Recently I’ve been thinking a lot about ethical accreditations and their role in helping to define what is or isn't a social enterprise.
This thinking was triggered at first by Conscious Consumers, an excellent app/platform that allows everyday consumers to find (currently hospitality) businesses near them based on their ethical performance. It works by prompting you on sign up to choose the issues that you care about and add the bank cards you use for everyday payments, and these aggregated preferences are used to influence the practices of the places where we spend. The businesses themselves get ‘badges’ for meeting certain criteria relative to the same issues you can say you care about – and these badges are what are searchable in the first place. These badges often relate to third party accreditations (such as CarboNZero, or Child Labour Free certified).
This approach of leveraging existing accreditations is, I believe, robust. As an advocate for collective impact approaches I’m all for teamwork and collaboration. Bundling several accreditations together in this way makes it easier for people who care about things to contribute in more ways than they know, which represents an important and invisible antidote to the single-issue approaches of many ‘everyday’ activists.
Sign up for Conscious Consumers here.
The challenge with accreditations in general, though, is that not all accreditations are created equal. And not all who are ‘qualified’ for an accreditation will necessarily want or need it. Let’s explore these ideas.
All illustration of the reason for accreditations:
A short story. In New Zealand, cows reared for their beef are predominantly fed grass. In the United States, the equivalent cattle are predominantly fed grains or corn for a number of reasons which are mostly economic. A comparatively small proportion of farmers in the US continue to grass feed their cattle despite the greater time and financial investments this requires, and the difference in the diet of these two types of cattle has an impact on the real cost, nutrient composition, taste, and perceived quality of the beef. In order for farmers of grass-fed beef to survive economically there was a need to distinguish between the two different types (and prices) of beef. Grass-fed Beef was born. Fast forward to today, and you can buy Grass-fed Beef from your favourite corner store and expect a certain quality, but get home and find yourself eating something quite different. As it happens there isn’t really a definition of what Grass-fed Beefactually means, and anyone can claim it. If a cow has eaten some grass at some point in its life can theoretically be called grass-fed, and that’s exactly how thousands of suppliers of grain-fed cows continue to market their beef.
In response to this, the term Grass-fed and finished Beef was started which, aside from making no sense as a standalone term, eventually morphed into an accreditation overseen by the US Department of Agriculture. This is a third-party accreditation (USDA being the third party, the farmer and consumer being the first and second) that verifies that the cow has only eaten grass or grass-based feed for its entire life after it stopped drinking its mother’s milk. The standard also states that the cow must “have continuous access to pasture during the growing season”.
This approach is typical in many areas. All around the world, anywhere that people are trying to do something good, there are examples like these of people leveraging language and terminology for their own gain, often at the cost of a misled consumer. “Green Washing” or “Social Washing” are some of the terms for these types of behaviours. The role of third-party accreditations is to prevent exactly this from happening, and this function is necessary in many areas of society. The value that such accreditations uphold and enable are the foundation for a large portion of the good that happens in the world, and these mechanisms continue to shine the light on corruption and deceptive practices around the world. But, it’s not that simple.
Not all third-party accreditations are created equal:
In 2013 the world’s attention was for a moment drawn to Bangladesh by the structural failure and collapse of a building called Rana Plaza, which housed a garment-factory, apartments, a bank and some shops. The search for survivors in the 5-stories of wreckage lasted for 3 weeks, with approximately 2,500 injured people rescued and a final death toll of 1,134. It is considered the deadliest structural failure accident in modern human history, and therefore also the deadliest garment-factory accident in history.
The immediate background of the building’s collapse was that cracks were discovered in the building, and the building’s owners ignored warnings to avoid using it and ordered garment workers to return to work the following day. So while the bank, shops, and apartments self-evacuated, garment workers dutifully returned to work and the building collapsed during the morning rush-hour that day.
The Rana Plaza collapse tells a story about the fashion industry, or, fast fashion to be more specific. Fast fashion as a consumer concept is the notion of being able to buy the latest trends in clothing at an affordable price as soon as they are fashionable. It is built on a supply chain optimised for rapid mass-production at very low cost, which does things like forcing workers to show up and put in huge hours for little to no pay in dodgy buildings in emerging economies. They are able to do this because of weak or absent local labour laws, and/or corruption on the ground that erodes similar safety mechanisms.
In response to the challenges of fast fashion, Baptist World Aid Australia decided to implement a third-party accreditation system to audit the supply chains of the fashion industry and publish the results in what is now called the Ethical Fashion Report (and the searchable Ethical Fashion Guide). This report is intended to inform consumer behaviour, and includes global giants like Farmers (D-) and Nike (B-) as well as NZ’s own Icebreaker (A+) and more. The website states:
“The grades awarded in this report are a measure of the efforts undertaken by each company to mitigate the risks of forced labour, child labour and worker exploitation throughout their supply chains. Higher grades correspond to companies with a labour rights management system that, if implemented well, should reduce the risk and extent of worker exploitation in the production of that company’s products.”
This is, without a doubt, a good thing.
However. When we think about terms like "efforts undertaken…to mitigate" and "if implemented well, should reduce" it becomes clear that the system is one of aspiration and intent rather than action. There is also no mention of any of the environmental impacts of the fashion industry, which are beyond significant. Proving intent is a different thing than proving action, and one of them takes a whole lot less effort than the other. It’s like the difference between telling a prospective employer "I don’t take drugs" and letting them have the results of a series of drug tests. They're just different things.
The approach taken for the Ethical Fashion Report is similar to that of many third-party accreditations and systems. The whole purpose and idea is to influence the behaviours of those being certified, so you get them to commit in principle to some things, then tell their customers about it and watch their sales of the 'more ethical thing' increase. This is, in essence, also how Conscious Consumers works. This theoretically creates a positive feedback loop that then reinforces further desirable behaviours. This is a good thing. The B Corporation Impact Assessment takes it a step further by gradually lifting the bars, forcing improvements even without the positive feedback look.
This approach is robust in terms of supporting organisations on a journey towards better social and environmental practices, but it also has some unintended consequences. In the case of the Ethical Fashion Report, a casual stroll through social media at it’s annual release shows that many people interpret an A+ grade to be the gold standard of ethics (rather than an A+ Grade at committing in principle to doing things better in most ways) and continue their regular consumption of fast fashion - the very thing that needs to change. Meanwhile, others try to tear the whole report apart on the basis that it doesn’t actually necessarily prove that anything has even changed for better. In either case, the actual impact in the real world is often smaller than people reasonably interpret or assume, but the conditions are shifted to hopefully gradually improve things over time. Hopefully and gradually being the operative words.
The hard reality is that there are very few examples of large organisations undergoing significant supply chain transformations as a result of these consumer-led effort. It leaves me believing that this approach of incentivising behaviours through accreditations, whilst a valuable part of the web of things, is not the only or even the best way forward on its own.
Let’s consider instead another approach, like that of fair trade. The fair trade movement has its roots in the fair treatment of farmers and farmer-level growers or producers of goods. Early fair trade organisations worked in partnership with small-scale farmers and producers to ensure that they were adequately looked after. Fast forward several decades and we have the 10 Principles of Fair Trade for how trading relationships at any level should work, which serve as the connective tissue across all aspects of the fair trade movement.
In simple terms, there are two major accreditations for Fair Trade. At one end we have the Fair Trade Mark, issued by Fairtrade International. This green, blue, and black label can be applied to consumer products that have fair trade ingredients in place of those that are traditionally exploitative. Most people will be familiar with this mark relating to coffee, cocoa, sugar, and cotton, and it is used in many other areas also. Most often when we see this mark on a consumer product like a chocolate bar it represents a small slice of the organisation’s actions, but is often interpreted as the gold standard for ethical products. Sound familiar?
At the other end of the spectrum we have the World Fair Trade Organisation (WFTO), and their WFTO Product Label which is granted to organisations whose entire supply chain and core intent adheres to the 10 Principles of Fair Trade. This requires an organisation to be fully committed to fair trade so is, understandably, an exclusive club. The WFTO Product Label can be applied to any product sold by accredited organisations, as well as the organisation itself.
Both fair trade approaches deliver the exact on-the-ground results that are often missed in the type of approach explored earlier, and work to directly address the types of problems that Rana Plaza brought to our attention. Within the global fair trade movement there is some contention about which approach is ‘better’: work with global giants to improve their supply chain practices from the inside out; or; support and grow a new breed of organisation committed fully to fair trade principles. We’re yet to really know.
Fair trade also falls prey to unintended consequences though. When large-scale purchasers can’t afford or otherwise don’t want to pay the rates they need to from (either form of) fair trade accredited suppliers, they simply use the mark without permission, or go off and create their own accreditation, sometimes with sufficient scale to become the ‘dominant’ framework globally. Historically there have been many ‘brands’ of ‘fair trade accreditation’ in the world - each playing by their own set of rules and diluting the power of fair trade or muddying the water in some way. ‘Fairwashing’ sits right alongside ‘green washing’ and ‘social washing’ in the corruption playground. This shows that accreditations designed to keep an eye on an organisation’s actions also fail to ensure that good is actually happening.
There is enough confusion within and about fair trade that consumers can find themselves having to investigate whether something is actually fair trade or not, or compare the value and efficacy of the various accreditations to find which one is ‘better’. To be honest, whilst writing this blog I misinterpreted how it all works three times, and had to have a phone call with the World Fair Trade Organisation so that I could understand and accurately present the succinct history and where things are at today. This confusion immediately drops us into the same problem area we see on social media at the launch of each Ethical Fashion Report. It fuels more confusion, polarised opinions, and disengagement, and as a result, less good happens.
All that said, a 'poor' fair trade standard is still better than something not fair trade. Buy Fair Trade at any available chance.
Where does this leave us?
If keeping watch on the intent of organisations doesn’t seem to work fully, and independent third-parties keeping watch on what happens on the ground can’t seem to work fully, where does this leave us? This is the answer that many people are looking for around the world, and there are a series of conversations in this realm in New Zealand.
In New Zealand we can 'accredit' an organisation as only having ‘good intent’ by registering as Charitable, but there’s no way of ensuring integrity or alignment of their actions and the impacts they have in the world (beyond legal compliance). That’s why we have e.g. excellent environmental movements that burn people out; and, incredible social justice movements that still use polystyrene cups. Many of our charities in New Zealand are simply eating each other’s tails while our pressing social and environmental challenges continue to grow. (That doesn't mean 'stop supporting charities' - keep going, but keep your eye on the bigger goals.)
All of this leaves me convinced that accrediting just the intent of an organisation simply isn’t enough either. We need to be finding a way to intelligently blend frameworks that oversee an organisation’s intent alongside its actual practices and impacts.
As it happens, this is where the B Corp accreditation started.
B Corps say that “B Corp is to business what Fair Trade certification is to coffee or USDA Organic certification is to milk”. The B Corp approach is a wide-reaching audit (mostly self-review and providing evidence to the third party) that looks at both an organisation’s intent and its actions through four difference lenses: governance, workers, community, and environment. Organisations get points based on their performance in each area and need a total of 80 points out of a possible 200 to get the accreditation. Most organisations can only get about 30 points on their first attempt, and the best in the world have around 170.
This approach is robust and all-encompassing, and the growing global network brings its own economic incentives - B Corps always try to buy from other B Corps, and many ethical consumers do the same. The major downside is that for most organisations it requires a lot of work to actually achieve the accreditation, requiring an organisation to really want to do good - it’s preaching to the choir in some respects. (This is parallel with the WFTO Product Mark, which requires the organisation to already be converted to the ideals in order to get the accreditation.) Again, a great thing and I continue to encourage organisations to go on the B Corp journey, but I believe that B Corp is simply another really valuable piece of the puzzle that helps move the needle on existing organisations. It’s not the blueprint or the DNA of organisations of the future.
Buy from B Corps over non-B Corps.
To my mind, an approach that is similar to B Corp and feels right, but something that requires less of the external accreditation and is more about the identity of the thing – like WFTO. I’m thinking about the difference between an Olympic Javelin thrower and a hunter-gatherer getting a running animal from a distance with a spear – one feels a bit more real than the other to me.
Is it Social Enterprise?
The concept of a social enterprise is a financially self-sustaining organisation that has a ‘pure’ intent, and delivers on the intent with actions that have wide-reaching integrity. In many ways it's just going back to what business used to be, and it's how pretty much every Māori organisation has always been. If you're still not sure what social enterprise is you can read more here. This concept includes organisations like Trade Aid – a WFTO certified fair trade organisation who purchases products from suppliers around the world and sells them wholesale and retail in New Zealand. They have Charitable status in New Zealand and are industry leading on things like worker rights and waste minimisation. Or Kilmarnock Enterprises who provide meaningful employment and training opportunities for school leavers with intellectual disabilities, whilst enabling their customers (large groups like Air NZ and Fonterra) to realise operational efficiencies and waste reduction. Or Little Yellow Bird, the ethical uniforms and clothing manufacturer, and B Corp, who built an ethical supply chain from the bottom up explicitly to be the opposite of the fast fashion monoliths discussed earlier.
Te ao Māori is full of amazing social enterprises that many New Zealanders don't even know exist. Iwi enterprises whole existence is often based on an assumption of kaitiaki (guardianship for the sky, the sea, and the land) and approaching social aspirations through the lens of seven generations. Kono is an artisan producer and exporter of award-winning wine, cider, seafood, fruit and natural fruit bars based in Mārahau on the south edge of the Abel Tasman National Park. Proudly Māori, their commitment to social and environmental outcomes is fundamental to their business, waxing lyrical on their website:
"At Kono, we have embarked on a journey of deep introspection to determine what being a good kaitiaki really means to us. We are guided by Te Pae Tawhiti – a 500 year plan for success. A compass that ensures we do what is right for people and place, and that manifests itself through ambitious intergenerational outcomes, core to which is our environment. To prosper, our environment must be well and healthy, full of life and vitality."
Meanwhile in the Hawkes Bay, Patu Aotearoa was started with the aspiration of decreasing inactivity rates (often leading to obesity related illness) of New Zealanders, in particular Māori and Pacific Islanders. This personal training business and self-described "positive gang" is fighting a war against such health issues and is, in the process, delivering better mental health and employment outcomes than many programmes designed specifically for those purposes. It’s not just what they do, it’s who they are.
These types of organisations utilise accreditations in various ways, e.g. Little Yellow Bird is a B Corp that purchases from (legit) Fair Trade and (legit) Organic certified suppliers, as well as completing regular (friendly) site visits to their production facilities and expensive testing of their materials to ensure efficacy. Kono have a whole page of their website dedicated to their sustainability credentials and practices. Unlike Kilmarnock and Trade Aid though, Kono doesn’t have Charitable status in NZ and doesn’t ever intend to get it because it would add no value to their organisation or its operations. Nor do Patu or Little Yellow Bird. The point here is that accreditations are used by social enterprises to help them achieve what they are trying to achieve - rather than to prove that they are trustworthy.
This notion of accreditations being in service of the value-add is something worth considering. Let’s say I run a small organisation and pay all staff $25/hr and higher. Technically, I’d be a living wage employer – as all staff are paid more than the $20.55/hr living wage – but I can’t in good conscious claim that without paying for the third party accreditation. I’ve seen this exact case in one of the Social Enterprise Development courses I teach – a passionate successful social enterprise leader agonising over not having the living wage accreditation because she couldn’t justify, from a business perspective, the cost of the third-party accreditation. Plus she already knew she was doing it. With her impact areas being Waste and Education it made no business sense to get the accreditation, even though she more than earned it.
This happens all the time for social enterprises as often they start at a layer of ethical performance much higher than most accreditations. They either get missed out entirely - Little Yellow Bird isn’t in the Ethical Fashion Report, despite having a more ethical supply chain than many of the companies being promoted with the highest-grade - or they can’t afford/justify paying a third-party to publicly validate something that is fundamental to their organisation.
I believe that social enterprises, when done with the depth of integrity as these examples, provide the most compelling case for how to do good well. The challenge is ‘proving’ the integrity, and it feels like third-party accreditations – which are based on an assumption that an organisation can’t be trusted – are not the way to do it.
All of this is my way of saying: we have lots of accreditations that are imperfect but mostly do a pretty good job of doing what they say on the tin. We should keep using them, keep improving them, and keep getting more people involved in conversations about how to make good happen. But something has to change.
In present-day New Zealand there is a conversation happening about the need for a new legal form for social enterprises. There are several valid reasons for this, which I won’t go into here (but can if anyone requests), and I agree that something has to change at some point.
A legal form is, essentially, a third-party accreditation. We leverage labour and tax laws, abide to certain standards of behaviours, and provide evidence of practices to a third party - central government. When we break the rules we get shut down i.e. we lose the accreditation.
I believe that New Zealand has the opportunity to do something different with the way that we ‘accredit’ social enterprises in New Zealand and that a new solution tested and proven in New Zealand could make significant global contributions once applied in other areas of the world. An effective accreditation needs to assess or otherwise demonstrate an organisation's intent in tandem with their actions, and it should be designed to help them do this wherever possible and require no extra work whenever possible.
Demonstrating Good Intent
To receive Charitable Status in New Zealand the benefit (AKA the impact, the good) of the organisation must align with “the relief of poverty, the advancement of education or religion, or any other matter beneficial to the community”. The benefit must be realised in New Zealand, and Environmental movements always have to frame their work relative to the benefit for people – which makes sense to some people and not to others.
Using this framework as the catch all definition of ‘good intent’ is, I believe, the wrong approach for social enterprise. Most of the pressing challenges we face globally don’t respect national boundaries, so why should the solutions have to? From a tax perspective, sure, maybe we only give tax breaks to things that realise benefits in New Zealand, but don’t define ‘social enterprise’ with that same rule. Taking the catch all 'any other matter beneficial to the community' is far too vague to take outside of a New Zealand context, so we either have to change the Charities Act (which is currently under discussion) or use a broader global framework.
I prefer the alternative, using a broader global framework or set of frameworks that are more closely tuned to the needs of the world than Charities Services are. A quick scan of the world reveals that the catch all framework is the UN Sustainable Development Goals, or SDGs.
The SDGs provide a set of language, targets, and measures that outline the most important actions to achieve a society that meets the needs of current populations without compromising our ability to meet the needs of future populations. Those of us who work closely with the SDGs recognise quite quickly that alignment with them in concept is easy, but in practice is harder. There are a small handful of indicators for each target, and they tend to be best suited as a single performance measure for a government department than a smaller local or even national organisation. What is needed is a more comprehensive set of indicators (things like percentage of people aged x-y living in ABC conditions, or, rate of change of species X population over Y time frame) that connect conceptually and academically to the real world that we live in, as well as the high level aspirations captured in the SDGs.
For that reason, I recommend that aligning with UN instruments and frameworks that sit one tier below the SDGs is the best starting point – especially given that NZ has ratified most of them already. Every goal has a global community of practitioners, funders, governments, and thinkers working towards it through a series of supporting frameworks and knowledge sets. I was personally involved (through the Sendai Framework for Disaster Risk Reduction 2015-2030) with contributions to what is now SDG 13 , specifically Target 13.1 and indicators 13.1.2 and 13.1.3. Within those few sentences sit entire industries that, without common understanding and guiding language, have historically languished in competitive and fractured communities of practice that fail to adapt and grow, and fail to meet the needs of the communities they serve. The Sendai Framework, which sits below and relates to the SDGs, is the guiding document for all Civil Defence and Emergency Management in New Zealand and many countries around the world. There are also a large number of charities in New Zealand (like NZ Red Cross) who actively work towards this framework.
Moving forward beyond 2030 (the 'end' of the SDGs life), the approach to the UN global agenda will, I believe, shift to being based more on real-time data and emerging and changing needs. It seems unlikely that, understanding the increasingly rapid societal changes and technological improvements emerging, we would commit to an inflexible 15-year framework again. It seems entirely more likely and prudent to opt for something that evolves and improves every 1, 2, or 5 years.
New Zealand would be well-placed to prototype an organisational form (not necessarily a new one) whose approach to governance anticipates and even leads this change in the global agenda. This way of doing things could also trial and ultimately prove, in concept, how organisations can be aligned in intent with global ideals, and led in practice by data on real-world need. It's less of an organisational form, and more of an organisational operating system. Feel free to re-read that last paragraph again.
Recognising and working with this existing ecosystem of thought and action, as well as the momentum of change in this area, quite simply seems to be the most sensible approach for social enterprise in New Zealand. It's never been done before, and given that Christchurch now sells itself as The City of Opportunity and New Zealand is well recognised as the prototype nation, perhaps we have the best conditions in the world to do this.
Demonstrating Good Actions
There are a number of existing third-party accreditations that every organisation in New Zealand already has to subscribe to, and we call them laws.
Currently, it would be very uncommon for a charity to think about laws and codes that don't relate to them. Consider seeing, say, NZ Red Cross making public comment about the Building Code. It would seem a bit odd to most people. At the same time, we have organisations like the Superhome Movement championing changes to the Building Code that would very much contribute to NZ Red Cross's mission of "improv[ing] the lives of vulnerable people by mobilising the power of humanity and enhancing community resilience". When we talk about vulnerable people in New Zealand, you can't go far without talking about the quality of our housing.
Imagine if every family with refugee experience that NZ Red Cross supports to resettle in NZ was moving into a home that not only met (the minimum standard set by) the Building Code, but a home deemed to be adequate, safe and affordable. This could be achieve by having not just a minimum standard, but an expected standard, set out in the Building Code. This is the same as the difference between a minimum wage and a living wage. One of them is known to be adequate for supporting quality of life, and the other isn't.
Having 'minimum' and 'expected' standards across the plethora of existing legal frameworks and requirements of organisations in New Zealand would not be an enormous undertaking. I suspect many of them have already be identified in concept.
Demonstrating good actions within a social enterprise could be explored relating to existing third-party accreditations, as well as self-imposed higher performance measures on things like wages and compliance to codes. All that is needed is transparency, which is already a requirement in many places at many times. As it happens, Transparency is also one of the driving characteristics of the social enterprise movement globally and domestically - so that should be an easy sell.
What started for me as a casual exploration of how to do accreditations better has uncovered what I see as a compelling direction for the emerging social enterprise ecosystem in New Zealand, coupled with a strong message to not create a new legal form for social enterprise yet. These thoughts and more form the basis of a book that I am writing in service of those trying to do good in contemporary New Zealand, and I'm actively looking for support (thinking and funding) to contribute to this independent 'pracademic' body of work.
I'm seeking peers and colleagues to discuss and debate the merits of these ideas, and would welcome comments, discussion, and criticisms of this thinking. If the thinking is found to be sound, I will undertake work in this direction with the organisations I already govern, lead, and advise, and integrate the thinking into the social enterprise programmes I teach.
I'll close by reiterating the valuable role that existing accreditations continue to play in NZ and the world, encouraging their use despite imperfections, and encouraging the ongoing use of our existing and imperfect organisational legal forms also.