Melisa Ongun

May 6, 2014

The project…

The certification of agricultural commodities, such as cacao, coffee, and bananas, as well as other natural resources, such as wood, is a practice that is becoming increasingly commonplace to help alleviate the environmental concerns associated with cultivating these products. Certification simply means that a given commodity has been produced using a minimum set of standards that have been set by that certification program. It is assumed that the consumer will interpret the certification stamp on a product as signifying that the commodity was produced in an environmentally and socially sustainable manner.  Most stamps are intuitive, for example: the Rainforest Alliance protects against deforestation, the Forest Stewardship Council ensures responsible management of forests through limiting clear-cutting and replanting trees, and Fair Trade Certified ensures that small, low-income producers are getting fair prices for their products.

As a master’s student at the University of Michigan, along with a group of four other students, I was presented with the opportunity to research the role that commodity certification can play in helping to reduce deforestation in the tropics. This project required us to travel to Brazil and Indonesia to study cattle and palm oil certification, respectively. During our field research we visited farms on the frontlines of deforestation and studied potential solutions to enhance sustainability in these tropical forest landscapes. Perhaps using the word “solution” is ambitious, but nonetheless, we hope that the work we have done contributes to an area that is rapidly expanding, and thus can provide some insight as to the specific practices that are producing desired results in terms of increased producer participation and sustainability.

When the CGIAR Research Program on Climate Change, Agriculture, and Food Security assigned us with the objective of determining how both SAN and RSPO are operating to enhance sustainability, it took our team a while to frame our research in order to tackle this wide scoping issue. What made it even more challenging was the fact that the two programs we looked at – the Sustainable Agriculture Network cattle certification program and the Roundtable on Sustainable Palm Oil certification program – are fundamentally different in terms of their structure. Furthermore, RSPO has been in existence since 2004, whereas SAN was created in 2010. We were also studying them in two countries that differ intrinsically in regard to culture, politics, and economics. Out task was not as easy as comparing the two programs with one another, but rather we had to frame our research in ways that allowed us to assess the programs’ successes and to identify areas for improvement within each country’s context.

After hours upon hours of painstakingly teasing through the literature and brainstorming both before and after our trips to Indonesia and Brazil, we came to the realization that the success of each certification scheme is hinged on the design choices that structure the programs. Our question became: how does the structure of certification programs influence producer participation as a route to enhanced sustainability?

What we found…

In the world of commodity certification, each program designs the factors that determine the structure of the entire certification process, from design of the program to recruitment of producers, in different ways.  We found that the decision to design a program’s ”core activities” has the potential to help scale-up the program and increase its contribution to reduced deforestation.  In the SAN and RSPO certification programs, each program makes distinct design choices, which result in fundamental differences in the path that their producers can take towards certification and, consequently, enhanced sustainability.

We also found that each program works to strike a delicate balance between maintaining program rigor and legitimacy while supporting producer accessibility to certification. However, it is very difficult to do both, as I will describe. Both the RSPO and the SAN attempt to achieve this aim by luring producers towards certification using non-monetary incentives.

Design choices within each core activity affect the structure of each program…

The four core activities that we identified within both the SAN and RSPO programs are: standards setting, recruitment and perception, implementation, and compliance. Standards setting, intuitively, refers to the philosophy that the program uses to shape their certification standards. Recruitment and perception is the way the program attempts to attract producers to want to certify. Implementation refers to the way certification inserts itself into the existing market structure.  Compliance is simply how the programs audit and enforce standards and what the consequences are when there is a failure of the producer to comply.

Standards Setting…

In setting the standards of the program, the RSPO and the SAN utilize very different design choices, laying the groundwork for two different ways to construct commodity certification programs. The RSPO program revolves around a philosophy where sustainable palm oil should be the norm and is something that all producers can achieve, and thus the program is structured in a way that is more inclusive rather than exclusive. In the RSPO program, producers who are not yet certified can still become members of the roundtable enabling them to attend conferences and learn the techniques needed to eventually certify. Furthermore, a roundtable consortium that includes a diverse group of stakeholders, including producers, sets the standards. This allows those who are directly affected by certification to have a say.

The SAN adopts a philosophy in which the standards are set to a very high level of social and environmental sustainability in an effort to elevate the entire industry from the top. The intention is not to be exclusive, but rather to push the industry towards a higher standard. Unfortunately, this has resulted, thus far—the program is only 3 years old – in exclusivity. Additionally, unlike the RSPO, there is no opportunity for producers hoping to certify to have any assistance to aid them in their effort to certify. Any technical assistance or advice must be sought out and funded solely by themselves. The standards are governed by a consortium of NGOs, also different from the RSPO, which enhances the rigor of the standards but reduces the influence and input of producers.

The philosophies and governance of the two programs result in higher participation but arguably less rigorous standards for the RSPO program, and lower participation but more rigorous standards for the SAN program.

Recruitment and Perception…

Another important activity involved in certification is how a program recruits producers to certify and the perceptions of the program by both producers and outside parties.

The two programs use similar tactics to recruit producers to participate. In both the palm oil and cattle industries, there are three types of producers: the small, the medium, and the large. The small and medium producers are those farmers that bring in the least income and tend to lack knowledge of sustainable farming practices. These are the farmers who may be farming in the same way that their families from generations before have been doing for years and thus lack the knowledge or will to seek out advanced practices. They have the most ground to make up in order to achieve certification and lack the funds to seek out technical assistance.

The large farmers are those that bring in the most income, are the most visible—often selling most of their product to multinational corporations – and enjoy the greatest share of the market. These are the producers that have the smallest sustainability gap between what they are already practicing and what it takes to certify. For these farmers, certification provides them with several benefits, such as potential price premiums, market access, and better management of their sustainability risks. Management of risk is especially important for these producers, since they sell to multinational companies who are most closely scrutinized by whistleblowers and therefore worry about brand image. Certification is relatively simple for them and is a way to improve their image.

Both the RSPO and the SAN go after the large producers initially, because they are easy “wins”. There is not much they need to do to certify and furthermore it allows the certification to gain visibility in the marketplace. However, where certification can make the biggest gains is by recruiting the small and medium farmers to certify, and by providing them with better accessibility to resources in order to achieve certification. This is where certification can make the biggest impact because it is the small and medium farmers who: 1. Make up majority of the market (in terms of numbers of producers), and; 2. It is often where most of the environmental degradation is occurring, at least in the cattle industry in Brazil.

Implementation…

Every producer in the both the palm oil and cattle industries falls along a spectrum of sustainability. Regardless of size, some practice lower sustainability and some prioritize environmental protection. The implementation of a certification program along this spectrum allows for a bar to be set at the environmentally friendly end of the spectrum. This bar can be visualized as the minimum standards necessary to certify. In the SAN program, this bar is a hard line that a producer either falls above or below—falling above the line means the producer has achieved certification, however there is little room for error and there is also no assistance from the program to help producers achieve this hurdle.

In the RSPO program, imagine the same spectrum of sustainability. The bar for certification is also set on the environmentally sound side of the spectrum, but the difference is that those producers that fall below the line, but are close to it, receive assistance from the RSPO as long as they are members in order to help them climb over this line and achieve certification. RSPO membership acts as a metaphorical ladder to help producers climb towards certification. It can be argued that the RSPO is more supportive of producers than the SAN.

Compliance…

In terms of compliance, SAN certifying bodies provide no consultation to producers and audit using a checklist approach. The minimum criteria must be met to maintain certification and, should the producer fall below this minimum, they lose their certification. There is a chance to have a follow-up audit, but this is not typical and must be arranged on an individual basis. The SAN program is thus very strict, and producers must maintain good practices to retain their certification status. As a consequence, NGOs and consumers can have confidence that SAN-certified products are genuinely sustainably-produced.

The RSPO also employs a model in which audits are conducted, but NGOs play a bigger role in acting as watchdogs over the compliance of producers that achieve certification. There are also some opportunities to correct any missteps by producers. Producers are allowed two 60-day windows to correct their actions, should they be found to fall out of the bounds of certification. This model may retain more producers, but can also cause NGOs and consumers to doubt the credibility of RSPO-labelled products.

What all of this means…

Our research led us to believe that both certification programs could experience the most growth by recruiting greater numbers of the small and medium producers. These farmers make up the majority of the two markets, and are also the ones having the largest negative impact on the environment. However, to do this, the programs may need to implement a method by which they can provide these small producers with further assistance and the training necessary for them to run their operations sustainably. Many smaller producers are operating using methods that past generations have used when sustainability and deforestation was less of a concern. At the same time, breaking these age old traditions takes a lot of time and effort by both the producers and the certification programs, requiring enhanced incentives, such as price premiums, to encourage action. In attempting to share what we have learned during the course of this project, our research group has presented our findings at an international conference, and has submitted a paper to the Journal of Sustainable Forestry.