rate the Raters research (see the just-released phase 2 findings), our Engaging Stakeholders membership program (upcoming workshops in New York and London will include in-depth discussions on transparency), our Global Reporters research program (our second report on the state of sustainability reporting in Brazil, with partner FBDS, will be launched in São Paulo at the end of October; also see the first one, here), and recent projects (such as this one).

We are now preparing to look at these questions in the context of eco-labels through a white paper and broader research effort this fall. If you’d like to get involved, please get in touch.