3rd Party Certifications have emerged as an essential way for manufacturers and suppliers to communicate claims related to ESG and sustainability to their end customers. It’s time the process around 3rd Party Certifications came to be treated with a level of rigor reflecting its importance.
Whether it’s a consumer looking for a cleaning product, food item, or cosmetic; or a manufacturer looking to select a sustainable source for a specific raw material, chances are 3rd Party Certifications are part of the decision making process. 3rd Party Certifications have become critical within the go-to-market approach for companies across industries and up and down the supply chain.
Today there are hundreds of 3rd Party Certifications globally related to a wide variety of issues. Some certifications are more consumer-focused, and often come with the right to use an icon on packaging or advertising. Others are more supplier focused, may be handled by auditors, and are sometimes lumped into the category of supplier sustainability applications.
As companies’ reliance on these 3rd Party Certifications has increased, so too has the complexity of managing the mountains of data and documents that go into each certification process. In fact, in many ways it looks similar to a government regulatory submission process. But most companies manage their 3rd Party Certifications in Excel and shared folders, with little of the rigor such business-critical elements deserve.
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In this post we’ll take a look at how 3rd Party Certifications have risen to such prominence in ESG and sustainability claims, where the complexity lies, and how companies can rethink their internal processes and systems to streamline and add more structure to this important process.
The Scope of 3rd Party Certifications
3rd Party Certifications related to ESG and sustainability fall into three general categories: environmental, fair trade/ethical labor, and animal welfare. Within these three categories there are quite literally hundreds of certifications to choose from.
Some are globally recognized such as Cruelty Free International’s Leaping Bunny or the Forest Stewardship Council, some are regional or national such as the EU Ecolabel, and many are very specific to an ESG or sustainability issue. If you’re looking for sustainable alpaca clothing for instance, look no further than Responsible Alpaca Standard Certified.
On the consumer side, it’s quite common for a single product to have several 3rd Party Certifications on the package, and perhaps many more on the website.
Prevalence of 3rd Party Certifications in ESG/Sustainability
There are several reasons for this reliance on 3rd Party Certifications to represent ESG and sustainability claims.
First, consumers have been burned in the past by companies making their own sustainability claims and to some extent are justifiably suspicious of claims or certifications made by a manufacturer today. Recall recent examples of Keurig’s recyclability claims on their coffee pods, or Innocent Drinks (a certified B-Corp owned by Coca-Cola) and the hot water they got in with the UK Advertising Standards Authority with ads that seemed to claim their smoothies helped the environment despite being sold in plastic bottles. More generally one can look at the tremendous increase in the number of class action lawsuits related to ESG claims against Food and CPG companies in the United States - increasing by a factor of 10 since 2017 based on Perkins Coie’s Food and Consumer Packaged Goods Litigation - 2021 Year in Review.
Second, and a close corollary to the first, companies and suppliers are deathly afraid of any hint of impropriety around ESG or sustainability claims and the potential for greenwashing accusations that may result. For them, a 3rd Party Certification offers an arm’s length, objective lens that reduces some of this risk.
Finally, although regulation is increasing, there are very few government standards for these sorts of claims - prominent 3rd Party Certification bodies are filling this vacuum and offering standards across industries.
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Certification Complexity and How Companies Can Address It
Given the importance of these 3rd Party Certifications to consumers, manufacturers, and suppliers, as well as the serious consequences related to reputation for errors or omissions related to ESG and sustainability, it’s not surprising that the process for certification tends to be very thorough and complex. The term “standards” is typically used to describe the requirements for certification - many certifying bodies work with iSeal to determine appropriate standards for their specific certification.
The 3rd Party Certification process often requires some or all of the following:
- Product data, including detailed formulation and ingredient information as well as product performance and efficacy test results as appropriate.
- Attestations and other documentation from manufacturers as well as from suppliers and distributors.
- Manufacturing details by facility with various product breakdowns, often accompanied by in-person facility/farm visits or audits.
- Images of packaging and other marketing materials using 3rd Party Certification icons.
- Many require all of this to be compiled by an independent and approved auditor.
Two Principles to Help Manage 3rd Party Certifications Complexity
- A Single Source of Truth
If the certification process were one and done, never to be revisited, a lack of rigor and traceability might not be a big problem. However, the truth of the matter is these certifications require constant updates as inputs such as suppliers or formulas change, periodic recertification, and are almost always subject to audit on short notice. Taking a lesson from regulatory dossier creation and maintenance would be a good idea here - concepts such as expected documents, timelines, reassessments, and versioning are all relevant. Maintaining a single source of truth for data and documents related to the certification is critically important, as is a clear audit trail and versioning capability.
- Visibility into Permitted and Actual Usage
Another area of complexity, particularly for certifications for consumer focused products where an icon signifying certification may be used on packaging or advertising, is where the certification icon is permitted to be used based on the terms and conditions in the agreement, and where the certification icon is actually in use. There’s a very important distinction here between permitted use, and actual use.
- Permitted usage should be clearly articulated in the agreement with the certifying organization and should cover marketing channels permitted (packaging, advertising, website, etc) as well as how usage is permitted within a manufacturer's product hierarchy. Is usage permitted only at the corporate level, for specific brands, or even specific products? As an example, the Leaping Bunny certification is generally used at the corporate or brand level, while the Green Seal certification tends to be product specific. It’s important to have a single source of truth for permitted usage of a certification tied to your product hierarchy - this should be visible and accessible to all marketers who may be interested in using certifications within your company.
- Actual usage is slightly different. Just because a 3rd Party Certification is permitted to be used for a brand or product doesn’t mean that it actually is used. A company may choose not to use a certification, even if permitted, for a variety of reasons. This could be for the purpose of differentiating brands or products within a portfolio. It could also be due to differing degrees to which various brands or products are consistent with the terms and spirit of the certification. Better not to use a certification than to risk greenwashing accusations. Downstream traceability to the specific marketing materials, advertising, or packaging that use a certification will help ensure appropriate usage, and will make it easy to remove or change usage if necessary.
3rd Party Certifications are a critical component of ESG and sustainability communications today. This is true for both finished goods manufacturers as well as suppliers of ingredients and raw materials. These 3rd Party Certifications have proliferated in recent years to the point where a company may be managing as many dossiers and submissions to third party certification bodies as they do to government regulators. It’s time 3rd Party Certifications are treated with an appropriate level of rigor.
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