Philip Schleifer, Matteo Fiorini and Graeme Auld
Pretty much every product one buys these days includes some form of label noting an ethical or environmental claim. The coffee you might buy, for instance, may carry a fairtrade label, or the label of the Rainforest Alliance, or a company’s own label, all of which are trying to tell you that you can rest assured that your coffee was grown and processed in a responsible way. Peruse any store shelf and you will see many ethical or eco-labels for an array of products – seafood, jewelry, paper, furniture, cosmetics, and more.
Given their ubiquity, one might assume these are all government run. Some are. Organics, for instance. But just as many, or more, of these labels are backed by environmental groups, companies, or multiple stakeholders working collaboratively. They are also often international programs that try to establish common standards of ethical or environmental performance for globally traded goods, at times when governments have been unable or unwilling to do anything to address potential issues of concern.
This might seem promising. Here is a story of the market providing information to consumers about things they might care about, letting the consumer choose a product with an ethical profile aligned with their values.
However, deeper issues are at play, one of which centers on questions of accountability when rules are being set by organizations that are distant and detached from citizens. Since citizens are unable to hold these private regulators to account via mechanisms such as elections, there is a view that transparency can help. If the organizations setting the standards for an eco or ethical label is highly transparent – providing information about how the standards are made and how they are enforced – then perhaps these labeling initiatives will be responsive to citizen concerns through pressure, shaming and self-reflection.
As much as this may be the case, up until very recently it has been hard to check these claims. Why? Well, information on the transparency of private regulators was simply not available. We do know a lot about certain organizations. The Forest Stewardship Council, the Marine Stewardship Council, the Global Reporting Initiative, as a few examples. But little was known about the whole group of organizations that are now trying to set and enforce ethical and environmental standards for numerous products traded in global markets.
To begin to offer some answers to these questions, in a recent study, we analyzed a group of 113 programs to assess how transparent they are in their decision-making, standard setting, verification, and dispute settlement processes. We also tried to understand why some programs were much more transparent than others.
We found that programs, on the whole, are not that transparent. Programs tended to prefer shallow forms of transparency – like disclosing who is involved in decision-making – rather than deep forms of transparency – like disclosing the meeting minutes of decision-making.
Some programs do embrace deep transparency. Why might this be? We looked at several features of the programs and the context in which they operate for clues. The key findings were than government involvement and participation in the ISEAL Alliance (a membership organization aiming to strength sustainability standards) were associated with deeper forms of transparency. On the other hand, programs that face more crowded markets (defined by product and geography) are less likely to be as transparent. On average, the involvement of non-governmental organization was not associated with a program embracing deeper forms of transparency.
Our work thus casts some doubt on the possibility that accountability is being accomplished through transparency for most programs we studied. Transparency is also considered a key ingredient for those who think of private regulation as experiments from which we can learn lessons for broader regulatory efforts. If insights about successes, failures, and ongoing program operations are not being disclosed, such learning processes seem less likely to occur. And for those in the business of studying regulations, we suggest that we need to be aware that studies of the most transparent programs out there are not likely to generalize.