Growth soars in sustainable commodities, but poorest producers miss out

by Megan Rowling | @meganrowling | Thomson Reuters Foundation
Friday, 31 January 2014 12:45 GMT

A Ferrero Rocher chocolate is seen in Milan on November 20, 2009. REUTERS/Stefano Rellandini

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As more companies produce “sustainable” products, fears grow that not all will adhere to highest standards

LONDON (Thomson Reuters Foundation) - Production of commodities certified with leading sustainability initiatives - including cotton, palm oil, cocoa, bananas and wood - is galloping ahead, but the poorest communities may not be benefiting, a new report from international researchers said on Friday.

The average annual growth rate of certified production across all commodity sectors examined, excluding biofuels, was 41 percent in 2012, far outpacing growth of 2 percent in the corresponding conventional markets, said the State of Sustainability Initiatives Review 2014, the second of its kind.

The strongest performer was certified palm oil, which enjoyed 90 percent growth in 2012. Other top sectors were sugar, which grew 74 percent, cocoa 69 percent and cotton 55 percent.

The private sector is playing a critical role in boosting the market for products certified by major sustainability initiatives such as Fairtrade International, the Forest Stewardship Council, the International Federation of Organic Agriculture Movements and the Roundtable on Sustainable Palm Oil, the report said.

"Much of the switch to standard-compliant and certified production is not about immediate consumer marketing; it is about risk management and brand protection," said Bill Vorley, a researcher with the London-based International Institute for Environment and Development (IIED) and one of the leaders of the project.

The report identified a persistent trend in sustainable sourcing commitments by large manufacturers including Dole, Chiquita, Coca Cola Company, Tetley, Twinings, Unilever, Hershey’s, Home Depot, Lowes, Starbucks, Nestlé, Ferrero Group, Mars, Ikea, Adidas and others.

This month, for example, cosmetics and beauty giant L'Oréal committed to sourcing 100 percent of the renewable raw materials it uses from sustainable sources by 2020, including palm oil, soya oil and wood fiber-based products. It has also adopted a goal of "zero deforestation" by 2020, meaning none of its products should be linked to deforestation.

But one less positive aspect of the wider market is a significant oversupply of standard-compliant products, with only around one third to one half of certified production actually being sold as such, the 2014 review revealed. 

“The visible oversupply of standard-compliant goods means that companies benefit from a wide selection of options when sourcing sustainably," said Jason Potts, co-author of the report and associate with the International Institute for Sustainable Development (IISD). "This may however also indicate a downward pressure on the prices of sustainable products due to oversupply which could create a detrimental impact on smallholder producers.”

Vorley said price premiums are a declining feature of certified markets, and future gains for producers are more likely to come from higher productivity, higher-quality products, a secure trading relationship and technical support. "We need to look at a post-premium world," he added.



Another downside for smaller producers is that production for sustainable markets tends to be concentrated in more advanced, export-oriented economies - particularly in Latin America among developing nations, and in developed countries for the forestry sector. That is because it is easier to do business where there are economies of scale that can offer better infrastructure and governance, Vorley said.

"In light of this, special investment will be necessary if voluntary standards are to effectively operate as tools for poverty reduction among those most in need," the report said.

Cocoa is one commodity where certified production is concentrated in less-developed economies like Ivory Coast and Ghana - mainly because Africa accounts for 72 percent of global cocoa production - and sustainability initiatives are working relatively well for small farmers there, Vorley noted.

The report identifies one potential problem that could arise as the market for sustainable products grows: the watering down of standards. The researchers' analysis of criteria in the voluntary initiatives suggests that newer, mainstream-oriented standards apply criteria of reduced depth and breadth in order to allow for more rapid uptake, the report noted.

Vorley said there is still a high level of public trust in certification initiatives, but noted they are "far from equal" in how they work. "If there is a general trend towards instruments that are less rigorous, you run the risk of overall leaking of confidence in them as indicators," he told Thomson Reuters Foundation.

The review examined 16 leading initiatives operating in the forestry, soy, palm oil, sugar, biofuels, coffee, tea, cocoa, banana and cotton sectors. IISD's Potts said biofuels were not included in the growth figures for 2012 because the market is still too young to generate adequate data.

Several certified commodities have managed to win significant market penetration, the report said. Certified coffee is the leader, reaching a 38 percent share of global production in 2012, up from 9 percent in 2008.

Other certified products that have a notable market slice are cocoa with 22 percent, palm oil at 15 percent and tea at 12 percent. In the case of forestry, the report's researchers conservatively estimated the amount of certified forest area at 9 percent of total forest land, showing annual average growth of 6 percent between 2008 and 2013.

The 2014 review was a collaborative effort by the IISD, the IIED, the Finance Alliance for Sustainable Trade (FAST), Environment and Trade in a World of Interdependence (ENTWINED) and the Sustainable Trade Initiative (IDH)

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