Sustainability standards are a great opportunity for the private sector to demonstrate its commitment to more sustainable and environmentally friendly practices. Although these standards, such as Fairtrade and Rainforest Alliance, are voluntary, a growing number of companies and producers are adopting them. What are the consequences of adopting these sustainability standards for businesses? A recent study by ESADE Assistant Professor Maja Tampe in the British Journal of Industrial Relations reveals the keys to adopting sustainability standards effectively and explains why they can sometimes be beneficial while other times they might backfire. "When you as a consumer go to the supermarket and buy coffee or a bar of chocolate and see that it has a sustainability label, you hope that the producer will be better off when you buy this certified product," says ESADE Assistant Professor Maja Tampe. "The problem is that through impact evaluations, we have observed that sometimes producers are better off, but sometimes they are not." Prof. Tampe's research analyzed two farmer groups in Ecuador that adopted sustainability standards starting around the same time and with the same donors, yet had very different outcomes. While one of the farmer groups was able to adopt standards, get benefits for their farmer members, and develop a thriving business, the other one went bankrupt after a few years. What worked for the first group and what went wrong for the second one? Keys to adopting successful sustainability standards According to the findings, the successful case was able to build a strong cohesive buyer relationship that helped them to become more competitive, particularly through better quality. "They had to adopt a lot of processes for which they had to learn from outside sources, but also from internal experimentation, and that helped them to rapidly improve the quality of their products," states the author. In addition, this group learned to export directly and to improve its processes. The unsuccessful farmer group also started out very promisingly. However, it relied only on indirect contacts with buyers. They learned the basics of how to produce good cocoa, but they never started exporting directly and their learning leveled off. They were able to attain decent but not excellent quality. In both cases, their respective buyers walked away during the economic recession in 2008. However, only the successful farmer group was able to find a buyer willing to pay a premium for sustainably produced cocoa, whereas the unsuccessful group was unable to find a replacement for its certified cocoa. They had to go back to the conventional market and sell their products at a lower price. "In the end, the farmers got so disillusioned that they stopped selling to this group and they went bankrupt," warns researcher Tampe. The findings prove that the success and failure of sustainability standards hinges on whether the producers are able to improve their quality and to develop close and diversified relations with various buyers. Sustainability standards by themselves do not help producers to be better off. Instead, producers need to become more competitive. But since that is a challenge, given the challenges they face, not all farmers improve their livelihoods when they adopt sustainability standards. "One possible solution from my research would be to support the farmers to essentially do what the successful case has done: become more competitive, improve product quality, build strong and diversified relationships with buyers, and really get into a better negotiation position," says Prof. Tampe. Yet the research also shows that sustainability standards are not a 'one-size-fit-all' solution for all farmers and businesses.

ESADE

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How to adopt effective sustainability standards

03/2018

Sustainability standards are a great opportunity for the private sector to demonstrate its commitment to more sustainable and environmentally friendly practices.


Although these standards, such as Fairtrade and Rainforest Alliance, are voluntary, a growing number of companies and producers are adopting them.


What are the consequences of adopting these sustainability standards for businesses? A recent study by ESADE Assistant Professor Maja Tampe in the British Journal of Industrial Relations reveals the keys to adopting sustainability standards effectively and explains why they can sometimes be beneficial while other times they might backfire.


"When you as a consumer go to the supermarket and buy coffee or a bar of chocolate and see that it has a sustainability label, you hope that the producer will be better off when you buy this certified product," says ESADE Assistant Professor Maja Tampe. "The problem is that through impact evaluations, we have observed that sometimes producers are better off, but sometimes they are not."



Prof. Tampe's research analyzed two farmer groups in Ecuador that adopted sustainability standards starting around the same time and with the same donors, yet had very different outcomes. While one of the farmer groups was able to adopt standards, get benefits for their farmer members, and develop a thriving business, the other one went bankrupt after a few years. What worked for the first group and what went wrong for the second one?


Keys to adopting successful sustainability standards


According to the findings, the successful case was able to build a strong cohesive buyer relationship that helped them to become more competitive, particularly through better quality. "They had to adopt a lot of processes for which they had to learn from outside sources, but also from internal experimentation, and that helped them to rapidly improve the quality of their products," states the author. In addition, this group learned to export directly and to improve its processes.

The unsuccessful farmer group also started out very promisingly. However, it relied only on indirect contacts with buyers. They learned the basics of how to produce good cocoa, but they never started exporting directly and their learning leveled off. They were able to attain decent but not excellent quality.


In both cases, their respective buyers walked away during the economic recession in 2008. However, only the successful farmer group was able to find a buyer willing to pay a premium for sustainably produced cocoa, whereas the unsuccessful group was unable to find a replacement for its certified cocoa. They had to go back to the conventional market and sell their products at a lower price. "In the end, the farmers got so disillusioned that they stopped selling to this group and they went bankrupt," warns researcher Tampe.


The findings prove that the success and failure of sustainability standards hinges on whether the producers are able to improve their quality and to develop close and diversified relations with various buyers. Sustainability standards by themselves do not help producers to be better off. Instead, producers need to become more competitive. But since that is a challenge, given the challenges they face, not all farmers improve their livelihoods when they adopt sustainability standards.


"One possible solution from my research would be to support the farmers to essentially do what the successful case has done: become more competitive, improve product quality, build strong and diversified relationships with buyers, and really get into a better negotiation position," says Prof. Tampe. Yet the research also shows that sustainability standards are not a 'one-size-fit-all' solution for all farmers and businesses.

Back to home