Certification in Developing Countries – Reducing Costs, Enhancing Value and Options for Compliance

1. Certification in Developing Countries – Reducing Costs, Enhancing Value and Options for Compliance Presentation to Standards and Technical Development Facility - 26 June 2008 David RichardsonManaging Director – International, Certification and Risk Services 26 June 2008

2. NSF-CMi OVERVIEW NSF International is an independent, non-governmental organization Vertically integrated, food and agriculture services Specialist activities include: Food and agriculture certification Organic certification Supply chain management Consulting & technical services Risk services Training • NSF-CMi – major provider of fresh produce certification • Largest certifier of GlobalGap – c.20,000 producers • Tesco Nature’s Choice scheme registrar and sole certifier – c.17,000 producers

3. REDUCING THE COSTS OF COMPLIANCE Is certification necessary? Role of certification? Costs of compliance Reducing costs of certification Achieving value Alternatives to certification?

4. THE ROLE OF CERTIFICATION Development of food safety standards targeting supply chain safety and legality Supporting recognised quality marks and labelling claims; providing consumer assurance on product safety, integrity, authenticity, methods of production Documented systems and procedures supporting product quality and consistency Food Safety & Legal Compliance Product Quality & Consistency Consumer Assurance & Product Marketing Incorporation of environmental, social and economic criteria to help demonstrate corporate responsibility Provides business focus for delivery of assurance and aids redeployment of company resources Certification & Assurance CSR & Reputation Management Business Enhancement Risk Management & Brand Protection Supply Chain Management Enhanced ability to monitor, analyse and pre-empt new risks or areas of consumer concern. Support for Global brands Scheme architecture – admin, assessors, IT – provides vehicle for improved communication and management of supply chain

5. CONSUMER ASPIRATIONS Ethics Environment Animal welfare Mislabelling Unnatural production Healthy nutrition Food safety A model used by a leading UK food retailer Source: Lang, T. & Heasman, M. 2004. ‘Food Wars. The Global Battle for Mouths, Minds and Markets.’ Earthscan, London.

6. CURRENT SITUATION • Retailers require food safety, due diligence and assurance on consumer concerns • This position is driven by legislation, Government policy, NGO pressure, brand protection/shareholder value concerns, media attention and consumer concerns • Certification has developed as a systematic approach to supplier conformity assessment • Certification favours large-scale producers in relatively developed countries. • Certification may disadvantage small-scale producers: • Scope and content of standards • Certification fees may be relatively expensive • Compliance costs may be prohibitive

7. COMPONENTS OF CERTIFICATION Components of accredited certification and sources of cost Standard Owner Accreditation Standards & Protocols Certification Assessment Production

8. REDUCING COST : ENHANCING VALUE Certification • Scale of operation to defray accreditation costs and business overheads • Optimum level of competition • Ability to offer multiple certification scopes • Credibility with end-users delivers VFM Assessment Standards Standards • Scope – what issues should be addressed? • Content – science and evidence based; avoid “gold plating” • Drive for harmonisation introducing irrelevant criteria? • Standard setting and benchmarking: • Competition drives innovation • Independent benchmarking gives credibility, delivers consistency and reduces duplication • Scope – what issues should be addressed? • Content – science and evidence based; avoid “gold plating” • Drive for harmonisation introducing irrelevant criteria? • Standard setting and benchmarking: • Competition drives innovation • Independent benchmarking gives credibility, delivers consistency and reduces duplication • Local assessors • Risk-based approach to sampling and assessment frequency • Practical interpretation of standards • Added-value activity to defray costs?

9. ALTERNATIVE SOLUTIONS Rather than continue to drive complex standards and a certification based approach into emerging farmers, is there an alternative? A new model is needed which: • Addresses the specific needs of the retail supply chain – and delivers equivalent assurance outcomes to a certification based system but: • Targets the areas of greatest risk • Is proportionate to the magnitude of risk • Creates a framework for facilitating ongoing compliance in a supportive environment • Draws on other compliance supporting activities • Is practical and affordable for small-scale producers

10. RISK BASED APPROACH • Standards - are activity specific and intervention based with compliance criteria linked to specific risk avoidance • Risk based surveillance - producers segmented according to exposure to risk. Assessment resources and costs targeted accordingly • Risk assessment – evaluation of sources of risk and measurement of assurance outcomes: • Index of compliance measures assurance outcomes in disparate systems • Risk reports identify and prioritise where producers can achieve the greatest risk improvement for investment • Compliance costs focused on areas with greatest potential for risk reduction • Compliance strategy – optimum combination of: • Assessment to drive compliance • Training & education to facilitate continuous improvement • Coregulation – utilisation of both public and private sector mechanisms to enhance compliance

11. SUMMARY • Private standards continue to evolve in response to changing assurance priorities • Certification is a means of assessing and demonstrating compliance in their supply chains and transferring compliance costs • Industry standards have reduced multiple assessments but: • They cannot cater for all purchasers’ requirements • As global standards become larger and more complex fragmentation may occur • Certification and compliance costs may be relatively high for emerging farmers but some cost is in meeting purchasers’ requirements is inevitable • A more risk-based approach to measuring compliance in emerging farmers could yield benefits but needs to: • Deliver equivalent assurance outcomes to certification • Be equally scaleable and efficient to operate

12. “Thank You” David Richardson Managing Director International, Certification and Risk Services NSF-CMi Long Hanborough, Oxford, England, OX29 8SJ David.richardson@cmi-certification.com www.nsf-cmi.com