4.3 Internal Versus External Standards

What is the best option: to use an external standard or to develop your own company’s internal sustainability criteria or standard?

There are basically two approaches. Your company can either define its own sustainability criteria for a particular commodity, or it can use an existing standard developed by an external organisation. The choice of whether to create your own standard or look to existing standards will depend on your firm’s market power, brand positioning, and decisions about risk. When you apply your own standard, you bear all the costs, all the risks, and all of the pros and cons related to credibility of that standard. When you look to external standards, you share costs and risks, and participate – for better or worse – in the credibility issues related to the external standard entity.

Somewhere between these two options lies an alternative – adopting a set of “guidelines” developed and used by a group of companies, such as SAI Platform’s Principles and Practices (P&Ps) for specific commodities. Within that organisation, food and drink companies jointly develop P&Ps for the sustainable production of several crops on a pre-competitive basis. To date, P&Ps have been developed for arable and vegetable crops, beef, coffee, dairy and fruit – see Example 15. Your firm may adopt the P&Ps as such, or use them as a baseline to develop its own internal standard.

Examples of company internal standards are Starbucks’ C.A.F.E. Practices standard (see example 5), and Unilever Sustainable Agriculture Code (SAC), used by the company for raw materials for which no appropriate externally defined standards are available.

Example 5.The Case for a Company-Owned Standard: Starbucks’ C.A.F.E. Practices

Starbucks: the Brand and Sustainability

At the centre of Starbucks’ business is coffee. Sustainable coffee sourcing is therefore a top strategic priority in the firm’s sustainability approach. There are many competing sustainable coffee standards available. Starbucks, however, has opted to apply its own standard to the bulk of its sourcing, thereby linking its brand to a consistent company-wide approach to sustainable sourcing.

C.A.F.E. Practices

Starbucks’ C.A.F.E. Practices (Coffee and Farmer Equity) were developed in close cooperation with Conservation International (CI) and industry stakeholders. A major reason for CI and Starbucks to cooperate was a strong overlap between biodiversity hotspots as identified by CI and the coffee growing areas from which Starbucks was sourcing its coffee.

The C.A.F.E. Practices programme is a holistic and comprehensive approach that addresses the most important factors that can impact sustainability in coffee production and processing. C.A.F.E. Practices consist of a comprehensive set of measurable standards focused on the social, environmental, economic and agricultural aspects of coffee production and processing.

1. Product Quality (requirement):
All coffee must meet Starbucks’ standards of high quality.

2. Economic Accountability (requirement):
Transparency is required. Suppliers must submit evidence of payments made throughout the coffee supply chain to demonstrate how much of the price that Starbucks pays for green (unroasted) coffee actually gets to the farmer.

3. Social Responsibility (evaluated by third-party verifiers):
Measures in place that concern safe, fair and humane working conditions. These include protecting the rights of workers and providing adequate living conditions. Compliance with the indicators for minimum-wage requirements and addressing child labour/forced labour and discrimination is mandatory.

4. Environmental Leadership (evaluated by third-party verifiers):
Measures in place to manage waste, protect water quality, conserve water and energy, preserve biodiversity and reduce agrochemical use. Additional indicators focus on yield improvement through best agronomy practices.

Supporting the Farmers

Although Starbucks is not directly involved in growing coffee and generally sources from traders and processors, it plays a strong role in supporting farmers through Farmer Support Centers, as well as access to loans for farmer cooperatives through third-party providers.

Sources: Starbucks Ethical Sourcing and SCS Global Services

You can also choose to use an externally defined, well-accepted standard. Whether applying an external standard is the best option depends on answers to the following questions:

1. Are external sustainability standards available for the commodities under consideration?
For a number of commodities, specific external standards have been developed. Examples are internationally traded for crops such as palm oil, soy, sugar, coffee and cocoa. For some others, including milk and beef, such standards are still in development.Apart from crop-specific standards, there are general standards for sustainable agriculture such as the Rainforest Alliance Sustainable Agriculture Standard (SAN), and standards that cover specific aspects of sustainable agriculture, such as the USDA and EU organic standards, and standards for Fair Trade. To help in the mapping out of the above-mentioned standards, the International Trade Centre (ITC) developed an interactive online database called Standards Map – see Example 6.

Example 6. ITC’s Standards Map

Comparative analysis and review of voluntary sustainability standards, audit protocols and retailer codes of conduct

Standards Map is an interactive online database which presents comprehensive and comparable information on voluntary sustainability standards, audit protocols and retailer codes of conduct, with the aim of strengthening the capacity of all value chain actors to participate in more sustainable production and trade.

Standards Map references information on over 100 standards operating in more than 200 countries and certifying products and services in over 60 economic sectors. Through an intuitive and user-friendly search process, users can review and compare standards across common themes and criteria. Standards Map also includes additional reference material to increase awareness and knowledge of standards, including quick factsheets for each of the standards referenced and links to over 300 research papers.

The key features of Standards Map are:

  • Analyse and compare standards across 60 economic sectors, including agriculture, forestry, fisheries, mining, textiles and manufactured products, among others.
  • Identify opportunities for product diversification and new niche markets: make a comparative assessment of standards requirements and assess potential costs and benefits of standard adoption.
  • Flexible analytical tool: run customised searches based on your needs. Review standards’ coverage and scope, cost and price estimates, support and assistance, governance and environmental, social, economic, ethical, traceability and quality requirements. Construct advanced queries or refine pre-set queries from a pool of over 700 criteria.
  • Review research documents on voluntary sustainability standards: focusing on specific standards, products, countries or issues such as sustainability impacts.
  • Generate maps: to view in which countries certified units operate, where specific certification bodies can certify/verify operations and link your queries to ITC’s Trade Map.
  • Impartial information: Standards Map is the only web platform providing information at such a high level of detail. Standards’ data in the tool is verified according to a process including third-party experts and the respective standard owners. Standards Map does not make value judgments or ratings of standards.
  • Multi-lingual: Standards Map is available in English, Spanish, French and Portuguese.

Users in developing countries and territories can register here to access Standards Map free of charge. Users in developed countries and territories can register to get a one-week free trial access or subscribe for longer term access.

 

2. Is there an external standard available that is in line with your firm’s sustainability ambitions?
The basis for choosing an existing external standard is given by the answers obtained as a result of the questioning process described in Chapter 3 on the priority issues that the standard should cover and the level that is required. In practice, existing external standards may fit your requirements, but they may be too high or too low for your company’s purpose. In some cases, it might be a good idea to take an existing external standard as the basis, but to add company-specific demands for issues that have high priority. Your firm may also take elements from different standards and combine them to create its own standard. You may, for example, add more explicit requirements on workers’ rights, which are not present in the specific crop standard, from a social compliance standard such as Ethical Trading Initiative (ETI) or Business Social Compliance Initiative (BSCI).

3. What is your company’s sourcing model for a particular raw material?
It makes a difference whether your firm sources directly from farmers and cooperatives, through suppliers, or even from commodity markets (for more information, see Chapter 5). The more the raw material has a ‘commodity’ character, the more uniform the raw material is and the less direct influence the company has on farmers. In such ‘commodity’ supply chains, it may make sense to rely on external standards and the related certification systems. In supply chains where a company is sourcing directly and, as a result, has more direct contact with suppliers and farmers, it may be less obvious to rely on external standards and systems. In that case, it may be better to carefully build-in the firm’s sustainability requirements into pre existing patterns of communication and control (see Chapter 6).

In order to carefully map the existing situation, try to address the following items:

Characteristics of the supply market:
  • Origin and related sustainability risk;
  • Availability of the raw material, and likelihood of supply bottlenecks;
  • Character of the supply market, and supplier power (especially for the qualities needed by the company, see next point).
Company’s manufacturing and production requirements:
  • Quality;
  • Logistics;
  • Any other sourcing requirements for your company to be able to manufacture the products for the relevant brands.
Type of sourcing:
  • Direct sourcing: raw materials are sourced directly from farmers or farmer cooperatives;
  • Sourcing through suppliers: raw materials are sourced from processors or traders, who in turn source from farmers or farmer cooperatives;
  • Sourcing on commodity markets: raw materials are sourced on commodity markets, often without precise information about the producing farmers and their locations.

4. To what extent are the available standards known and accepted by producer markets as well as your company’s producers and suppliers?
Standards that are already known and well tested in the market may be preferred above standards that the producers are unfamiliar with. Such standards will be easier to implement as farmers will have some existing knowledge.

5. Can the standard contribute to creating value in consumer markets?
Certain external standards are well-known in consumer markets through certification and labelling programmes (see Chapter 4.9). Using such standards can thus be welcomed by some groups of discerning consumers. However, in other cases, an internal standard, strongly linked to the own brand identity can do as well or even better (again, the Starbucks case in Example 5 just above is a good example of a credible internal standard that consumers recognise).

6. Is there a support structure available for implementing the standard?
If an external standard is linked with appropriate infrastructures, including training and extension services for farmers, there are strong arguments to use that standard instead of others for which such support is lacking. See the chapter on implementation (Chapter 5).

7. How much will it cost your company to implement a standard?
The answer will depend on many factors, including the presence of your company in the sourcing regions, the availability of support structures, available skillsets and the level of requirements encompassed in the standard itself. Some further questions to ask in this regard: Who bears the costs and risks? What is the credibility of your own standard?

8. What is the difference in the price and quality of implementation of a standard?
Just as there are intrinsic quality differences between products, there are “extrinsic” quality differences between suppliers and their implementation of sustainability programmes. While superficially a certification label is supposed to mean “ok”, not all Rainforest Alliance certified products are equally sustainable, not all UTZ Certified products are equally well implemented, even if they have passed an audit.

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