Ethical accreditation schemes: good or ill?

As unethical companies continue to generate hefty profits, Josie Wexler examines various schemes for upholding ethical standards, and how much faith we should put in them

December 15, 2020 · 6 min read
Garment workers and their unions rally on the one-year anniversary of the Rana Plaza factory collapse. Photo: Solidarity Center (Creative Commons)

The era of ethical accreditation schemes began in the late 1980s. With neoliberalism in full swing, and exploitation and environmental destruction rampant globally, labels like Fairtrade and the Forest Stewardship Council arose to try to mitigate damage.

They have since multiplied into dozens of different schemes. But what are these, and do they actually do any good?

Plaudits for audits

The bulk of these schemes, including the Forest Stewardship Council, the Rainforest Alliance, and the Roundtable on Sustainable Palm Oil, are the brainchildren of ‘multi-stakeholder initiatives’ – coalitions of companies and campaigning groups.

While each scheme is different, they generally work to a common model: the coalition comes up with a set of standards for companies – such as no child labour, no growing on ‘high conservation value’ land – which are then policed by auditing companies.

These schemes may be better than nothing. But many of them have faced a lot of criticism, sometimes about the standards being too weak, but often simply around not enforcing them. It’s common for the company being inspected to appoint the audit firm, which gives the audit firms, competing for business, an incentive to be lax. Audits are generally announced in advance, and sanctions faced by companies for non-compliance are weak – the ultimate one is generally merely that their certifications are revoked.


This has led to repeated academic and journalistic exposés of flouted standards. The most devastating cases have been around building safety – one example was the Ali Enterprises factory fire in Pakistan in 2012, which killed nearly 300 workers three weeks after the building had passed a Social Accountability International inspection.

Fairtrade: policing with price control

Fairtrade is a bit different from most of the other schemes because as well as the policing aspect, it directly regulates prices – it has a price premium that must be paid on top of the market price, and a floor price to protect producers against sudden price falls. The premium varies across products, but last time Ethical Consumer calculated it for tea and coffee it was about a fifth of the market price in both cases.

One of the reasons for Fairtrade’s emphasis on pricing is its history – it was partly formed as a reaction to the collapse of the International Coffee Agreement, which had largely arisen out of the Cold War. The US was frightened that Latin American coffee producers would turn to communism if they were too immiserated by low, volatile coffee prices, and thus agreed to regulate how much coffee each country could export, stabilising prices and keeping them reasonably high. When the Agreement collapsed in 1989 many coffee farmers were thrown into desperate poverty.

Fairtrade, of course, is not a perfect solution. One flaw is that it doesn’t regulate wages very well, and various studies – including one on Ethiopia and Uganda – have shown that the extra money the farmers get doesn’t seem to be reaching their employees. This isn’t just an issue for large estates – even small farmers do often employ a few workers, and they tend to be the poorest people in the entire system – the underdog beneath the underdog.

However, Fairtrade remains a stronger scheme than many of the others – it does require some unannounced audits, and the pricing aspect directly regulates things in terms of cold hard cash.

Companies’ own schemes and other models

Some companies have recently been creating own brand accreditations, such as Cadbury’s Cocoa Life. These aren’t always complete nonsense, but as a first approximation, there is a reason why we don’t usually allow people to police themselves. There is also a lack of transparency about what many of these schemes actually involve.

Because of some of the publicised failures of the schemes described above, there have also been some other schemes and initiatives created along different models. One is the Soy Moratorium in Brazil, an agreement signed by all of the big traders not to buy soy grown on any freshly deforested land in the Amazon, enforced with satellite data from Brazil’s national space agency. It appears to have been successful at preventing soy being grown on newly deforested land. However, there are worries that it is just causing things to be shifted around, with soya being put on the previously deforested land, while cattle are pushed into the forest frontier.

Another model is provided by the Bangladeshi Accord on Fire and Building Safety, which many clothing companies signed in the wake of the 2013 Rana Plaza building collapse which killed over 1000 people. Although companies signed it voluntarily, it is a binding legal agreement they have with the trade unions, and they can ultimately be taken to court if they fail to meet the obligations in it.

While the Accord has a narrow remit, it has been uniquely successful – the International Labor Rights Forum has reported that since 2015, no worker has died in an accord-listed factory, thanks to a safety issue covered by it.

Good or ill?

There is always a danger that voluntary schemes can give the impression that the problem is fixed, when it isn’t. The presence of such schemes can also deflect stronger opposition to companies – having your critics sitting in your kitchen drinking your tea may prevent them from battering down your door.

However, while governments are failing to act, these schemes can be better than nothing, and they can also be a laboratory for government regulation – so governments with very few resources to expend on policing can find out how they can enforce standards themselves.

Ultimately, while narrow voluntary schemes only go so far, legally binding schemes like the Bangladeshi Accord, and agreements that cover all traders, like the Brazilian Soya Moratorium, have much more teeth. The Accord’s success has resulted in many people talking about how its model could be exported to other areas, and that may be a promising avenue for improving standards of companies globally.

Josie Wexler is co-editor of Ethical Consumer Magazine


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