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)

Where does the buck stop?

‘Passing the buck’ is an English expression. It means letting someone else take care of a problem or take on the responsibility. The former US President Truman famously had a sign on his desk saying that ”the buck stops here”. Clarifying that he was ultimately in charge.

Who is really in charge? Who is to blame? These are questions that come into mind when reading the European Court of Auditor’s report on the EU organic system. Some of their conclusions could have been drawn directly from earlier leaders of The Organic Standard...

The EU system is built on competing national certification bodies – in some countries up to thirty certification bodies – with oversight by a plethora of national and sometimes regional authorities, accreditation by national accreditors ( only one per country because they have been granted monopoly by the European Union) and oversight by the European Commission. The system has developed not based on the needs of the sector but on the needs and habits of the governments. That is the only reason why authority for approval of certification bodies follows the divisions of the governments. And it is why in some countries regional authorities are in charge and in most countries several authorities are in charge.

Because of an, unfortunate, reference to the EN 45011 (ISO 65) in the EU Regulation back in 1997, national accreditation bodies came into the game, bringing little added value, but increasing cost and increasing focus on rather unimportant procedures. As they were given a monopoly of accreditation, they also swayed the EU that they should have the monopoly of interpreting the EN 45011, a rather outrageous claim.

All of the actors in the system have resource constraints, and will only do what they are forced to do. Most of them also lack competency. Some of the authorities are even hostile to the organic sector despite it being within their mandate to supervise and approve the certification bodies. How does that make the certification bodies and producers feel? The EU has rarely conducted any supervision of what the Member States do. And the ‘transaction costs’ of keeping all in the systems up to date and informed are astronomical. But the biggest problem is that nobody takes responsibility. A concerned consumer in an EU country or a food processor that suspects you’re a competitor is cheating, has nowhere to go with a query because nobody is in charge.

This mess is likely to lead to calls for more controls and more supervision, probably by strengthening the Commissions oversight, and increased reporting upwards by all concerned. But that is the wrong way to go.

What the system needs is rationalisation and fewer actors. There are several options for this. By integrating organic controls into the normal food control system, like in Denmark, both certification and accreditation can be eliminated, and accountability is clear. The same can be accomplished by having a national monopoly for certification, like in the Netherlands. By recognising one international accreditation system for all certification bodies, such as the IOAS, certification bodies could operate freely within all the European territories. In any case, the national approvals of certification bodies are antiquated and could be abolished; a certification body is approved in one country it should be allowed to operate freely in the other countries.

This is not the place to make the blueprint for a new system, but any new system should be built on fewer actors and fewer layers and clearer lines of responsibility, and as much as possible responsibility should be at the ‘lower’ levels, i.e. with the producers and the certification bodies.

What does sustainable really mean in an unsustainable economy?

There is renewed interest in sustainability issues, ahead of ‘Rio +20’, the follow up to the UN Environment conference of Rio 1992. What has been called ‘sustainable development’ for the last twenty years is now often referred to as the ‘Green Economy’. As before, one of the tools for its promotion are markets for ‘sustainable products’. And of these, organic products are one of the most prominent examples. Certainly, there has been a tremendous increase in the market for various sustainability schemes, such as organic and fair trade schemes, as well as others like the Rainforest Alliance, the Marine Stewardship Council (MSC), etc. In the most developed market segments some of these schemes are taking significant market shares. There is a tendency for  people to assume that sustainability standards represent something new, but that is not true.

Gandhi advocated the boycott of machine-made European clothing as it caused large-scale unemployment in India. He took to wearing hand-made cloth called Khadi  that was inexpensive and suitable for poor Indians. Most importantly, it showed Indians how to be self-reliant by a symbolic act. His arguments are similar to arguments used today of sustainability proponents. 

“Khadi is only seemingly expensive. I have pointed out that it is wrong to compare khadi with other cloth by comparing the prices of given lengths. The inexpensiveness of khadi consists in the revolution of one's taste. The wearing of khadi replaces the conventional idea of wearing clothes for ornament by that of wearing them for use. (Young India, 7-8-1924)”

There are still many issues associated with the schemes that need to be discussed. ‘Can you trust them?’ is one of the questions. On this matter ISEAL has worked hard to develop codes of good practice. And in the organic sector there are many layers of watchmen all watching each other over and above the constant criticism by competitors. Compared to other claims in the market  place, the credibility and integrity of sustainability schemes is generally high.

‘How sustainable is the production?’ is another increasingly common question. As the term  sustainable’ is often badly defined, or defined in hundreds of different ways, and everybody pays lip service to sustainability, it is very hard to respond to such a question. Even systematic and

standardised methods of measuring sustainability, like Life Cycle Analysis, are ultimately based   on subjective values and depend on how much weight is given to different parameters. The ultimate answers are not scientific but ideological.

‘Could the schemes be merged?’ is another common question. It is often the same clients that ask this question who are interested in the many facets of sustainability, and it is not so farfetched to believe that there could be benefits in merging them. But reality speaks a very different language, new  sustainability schemes emerge all the time. Those who call for schemes to merge do not really understand that the main role of a scheme is to be a marketing tool for differentiation.

Also, they don’t realise that consumers are different. For some environment is the most    important, for others personal health, fairness or animal welfare is more important. For the

ethical vegan it can hardly be acceptable to support a sustainability scheme that allows animal products; while anti-globalisation activists would probably not approve schemes built on free international trade.

Questions that are not asked often enough are:

• What is the role of a sustainability scheme in our world?

• To what extent can we rely on markets to shape our world?

• Under which conditions do they work and under which don’t they work?

• Will fair trade or organic schemes really change the bigger picture?

While Gandhi’s cloth was a forceful symbol for self-reliance, in the end not many Indians wear hand-spun cloth today. Perhaps buying organic products is more like a statement of how we want the world to be; a statement of what is good and sometimes even a statement of status, of being  hip.

Most of the sustainability schemes work purely as a marketing tool. Their need comes from the market place which relies on a pricing process that does not internalise social or environmental costs into the price of products. This means that some consumers foot the bill for what essentially   are market failures, while other consumers are free-riders – that is they get the benefits without contributing. What are the issues that are best dealt with by voluntary markets and what are best dealt with by regulation, or by a combination?

For example, in carbon offset trading the often-hyped voluntary markets (i.e. where a supplier claims to be carbon neutral by buying offsets) represents only around 10% of the total market value for carbon offsets, the rest is created by regulations. The organic sector in  Europe is as much driven by political endeavour as it is by the market, which results in measures such as direct subsidies, proclamation of areas dedicated for organic farming (nature reserves, water-protection areas) and public procurement. These issues should be discussed to a much greater extent within the ‘sustainability industry’, rather than the detail of a particular standard, or another layer of supervision

(leader in The Organic Standard, Issue 134)

Khadi means handspun and handwoven cloth. In 1918 Mahatma Gandhi started his movement for Khadi as relief programme for the poor masses living in India's villages. Spinning and weaving was elevated to an ideology for self-reliance and selfgovernment. Every village shall plant and harvest its own raw-materials for yarn, every woman and man shall engage in spinning and every village shall weave whatever is needed for its own use. Gandhi saw it as the end of dependency on foreign materials (symbolizing foreign rule) and thus giving a first lesson or real independence. Raw materials at that time were entirely exported to England and then re-imported as costly finished cloth, depriving the local population of work and profits on it. Gandhi also felt that in a county where manual labor was looked down upon, it was an occupation to bring high and low, rich and poor together, to show them the dignity of hand-labor. Thus Khadi is not mere a piece of cloth but a way of life. Readmore

The danger of predictable procedures

Days go by. Years go by. A new procedure is added to an old one, the system expands and it becomes more and more difficult to manage. Special systems are developed to manage the more and more complex system, and others are put there to monitor that the system to manage the system is systematically and consistently applied.

We all know the story. We have seen it. Some even claim that this increasing complexity
brought down empires. When the purpose is to protect citizens from ills it is even easier to accept that there is no end to what can be done and, therefore, has to be done. Airport security is a very clear example in point. However, now after a decade of ever increasing scrutiny and more procedures, not only passengers, but also security officials, question the wisdom of this. In a poll reported by The Economist, 87% of the respondents thought that changes implemented since 2001 had done more harm than good.

Kip Hawley, the former head of the US Transportation Security Administration (TSA), says in an article in the Wall Street Journal that the system needs reform. Two of the issues he singled out are also of particular relevance to the organic inspection and certification system. By checking a multitude of minute details, focus is easily lost
from the really important issues. Tests conducted by the TSA itself show that when officers are busy hunting cigarette lighters and pocket knives they may very well overlook
the dummy bomb parts placed next to them. And by making the system predictable and rigid, terrorists are helped more than deterred.

Organic operators are not airline passengers and the odd fraudster in the organic sector is not a terrorist; it is likely there are many more organic fraudsters in my plane than terrorists. Nevertheless, these observations may well hold for the organic inspection
and certification system. I have come across certification bodies, and regulatory authorities for which ‘annual inspection’ meant literally every 12 months, making it completely predictable when the next inspector will come. The minute detail that is recorded and made an issue of – largely a result of standards and certification requirements growing exponentially – substantially reduces the attention that is given to
more important things, and in particular to any kind of qualitative evaluation. The word ‘evaluation’ is probably missing from most audit forms.

Instead of helping, quality management systems used by certification bodies, aggravate the problem. The main tool for quality management is a standard operating procedure, which essentially means actions are predictable – for fraudsters as well as all other operators. Creativity and acting on a hunch or intuition are largely banned from such a system. But making imaginative, unprecedented effort can yield a lot more than following a prescribed course. For instance, in most cropping systems, there is a specific period when fertilisrs are applied. However, a few weeks after an application it is basically impossible to determine whether a fertiliser has been used or not. Despite this, most farms are never visited at those times. Certification bodies could redirect their effort one year to visit most or all farms at the critical time – or the time of sowing to detect treated seeds, or the time of insect attacks to determine use of a pesticide. But it would not be possible to conduct full inspection visits because that would be too resource demanding. Likewise,
to make a full, comprehensive (on site and crosschecking information) audit of a whole supply chain of products randomly selected (or based on a suspicion) in shops could disclose fraud in a way that routine audits hardly ever do.

There are many good and creative measures that can be taken to improve the organic certification system, and there are many good ideas among the talented people working within the system. But the attention of certifiers, accreditors and regulators is far too
often directed at the management of a system of ever increasing complexity. Unfortunately, when systems are too rigid they also drive away creative people, as they can’t flourish. In this way, the system produces people who believe there is only one right way of doing the job. And that is not a good starting point – neither for disclosing organic fraud nor for detecting terrorists in the making.

Published as Leader in The Organic Standard issue 133