Who does what? - An Assurance Ecosystem

This blog focuses on the role of the scheme owner. But, let’s be clear that while the scheme owner is a central player, there are others that have crucial roles. Previous posts have included some elements related to standards development with some references to auditing. In this post I wanted to look at the big picture of how assurance is managed, in what I think of as an ‘assurance ecosystem’.

Before going any further, I want to be clear that while all well run standard systems include all the elements discussed below, who does what and how oversight is conducted can vary greatly. This can be due to the objectives of the scheme owner, the nature of the industry or in response to the way an industry sector or key resource is managed internationally or in specific countries.

A fully functioning assurance ecosystem includes several players, each with their own responsibilities. The diagram below is a highly simplified map of the players and the primary relationships of each.

Assurance Ecosystem

Kitbag - An Assurance Ecosytem - Page 1.jpeg

 

 For this post, as with the all the posts on this blog, the central player in our assurance ecosystem is the scheme owner.

In most cases the scheme owner is responsible for:

  • the standard itself, including its development, maintenance and interpretation;
  • the rules for the assurance system including the documented policies, processes and procedures that govern its application; and,
  • the day to day management of scheme operations including oversight, monitoring and evaluation, risk management, and business operations such as marketing, finance, personnel, etc.

Some schemes delegate some of these responsibilities to other organizations. However, the scheme owner is always ultimately responsible for the scheme. For example: 

  • In the case of organizations such as MSC and RSPO, they act as scheme owner and they have assumed all these three core responsibilities.
  • In the case of FSC, it established a global set of ‘Principles and Criteria’ that standards must address and works with affiliated national and regional organizations who assume the role of a standards development organization (SDO). FSC, the scheme owner, endorses those standards that conform to its system requirements.
  • In the case of ASC, the standard was developed by a group of semi-autonomous bodies, the aquaculture dialogues that were set up by WWF, and the completed standards were given to ASC who now undertakes all the responsibilities of the scheme owner.

The other three players on the assurance ecosystem map (AB, CAB and client) have their own roles to play.

The accreditation body (AB) has the job of providing "third-party attestation related to a conformity assessment body conveying formal demonstration of its competence to carry out specific conformity assessment tasks (ISO 17011:2004 3.1)". In plain English, its job is to make sure that the CAB has the competence and capacity to carry out audits for a scheme. For some schemes, the accreditation body works in a single country, such as DAkkX in Germany or ANSI in the US, or the accreditation body works internationally, such as IOAS, SAAS or ASI.

The conformity assessment body (CAB) - sometimes referred to as the 'certification body' or the auditor - has the job of carrying out audits against the scheme owner's standard following the policies, practices and procedure specified by the scheme owner. CABs can range from large multinational organisations such as Bureau Veritas, SGS or TÜV to small organisations with only a few staff working in single country or region.

The client, that is the applicant for certification or, when certified, the certificate holder, has the job of making sure that the product, process or service conforms to the standard.

The assurance ecosystem is almost never a single organization that does everything. As a result, the task of assuring that each certificate means that the same minimum performance level has been achieved for each certificate is a challenge that requires skills of facilitation, negotiation, management, collaboration and communication.

In brief, the challenge of being a scheme owner includes the skill and capacity to partner with specialist organization in a range of roles and responsibilities in a way that respects the the scheme owner and their specialist roles so that the whole ecosystem delivers consistently high quality.

 

Planning for the future

There is a popular quote from Wayne Gretzky. He is reported to have said something like: "I skate to where the puck is going, not where it has been.” 

As cheesy as the quote may be, it draws attention to a fundamental problem that decision makers face - how to position yourself to take advantage of something that is going to happen rather than try to go after the rewards of something that is happening now or has already happened.

My cynical mind sees populist leaders of our age expending tremendous amounts of energy to recapture the glory of a bygone era, whether that is Trump seeking to recreate the hegemony of the US in the 1950s, Putin seeking to recapture the glory of the Byzantine Empire, or the Brexiteers seeking to reclaim the primacy of the British Empire, they all seem to me to be ‘skating to where the puck was…’

Business leaders can get caught in the same trap, that is focussing their resources on a recent trend only to be faced with all their competition going after the same, now diminishing opportunity.

This may not seem like it has much to do with certification; but it does, stay with me.

Certification systems face the pressing demand to solve the problems that they face now. This pressure can be overwhelming and can mean that leaders can be caught in the trap of focussing on where the puck is now, without devoting time and energy to where it will be. Limited resources can also truncate the capacity of leaders to think about the future.

The visionaries that were behind the leading social and environmental standards were thinking about the future and how to bend it toward creating a more just and greener world. They looked at long-term trends and tried to figure out how to take advantage of them.

While leaders in certification systems have to devote large amounts of energy into solving today’s problems, they also need to spend time thinking about were the world is going and how they can get out in front of the changes that are now developing.

All this comes down to the fact that certification systems are constantly changing and taking advantage of the opportunity to change can give us the opportunity leverage to broad changes that are occurring and are likely to occur.

These can include:

  • Growth in markets and trade in developing countries
  • The ever-increasing rate of technological change
  • The globalization of markets, especially capital markets
  • Market pressure from activist consumers
  • The growth of the size and importance of global megacities
  • The growing inability of national governments to control markets

I would not counsel adopting my list, but encouage looking to the research being done on future trends. Study the reports, evaluate the trends and ask the question: How could this impact my standard system?

Even if we just consider the growth in global trade and especially the growth in south-south trade, certification systems will need to adapt to a new shape in global markets. Most certification systems are designed to manage north-north and south to north trade. As a result, their efforts to develop markets for certified products in Europe, North America and Japan will not encourage growth in the rapidly growing market share in the developing world. Will your system be positioned to grow in Indonesia, Kenya and Brazil? Will you be able to deliver markets to your certificate holders for those that produce products in Africa and sell into Southeast Asia?
 

How to Build an agreement

Core to any standard system is the need to build a consensus, that is to reach agreements that can be supported by all your key stakeholders.

This sentence is self-evident...and impossible at the same time.

It is self-evident because agreements that have the support of all your key groups of stakeholders are the most durable and form a solid foundation for your system. It is impossible because getting that agreement on everything from everyone is, well, impossible.

Multiparty negotiation is one of the most challenging elements of building a consensus standard. It is necessary to get agreement between a wide range of interests, many of which are contradictory. (For more on what a consensus means see my earlier post: Who Can Write a Standard?)

In my experience multiparty negotiations follow a consistent pattern:

  1. Very quickly, the group can reach an agreement on close to 90% of the issues. This is the case because, despite our differences we all agree on wide common base (I know this does not feel like the case but it is really true!).
  2. Getting agreement on the next 7% of the issues will take a lot of work, trust building and creative thinking but it can be done.
  3. The last 3% is the killer. These are the issues where the most fundamental disagreements reside.

As I state in the title, agreements are built. The popular myths are either that the agreement is a compromise, that is all sides must ‘lose’ something or one side just gets its way at the expense of all the others. While these happen sometimes, the best agreements are built from innovative approaches to old problems. This is important because agreements we can actively support are more durable than those we can just accept.

Back in the early days of FSC, the original Principles and Criteria had a text of principle 9 – it dealt with the issues of ‘old growth forest’ and the parties could not agree to a text. After many tries to get an agreement a proposal was made to create a committee of representatives from the three FSC chambers  who would be charged to develop an agreed text for principle 9 (these included environmental, social and economic representatives from both the developed and developing countries).

To create the group, each of the chambers elected their developed and developing world representatives. To incentivise the group to reach a decsion, the FSC board which approved the process was clear, if this group did not solve the problem, the board would. This last point helped because very few folks liked any proposal that the board had produced to date.

When convened, the group started off with the all the expected concerns raised, the foresters from the economic chamber talked about ‘over-mature trees’, the environmentalist talks about the value of ‘old growth forests’, and the social chamber representatives talked about the need for sustainable employment and preservation of cultural sites in forest landscapes.

About halfway through the time we had together, a new idea emerged. It was proposed that we talk about ‘high conservation values’. That is, the concerns of each group could be mixed up in different ways. The question ceased to be “Is this an old growth forest?” and became “What are the high conservation values for this forest?”

Because of this change in approach a text of principle 9 was proposed that required protection of high conservation values. The text was clear that high conservation values could be found in just about any forest, from plantations to virgin forests and everything in between.

For FSC, the issue of principle 9 was the killer 3%. It took years to build an agreement, but it happened because a new idea was brought into the room, it was explored, and an agreement was built. The solution worked better for everyone’s concerns than any other. When the meeting ended, no one left feeling like they had lost.

A creative solution that allows the parties to think about an issue in a different manner is often the route to building agreements.

Writing Code for Humans

My father used to say: “If all else fails, read the instructions!” I think that this is an accurate way to describe how people function. The first thing we do when we open a box is to toss the instructions aside and try to figure out how to use our new toy. We will puzzle through a problem, press buttons on the new camera, and assemble the IKEA cabinet our own way before we find out that that we wasted time, did it wrong, or worse, broke it.

This natural tendency is at odds with how standards, audits and such are designed and implemented. Tossing the certification instructions aside is not going to ensure that your implementation of a complex system is going to be successful.

Standards, audits, certification, labelling, and other bits that are part of a certification scheme are detail oriented and require clear, step-by-step instructions and guidance for users. 

It really helps if the stuff is clear, easy to read and works with the way humans work. But, let’s be honest, most scheme documentation is confusing, not well organized and hard to follow.

We often think of instructions as a computer program in which each step, no matter how trivial must be written and placed in its proper order in the sequence. Humans, thankfully, are not computers and we are a bit more flexible than computers. With that said, clear instructions designed for humans do help and when properly prepared it is more likely they will be followed.

So how do you write code for humans? Here are a few things to keep in mind:

1.       Understand what your user needs

Find out who is going to use your instructions and guidance; write for them. If it is likely to be an intern or junior staffer, keep that in mind. Your writing may be their first real introduction to standards and certification.

2.       Use words and graphics

Some people read the words and ignore the graphics, others read the graphics and just look at the words as if they are footnotes to the graphics. Whenever you can, give presentations that both can read.

3.       Write in the positive

It is very hard to follow instructions that tell you what not to do. Instructions are so much clearer when you keep this in mind.

4.       Tell them how their work will be evaluated or audited.

Give a clear description of how their work will be used. If it is to be audited, explain the steps in how that works.

5.       Don’t think they are stupid or that they can read your mind.

Write for readers that are smart and want to learn, that is why they are reading your work. At the same time, be aware that what is ‘obvious’ to you may not be to others, so include all the steps in your descriptions.

Are voluntary standards really a form of environmental governance?

I have been reading studies, articles and such for years that describe voluntary standard systems (VSS) as a form of environmental governance – and for just as long I have been wondering if that really is the case.

The term ‘governance’ is very broad can include governments (national, state, provincial, county, municipal, etc…) and civil society (businesses, not-for-profits, charities, unions, churches, universities, partnerships, informal collaborations, the girl scouts, etc…).

I am a bit biased, I guess... I think of 'governance' as a role that includes a measure of direct control. This is informed by my experience as a member of several boards of directors and having worked directly for boards. The governance role of a board is focused on setting a direction and making sure that it is the goal of the organization. (Boards also have a budget and legal compliance role but let's put that aside for now.)

Most of the time when we hear the term ‘governance’ we think of a decision-making body that can create and enforce a policy, rule or regulation. As a result, most people do not think of voluntary or optional systems a form of governance because it lacks the capacity to compel compliance.

Since I am not a lawyer, I will skip over any musings on how legislation and regulation come to be; I will just focus on the voluntary side.

Standards are not legislation or regulation (see my earlier post “Conformity vs. Compliance”) although they can be easily confused. 

Voluntary standards are normally developed to codify norms of practice, that is they are designed to create specific outcomes, whether it is a common screw thread for bolts and nuts or how to manage watersheds.

Once they are developed, voluntary standards are either become the common practice or they are ignored. Those that become common practice create a new norm and nuts of a certain size all fit bolts of the same size. (These are the ones that can 'feel' like they are mandatory.) Those that are not adopted, fall by the wayside or sit in limbo until they are needed, if ever. The ‘decision’ is made in the market, and competing standards are used by different players until one is the clear winner. As a result, VHS became the norm despite the obvious superiority of Betamax (I know, I am showing my age now….)

Voluntary standards establish the norm by competition in the market. Winners and losers are not often clear because the winner may be selected for reasons that are not clear at the start.

A new norm, widely accepted may have the effect of regulation because once it becomes the new norm it is hard to use some other option, and have it accepted. Sometimes these other options can arise and disrupt the accepted norm, and then things change.

Well, what does this mean for a new standard system? I would see this as an opportunity to look at competing standards in the past and really understand why some succeeded and some failed. Shelves are full of standards that were rarely used (I should know because I spent lots of time writing some of them). Also, for every successful standard there are many competing ideas that were discarded.

I have my own ideas about why some succeeded and others fail. But that may just have to wait for a future post.

 

A NOTE: Yes, I agree that some governments adopt standards as regulation, effectively making them law in some jurisdictions. I consider these standards to have become regulations since they then have the force of law – they are no longer voluntary, even thought they were originally developed outside of legislatures and government departments.

"White Label" Standards

A white label product is a product or service produced by one company (the producer) that other companies (the marketers) rebrand to make it appear as if they had made it.  ("White-label product" Wikipedia, 24 January 2018)

In the world of social and environmental certification many have noted a growing frustration by some large brand owners with the use of certification trademarks on their product packaging.

This frustration may be due to one or more issues:

  • loss of packaging 'real estate' to other peoples' logos,
  • having to pay a logo licence fee to display other peoples' logos,
  • fear that using other peoples' logos to assure their customers is also weakening their own brand,
  • frustration that multiple logos may be needed for packaging, sourcing of certain components, treatment of workers, and production aspects such as water use, CO2 emissions, energy consumption, waste management, recycling, etc...

Underneath these issues is the powerful desire by some brand owners for their customers to trust the brand as being responsible across a range of issues. These brand owners want you to see their product and to recognize the brand as providing the assurance that the environment is protected, workers are well treated, and all materials are sourced in the most responsible manner possible. 

It is possible that as the number and complexity of social and environmental standards grows, brands will be looking for ways to 'transfer' the assurance provided by third party certification logos to their own brands. This is important to the brands because they want to have their brand to be all the assurance that customers will want.

This can present a challenge to standards system owners. First, it can mean that all the effort that they have invested in growing their own brand may be diminished or lost altogether. 

Also, it can pose a significant challenge to the viability of a scheme owner. If its logo is its main source of revenue, then the loss of logo revenue may put at jeopardy the viability of the certification itself.

In the end, most brand owners will still need to monitor and evaluate their supply chains and their own production - and third-party certification is a fantastic way to do it. Just because the brand does not want to display your logo does not mean that they want to build their own audit and certification system.

A first step is to understand what the brands that rely on your certification want and need. Paying close attention, really listening and engaging in discussions with brands is crucial. The last thing you want is to be surprised by an announcement that one of the brands using your logo will be dropping it from all its packaging.

Your business model may need to be re-thought – this can include a range of questions such as:

  • How can you continue to finance your operations, keep your standard current and maintain high quality assurance?
  • Can you provide a ‘white-label’ service to brands that want it?
  • How will you address concerns of smaller brands that want to continue using your certification mark?
  • Can you deliver the market change that you are committed to?

 

Humility

Do we develop standards and certification to change the world?

This may seem a bit grandiose, but to some degree it must be true. Social and environmental standards have been driven by individuals and groups that want to save natural ecosystems, preserve endangered species, make the lives of workers and small producers better, make trade fair, save indigenous cultures, protect the oceans, save the forest….well you get the picture.

To create an international standard and go to the trouble of turning it into a global enterprise requires dedication, hard work and a belief that we can make change happen, even reform an entire industry sector.

While this undying belief that we can effect change must be present, it should be tempered with humility.

By humility, I mean a sense that a much as we believe in what we are doing we must also be aware that we may make mistakes. These mistakes can help us to realize that there are better ways to do our work and make the difference we are driven to deliver.

That is, errors CAN help us - but they may not if we do not have the humility to recognize that our system is not flawless and that we can change the way we work.

To be blunt, errors to not happen just because of the failure of others. 

We should be looking at our own work with an eye to seeing our own weakness and failures. More than that, we should be looking to make changes, even hard changes, to better deliver on our objectives.

The Growing Importance of Social and Environmental Certification

NOTE: I am sorry that I have been remiss in maintaining this blog, events over the last year took over my life and demanded attention. I am hopeful that a new normal has been established so that my work-life-chaos balance has stabilized. I will endeavour to post regularly to this blog.

 

For many years some folks have been predicting the demise of social and environmental certification. The reasons for these predictions are many and include:

  • Market confusion caused by too many schemes;
  • Brand owners resistance to having 3rd party logos on their packaging;
  • Failure of 3rd party certification to solve the worlds problems;
  • High cost of certification for primary producers;
  • Failure of a price premium to support improved performance;
  • Failure of 3rd party schemes to really deal with the weakest players;
  • Large northern companies benefiting over smaller and southern producers;
  • etc....

Yes, social and environmental certification has many issues that need to be addressed and is not (and never has been) the silver bullet that will fix all problems.

But there are benefits.

First let's consider the principle strength of 3td party standards. They function within markets and as a result can only effectively be regulated by goverments using tools that regulate trade.

Why does this matter?  Some national goverments have been taking actions to restrict the ability of civil society players to drive change. These actions have included:

  • Restrictions on civil socitey organization raising funds.
  • Restricions on travel by NGO reseachers.
  • Punative audits by governments of charities they do not like.
  • Austerity budgets by governments that undermine social and environmental progress.
  • Active promotion by goverments of projects that undermine rights of individuals and groups as well as those that subsidize environmentally dangerous industrial practices.
  • Restrictions on travel and investment by academic and business professionals from developing countries.
  • Restrictions on students' travel and study in other countries.
  • etc...

These and other actions are designed to weaken the capacity of civil society to challenge inequity, injustice, environmetal degredation and undermine efforts to increase the capacity of civil society to challenge governments, militaries or the ultra-rich.

What can social and enviromental certification bring to the table?

First of all, because social and environmental certification is a commercial practice, any efforts designed to restrict it by necessity will also apply to all other forms of certification. Most governments (othe than absolute dictatorships) cannot target one company and ignore all others - the rules that apply to one certification system apply to all. A country cannot, for example outlaw MSC or Fairtrade certiifcation, it would have to ban the use of all foreign standards in their country and that would have a massive impact on their ability to trade internationally. 

The same principle applies to the use of trademarks. If a country outlawed the use of the FSC logo on products all other owners of international brands would become nervous about protecting the value of their brands in that country. Again, international trade could be negatively impacted as international brands would likely reduce investment in the offending country. Why would a brand owner invest in a country that has just oulawed the use of a brand logo?

The close integration of social and environmental standards, certification and labelling with business mean that actions to restrict its use by definition stray into regulation of trade, business and industry.

3rd party social and environmental certification is not the panacea that will solve the worlds problems, but it is a useful tool that can support social change by encouraging business to adapt to a market demand for responsible products and services.

As governments retrench and seek to silence dissenting voices, tools that can bypass these efforts are needed. Social and environmental certification is one of those tools.

As a result we will see more reliance on independent standards in international supply chains to meet the growing consumer demand for responsible products and services.