Sustainability Standards and Economic Concerns: An Academic Roundtable Discussion

man wearing blue hat spraying yellow flowers on field

When Voluntary Sustainability Standards (VSS) emerged in the late 20th century, they were heralded as innovative new instruments to help meet some of the most pressing sustainability challenges. Disappointment in the lack of meaningful government policy commitments and/or ineffective implementation of traditional ´command-and-control´ regulatory systems spurred the emergence of these market-based instruments.

The question is whether VSS have been able to deliver on their promise to bring about fundamental, lasting changes in sustainability practice. Putting focus on the economic benefits, SDGs 1 (poverty reduction), 8 (sustainable economic growth and employment), 9 (sustainable industrialization), and 10 (reduction in inequality) are tied to the potential that implementation of VSS and its related capacity building projects may help increase farmers´ productivity (UNFSS, 2016). This in turn would lead to higher income for farmers, more stable relationship with their buyers, and greater access to resources.

While increased productivity may bring about larger yields and increased revenue, net income for farmers may be modest, not significantly increased due to costs involved in certification, such as audits and other requirements (IOB, 2014). Some audits “… generally find that Fairtrade farmers receive higher prices, have greater access to credit, (and) perceive their economic improvement as being more stable” (IOB, 2014). Yet, other studies have shown that economic gains from sustainable value chains accrue essentially to processor and retailer, rather than to the farmers. The Cocoa Barometer finds that, in supply chains of certified cocoa, the value added for farmers is around 6.6 per cent while processors and retailers garner 35.2 per cent and 44.2 per cent, respectively (Barometer Consortium, 2015).

Some studies have shown that producers of certified products have increased access to lucrative markets, though this has also been inconclusive. A study released by the WWF regarding the economic benefits of the Forest Stewardship Council (FSC) highlights that in some cases, FSC certification, particularly for the larger, better managed enterprises, has improved access to European markets. However, this was not found to be the case for all FSC products (WWF, 2015, 8).

The longstanding concern of many developing country exporters has been that VSS may be used to limit access to developed countries’ agricultural markets. Other ongoing discussions on the economic impacts of VSS are mostly around:

  1. Their effect on trade, GVCs participation, and market access and structure.
  2. Their impact on employment creation, wages and poverty alleviation.
  3. Their impact on the level of productivity and product quality.
  4. Their impact on transferring knowledge and creating innovation and better practices.
  5. Their legal status in the WTO

A Dialogue on VSS and Economic Concerns

The UNFSS’s Academic Advisory Council (AAC), in partnership with Evidensia, will be hosting the 3rd AAC Roundtable Series virtually on Sustainability Standards and Economic Concerns on 17 June 2021, 14h- 15h30 CET.

The dialogue will cover the means of maximizing VSS economic benefits while minimizing their risks. It will help to provide inputs in developing a common foundation upon which the discussion is compounded with the following questions:

  1. What is the role of VSS in transforming the GVCs structure and participation?
  2. From a developing and least developed countries perspective, what are the determinants of VSS being catalysts or barriers to trade? And how to enhance their favorable impact on trade?
  3. On which economic dimensions would VSS be a challenge to address, and which of these dimensions can VSS make a difference and/or should prioritize?
  4. What are some of the main knowledge gaps and where we need more research/type of research?
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Meet the Speakers

Bernard Hoekman is Professor and Director, Global Economics at the Robert Schuman Centre for Advanced Studies, European University Institute in Florence, Italy. Prior positions include Director of the International Trade Department and Research Manager in the Development Research Group of the World Bank. He has been an economist in the GATT Secretariat and held visiting positions at SciencesPo, Paris.

Stefano Ponte is Professor of International Political Economy at Copenhagen Business School, where he is also the director of the Centre for Business and Development Studies. His current research is concerned with sustainability issues in agro-food value chains. One of his recent books is entitled Business, Power and Sustainability in a World of Global Value Chains (Zed books, 2019).

Mercedes Aráoz Fernández was named prime minister of Peru in September 2017. Previously, she was second vice president and congresswoman since July 2016. Aráoz Fernandez has also served as country representative for the Inter-American Development Bank in Mexico and as the first female finance minister of Peru from 2009 to 2010. She served as minister of foreign trade and tourism from 2006 to 2009, and also as Peru’s production minister during 2009.

She has been a board member and professor at the Universidad del Pacífico in Lima and the Academia Diplomática del Perú. Aráoz Fernandez has a bachelor’s in economics from the Universidad del Pacífico and she earned her master’s and doctorate in economics from the University of Miami.

Thomas Dietz is Professor for International Relations and Law with a focus on Sustainable Development. Before coming to Münster he was a Postdoctoral Fellow in the Institute of European and Comparative Law at the University of Oxford and a member of Wolfson College. His research examines the implementation and effects of VSS on the ground. He leads the research group TRANS SUSTAIN which focuses on the efficacy of VSS in global coffee value chains. He is currently the Director of the Institute of Political Science at the University of Münster.

Vera Thorstensen is a professor at the School of Economics from the Getulio Vargas Foundation and Head of the Center on Global Trade and Investments. She was the economic advisor of the Mission of Brazil to the WTO from 1995 to 2010 and was Chair of the WTO Committee of Rules of Origin for seven years.

She is the WTO Chair Holder in Brazil and the President of the Brazilian Committee on Technical Barriers to Trade Committee, a governmental body under the National Council on Metrology, Standardization and Industrial Quality of the Ministry of Industry, Foreign Trade and Services (Conmetro-MDIC) since 2014.

References

Barometer Consortium (2015). “Cocoa Barometer 2015—USA Edition.” http://www.cocoabarometer.org

IOB Review (2014). “No. 397: Riding the Wave of Sustainable Commodity Sourcing: Review of the Sustainable Trade Initiative IDH 2008– 2013.” The Hague: Netherlands Ministry of Foreign Affairs, Policy and Operations Evaluation. 2014.

WWF (2015). “Profitability and Sustainability in Responsible Forestory: Economic Impacts of FSC Certification on Forest Operators.” Gijs Breukink, Joshua Levin, Karen Mo, authors. 2015. http://www.worldwildlife.org/publications

The United Nations Forum on Sustainability Standards (UNFSS) is a joint initiative of 5 UN Agencies (FAO, ITC, UNCTAD, UN Environment and UNIDO) that seeks to address these challenges. It is a demand-driven forum for intergovernmental actors to communicate among each other and engage with key target groups (producers, traders, consumers, standard-setters, certification-bodies, trade diplomats, relevant NGOs and researchers) to address their information needs and influence concerned stakeholders. It aims to provide impartial information, analysis, and discussions on VSS and their potential contribution to facilitate market access, strengthen public goods and achieve Sustainable Development Goals (SDGs). Most importantly, the UNFSS focuses on potential trade or development obstacles VSS may create, with particular emphasis on their impact on SMEs and less developed countries.

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