Ethical labels not fit for purpose, report warns consumers

Many of the world’s leading certification standards are not only failing to improve the ethical conduct of large corporations but are serving to entrench abusive business practices, a damning new report argues.

The study of 40 global voluntary initiatives, including emblematic on-pack labelling schemes such as the Forest Stewardship Council (FSC) and Fairtrade International, identifies multiple failures in what it refers to as a “grand experiment” in corporate accountability.

“These kinds of initiatives are not effective tools for holding corporations accountable for abuses or for protecting rights holders against human rights violations,” says Amelia Evans, executive director at MSI Integrity, the US-based human rights group behind the research.

The 235-page Not Fit for Purpose report draws on a decade of research into “multi-stakeholder initiatives”, which count global corporations from Nike, Coca-Cola and Nestlé to Shell, Apple and Newmont among their staunch supporters.

In recent years there has been a steady expansion in the influence of multi-stakeholder initiatives, which originated in the 1990s as a voluntary response by big business to widespread abuses in their supply chains.

The report’s sample alone involves more than 10,000 participating companies in 170 countries, and covers sectors as diverse as cocoa, sugar, palm oil, minerals, seafood, electronics, jewellery and children’s toys.

According to Evans, multi-stakeholder initiatives have a “tricky relationship” with governments, which frequently interpret their existence as evidence that abuses are being “taken care of”.

“In truth, the exact opposite needs to happen. Governments must recognise that because there’s an initiative in place, then underlying human rights abuses are occurring and they are obligated to take action,” says Evans.

The “multi-stakeholder” element of these initiatives derives from participation of civil society organisations, government agencies and other groups. While cross-sector dialogue is generally positive, MSI concedes, most initiatives tend to be heavily skewed towards corporate interests.

According to the research, only 13% of the initiatives analysed include affected populations in their governing bodies and not a single one has a majority of rights holders on its board.

Such an imbalance comes into stark focus at the complaints stage, with almost one third of the initiatives offering no grievance mechanism whatsoever to workers or other affected parties.

The frequent absence of victims’ voice speaks to a wider concern about the use of certification schemes and similar voluntary standards to stall progress on human rights and safeguard the status quo.

“Over time, MSIs [multi-stakeholder initiatives] have become captured and dominated by corporations. So, while they may not have been designed to fail, I think they were destined to fail,” says Evans.

Referring to the “flawed concept” of monitoring, she says third-party auditors are typically paid by the self-same corporations they are hired to assess, creating a clear conflict of interest. In addition, few if any protections are given to critics or whistleblowers, thus limiting the incentive for victims to speak out.

The contrast with initiatives designed by rights holders is clear. A case in point is the worker-led Fair Food Program in Florida’s tomato sector, which, among other strict sanctions, obliges buyers to suspend purchases from producers that fail to comply with its code of conduct.

A similar inbuilt bias is evident in the attention given by certification schemes to abuses in the Global South, while turning a blind eye to non-compliance in the Global North, the report alleges.

Setting below-cost prices, request fast turnarounds and other aggressive procurement practices by multinational buyers are also widely overlooked. Indeed, of the eight initiatives linked most closely to supply chain issues, only two explicitly reference the need for responsible purchasing.

In light of its critique, MSI Integrity warns that consumers “can’t rely” on the claims made by many ethical labels. Not only are abuses continuing to occur, but generic terms such as “fair” and “sustainable” can be misleading.

As Evans says: “The risk is that these initiatives are legitimising abusive behaviours by failing to detect them and by suggesting that a wider range of issues are being addressed than often is the case.”

Sarah Newell, a spokesperson for the US-based Worker-driven Social Responsibility Network, goes even further, arguing that multi-stakeholder initiatives exist to intentionally “obscure” worker abuses in multinational supply chains.

Their “primary function”, she argues, is “to distract from the fact that these abysmal conditions are the direct result of the business practices of the brands at the top of these supply chains”.

A Fairtrade International spokesperson highlighted the fact that Fairtrade International, was among the highest scoring certification schemes examined by the report. “Tackling some of the issues raised in the report – such as farmers and workers having unequal power in trade – is precisely why Fairtrade was set up, with rights holders (producers) having 50% ownership and voting power in the Fairtrade International General Assembly, and being consulted on all Fairtrade Standards and pricing reviews. Yet the wide issues reflected in the report must be addressed collectively. We agree that no initiatives should ever be seen as the replacement for the rule of law which is why we believe in and call for regulation aimed at preventing human rights abuses.”

In a statement, the Forest Stewardship Council said, “We question if the report writers understand the mandate of certification schemes. It is true that FSC certification alone cannot solve all the problems associated with human rights abuses, poor forest management, illegal trade or any of the other recurring issues in the forestry sector. FSC – or any other certification scheme – cannot be held responsible for many of the weaknesses detailed in the report. To achieve real transformation, all stakeholders must come together and work hand-in-hand to find solutions for these issues.”

The iSEAL Alliance, the umbrella body for ethical certification schemes, welcomed the findings of the report, and said: “The available evidence shows that sustainability standards can and do have positive impacts on many sustainability outcomes. For very complex issues, such as human rights, there are limits to how far sustainability standards can go on their own. Partnerships are essential to achieve the scale and depth of impact needed.”