Social compliance standards refer to how a business protects the health rights and safety of its staff, supply, and value chain. Examples include the Business Social Compliance Initiative and Ethical Trading Initiative.
Trends and developments in social certification standards in Europe
The overall market share of social certifications in international trade may be small, but the demand for certification is growing. Both product certification and social compliance standards will continue to be important in the future. ProFound consultants identified the following trends that shape the market for social standards.
1. Sector-wide and national sustainability initiatives drive up demand for certifications
A growing number of national and sector-wide initiatives are being created to counter increasing sustainability concerns in Europe. These initiatives provide a platform for actors in the supply chain to share experiences and create a common understanding. Companies that sign up to these initiatives adopt their practices to contribute to the targets set. Examples include endorsing specific certification schemes or codes of conduct.
2. Retailers’ private own-label boost certification demands across Europe.
Certifications are becoming a prerequisite to enter the mainstream market for sectors like coffee, cocoa and bananas. This is partly driven by retailer commitments for third-party certification, which are strongest in retailers’ private-label products. These are gaining popularity and market share across Europe, because they offer similar characteristics as branded products at more affordable prices.
3. Supply of certified products may overshadow demand in some sectors
It is good to keep in mind that there is an oversupply of certified products in some sectors. For example, of all the production of Fairtrade coffee, only 25% is sold as certified coffee. The remainder is sold as conventional. Even though producers made the investments to certify their operations, they cannot sell all their coffee at a premium price.
Before committing to certification, producers should determine if there is sufficient demand for certified products. There are already movements that are trying to find a solution for this problem. For example, Fairtrade now requires coffee and cocoa operatives and traders to have a commitment for new Fairtrade sales volumes, that are confirmed by the end buyer.