Better Trade for Sustainable Development: The Role of Voluntary Sustainability Standards

The expansion of international trade in the last decades, although it has brought economic and societal benefits across the globe, sometimes led to failure in addressing the adverse social and environmental impacts. Sustainable trade takes place when these adverse impacts are mitigated, and the international exchange of goods and services yields positive social, economic and environmental benefits [Read: Minding the gap to foster better trade for sustainable development].

For trade to become a ‘sustainable engine’, one approach that seems to be increasingly used is to internalize social, economic and environmental concerns in international trade. This can be done by different means and policy instruments and tools. One promising tool that can contribute to sustainable trade and sustainable development is Voluntary Sustainability Standards (VSS), which comprises certification schemes, labelling programs, and private standards. Over the last decades, VSS have emerged as new tools to address key sustainability challenges such as biodiversity, climate change, and human rights.

A dialogue on “Better Trade for Sustainable Development: The Role of Voluntary Sustainability Standards”

UNCTAD will host a webinar on 30th August 2021 at 14h (CET) to launch its new report: “Better Trade for Sustainable Development: The Role of Voluntary Sustainability Standards (VSS). This dialogue will discuss the potentials and constraints of VSS in making international trade more sustainable, in particular with regards to developing countries development opportunities. It seeks to foster the debate on the means of maximizing VSS contribution to sustainable development and minimizing their risks.

To register to this public webinar, please visit bit.ly/3z1Fqoi.

Chaired by UNCTAD Acting Secretary General, Ms. Isabelle Durant, along with the authors of the report, Dr. Axel Marx, Deputy Director, Leuven Centre for Global Governance Studies and Mr. Santiago Fernandez de Cordoba, Senior Economist and UNFSS coordinator at UNCTAD, and discussants Ms. Mercedes Aráoz Fernández, Professor of Economics, Universidad del Pacifico, Mr. Chad Blackman, Ambassador of Barbados to the United Nations and WTO in Geneva, and Ms. Monica Rubiolo, Head Trade Promotion of the Swiss State Secretariat for Economic Affairs, this dialogue aims to build a way forward in understanding the association between VSS and sustainability concerns.

VSS as an engine to sustainable value chains and better trade

The changing nature of trade which is characterized by the dominance of global value chains (GVCs) allows producers in developing countries to be integrated in global economic dynamics which can contribute to their economic development. In addition, GVCs allow for the diffusion of social and environmental standards throughout production processes.

VSS play an important role in this diffusion of social and environmental standards. That is, GVCs can be governed in a way which enhances economic, social and environmental ‘upgrading’, a process that contributes to better protection of social and environmental standards.

Upgrading through the governance of GVCs directly allows producers in developing countries to access global markets and reap their potential benefits contributing in this way to economic development in developing countries.

Emergence, drivers of VSS adoption

In order to better understand VSS potential as tools for social and environmental upgrading it is important to study the drivers and challenges for their adoption.

Studies focusing on the emergence of VSS are sparked by many interrelated factors, and that the story about their emergence is partially different depending on the commodities covered and the type of VSS.  Five major drives for VSS adoption include: consumer demand, brand protection, government regulations, reaction to failure of multilateral efforts, and reaction to other VSS. Any change in any of these drivers will influence adoption of VSS.

Challenges for developing countries

From the perspective of developing countries, there are several barriers to VSS uptake including  the costs involved in obtaining VSS, a lack of incentives, a governance gap which refers to the fact that producers in many developing countries operate in a regulatory context which is not aligned with the regulatory approach of VSS, and the political opposition towards VSS.

Impact and effectiveness of VSS on the ground

Increasing VSS adoption without achieving tangible on-site impacts represent mere “greenwashing” effects, which can have long-term negative consequences for the reputation of VSS.

A structured overview of the literature that has evaluated the impacts of VSS on sustainable trade and production shows that the literature that has investigated the impacts of VSS on the ground reveals different conclusions. While some evaluate the effects of VSS on sustainable trade positively, the majority of articles question the capability of VSS to promote substantial changes towards more sustainable modes of production and trade.

Enhancing VSS role and impact on sustainable trade

The potential of VSS to make trade more sustainable relies on two crucial components: first they need generate a substantial impact on the ground with regard to key sustainability parameters (impact-dimension). Second, they need to be widely used (adoption-dimension). In order to improve on both dimensions, some of the structural approaches/transformations which can be considered for enhancing the potential of VSS include:

  • Leveraging the support by donors and multilateral organizations: Multilateral organizations and donors can continue their engagement with VSS in order to overcome some of the barriers identified earlier.
  • Integrating VSS in Public Policy: This is already occurring; for example, VSS are becoming a key component of policies on sustainable public procurement. Also, an increasing number of free trade agreements promote cooperation and information sharing about VSS.
  • Further harness the market-based potential of VSS by providing more transparency to consumers.
  • Strengthening Empowerment: VSS schemes need to address power imbalances that marginalize producers and to place fairness at the heart of economic relations to transform trade. This includes redesigning the ways decisions are made to include actors from the back-end of the value chain.

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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