The empirical evidence shows that while voluntary certification is not a panacea for all agricultural producers, it may benefit farmers depending on the agro-ecological and social-economic context in which they operate. Implementing a standard and obtaining certification entail higher costs for farmers. These derive partly from the initial investments necessary to meet the standard. In addition, production costs may increase and yields may decrease, at least temporarily during the transition phase, as often happens in organic agriculture. However, costs tend to decrease and productivity to recover over time as farmers become familiar with the new production process and learn more effective techniques.
Overall, those producers who implement a new standard improve their managerial and technical capability, which often results in efficiency gains. For example, complying with a standard may lead to a more rational use of inputs (such as agrochemicals), thereby reducing production costs. In the case of larger agricultural businesses, social certification may result in lower rates of incidents and disease, improved morale of workers and lower absenteeism, all factors that contribute to cutting costs and improving productivity. In the case of farmer cooperatives selling fair trade products, organizational improvements, better bargaining positions, credit worthiness and economies of scale seem to be important benefits. Enhanced managerial capability also contributes to improvements in product quality.
The actual impacts of certification on the environment are more difficult to measure as they depend to a large extent on the nature of the standard. Several studies have demonstrated the beneficial impacts of organic agriculture on the soil, water resources and biodiversity. As for other environmental certification programmes, although positive impacts can be assumed, few studies have done a quantitative evaluation.
In addition to the costs that directly derive from the implementation of the standard, farmers have to incur certification costs (to cover inspections and administrative costs of the certification body). The total cost related to certification can therefore be high and might be an obstacle, especially for small-scale farmers. Consequently, some mechanisms for sharing the costs along the supply chain are needed. When certified products carry a recognized certification seal and command a price premium, such as organic and fair-trade products, the costs are split between the farmers and the consumers. However, in the case of other certified products that do not carry a label, there is usually no price premium and the producer incurs all the costs, unless its corporate client (local trading company, importer or processor) is willing to pay a premium. So far, most of the operators of the supply chain between the producer and the consumer (exporter, importer, processor, wholesaler and retailer) have considered that they should not bear a share of the certification costs.
In this context, a possible solution would be to affix a label to all certified products. However, there is a limit to the number of labels that consumers can recognize and trust, so it is unlikely that all labelled certified products would command a price premium. As a result, more dialogue is needed between the various operators of the supply chain to achieve a more equitable distribution of costs.
Another key issue is the limited size of the market for certified foods. These products account for between 2 and 4 percent of total food sales in developed countries. In developing countries, their share is below 1 percent. Projecting the total market for certified foods in the medium to long term is a difficult exercise. Although sales grew at very high rates in the 1990s and early 2000s, market growth has slowed in the last two years. While the growth rate is still higher than that of conventional foods, industry sources expect it to remain at the current moderate level. As a result, it is likely that, under current conditions, certified foods will continue to account for only a portion, albeit growing, of the total food market.
The mainstream foodstuff industry has conducted some trials with environmentally and socially certified foods but so far its involvement in this market segment has been very limited. Yet, a greater participation by large food producers, distributors and retailers is necessary if certified products are to become mainstream. Some participants in the FAO Meeting stated that the marketing power of these companies is so large that the benefits would be considerable if they could adopt some standards. Even if those standards were less demanding than those currently operated by the NGOs, the gains for the environment and society could still be significant. As a result, several participants considered that certification and standard-setting NGOs should open a dialogue with the mainstream industry to explore possibilities for collaboration. It has been suggested that FAO could provide a forum for such a dialogue and play the role of a neutral facilitator.
