1. Certification in Developing Countries – Reducing Costs, Enhancing Value and Options for Compliance Presentation to Standards and Technical Development Facility - 26 June 2008 David Richardson Managing Director – International, Certification and Risk Services 26 June 2008

2. © NSF-CMi Ltd 26 June 2008 1 NSF-CMi OVERVIEW n NSF International is an independent, non-governmental organization n Vertically integrated, food and agriculture services n Specialist activities include: Food and agriculture certification Organic certification Supply chain management Consulting & technical services Risk services Training nNSF-CMi – major provider of fresh produce certification nLargest certifier of GlobalGap – c.20,000 producers nTesco Natures Choice scheme registrar and sole certifier – c.17,000 producers

3. © NSF-CMi Ltd 26 June 2008 2 REDUCING THE COSTS OF COMPLIANCE Is certification necessary? Role of certification? Reducing costs of certification Alternatives to certification? Costs of compliance Achieving value

4. © NSF-CMi Ltd 26 June 2008 3 Certification & Assurance Consumer Assurance & Product Marketing Supply Chain Management Risk Management & Brand Protection Food Safety & Legal Compliance CSR & Reputation Management Business Enhancement Supporting recognised quality marks and labelling claims; providing consumer assurance on product safety, integrity, authenticity, methods of production Provides business focus for delivery of assurance and aids redeployment of company resources Scheme architecture – admin, assessors, IT – provides vehicle for improved communication and management of supply chain Enhanced ability to monitor, analyse and pre-empt new risks or areas of consumer concern. Support for Global brands Documented systems and procedures supporting product quality and consistency Development of food safety standards targeting supply chain safety and legality THE ROLE OF CERTIFICATION Product Quality & Consistency Incorporation of environmental, social and economic criteria to help demonstrate corporate responsibility

5. © NSF-CMi Ltd 26 June 2008 4 Ethics Environment Animal welfare Mislabelling Unnatural production Healthy nutrition Food safety A model used by a leading UK food retailer Source: Lang, T. & Heasman, M. 2004. Food Wars. The Global Battle for Mouths, Minds and Markets. Earthscan, London. CONSUMER ASPIRATIONS

6. © NSF-CMi Ltd 26 June 2008 5 nRetailers require food safety, due diligence and assurance on consumer concerns nThis position is driven by legislation, Government policy, NGO pressure, brand protection/shareholder value concerns, media attention and consumer concerns nCertification has developed as a systematic approach to supplier conformity assessment nCertification favours large-scale producers in relatively developed countries. nCertification may disadvantage small-scale producers: Scope and content of standards Certification fees may be relatively expensive Compliance costs may be prohibitive CURRENT SITUATION

7. © NSF-CMi Ltd 26 June 2008 6 COMPONENTS OF CERTIFICATION Standard Owner Standards & Protocols Accreditation Certification Assessment Production Components of accredited certification and sources of cost

8. © NSF-CMi Ltd 26 June 2008 7 Assessment nLocal assessors nRisk-based approach to sampling and assessment frequency nPractical interpretation of standards nAdded-value activity to defray costs? nScale of operation to defray accreditation costs and business overheads nOptimum level of competition nAbility to offer multiple certification scopes nCredibility with end-users delivers VFM Certification Standards nScope – what issues should be addressed? nContent – science and evidence based; avoid gold plating nDrive for harmonisation introducing irrelevant criteria? nStandard setting and benchmarking: Competition drives innovation Independent benchmarking gives credibility, delivers consistency and reduces duplication Standards nScope – what issues should be addressed? nContent – science and evidence based; avoid gold plating nDrive for harmonisation introducing irrelevant criteria? nStandard setting and benchmarking: Competition drives innovation Independent benchmarking gives credibility, delivers consistency and reduces duplication REDUCING COST : ENHANCING VALUE

9. © NSF-CMi Ltd 26 June 2008 8 ALTERNATIVE SOLUTIONS Rather than continue to drive complex standards and a certification based approach into emerging farmers, is there an alternative? A new model is needed which: nAddresses the specific needs of the retail supply chain – and delivers equivalent assurance outcomes to a certification based system but: Targets the areas of greatest risk Is proportionate to the magnitude of risk Creates a framework for facilitating ongoing compliance in a supportive environment Draws on other compliance supporting activities Is practical and affordable for small-scale producers

10. © NSF-CMi Ltd 26 June 2008 9 RISK BASED APPROACH nStandards - are activity specific and intervention based with compliance criteria linked to specific risk avoidance nRisk based surveillance - producers segmented according to exposure to risk. Assessment resources and costs targeted accordingly nRisk assessment – evaluation of sources of risk and measurement of assurance outcomes: Index of compliance measures assurance outcomes in disparate systems Risk reports identify and prioritise where producers can achieve the greatest risk improvement for investment Compliance costs focused on areas with greatest potential for risk reduction nCompliance strategy – optimum combination of: Assessment to drive compliance Training & education to facilitate continuous improvement nCoregulation – utilisation of both public and private sector mechanisms to enhance compliance

11. © NSF-CMi Ltd 26 June 2008 10 SUMMARY nPrivate standards continue to evolve in response to changing assurance priorities nCertification is a means of assessing and demonstrating compliance in their supply chains and transferring compliance costs nIndustry standards have reduced multiple assessments but: They cannot cater for all purchasers requirements As global standards become larger and more complex fragmentation may occur nCertification and compliance costs may be relatively high for emerging farmers but some cost is in meeting purchasers requirements is inevitable nA more risk-based approach to measuring compliance in emerging farmers could yield benefits but needs to: Deliver equivalent assurance outcomes to certification Be equally scaleable and efficient to operate

12. Thank You David Richardson Managing Director International, Certification and Risk Services NSF-CMi Long Hanborough, Oxford, England, OX29 8SJ David.richardson@cmi-certification.com www.nsf-cmi.com