June 02, 2008
Michael Conroy on Activist Campaigns and the Certification Revolution
by Bill Baue
SocialFunds writer Bill Baue speaks with Michael Conroy about his new book, Branded! How the
“Certification Revolution” is Transforming Global Companies
Certification—-it sounds boring and wonky. But in his new book Branded! How the “Certification Revolution” is
Transforming Global Companies, Michael Conroy tells an exciting story of activists
campaigning against companies--and companies responding! The two sides moved from antagonism to
tense collaboration in the creation of certification schemes that solved activist concerns while
preserving--and often boosting--companies' profitability.
Conroy brings a
hands-on view to the story as a former program officer at the Ford Foundation and Rockefeller Brothers Fund, where he helped fund the activists NGOs
as well as the resulting certification processes. He also serves as chair of TransFair USA, the Fair Trade certifying body in the US.
SocialFunds writer Bill Baue recently spoke with Conroy about the history, present, and
future of the certification revolution.
Bill Baue: What background set the groundwork for
the soil to be seeded for the “certification revolution”?
Michael Conroy: For probably
25 years now, civil society, consumers, and advocacy groups have been encouraging companies to be
more socially and environmentally responsible. But what emerged as a movement called corporate
social responsibility, or CSR, never had much grounding.
BB: You focus on how CSR
transformed from a largely internal development springing from corporations into something where
they are now held accountable from the outside, by external stakeholders.
MC: The big
change has taken place with the emergence of relatively small but very effective advocacy groups
who have discovered the sweet spot in corporations that gives them leverage to encourage--and some
would say force--companies to become more accountable. Groups like Forest Ethics, Rainforest Action Network, and Global Exchange have learned that, as companies add value
to their brands, they become increasingly vulnerable to campaigns that threaten those brands. And
that's the starting point of the certification revolution.
BB: Branded is your
title, and you define “branded” with several different connotations--what are they, and how do they
tie into creating the certification revolution?
MC: Companies’ brands convey something
about the values associated with products, such as higher quality of life. But every dollar
companies spend increasing familiarity with their brands also increases their vulnerability. So
the negative side of branding is association with child labor, environmental disaster, human rights
violations, leading to loss of viability, marketability, and share value.
BB: So companies
become “branded” with a stigma, so to speak.
MC: Exactly. The classic example is the
early campaign against Nike, which in the 1990s was found
to be employing women and children under environmentally horrendous conditions in Southeast Asia.
But CEO Phil Knight simply said, "We're not responsible, we don't own those companies, they're just
contractors, and yeah, we tell them what we want them to do, but we have no influence over them."
In the course of two-and-a-half years--because he wouldn't pay attention to these
challenges to his brand--the company lost almost half of its capitalized value and value of its
brand. It also lost profitability and markets--because people increasingly associated Nike with
child labor and women’s exploitation.
BB: All due to a market campaign--activists
drawing attention to this.
MC: Absolutely. Activists who raised strong enough claims that
the major media did independent investigations verifying those claims.
campaigns are one of three necessary elements driving the certification revolution. What are the
MC: I argue that the certification revolution is a three-legged stool. First,
advocacy campaigns (or market campaigns) make companies aware of their practices. Second, the
creation of certification systems that independently verify company compliance with sets of
standards. And third, an internal champion within the company recognizes that certification not
only protects brands, but also leads to profitability if done right.
BB: You map out three
levels of certification: first-party, second-party, and third-party. Explain them and their
degrees of effectiveness.
MC: First-party certification is what companies have been trying
to do for a long time. They simply say, "Hey, we're good guys. Here's the code of conduct we're
going to follow, and we'll let you know periodically how well we're following that code." Most
consumers, and more importantly, most companies that buy from original producers, no longer
consider this a credible claim. Second-party claims emerged in the 1980s and '90s, where industry
says, "Ok, we've got an image problem, we'll create a set of standards and verify for ourselves and
the members of our industry association and we'll tell consumers, these are good guys."
The best example is how the global chemical industry responded to the Bhopal disaster in
India--when a giant Union Carbide chemical plant blew up in the 1980s--with the Responsible Care
Program. But it was quickly apparent to citizens, consumers, and advocacy groups that this was not
Third-party independent verification or certification systems emerged in the
mid-1990s, where stand-alone groups that have nothing to do with companies negotiate a set of
standards with companies and advocacy groups, and then verify that companies are fulfilling those
standards. And it’s that third-party, independent status that consumers and retailers and
financial markets and insurance companies are now demanding.
BB: And stakeholder input is
the key--in other words, people from outside the company engage with companies to create standards
instead of companies creating the standards themselves.
MC: And it's different from the
outsiders saying, “These are the standards you've got to meet.” What makes certification systems
effective is that companies sit down with advocacy groups and say, "What do you absolutely need?"
And so they hammer out standards in very complex, tough discussions.
Once they agree to
standards, they create a seal of approval or certificate or logo that goes on products that are
verified continually--monitored every year and re-inspected every three to five years. So when
consumers see the logo, they know the product meets a transparent set of standards and has been
BB: Near the end of your book, you talk about perhaps the mother
of all campaigns-against big-box retailers, in particular Wal-Mart. For the sake of
disclosure, I wrote the Wal-Mart Sustainability Report
as an outside contractor and an avowed skeptic of Wal-Mart. What were the successes and
limitations of that campaign?
MC: My chapter on Wal-Mart and big-box retailers is the
longest and most complicated chapter. It documents how a coalition of almost 80 groups around the
country pulled together a single, multi-focused, well-coordinated campaign to get Wal-Mart to
change its practices--from how it treats workers in Chinese factories to how it treats associates
in stores around the country. In October 2005, largely in response to that campaign--just six
months after its launch--CEO Lee Scott came out with his most profound statement on how they were
going to change their practices inside Wal-Mart.
And those practices have become
industry-leading changes in the reduction of energy consumption in their stores and increasing fuel
efficiency in their trucks. What they're finding is that this combined pressure from many groups
makes it more valuable to sell independently verified, certified products--whether it's paper or
food or seafood products. Wal-Mart made one of the biggest commitments ever to Marine Stewardship Council certified fish, saying that by 2010 they
want all of their ocean-caught fish to MSC-certified--and that is transforming almost every fishery
in the world, raising their standards.
However, these campaigns have been least
successful in improving the way Wal-Mart treats its own associates inside its stores. My book
documents many changes in their practices, but they generally haven't been large or widespread
enough to change the general image Wal-Mart has of not treating its workers well.
ultimate irony is that Wal-Mart may, in the end, be capable of incorporating many more of these
certified social and environmental practices into its business--and gain market strength because of
it, despite the hopes of many of the advocacy groups that Wal-Mart might be crippled by having to
meet these standards. It’s accelerating the rate at which Wal-Mart's competitors also enter into
the purchase and resale of certified products, pushing the whole movement forward more rapidly now
than at the time I wrote the book.
BB: Wal-Mart still represents a double-edged sword.
Admittedly, its sustainability practices have a huge impact on moving entire industries. At the
same time, activists continue to question whether the basic business model of Wal-Mart and can ever
truly be sustainable. What's your projection--do you think Wal-Mart is going to transform
everything toward sustainability, or is it going to hit a wall where its business model won't be
able to achieve the biggest changes?
MC: That's a tough question to answer, because we're
in the middle of a very complicated process where Wal-Mart is changing almost daily. Wal-Mart’s
recent announcement committing to selling Fair Trade illustrates not just a double-edged sword but
a multi-edged tool. TransFair USA, whose board I chair, has been working to get Wal-Mart to
introduce more Fair Trade certified products. They experimented with Fair Trade coffee in their
Sam's Clubs, found them very effective, and now they are selling large volumes of Fair Trade coffee
in their stores around the country.
Wal-Mart’s commitment to improve working conditions
and wages and income received by farmers in six countries around the world by purchasing coffee,
chocolate, and other products on Fair Trade terms has strengthened the Fair Trade movement in the
US. At the same time, the coalition of advocacy groups is asking Wal-Mart, "If you can do this for
farmers in Brazil, why can't you do it for workers in this country?”
Whether this will
ultimately transform all of Wal-Mart, which has about 50,000 products in its stores, remains to be
seen. But the thinking within the coalition is that we need to celebrate every little victory in
terms of Wal-Mart becoming more sustainable, and continue to put pressure on it to change even
BB: Stepping back, to what degree does the certification revolution show promise
of transforming our economy toward sustainability?
MC: I envision the possibility of
forest products and the FSC logo becoming in 20 or 30 years the label that everyone looks for and
expects to ensure they didn’t fuel destruction of Indonesian or African or Brazilian rainforests.
Product by product, I think we're going to find labels like this becoming ubiquitous in the market.
They may not necessarily earn a price premium, but unlabeled products will be heavily discounted.
Is this enough to solve all of the social and environmental problems that consumers and
industry encounter? I wouldn't claim that. But what we see, and why I call it a revolution, is
that for the first time in almost a hundred years, citizens are taking back the ability to force
companies to become more socially and environmentally responsible, and particularly accountable.
There are consequences of not meeting the emerging standards--that retailers won't buy your
products, because they run the risk of being attacked because of the social and environmental
characteristics of the supply chain.
You can listen to the complete interview by Corporate Watchdog Radio host Bill Baue with Michael
Conroy at the CWR website.