The benefits and shortcomings of labelling agricultural products

Stakeholders wishing to support farmers in developing countries often regard voluntary labels as a relatively easy and efficient way of improving smallholder farmers’ working and living conditions. These labels certify the farmers’ compliance with certain social, economic, and environmental standards and promise broader benefits to society such as fair trade, environmental protection, and enhanced transparency for importers and consumers.

However, certification comes at a cost. The significant investments in the farms which are required to meet the standards, plus the initial cost of certification and annual renewal fees, can represent a considerable burden for smallholder farmers given their low financial capacity. The different schemes vary in terms of benefits and shortcomings, so it is important to compare their pros and cons before committing to a specific label. Stakeholders advising the farmers must carefully weigh the certification benefits against the risk of the farmers not being able to recover the costs. 

The SSNUP programme finances various certification projects. On 30 November 2021, ADA organised a workshop with SSNUP stakeholders to explain the benefits and shortcomings of different types of certification schemes and to discuss how to maximise the benefits for smallholder farmers:

Benefits

• Enhanced visibility
• Greater reactivity to market demand
• Potential increase in sales price
• Improved image attracts more investors
• Improved working conditions, sustainability, fair trade (depending on the label)
• Certification premiums can be invested in other community projects
   

Shortcomings

• Important investments in farms required 
• Initial and renewal fees 
• Annual investments to maintain certification
• Insufficient demand for certified products, sales not guaranteed
• Farmers risk not recovering the certification costs 
• Farmers risk relying on permanent subsidies or having to work off the farm to cover the certification cost

Profitability is key for keeping a label

While smallholder farmers need support to cover the initial certification cost, the decision to continue to pay for a label should depend on tangible benefits. If a specific label does not boost sales enough to cover the certification cost, farmers need support in finding alternatives. 

While the SSNUP programme will fund the initial costs, the farmers need to be financially autonomous in the medium term. To this end, it is important for stakeholders advising the farmers to be aware of the different available labels and of their respective benefits and shortcomings.

In the long term, stakeholders should also advocate for an increase in cost transparency of the labelling schemes and for a greater role for the farmers in their governance. 

See the full workshop results