Opinion of the European Economic and Social Committee on  Ethical Trade and Consumer Assurance Schemes
Date: 2005-10-27
Institutions: European Economic and Social Committee
Subjects: consumer information, corporate social responsibility, fair trade, international trade

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4.2
The EESC welcomes the improvements made in the
proposed Regulation, but considers that these are insufficient
to enable the EUSF to achieve its full potential and capacity to
take appropriate action.

4.3
The Committee thinks that the Commission proposal
should be amended in three ways so as to gear it more effec-
tively to practical requirements:

a) extend its scope to cover other forms of disaster, particularly

droughts;

b) lower the threshold figures for the scale of damage (which
are too high, and exclude most recent disasters) and/or give

the Commission greater powers of discretion, so that it
could recognise disasters with a serious regional impact;

c) be more flexible about the types of eligible expenditure, by
introducing a new, more comprehensive clause to cover
other significant costs that are not included in the Commis-
sion's list of ‘eligible operations’.

An own-initiative opinion evaluating the principles and
4.4
operation of the Solidarity Fund and its ability to meet the
needs of the EU's Member States and regions could also be
drawn up at an early opportunity, as a further way of addres-
sing the problems already identified.

Brussels, 27 October 2005.

The President

of the European Economic and Social Committee

Anne-Marie SIGMUND

Opinion of the European Economic and Social Committee on ‘Ethical Trade and Consumer Assur-
ance Schemes’

(2006/C 28/15)

On 8 February 2005, the European Economic and Social Committee, after a request received on February
2005 from the next UK's Presidency of the EU approved to draw an opinion on Ethical Trade and Consumer
Assurance Schemes.

The Section for External Relations, which was responsible for preparing the Committee's work on the
subject, adopted its opinion on 10 October 2005. The rapporteur was Mr Adams.

At its 421st plenary session, held on 26 and 27 October 2005 (meeting of 27 October 2005), the European
Economic and Social Committee adopted the following opinion by 75 votes in favour, 12 against and 10
abstentions.

Executive Summary

Ethical trade (in the various forms which the Opinion
1.
defines) (1) can make a significant contribution to sustainable
development and to the direct engagement of consumers in a
positive and empowering response to globalisation.

Using a knowledge-based set of systems it can inform
2.
both the provider and producer of goods and services and
stimulate market-centred action and consumer
response.
Europe has global leadership in this field. Such activity ties in
with the Lisbon Strategy and simultaneously contributes to the
Millennium Development Goals.

(1) As these terms are subject to differing interpretations a definition of

key terms used in this opinion is clearly set out in section 9.

3.
Proliferating consumer assurance schemes seek to offer a
range of ethical, social and environmental guarantees. Most
seek to address one or a small number of issues specific to that
product, such as fair trade, organic production, sustainable
forests, environmental impact, child labour or animal welfare.

4.
The Opinion critically explores the necessary require-
ments of such schemes to be effective, the adequacy of policy
definition within the EU and the urgently required need for
clarification and co-ordination. It suggest practical steps which
EU institutions, Member States and regional/local communities
and authorities can take to consolidate, underpin and enhance
these initiatives.

5.
The Opinion also suggests a policy framework which will
help the various institutions of the EU and a wide range of
ethical trade initiatives ask the same questions about securing

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and demonstrating impact, and share learning about how to
answer them. This will help to enhance effectiveness and mini-
mise any duplication and waste of monitoring effort.

6.
Such a framework should give an intelligent basis for
comparing consumer assurance schemes with other policy
instruments aiming to achieve similar goals and provide EU
institutions and Member States with a pointer towards policy
coherence and a practical tool for assessing the investment of
resources.

consumer trends and also seek to minimise risk to their reputa-
tion. The potential leverage of ‘ethical trade’ is substantial. Of
the 100 largest economies in the world, 51 are corporations,
49 are countries (3). In 2003 world trade flows between nations
exceeded $9.1 trillion — some 25 % of global GDP — and
have grown at an average rate in excess of 6 % per annum for
more than 20 years (4). The absolute volume of ‘ethical trade’
flows is difficult to measure but an estimate can be made based
on goods and services sold by corporations that subscribe to
social and environmental audit schemes. This gives an approxi-
mate figure of 5-7 % of world trade.

7.
The development of the Opinion has resulted in far-
reaching interest and participation across the Commission,
amongst major commercial interests and NGOs. The EESC will
encourage through further practical work:

— practically facilitating a stakeholder dialogue in 2006 to
produce a common ethical trade assurance framework for
impact assessment/quality;

— practically facilitating a stakeholder dialogue in 2006 to
prepare the EU participation in the work of ISO 26000;

— a consumer awareness programme,

from early years,
through mainstream education and extending into lifelong
learning, on the capacity of consumers to influence social
and environmental dynamics through informed purchasing.

1. Introduction

1.1
In February 2005 the UK Government requested the
EESC to produce an exploratory opinion on Ethical Trade and
Consumer Assurance Schemesin the context of its Presidency
of the Council from July — December 2005 and contributing
to initiatives on sustainable development. ‘Ethical trade’, in its
various forms, has been an element in a number of recent
EESC opinions, notably in the field of sustainable development
(CESE 661/2004) and corporate social responsibility (CESE 355/
2002). Fair trade in particular has long been of concern to the
EESC commencing with its opinion in 1996 (2). We therefore
welcome this further opportunity to look specifically at the
issue.

Trade usually drives positive economic growth, wealth
1.2
creation and social opportunity but can also create human and
resource exploitation and environmental impact. ‘Ethical trade’
may offer possibilities of resolving some of these tensions.
Consumers can direct the power of their consumption with
to
significant

are highly

companies

responsive

effects;

the shaping of

Economic globalisation,

1.3
the world
through a consumer society and the increasing influence of
transnational corporations, has stimulated discussion of ‘ethical
trade’. It has led to demands that greater social and environ-
mental responsibility is exercised by those involved in the
trading chain and through a more coherent national and inter-
national regulatory framework. This has seen rapid growth in
the attempted measurement of ‘ethical trade’ through various
assessment processes.

1.4
‘Ethical trade’ is directly relevant to the strategic interests
of the EU. An important aspect of the Lisbon Strategy is the
focus on a knowledge-based economy to ensure a strong
competitive base. ‘Ethical trade’ relies on a knowledge-based set
of systems to inform both the provider and producer of goods
and services and stimulate market-centred action and consumer
response. Europe has global leadership in ‘ethical trading’ initia-
tives and by consolidating this position will simultaneously
contribute to the Millennium Development Goals. In addition
the important role of products and services subscribing to
specific environmental impact minimisation goals are identified
in the sixth and current Environment Action Programme (5).

The various

emerging strategies and initiatives

to
1.5
promote ‘ethical trade’ share a non-statutory approach and a
recognition of consumer or investor power; they complement
and share a significant proportion of their methodology and
analysis with the movement
for greater corporate social
responsibility (CSR). The European Commission adopted new
guidelines for the promotion of CSR in July 2002 and will
shortly publish a ‘Strategy for the promotion and development
of CSR in the European Union’.

(3) Top 200: The Rise of Corporate Global Power.

Institure for Policy

Studies 2000. (Measuring corporate sales and country GDPs).

(2) European ‘fair trade’ marking movement EXT/134 April 1996.

(4) WTO Trade Statistics April 2004.
(5) COM(2001) 31.

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1.6
This particular area has been covered in depth by the
recent EESC own-initiative opinion ‘Information and measure-
ment instruments for corporate social responsibility (CSR) in a
globalised economy’ (6).

practical
regional/local communities and authorities can take.

steps which EU institutions, Member States and

a

The

present

complementary
opinion provides
1.7
approach and uses a common basis. In doing so it recognises
that widely accepted international conventions and frameworks
are already in place or under development;
in transnational
business, international development, environment, corruption,
foreign affairs, labour issues and human rights. These are based
on a combination of humanitarian ethics and international law.

labour,

1.12
The outcomes of this initiative will also benefit other
stakeholders. Trade unions and their members will have specific
interest in ensuring that assurance schemes that recognise the
dignity of
improving working conditions for their
members and other disadvantaged workers — are distinguished
from those that do not. Similarly, businesses will be interested
in ensuring that consumer trust is improved through public
support for good quality assurance schemes. Public Authorities,
while constrained by EU procurement regulations, can also
stipulate quality standards based on ‘ethical
in their
procurement strategies and thereby support their policy goals.

trade’

They find expression in a body of standards which
1.8
provide a benchmark at international
level, for example the
ILO Tripartite Declaration on Multinational Enterprises and
Social Policy; the ILO Declaration on Fundamental Principles
and Rights at Work and Conventions covering employment
conditions and labour rights; the guidelines for multinationals
set out by the OECD; the UN's Universal Declaration of Human
Rights; and the conventions listed in connection with the new
GSP+ measures (see Appendix 1).

1.13
In so doing, it will contribute to the development of
assurance schemes that offer a positive cost/benefit ratio, that
secure real social and environmental improvements as well as
consumer satisfaction and enable responsible employers to
distinguish themselves objectively from others whose intent is
primarily one of gaining market advantage.

1.9
The encouragement of corporate social responsibility
through, for example, the Multi-stakeholder Forum promoted
by the Commission (7) and the Ethical Trading Initiative (8) by
the UK Government, has played a part in further establishing
the market framework for consumer involvement. The concepts
and tools being developed by these and similar initiatives are
beginning to provide a practical working consensus in the area
of production and supply chains.

2. Scope

CSR focuses on supplier-driven processes whereas
1.10
‘ethical trade’ involves a broader remit and includes consumer-
driven initiatives. Retailers in particular have developed supply
chain auditing programmes (9) some of which have been
supported by NGOs and trade unions. Some NGOs have also
supported independent product labelling. These initiatives bring
an awareness of the social dimension of the market to producer
and/or consumer and may provide a way for moral and social
influences to be exercised through purchasing power.

1.11
This opinion recognises that not all consumers have
the economic capacity to choose ‘ethical’ products, but will
focus on how consumers who do choose to support ‘ethical’
schemes can be assured that the schemes (and companies) truly
deliver what they promise and do not promise or imply more
than they can deliver. It will explore the adequacy of policy
definition within the EU on this subject; look at where respon-
sibilities lie, the degree of coordination necessary and suggest

(6) Information and measurement

instruments for corporate social

responsibility (CSR) in a globalised economy SOC/192.

(7) European Multistakeholder Forum on CSR Final Report June 2004.
(8) An alliance of companies, NGOs and trade union organisations
which promotes and improves the implementation of corporate
codes of practice which cover supply chain working conditions.
(9) For example the BSCI (www.bsci-eu.org) and ICS (www.scd.asso.fr).

‘Ethical

2.1
trade’ covers a range of approaches which
enable consumers to respond to some of the social and envir-
onmental costs of production. Given the different priorities
attached to these issues in different Member States, it is impor-
tant to define clearly the scope of this opinion.

2.2 Whilst CSR refers to managing and minimising the
negative consequences of a company's entire activities there has
developed a particular set of initiatives to monitor, manage and
improve the social, economic and environmental impact of its
sourcing operations. This usually involves the means by which
it improves the social and environmental performance of its
suppliers and has come to be referred to as Ethical Trade or
Ethical Trading.

2.3 Within this broad category those initiatives that focus
on risk management can be distinguished from those intended
to influence company reputation or gain market advantage
through public claims. Most Ethical Trade initiatives are essen-
tially defensive: means by which companies can guard against
negative media coverage and/or develop a credible defensive
response to such an event. Others will more openly aim to
improve market opportunities through offering assurance to
either the public or other business customers.

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2.4
There is a further distinction between those initiatives
whose outcomes are largely focused on assurance from those
whose outcomes include an intention to improve a given situa-
tion. In many cases, schemes aiming solely at assurance will
tend toward a ‘compliance mentality’ with a use of sanctions.
By contrast, those aiming at improvement will be less compli-
ance-oriented and focus on addressing underlying causes of
non-compliance. They will tend to value long term relation-
ships and management above the need for verification.

2.9
In practice, there are no neat dividing lines between
categories and most schemes will claim to contribute to the
awareness and practice of
sustainable development. This
opinion focuses on schemes that rely on informed consumer
action to achieve their aims.

Finally,

2.5
there are schemes that are essentially ‘main-
stream’ by contrast with those that are based on the minority
of consumers who already seeking ways to express social or
environmental values through their purchasing. Schemes that
either aim at improvement or aim at securing market advan-
tage will often be based on consumer willingness to pay more
for a product — or at least to demonstrate preference. Other
schemes are often lower cost and the additional costs are
absorbed within the supply chain,
justified by the additional
security to corporate reputation which is gained.

This opinion deals only with initiatives

2.6
that are
promoted to consumers to assure them that certain specified
social and environmental benefits result from their purchase. In
some cases these schemes are known and defined by the use of
a product-based label, and most seek to address one or a small
basket of issues specific to that product. Common examples are
Fairtrade, Organic, Marine and Forest Stewardship, Eco-label,
Child Labour. Other schemes may be promoted by an indivi-
dual company or trade association and may not involve a third
party ‘label’,
instead being promoted to consumers through
packaging, point of sale or PR material.

2.7
There is a risk to all such schemes; if some overstate the
impact/benefit or mislead the public there will be a loss of trust
affecting all. There is therefore need for authoritative quality
assessment of consumer assurance schemes. Since schemes will
have a wide range of aims, it is not feasible or desirable to have
a central definition of ‘ethical trade’. Instead there can be a high
level framework defining how quality is to be assured. The
framework must be defined by a body free from commercial/
operational pressures; for example a multi-stakeholder group.

3. The relevance of ‘ethical trade’ to the EU

European citizens benefit from a protective and suppor-
3.1
tive social net which is financed by tax levels that run, on
average, at 40 % of GDP. Manufacturing and the provision of
services within the EU are embedded within a framework of
labour, environmental and social legislation the cost of which
is incorporated in the price by the manufacturer and met by
the consumer.

3.2
However, whilst this European model has contributed to
the widespread achievement of good standards in many areas,
at a global level the market heavily influences the spread of
best practice. Price and quality remain the major considerations
but some consumers have shown a growing willingness to
select products and services from companies claiming to make
the greatest contribution to social and environmental progress,
both in the EU and elsewhere — and particularly in less devel-
oped countries. Trusted, transparent and effective assurance
schemes can complement legislation by rewarding best prac-
tice. Consumer power driven by social values is becoming a
significant
rewarding
force within the commercial world,
companies that meet consumers' concerns and enabling corpo-
rate behaviour to reflect changing socio-economic values —
which naturally vary to some degree across Member States
according to economic capacity and priorities.

3.3
The non-statutory nature of such consumer assurance
schemes requires the costs of implementation to be borne by
consumers, and therefore it is consumer demand — expressed
through the operation of the market — that encourages and
discourages growth. It also means that compliance with compe-
tition and WTO trade rules is not compromised in the effort to
promote good practice. On the other hand, voluntary schemes
do not replace the need for proper regulatory frameworks
within WTO to ensure that basic minimum standards are met
in all trading relationships between countries.

2.8
Not all initiatives are based on such specific outputs. In
particular the Ethical Trading Initiative in the UK is based on
civil society organisations working together to learn about how
such programmes can be effective and achieve hoped-for
outcomes. Whilst the ETI is not, in these terms a ‘scheme’, its
learning can be usefully applied to schemes across categories
and its corporate members may in time become suppliers to or
members of schemes.

3.4
Both individual Member States and the Commission
have financially supported the development of several of the
assurance schemes currently in the market, in recognition not
only of their potential for environmental and social impact, but
also for the role they can play in improving consumer aware-
ness and developing consumer attitudes. It is important that
the value of such schemes is assessed — both in achieving
stated objectives and in being cost-effective.

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3.5
Similarly, the EU and Member States have supported,
through financial assistance and by defining legislation, produc-
tion and manufacturing systems providing for such assurance
schemes. Standard setting, and assistance to producers in
achieving those standards, has been recognised as an important
aspect of maintaining a distinctive European approach. The
examples of appropriate packaging, energy efficiency, product
disposal, and organic agriculture are all well-established.
It
should be noted that legislation for such schemes was preceded
by extensive practical experience in running well-defined volun-
tary programmes.

Considerable attention has been given to the implica-
3.6
tions of a knowledge-based economy for equipping the supply
side of European production and service industries (technology,
lifelong learning, research, etc.) but less attention has been paid
as to what this means for the demand side of the economy. If
European consumers are the most knowledgeable in the world
they are likely to be the most selective and discriminating —
more likely to make a purchasing choice based on a range of
social and environmental factors in conjunction with the tradi-
tional elements of price and quality. Product labelling is a
simple way to communicate complex issues. However,
the
underlying complexity of ‘ethical trade’ issues requires a new
approach to consumer education and information based on
appreciation of sustainable development.

3.7
Developments in the international economy — globa-
lised, diversified production and increasing comparative knowl-
edge available to the consumer — are bringing about new
types of market. Consumers are increasingly in a position to
demand, and obtain, goods and services tailored to their
personal preferences. These preferences have been extended
beyond the traditional ones of price, style and quality and now
include a range of social and environmental values that also
look backwards along the supply chain and forwards to impact
in use and disposal. Encouraging this
sophistication in
approach is very much in the interests of European business
and labour, which should be well placed to respond. It is also
very much in line with the needs of an efficient free market, in
which consumers have the information and understanding to
make effective demands. Without
this knowledge, market
distortions occur in which social and environmental costs are
not effectively allocated or borne.

3.8
Nevertheless, it is recognised that consumers in all 25
Member States have a wide and differing range of concerns and
priorities. In the new Member States particularly, consumers
are rightly most concerned about product quality, safety and
value. Basic assurance on these issues has yet to be achieved in
many of these countries. The Committee again stresses the
non-statutory nature of ethical assurance schemes which allows
take-up to be matched with consumer priorities.

4.

‘Ethical trade’ initiatives in Europe

4.1
There are several schemes (examples in 2.6) that offer
assurance to consumers in Europe and internationally through
enhancing company reputation, site inspection and certification
or specific product labelling. All of them involve significant
expenditure both in meeting the required standards and in
documenting and assuring compliance; these costs in general
being borne in the pricing of goods by consumers wishing to
contribute to social and environmental progress. Obtaining
comprehensive information on such schemes is problematic as
there is no clearing house, trade association or accepted refer-
ence point at present. However, it is possible to conclude that
in excess of 100 label-based consumer assurance schemes are
marketed across the 25 Member States with sales estimated at
in excess of EUR 20 billion.

4.2
Each system has its own developing mechanisms to
ensure that the standards are met in reality. There are on-going
initiatives to develop common approaches to this level of assur-
ance among several schemes. Such coherence of approaches
can and should lead to comparable quality management
systems as well as efficiency and other savings, which will
benefit all partners.

4.3
There is a similar need to develop and adopt common
approaches to monitoring impact, since the assurance of stan-
dards does not in itself guarantee that improvements are taking
place, either at specific sites or in general. For example,
minimum labour standards may be most easily achieved by the
pre-selection of suppliers that already meet the standard, or by
the de-certification of non-compliant sites. While this meets the
standard at a technical level and may assure consumers, it may
in fact reduce overall standards — by further disadvantaging
weak producers.

4.4 Many (but not all) of
the independently monitored
assurance schemes are developing common approaches to
demonstrating that their standards are met. For example, the
International Social and Environmental Accreditation and
Labelling (ISEAL) Alliance is developing common approaches
to quality amongst its members. There is a need for similar
coherent work across the full range of consumer assurance
schemes to ensure that the standards have the desired outcome.
This needs to take the form of an impact assessment. A
common approach to assessing the impact, the extent to which
this reflects the understanding of the consumers and justifies
the costs they bear will allow a more open valuation of such
schemes. It will also lead to a definition of the qualities such
schemes need in order to qualify for the Commission's support
— which itself needs to be based on evidence of impact if it is
to contribute towards agreed policy goals.

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4.5
For consumers and suppliers to have confidence in
‘ethical trade’ they need assurance that the costs and benefits to
consumers and companies on the one hand and the ‘target’
social/environmental benefits on the other hand, are in a
sensible balance. A scheme to secure better conditions for
workers in developing countries may merely shift production
into the unregulated margin; a scheme to reduce environmental
impact may cost more to audit
than is justified or create
serious inefficiencies; organic animal husbandry standards may
decrease animal welfare if mechanistically applied; an initiative
to reassure consumers about child labour may result in children
moving into more damaging occupations or being unable to
pay for part-time education.

distort priorities; audit requirements and costs may exclude
producers with the greatest need for improvement.

Further,

5.4
in many cases, the understanding and hence
priorities of consumers may be limited and result in distortions
in the scheme — for example, consumers will in general priori-
tise a ‘clean’ supply chain (no child labour, no pesticide resi-
dues) rather than effective progress on the ground (improved
wages and availability of schools, better environmental manage-
ment).

As mainstream manufacturers and service providers see
4.6
‘ethical trade’ as a significant market trend, they play an impor-
tant role in translating the idealistic expectations of consumers
into practical, operational schemes. The inevitable gap between
expectations and reality means that the ‘ethical trade’ movement
(in its many forms) risks being accused of naivety. In the corpo-
rate world attitudes vary according to their sensitivity to
consumer pressure and their relative power within the trading
chain. Some responses are led by a concern for public relations
some are market-led (designing
(protecting brand value),
products for these new areas of concern) and others procure-
ment-led (a culture of due diligence and risk management). All
approaches can have value but
the varying motivation of
companies suggests that a common analytical framework is
necessary.

This in itself may lead companies to select new suppliers
5.5
that already meet good standards, instead of engaging in longer
term improvement in their existing supply chain, which may
have no net benefit in terms of the broader goals.

5.6
Finally, a scheme without some independent scrutiny
might be making assurance claims that exaggerate or over-
simplify the impact of the scheme (or even make false claims!)
which will in the short term undermine the goals and in the
longer term undermine consumer trust in assurance schemes as
a whole.

5. Common Framework

In systems that are funded by a few major donors these
5.7
issues can be addressed through good management, but a
system that is funded to a major extent by part of the premium
on individual consumer purchasing choices does not necessarily
have the proper management processes in place and consumers
themselves are not in a position to judge the quality or cost-
effectiveness of a consumer assurance scheme.

5.1
There are tensions inherent in any ‘ethical trade’ system
that has a strong consumer assurance element. On the one
hand the system seeks to achieve social and environmental
goals within the supply chain; on the other it seeks to offer
assurance to consumers. This gives rise to a number of poten-
tial problems.

5.8
A common criticism of consumer assurance schemes is
that, because they are to a greater or lesser extent dependent
on consumer attitudes, and the level of consumer under-
standing of the problem is limited, there is a tendency for such
schemes to offer a simpler and more complete assurance than
is justified by the reality. Only a more open and informed
debate can resolve this and allow an open and informed
(knowledge-based) market to develop.

5.2
The arrangements that need to be put in place to offer
assurance may be disproportionate to the ‘real’ impact on the
goals — for example auditing may be costly, the administrative
changes required for transparency may be costly and complex.

5.3 More seriously, the assurance requirements may actually
have a negative impact on the goals of the scheme — for
example a focus on what can be measured and audited can

It is, however, not appropriate for the EU or Member
5.9
States to attempt
to prescribe centrally the definitions or
substantive standards for the various strands of ‘ethical trade’
— such central control will lack flexibility to take account of
improving performance and changing circumstances.
It also
the right of consumers to exercise choice
militates against
according to their own changing values. What can — and
should — be set centrally is the basis on which consumers can
be assured that such schemes achieve what they claim.

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5.10
This opinion seeks to create a framework within which
a variety of initiatives can begin to ask the same questions
about securing and demonstrating impact, and share learning
about how to answer them. The dynamic is presented diagram-
matically in Appendix 2. The various assurance schemes are
aiming at different goals, so a simple cost-benefit analysis
would be difficult and ultimately unlikely to succeed, given the
difficulty in valuing such diverse and subjective ‘goods’.
is possible to develop a common framework
However,
within which we can ask the same questions about quality of
all schemes and obtain comparable answers. Ultimately it is for
consumers and consumer organisations to apply their personal
values to the resulting information.

it

5.11 While the detailed terms and performance measures
will vary, depending on the scope and objectives of any
scheme, there are several underlying quality issues. It will be
possible, following further research and consultation, to identify
some key questions each scheme should be in a position to
answer and provide evidence for to demonstrate quality. Most
crucial will be to identify high-level social, environmental or
economic goals to which schemes hope to contribute:
it is
these that define basic scheme elements such as stakeholders,
scope and impact measures.

5.12
The following are recommended as a starting point
(though in further consultation it is recommended that coher-
ence is sought with existing, credible, quality frameworks):

c) Scheme scope

Does the scheme address the ‘problem’ as normally defined?

— Do the terms of

the
‘problem’ to a reasonable extent, or are they focusing only
minor, easily-achieved aspects?

the scheme address the scope of

— Do the profiles of certified sites (‘producers’) match the

promoted vision and goals?

— Do sites already meet

the standards or
improvement a core element of the scheme?

is continuous

d) Scheme standards or terms

Do the standards set and monitored by the scheme express the goals?

— Are the standards defied in a process in which stakeholders
(including those in developing countries) can participate?

— Is there a credible mechanism by which the adoption of the
standards will contribute to the achievement of the goals?

— Are the scheme terms or standards open to the public?

a) Scheme Governance

e) Impact assessment

Where does ultimate control of the scheme lie?

Is it a multi-stakeholder scheme in which a balance of stakeholders
constitute the decision-making bodies?

Is it controlled by an independent and disinterested ‘trustee’ group to
which stakeholders can appeal?

b) Scheme Goals

Are the goals clearly defined?

Is there credible assessment of the impact of the scheme on the goals?

— Is the wider and longer term impact on the sector moni-
tored and do changes (‘outcomes’) match the goals of the
scheme?

— Are local stakeholders actively and knowingly involved in
defining the terms of the impact assessment and in its
implementation?

— Is there a process to identify and address any negative

impacts?

f) Independent review

Is there any independent review of the scheme's operation?

Do the goals of the scheme match the needs of the stakeholders most
disadvantaged by the trading system?

— Are stakeholders (including those in developing countries)

involved in defining the terms or in the review itself?

Do the goals of the scheme match the concerns of consumers and the
‘vision’ promoted by the scheme?

— Have affected stakeholders (including those in developing
countries) been involved in clarifying and codifying the
goals?

— Are the goals of the scheme publicly available?

— Are the findings of such reviews available to the public?

g) Cost-benefit analysis

Is there any process to monitor and evaluate the costs of the scheme
borne by suppliers,
traders and consumers in comparison to the
progress made to achieve the goals?

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h) Public claims

— how to encourage such policy consideration in Member

States.

Do the public claims by certified companies or suppliers match the
goals, standards and outcomes of the scheme?

— Does

the independent/stakeholder

review monitor

the

public claims made by companies involved in the scheme?

7. Practical action

5.13
Quality standards, such as those outlined above (which
need to be further refined and tested) should be met by any
scheme that seeks the trust of consumers or any support from
the Commission and national governments. Schemes that do
not meet such standards may be understood to offer poor
value for money.

5.14
The credibility with which these standards can be
developed and promoted needs to be assured by a multi-stake-
holder approach, supported by public authority at European
level.

This opinion explores the coherence of the processes
7.1
encouraging the presentation to consumers of ethical assurance
schemes. It has provided pointers and policy tools to enable
the EU to decide whether to provide further support in this
area and how to do so rationally and cost-effectively. There are
a small number of practical actions the EU can take to encou-
rage and support the continuing development of ‘ethical trade’
(as defined for the purposes of this opinion) in such a way as
to ensure coherence with the EU's wider policy goals.

are

there

Clearly

challenges

5.15
any
comparative cost-benefit evaluation in this area, but it should
give an intelligent basis for comparing consumer assurance
schemes with other policy instruments aiming to achieve
similar goals.

in developing

It

is

recognised that

7.2
the EU and some individual
Member States may wish to continue to support the develop-
ment of specific initiatives in this area. It is recommended that
such support is focused on those that both offer consumer
assurance and are able to objectively demonstrate that they are
also contributing to tangible improvements in socioeconomic
and environmental conditions in communities affected by the
that encourage capacity
supply chains
building in Southern countries should certainly be encouraged.

involved. Schemes

6. Policy framework and responsibilities

A coherent policy rationale is essential in this rapidly
6.1
developing area and practical suggestions are set out in section
7. The EU and individual Member States believe that strong
ethical and humanitarian standards should be an integral part
of global trade and diplomacy. Not only is a ‘better’ world a
desirable objective in itself but such common concerns help to
further develop a Europe-wide culture based on values. More
tangibly,
stimulating consumer purchasing and awareness
towards the ‘ethical’ can be a good opportunity for European
industry as it is well placed to engage with the commercial
opportunities. The EU and Member States should not endorse
any specific brand but provide the authority for an assurance
scheme to which all reputable consumer assurance initiatives
can subscribe.

6.2
Policy coherence is therefore a prime objective. In the
development of this opinion, extensive and valuable exchanges
information, views and policy perspectives have already
of
taken place. It is proposed that a managed, active dialogue
between stakeholders on the issues of
trade’ and
consumer assurance schemes
formally established as a
follow-up to this opinion under the auspices of the EESC.

‘ethical

is

7.3
In order to facilitate this, it is recommended that the EU
commissions exploratory research to establish clear and widely-
applicable quality criteria against which such consumer assur-
ance schemes can be assessed. This research should involve,
the participation of a
apart
variety of environmental and social labelling and other schemes
and engage with stakeholders throughout the supply chain to
ensure wide applicability, and to facilitate the development of
coherent quality tools within the sector.

from consumer organisations,

7.4
The questions offered in section 5 can form a useful
starting point for a more comprehensive evaluation framework.
The EESC wishes to stress that the intention is not to create
another level of bureaucracy or another market barrier to
companies or assurance schemes. It believes that any scheme
needs to be able to demonstrate impact, quality and cost-effi-
ciency and a common framework will help to minimise dupli-
cation of effort.

6.3

Such a dialogue would seek to establish:

— the elements essential to a coordinated policy on social and

environmental consumer assurance scheme issues,

— the action required to embed such a policy in the EU,

7.5
Such research will also be helpful to underpin consumer
confidence in such assurance schemes, allowing civil society
organisations to recommend their members and adherents to
support schemes relevant to their own particular social and
environmental concerns. Given that this issue has implications
for a number of DGs, there will need to be a coordinating
point at which information and the development of a coherent
policy can be focused.

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7.6
Given the current reliance of consumers on product
labels to identify products produced and traded according to
specific social, environmental and animal welfare standards,
there is increasing likelihood of consumer confusion and ineffi-
ciency as products carry multiple labels. It is therefore also
proposed that the EU Commission research into alternative
means by which the social and environmental values of
products can be reliably measured and drawn to the attention
of consumers.

A strategic programme of consumer education in
7.7
member states should focus on raising consumers' awareness of
the potential and means by which they can use their
purchasing decisions to achieve social and environmental goals
appropriate to their priorities.

7.8
It is noted that, with the rapid development of product
information systems that can be accessed at point of sale, via
the internet and other channels, it will in the next few years be
increasingly feasible to develop databases of product prove-
nance and quality. As well as covering the social and environ-
mental issues related to this opinion, this can also record wider
quality and safety issues, such as specific dietary factors and
allow consumers to prioritise specific issues according to their
values or needs.

7.9
The development of a common framework for quality
and impact assessment for ‘ethical trade’ assurance schemes will
facilitate the development of more objective and sustainable
ethical procurement policies within the Commission and
perhaps Member States.

Further stimulus of the demand for products can be
7.10
encouraged through public procurement. Much consolidation
and clarification of the role of social procurement by public
authorities has taken place in the last five years and the propo-
sals suggested above will ensure that if purchasing authorities
opt, within the EU legislative framework, for products with
positive social and environmental benefits, this will achieve
tangible outcomes.

8. A way forward

appropriate) on reaching policy coherence in ‘ethical trade’
and consumer assurance schemes. The EESC proposes that
it takes the lead through 2006 in establishing a specific
stakeholder forum of the type which has already proved
valuable. This may include establishing the feasibility of
establishing a comprehensive information database under
which the social, environmental and other factors under-
lying product quality and performance can be gathered,
objectively confirmed using clear assessment protocols and
made publicly available. DG Development has already
signalled interest
in making available critical, evaluating
data about ‘ethical trade’ schemes to assist producers and
exporters to access the European market (10).

— The development,

through a wider and more detailed
consultation with stakeholders in Member States and glob-
ally, of a common ‘ethical trade’ assurance framework for
impact assessment and measures of quality. This will allow
the EU and Member States to more objectively distinguish
the initiatives that genuinely add value from those that
merely offer reassurance. Such work will support the policy
goals of DG Development
through encouraging more
sustainable trade relationships and the work of DG SANCO
in providing reliable consumer information.

— An involvement with the development of a standard ISO
26000, which aims to provide practical guidance related to
operationalizing social responsibility, identifying and enga-
ging with stakeholders and enhancing credibility of reports
and claims made about social responsibility. While this is
primarily aimed at developing a standard for corporate
it may provide a baseline of perfor-
social responsibility,
mance against which to measure specific ethical
trade
schemes.

— A consumer awareness programme, starting with early
years education, running through mainstream education
and extending into lifelong learning, on the capacity of
consumers to influence social and environmental dynamics
through informed purchasing. DG SANCO has already
signalled interest in encouraging consumer education about
fair trade, and the objective of a more informed and
empowered consumer
effective
choices in the marketplace is key to its role.

society able

to make

The development of this opinion provides an opportu-
8.1
nity for the main stakeholders to respond and engage in
dialogue, although in a very modest way. As a result of this
consultation, the opportunity arises for the EESC to stimulate
work on five new initiatives:

— A proposal for an international research centre to provide a
focus for supplier and market research, sales and technical
information, educational initiatives and policy development
to be supported as a joint programme by the Commission,
Member States, and all main stakeholders.

— A continuing dialogue between key stakeholders, including
consumer associations, across the EU (and globally where

(10) Cooperation with cross-cutting data and information services such

as the EU's PRISMA project will be worth exploring.

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9. Concluding note: definition of the terms used in this

Fair Trade

Opinion

The global impact of commercial activity on society and the environ-
ment has led to a number of new terms and concepts evolving. The
way that key terms and concepts have been used in this opinion is
defined below. Terms and definitions in this field vary from country to
country and to avoid translation misunderstandings it is essential that
this Glossary is used throughout.

Corporate Social Responsibility (CSR) This term is now well-
established.
It is accepted that wealth creation and meeting
national statutory requirements of operation are intrinsic to all
responsible business activities.

CSR therefore specifically refers to ... The voluntary policies and
practices of a company to maintain and improve the social
and environmental performance of its entire operation. It can
involve review through internal management and assessment systems
or external audit.

This can be regarded as a subset of ethical trade; in general
usage the phrase is understood as ... Trade where those
involved in the process — whether producing or consuming,
buying or selling — are not disadvantaged and gain reasonable
and proportionate benefit. The opinion, when it is using this
sense, will present the phrase as ‘fair trade’.

The second, distinct, usage defines the phrase as … a trading
partnership, based on dialogue, transparency and respect,
that seeks greater equity in international trade. It contributes
to sustainable development by offering better trading condi-
tions to, and securing the rights of, marginalized producers
and workers — especially in the South. For example, those
organisations represented by the European Fair Trade Associa-
tion accept such a definition. The opinion, when it is using this
sense, will present the phrase as Fair Trade.

Ethical Trade This is a subset of (and a more recent concept
than) CSR and is used in two main senses.

Consumer Assurance Schemes

In general usage the phrase is understood as … A conscious
attempt to adjust the trading activities (producing, retailing
or purchasing) of a company, organisation or individual to
reflect a set of ethical values. Ethics is a branch of philosophy
concerned with human character and conduct. Ethical trade in
this sense can therefore reflect a very wide ranging set of
values;
its scope can include a wide range of products and
services (including financial services and tourism) based in any
country,
the EU. The opinion,
when it is using this sense, will present the phrase as ‘ethical
trade’. The title of the opinion is also used in this sense.

including member states of

The second, distinct, usage is current in the Commission and in
a number of European initiatives such as the Ethical Trading
Initiative (ETI) in the UK, the Initiative Clause Sociale (ICS) in
France and the Business Social Compliance Initiative (BSCI)
which is
the phrase
normally refers to ... The policies and practices of a company
to address the social and environmental impact of its sourcing
the working conditions of
operations and in particular
suppliers. The opinion, when it is using this sense, will present
the phrase as Ethical Trade.

in membership. Here,

international

Brussels, 27 October 2005

In this opinion one specific aspect of ‘ethical trade’ and ‘fair
trade’ is of concern: where consumer pressure is a major factor
and where consumer choice — and often consumer willingness
to pay more for a product — is the major driver for change.
For the purposes of the opinion consumer assurance schemes
are defined as … A system that allows and encourages consu-
mers to play a part in ethical trade by purchasing goods and
services that are produced in a way to achieve specific social
or environmental outcomes, benefiting specific communities
or society as a whole.

Note that use of the term ‘scheme’ is taken to include social
and environmental assurance approaches taken by individual
businesses and business coalitions as well as independent third
party and multi-stakeholder schemes.

Sustainable Development

‘Sustainable development is development that meets the needs
of
future
generations to meet their own needs (11)’.

the present without compromising the ability of

The President

of the European Economic and Social Committee

Anne-Marie SIGMUND

(11) World Commission on Environment and Development (WCED).

Our common future, 1987.