Tackling supply chain challenges with credible standards
What is the real role of sustainability standards in supply chains? This was a question we had been grappling with for a long time at the ISEAL Alliance, the global membership association for sustainability standards that I head. Hence, we began in late 2014 to interview companies to learn from all kinds of businesses as to what they saw as the value of working with credible standards systems. We wanted to know if certification made good sense from a business perspective.
We began to seek out and interview experts who had actively participated in the decision to engage with standards and who watched their evolution in their company over time. We learned the value of standards was high, though it varied by type of business, sector, geography and other factors. This month we issued the full report and the set of individual interviews entitled the Value of Sustainability Standards for Businesses: Stories from Companies*.
The interviews also revealed that standards were not always valued in the way one might expect. While market differentiation and increased sales were mentioned by a few companies, the potential value of a visible ecolabel was never the primary reason for the standards partnership.
Instead we heard a great deal about supply chain challenges. We learned how sustainability standards reduced risk, raised the bar in a challenging sector or made a complex supply chain more understandable.
As one retailer put it: ‘Credible standards and certification give us confidence that our supply chains are being managed in socially and environmentally responsible ways.’
Risk management came up repeatedly in interviews. A major palm-oil producer and trader said that his company’s experience with a sustainability standard helped staff ‘understand that things must be done in a systematic way’ and that they had now ‘moved away from ad hoc crisis management.’
Additional benefits can also be derived. A diamond company told us that its engagement provided an extra risk-management tool for downstream customers and helped manage risk in the broader industry.
‘Diamonds are not that branded, so if there is any reputational damage caused by a rogue entity the entire supply chain will feel a disproportionate impact. It is thus important to raise the industry standards, the whole pipeline. The best reason for working with a credible standard is to level the playing field and to have an independent organization that is able to reach out to people that we can’t reach,’ the company stated.NO SILVER BULLET
We also learned that sustainability standards are not a silver bullet. Companies continue to work with multiple sustainability tools and multiple certifications. Many still rely heavily on their own codes of conduct or auditing programmes, which they see as complementing their use of third-party certification. One retailer working with six ISEAL members told us that certification completes the chain of sustainable sourcing, complementing and going further than the company’s own code of conduct.
The outsourcing of assurance to competent local experts was another theme. The same retailer working with our six members, spoke to us about the decision to work with a forestry certification programme, explaining ‘if we had to send out own auditing teams to each forest, we would be training them to assess forests in more than 50 countries. By relying on [the standard’s] local experts to assess the forest independently, these costs are shared by other customers. This also reduces the number of audits on the forests’ management’.
Credibility was always cited as crucial. Some experts brought up the issue of noncredible messaging and claims which confuse consumers and don’t help sustainability issues. This is particularly true in the seafood sector, where a range of non-credible messages are appearing, particularly in North America. One food company grappling with the conservation of global tuna stocks summed up their experience in deciding to work with an ISEAL member: ‘There wasn’t a player that was directly addressing the supply side [of tuna] and others were just making claims without substantiation, so the importance of a credible label was critical.’COMMITMENTS TO STANDARDS
While all of those interviewed agreed that the sustainability landscape is changing dramatically, they also said that their company’s commitment to sustainability standards will only deepen over time.
While these results show interesting thoughts and views on the credible standard’s real role in supply chains, ISEAL believes deeper research on the business case for standards is needed. We hope these stories will inspire more companies to engage with credible, robust and transparent standards. We believe sustainability standards can provide a roadmap to responsible practices for companies large and small, particularly if those standards systems are set up with positive sustainability impacts as their highest aim and with credibility at the heart of their systems.