Beyond Commodity Certification

Value Chains Performance and Smallholders Welfare

Prof. dr. Ruerd Ruben

Key Issues

 Fair Trade Certification

● Theory of Change
● Impact studies
 Assessing impact
● Field level sustainability
● Farm household welfare
● Supply chain integration
 Beyond certification
● Impact investment
● Private labels
2
 Impact pathways
Assumptions: Trainingand new practices are
appropriate. Cooperatives function well. Individual
farmers are receptive to proposed changes. Farms
are adequatelyselected accordingto the aims of
the certification scheme.
Inte rve ntio ns
Assumptions: Market conditions
allow for price differentiation.
Market volatility is a problem.
Government interventions and/or
regulation
Assumptions: Existing gaps in social
infrastructure. Demand for
proposed services / infrastructure.
Affordable service delivery is
possible in the certified area.
Assumptions: Monitoring and
enforcement mechanismswork and
are more demandingthan
alternatives. Labour legislation (e.g.
minimumwages) is in place.

 Professiona l farm  Pric e premium  Premium-funded  M onitoring safe

management  Floor pric e investments for w orking c onditions
 Produc er group  Ac c ess to more c ommunity  Worker assoc iation
management luc rative market interventions training
 Training for better nic hes via label  Support to PO s for use  Workers’ rights
farming prac tic es for  Pre-payment and of premium  M onitoring and
higher quality c redit  Healthc are and/or enforc ing living/ higher
 Stable market relations educ ation ac c ess w ages

Dire c tio n o f c a usa lity

Assumptions: Farmers adopt new practices
effectively. Services and inputs are available and
adequate to context. Standardsfor niche markets
can be met consistently. New practices raise value
of output.
O utc o m e s
Assumptions: Premiumand new markets
are sufficiently remunerative. Costs of
certification lower than benefits.
Farmers have pre-existing capacity to
meet standards.
Assumptions: ‘Social’ premiumis
sufficient and effectively used. Equal
distribution of benefits of community
investments. Elite capture is avoided.
POs are internally democratic.
Assumptions: Incentives to invest in
improvement in working conditions.
Workers’ associations or unions can
operate freely. Better labour practices
are adopted

 Improved yields  Higher producer  C hildren in sc hool  Skilled and

 Higher quality prices  Better health motivated workers
‘nic he’ products  Lower pric e volatility acc ess for  Living/ better
 M ore (more protection) beneficiaries wages
competitive  Increased farm  Investment in other  Decent labour
farms inc omes and farm shared basic standards
profits services achieved

Assumptions: Adequate demand for certified products. Certified production/employment is the main source of livelihoods. Practices are adopted
evenly across socio-economic groups. Monitoring & traceability is ensured. Appropriate balance of incentives and sanctions.

 Higher and more predic table household inc omes; improved soc io-ec onomic status
Im p a c ts

 Improved soc ial outc omes (health, educ ation, general wellbeing) 3
Theory of Change

4
Certification mechanisms

• Guaranteed minimum floorprice (only Fairtrade)

Prices • Stable price expectations
Farm household
welfare (income
• Long-term market access and price stability)

Contract • Pre-finance (or collateral for borrowing)  

Sustainable and
• Joint fund for collective asset building
Premium
competitive
• Social and productive infrastructure (yields and quality
 

• Capacity building for sustainable farming

Quality • Access to premium market outlets Inclusive and
participatory
organization
 
• Cooperative organization and Collective Action
Governance • Pooling for increased Bargaining power
Social services
provision and
• Workplace safety and health workplace safety

Labour • Decent living wage  

5
Key areas

6
Proliferation of standards
 Impact studies
160

140

4
120 14
15

100 12
Fairtrade
GlobalGAP
80 Organic
RQ2
128 Rainforest Alliance
RQ1
UTZ
60 57
Other
RSPO

40
16

20

0
99

01

03

05

07

09

11

13

15
19

20

20

20

20

20

20

20

20

8
Certfication criteria

9
Impact analysis (Diff-in-diff)

Intervention

Control

Before After
 Matching (PSM)

Before Matching After Matching

2.5

2
2

1.5
1.5
Density

Density
1
1

.5
.5

0
0

0 .2 .4 .6 .8 1 0 .2 .4 .6 .8
Propensity Score Propensity Score

Control Control
Treated Treated

Number of observations on Common Support

ON-CS • OFF-CS • Total

FT 42 6 48
Organic 97 6 103
FT 39 9 48
Conventional 30 6 36
Results (coffee)

Indicator FT non-FT sign

Net Household Income + - n.s
Crop yield - + n.s
Crop price + - n.s
Other crops/non-farm income - + (*)
Expenditures 0 0 n.s
Past/future perceptions - + n.s
Durable Assets + - *
Credit Access + - *
Land investments + - *
Housing investments + - *
Organizational Force ++ - **
Organizational Satisfaction ++ - ***
Female-biased Decisions + - *
Risk Acceptance + - *
Impact areas & Risk of bias
Labour

Management

GAP
Yes
No
Market
Not clear/Not reported

Premium

Price

Clarity of research question(s) 70% 5% 25%

Justification of research approach 64% 2% 16% 18%

Clear description of context 91% 5% 4%

Clear description of researcher's role 23% 18% 47% 12%

Sampling methods 45% 7% 25% 23%

Site selection 47% 6% 33% 15%

Data collection 92% 8%

Analysis 49% 8% 38% 6%

Claims supported by evidence 73% 6% 21%

Triangulation 21% 8% 63% 8%

13
Yes No Not Reported Not Clear
Primary effects (yield & price)

Study C rop C ertification SMD (95% CI)

J ena et al., 2012 (Ethiopia) C offee FT or FT & org -2.20 (-2.53, -1.87)

Ruben & Fort, 2012 (Peru) C offee FT or FT & org -0.32 (-0.62, -0.01)

Waarts et al., 2016 (Kenya) C ocoa Utz or Utz & org -0.04 (-0.28, 0.20)

van Rijsbergen et al., 2016 (Kenya) C offee FT or FT & org 0.19 (-0.13, 0.50)

Bennett et al., 2012 (Cote d’Ivoire) C ocoa RA or RA & org 0.26 (0.01, 0.51)

Overall (I-squared = 97.5%, p = 0.000) -0.42 (-1.23, 0.39)

-2 -1 -.5 0 .5 1

Yield Reduc ed yield Increased yield

Study Crop C ertific ation SMD (95% C I)

Ruben & Fort, 2012 (Peru) Coffee FT or FT & org -0.03 (-0.34, 0.27)

Weber, 2011 (Mexico) Coffee FT or FT & org 0.19 (0.04, 0.34)

Minten et al., 2015 (Ethiopia) Coffee Various 0.42 (0.32, 0.53)

Subervie & Vagneron, 2013 (Madagasc ar) Horticulture GlobalGAP 0.45 (0.18, 0.72)

Overall 0.28 (0.08, 0.47)

-.5 -.25 0 .25 .5

Prices Lower price Higher pric e

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Net Revenue effects

Study Crop SMD (95% CI) Study SMD (95% CI)

FT or FT & org
Coffee
Ruben & Fort, 2012 (Peru) -0.17 (-0.47, 0.14)
Ruben & Fort, 2012 (Peru) Coffee -0.17 (-0.47, 0.14)
Riisgaard et al., 2009 (Uganda) -0.02 (-0.34, 0.30)
Riisgaard et al., 2009 (Uganda) Coffee -0.02 (-0.34, 0.30)
van Rijsbergen et al., 2016 (Kenya) 0.25 (-0.07, 0.56)
van Rijsbergen et al., 2016 (Kenya) Coffee 0.25 (-0.07, 0.56) Riisgaard et al., 2009 (Uganda) 0.80 (0.46, 1.13)
Becchetti et al., 2008 (Chile) Other 0.37 (0.09, 0.65) Subtotal (I-squared = 84.7%, p = 0.000) 0.21 (-0.20, 0.62)
Subtotal 0.11 (-0.14, 0.36) .
Horticulture
GlobalGAP Asfaw et al., 2010 (Kenya) 0.44 (0.22, 0.65)
Asfaw et al., 2010 (Kenya) Horticulture 0.44 (0.22, 0.65) Mueller & Theuvsen, 2015 (Guatemala) 0.47 (0.23, 0.71)
Subtotal (I-squared = 0.0%, p = 0.824) 0.45 (0.29, 0.61)
Mueller & Theuvsen, 2015 (Guatemala) Horticulture 0.47 (0.23, 0.71)
.
Subtotal 0.45 (0.29, 0.61)
Other
Becchetti et al., 2008 (Chile) 0.37 (0.09, 0.65)
RA or RA & org Subtotal (I-squared = .%, p = .) 0.37 (0.09, 0.65)
Waarts et al., 2012 (Kenya) Tea -0.12 (-0.47, 0.23) .
Bennett et al., 2012 (C ote d’Ivoire) Cocoa 0.27 (0.02, 0.52) Cocoa
Subtotal 0.09 (-0.29, 0.48) Waarts et al., 2016 (Kenya) -0.12 (-0.37, 0.12)
Bennett et al., 2012 (Cote d’Ivoire) 0.27 (0.02, 0.52)
Utz or Utz & org
Subtotal (I-squared = 79.2%, p = 0.028) 0.07 (-0.31, 0.46)
.
Waarts et al., 2016 (Kenya) Cocoa -0.12 (-0.37, 0.12)
Tea
Riisgaard et al., 2009 (Uganda) Coffee 0.80 (0.46, 1.13)
Waarts et al., 2012 (Kenya) -0.12 (-0.47, 0.23)
Subtotal 0.33 (-0.57, 1.23) Subtotal (I-squared = .%, p = .) -0.12 (-0.47, 0.23)
.

-.5-.25 0 .25 .5 1 1.5 -.5 0 .5 1 1.5

Lower income Higher income Lower income Higher income
Type of certification By crop type

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Household welfare

Study Crop SMD (95% CI) Study Crop SMD (95% CI)

FT or FT & org FT or FT & org

Cramer et al., 2014 (Ethiopia) Horticulture -0.88 (-1.21, -0.54) Ruben & Fort, 2012 (Peru) Coffee -0.28 (-0.59, 0.02)

Cramer et al., 2014 (Ethiopia) Coffee -0.39 (-0.63, -0.16) J ena et al., 2012 (Ethiopia) Coffee -0.09 (-0.35, 0.18)

Cramer et al., 2014 (Uganda) Tea -0.35 (-0.65, -0.04) Parvathi & Waibel, 2016 (India) Other 0.06 (-0.17, 0.29)

Cramer et al., 2014 (Uganda) Coffee -0.26 (-0.50, -0.01) Fort & Ruben, 2009 (Peru) Banana 0.21 (-0.23, 0.64)

Dragusanu, 2014 (Costa Rica) Coffee 0.01 (0.00, 0.02) Becchetti et al., 2011 (Thailand) Other 0.24 (0.03, 0.44)

Subtotal -0.35 (-0.65, -0.05) Chiputwa & Qaim, 2015 (Uganda) Coffee 0.48 (0.23, 0.73)

Subtotal 0.11 (-0.10, 0.32)

GlobalGAP

Colen et al., 2012 (Senegal) Horticulture -0.50 (-1.09, 0.09) GlobalGAP

Ehlert et al., 2014 (Kenya) Horticulture 0.04 (-0.23, 0.30) Mueller & Theuvsen, 2015 (Guatemala) Horticulture 0.47 (0.23, 0.71)

Subtotal -0.17 (-0.67, 0.34) Subtotal 0.47 (0.23, 0.71)

Various Utz or Utz & org

Schuster & Maertens, 2014 (Peru) Horticulture -0.02 (-0.25, 0.22) Waarts et al., 2016 (Kenya) Cocoa -0.07 (-0.29, 0.15)

Subtotal -0.02 (-0.25, 0.22) Subtotal -0.07 (-0.29, 0.15)

-1.5 -1 -.5-.25 0 .25 .5 -.5 -.25 0 .25 .75

Lower income Higher income Lower income Higher income
Wage workers Farmers

16
Comparative results
Decreasing returns

Organisation Production Farmers

strengthening techniques Power
income

Contested Areas:
• Over-certification
• Value added distribution inside chain
• Multi-annual contracts (trust)
Double Certification : Fair & Organic
(bananas, Peru)
80%

67% 66%

60%

49%
45%
42% 42.6%
40%

26% 25.8%
20%
20%

8% 8%
6.2% 5%
1.3% 1.2% 0.5%
0%
-3%

-20%
-23%

-40%
FT- Organic vs Organic FT - Organic vs Conv Organic vs Conv

Gross Income banana Profit banana production Banana production (Kg.)

Banana productivity (Kg./Ha.) Price Banana-high season Price Banana-low season

19
Voluntary vs Private Standards (Nicaragua)

25,00 Fair Trade Private / B2B

20,00

15,00 Coffee Price ($)

10,00 Coffee Yield

5,00

0,00
Externalities (Peru)

70

60
Regional prices
50

40

30

20 FT market
share
10

0
1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007
Impact fallacies

Secondary effect Over-estimation Under-valuation

Farm-level resource reallocation X
Disloyalty and side sales X
Copying behaviour and spillovers X
Over- and multi-certification X

Reduced risk averseness X

Reliability in value chains X
Innovation towards sustainability X
Gender equity and living wage X

22
Value added distribution

23
Fair Chain

Figure 2: Value Chain Restructuring

€ 6.00

€ 5.00

€ 4.00

€ 3.00

€ 2.00

€ 1.00

€ 0.00
Red cherries Depulping and Hulling and Roasting Transportation Grinding Packaging Fulfillment + Sales +
Drying Sorting Delivery Margins

24
Value chain simulation & gaming

25
Behavioural linkages

Standard for Adoption of Reliable & Quality of Improved

business GAP & GBP sustainable procurement welfare &
support supply sustainability

Risk Mutual Transaction

perception trust costs

26
VC Outcomes (trust)

27
VC Game design

28
VC Game outcomes

29
Critical issues

 Modest direct welfare effects

 Some intensification

 Specialization

 Over-certification

 Costs of certification

30
Beyond certification

 Delivery Contracts (TCs, trust, reliability)

 Impact investments Funds (pre finance)

 Private labels (graduation)

 …..

31
 Thanks for your attention

Ruerd.Ruben@wur.nl

RRuerd