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 Ltd

26 June 2008

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© NSF-CMi Ltd

26 June 2008

REDUCING THE COSTS OF COMPLIANCE

Is certification necessary?

Role of certification?

Reducing costs of certification

Alternatives to certification?

Costs of compliance

Achieving value

4© NSF-CMi Ltd

26 June 2008

Certification & Assurance

Consumer Assurance

& ProductMarketing

Supply Chain Management

Risk Management

& Brand Protection

Food Safety & Legal

Compliance

CSR & Reputation

Management Business Enhancement

Supporting recognised quality marks and labelling claims; providing consumer assurance on product safety, integrity, authenticity, methods of production

Provides business focus for delivery of assurance and aids redeployment of company resources

Scheme architecture – admin, assessors, IT – provides vehicle for improved communication and management of supply chain

Enhanced ability to monitor, analyse and pre-empt new risks or areas of consumer concern. Support for Global brands

Documented systems and procedures supporting product quality and consistency

Development of food safety standards targeting supply chain safety and legality

THE ROLE OF CERTIFICATION

Product Quality & Consistency

Incorporation of environmental,

social and economic criteria to help demonstrate

corporate responsibility

5© NSF-CMi Ltd

26 June 2008

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.

CONSUMER ASPIRATIONS

6© NSF-CMi Ltd

26 June 2008

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

CURRENT SITUATION

7© NSF-CMi Ltd

26 June 2008

COMPONENTS OF CERTIFICATION

Standard Owner

Standards & Protocols

Accreditation

Certification

Assessment

Production

Components of accredited certification and sources of cost

8© NSF-CMi Ltd

26 June 2008

Assessment

Local assessors Risk-based approach to

sampling and assessment frequency

Practical interpretation of standards

Added-value activity to defray costs?

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

Certification

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

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

REDUCING COST : ENHANCING VALUE

9© NSF-CMi Ltd

26 June 2008

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© NSF-CMi Ltd

26 June 2008

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© NSF-CMi Ltd

26 June 2008

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

“Thank You”

David RichardsonManaging DirectorInternational, Certification and Risk ServicesNSF-CMiLong Hanborough, Oxford, England, OX29 8SJ David.richardson@cmi-certification.comwww.nsf-cmi.com