The dark side of sustainability standards

If you are at all an attentive consumer, you surely will have noticed that we are increasingly surrounded by ‘sustainable’ products. However there is no clear and univocal answer as to what this means: on the contrary, it seems that the label ‘sustainable’ means everything and nothing at the same time.

The blurred concept of sustainability

First of all, the attribute ‘sustainable’ can be given to a product without an evaluation of all pillars of ‘sustainability’. To the extent the concept of sustainability is a direct descendant of the notion of ‘sustainable development’, sustainability is a composite of environmental, social and economic sustainability.

Nonetheless, sometimes (but not always) a product is declared ‘sustainable’ because it is environmentally sustainable, while social—and especially economic—aspects are left out of the picture.

Another line of differentiation regards the object of sustainability: sometimes the attribute ‘sustainable’ refers to the characteristics of the process of production while other times it addresses only product features, such as the environmental impact of the use of the product in question. To the consumer feeling confused I wish to say: don’t despair, it’s not you, that of sustainable products is indeed a wild world.

Lack of regulation and voluntary standards

But there is more to this: while the concept was probably not deliberately designed to be confused and confusing, there has been no effort to clarify the criteria needed to be labelled ‘sustainable’. As a matter of fact, there is no international regulation or administrative body that can compel any private actor to comply with sustainability requirements; the entire matter is left to voluntary self-regulation by companies.

As a result, companies adopt ‘voluntary sustainability standards’ which can be drafted either by third party standard organisations or by the companies themselves. This voluntary and private approach to standards has led to a proliferation of sustainability schemes with the result that there is little actual standardisation.

We can immediately spot the leak: how much will a company be willing to self-impose obligations that is, costs, in order to increase the sustainability of its products (processes of production or products strictu sensu)? The answer is simple: to the extent it will be able to extract value from such a move towards sustainability.

The dark side: value extraction by means of commodification of sustainability practices

The voluntary standards-based system allows for a ‘commodification’ of sustainability practices, whereby value is extracted from the alleged effort made by companies to comply with sustainability standards. This extraction is made possible by the idiosyncrasy of the mixture of internal and external standards to which every company subscribes and that make their products ‘sustainable’ in a different way than those of other companies.

At first glance, this can be considered a positive effect: the existing system promotes competition on the basis of sustainability of products. However, the system of sustainability standards has a dark side—the commodification of sustainability practices. The value extraction means that sustainable products justify a higher price to be paid by consumers—especially if the company offers a unique tailor-made combination of sustainability standards, some of which may even be covered by trademark protection—while the costs of production are not necessarily higher.

The status quo benefits corporations to the detriment of consumers

Most consumer products are produced through global value chains (GVCs). From a legal perspective, these chains are nothing more than chains of contracts that are led by a company, usually the company with the final brand on the product (e.g. Apple, Samsung, Inditex, Levi Strauss, etc.).

As a result, the company that adopts voluntary sustainability standards is not the actor that must comply with them de facto: the obligation to comply is transferred to the contractors which supply the products to the chain leaders. However, as is often the case, these contractors might not be operating under the economic and social conditions necessary to comply with sustainability standards.

GVCs allow companies to increase the price of sustainable products, without directly paying the costs associated with them. Furthermore, if contractors have not complied and it is discovered that  sustainability standards have not been met, GVCs leading companies are not held responsible for that, either.

Not all companies disclose the measures they adopt when contractors fail to meet sustainability standards; reactions may vary depending on the gravity of the lapse. However, due to the contractual nature of the bond, ending the contract is always an available option.

This is a win-win situation from the perspective of the company: the only cost to bear is that of subscribing to the sustainability standard schemes (yes, companies have often to pay a membership fee in order to receive a certificate or label, such as in the case of the Better Cotton Initiative, a very popular label for organic cotton while the gain economic and reputation benefits).

Conclusion: No ‘green light’, yet

As a result, while alleged sustainability practices are misused to justify an increase in product prices that is paid by consumers, the actual costs of sustainability are not paid by the companies that declare the products sustainable. This is how companies extract value from sustainability practices, turning sustainability itself into a product.

The dark side of sustainability standards is extremely opaque, and regulators do not seem able to shed light on the matter. Unless a clear choice is made on which values deserve actual promotion and protection, not even the brand new ‘Green claims initiative’ recently announced by the European Commission will challenge the system.

Rebecca Ravalli is a PhD researcher at the Law Department of the European University Institute. Her PhD project deals with sustainable production and sustainable consumption in GVCs. Her research interests include European consumer law, voluntary sustainability standards, corporate social responsibility, international economic law and regulatory theory.