Jorge Casale, IFOAM Argentina
Representing 720 mainly private organizations in about 98 countries, IFOAM is working towards the goal of worldwide adoption of organic agriculture. The organization represents producer organizations, NGOs, importers, retailers, certification bodies, etc., 44 percent of whom are based in Europe and 40 percent in developing countries. The primary IFOAM activities include maintaining the International Organic Guarantee System, advocacy work, publications and conferences.
IFOAM is currently trying to overcome constraints in certification through a number of activities relating to the organic guarantee system. These include:
continuous revision and development of basic standards and criteria for accreditation (necessary to ensure regional flexibility);
monitoring the accreditation of certifying bodies;
working to harmonize the different national standards;
lobbying governments to base national regulation on the IFOAM basic standard.
To support smallholders and especially those selling products on local markets, IFOAM recently held an international workshop in Brazil to find appropriate mechanisms for these farmers in order to evaluate and guarantee organic production methods. Such mechanisms include, but are not restricted to, certification initiatives and those built on internal control systems (ICS). IFOAM has recognized the importance of being open and able to learn from these alternative certification initiatives for the commercialization of organic products in local markets.
Thomas Divney, Sustainable Agriculture Network (SAN), Costa Rica
The Rainforest Alliance offers farms a business-to-business service in order to help transform land-use and business practices into more sustainable practices. Its mission is to protect ecosystems, including the people and wildlife that live within them, through a variety of programmes in forestry, agriculture, tourism and natural forest products. The resulting products are labelled, depending on the preference of the certification body involved. Overall, the Rainforest Alliance works with a number of basic principles including environmental, social and economic aspects and the programmes are implemented through a network of nine national NGOs that also function as their certification bodies.
Farmers are generally very interested in knowing about the advantages of certification which may include social, environmental and economic benefits. Consumers are also interested in certified products, and although the concept of sustainability is not always easy to sell, the products tend to have broad consumer appeal as demonstrated by the growth in "the green market" and the interest shown by large buyers. While the Rainforest Alliance continues to work with small farmers, it is also its strategy to collaborate with the industry in order to open up more self space (and hopefully more mind space among consumers). With these buyers, the Rainforest Alliance tries to make them buy at a higher price for the certified products through a free market approach because the programme does not set any fixed price premium.
Within the coffee certification programme, an example of such industry collaboration is the agreement with KRAFT which helped stimulate growth in the market over the last year by purchasing 500 million pounds of RA coffee this year (and double that the next year). In this case, the company will buy at a premium but continue to use their own brand on the package. Such certified products are also actively promoted within other industries like food service and catering. As a result of these initiatives, the United Nations Secretariat General in New York, along with a few others, have started to sell RA certified coffee in their canteens.
Olaf Paulsen, FLO, Germany
The main focus of the Fairtrade Labelling Organizations (FLO) and its member organizations in now 19 consumer countries across the world is to guarantee a better trade arrangement for producers in developing countries. At present, however, the range of fair-trade products from developing countries is limited and the products only account for about 1 percent of the total food market (the share of fair-trade products in the total amount of exported products is not known). Despite the market constraints outlined in previous presentations, it is important to look beyond what is possible today and tomorrow as it may limit what could be achieved in the future. In fact, the biggest constraint of fair-trade today is that the markets are not growing fast enough to cope with the needs and the demand of producers in developing countries - this is the case even with a market growth of 20 percent per year.
To overcome these constraints and increase sales rapidly, a very diverse and extensive marketing strategy is needed; one which engages consumers in the issues surrounding fair-trade and helps to link stakeholders together. This strategy is well illustrated by the UK Fairtrade organization and its implementation of the Fairtrade Fortnight. During this nation-wide event in March 2004, a large number of promotional activities occurred all over the nation: traditional boats brought bananas from the Windward Islands; cities competed with each other to sell fair-trade products and links were made between producers and consumers. The organization also implemented a system whereby "Fairtrade status" is allocated to towns, cities and universities where such consumer and retail measures are in place.
Given the higher price premium absorbed by consumers purchasing fair-trade products, promotional activities like those mentioned above are often necessary to make the consumer aware of issues surrounding the products. The increase of total sales under fairtrade labelling in 2003 (+ 40 percent overall) is a first indicator that there is a rapid expansion now. A number of retailers have reacted to the interest by adapting the concept into their own company philosophy, enabling a more proactive interaction with the consumer. In fact, pressure is now coming from the retailers to diversify the fair-trade product range, a request which FLO is trying to fulfil as quickly as possible without losing sight of its original mandate.
Therefore, constraints to increasing the fair-trade market lie primarily with the retailers and consumers at the end of the supply chain, which makes consumer awareness even more essential. In terms of future strategies, the fair-trade organizations intend to focus on the partial adopters and the occasional conscience buyers to improve the market share.
Alice Tepper Marlin, SAI, United States
SAI has three main elements to its mission: 1) to develop social standards (the SA-8000 labour standard); 2) accreditation of SA-8000 certification bodies; and 3) capacity building and education through training activities. Currently, there are SAI certified work facilities in 10 counties, with more than half of these located in Italy, China and Brazil. Although it began in the manufacturing industry, SAI now works in the agricultural sector. Today, about 10 percent of its certified facilities are in this sector, examples of which include Dole and Chiquita banana plantations in Colombia and the Philippines.
To determine the impacts of implementing the SAI-8000 standard, SAI is conducting cost-benefit analysis studies. Results indicate that there are significant benefits at the farm level, primarily relating to quality improvement, productivity increases, workers moral and finally improvements in the company revenue. Initially, the companies tend be focused on the costs associated with certification but they quickly realize that there are greater benefits to be realized by investing in worker training, health and safety, and ensuring decent working hours. Among other things, benefits for employers include reduced employee turnover, easier recruitment and even new sales opportunities.
Workers also benefit from certification in a number of ways, such as: potential for advancement due to more training; fewer accidents; reasonable and safe work hours; less discrimination in the work place; and remuneration to meet basics needs. In the longer term, the programme aims to increase the number of children attending school so that families can break out of the cycle of poverty.
In the promotion of certification efforts, it is important to look at the effect of governmental policies, such as the recent EU organic action plan, on the international market.
It was asked whether the Rainforest Alliance and Social Accountability International are tracking price premiums back to producers and workers. The Rainforest Alliance is in a preliminary stage of developing a tracking system for premiums with the help of a US Government grant to explore coffee production in particular. However, it was emphasized that they are complicated to monitor and should not be the only parameter involved. Since SAI does not control the price in any way, they do not track premiums. However, it has recently started to monitor the implementation of the standard by companies and the associated costs of implementation along the supply chain. At some point, this may also include price but again, it is only one out of many important factors.
Lastly, the importance of working for more transparency along the supply chain was stressed and the Rainforest Alliance was applauded for their agreement with KRAFT. The advantage of targeting the mainstream market is the magnitude of the impact.
The text below was produced by the Secretariat of the Social Accountability in Sustainable Agriculture (SASA) project. It summarizes the full report on Internal Control Systems that is available on the SASA Web site.
A key sub-objective of the SASA project is to address the particular needs of smallholder producers in the development of social guidelines for sustainable agriculture. The increasing involvement of corporate agribusiness in social and environmental certification and labelling systems triggered the SASA Project to explicitly address the interests of smallholder producers, which might otherwise be overlooked. An exploration of group certification was the primary means to address this overall question.
Group certification is used in the organic sector as a way to allow small producers in developing countries (organized as cooperatives or farmers organizations) to certify products for western markets via an internal control system (ICS). The SASA Project used the ICS as a starting point for addressing smallholder issues, as it is a functioning mechanism in the organic sector to lower certification costs and allow small producers to access certification and export markets.
A key component of the SASA Project was the nine pilot audits taking place in different countries, each addressing different production systems. ICS learning was a focal point throughout four SASA audits that involved producer groups in developing countries: Thailand (rice), Burkina Faso (mangoes), Costa Rica (coffee) and Uganda (cotton). The SASA audit teams, including auditor and research representatives from the SASA organizations, jointly examined key issues with respect to the local and sectoral contexts of each audit, grappling with the challenges and opportunities for ICS in organic and social certification. Drawing from audit exercises, stakeholder meetings and steering committee discussions, project learning on ICS can be identified as covering the three main areas listed below, with a fourth learning module that, though slightly more abstract, is nonetheless apparent:
ICS and smallholder access to certification
ICS and social certification
Internal control elements in SASA
Organizational coordination opportunities related to internal control (a generic management system for smallholder producer groups)
SASA Project learning evolved from initial examination of the organic internal control system (ICS) in terms of inspectability, certification access and producer training. Key reflections are outlined in section 5.1 below. This foundation permitted a comparative discussion on the elements of internal control, monitoring and smallholder access operating within each of the four participating systems. A key question for the SASA project was whether the scope of the ICS tool could be expanded for use in social certification or for development purposes beyond certification. This is discussed in section 5.2.
The project continued its learning trajectory with an in-depth examination of the different kinds of internal control used by SASA organizations. Beyond the primary objective in the IFOAM ICS - to control internally the compliance with the production standards and assure the specific quality requirements - other internal control functions ranged from financial and product traceability to systems with developmental goals or continual improvement approaches that could support capacity building amongst producers. This is summarized in section 5.3. The final outcome of the SASA Project on this theme is the conceptualisation of a generic management system for small producer groups that provides a basis for meeting certification requirements of the different systems (see section 5.4). A manual template for the producer groups synthesises the learning about common elements and shared goals with respect to small producer groups (see appendix of full document on the SASA Web site).
The organic group certification mechanism for small producers in developing countries - internal control systems - was the starting point for examining the strengths and weaknesses of current structures, and the associated challenges and opportunities for addressing smallholder needs. Organic certification bodies have certified smallholder producer groups since the mid-1980's with principles and basic benchmarks laid down in IFOAM´s Accreditation Criteria. However in 2003, IFOAM finished a process to set more precise levels and definitions for implementation of ICS inspection and certification (definitions of an ICS, basic elements, evaluation protocols, appropriate re-inspection rates, risk assessment tools, etc.). Although not available for most SASA audits, these practical guidelines and definitions are regarded as highly useful by SASA partner organizations and will be a reference point in future.
Two cases of organic sector approaches to smallholder group certification provided the basis for the SASA Project's examination of the organic ICS. On both the Thai rice audit and the Burkina Faso mango audit, the structures in place for inspection, capacity building and traceability were presented. The teams met with certifiers, farmers, the technical extension teams and internal inspectors to gain insights into the workings of these organic models. Other SASA organizations have learned a lot from IFOAM regarding smallholder access and group certification. SAN has, for example, developed an ICS system, largely based on the organic group certification model. FLO is currently considering how best to apply ICS to their systems, perhaps for environmental criteria, or for second level cooperative certification that covers both social and environmental aspects. Key points from the audits with respect to the organic ICS are listed below.
Both extension and inspection are integral to the ICS, but need to be better nuanced and defined. ICSs are claimed to be a means to create cheaper certification systems, yet division of the internal inspection and extension roles increases the workload and costs of employing internal staff. The organizational costs of a functional ICS - especially in the beginning - might prove to be higher than individual certification, but the additional benefits for the producer include training, extension and market access. It makes logistical sense, and is more cost effective for an internal inspector auditing an ICS to provide extension advice at the same time; however, this raises a potential conflict of interest. Ways to address conflict of interest include rotating roles amongst inspectors - internal inspectors would refrain from consulting in the communities where (s)he inspects. IFOAM's approach was regarded as best practice amongst the SASA organizations.
ICSs bring more structure to farm management through the documentation of farm inputs/outputs and relevant actions. Record keeping can be regarded as a positive learning outcome of the ICS, wherein farmer understanding and monitoring of on-farm balances improves, the farmers become more organized, they meet regularly and are part of a learning process regarding certification. Planning and learning are outcomes even at early stages as production plans compel farmers to think ahead. That said, despite the positive outcomes associated, the documentation requirements of ICSs tend to demand a lot of extension officers time. Documentation workload is a repeated concern.
Internal control system guidelines (i.e. EU regulations or organic certification body standards) are applied universally, yet in stakeholder discussion, two distinct forms of organic ICS emerged:
a. Endogenous ICS: farmer associations with
well-developed and active internal systems
b. Out-grower ICS schemes: group certification driven by economic objectives as opposed to internal support and producer development.
Each model exhibits different needs and incentives. An ICS of the first type has its own standards and system - it reflects ownership of the producer group. The second scenario is characterized by farmers who are suppliers to a buyer where the buyer controls the ICS through the implementation of external guidelines to regulate the supply chain and outsourced farmers. These are two very different systems with different dynamics that need to be understood by certification bodies. For social as well as environmental certification, the methods used and risk analysis done prior to inspection may well need to be tailored in order to reflect the distinctive character (out-grower versus endogenous) of the ICS being assessed.
Heterogeneity within a producer group renders group certification very difficult. Such heterogeneity can be expressed in different ways including:
Degree of dependence on the income derived from commercialization through the cooperative;
Internal operations of the producer group and the sharing of income amongst members, and;
Producer perception of the cooperative - as an intermediary versus as their own organization.
In field visits on the Burkina Faso audit, the challenge of heterogeneity for group certification became apparent. For example, in one case, when village-based sub-groups drew small parts of their income from commercialization via the cooperative, they proved to be more individualistic, less directly feeling the benefits of cooperative membership. By contrast, other sub-groups showed a high degree of solidarity and interest in organic certification and principles. This may be related in part to the level of producer dependence on group commercialization for their annual incomes. Such differences in the sampling populations make random sampling unreliable and inappropriate, as well as demanding strong organizational knowledge on the part of the inspector.
It was agreed that the sampling formula embraced by IFOAM and supported by the EU Commission Agricultural Directorate General regarding equivalence for group certification of producers in developing countries, represented best practice and a sound foundation for sampling. This formula includes risk assessment as an integral part of choosing an appropriate sample size. IFOAM requires minimum compliance criteria, however the existence of risk areas (both in terms of production and ICS organization) do not lead to de-certification provided that the risks are managed internally. Higher risks imply that the external inspectors will require more sample inspections and thus lead to increased costs.
In many cases, an ICS does not initially function in a certification capacity, and can instead be conceptualised as an ICS in development, focussing primarily on capacity building. The ICS is, as such, a means to coordinate commercialization, and technical training on organic methods and standards. The cooperative puts in place a technical team who is responsible for training/advice and internal inspection of the organic producers, and the ICS database can speed-up external certification processes. However, investing in an ICS while at the same time paying for 100% external inspection is extremely costly. A key question is how to determine a producer group's readiness for certification via ICS.
Challenges include the following:
ICS is a tool without instructions, without good models regionally and lacking opportunities for producer exchange on best practices;
Recognizing 'development factors' sometimes contradicts organic integrity - inspectors need to verify actual situations rather than potential;
Determination of a producer group's readiness for ICS certification is critical;
Commercialization versus social/environmental benefits can be a source of tension.
While raised in the SASA Burkina Faso audit, these challenges are applicable to other contexts where ICS does not have a long history of implementation. IFOAM is addressing some of these concerns by developing training manuals for both setting up an ICS and for ICS evaluation by external inspectors. In terms of capacity building and a developmental/progress-based approach, coordination amongst SASA organizations - particularly between FLO and organic certification bodies - may allow some of these challenges to be addressed.
The SASA project looked at how the ICS tool, initially developed for organic group certification, could be also be used for social certification purposes. In addition, a further question was how could the results of social and environmental audits of smallholder production be used for development purposes beyond certification? Using the organic ICS as a model and considering internal control mechanisms beyond organic (including the evolving SAN model) project discussions explored ways in which small producers are or could be benefiting (in terms of social development) from sustainable agriculture certification.
On the Thai and Costa Rica audits in particular, SAN, FLO and SA8000 perspectives on social certification via ICS in light of each organizations own priorities and approach were explored. IFOAM was interested in learning from its partner organizations - with more developed social standards - about how social accountability could be best integrated into organic practice and certification. Perspectives related to ICS for social certification include the following discussion areas:
An ICS used for social certification would need even more documentation than is currently necessary for meeting organic standards via an ICS, thus requiring field revision of documentation and registration maintenance in order to assess the viability of the system. The issues outlined above regarding documentation continue to apply and may well be exacerbated with additional social certification requirements. However, if social requirements are narrowed down to their essence, then what is directly relevant for the small producer context can be clarified. The importance is to ensure compliance with the spirit or intent of the standard. When adding new requirements to the system, processes rather than checklists should be sought.
Many principles or requirements are common amongst the four systems. In recognizing the common features, the efficiency of building on the base already in place became obvious. This issue was further developed in later audits and is the foundation for the generic management system for small producer groups.
Concerns were raised as to the applicability and relevance of many social issues in the smallholder context. For example, labour rights issues as applied to smallholder producer contexts are difficult from a social auditing perspective given that many smallholder producers mainly use family labour and are not structurally dependent on hired labour. Local labour exchange systems within a given community may also be common as was seen in the Thai and Ugandan audit exercises. These particular issues may not lend themselves to the current social standards in place. However, other social and socio-economic issues such as those defined in FLO standards - producer access to markets, fair prices and democratic decision-making within the producer group, amongst others - were agreed within SASA, to be relevant to the smallholder producer context.
ICS is meant to be an internal monitoring system - a quality assurance programme - designed internally to satisfy external requirements for certification. An internal system can only work if it is owned by the producer group. This experience of growing from a group of independent farmers to a complete functioning ICS is a process of development. An ICS is not static. It needs to start somewhere and develop with the dynamic of the group. Internalization of standards however, takes time. Neither the market nor certification bodies allow for extensive growth before compliance is reached. Imposing a pre-determined structure does not fit with a more developmental approach based on progress. A challenge is how to allow for processes of development in certification. Using FLOs development framework and experience to support organic ICSs as they develop (through progress requirements) is one example of the coordination potential amongst SASA organizations.
Over the course of the SASA audit exercises, a process of understanding and comparing elements of internal control within each initiatives system was developed, and culminated in the Costa Rica Audit. In the Costa Rica audit report, basic, compatible and unique elements of internal control were identified for each SASA organization. These elements describe the overlaps and areas for potential coordination amongst the organizations. A methodical comparison of the kinds/elements of internal control in each SASA organization provided a basis for coordinated diagnosis of internal control needs. Different kinds of control found within the SASA initiatives include product traceability, financial traceability and supplier control mechanisms amongst others.
Comparative charts coming out of the Costa Rica audit allow consideration of where SASA organizations might better collaborate with or complement one another (e.g. joint auditor or producer group training, integrated inspections). For example, the box below illustrates some of the common ICS requirements of FLO, IFOAM and SAN.
IFOAM/SAN/FLO Common Basic Control System
Required records and "database" documentation about the farms
Basic Elements Organizational Level
A final direction of the SASA Project with respect to ICS and smallholders was the conceptualisation of a management system applicable to the realities of small producer groups. This management system was intended to provide a foundation on which the elements for meeting specific requirements of different certification systems could be met. The three learning areas identified and elaborated above (sections 5.1, 5.2 and 5.3) converged in the final stages of the project and were synthesised through recognition by the SASA organizations of the opportunity and value of developing a Generic Management System for Small Producer Groups. The ISO9001 standards and SA8000 management system elements were used as reference points for developing the Generic Management System for Small Producer Groups, and the ISO9001 continuous improvement DEMING cycle [PLAN-DO-CHECK-ACT] proved to be a useful conceptual tool. The outcome of the learning process is encapsulated in a simple and practical manual template produced by the SASA Project (see SASA Web site). It is a basis for recommendations for future work and collaboration.
In creating their own management system manuals based on this template, small producer groups would be able to incorporate elements necessary for any of the four certification systems. Each system will have additional requirements or 'modules' attached to a baseline system. The manual developed by a producer group based on this template would be a foundation on which the producer group could build its own internal control system. Recommendations for future coordination amongst SASA organizations regarding the management system for smallholders include:
Fleshing out the manual template with a simple language guidance document;
Developing independently the modules necessary for meeting the additional certification requirements of each system; and
Developing modules that identify elements required jointly by two or more certification systems.
A management system such as that put forward by the SASA organizations could provide a framework to help build capacity within smallholder producer groups over time through the feedback and self-evaluation inherent in the structure. This in itself is extremely useful. Once producers have a baseline system in place (i.e. with the elements identified in the manual template or for one certification system) it becomes much easier to then add additional components necessary in order to meet a second certification. This benefit is not limited to SASA organization initiatives, but is an equally valuable preparation for other standards (i.e. food safety verification system requirements). The manual template is necessarily simplified so as to be a usable tool rather than a documentation-heavy, intimidating or overwhelming exercise for small producer groups.
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