In SQ Consult’s recent newsletter article, Sustainability of supply chains: From trust to proof, SQ Consult partner, Sergio Ugarte, makes a strong case for the need for companies and policymakers to use the most credible certification schemes in the context of biomass supply chains for biofuels, including governmental mandates. He also suggests criteria to evaluate a scheme’s credibility.
I would like to share some thoughts I believe could apply to cotton. First and foremost, as Mr. Ugarte states, credibility of a certification scheme is important. Having multiple stakeholders involved in the development of a standard and implementation mechanisms through a credible processes such as those established by ISEAL Alliance is one way to achieve a level of credibility.
However, I believe we should look beyond the credibility of an individual certification scheme. We must provide evidence that the overall use of sustainability schemes is credible, including adoption of such schemes on a meaningful scale with improved practices across all supply chain actors. We should also consider business, trade and supply chain infrastructure that may allow or hinder adoption by mainstream brands and supply chain actors.
Mr. Ugarte references SQ Consult’s study, Guidance for the selection of best quality voluntary standards systems for the certification of biomass, soy and palm oil, produced for International Union for Conservation of Nature (IUCN) as well as a complementary Proforest publication when he states that selection of quality certifications should be based on:
- Identifying the schemes with most comprehensive criteria;
- Choosing a strict chain of custody method suitable to the characteristics of the supply chain;
- Selecting schemes with highest level of assurance;
- Calculating the cost and benefits of selected certification options;
- Selecting the best quality certification scheme for your sustainability ambitions.
I don’t disagree with any of these criteria. However, there are costs – and limitations – associated with each one, which should be considered. A business’s or industry’s ability to apply and support the schemes and financially integrate it into business (and, thus, become financially sustainable) is equally important. I would hope that this ability would become a baseline standard.
To illustrate my point I would like to share an example using my client, IPIECA. IPIECA identified the following criteria, considerations and basis for them as important to consider when adopting a chain of custody system for biofuels in the context of government mandates in their paper, Chain of custody options for sustainable biofuels. Many of these principles apply to the cotton industry.
While governmental mandates, international standards, and certification programs are instrumental in promoting responsible production of sustainable biofuels, they are susceptible to fraud if not managed correctly, and can disrupt the supply chain, increase costs, and inflate bureaucracy. The processing and administrative requirements of typical chain of custody systems (physical segregation, mass balance and book and claim) should consider the following criteria.
- Maintains fungibility: Works within the existing petroleum supply chain’s transport, storage, trade and marketing system without impacting biofuels ability to be freely interchanged within this system.
- Limits disruption: Works within existing petroleum supply chain’s transport, storage, and delivery systems without negatively impacting the industry’s ability to provide consistent sources of fuel to the general public, at times despite fuel shortages, natural disasters or systems needs to go offline.
- Auditable and enforceable: Ability to systematically check and verify all certified biofuel related claims of every participant throughout the entire supply chain. This is typically done by an accredited independent auditor. Regulatory authorities or qualified third-party do accreditation and enforcement.
- Complexity: Being comprised of multiple steps, each of which poses additional and over rigorous documentation, processing, data entry and auditing or certification requirements resulting in higher bureaucracy, additional resource needs, costs.
The following considerations will help shape the success of a sustainable biofuels program:
Few certification programs—if any—have reached a significant scale, largely due to costs, distractions to business operations, transportation costs associated linking new supplier-buyer connections, and limited appetite of consumers to pay a higher price associated with non-food/premium products.
All three systems support the overarching intention of existing government mandates: support the shift from unsustainable and GHG intensive practices resulting from biofuel production. They must enable the industry to maintain the fungible nature of the global commodity trade while ensuring a level playing field for all economic operators.
It would strengthen the integrity and credibility of the system and associated claims if governments would also enforce compliance with systems and mandates. Systems should operate transparently and facilitate an appropriate level of transparency throughout the supply chain. Systems should be auditable and, ideally, audited on a routine basis.
Systems should be coordinated with other sustainable agriculture and biofuel systems (e.g., RSPO) to prevent the possibility of intentional or unintentional double counting of certified product.
If we want to the cotton industry to build more sustainable supply chains and be recognized for its overall improvements, these criteria will be important. The challenge lies in achieving scale, mainstream adoption, and financial sustainability without compromising the integrity of the individual schemes and the collective approach.