Companies taking over government's product-regulation role

A growing number of private organizations is putting stamps of approval on the products we buy, writes Don Pittis. Is this system more effective than government regulation?

As governments regulate less, private companies are filling the gaps

Tom Minor, of Minor Fisheries, returns to Port Colborne with more than two tonnes of Lake Erie yellow perch. The family is among a group that hopes to get Marine Stewardship Council certification for Lake Erie pickerel and yellow perch by July of next year. (Don Pittis/CBC)

Would Canada's northern cod fishery have been saved from collapse if it had been regulated by a private company instead of the government?

"I think that if the cod had been certified under the MSC program back in the late ’80s and early 1990s, given the evidence that was mounting at the time, the MSC process would have probably pulled the certificate for the northern cod long before the collapse actually occurred," says fish biologist Kevin Reid.

MSC stands for Marine Stewardship Council, one of a growing number of non-government verification bodies that put their stamp of approval on the products we buy.

There are hundreds of them. And unless you spend time doing a bit of research, the only time you might notice them is a little logo on a box of crackers or package of frozen fish.

Kevin Reid has been learning a lot about MSC lately. As staff biologist at the Ontario Commercial Fisheries' Association, the world's largest freshwater fishery, he's hoping to get his first MSC approval – for Lake Erie pickerel and yellow perch – by July of next year.

The business of certification

"It’s a multibillion-dollar industry," says Peter Vandergeest, a geography professor at York University who studies the global network of ecological certification systems.

Peter Vandergeest is a geography professor at Toronto's York University who studies the growing global network of ecological certification systems. (York University)

As governments regulate less, increasingly standards are being set not in Ottawa or provincial capitals, but by what are effectively global private businesses. And the change is not without controversy, says Vandergeest.

"What used to be a government role, you are now handing over to a private entity. [People are asking], how democratic is that?"

Vandergeest says it was forestry that really got the industry started. It grew out of fears that humans were cutting many of the world's forests into virtual extinction and governments were just letting it happen. In a response, a group of committed environmentalists created the Forest Stewardship Council, the model for all the similar groups that have come since.

Unlike some conservation groups, the FSC was not opposed to all logging.

Instead, it gave itself the task of creating a list of standards that would assure that forests could keep on producing wood forever. Forestry operations that could prove they were following those standards got the FSC label. The process was called "certification." Using an advertising campaign, the council encouraged concerned consumers to only buy certified lumber.

The MSC certification process, it's an expensive process. And that isn't just a one-time cost. Certifications have to be done every five years.- Kevin Reid, Ontario Commercial Fisheries' Association

Part of the success of the system is that rather than try to do all the work itself, the FSC just sets the rules for how the standards must be followed, and then leaves the inspections and auditing to the private sector.

"The structure is that you have your standards-holding body, the sort of accrediting organizations," says Vandergeest. "And then you have this multibillion-dollar industry where you have companies and NGOs that actually do the assessing and the auditing and so on.

"All that is expensive," he says. "And typically, it is the producer that pays." 

At the Ontario Commercial Fisheries' Association, Kevin Reid knows all about the cost.

"The MSC certification process, it's an expensive process," says Reid. “And that isn't just a one-time cost. Certifications have to be done every five years."

It was so costly that when they first considered it a few years ago, members of the Ontario Commercial Fisheries' Association balked at the idea. But Reid says it was market pressure that changed their minds.

Who carries the cost of certification?

Industry-led certification programs include Fair Trade International for farm products (top), the Forest Stewardship Council which promotes responsible forest management (middle) and the Marine Stewardship Council which encourages sustainable fishing practices. Their logos can be seen on certified products.

"The fact is that we've had to share the cost among all the processor members of our association in order to accomplish this," he says. "The effects on their profitability are not known at this time. They can only speculate to the benefits of [certification]. But I think the main concern is losing access to markets because of not having the MSC certification in place."

In the world of certifications, the Marine Stewardship Council carries a lot of clout. But there are many more such organizations. Organics is huge. Certification for being free of genetically modified organisms is growing. There is Fairtrade. There is one for palm oil, one (or more) for each of jewellery, labour, gluten free, biomass, sugar, water and travel.

And that only scratches the surface.

"This stuff is proliferating," says Vandergeest.

The question you might ask yourself is, How can consumers keep track of it all?

The answer is that everyone doesn't have to. And that's where the retailers come in.

By stocking certified products, companies like Sobey's, Loblaws and Walmart build their brand value. Take Walmart: Rather than having a reputation for poor labour relations, it becomes known as a chain that for five years has only stocked MSC fish.

The other advantage for retailers is that it helps them avoid what Vandergeest calls "reputational risk."

"What they're really concerned about is that Greenpeace or some other muck-raking NGO is going to find out some scandal about how their products are being produced," says Vandergeest. He says that's exactly what happened when the Bangladesh factory collapsed and Loblaws branded goods were found inside.

In the growing economic study of certification, Vandergeest says this is called "outsourcing reputational risk."

A third generation of Minors, the family that owns Minor Fisheries, works on the boats on Lake Erie. They supply the family's restaurant and fish store, and hope that a certification by the Marine Stewardship Council will help keep the industry healthy. (Don Pittis/CBC)

"For example, if McDonald’s is selling a fisheries product and the stock collapses and it becomes a scandal, if it's certified, they can turn around and say, 'We did what we could do,'" Vandergeest says.

As usual, deconstructing economic motivations can often make a project based on good intentions sound purely mercenary. Within the Canadian certification sector, people told me that the Weston family, which owns Loblaws, have shown a personal commitment to the process.

One of the companies helping to pay for the certification in Lake Erie fishery is owned by the Minor family, who catch their own fish and sell almost all of it in their own Port Colborne restaurant and store. 

Tom Minor runs the fishing business that his father started. A third generation works the nets.

"I hope it lasts forever," he says. "You know, you don't want it to ever go like the dinosaur."

About the Author

Don Pittis

Business columnist

Don Pittis was a forest firefighter and a ranger in Canada's High Arctic islands. After moving into journalism, he was principal business reporter for Radio Television Hong Kong before the handover to China. He has produced and reported for the CBC in Saskatchewan and Toronto and the BBC in London. He is currently senior producer at CBC's business unit.


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