This section summarizes key issues and common approaches that unite the sustainability standards movement, based on the discussions, debates and research carried out during this project.
A longer, more detailed version of this document, and an explanation of the process that led to its development, is available here.
Global Challenges
Today’s economy is highly globalized, with production chains reaching across continents to supply vital goods and services to a population that is likely to reach 10 billion within fifty years. If the global economic system is to meet peoples’ needs in the future, it needs to change. It needs to be more responsive today to the needs of future generations, and it needs to be better at integrating social and environmental costs into market economics. Changes to government regulation, company policies and voluntary consumer behaviour are all needed.
We believe that sustainability standards can be powerful tools to help governments, businesses and individuals achieve the necessary changes. We are still learning how these tools can best be used, and recognize that there are many challenges still to overcome, but we strongly believe that sustainability standards have a major contribution to make.
How Sustainability Standards work
In economic terms, sustainability standards are a tool to internalise negative externalities associated with dispersed, global supply chains, and so are an efficient way to help correct market failure. In the longer term standards systems can help drive more fundamental change by raising awareness, creating new opportunities for action, and changing social attitudes and behaviour. These changes will ultimately be reflected in the decisions of government, formalised through national regulations and intergovernmental agreements.
Two Levers for Change
1. Market Failure
Markets favour cheaper products of a given quality. It is generally cheaper for a producer to ignore the social and environmental impacts of production, where these do not directly affect product quality. The social and environmental impacts have real costs, but these are paid by workers, local communities and future generations, rather than by the companies involved. The highly globalized nature of production processes means that social and environmental costs of production are not apparent to consumers. The global economy consistently rewards businesses which damage the environment and local communities, whatever the longer term consequences.
2. Regulatory Failure
National economic strategies typically focus on the growth of companies, fueled by increasing consumption. Government regulation is often weak, or poorly enforced. Trade negotiations are generally opaque and dominated by business interests, to the exclusion of the voices of civil society and local communities. Market failure is exacerbated by regulatory failure.
In consequence, the global economy is extremely efficient at driving prices down and at ‘externalising’ social and environmental costs: resulting in child labour, poor working conditions, forests degradation, water pollution, collapsing fish stocks, climate change and such like.
Sustainability Standards as a Business Strategy
Sustainability standards define practices which reduce or avoid such social and environmental impacts. Systems for labelling or otherwise identifying such products make a more sustainable economic model possible, by allowing businesses and consumers to distinguish between products and services on the basis of their social and environmental impacts, and not just on price and quality. In economic terms, they internalise the costs of more sustainable practices, and provide additional information to allow the market to operate more efficiently. They also create new opportunities for efficient regulation, where government can act to correct market failure.
In recent decades a few companies have begun to develop long term business strategies based around such sustainable practices. In doing so they are responding to growing consumer demand, but also reducing their exposure to reputational risk, political risk and supply chain disruption, pre-empting regulatory change, improving their ability to recruit staff and building employee loyalty. In short, they are beginning to see sustainability as profitable.
To date, however, companies that consider sustainability to be a normal way of doing business are the exception, not the mainstream norm. Governments are often skeptical of the value of sustainability standards, perceiving them to be economically unorthodox. Consumers and the general public have mixed reactions: a relatively small percentage are prepared to pay more on a voluntary basis for products that they see as being ‘more ethical’, but a large majority purchase products on the basis of price and performance.
To make fundamental change businesses, policy makers and the public need to be convinced: that change is needed; and that sustainability standards are an effective and legitimate response.
The case for change is being led by scientists and NGOs. The sustainability standards movement needs to convince policy makers and the public that sustainability standards are effective and legitimate.
On the Impact of Sustainability Standards
It has proved incredibly difficult to prove that a given standards system is effective in making a specific change. However, the evidence is accumulating. The movement is getting better at putting systems in place to collect the evidence, analysing it, and presenting it.
Sustainability standards systems can be effective.
Clearly some systems will be more effective than others. The standards movement is getting better at understanding the different elements that contribute to a system’s effectiveness, and using this information to make improvements. Tools such as the ISEAL Codes of Good Practice are being developed to define characteristics that make standards systems effective, and to encourage and support their wider adoption.
On the Legitimacy of Sustainability Standards
Good governance is a fundamental element of sustainability. Sustainability standards should complement and reinforce good governance.
Voluntary sustainability standards have sometimes been justified as filling governance gaps, offering stakeholders mechanisms to define and encourage more sustainable practices where governmental systems are not working.
There is a legitimate role for voluntary systems, but it is also essential that voluntary systems do not undermine the proper role of government.
Well developed non-governmental multi-stakeholder processes provide a level of legitimacy, but the limits of this legitimacy in relation to governmental and inter-governmental systems are not well understood.
The standards movement recognizes the critical importance of this issue, and is committed to understanding it better with a view to clarifying and then implementing best practice.
The paper Voluntary Social and Environmental Standards and Public Governance: Reviewing the Evidence and Setting Principles for Standards-Setters reviews these issues in depth, and proposes eleven ‘principles’ as a starting point for seeking agreement on best practice.
Three Strategic Challenges
The standards movement recognizes that there are several key, strategic challenges that need to be resolved. It is committed to working with government, businesses and all other stakeholders to find the best solutions. Key challenges include:
1. Navigating Standards Diversity
The number and variety of sustainability standards has grown exponentially over the last couple of decades. There is widespread concern that this diversity will make the movement less effective in achieving its aims. Conversely, diversity permits innovation and experimentation. There is recognition that different standards are effective at addressing different issues, responding to the needs of different product sectors or consumer requirements. A range of standards may be more effective overall than a ‘one size fits all’ approach.
The standards movement is working with businesss and other stakeholders including consumer organizations to understand the issues better, and to identify the most effective solutions.
2. Responding to Business Expectations
Companies’ expectations for standards systems are changing. Businesses are looking for systems that address their needs across the full range of their products, and which cover the full range of reputational issues and supply chain risks they face. They see the current landscape of sustainability standards systems as fragmented, and foresee a period of rapid consolidation.
Sustainability standards systems recognize these challenges too, and can respond through better organization, strategic alignment and integration, and by providing a clear and consistent explanation of what they offer and of their unique, long term value.
Sustainability standards systems are working together increasingly closely through organizations such as ISEAL: defining best practice, aligning systems and approaches, and coordinating strategies and messages.
3. Going Global
Standards systems have been driven historically by demand from consumers and businesses in high income, western countries. With the emergence of the ‘BRIC’ countries (Brazil, Russia, India & China) global consumption patterns as well as political influence are changing rapidly . Sustainability standards need to operate globally. The movement needs to develop and implement strategies that recognize and address differences in governance, consumer awareness and concerns, and levels of private sector engagement in BRICs and developing countries, as well as the West.
To see this Theory of Change in action, check out the demonstration site Sustainability Standards 101.
