Benefits of standards

A business’ decision to become certified in one or more sustainability standards can be traced back to the different strategies that it might employ. In principle, businesses employ 3 different strategies with regards to certification.

Reactive: This happens when a company has been supplying a product to a trader for several years and has to respond to the changing demand of buyers because a trader will now only purchase this product if it is certified.

Proactive: When operating in a saturated market, some companies use sustainability standards as market differentiators.

Predictive: When companies internalize future trends or forecast that the demand for a certain certified product will grow substantially, they turn to certification.

Certification was seen as a barrier years ago, though, in general, standards open numerous possibilities.

Standards facilitate communication between buyers and sellers and joint production by creating common expectations.

Standards provide assurance on certain aspects of products to help consumers choose among a variety of seemingly similar products.

Standards ease the functioning of international markets of products and services by harmonizing requirements.

Standards can be ways to further differentiate products and services.

In particular, certification brings the following benefits to companies:  business opportunities, positive effects on production, positive effects on workers, the community and the environment.

• Financial benefits: premium prices for certified products, higher profitability, access to financing.

Products and/or services that are certified may be sold for higher prices and thus generate higher profits and net income for certified producers. Such products are often more expensive due to the higher effort which has gone into producing and processing them in a sustainable way.

Higher profitability is also directly connected with the increased yields and higher quality of certified produce.

As compliance to standards requires good organizational and management skills, businesses whose products or services are certified increase their credibility vis-à-vis investors, thus enjoying better access to credit.
 In addition, depending on the standard, some producers may receive technical and financial support from the standard organization to assist them in implementing the standard requirements and ensure full compliance.

• Benefits in management: Business and market opportunities such as access to new and growing markets, moving beyond «niche» categories; new clients, or improved relationships with existing clients; repositioning in global value chains.

Access to new and growing markets, moving beyond “niche” categories. In the past several years, several sectors of standard-certified markets have displayed double-digit growth rates, often surpassing the growth rates of conventional markets.

Standard-certified products are moving from being niche products to being the mainstream. Growing portions of various global commodity markets are now produced as standard-certified, creating potential disadvantages for those companies that do not yet have any certification.

New clients, or improved relationships with existing clients. More and more buyers follow the path of “sustainable sourcing”, including high-value/high-volume buyers in both the public (e.g. new sustainable public procurement policies) and the private sector (e.g. global corporations’ sustainability commitments).

Repositioning in global value chains. Compliance with voluntary sustainability standards can translate into gaining the status of preferred supplier, thus giving companies access to a greater market and income security.

• Quality: Better quality, productivity, and processes.

Better quality and greater yields: The business process improvements usually required as part of complying with standards often result in higher quality products and higher production yields.

Better management and production skills: Certified producers often gain comparably better management and production skills as a result of the upgrading process involved in adopting a standard, including through taking part in training, implementing continuous improvement requirements, etc.

Improved efficiency and productivity: Adopting better practices and investing in new equipment often contributes to greater efficiency and productivity, especially for farmers or producers who face resource constraints. This potentially results in higher yields/production with the same amount of inputs. As a result, competitiveness improves.

• Sustainability: Positive workers/ comminuty/ environment effects.

The benefits which result from certification in a standard can positively impact the working environment of a company, the well-being of its community, as well as help protect the environment. The sustainability benefits associated with certification include:

Better working environment: Improved employee welfare and motivation (lower absenteeism, lower number of work-related accidents).

Improvement of basic working conditions for employees, including job security, medical and hospital treatment. Increase in the use of labor contracts, safety equipment, the availability of first-aid kits.
Higher satisfaction of workers due to higher technical assistance and lower trade risk.

• Developments in the community and livelihoods of producers.

Some voluntary standards aim to extend their impact beyond individual producers, generating positive change at the local community level.

Higher incomes associated with producer certification may also improve the overall living conditions of producers.

A standard can fill a gap in addressing issues which are not, or cannot, be tackled by public regulation, or where such regulation is insufficient.  Standards often include specific requirements, often associated with production processes or methods, which aim to substantially improve environmental management practices.