Voluntary Sustainability Standards and Economic Rents - The Economic Impacts of Voluntary Sustainability Standards along the Coffee, Forestry and Fisheries Value Chains
Jason Potts and Kathleen Sexsmith
Since the development of organic and fair trade labels in the 1970s and 1980s, the use of “private voluntary standards" as a means for distinguishing products in terms of their sustainability has grown exponentially. Fuelled by a growing awareness of the social and environmental implications of the planet´s rapidly industrializing economy and the limitations of public regulation, stakeholders have increasingly sought alternative, “rules-based" systems to ensure that their everyday market decisions do not have unsustainable outcomes. While the use of sustainability-motivated standards is not a new phenomenon, the more recent entry of such standards within mainstream supply chains is. Indeed, the recent growth of certain voluntary sustainability systems in the agriculture sector has rendered compliance a virtual “prerequisite" for access to many mainstream markets. As instruments for developing and implementing rules-based interaction between supply chain actors, sustainability standards have the potential to exert considerable influence on both supply chain decision-making and overall sustainability within the many major commodity sectors.
Information on the relationship between sustainability standards and economic development is particularly important, since economic sustainability provides the pathway to social and environmental sustainability. Yet, data on the influence of sustainability standards on economic variables and conditions along the supply chain is persistently elusive. At present, there are no national or international authorities mandated with the task of regularly gathering information on the markets of certified products. In the absence of credible market information it is difficult for stakeholders to make significant investments in the sector, and even more difficult to assess whether sustainability initiatives are having positive impacts on the quality of life.
Determining whether sustainability standards create systemic economic impacts would require significantly more robust market data than is currently available. Nevertheless a growing body of anecdotal evidence can assist with the assessment of trends. This paper attempts to identify the historical trends for some key economic parameters across a select number of standards initiatives operative in the coffee, forestry and fisheries sectors—each of which exhibits significantly different market structures and depth of history in the application of sustainability standards.