First, as noted at the outset of this section, given their voluntary, bottom-up character, civil regulatory initiatives cannot in their nature address effectively the _comprehensiveness_ dimension of globalized regulatory performance.

Second, civil regulation can be highly credible – exemplified most vividly in the robust, multi-stakeholder arrangements for rulemaking and monitoring adopted by full members of the ISEAL Alliance.

Third, peer reputation comprises the critical enforcement mechanism through which civil regulation assures credibility – but the incentives of key actors vis-à-vis reputational enforcement are mixed. Reputational enforcement operates via signals from markets (consumers, shareholders etc.), or from individual and organizational standing with peers; the incentives can be positive or negative. Many consumers are willing to pay a significant premium for „sustainability‟, if it is credible. (See Box 3.) All actors thus have a clear incentive to signal their good intent. However, ambiguity as to follow-through may offer the benefits of seeming responsive, but at limited cost. To achieve credibility, reputation-based enforcement thus needs to overcome a wall of skepticism. Investment in the credibility of the regulatory arrangements (how the rules are made; how they are monitored) becomes key.

# **Box 3: The growth of ‘fair trade’**

The rapid growth of products certified as „fair trade‟ signals that consumers respond to a credible signal on social, environmental and ethical standards. The principle of ethical purchasing is a longstanding one, dating back at least to various nineteenth century religious organizations and, more recently, co-operative producer and consumer movements, with Oxfam‟s 1965 „helping by selling‟ program an important precursor.

The collapse of the International Coffee Agreement in 1989 spurred efforts to find an alternative way of protect the livelihoods of small-scale coffee producers. This resulted in the emergence of a variety of initiatives to provide a credible „fair trade‟ signal in the marketplace – not as a unique product/brand but as label that could be adopted, in selected product markets, by producers and distributors that credibly commit to meet „fair trade‟ standards. In 1997, these initiatives came together to form the umbrella Fair Trade Labeling Organization (a member of the ISEAL Alliance). Sales growth of „fairtrade‟ labeled products has been rapid:

- In 2000, global sales amounted to about $300 million. In the subsequent seven years, global sales rose over ten-fold – an almost 50 percent average annual growth rate --  to reach $4 billion in 2008, including 22 percent year-on-year growth for 2008, despite the  global economic crisis.

- The market is overwhelmingly in North America and Western Europe, largest in the United States and the United Kingdom. The Japanese market, though still small, grew at 44% in 2008.

- Coffee is the largest „fairtrade‟ labeled product, with 2008 sales amounting to $1.8 billion, Bananas (at over $550 million, mostly in Europe), are the second largest fair-trade seller. Tea, cocoa, cotton, sugar and flower each had 2008 fair trade sales in excess of $250 million. The US fair-trade labeling organization recently has introduced a fair-trade labor standard for cotton garments, covering the conditions of both cotton production, and cut-and-trim sewing operations.

- A recent large-scale survey found that the proportion of U.S. consumers reporting that they rewarded companies for being socially responsible has risen from 46% in 1999 to 59% in 2009.

_Sources: Global Fairtrade Foundation, “_ Global Fairtrade sales increase by 22%”, press release, June 8, 2009. _Wikipedia, Transfair USA,_ “Fair trade thriving in tough U.S. economy”, <u>press release, April 16, 2009.</u> 20