Sunday, February 24, 2013

Organic certification - Is it worth it?

The main positive development reflected in the 2013 Organic Certification Directory is the rapid increase in the number of certification bodies accepted in the EU and in the US. This is driven by the EU-US equivalence agreement and by the new EU regime for direct approval of certification bodies as being equivalent. It is encouraging to see this development and it certainly shows that recognition of other systems is more a matter of political will than a technical matter. Late in 2013 a new equivalency agreement between Canada and Switzerland was announced (for more details see TOS 141). It is important that organic products imported from third countries to countries in an equivalency agreement are included in the scope of the agreement. If such products are excluded the third countries may face reduced market access as a result of these agreements.  
Organic certification bodies, The Organic Standard, Feb 2013

In Asia they still think it is fun or profitable to start organic certification bodies, while the enthusiasm in Europe and the Americas is waning. A general trend is that when governments start regulating their organic sector, a number of new actors step in to offer organic certification services to what they believe is a burgeoning market. In most cases, however, after an initial growth, numbers rapidly go down as a result of failure by certification bodies to fulfil government requirements and a lack of profit.

Worldwide, organic certification costs the sector approximately 500 million US dollars annually, which is at least 1% of the retail value of the products. The indirect costs – activities that operators do just to fulfil certification requirements, such as filling in forms, participating in the inspection, preparing inspections and responding to requests from the certification body – are probably in the same order of magnitude. Historically, most organic certification bodies were associations, foundations or other not-for-profit organisations. Today, most are for profit. But even if the cost of the service is high from the perspective of the clients, it is doubtful that there is a lot of profit generated by selling certification services.

The important question is, perhaps, not how many dollars or euros certification costs nor is it whether certification bodies make too much or too little profit. The important question is whether certification adds sufficient value to the production to motivate the investments. And this is different for different producers. For a small producer with diversified production and direct marketing, the direct and indirect costs, as well as the administrative pressure are often too high. Standards and certification, by their very nature, almost always discriminate against small and diverse production. This is especially painful for the organic sector, as diversity is a cornerstone of organic production. The solution to this problem is two-fold. First, as much effort as possible should be spent within the system to accommodate the needs of small producers. Second,  small producers should be allowed to identify themselves as organic in the market place with other tools specifically designed for them.

The number of private standards is declining, and only a fourth of the certification bodies today have their own standards, the others provide a certification service to a standard set by someone else, normally the government of their country. This is likely to result in  diminishing returns from private standards. Those that still invest in them are forced to make them differ substantially from the regulations so as to motivate consumers to select them over following just the regulations. On the one hand this creates some dynamism in the market place. On the other hand it is resource-consuming and poses huge challenges for trade. It also makes keeping a consistent message for consumer communication and fostering market recognition for organic products difficult.

The question of added value also applies to accreditation. IFOAM Accreditation has – after almost twenty years – still only got 31 accredited schemes. ISO 65 accreditation is much more widespread, but one should not believe that it gives greater added value. ISO 65 is wide-spread because some regulations, most notably the EU Regulation, require it. The added value, both in the market place and for the integrity of organic production, of ISO 65 accreditation is often, rightfully, questioned. Now that the Regulation is under review, one would hope that the EU will look into this once more.   
(first published in The Organic Standard Issue 142, February 2013)

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