In the olden days, those who ruled were also judges, and extreme inequality was a natural state of society. Separating those two powers and creating an independent judicial system is a prerequisite for democracy. In business, a similar type of institution came into being in the 20th century, not only to limit corporations’ greed but also to ensure the balance of power between the State and the market was always respected: the regulator, or the judge of good market behavior.
But when it comes to soft law, regulators have no power or interest to intervene. Markets organize voluntary codes to showcase the quality or the sustainability of a product. In some instances, international organizations set standards and issue certifications like the well known ISO 9001. In others, smaller scale groups develop references around features such as ethical sourcing of natural resources. One such example is the Fairtrade certificate.
Fairtrade has been in existence since 20 years. Developed as an independent label, it illustrates this necessary balance between food companies on one hand, and consumers and producers on the other. And recently, some of the biggest food retailers decided to ignore it, by creating their own in house standards for the ethical sourcing of their products.
As much as the Fairtrade label may have limitations and issues, this move is a dangerous example of corporations becoming also the judges of their own “good” behavior. In a world where short-termism is still the unfortunate reality for most businesses, questioning, dismissing or ignoring sustainability labels and standards, is a dangerous and backward trend.
Independent standards cost money, and companies engaging in such certifications prove their engagement towards sustainability is credible. Moreover, accepting an independent third party judgment on the product sustainability shows the company has confidence in its products and actions. However imperfect independent certifications are, they are the best guarantee of the transparency and impartiality of businesses. In a world of ever growing multinationals, we need to preserve this balance of power, and keep companies fully accountable.