Negative consequences of sustainability labelling
Labels such as Fairtrade, Green Seal and Utz claim that a product was produced in a socially and environmentally sustainable way. However, new research by Associate Professor Frank Wijen of Rotterdam School of Management, Erasmus University (RSM) reveals that putting such labels on products – and trying to adhere to the principles and practices underlying standards to pursue sustainability – can deliver unintended negative consequences.
Watch the RSM Discovery video below in which Dr Frank Wijen discusses what the unintended consequences of standard adoption are and how they can be reduced.
The less specific a qualification is, the more need people have for clear, universal rules, incentives, and best practices. Think of quality management systems, educational rankings, and the ‘sustainable’ and ‘eco-friendly’ products in supermarkets. With a list of requirements on their website, setters of standards try to clarify that producers can only have a certain label if they stick to the rules that come with it. But how feasible is it to attach such clear rules to vague qualifications? According to RSM’s Dr Frank Wijen, this is not realistic. While these compliance-oriented means may be well-intended, they can actually be counterproductive and lead to overshooting the intended goals.
This can happen because it is difficult to monitor and regulate all the social and environmental effects during production processes in foreign countries. Also, a direct interrelation of causes and wider consequences is not easy to tell. For example, will a ban on child labour lead to better working conditions for children – or force them into child prostitution instead?
Failing to meet expectations
Ultimately, the setters of standards want these labels to mean more to companies than just a label with symbolic value that will attract certain customers, so that standard adopters are able to charge a premium price or obtain privileged access to niche markets. It cannot be assumed that producers who want to achieve certification will rightfully fulfil their set of responsibilities. Producers might deliberately not live up to the duties being imposed upon them or simply not understand how to comply. Whatever the reason, this failure undermines the credibility and effectiveness of the labels themselves.
To successfully set and enforce a standard, Dr Wijen firstly suggests standard setters should develop and enforce rules in a comprehensive way, considering in advance all direct and indirect consequences.
In addition, the rules set for one country or area may not be applicable for another. Therefore, each country or region may need its own niche set of rules, incentives and practices on top of a universal basis for all adopters. Thirdly, setters of standards should encourage intrinsic motivation—for instance, through regular training sessions—so that producers carrying a label have their motivations aligned with those of standard setters.
In conclusion, while sustainability and other standards may seek to create clarity, full transparency is not feasible without overshooting goals. But standards can be much more effective when they duly consider wider effects, adopter motives, and regional differences.