By Finn Ole-Treusch, Pohsiang Huang, Janet Fraser, Pascal Hofstetter, and Prof. Kristjan Jespersen
Copenhagen Business School’s (CBS) commitment to sustainability is reflected in its academic projects. One such project involved a group of CBS student consultants who, as part of the ‘Consulting for Sustainability: Harnessing Business Models and Innovation’ course, collaborated with the international NGO ‘Preferred by Nature’. Preferred by Nature’s activities include conducting third-party audits for voluntary sustainability certification schemes, such as those from the Forest Stewardship Council (FSC). The student project focused on voluntary sustainability certification schemes, their effectiveness, and the challenges companies face in meeting these standards by reviewing relevant literature and by analyzing Non-Conformities Report (NCR) data from Preferred by Nature’s certification audits.
In the current global business landscape, sustainability practices are becoming increasingly vital. Voluntary sustainability certification schemes play a crucial role in promoting responsible business practices worldwide. These certifications help consumers make informed choices, yet their effectiveness and the hurdles faced by businesses in complying with them are often underexamined.
The growing importance of sustainability certification schemes is also driven by increasing legislative demands, particularly in Europe and specifically the European Union. As governments implement stricter regulations to ensure sustainable practices, the role of voluntary certifications becomes even more significant. These certifications not only help businesses align with legal requirements but also enable them to gain a competitive edge by demonstrating their commitment to sustainability.
The literature review revealed that the effectiveness of certification schemes varies greatly, especially between industrialized and developing countries. Industrialized nations tend to have a higher overlap between legal regulations and voluntary standards, likely aiding compliance. Additionally, anecdotal evidence showed certified farms have occasionally been found violating international laws, highlighting the need for further research in this area. The literature highlights mixed results regarding the trend of non-compliance over time. While there is an initial decline in non-compliance after the first assessment, this trend does not necessarily continue in subsequent reassessments. This indicates that sustained compliance remains a challenge. Also, companies often need to undertake significant preparations before audits; this preparatory phase is an under-researched area that warrants further exploration. Overall, challenges in certification audits include procedural inconsistencies, focus on processes over impacts, and issues with audit frequency. While certifications and audits are valuable tools, they are not a ‘silver bullet’ for ensuring sustainable practices.
Analysis of 40,000 certification records of Non-Conformities Reports (NCRs) from 2018 to 2023, supplied by Preferred by Nature’s certification audits, was completed and covered various aspects such as engagement year, certification type, country, and grading type. There are a large number of records from Covid time when Preferred by Nature mostly conducted remote audits with a focus on procedural elements of standards. This analysis revealed patterns in non-compliance across various categories, though specifics and details cannot be revealed here due to confidentiality.
Looking at the cases that included Non-Conformities (NCRs) showed interesting patterns and regional disparities in the number of NCRs per engagement across a broad spectrum of different certificate record types (“sustainability labels”) for both forestry, agriculture, and chain of custody. The data exhibited high regional disparities in the distribution of major and minor NCRs and showed that certain certificate record types exhibit a particularly high number of NCRs on average, especially forestry/agriculture certificate types in contrast to chain of custody types. Both the average number of NCRs per engagement and the share of engagements without any NCRs varied highly by region worldwide. Regional analyses for the engagement type (initial assessment vs. reassessment vs. annual audit) revealed cross-current patterns, leaving us with no clear findings.
In summary, we observed high regional differences in our dataset of NCRs and various trends and patterns, depending on different variables, highlighting the need to address procedural inconsistencies and variability in the audit processes and thereby improve the overall quality of all audits. To analyze qualitative and procedural aspects of the NCRs, audits, and auditors worldwide, – and to get away from just looking at numbers and categorized NCR checklists – it is indispensable to get on site in the corresponding agricultural regions and thereby find the root cause of existing issues, to ensure tangible sustainability impact. Our analysis has enabled us to identify clear trends that inform our subsequent recommendations.
Based on our findings, we propose several key recommendations for voluntary sustainability certification schemes:
- Enhance awareness and understanding of sustainable business practices among organizations and farmers, especially in critical regions and sectors.
- Address procedural inconsistencies and ensure certification schemes focus more on real-world impact than merely complying with a list of standard requirements.
- Ensure focus on on-site, qualitative results in participating organizations, rather than only quantitative data and complying with sustainability standard ‘checklists’.
- Further research the correlation between legal regulations and certification standards and factors affecting audit quality in different regions.
Moving forward, it is essential for stakeholders—including businesses, auditors, and regulatory bodies—to collaborate closely. It is crucial to note that there are diverse cultures and ways of approaching sustainability in the regions around the world, and uniformly applying sustainability standards predominantly developed by Western countries can be challenging. By sharing an understanding of sustainable practices and improving the consistency of audits, we can ensure that certification schemes support meaningful change in business operations worldwide.
In conclusion, voluntary sustainability certification schemes play a pivotal role in promoting responsible business practices. While there are challenges and areas for improvement, the insights gained from this study provide a strong foundation for enhancing the effectiveness of these schemes. By focusing on education, improving audit processes, and conducting further research, – also in a regulatory and legal context – we can help businesses achieve their sustainability goals and contribute to a more sustainable and equitable world.
Figure 1 Student presentation of project findings at Preferred by Nature offices in Copenhagen. Left to right: Finn Ole-Treusch, Pohsiang Huang, Janet Fraser, Pascal Hofstetter.
About the Authors:
Finn-Ole Treusch is a graduate candidate of the MSc in Industrial Engineering and Management from the University of Hamburg. He is particularly interested in renewable energies, climetech start-ups, sustainable product development and manufacturing and mobility. Alongside his studies he worked in strategy consulting, university research & teaching and metal manufacturing.
Janet Fraser is a graduate candidate of the Master of Business Administration (MBA) programme at the University of Otago in Dunedin, New Zealand. Her career to date includes work as an operations manager in pharmacy and higher education sectors. She is currently taking a career break to finish her degree. Her study interests lie predominantly in sustainability, general business strategy, and human resource management.
Po-Hsiang Huang is a recent graduate of the MSc in Money and Banking at National Chengchi University in Taiwan and was an exchange student at Copenhagen Business School. He is passionate about sustainable finance, climate investment, and climate change mitigation. His career spans market research, business consulting, and asset management.
Pascal Hofstetter is a graduate candidate of the Master of Business Administration degree at the University of Bern, Switzerland. His interests lie in sustainability, business strategies and digitalization. He was an exchange student at Copenhagen Business School is starting a trainee program at a Swiss mobility firm. During his studies he worked for a major industry firm in the topics of process digitalization and product management.
Prof. Kristjan Jespersen is an Associate Professor in Sustainable Innovation and Entrepreneurship at the Copenhagen Business School (CBS). Kristjan is an Associate Professor at the Copenhagen Business School (CBS). As a primary area of focus, he studies the growing development and management of Ecosystem Services in developing countries. Within the field, Kristjan focuses his attention on the institutional legitimacy of such initiatives and the overall compensation tools used to ensure compliance. He has a background in International Relations and Economics.