End Consumers and Business Increase Demand for Certified Products

By Christopher Kapáz and Letícia Figueiredo, with kind acknowledgements to GVces center for Sustainability at FGV-EAESP and P22_0n magazine

‘The transparency society is a society of mistrust (Misstrauen) and suspicion (Verdacht), based on control due to the end of trust. The strong and intense demand for transparency points exactly to the fact that society moral foundation became fragile, and moral values such as sincerity or honesty are increasingly losing their original meaning.’ Excerpt from the book Society of Transparency, by Byung-Hul Han

CSR, leadership, social enterprise, management, philanthropy, diversity, gender equity, healthcare, sustainability, ethics, industrial relations, healthcare, employee wellbeing, Council on Business & Society, Global Voice magazine, ESSEC Business School, ESSEC Asia-Pacific, FGV-EAESP, Trinity College Dublin Business School, Keio Business School, Warwick Business School, School of Management Fudan University, Tom Gamble, Global Voice 11 special issue Responsible Leadership & Sustainable Business Practices, GVces, FGV-EAESPRegarding relationships of conscious consumption, there is a growing uneasiness associated with the path products take to end consumers, the inputs used, forms of labor adopted, among other concerns. Consumers have been playing a new role of questioning and investigating producers and businesses. Producers, on their turn, seek new ways to build trust with those who buy from them. But how can they do it? Certification and traceability are some of the responses.

Among the new conscious consumption habits, we can highlight organic products, which already account for BRL 3 billion per year, and show growth rates of 20% to 30% per year, according to Organis (Brazilian Council of Organic and Sustainable Production). Greeneries, vegetables, fruit and cereals are the most representative products in the sector, still according to Organis.

Thanks to the influence of organized groups in civil society and producers, the consumption of organic products was incorporated into the government agenda. In the municipality of Sao Paulo, for instance, law # 16,140/2015 establishes it is mandatory to serve organic food in the lunch offered at public schools. According to Heloisa Bio Ribeiro, from AAO (Associação de Agricultura Orgânica, Organic Farming Association), the law is the result of a mobilization of the civil society with the Legislative branch. As she explains, the goal is to have 100% meals with organic products by 2026, which will account for 2.5 million meals per day, generating a great positive impact on the health of children and on the market. ‘It is a law that is not associated specifically with a certain mayor, but is rather the result of a historical construction. However, the current administration virtually halted the implementation of the law’, she declares.

CSR, leadership, social enterprise, management, philanthropy, diversity, gender equity, healthcare, sustainability, ethics, industrial relations, healthcare, employee wellbeing, Council on Business & Society, Global Voice magazine, ESSEC Business School, ESSEC Asia-Pacific, FGV-EAESP, Trinity College Dublin Business School, Keio Business School, Warwick Business School, School of Management Fudan University, Tom Gamble, Global Voice 11 special issue Responsible Leadership & Sustainable Business Practices, GVces, FGV-EAESPConsumers visiting the organic product street market in Ibirapuera, Sao Paulo, highlight health and environment as the main drivers for their choices. Lívia Menezes, for instance, points out the growing dissemination of information showing the harm caused by agrochemicals. ‘It is amazing to see many substances forbidden in other countries are still allowed here’, she says. In addition to health issues, Mariana Cüry, who has been going to the street market for five years, mentions as a reason for her choice the way the land is handled, care with the ground, and respect for nature in the production of organic food, but she believes very few people are aware of all that (learn more about what consumers think about labels, below).

The demand for more sustainable products goes beyond organic products, reaching other sectors and affecting the way companies deal with responsibility concerning the origin of the products and the conditions under which they are produced. Businesses that manufacture cosmetics, food products and even clothes are interested in getting certification and traceability in their production chains, seeking for greater control and mitigation of risks. Natura, for instance, which produces and trades cosmetics and personal care products with Brazilian inputs, has its own certification to assure the quality of its final products and proper conditions for producers. ‘We aim at the stability of our supply chain in order to manage risks. With clarity and transparency in our chain, we can verify where the risks of supply and even labor conditions are’, says João Teixeira, Sustainability Senior Coordinator at Natura.

According to him, the company supports smallholders, not only to certify the inputs needed for production, but also to play a role in training, instruction and support to local development projects and infrastructure. Selected producers in the Brazilian Amazon region have been tracked since 2000, with the launch of Natura Ekos line, which uses inputs from socio-biodiversity in the region. According to data published in Natura’s 2017 annual report, 5,296 families have been benefited, and the plan is to reach 10,000 families by 2020. ‘In the beginning, it felt like a kind of ‘toll’, one additional task so they [producers] could meet the company’s requirements. But, as time went by, we were able to show them that caring for the land is important to enable sustainable trade’, tells the Supply Coordinator, André Santos de Freitas, who works in the Relationship and Socio-biodiversity Supply Management department, at Natura, Belem (State of Para) and conducts audits in the region. For him, in addition to certification being beneficial to consumers, it strengthens the relationship with producers and encourages them to search for higher levels of quality. ‘Currently, producers acknowledge they are capable of transacting with other businesses.’

CSR, leadership, social enterprise, management, philanthropy, diversity, gender equity, healthcare, sustainability, ethics, industrial relations, healthcare, employee wellbeing, Council on Business & Society, Global Voice magazine, ESSEC Business School, ESSEC Asia-Pacific, FGV-EAESP, Trinity College Dublin Business School, Keio Business School, Warwick Business School, School of Management Fudan University, Tom Gamble, Global Voice 11 special issue Responsible Leadership & Sustainable Business Practices, GVces, FGV-EAESPAnother example is Nespresso, who is part of Nestlé Group portfolio and trades espresso coffee machines and capsules. The brand decided to create its own verification process, after having determined there was no system that met the company’s quality requirements. According to Guilherme Amado, current Green Coffee Project Manager at Nespresso, the priority is to combine coffee quality assurance with encouraging of best social and environmental practices. That is why, according to him, the AAA Sustainable Quality Program (Triple A) was created, including audits and technical visits to verify coffee production. They assess environmental aspects (such as the water used), social and labor, economic and operational aspects (such as productivity), among others. ‘Traceability tells the story about the life of a product’, he says.

In 2016, 2,563 farms were assessed by the program, according to Nestlé Report in the Society. The manager also points out that, using traceability, it is possible to see the entire chain and offer guarantees to consumers, who are increasingly more demanding. The producers’ certification process started in 2009 as a demand from consumers. In addition to that, Amado sees the certification as a tool to improve management, as it promotes a closer relationship with producers, and increases productivity and quality.

CSR, leadership, social enterprise, management, philanthropy, diversity, gender equity, healthcare, sustainability, ethics, industrial relations, healthcare, employee wellbeing, Council on Business & Society, Global Voice magazine, ESSEC Business School, ESSEC Asia-Pacific, FGV-EAESP, Trinity College Dublin Business School, Keio Business School, Warwick Business School, School of Management Fudan University, Tom Gamble, Global Voice 11 special issue Responsible Leadership & Sustainable Business Practices, GVces, FGV-EAESPNew consumer demands can also be noticed in the fashion industry. ‘The connection between individual choices and the collective impact they cause, whether social or environmental impacts, is increasingly visible’, says Dariele Santos, founder of Alinha Institute. Mrs. Santos had the chance to get to know the reality and poor labor conditions in textile factories in Sao Paulo and felt the need to change that situation. For that purpose, she created the institute, in order to improve labor conditions and the life of seamsters and seamstresses in small textile factories.

Alinha Institute is a social business that operates in the city of Sao Paulo, offering free consultancy services to factories so they can deploy fair labor conditions. In addition to that, she acts as a link between the factories and the brands interested in paying fair prices and setting feasible deadlines. Brands, on their turn, fund the Institute when they purchase plans to have access to the Institute factories database and the Alinha label to affix to their products, as a way to assure provenance to end consumers.

How to fight distrust

Behind the search for labels, there is a deeper issue: fight distrust. People need guarantees to believe what is offered. According to the Irish philosopher Onora O’Neill, author of TED Talk What we don’t understand about trust, ‘in Western culture, and particularly since the communication revolution, we have lots of examples of behaviors that were not trustworthy, and hence more regulation, more accountability and more complexity were introduced’.

A survey conducted in 2014 by the World Values Survey shows Brazilians are one of the most distrustful people in the world, ranking in position 55 among 60 countries surveyed. When asked about the options to either trust most people or to be very careful about them, only 7.1% of Brazilians chose the first option.

A poll conducted by Latinobarómetro in 2017 corroborates that information, showing that, out of all Latin American countries, Brazil has the lowest trusting rate, with 7% of Brazilians trusting most people. The ranking contrasts with the fact that, according to the World Values Survey, 93.2% of Brazilians see themselves as generally trustworthy. The question is: how much guarantee is enough to build consumers’ trust? In interviews conducted by our team with people who either consume or not organic food or other products with social and environmental labels, we could notice there are different levels of trust. As O’Neill points out, ‘in real life, we place trust in a differentiated way’. There are people who simply trust what others say, and there are people who will not even trust regulations and accountability records.

CSR, leadership, social enterprise, management, philanthropy, diversity, gender equity, healthcare, sustainability, ethics, industrial relations, healthcare, employee wellbeing, Council on Business & Society, Global Voice magazine, ESSEC Business School, ESSEC Asia-Pacific, FGV-EAESP, Trinity College Dublin Business School, Keio Business School, Warwick Business School, School of Management Fudan University, Tom Gamble, Global Voice 11 special issue Responsible Leadership & Sustainable Business Practices, GVces, FGV-EAESPIn the first group, we can find Mariana Cüry, the consumer visiting the organic street market in Ibirapuera, mentioned in the beginning of this article. She knows every stand and just about all products offered, and the presence of a label does not make any difference in her purchase decisions. She believes merchants are telling the truth. Another group of consumers is formed by those who seek the label as a guarantee. Maria Eduarda Loureiro is one of those people. She says she only consumes organic products in the supermarket, and her choice is guided by whether there is a ‘Produto Organico Brasil’ (Brazil Organic Product) label.

According to research conducted by Organis in 2017, in nine Brazilian capitals, only 8% of consumers find out the product is organic because of the label, whereas 37% read the information contained on the package, and 27% at the point-of-sale. For 86% of the respondents, the ‘Produto Organico Brasil’ label is more trustworthy than any other source of information about organic products.

Producers also find the presence of the certificate important to build trust. The President of Rural Farmers Association in Campo Limpo (Aprocamp), Valdir Ataíde Mateus, tells that losing the label for organic production in the outskirts of Para State, due to a change in the way the audit was conducted, was a great discontentment to all associates. ‘We are still growing organic products, but how can we prove our jambu herb is organic if we do not have a label? It is like being a driver and not having the driver’s license!’ Thus, by losing the label, the trust relationship with consumers was affected.

CSR, leadership, social enterprise, management, philanthropy, diversity, gender equity, healthcare, sustainability, ethics, industrial relations, healthcare, employee wellbeing, Council on Business & Society, Global Voice magazine, ESSEC Business School, ESSEC Asia-Pacific, FGV-EAESP, Trinity College Dublin Business School, Keio Business School, Warwick Business School, School of Management Fudan University, Tom Gamble, Global Voice 11 special issue Responsible Leadership & Sustainable Business Practices, GVces, FGV-EAESPAnd the remaining group consists of those who do not trust even the labels. Márcio Hamashira, who has been attending organic products street markets for three years, is one of them. ‘I particularly do not believe it is organic’, he says. According to him, that distrust is explained by ‘the Brazilian people, who usually wants to take advantage of others’. He suspects businesses use agrochemicals but advertise their products as organic. According to Lívia Menezes, distrust about everything is a problem in Brazil today. ‘We do not trust anything anymore, we do not trust institutions, we do not trust politicians, we do not trust people.’

Consumer Sérgio Pileggi has another point of view. In his opinion, the fact there are many social and environmental certification labels confuses consumers, so they do not know in which label they should trust. But he agrees there is a general distrust in people and processes. According to him, scandals such as the one known as ‘Weak Flesh’ meat fraud contribute to that distrust, because they reinforce the idea that processes in Brazil are subject to fraud. Hamashira agrees and points out: ‘We are not free of a ‘Weak Organic’ fraud. I do not believe human beings who are issuing the certification’, he declares.

In order to minimize distrust, blockchain can be a solution. Through this technology, consumers can track the entire production chain. André Salem, a blockchain expert, refers to Walmart as an example. In partnership with IBM, Walmart is applying a QR Code to its products. This allows consumers to scan the bar code using their smartphones and view the entire production chain of the product.

Using the bitcoin for sustainable business practicesThe software company Provenance is also promoting a similar initiative. Consumers go to the company website, enter an identification number found on the product and can access a history that Provenance offers in partnership with producers who adopted blockchain. Among the information consumers can access, are the production date and location, as well as the amount produced.

Innovation provided by blockchain has great potential to be seen as beneficial. The research conducted by the World Values Survey shows that 70.9% of Brazilians think the technological development would generally bring benefits to their routines. That number is higher than countries like the United States (48.9%), Argentina (47.1%), Chile (50%), South Africa (46.9%) and Sweden (46.3%). However, the application of blockchain divides the consumers’ opinions. Consumer Lívia Menezes, for instance, says she would be very interested in knowing the origin of the products she buys through a QR Code or website. ‘When we have an application [that traces back the origin of the products], it offers more security, definitely’, she says.

Maria Eduarda points out that having access to the origin of the products would be very welcome, but questions whether consumers would be really interested in that type of technology. She suggests information provided to consumers should not be in a written document format, but rather a video or image, which usually builds more trust. Menezes says that ‘if it is something practical, people would appreciate it’. As for Hamashira, he disagrees with both of them. He questions if the price of certified products, such as organic food, which is high, wouldn’t get even higher, and if it wouldn’t encourage corruption.

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