# State of the art: The impact of sustainability standards

Allison Loconto

► To cite this version:

Allison Loconto. State of the art: The impact of sustainability standards. Journal of Fair Trade, 2024, 5 (2), 10.13169/jfairtrade.5.2.0127. hal-05310124

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Essays

# State of the art: The impact of sustainability standards

Allison Loconto

Allison Loconto

is Research Professor at the French National Institute for Research on Agriculture, Food and Environment (INRAE) and Co-Director of the Interdisciplinary Laboratory for Science, Innovation and Society (LISIS) at Gustave Eiffel University.

## Abstract

Voluntary sustainability standards emerged in the 1980s with the promise of making agrifood systems sustainable, and have developed over time into rather sophisticated systems of rules and sanctions. With this promise of change, has also come an interest in understanding whether or not change has come about. This is particularly pertinent as public agencies and governments are increasingly seeking to use sustainability standards as proxies for progress towards sustainability. In this short commentary, I share some of the recent knowledge about the impact of sustainability standards and Fairtrade standards in particular. I explore the impact of the use of the Fairtrade Premium and the impact of engagement with the Fairtrade system on business practices. I conclude with some reflections on the importance of standards in current debates in Europe.

## Keywords

sustainability standards; Fairtrade; impact; business engagement; premium

## Introduction

Voluntary sustainability standards emerged in the 1980s, bringing with them the promise of making agriculture more sustainable by working through the market (Loconto & Fouilleux, 2014; Lockie, 2020). This promise brings with it also a claim that sustainability standards can not only encourage producers to adopt more sustainable practices, but they can also have broader impacts on
society (Loconto, 2018). A rather large effort has been undertaken by the most
popular sustainability standards to collaborate under the umbrella of the
ISEAL Alliance in order to harmonize the ways in which their members create,
audit and evaluate the impact of their standards (Loconto & Barbier, 2014;
Loconto & Barbier, 2017). The work of ISEAL members on credibility and
claims has contributed to this vision that sustainability standards can (and do)
have a role to play in transitions to more sustainable agrifood systems. The
result of this effort is that, unlike other voluntary instruments for governing
agrifood systems, sustainability standards have become some of the most
studied market instruments in the agrifood sector. Between 2012 and 2014,
the International Trade Centre, the Food and Agriculture Organization of the
United Nations and the United Nations Forum for Sustainability Standards all
published literature reviews on the impact of sustainability standards because
of the increasing policy interest in the claims that were being made by both
NGOs and the private sector (ITC, 2011a, ITC, 2011b, ITC, 2011c, ITC, 2012;
Loconto & Dankers, 2014; Potts et al., 2014; Potts, Van Der Meer & Daitchman,
2010).

The first study on the impact of sustainability standards was conducted in 1993 and the largest concentration of studies was conducted between 2007 and 2011, resulting in 340 studies published by the end of 2012. The most commonly studied sustainability standards have been Fairtrade, Organic and GlobalGAP for coffee and horticulture production in Kenya, Mexico and Peru. Seventy-five per cent of the studies were empirical, but only 44% had been peer-reviewed and about 70% of the studies were considered to be of low to medium rigour (Loconto & Dankers, 2014). Since 2005 there has been a clear shift in the quantitative literature towards more highly rigorous methods. Between 2006 and 2010 a large number of project reports and peer-reviewed articles were published following the completion of major research and development projects that had been underway during the early 2000s. During this period, we also noted that there were significant concerns raised about the negative impacts of GlobalGAP on smallholders by earlier, highly cited studies, and thus there was a rebound effect whereby researchers picked up this standard to study it in detail.

Since 2012, there has been a steady increase in the number of empirical
and theoretical studies that have been published on an increasingly wide
range of sustainability standards. The purpose of this commentary article is to
explore some recent studies conducted by the author in order to position the
current debates around the role of sustainability standards in current policy
efforts to regulate transitions to sustainable agrifood systems. I thus ask: what
is the current state of knowledge and debates at the science–policy interface
of sustainability standards?

Recent Studies on the Impact of Fairtrade

Between 2019 and 2022 I led a team of researchers that looked at two aspects of the impact of Fairtrade certification. The first was on the use and impact of
the Fairtrade Premium, while the second was on the impact of Fairtrade engagement with businesses.

## Use and Impact of the Fairtrade Premium

According to the scientific literature, the impacts of Fairtrade remain rather limited, even though Fairtrade is the second most studied sustainability standard after Organic (FAO, 2014). In 2019, we conducted a search of the Web of Science database, which contains the top-ranked scientific journals.

We searched for the following string: 'Fair Trade' OR 'Fairtrade' AND 'Impact' OR 'Premium' and came up with 278 articles. Repeating this exercise in 2024 offered up an additional 298 articles. As shown in Figure 1, the first article was published in 2002¹ and the volume of publications has increased steadily since that date, with a decrease seen since 2021.

Of the 576 articles found in the scientific literature, 118 contain the word 'premium' in their abstract and only nine actually discuss the FT Premium (as opposed to price premiums).<fnref n="2" /> Given the paucity of studies published in the scientific journals, and the fact that many studies on Fairtrade are published in books, working papers, theses and journals that are not part of the Web of Science database, we expanded our search to include those references found on the Fairtrade Institute's database of literature on Fairtrade.<fnref n="3" /> Their full database contains 648 publications with the first one dating from 1987. Of these, 19 are focused on impact and two mention the impact of the FT Premium in the text.

In general, these articles demonstrate that there is very little knowledge about what role the Premium plays in making an impact on farmer livelihoods and empowerment (cf. Jena & Grote, 2017; Jena, Stellmacher & Grote, 2017). Moreover, there was no study in this group that examined the relationship between how the Premium was used and the fairness of the trading relationship. In other words, the hypothesis that paying farmers a social premium changes the power relations in a trade agreement has not been tested to date. When the Premium is discussed explicitly, the data usually focuses on Premium use, rather than impact. In general, producers (mainly in Latin America) have positively perceived the use of the societal Premium on health services and infrastructure and other local community projects (Blackman & Rivera, 2010; Sáenz-Segura & Zúñiga-Arias, 2008; Ruben, Clercx, Cepeda & De Hopp, 2008; Ruben & Fort, 2012; Ruben, Fort & Zúñiga-Arias, 2009; Ruben & van Schendel, 2008; Ruben & Zuniga, 2011). What was considered to be a community project

<footnote n="1">1 Nelson, V., Tallontire, A. & Collinson, C. (2002). Assessing the benefits of ethical trade schemes for forest dependent people: comparative experience from Peru and Ecuador. *International Forestry Review*, *4*(2), 99-109.</footnote>

<footnote n="2">2 The ninth article is the article I published from the Fairtrade International commissioned study. Loconto, A. M., Arnold, N., Silva-Castañeda, L. & Jimenez, A. (2021). Responsibilising the Fairtrade Premium: Imagining better decision-making. *Journal of Rural Studies*, *86*, 711-723.</footnote>

<footnote n="3">3 The 648 publications held in this database can be found at: http://www.fairtrade-institute.org/publications/, accessed 6th April 2024.</footnote>
<figure><img src="image_2.png" /><figcaption>**Figure 1.** Publications on fairtrade impact or Premium in the web of science database (2000–2024)</figcaption></figure>

ranged from technical assistance, through cooperative operating costs to farmer credit (Ruben & Fort, 2012; Meemken, Spielman & Claim, 2017; Tampe, 2012; Valkila & Nygren, 2010; Dolan, 2010; Singh, 2015), or as extra income to farmers (Doherty & Tranchell, 2005), which was reportedly the preferred approach (Ronchi, 2002; Sáenz-Segura & Zúñiga-Arias, 2008). Tensions have been documented about whether or not the poorer members of the community (Valkila & Nygren, 2010; Cramer, Johnston, Mueller, Oya & Sender, 2017; Darko, Lynch & Smith, 2017; Kilian, Jones, Pratt & Villalobos, 2006; Ruben, 2008) or hired farm workers on a small scale farms (Cramer et al., 2017; Oya, Schaefer, Skalidou, Mccosker & Langer, 2017) benefited from the social premiums.

The results on education more generally are rather positive. Meemken et al. (2017) found that, controlling for other factors, Fairtrade increased child schooling by 0.66 years, thus confirming the results of earlier studies (Arnould, Plastina & Ball, 2009; Becchetti & Costantino, 2006; Gitter, Weber, Barham, Callenes & Valentine, 2012; Becchetti, Castriota & Michetti, 2013). The mechanisms through which these works are through educational scholarships (Bacon, 2008) and through awareness raising and other interventions aimed at eliminating child labour. However, more recently, Sellare (2022) showed that while most of the Fairtrade Premium is not spent on projects that promote broad community development – in other words, individual payments were common – living in a village with a Premium-financed education project has a positive effect on the education expenditure among farmers (but not among cooperative and farm workers). This means that there is a spill-over effect whereby community-level investment in education infrastructure seems to encourage farmers to also invest more in their children’s education.

Any documented differences in outcomes are thus attributed to the different types of Premium use (i.e., individual payments, investments, the capacity of the organization to invest and manage the Premium, and the decision-making process used to determine its use) (Broeck et al., 2017; Singh,
2015; Said-Allsopp & Tallontire, 2014), but all authors were hesitant to attribute any direct impact to the Premium as there was significant co-financing of the projects with other rural development funds.

## Pathways to Impact

In 2019, FI commissioned new empirical research to: 'analyse how the FT Premium has been used by Fairtrade organizations and how it generates benefits for Fairtrade farmers, workers and their communities' (Loconto, Arnold, Silva-Castañeda & Jimenez, 2021; Loconto, Silva-Castaneda, Arnold & Jimenez, 2019). Data was collected through reports from 385 producer organizations (POs) and qualitative interviews onsite in a coffee/cocoa Small Producer Organisation (SPO) in Peru, a cocoa SPO in Côte d'Ivoire, a banana SPO in Ecuador, a banana SPO in Peru and a flower Hired Labour Organisation (HLO) in Kenya. Our analysis focused on four characteristics of an intervention that influence its impact within organizations and on systems: Use, Participation, Functions and Impacts.

**Use:** Direct payments to farmers, investments in operations and production and community infrastructure (basic needs) direct the FT Premium funds towards projects that address both individual and community needs. The main Premium uses are individual services to farmers and workers (52%),<fnref n="4" /> followed by investments in the POs (35%) and services to the communities following with just 9%.

**Participation:** Separating the FT Premium decision-making process from the operations management decision-making process empowers producers and workers. Premium uses and impacts depend on participation and accountability arrangements in the decision-making process. Empirical field work shows, that POs organize the use of the Premium by different (in) formal elements that determine the visibility of the Premium.

**Accountability:** Participation arrangements and the ways in which decisions are taken affect the Premium uses. Workers on small farmers' farms are rarely involved in the decision-making process. Levels of knowledge and trust vary across gender, status and level of involvement in representative and management bodies. Many representatives do not have the skills needed to carry out some of the financial and administrative duties required of FPC members.

**Function:** The Premium serves to cover core expenses of certified operations and basic needs of the communities – which puts into question the viability of these enterprises (who are perhaps not yet fully autonomous) – however, when participatory decision-making is working, the Premium does increase the dignity of farmers and workers by enabling them to become 'patrons' of their communities.

The combination of these four elements provides insights into possible impacts, particularly at the level of the PO, and not at the household level. The

<footnote n="4">⁴ The 'direct payments' category includes either cash payments or material goods/products that have been purchased at an economy of scale and then given to the workers or the farmers.</footnote>
Fairtrade Premium is currently holding up the system to pay for many services provided by POs and its long-term impact through financing multi-generational education is critical. However, no causal pathways can be determined via the Premium use alone. Instead, there is a need for a broader perspective on how POs operate in a Fairtrade system. For example, we found that stronger, well-managed and democratic organizations – when this is implemented through separated decision-making processes – can result in resilient, viable and inclusive POs. Additional impact pathways can be envisioned based on how the different aspects of the FI system – standards, FI support services, and local autonomous decision-making – interact over time.

## Impact of Fairtrade Engagement with Businesses

Traders are key actors in the Fairtrade system, as it is through their trading practices that producer organizations in the Global South are linked with consumers in the Global North. Ultimately many producer-level impacts, including the amount of Fairtrade Premium available, depend on volumes sold on Fairtrade terms. These terms are reached by consumer purchases, but these purchases are possible only because certified traders, licensees and brands are committed to purchasing their raw materials and products according to Fairtrade terms. However, these market dynamics are not well understood, particularly those that determine the form and size of business engagement with the Fairtrade system.

Similarly, to the situation regarding the literature that has studied the impact of the Fairtrade Premium, there are very few studies that have looked at the impact of Fairtrade on the businesses along certified supply chains. This reality has caused some scholars to call for a paradigm shift towards systematic and regular outcome and impact reporting by Fair Trade organizations (Galtung, 2019). In the scientific literature, we were able to identify a few studies that examine social sustainability in supply chain management (Miemczyk, Johnsen & Macquet, 2012; Kauppi & Hannibal, 2017; Yawar & Seuring, 2017). Studies on supply chain sustainability have tended to focus on environmental issues (Gimenez & Tachizawa, 2012; Carter & Easton, 2011). Only four articles within the supply chain management literature focused on Fairtrade (Karjalainen & Moxham, 2013). There are just a handful of studies that specifically address the key risks that Fairtrade faces in the competition between sustainability certifications and substitution risks as certifiers, brands and producers all develop their own labels (Arnold & Hasse, 2015; Marx & Wouters, 2014; Reinecke, Manning & Von Hagen, 2012). Moreover, increasing reliance on corporate-led sustainability initiatives constitutes a significant shift in terms of sources of credibility, which risks exacerbating power and embeddedness asymmetries (Krauss & Barrientos, 2021). In parallel, rising consumer concern over the environment means that companies are increasingly measuring only the environmental impact and taking consequential decisions based on these factors, rather than the social and organizational value that responsible business models and collective marketing offer
<figure><img src="image_3.png" /><figcaption>**Figure 2.** Publications on fairtrade, business engagement and ethical consumption (n = 2543)</figcaption></figure>

(Sjauw-Koen-Fa, Omta & Blok, 2018; Loconto, Desquilbet, Moreau, Couvet & Dorin, 2020; Ikwera & Twongyirwe, 2019; Sahan, 2019) (Figure 2).

In 2020, FI and the European Union commissioned a study on the impact that Fairtrade had on businesses and Fairtrade consumer markets for bananas, cocoa and coffee in the Global North. It sought to explore: *how Fairtrade might maximize demand and positive producer impact through its supply chain and business engagement* (Loconto et al., 2022).

Data was collected about organizational and supply chain characteristics from 932 certified traders and licensees, and semi-structured interviews with 151 certified traders, licensees, auditors, employees of Fairtrade organizations and consumer experts in six European Countries (Czech Republic, Finland, France, Germany, Poland and the United Kingdom). Participant observations and informal interviews during trade fairs were also conducted in order to conduct a comparative analysis across four domains of interaction: consumer, business, producer and standards.

This study documented a series of changes in business practices due to engagement with the Fairtrade system. First, rarely is Fairtrade simply a CSR strategy. Instead, it is central to the mission of more than half of the interviewed companies (55.81%, n = 24). Businesses are gaining reputational benefits from engaging with Fairtrade, particularly because of its strong label recognition and acceptance by consumers. Businesses expect to profit from this reputation and they expect that Fairtrade will help them to find trustworthy trading partners. However, just over half of the traders we interviewed (56%, n = 20) have experienced increased sales since joining Fairtrade, however, they all claim that this is not linked directly to Fairtrade certification.

Traders are looking to Fairtrade to ensure the traceability of their supply chains. Pressure no longer comes only from consumers, but EU governments are beginning to require them to make their supply chains transparent, ethical
and sustainable – and they are looking to Fairtrade to help them demonstrate their responsibilities. Some of the businesses are looking to use their market influence to raise the bar on environmental and social practices in their sectors – and they are looking for Fairtrade to provide them with the evidence of first the environmental, then the social, impact that the Fairtrade system has for producer organizations in the Global South – however, this evidence has not yet been delivered.

The greatest impact observed is a change in business supply chain management behaviour as a result of engagement with Fairtrade (65% of respondents, n = 40). The majority of companies reported that they had increased the prices they paid to producers. Indeed, in the interviews with actors across the Fairtrade system there was a general tendency to claim that producers are not paid enough, even when using the Fairtrade mandated minimum prices. Moreover, the majority of respondents claimed that the hidden costs – particularly the environmental costs – of production are not covered by the current prices used in the Fairtrade system. For this reason, the traders claimed that they were often paying more than the minimum price for the Fairtrade-certified products that they purchase. Nonetheless, these same traders also admitted that they were often not able to offer long-term contracts or prefinancing, the reason being that the nature of the commodity markets (and the need for specific quantities of specified qualities at different points of time throughout the year) made it difficult and often undesirable to enter into long-term or prefinanced contracts.

Fairtrade remains one of the most easily recognized labels by consumers, but ethical consumption on its own is not strong enough of a motivation to change industry practice, which remains extremely strong for each of the three products. Indeed, the benefits for businesses from Fairtrade engagements do not come from compliance with (or audits of) the Fairtrade Trader standards. So, the high costs of participation in the Fairtrade system (particularly licensing fees, which are different in every country and in each product category) might discourage traders from joining the Fairtrade system. In fact, the participation of small and medium enterprises seems to be inhibited by these higher costs, as compared to other certifications. Fairtrade is thus the most attractive to those companies on the far ends of the spectrum of company size (micro and large enterprises). For the large companies, the licensing costs are easily absorbed in their large quality assurance programmes, while the microenterprises are so small that the licensing costs are justified by the brand recognition that Fairtrade provides them. In addition, businesses increasingly develop an interest in implementing their own projects directly with producer organizations. These project-based collaborations pose both opportunities and risks for demonstrating the usefulness of the Fairtrade system.

Values and customer requirements drive business engagement. Our results confirm that the value of coffee and cocoa is mostly determined by the personal experiences of the consumers and their attachments to the products. This opens up many possibilities for the valorization of these products. In the
case of bananas, however, the monetary value strongly orients how important this product is to consumers.

One final insight was gained with this study in terms of the identification of a seniority effect whereby an increasing number of organizations have been in the Fairtrade system now for more than twenty years and have reaped enormous benefits through increased sales, revenue, volumes, community development and professionalization. The risk is that some of the companies who are certified are no longer those who need the support and empowerment from the Fairtrade movement. Further research is needed in order to understand how to keep strong fair traders, but make room for those producer organizations that need Fair Trade opportunities to improve farmer livelihoods.

## Conclusions and Current Debates

The state of the art in sustainability standards that was presented in this article is far from complete and presents a very partial vision of current knowledge. But it is important to digest as sustainability standards are again a hot topic of debate in science–policy circles in 2024.

At the beginning of 2024, tractors blocked major highways across Europe (e.g., in France, Italy and Brussels) leading to airports and a number of public buildings being sprayed with farm animal effluents. These actions were carried out by farmers who were protesting the new environmental requirements for agriculture that came into force at the beginning of the year. Like farmers all over the world, EU farmers complained that they should not have to carry the full burden of paying for environmental conservation. As part of the farm-to-fork policy, which was one of the focuses of the protest, sustainability standards and labels were supposed to help Europe transition to more sustainable food systems. For example, mandatory environmental labelling (e.g., EcoScore and PlanetScore) was passed as part of the Climate Law in France in 2021, with the obligation of compliance looming on the 2025 horizon.<fnref n="5" /> The approach that has been taken by the French government is to use some sustainability standards as proxies for sustainability if full product lifecycle assessment is not feasible for the companies (level 1 of 3 possible levels). The recent human rights due diligence and zero imported deforestation legislations, that also came into force recently, have also looked to labels as proxies of good practices (Ponthieu, Vernier, Lunder & Conesa, 2023).

In all of these instances, governments have been examining how they might rely upon existing voluntary sustainability standards to help them reach the very ambitious targets that have been set in the 2030 and 2050 agendas. This ambition is admirable and it does make sense to use instruments that are already established and recognized by consumers. However, the state of the art on the impact of sustainability standards is that conclusive evidence of positive impact is not known. A number of recent studies have been undertaken in order to understand how sustainability standards (including Fairtrade)

<footnote n="5">5 https://affichage-environnemental.ademe.fr/, accessed 6th April 2024.</footnote>
contribute to biodiversity conservation (Potts, Vioora, Mammadova & Lynch, 2017; Hörmann, 2017), which has finally reached prominence in the global agenda. The evidence to date is that they don't really measure biodiversity or complex ecosystems. This recognition is very similar to the state of the art presented in this paper. Even though there is a clearly articulated theory of change within the Fairtrade standard, the evidence to date is not conclusive about whether or not the impact pathways are being followed and thus influencing change in trade or agricultural practices.

The recent call by the World Wildlife Fund (WWF), to create a Codex Planetarius (i.e., a sort of ecological equivalent to the Alimentarius that currently governs food safety for international trade through the creation of science-based standards), is an attempt to build global consensus around minimum sustainability standards for agriculture and food systems (Clay, 2016). This proposal has been taken seriously in a number of international arenas – including within the Food and Agriculture Organization of the United Nations – and additional research is being carried out in order to determine the feasibility (and desirability) of such a proposal. Nonetheless, if the information conveyed in this paper can contribute at all to this debate around sustainability standards, it is to say that we still do not know what their true impacts are.

## Acknowledgements

The data collection that was carried out for this article was funded through two research grants from Fairtrade International. The author thanks the members of the two research teams for their contributions: Matthew Anderson, Nadine Arnold, Aurélie Carimentrand, Camille Cleuziou, Alejandra Jimenez Torres, Laura Silva-Casteñada and Jennifer Widmer. Helpful comments on the original reports were received from Margret Loeffen and Harveen Kour. The author also thanks the special issue editors for comments that led to the improvement of the article.

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