Presentation: The Role of Accreditation In Accessing the Global Organic Marketplace | 2003

International Organic Accreditation Service
118 1/2 1st Avenue, South Jamestown, ND 59401
Phone: 701 252 4070   Fax: 701 252 4124 E Mail: intlorg@daktel.com
May 16, 2003

My presentation will focus on the growing number of Third World smallholders who produce organic food, the certifiers who verify their compliance with organic standards and requirements for certification, the importance of accreditation in helping these smallholders gain access to global markets, the financial challenges they face, and the help that they need.

My comments are offered from the perspective of a nonprofit organization with more than 10 years of experience accrediting certification organizations throughout the world. This experience has made us increasingly aware of the financial barriers to accreditation for Third World certifiers who provide verification services to hundreds of thousands of small farmers who produce organic food but lack global market access.

It is important to note that certifiers verify the performance of organic farmers and processors and accreditors verify the performance of the certifiers. The authorities that issue import licenses and, in effect, are the gatekeepers to global markets do not send out their own inspectors or evaluators. They base their decisions, for the most part, on the performance of this global verification system.

Both the supply and demand for organic food continue to expand globally and growth since the late 1980s has been approximately 20 percent per year. Europe, Japan, and the U.S. provide large and rapidly expanding markets and consumers willing to support organic farmers by paying premium prices for organically grown products. This trend is especially helpful for small farmers since organic farming requires more extensive management and, in Third World countries in particular, it involves the production of high value crops.

Third World producers are in a strong position to capture these premiums. Food processors everywhere must increasingly rely on high value ingredients, such as spices and herbs and natural flavorings that are grown only in tropical countries. Third World countries are the primary source for well-off importing countries of coffee and tea, of culinary and medicinal herbs, and of off-season fruits and vegetables. New gourmet markets also provide growing demand for imported exotic fruits. All are produced organically by smallholders.

I know from my own work in accreditation and as an international consultant that every country now has an organic movement. In the less developed countries, organic farmers sell primarily into export markets. Many small certifiers in the Third World are struggling for recognition and support. If they had more resources and other assistance, they could help large numbers of smallholders access these markets and increase their incomes.

It was estimated at a recent international smallholder workshop that 350 organic grower groups exist in less developed countries and that as many as 150,000 smallholders have gained access to organic export markets. The range of problems discussed at the workshop strongly suggest that many more smallholders could access these markets if they were certified by accredited certification bodies.

We have 30 certification bodies in our program, including many of the world’s largest as well as several in the Third World that are very small and struggling. These certification bodies operate in more than 75 countries, including most of the countries in Asia and Latin America, and we estimate that they certify roughly 60 percent of all the organic food moving in global trade. Twenty-four of these certifiers are fully accredited and six others are going through the accreditation process.

It is important to emphasize that certification bodies, no matter how large or how small, must go through the same rigorous evaluation process and comply with the same requirements for accreditation. There is no second tier in our accreditation system, all of our accredited certifiers play by the same rules, and our level of confidence in the performance of the smallest is as high as it is for the largest. We do not accept the suggestion, often made, that small Third World certifiers are any less professional or any less diligent.

It is significant that several Third World certifiers, including small ones from Bolivia and Brazil and Thailand, are part of a new multilateral agreement signed by 23 of our accredited certifiers. What this says, in effect, is that they recognize each other and trust the quality of each other’s work. This eliminates expensive and burdensome paperwork required when one certifier accepts the work of another. The largest and most prominent in the North, as a result, fully recognize the work of the smallest in the South.

The organic verification system is changing in the Third world. Large certification organizations from Europe and the U.S. initially provided the certification services for small Third World farmers. They still send in their own inspectors as part of the effort to certify production of food controlled, for the most part, by traders and other outsiders. In too many cases, however, these certifiers do not connect with, or help develop, local organic movements.

A much greater effort is underway now to develop local certification capacity. Decentralized country-specific certification allows much more adaptation to local conditions and provides local employment. It is much more economical way to reduce the globalization of organic inspection and certification and the inherent danger of bio-colonialism. If these small certifiers lack full access to export markets, the larger organic operations in these countries will use the international certifiers and leave the smaller farmers to the local certifier. This, in turn, makes it more difficult for the local certifier to afford the accreditation needed. The result is a vicious circle that can be broken only if these small certifiers can be accredited so they are on an equal footing with international certifiers in gaining access to global markets.

I have examined the winter 2003 summary of your contracts to see the kinds of projects you have underway. I was pleased to see references to small farmers and entrepreneurs, indigenous organizations and associations, specialty coffee production, eco-certification and other certification initiatives, and nontraditional exports. But in searching through 67 impressive projects, plus a list of indefinite quantity contracts, I was a little disappointed to find only two references to sustainable agriculture and not a single mention of organic farming or certification or accreditation.

I’m sure this says much more about USAID, which funds most of these projects, than it says about the work you do. The fact that Gunnar and I have been invited to serve on this panel suggests you may want to do more in this area. I hope one result will be more support for projects that recognize organic farming as a viable economic development opportunity and as a way to support smallholders and alleviate rural poverty in developing countries.

I would like to turn now to special efforts by IFOAM, the IOAS, and the organic sector overall to help Third World certifiers become accredited and gain access to global markets. This may help illustrate the kinds of help that is needed.

One effort is smallholder group certification, which involves development of internal control systems that greatly reduce inspection costs and individual recordkeeping requirements. Instead of dealing with each tiny smallholder, the certifier attests to the integrity of the control system for groups of smallholders. The other important change is adoption of organic standards for gathering of wild products. We are able to evaluate certifier performance in both of these areas.

Another contribution to the development of organic farming in the Third World is important consulting and financial and other assistance provided by the Swedish International Development Cooperation Agency and other European aid agencies. All of the small certifiers we now accredit in the Third World have been established with this kind of help. It is our hope that the World Bank, USAID, and others that have public resources and development responsibility will recognize this need to help build local organic inspection and certification capacity.

But assistance in helping Third World certifiers get established, as important as it is, is not enough. These small certifiers also require help achieving, and keeping, the accreditation status they need to ensure global market access for the smallholders they serve. Further, the accreditation status that we provide now, and that is working for them, may no longer be enough. Developing country certifiers now face requirements for new and separate government accreditations to gain access to U.S. and Japanese markets. There may be more as more governments establish organic programs. These government accreditations involve additional evaluations and site visits that for many Third World certifiers will not be affordable.

So what has the organic movement itself done to help? A special fund administered by FOAM has provided funding to developing country certifiers to help pay the translation costs involved in becoming accredited. This fund also underwrites the expenses of Third World members of the IOAS board and our accreditation committee and helps guarantee full participation in our decision making.

Our fee schedule also includes a graduated scale that, to a limited extent, also provides some help by taking size and ability to pay into consideration. The average annual cost for the largest certifier in our system during the three non-evaluation years is $18,549, for example, compared with $4,602 for the smallest. But this represents 11 percent of the annual turnover of the smallest compared with less than one percent for the largest. The cost of the evaluation process required to maintain accreditation status, and which must be repeated every four years, was 29 percent of this small certifier’s annual turnover and, again, less than one percent of the turnover of the largest certifier.

Overall the average cost of an evaluation for a developing country certifier was 17.4 percent of annual turnover compared with only 1.7 percent for those in developed countries. Finally we also require annual surveillance of every accredited certifier, which requires an annual report and a visit.   Developing country certifiers paid an average of 14.3 percent of their annual turnover for annual surveillance, compared with 1.3 percent for those in developed countries. It is clear that the cost of getting accredited, as well as the annual cost of maintaining accreditation status, is an almost impossible financial burden for the small certifiers involved.

So why doesn’t the IOAS do more to even out, or to reduce, the cost of accreditation for developing country certifiers? The main reason is that we operate as a fee for service nonprofit organization. We adjust our fees periodically to cover costs and to attempt to come out even at the end of each year. Our fees would be higher except for the fact that, unlike most accreditation entities, all of the work done by our board and accreditation committee is pro bono.

When I agreed to be on this panel, I agreed to discuss what is needed to help developing country certifiers gain the accreditation they need to enable the smallholders they serve to gain access to global markets. I have touched on several things but want to be more specific.

First, we need your help in finding resources to help pay the initial costs of accreditation for qualified Third World certifiers and, equally important, to help underwrite the costs of their first four-year accreditation cycle. In addition to helping them remain financially viable during this initial period, this would help them build their farmer base to the point where they would no longer need this kind of help. Having one financially viable accredited certifier in each developing country would be sufficient to enable thousands of small organic farmers in that country to access the global marketplace.

Second, we need your help in convincing the World Bank, country-specific development agencies like USAID, and others that provide development funding to support this effort. It is important to convince them that the market for organically-grown food is expanding rapidly in developed countries and that consumers in these markets are more than willing to pay a premium for organically-grown food. But they cannot do this unless this food produced by developing country smallholders is certified by an accredited entity so it can be imported and made available in local markets.

Finally, we would urge you to build organic farming development components into your projects. This is, as mentioned earlier, necessary to help provide access for smallholders to global organic markets. But equally important, for the long term, it will help build more smallholder capacity to serve domestic organic markets that are emerging, slowly but surely, in most countries. And to profit from premiums and to begin to gain additional income from well-off consumers at home as well.

The organic industry provides an unusual opportunity to increase food security, alleviate poverty in rural areas, and enhance sustainable economic growth in developing countries. And, in harmony with your goals at Chemonics International, it also will make an important contribution to broad and encompassing approaches that help people live healthier, more productive, and more independent lives.