Fingers on, Hands off.

Sometimes I get the question on the role of governments in sustainability certification. Well, the truth is that governments themselves decide when they want a role in any aspect of society, the challenge is to manage their expectations with your needs.

Standards and certification are built for the needs of markets. To make sure that certification works most governments want to have their fingers on the process but to be seen as having their hands off of it.

To make sense of this contradiction it is important to note how governments themselves use standards.  In a number of areas standards and the associated audits, inspections and certifications are in fact regulations that are developed by an industry or business sector. Sometimes this is done to replace existing regulations (this is being done in transportation by having airlines and railroads manage their own safety systems based on private sector audits against a standard). Other times governments choose to adopt a standard as regulation (this means that a standard becomes mandatory even though it was not debated or passed by a legislature). Governments, for the most part, understand standards and certification to be part of their regulatory toolbox.  It is in this sense that they want have their fingers on the process.

With their fingers on the process, governments want to be seen as not interfering in the market so most governments will want to be seen as keeping their hands off market based standards that the business world creates.

There is clearly a tension here.  

When developing a new standard or certification system it is best to keep this, and other contradictions in mind.  

For governments to stay in power the economy must grow - so new systems and processes are necessary. However the creation of sustainability standards can be disruptive, causing unease to those that profit from the status quo. Disruption in the economy can mean an old industry looses to a new innovation causing empires to fall and jobs to be lost.  It can also mean that new industries rise and new jobs are created.  

Good governments help manage the process of social and economic change. However the temptation to help their supporters win (and their opponents loose) can be tempting; that could mean propping up the old order or encouraging new new players. It is important to never underestimate the scale of resistance to change, especially by those who public image is built on promoting innovation and change. As a result the default position is almost always resistance to change.

Successful sustainability standards and certification systems establish themselves as firmly non-governmental.  That means that all of their governance and decision making is done without a formal role for governments.  At the same time they actively encourage governments to participate at a technical level and welcome the opportunity to meet with policy and political folks.  This allows an open channel of communication in which governments can have input on the new scheme but are not required to actively take a position on the result.

Fingers on, Hands off.

That being said, it is important that open communication be maintained even after the new scheme has become operational.  Governments are jealous of their powers and may be gentle with you when your scheme is small, but may become more aggressive as you grow.

Thinking deeply about Data...

One of the biggest challenges for new and growing schemes is dealing with data.  Early on in your operations there is often strong pressure to save money and postpone putting resources into a robust data management system that can grow with the scheme and provide a rich source of data for use in managing the scheme and understanding the impact your scheme is having.

Before thinking about how to start, let's look at the uses for the data.

For certification schemes there are two clear, high priorities for collecting data:

1. Gathering data to be used in the ongoing management of the scheme.  This includes the operation of the business and the performance of your organization (i.e. financial management, numbers of certificates, results of audits, etc...) and all other related organizations that deliver your service (i.e. certification bodies, accreditation bodies, registered consultants, registered auditors, etc...).
2. Gathering data to be used to understand the impact your scheme is having.  That is, how much, if any, is your scheme producing the changes that your scheme is seeking to make. This is to answer the question: "Is the environment or society better off because of your scheme?"

To address the first point, data is crucial to managing your scheme. Imagine trying to manage your scheme with no financial information, you would have no way of knowing whether or not you can make payroll each month or pay your bills.  Business management requires data. Business managers often speak about KPIs (Key Performance Indicators). These are the key bits that a manager needs to know in order to determine if the organization is achieving its operational goals.  

For business management the sequence of what can be done with raw data looks something like this:

Data - Information - Knowledge - Insight

Data is the raw set of numbers or other points that are gathered.  As you process that data you can produce information.  Using the information you can begin to ask questions, explore what is happening and gain knowledge about your operations.  From that knowledge you can gain insight that you can then use in making operational, tactical and strategic decisions about how to be more successful. For more information on this take a look at ISO 14031, Environmental Performance Evaluation - Guidelines (there are also loads of business books on KPIs).  In this area it is important to never confuse raw data with knowledge or especially with insight.

For the process of understanding the impact of your scheme the process looks something like:

Outputs - Outcomes - Impacts

Outputs are the basic statistics about your program (i.e. how many audits were conducted, how many people attended training seminars, how many products are certified, etc...).  Outcomes are the second or third order changes that may result from the outputs (i.e. how many people who took your training shared that information with other groups, how many companies sought certification because someone else got certified, etc...).  Impacts are the changes that you want your scheme to achieve (i.e. the water is less polluted, are more girls are going to school, is farm income rising, etc...).  For more information on this look at ISEAL Alliance's Impacts Code. The full progression is important because while you may be achieving high levels of outputs these are not necessarily a guarantee that you are ultimately having your desired impacts.

In  brief, you can run your scheme with limited data only for a short while.  Eventually you are going to need robust and reliable data that you can use as a basis for making decisions. One day you will get to the point that you need the data, at this point it is too late to start collecting it. Data collection is crucial and must be started before the board, CEO or a new strategy consultant asks for it.

The big challenge in starting the collection of reliable data is knowing what to collect.  To design a good system for collecting data it is important that you think deeply about what you are trying to do and what you are trying to achieve.  Your data collection should be focused on what you need to know about, understand and evaluate.  

My last point is to encourage you to be open to the possibility that what you learn from the data you collect may challenge some (or even all) of the fundamentals of your scheme.  You may be extremely successful in getting companies or products certified, that does not mean however that you are automatically achieving your desired impacts.  Use the data to understand, and if necessary, change how you and your partner organizations do your work. 

No matter where you are in the process of managing your scheme, but especially when you are just starting out, it is important to start early and to think deeply about data.

A note on connection with colleagues...

This past week I had the chance to attend my first ISEAL Conference, this one was held in London.  The ISEAL Alliance www.isealalliance.org is the leading international organization for sustainability standards, certification, accreditation and labeling. They are based in London and have staff in a number of different countries.

This may seem a little off topic but work in the field of social, environmental or other sustainability standards and certification can be isolating. As many of you may have noticed, certification is not a normal topic of conversation and finding colleagues who work in this area can be a bit hard.  If you are working on a certification scheme (on standards, certification, accreditation, labeling, etc...) it is really helpful to find folks that you can talk to. 

In organizations that run schemes that I have worked with there are a number of different specialties of the staff.  Some are marketers, others are branding experts, some are the issue experts (these are the folks that are experts in the subject area of the scheme) and then there are the people that work on the nuts and bolts of how audits are conducted.  

No matter which area you are in it is important to be able to connect with people who are working in a similar field.  How one scheme solves a problem can inform how you can solve yours - even if the solution had to deal with calculating a living wage in a wide range of countries and you have to figure out how to deal with sustainable harvest levels across numerous ecoregions. Sometimes solutions are out there and it is so much easier to adapt a solution that works than to create a new one from scratch. 

Our common goal is to make the world more just and sustainable --- and we can do that together so much more easily than working in isolation.

Market Transformation

Way back in the mists of time, standards were developed to ensure that technical issues could be resolved.  The goal was to make sure that measures were the same at the buyer's and seller's end, that screw threads or that railroad gauges were the same.  

The role of standards began a major transformation with the development of 'management system standards'.  These standards did not set specific requirements for the product but were designed to ensure that each product (or service) was consistent and of the same quality.  With this approach the role of standards began a transformation.  Now when I purchase a ton of widgets not only can I expect that a ton is a ton but I can expect that each of the widgets is of a consistent quality.

With the development of social and environmental standards the role of standards has seen another change, now standards can tell us about process and production methodologies - that is - how a product was made or how a specific material was sourced.  This can include things like whether or not pesticides were used, if raw materials were sourced sustainably or if workers were paid a living wage.  

Most social and environmental standards and certification schemes have been developed to change how a market functions so that buyers and final users expect and demand products that are socially and or environmentally responsible.  If certification schemes are successful they can create demand that producers have to respond to, whether or not they are certified.  At some point, with sufficient demand an entire market can change so that the vast majority of products are produced in a way that seeks to satisfy the new market demand.  This establishes a 'new normal' in the market in which this more responsible performance is expected and it becomes difficult for those not meeting this new level of performance to succeed. 

Market transformation occurs when this 'new normal' is established.  It does not mean that all products sold fully conform to a certain scheme, but it does mean that there has been a fundamental change which disadvantages those that do not change.

The path to successful market transformation is not straightforward or easy.  Setbacks are many and conflict with those that resist change will arise.  The bigger the market transformation that is sought the greater the challenge.  

Fundamentally if a goal of your scheme is to transform a market then it is important to understand the market and the value chain from primary production to final use (and maybe to reuse) even if your scheme only focuses on one part of the process.  For example if your scheme seeks to ensure that farm workers are paid a living wage and treated with dignity, your scheme will likely just set certification requirement for the farm.  The market transformation will occur when the value chain adopts your position and demands justice for farm workers.  This means that decisions made off the farm, by brokers, processors, retailers, restaurants and consumers have adopted the 'new normal' so that just about every farm worker can feel a change in the market by the change in their daily lives.

Certification...why even bother?

Some economists tell us that price is the only signal that is needed in the market. This signal indicates when supply is high or low relative to demand. The need for only a price signal in the market may have been the case when Adam Smith was writing in the late 1700s when purchasers most likely knew the person selling a product, how it was made and where it came from.  For us living in a global economy most of this information is not readily available.

We want or need to know about a product in order to make a choice. In addition to price we need to know about quality, materials, the source of materials, where a product is made, the conditions under which it is made and a host of other bits of information.

We have standardized many elements from voltage for electronics to thread size of bolts, each of these need to be identified and confirmed when, for example we need to make sure that your bolts fit the other parts on my machine; or when we need to know the grade of wood (i.e. how many knots and of what size to expect) for the wood we want to buy without having to travel to the sawmill to inspect each shipment.

As global supply chains grow and as market demand reflects changes in values about the products we buy, certification schemes have been created that provide information about the sourcing of raw materials, resource extraction, the impacts of processing, as well as the working conditions in mines, forests, fisheries and factories. Certification schemes can enable purchasers, either processors in the supply chain, retailers or consumers to make purchasing decisions on a host of product characteristics.  

Effective certification schemes are the ones that fill an information need in the global supply chain and better enable sellers and buyers to match up their needs with the products and services available.

Certification schemes that are successful in providing clear and useful information about the characteristics of products, services as well as process and production methods will be most successful and will be best placed to support and encourage markets to prefer environmentally and socially beneficial purchasing decisions.

What is a standard?

ISO defines a standard as:  A document established by consensus and approved by a recognized body that provides for common and repeated use, rules, guidelines or characteristics for activities or their results, aimed at the achievement of the optimum degree of order in a given context.  (from ISO/IEC Guide 2:1996, definition 3.2)

While this is a good technical definition it does not cover all of the key points that are important. There are a few things that I would add.

First of all a standard should be written for the user, that is it should clearly describe what someone who is going to use the standard needs to do in order to conform to it.  

Writing a clear document can be best done when you know for whom you are writing and when you write to that audience.  A scientific paper written for a journal is written for an audience of scientists not politicians.  A policy brief can be written for politicians but would not contain the detail or extended explanation of the research methodology that scientists need.

A standard should include clear statements for each requirement of:

• what must be achieved,
• how it is measured and
• the level of that measure that must be met.

This clarity is important for two reasons:  1) the user can understand what is expected and 2) when audits take place in many locations by different auditors we know that the same specified requirements are being examined.

For the user's sake the standard should include everything that the user needs to do and nothing more.

A standard that says, for example, that 'logging shall not be done on stream banks' sounds like a good idea but this language is unclear and the user will not know what that means in each case.  For example should the distance from the stream be 1m, 5m, 25m or more?  Does this distance apply to every class and type of stream? Does this apply to rivers?  Where do you measure the stream bank from, is it the high water mark, where the water is on the day the auditor arrives or some other point? Should the cut-bank of a stream be treated the same as all other banks? Does the steepness of the stream bank matter? Does this apply to a watercourse that is seasonal?

A standard should be written in language that is easily understood by users.  For example, a standard for cryptography will most likely be written in highly technical language of the sort that mathematicians will understand but us mere mortals will not be able to follow. While a standard for growing tomatoes will use terminology that is known to farmers and farm managers and may not make much sense to mathematicians (except for the small subset of mathematician-farmers out there).

Finally, a standard should not include requirements that apply to others, including the auditor.  Instructions to the auditor about how to conduct an audit should be in a separate document written just for auditors.

Be useful...

The best schemes benefit everyone.

Some of those who get the idea to create a new social or environmental certification scheme may want to develop a system to benefit the environment, workers or the community at the expense of the companies that are subject to certification audits.  It is easy to get into this mindset; there is a problem and you want to solve it.  Companies are polluting so your scheme is designed to prevent pollution - companies that pollute cannot be certified.

This approach can make companies feel that they are the target of the scheme and not a client, stakeholder or partner in making the world a better place.  As a result they may feel that they are being used for the benefit of others or worse, that they are the patsy - being used to pay the cost and never gaining the benefit of being part of the project.

One way to get around this to design a scheme that benefits all the users, supporters and those whose business you hope will come to depend on your scheme.  It is never wrong to say that my scheme will reduce pollution - but what are the reasons that anyone in the value chain from the primary producers to the final user (or even a recycler) would participate?  Why would a retailer sell a certified product?  Why would an environmental organization support the sale of certified products?  What would motivate workers to support the scheme?  Local community leaders? etc...

Think through your value chain and find partners in each link. Invite them into your process and find out what you can do to make their lives, business, community or environment better.  Yes, every scheme will have elements that cost - the costs become acceptable when the benefits outweigh the costs.  Consumers will pay more for organic baby food because they feel it is worth it for the heath of their babies. A company will pay more for organic apples because their customers want organic applesauce for their babies. A farmer will go through the cost and inconvenience to be certified organic in order to sell to the baby food manufacturer.  Some or all of the players in the value chain may passionately believe in the benefits of organic food, some may just see economic benefit.

Most schemes consider benefits in the supply chain such as increased market access, larger market share, access to long term contracts, and occasionally a premium price for the product.

There are other benefits that can be considered including using your scheme as a way to better manage risk (e.g. food safety certification or making sure that child labour is not used to make the clothes that I sell...) 

Really inventive creators of a scheme may be able to think of more ways this scheme can improve productivity, reduce costs, enhance quality, improve the environment, improve working conditions, etc...   If the scheme adds value (regardless of the cost) throughout the value chain then companies will line up to join and your original goal can be achieved with the enthusiastic support of industry, service providers, retailers, consumers, workers, communities and advocacy organizations....and if you are really luck governments will not get in your way. 

Conformity vs. Compliance

In the world of standards, the term conformity is use rather than compliance. This is to distinguish between requirements set by governments that are legal or regulatory requirements that are to be 'complied with' and voluntary elements set out in standards that are to be 'conformed with'.

While this distinction may seem trivial at first blush it is important to note that there are some fundamental differences in how these two processes work. Failure to comply with the law can result in penalties while failure to conform with a standard means that certification may not be granted, or if it has been granted may be suspended or withdrawn. Conformity is a voluntary act while compliance is imposed.

More importantly from the perspective of those creating a standard, these two processes begin with two different attitudes.

Legal enforcement processes (compliance) normally are undertaken with the express purpose of uncovering noncompliance, that is why police in most countries are allowed to lie when interrogating a suspect; their goal is to find out what you have done that is against the law.  They have no responsibility to help you demonstrate your innocence.

In the case of conformity assessment the process begins with the assumption that the client is in conformity with the standard and the job of the auditor and the Conformity Assessment Body (CAB) is to evaluate the client's evidence to determine whether or not their belief that they are in conformity is correct.

It is not uncommon for inexperienced participants in a new standards writing initiative to model their standard after regulations or legislation.  

Government enforcement agents conduct investigations and in that process they search for new information.  

Auditors evaluate the available evidence and determine where there is not sufficient evidence to demonstrate conformity.  When a non-conformity is discovered they do not start an investigation, rather they point out the non-conformity and ask that it be resolved.  If the non-conformity is serious it may be decided that the client will not be certified, or if already certified swift action to demonstrate conformity may be sought  or a certificate may be suspended or withdrawn.

For the standard writer, work to keep in mind how audits are conducted and how audit evidence is evaluated and what a non-conformity means.