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CID Graduate Student and Postdoctoral Fellow Working Paper No. 37

May 2009

Standardization, Certification and Labeling: Lessons from Theory and Practice

Kira JM Matus

A publication of CID's Sustainability Science Program.

Abstract

Voluntary regulations have emerged in recent years as a popular way to address environmental problems. In particular, standards, certification and labeling are popular, market-based mechanisms that aim to use the provision of otherwise difficult to obtain information in order to create a market for more environmentally favorable products. The use of standards, certification, and labeling has been growing in a number of areas, as consumers demand more information about the products that they use. From a consumer perspective, they have become increasingly common in relation to information regarding nutrition, safety, and most recently, the environmental impact of a range of products. Understanding both the theory and the reality of these efforts to date are key to developing a deeper understanding of when and how standards, certification and labeling can be used with the greatest positive impact.

Empirical experience has shown that while some programs have been successful, there are many challenges in creating effective certification systems. Like any policy tool, they need to be considered along with other policy options.

In cases where certification systems are used, they need to be designed with care. First, they must address a clear goal, to which the standard, the certification process, and the labels can be clearly linked. Secondly, process, not just the end product, matters. Inclusion of stakeholders, and the institutional arrangements used in the decision making process can have long-lasting impacts on the eventual acceptance and uptake of a standard. Standards need to be based on solid scientific and technical knowledge - they must be salient to the goal, and the underlying knowledge should be credible. Similarly, the certification process must also be credible—it must be able to measure compliance and catch cheating. It must also be seen as legitimate, and free from capture or corruption. And finally, labels must also be credible, relate to the underlying goal, and be effectively targeted and branded. The entire process, at the end, should be able to relate otherwise unknown information to the consumers, in order to influence their purchasing decisions and create a market for the labeled products.

Keywords: Standardization, certification, labeling, voluntary regulation, voluntary standards

JEL codes: Q13, Q27, Q56

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