Rio de Janeiro—How many definitions are there to the concept of sustainable development? At least 436, according to the panel on assessing sustainability at the Rio +20 Corporate Sustainability Forum. More on that shortly.
Business wants to get in on the business of sustainable development big time. The official United Nations Conference on Sustainable Development doesn’t kick off until the end of next week. But there’s plenty going on in and around Rio de Janeiro now. I spent the day hanging out in meeting rooms at the elegant beachfront Windsor Barra Hotel where a couple of thousand businesspeople, government officials, activists, and U.N. bureaucrats have gathered with the goal of somehow making money out of “sustainability.”
The figure for 436 different definitions and visions of sustainable development comes from the private voluntary social and environmental product labeling schemes identified by the Committee on Sustainability Assessment (COSA) have identified. That number includes labels like Fairtrade, Rainforest Alliance, UTZ, and Marine Stewardship Council and so forth. Other panelists would later ratchet that number to more than 800 just in Europe alone.
The head of COSA is Daniele Giovannucci who declared at a panel discussion devoted to Making Sustainability Standards Work for those Most in Need that the goal of COSA is to set up a consistent set of standards and indicators that can be used to assess the impact of the labels – are they actually accomplishing what they claim to be doing? Even if a person thinks that some of the goals of the certifying groups are silly, checking up on them is a laudable enterprise. His organization aims to gather evidence for effectiveness using 135 different indicators of economic, social, and environmental effects. The group has sought the advice of hundreds of groups ranging from major food companies to radical leftwing NGOs. Giovannucci declared, “If we are going to drive sustainability, we can’t drive it from a charitable or donor perspective; it must be driven through markets.”
Giovannucci illustrated COSA’s goals by citing a study looking at a couple of eco-labeling schemes applied to coffee and cacao production. Why? Because these export crops appear to be moving faster toward sustainable production than crops that are not exported. COSA analyzed more than 5,000 farms in ten developing countries measuring various aspects and consequences of certified versus uncertified production, including yields, income, adoption of conservation measures, and even the schooling of children.
For example, the COSA researchers looked at coffee yields under various labeling schemes. Giovannucci said that he was surprised that the researchers found that certified yields were generally higher than uncertified yields, e.g., Organic + 5 percent, UTZ +32 percent, Starbucks + 18 percent, Rainforest Alliance + 15 percent, and Fairtrade + 13 percent, for an average +17 percent over uncertified production. He speculated that certification training of farmers might have introduced better management practices. However, Giovannucci did note that between 2009 and 2011, the differences in yield between certified and uncertified were declining. The researchers had no explanation.
Coffee certification also tended to increase farm incomes, raising them +35 percent in Colombia, but falling -1 percent in Mexico. In addition, certification raised the chances that farm kids were in grades appropriate for their ages, up 9 percent in Colombia (which is already fairly high) and up 254 percent in Tanzania.
One intriguing finding was that when COSA researchers measured how income affected environmental conditions in and around the coffee farms, they were surprised to find that increased income resulted in worse conditions. Giovannucci speculated that incomes between $2,000 and $10,000 per year are not yet high enough for farmers to prioritize environmental improvements.
I asked Giovannucci later if the certifiers liked being checked on by COSA. He observed in one instance that COSA researchers had discovered that in one country a specific certification scheme had increased incomes and yields, yet in a neighboring country certified yields and incomes were 30 percent lower than uncertified yields. “They do not want to hear that,” he said.
The result of the proliferation of hundreds of labels, codes and audits, according to Robert Skidmore from the United Nations International Trade Center, is that “standard fatigue is developing” among producers and consumers. His group has set up a database looking at 75 standards, codes, and audits based on a framework of 200 criteria. The idea is to make it easy for producers and businesses to find background information on what is involved in implementing each scheme.
The chief sustainability officer at Mars, Inc., Andrew Hobday claimed that the company has found that “being more sustainable is entirely consistent with making a profit.” Mars relies on sustainability labeling of cacao by the Rainforest Alliance and UTZ. Currently 20 percent of the cacao used by the company to make chocolate is certified, but the goal is 100 percent by 2020. The company is also involved in four pilot programs for sustainability certifying coffee. However, Hobday noted that sustainability labeling doesn’t have the clarity and simplicity behind it yet for consumers to make sensible decisions. Mars currently uses certification as a way to drive supply chain changes, not really to inform consumers.
Helio Mattar, founder of the Akatu Institute in Brazil, suggested that sustainability labeling comes in two varieties, window labels and mirror labels [PDF]. This distinction was devised by Simon Zadek and his colleagues at the New Europe Foundation more than a decade ago. Window labels inform consumers about how the product was or was not produced; mirror labels reflect back consumer values securing for them the benefits of self-expression and positive social identity. Basically a person buying certified goods tells themselves that they are nice people. Most sustainability labels now function as mirrors, but Mattar claimed that his research shows that the demand for window labeling is increasing. The point is that information behind labeling costs money and somebody has to pay for collecting and verifying it. That would be the consumer.
While the activist panel on assessing sustainability standards concentrated on how to get private voluntary labeling to work, I was struck by the contrast with the panel devoted to doubling global rate of energy efficiency improvement. The corporate participants in that panel were intent on seeking government mandates as way to boost their profits. For example, Gabriela Werner who was representing the appliance manufacturer Embraco noted that her company currently makes a refrigerator that turns on its compressor only when cooling is needed, making it 40 percent more efficient than earlier models. However, she said her company was quite frustrated by the fact that government energy efficiency standards vary quite a bit around the globe, making it hard for this improved refrigerator to compete with cheaper, less efficient competitors. This lack of government regulation and standard setting was big theme in the discussion that followed. “Government policies and legislation are the main drivers to how fast we introduce new products,” explained Werner. She asserted that the return on investment in energy efficiency is always positive, but that for many companies the payback period takes longer than expected. Thus, in her analysis, they tend to underinvest in energy efficiency.
Another panelist, Stephen Harper from Intel, was asked what it would take to drive radical innovation inside of companies. Harper declared that there is already a tremendous amount of innovation available. He then added that companies will only invest in more energy efficiency innovation for two reasons: They have to get a regulatory signal, such as carbon tax. Or they must get a price signal. For example, a new energy technology must be cheaper so that the buyer will save money. (The last point seemed pretty obvious).
“We know that incentives don’t always work,” said Harper. Why? Because of things like principle/agent problems in which the person buying equipment doesn’t have to pay for the energy they use. One typical example is a homebuilder selecting appliances for a new house. A second failure occurs because of lack of open information. Consumers don’t know how much electricity they are consuming, so they can’t connect their behavior to their monthly bills. This lack of information creates a market for various applications that allow consumers to control their energy use. Harper identified as a third problem the disconnect between energy production and the way power companies are compensated. Regulators need to figure out a way to pay power companies for selling energy services instead of just more electrons.