How Can Voluntary Sustainability Standards Drive Sustainability in Public Procurement and Trade Policy?
Governments are increasingly recognizing voluntary sustainability standards (VSSs) as tools to help them achieve macroeconomic objectives—from boosting exports or increasing farmers’ revenues, to advancing more sustainable production and consumption practices in line with the UN Sustainable Development Goals. VSSs, which require participating producers and operators to comply with verifiable environmental and social criteria, are consequently increasingly being integrated into public procurement and trade policy. This, in turn, can help enhance the sustainability performance of global value chains. However, these trends do not come without potential challenges as well as opportunities—particularly for small-scale producers in developing countries—that must be considered carefully to ensure equitable and inclusive access to international markets.
Countries are increasingly engaging with VSSs to promote sustainable development, ensure that value chains are governed equitably, and achieve local goals and priorities.
VSSs can play a complementary role in advancing policy goals related to sustainability, as they often integrate international principles and commitments in their environmental and social criteria, such as those included in several conventions of the International Labour Organization (ILO). VSSs also often require compliance with domestic standards and regulations relating to issues such as biodiversity, land management, and forest conservation. Furthermore, performance-based VSSs can potentially be used as tools for monitoring and reporting progress toward achieving sustainability objectives, as they have defined standard performance indicators and established systems to monitor compliance. For example, Bonsucro—a sustainability standard for the sugarcane sector—has developed a set of principles, criteria, and indicators for defining the sustainable performance of smallholder sugarcane producers and processors in the countries where they operate.
How Are VSSs Integrated Into Public Policy in Practice?
During the last decade, governments in producing and consuming countries have integrated VSSs in public policy in three ways: by developing national regulatory frameworks that support or promote the development of certification schemes; by referencing them in sustainable procurement policies; and by integrating them in free trade agreements, in market access regulations, and in export-promotion measures.
1. VSSs in National Regulatory Frameworks
Countries are increasingly engaging with VSSs to promote sustainable development and equitable value chain governance while ensuring they are aligned with local priorities to facilitate their applicability. For instance, in 2011, the Government of Indonesia introduced the Indonesian Sustainable Palm Oil (ISPO) certification as a mandatory requirement for all oil palm growers and millers operating in the country, with the objective of addressing environmental issues in the sector and improving the competitiveness of Indonesian palm oil in the global market.
Brazil and India have also supported the development of national VSSs in the coffee and tea sectors, respectively, by establishing Certifica Minas Coffee (CMC) (2006) and Trustea (2013) standards. They are governed by multistakeholder forums composed of representatives of producers, manufacturers, academia, governmental organizations, and civil society actors. These actors represent the industry and participate as key advisors in the development of codes of conduct that are used to verify that suppliers meet the standards agreed upon by the members of the initiative. More recently, both countries have also established national multistakeholder platforms to facilitate informed discussions on how to better use VSSs in their respective jurisdictions. Other countries, including Kenya, Mexico, and Chile, have benchmarked their national farming standards against the Global G.A.P, an international standard for farm production under good agricultural practices, aiming to help local farmers of fruits, vegetables, flowers, and ornamentals access international markets where this standard is widely recognized (i.e., KenyaGAP; ChileGAP).
2. VSSs in Sustainable Public Procurement (SPP)
Sustainability considerations are also being adopted in public procurement policies. In some cases, VSSs are referenced as proxy indicators of positive social and environmental performance so that procurement agencies can better identify sustainable products or assess a bidder’s credentials. Even when governments cannot refer to one specific VSS to ensure equal treatment, non-discrimination, and fair competition in the tender, VSSs are often used by governments as reliable mechanisms to verify the social responsibility and sustainability of a supplier’s goods or services. For instance, in some Asian countries there is an obligation to purchase only eco-labelled products when available. In Europe, VSSs are used as promotional tools rather than conditional policy requirements and are being considered as a means to verify sustainable practices alongside other available options.
In the Republic of Korea, there has been an increase in VSS-compliant products available through its e-procurement system, KONEPS, which provides a catalogue of technical specifications on green products and applicable ecolabels for public purchases. In Mexico, the federal government’s procurement policy requires that all timber and wooden furniture products be third-party certified to ensure that the origin of the products is known, and the government is thus able to verify that these are made of wood from sustainably managed forests. For this purpose, Mexico recognizes certifications such as the Forest Stewardship Council (FSC) and the Programme for the Endorsement of Forest Certification (PEFC) standards.
3. VSSs in Trade Policy
As elaborated in the latest flagship report of the United Nations Forum on Sustainability Standards, VSSs are increasingly being referenced in trade agreements, in market access regulations, and as promotional or conditional measures in policies promoting exports.
Free trade agreements (FTAs):
According to UNFSS, 19 FTAs mention VSSs or similar terms such as “eco-labelling,” “sustainability standards,” or “certifications” as mechanisms to promote objectives concerning environmental and social provisions. Most of these FTAs involve developed countries and country groups (Canada, the European Union, and the United States) and two FTAs have been established by emerging economies (Republic of Korea–Turkey and Republic of Korea–Colombia). Despite the growing interest in referencing VSSs in FTAs, existing provisions only promote the use of VSSs and do not include legally binding requirements on the parties to undertake specific actions.
Import restriction measures:
Regulations that specify the use of certain VSSs as market access requirements are in place in Europe and some Asian countries, where importing specific commodities such as timber or biofuels is allowed only if they comply with a set of sustainability criteria or with the adoption of specific certification systems. For instance, the Republic of Korea has explicitly recognized some VSSs in its national regulations to reduce illegal logging imports from high-risk countries. VSSs such as FSC, PEFC, and other third-party certifications are now accepted by the country as proof of the legality of imported and domestically produced timber and timber products.
Furthermore, a number of VSSs such as Bonsucro and the Roundtable on Sustainable Palm Oil have been recognized in the European Union Renewable Energy Directive as proof of compliance with sustainability requirements for biofuels and bioliquids used in the region. VSSs have also been indirectly referenced in the European Union Timber Regulation, which requires operators to comply with several stringent due-diligence requirements concerning the legality of timber and timber-based products by accepting the use of certification or other third-party schemes as evidence of risk mitigation.
Export promotional/conditional measures:
Some governments are using VSSs to increase access to export markets by making certification a necessary requirement for domestic producers to obtain export licences. They are also using VSSs as capacity-building tools. For example, the Government of Mozambique formed a strategic partnership with the Better Cotton Initiative (BCI) to embed the standard’s principles and criteria in national regulations related to cotton production to boost sustainable cotton exports. This move resulted in both the development of a national standard for cotton that mirrored the criteria and indicators of BCI, and the design of improved training and technical assistance for cotton farmers to enable them to comply with the new requirements.
The Government of Gabon did something similar by engaging in a cooperation agreement with the FSC standard to develop markets for sustainable wood products and to provide capacity building to forest communities on sustainable forest management. The country is making the certification a requirement in the issuing of forestry permit operations as a strategy to boost sustainable forest management and increase international market access for their forestry products.
Despite their growing inclusion in public procurement and trade policy, VSSs remain for the most part optional and promotional measures rather than conditional requirements. They also do not offer many incentives for adoption and are mainly promoted by developed countries. The way that VSSs are currently referenced in national regulatory frameworks, sustainable procurement initiatives, FTAs, and export or import measures could represent an opportunity for further integration of VSSs in public procurement and trade policies, as well as open market access opportunities for VSS-compliant farmers in developing countries. However, it also raises some concerns in relation to the potential challenges smallholder farmers and small and medium-sized enterprises (SMEs) may face—especially in least developed countries (LDCs)—in complying with additional procurement and export requirements.
Implications for Developing and Least Developed Countries
While voluntary in principle, the potential expansion of VSSs as de facto requirements for accessing some markets could transform them into “unnecessary obstacles to trade.” Although there is some legal uncertainty on the status of VSSs in relation to the international trade regime, the potentially distorting effects on trade are a concern from producers in developing countries. These countries are particularly vulnerable to the trade-restrictive implications of these barriers as they usually have weaker bargaining power over their terms of trade. This could create discriminatory effects by marginalizing small-scale producers and SMEs in developing countries and LDCs that are unable to cover the costs of obtaining and maintaining certification, thereby excluding them from global value chains and international markets that demand certified commodities.
Ensuring that small-scale producers and SMEs in developing countries can participate fairly in VSS-compliant markets requires special attention.
Indeed, some farmers in developing countries have already identified concerns regarding the high transaction costs to comply with certification and adapting to new practices, the irrelevance of international standards to local conditions, and the uncertainties arising from rapidly changing requirements in overseas markets. In this context, ensuring the fair participation of small-scale producers and SMEs in developing countries and LDCs in VSS-compliant markets is an issue that requires special attention. This is especially true given that many VSSs aim to improve livelihoods by creating inclusive markets and better opportunities for these producers.
Some of the above-mentioned examples were also discussed in a webinar organized by IISD and the University of Geneva in November 2020 entitled Voluntary Sustainability Standards, Public Procurement, and Trade Policy: Trends, Challenges, and Development Implications. The webinar built upon the findings from the United Nations Forum on Sustainability Standards’ (UNFSS’s) fourth flagship report. The dialogue raised issues for further consideration and provided examples of good practice, particularly related to the inclusion of VSSs in public policy while supporting market access of small-scale farmers and SMEs in developing countries. Below are some of the key highlights from the discussion.
Best Practices for SPP
Including sustainability considerations in procurement systems might require measures to prevent burdening procurers.
In developing countries, procurement has a great potential to serve as a key policy driver, by allowing governments to use their purchasing power and influence to deliver on sustainability goals and reshape markets. However, agencies and public procurers have historically struggled to determine what is sustainable and what is not, as they are not fully equipped with the resources and knowledge to do so. This is particularly the case in emerging and lower-income economies where there is an absence of specific laws and guidelines mandating that procurement consider environmental and social impacts. Thus, the integration of VSSs in public procurement, following transparency and competition principles, can play an important role in providing guidelines on sustainability. This would require a shift in procurement systems from an administrative function to a strategic one, as well as additional thinking on potential mechanisms to verify compliance and on ways to ensure that sustainability does not become an additional burden to procurers.
Building capacity of procurement agencies and suppliers is key to integrating sustainability requirements effectively in public procurement systems and benefiting SMEs.
In addition, the integration of VSSs in SPP should avoid crowding out economic actors—in particular SMEs—that are crucial for job creation. Governments can ensure that SMEs have good access to sustainable procurement markets through the following actions: facilitating timely payments to SMEs; building capacity of both procurement agencies and suppliers, focusing on helping suppliers understand the processes and sustainability requirements of the procurement system; announcing changes and defining transition periods in procurement plans to enable SMEs to comply with new requirements; and defining a minimum share of procurement contracts allocated to SMEs.
Some government initiatives in Latin America offer interesting lessons. Authorities in the Dominican Republic and Chile have set up information and communications technology systems along with data management software to simplify procurement processes and make them more efficient and accessible for users. Also, they have provided tailored payment processes for SMEs while engaging in skills development for women-led businesses. In both cases, procurement agencies went beyond their direct sphere of influence and formal mandate to ultimately improve their procurement outcomes and impacts.
Collaboration between public agencies and rewarding tenders on best-value offers is critical to benefiting small-scale farmers and SMEs and contributing to sustainability through SPP.
Collaboration between public agencies has also proven to be key when repurposing procurement as an instrument to achieve societal targets and benefit SMEs. In Paraguay, for instance, the involvement of the Ministry of Agriculture and the Ministry of Industry and Commerce has helped create an understanding within procurement agencies and officers on how family agriculture businesses and SMEs operate. This involvement has facilitated their access to public procurement tenders targeting school feeding programs. However, there is more work to be done to ensure that tenders are awarded on best-value offers, considering environmental and social aspects in addition to price. In this scenario, life-cycle costing (LCC) should also be considered, as it can be an efficient vehicle for sustainable development. In LCC, cost considerations extend beyond the purchase price of a product to include other significant social and environmental costs associated with the entire product life cycle.
Best Practices for Trade Policy
Risk mitigation plans could help developing countries better integrate VSSs provisions in FTAs.
When integrating VSS provisions in trade agreements, ex ante risk impact assessments could be implemented to limit the risk that small-scale farmers and SMEs in developing countries may face as a result. These risks include the potential to lose access to international markets unless farmers and SMEs undertake costly changes to their production practices. Governments would then need to design risk mitigation plans based on the assessment results and allocate necessary resources for effective monitoring of the implementation of these VSS provisions and adjust accordingly.
Mutual recognition agreements and cooperation between governments, VSSs, and industry actors can help reduce certification costs and enable market access.
Promoting mutual recognition and equivalence systems between VSSs is also a key element to explore by the standard setters and governments interested in integrating VSS provisions in FTAs, since this approach can reduce implementation and certification costs for small-scale farmers while enabling market access. A promising example is the recent equivalence agreement signed between Chile and Brazil, which recognizes both national organic standards and their correspondent assurance systems to enable trade of organic-certified products between both countries. For the first time, this agreement also recognizes those products that have been certified by Participatory Guarantee Systems (PGS), an affordable means of verification conducted by producers and supporting agents. This system helps make organic certification accessible for small-scale farmers.
It is also important to mention the lessons learned from existing practices that have benefited small-scale farmers in developing countries using VSSs. The case of Suriname is an interesting example of cooperation between the government, the fishing industry, scientists, and the Marine Stewardship Council Fisheries Standard. Certification processes in this country have helped fishing communities access important export markets and led to significant improvements in fisheries management, including the creation of a national seabob shrimp fishery management plan that defines the objective and management process for sustainable fishing. Coordination mechanisms were also established by the government and the standard to provide training and assistance services to catchers as well as monitoring practices to ensure compliance with the standard.
Another good example is the aforementioned case from Mozambique, which revitalized its cotton industry by partnering the Government of Mozambique with the BCI to boost productivity and sustainability in the sector with the support of training programs and extension services to farmers to apply sustainable practices when growing cotton (i.e., intercropping, crop rotation, cover crops).
The examples and practices illustrated in this article show that VSSs can be catalysts for public–private collaboration and have the potential to be integrated effectively into public policy. These experiences also show how policy-makers can use VSSs in SPP and trade policy to facilitate delivering positive sustainability outcomes—and contribute to achieving the UN Sustainable Development Goals—while revitalizing national industries. For this to happen, governments need to plan adequately the integration of VSSs in public policy instruments by conducting risk assessment exercises to address potential discriminatory effects concerning small-scale farmers and SMEs.
VSSs can be catalysts for public–private collaboration and have the potential to deliver positive sustainability outcomes while revitalizing national industries.
Also, governments, private sector actors, and development organizations would need to coordinate to create an enabling environment with targeted capacity-building services, including farm monitoring and market linkages, as well as investment supports to benefit small-scale farmers and SMEs. There is a clear interest in the use of VSSs as a policy tool, which opens up new opportunities to explore further how to ensure their success.
To learn more about the integration of VSSs in trade policy and public procurement, please consult UNFSS’s fourth flagship report and the webinar organized by IISD and UNIGE in November 2020.
The author would like to thank Sofia Baliño, Cristina Larrea, Sally Millett, and David Perri for their valuable feedback on earlier drafts of this article.
You might also be interested in
South-South Trade and Voluntary Sustainability Standards
This report explores how voluntary sustainability standards are being used in trade policy to increase the trade of more sustainable products between developing countries.
Global Market Report: Sugar cane prices and sustainability
This report explores recent market trends in the sugar cane sector, what these trends mean for producers in developing countries, and what can be done to improve farmers' incomes.
Global Market Report: Palm oil prices and sustainability
This report unpacks market trends in the palm oil sector and examines the role of sustainability standards in ensuring farmers receive fair incomes and adopt sustainable practices.
Global Market Report: Banana prices and sustainability
This report explores market trends in the banana industry and how standards and other supply chain actors can build producers' resilience to sustainability challenges.