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: Training and new practices are
appropriate. Cooperatives function well. Individual
farmers are receptive to proposed changes. Farms
are adequately selected according to the aims of
the certification scheme.
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 mechanisms work and
are more demanding than
alternatives. Labour legislation (e.g.
minimum wages) is in place.

Price premium Premium-funded

Interventions

Professional farm Monitoring safe

management Floor price investments for w orking conditions
Producer group Access to more community Worker association
management lucrative market interventions training
Training for better niches via label Support to POs for use Workers rights
farming practices for Pre-payment and of premium Monitoring and
higher quality credit Healthcare and/or enforcing living/higher
Stable market relations education access w ages

Assumptions: Farmers adopt new practices
effectively. Services and inputs are available and
adequate to context. Standards for niche markets
can be met consistently. New practices raise value
of output.
Assumptions: Premium and new markets
are sufficiently remunerative. Costs of
certification lower than benefits.
Farmers have pre-existing capacity to
meet standards.
Assumptions: Social premium is
sufficient and effectively used. Equal
distribution of benefits of community
investments. Elite capture is avoided.
POs are internally democratic.
Direction of causality
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 Children in school Skilled and

Outcomes

Higher quality prices Better health motivated workers

niche products Lower price volatility access for Living/better
More (more protection) beneficiaries wages
competitive Increased farm Investment in other Decent labour
farms incomes 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 predictable household incomes; improved socio-economic status

Impacts

Improved social outcomes (health, education, general wellbeing) 3

Theory of Change

4
Certification mechanisms

Guaranteed minimum floorprice (only Fairtrade)

Prices Stable price expectations
Farm household
welfare (income
and price stability)
Long-term market access
Contract Pre-finance (or collateral for borrowing)

Sustainable and
Joint fund for collective asset building competitive

Premium 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

120 4

14
100 15 Fairtrade
12 GlobalGAP

80 Organic
RQ2
Rainforest Alliance
RQ1 128
57 UTZ
60
Other
RSPO
40 16

20

0
2011
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010

2012
2013
2014
2015
2016

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

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

0% 20% 40% 60% 80% 100%

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%

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

Study Crop Certification SMD (95% CI)

Jena et al., 2012 (Ethiopia) Coffee FT or FT & org -2.20 (-2.53, -1.87)

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

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

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

Bennett et al., 2012 (Cote dIvoire) Cocoa RA or RA & org 0.26 (0.01, 0.51)

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

Yield
Study Crop Certification SMD (95% CI)
-2 -1 -.5 0 .5 1

Reduced yield Increased yield

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 (Madagascar) Horticulture GlobalGAP 0.45 (0.18, 0.72)

Overall 0.28 (0.08, 0.47)

Prices -.5 -.25 0 .25 .5

Lower price Higher price 14

 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 (Cote dIvoire) 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 dIvoire) 0.27 (0.02, 0.52)
Subtotal (I-squared = 79.2%, p = 0.028) 0.07 (-0.31, 0.46)
Utz or Utz & org
.
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)
.

Type of certification -.5-.25 0 .25 .5 1 1.5 By crop type -.5 0 .5 1 1.5

Lower income Higher income Lower income Higher income

15
 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) Jena 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

Wage workers Lower income Higher income Farmers
-.5 -.25
Lower income
0 .25
Higher income
.75

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%

70% 67% 66%

60%

49%
50% 45%
42% 42.6%
40%

30% 26% 25.8%

20%
20%

8% 8%
10% 6.2% 5%
1.3% 1.2% 0.5%
0%

-3%
-10%

-20%
-23%
-30%
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
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Externalities (Peru)

70

60
Regional prices
50

40

30
FT market
20
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

7.00

6.00

5.00

4.00

3.00

2.00

1.00

0.00

- 1.00

Series1 Series2

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