Presentation on the dynamics of certification in a green economy

Dynamics of cer.fica.on in a green economy

Greening the economy and the importance of innova.ve good quality cer.fica.on standards to enhance a

transi.on

Theory of change: the Standards System Value Cycle (adopted from Aidenvironment, New Foresight, IIED, 2013)

Voluntary standards have an important role to play in the implementa.on of a green economy (IISD, UNEP, 2014). To create impact and to be a driver of change requires from standards to be innova.ve to:

! Drive the theory of change as an innova.ve, market driven growth model ! Create impact by raising the bar and/or increasing scale ! Cover the full scope of sustainability (3Ps) in a par.cipatory approach.

Green economy

“Results in improved human well-‐being and social equity, while significantly reducing environmental risks and ecological scarci=es”.

The role of RTRS as driver of change in the green economy: current dynamics

Increasing produc.on

Changing impor.ng and expor.ng countries: India and China gain importance

! Growing produc.on shows increased importance to drive best prac.ces in a green economy

! In an interna.onal context with changing trade flows and; ! Increased compe..on between countries (with different requirements on

sustainability) > no level playing field

!  Cer.fica.on is used as means to proof compliance with the EU-‐RED in Europe.

!  European legisla.on is not comprehensive in its scope of sustainability. Socio-‐economic requirements are for example not included.

!  There has been a strong increase in cer.fica.on standards to be used for biofuels, some solely developed to proof legal compliance.

!  This has resulted into increased compe==on between cer.fica.on standards, with different levels of quality.

!  Some (as ISCC) started to widen their scope to other end-‐use markets as food or feed.

The role of RTRS as driver of change in the green economy: current dynamics

(Focusing in this example on the biofuels market)

The role of RTRS as driver of change in the green economy: current dynamics (Focusing in this example on the biofuels market)

© NEA, 2013 over year 2012: reported standards for compliance sustainability biofuels

Dynamics: •  Fast increase of recently developed standards as ISCC and 2BSvS

•  This has driven compe..on in producer countries

© Moser, Hildebrandt and Bailis, 2013

Implica=ons in this compe==on:

•  The possibility for cross-‐compliance under the EU-‐RED which hampers transparency in the market

•  It hampers transparency on quality and assurance differences between standards in a demand driven market with strong compe..on, as example:


Used in area with high risk for impacts?

Difference between these two standards?

Accepted by other standard Merged into one scheme at end-‐user

"  Laws and regula.on in countries are not comprehensive to cover the full scope of sustainability – or may even be fully absent;

"  Consequently, a full-‐scope interna.onal playing field in the market is not present, and will at least not be present on the short to mid term;

"  A single driver to meet legal compliance (as under the EU-‐RED) does not result into innova.on and best prac.ces;

"  In contrary – it results at this moment into demand-‐driven compe..on between standards where costs and “the proof of legal compliance” are domina.ng;

"  Producers have the op.on to choose, also .ghtened by cost and compe..on on the supply side

Thus: How can high quality standards drive change towards the green economy while facing these obstacles in current dynamics?


Key boIlenecks for high quality standards to be a driver of change towards the green economy:

A.  Compe..on and lack of level playing field on demand and supply side B.  Financing: Costs -‐ benefits

C.  Demand driven: tendency for the "low hanging fruit”

• Compe..on and lack of playing field • Costs

Choose low hanging fruits Costs

Key to understand and be transparent on what is behind the standards!

"  Assurance is a guarantee for ensuring what you stand for as standard.

"  Strong difference in strictness of criteria and quality of control between systems

"  In terms of assurance this includes for example issues as accredita.on, sampling requirements, audit and verifica.on procedures, stakeholder consulta.on, etc.

A.   How to deal with compe==on and lack of level playing field?:

Some food for thought

© A benchmark on level of assurance between cer.fica.on systems for biofuels (Dam and Ugarte, 2012)

A. How to deal with compe==on and lack of level playing field?

" Key to understand and be transparent on what is behind the standards!

Benchmark study WWF on a wide range of topics: One example given >>

IUCN developed a benchmark study on the overall indica.ve quality of standards

© WWF, searching for sustainability, 2013

What is needed?

Incen=ves by transparency and choosing for quality

"  Transparency on what cer.ficates are received by the end-‐user: incen=vize the market. "  Transparency on the quality (also in assurance) of cer.fica.on standards is crucial.

Commitment from the sector

•  Interna.onally, laws and regula.on will not be comprehensive in sustainability requirements– at least not in the short term;

•  BUT: they do can complement each other •  Commitment from the market should therefore not be only demand and compliance driven.

•  It should be a legi.mate choice for choosing for a comprehensive standard that enables learning and change in the market. This requires collec=ve commitments.

“Enhancing sustainability in the green economy is reached only when both environmental and socio-‐economic sustainability criteria are addressed and verified in a holis=c way by standards”.

B. Financing: costs and benefits

•  Financing is key to make addi.onal requirements (as biodiversity conserva.on) under high-‐quality cer.fica.on standards economically viable.

•  To meet compliance costs, and to create an incen.ve for producers to choose a cer.fica.on system with more stringent criteria.

•  Benefits have to outweigh the costs •  Benefits include price but also intrinsic benefits (higher yields),

or preferences in the market (e.g. from financing sector)

© Lessons learned from study: Financing biodiversity conserva.on in soy producing areas. Explora.on of financing mechanisms to support biodiversity conserva.on in soy producing areas in Brazil, October 2013

Table&4:&Suitability&of&financing&mechanisms&to&overcome&the&main&obstacles&for&biodiversity&conservation&in&soy&growing&areas&(++&=&high,&+&=&to&some&extent,&?&=&none&to&low)&! SHORT!TERM!

“Accelerating!HCV!inclusive!certification”!

MIDDLE!TO!LONG!TERM!

“Beyond!certification!solutions”!

Criteria!

!

!

Mechanisms!

Experience! in!

(soy)!

agricultural!

production!

Simplicity! to!

implement!

mechanism!

Contributes! to!

level! playing!

field! with! solid!

market!demand!

Cooperation!

outside! soy!

value! chain!

feasible!

Regulatory!

basis!in!

jurisdiction!

present!

1.!Voluntary!PES! Q! Q! Q! +! Q!

2.!Public!payment!

scheme!for!PES!

Q! +! +! +! ++!

3.Voluntary! carbon!

markets!

+! Q! Q! +! Q!

4.Regulatory! carbon!

markets!

+! Q! Q! +! +!

5.!RT/REDD!for!soy! +! +! Q! +! +!

6.!Voluntary!

biodiversity!banking!

and!offsets!

Q! Q! Q! ++! Q!

7.!Regulatory!

biodiversity!banking!

and!offset!

+! Q! Q! ++! ++!

8.! Ecological! fiscal!

returns!

+! +! +! ++! ++!

9.!Domestic!Funding! +! ++! Q! ++! ++!

10.!Climate!Funds! +! Q! Q! +! Q!

11.!BACP! ++! +! Q! Q! Q!

12.!BBOP! +! Q! Q! +! Q!

13.! Green!

Development!

Initiative!

Q! Q! Q! ++! Q!

14.!Choice!editing!in!

supply!chain!

+! +! ++! Q! Q!

15.! Sustainable! soy!

fund!

+! +! +! Q! Q!

!

Analysis of possible financing mechanisms to overcome obstacles for biodiversity conserva.on in soy growing areas

PES mechanisms: • Water • Biodiversity • Carbon

Funds and tax mechanisms


Lesson learned: need from sector to landscape approach from financing perspec.ve!

Two-‐step approach: Middle to long term Beyond cer=fica=on solu=ons

! Generate finance outside the soy sector ! From a soy supply chain approach to an

integrated landscape approach; ! Link soy cer.fica.on to other financing

mechanisms; ! Establish minimal compliance standards

at jurisdic.onal level in countries.

Short term

!  Legality: need for common approaches governments -‐ standards

! Create clarity regarding compliance ! Crea.ng market in a level playing

field: Market push ! Financial incen=ves in sector


Link to financing ins=tu=ons Link to ini.a.ves in and outside the sector to enhance sustainability through financing mechanisms (e.g. linking RTRS criteria to credibility, ranking, credits, investment poriolio banks)

•  Provide more understanding and proof on the (intrinsic) benefits of high quality standards: what are the (economic) business benefits?


Example: evalua=on of 40 biomass projects, subsidized in Netherlands •  Cer.fica.on links to financing and investment requirements: proof for sustainability •  Stakeholder consulta.on and par.cipatory approaches are needed for local embeddedness of new projects

•  Data recording and monitoring contributes to day-‐to-‐day business: bejer efficiency

Sustainable business

Social benefits

Economic benefits

Environmental benefits

Higher yields Higher commitment

C. From demand driven (choosing the "low hanging fruit”) to learning tool?

!  Buyers tend to reach out to those producers who face least difficul.es in mee.ng their requirements: the low-‐hanging fruits.

!  How to reach out to the remaining group? !  How to get bejer prac.ces at the places where it is needed: the (more

complicated) higher risk areas?

•  Next to financial support: •  Learning and capacity building as vital prerequisite for cer.fica.on

C. From demand driven to innova=ve learning tool?

Models (can) exist to make a larger shil from demand driven to innova.ve learning tool

© Dam and Aidenvironment, 2014

Model Within standard Outside the standard

Moving threshold Moving thresholds, and/or increase area as requirement

Linked to legisla.on, regional or land use policies

Step-‐wise compliant approaches

See e.g. Modular Approach Program FSC: Step-‐wise approach in .me to reach compliance

Can be combined with benchmarking tools Rural Horizon Solidaridad

Collabora=ve improvement programs

Capacity building in standard included: reward the learning element

E.g. Cacao World Program – collabora.on with demonstra.on farms, extension programs, research

Reward best performers Premium quota differen.a.on, sale preferences

Linked to financing requirements, company commitment, credit loans

Knowledge crea=on and data sharing

Peer reviews amongst producers, feed-‐back loops

Coupled to land use or satellite data, research programs, etc. Observatorio de Soja?

In summary: Some food for thought Enhancing the transi=on to the green economy? Explore the tool box!

Create transparency: incen.ve for market – know what you are buying!

Collec.ve market commitment Link to financing standards Link to governance as driver for change

Integrated landscape approaches Create cost mechanisms

Proof (economic) and intrinsic benefits Integrate standard in daily business

Collabora.ve improvement programs

Step-‐wise approaches, moving thresholds Reward best performers

Thank you for your ajen.on!

Jinke van Dam Consultancy Mrs. Dr. Jinke van Dam Consultancy on sustainable value chains and land use for biomass end-‐uses

Bunnik, the Netherlands E: [email protected] More informa.on on: www.jvdconsultancy.com