Separating fact from fantasy: What's the future for ethical labels?

Look at the headline figures and all seems well for ethical certification schemes. The 'big two' of organic and Fairtrade remain multi-billion euro operations.

Sales of the former have been rising steadily across Europe, and are now recovering well from a blip in the UK market during the economic downturn.

The latter has also had issues of late, most notably the EU sugar reform, but in many other categories more consumers are buying into the ethical brand. In Germany, the market rocketed 26%, prompting TransFair, the country’s Fairtrade organisation, to claim the scheme is “unstoppable​​”.

But underneath the expanding product ranges and (steadily) increasing sales, all is not well in the ethical certification sector – and it hasn’t been for some time.

In 2010, a report by the think-tank SustainAbility, suggested the model had reached its sell-by date. One comment in particular stood out: “Certification cannot reach every farm and factory in the world, while labels alone will not shift the mainstream consumer.”​

Bad buying habits​

Indeed, sales of products with these marks might be in the billions, but they still represent just a fraction of overall food and drink sales. In the UK, for example, organic sales of around €2.5 billion represent just 1.4% of the total market.

Meanwhile, countless polls have suggested the majority of consumers want to buy ethically produced food, and are willing to pay more for it. The latest was released just this week: the Eurobarmeter survey​​ found that more than half (59%) of all Europeans are prepared to pay a premium for products sourced from animal welfare-friendly production systems.

But when they get to the shelves, price takes over. Sales of organic food show this in action – recent figures released by the Soil Association in the UK showed that categories where the premium is smallest (for example, dairy) continue to dominate. Meanwhile, sales of red meat have plummeted 8.1%.

It’s a results game​

Ethical certification schemes have not only struggled to shift consumer buying habits. “We cannot certify or label people out of poverty,”​ said Nestlé’s head of agriculture, Hans Jöhr a couple of years ago.

There is an argument that this approach wouldn’t be on Nestlé’s agenda had ethical labels not redrawn the consumer landscape. These schemes have undoubtedly brought the ethics of food supply into the spotlight, but more brands are beginning to wonder whether they are better off going it alone – especially if they can prove the impact schemes are having on the ground.

This won’t be an easy sell: the benefit of an independent certification scheme is that it does exactly what it says on the tin, allowing food brands to bask in the green halo without fear of repercussions. That is, until the schemes themselves are hauled over the coals.

Problems at Rainforest Alliance Certified tea plantations surfaced late last year, whilst Fairtrade has increasingly had to bat away suggestions that it doesn’t provide enough hard evidence of the impact the scheme is having on farmers.

“It’s easy to let people fantasise about what Fairtrade does, after all if you don’t give people hard facts then they’re going to imagine,”​ explained agricultural economist Peter Griffiths, an outspoken critic of Fairtrade coffee, in an interview. Farm Africa chief executive Nicolas Mounard recently said certification alone doesn’t address the problem that consumers think it does​.​

Consumers expect capacity to be built at farm level, in combination with quality. This hasn’t happened – at least it hasn’t happened as quickly as consumers think, or businesses might have wanted.

Direct trade​

Indeed, the number of brands going it alone with, for example, direct trade models seems to be rising. Industry wants the pace of change to quicken. Some have already got tired of waiting: Ferrero has gone above and beyond the requirements of Certified Sustainable Palm Oil, for example.

CSPO is an interesting case, with brands having actually shied away from using the scheme’s logo to reassure customers that procurement has all been above board. 

Of course, there is an argument that shoppers have become tired of unpicking which eco-label does what and whether they are worth a premium. There were 400-odd schemes out there at the last count, and the EU has said enough is enough (at least in relation to environmental claims​​).

Mondelez and Nestlé, via their Coca Life and Cocoa Plan schemes respectively, provide a hint of how things may change. The latter, for example, uses UTZ Certified and Fairtrade, but it is very much a Nestle-led scheme. It’s bearing fruit quite quickly​​, too.

Can brands and retailers convince consumers to believe in their own schemes without the safety net of an independent assessor? That won’t be easy. But the challenge for ethical certification schemes is to adapt before it (almost inevitably) happens.