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ISEAL Emerging Initiatives Models of Governance July 2007

MODULE

4

2 ISEAL Emerging Initiatives – Module 4: Models of Governance

The Emerging Initiatives program of the ISEAL

Alliance provides an opportunity for social and

environmental standards and conformity

assessment organisations to build on existing

knowledge and experiences. By learning from

others, emerging initiatives will be in a better

position to establish credible and effective

programs. Credible programs are more likely to be

taken seriously by stakeholders, recognised and

supported by governments and industry, and have

real impacts on the ground.

ISEAL Emerging Initiatives - Module 4: Models of Governance

Authors:

Patrick Mallet, Technical Director, ISEAL Alliance,

[email protected]

Matthew Wenban-Smith, Director, OneWorldStandards,

[email protected],

www.oneworldstandards.com

2007 ISEAL Alliance. All Rights Reserved. Original content

may be reproduced with permission from ISEAL Alliance at the

below address.

Photograph Credits:

Catalina Aneca: 4

Didier Gentilhomme / Fairtrade Labelling Organizations

International: Cover (top left), 30

ISEAL Alliance: Cover (top right), 26

Juan Carlos Reyes / Forest Stewardship Council: Cover

(bottom left), 5

J White / Marine Stewardship Council: Cover (bottom right), 7

Unit 1, Huguenot Place

17a Heneage Street

London E1 5LJ

United Kingdom

t/ f: +44 (0)20 3246 0066

www.isealalliance.org


Contents

Your initiative’s governance structures define the

relationship that you have with your stakeholders

and the efficiency and effectiveness with which you

operate. Governance encompasses the

mechanisms by which an entity is controlled and by

which it is accountable to its stakeholders, including

which decisions are made, how and by whom. It

defines the relationships between different

stakeholders and between different parts of the

system.

1 Introduction 4

2 Key Considerations 5

3 Governance Models 7

3.1 International Federation of Organic Agriculture Movements

(IFOAM) 7

3.1.1 Discussion 10

3.2 Forest Stewardship Council (FSC) 11

3.2.1 Discussion 13

3.3 Program for Endorsement of Forest Certification Schemes

(PEFC) 15

3.3.1 Discussion 17

3.4 Marine Stewardship Council (MSC) 18

3.4.1 Discussion 20

3.5 Fairtrade Labelling Organisations (FLO) International 22

3.5.1 Discussion 24

4 Summary of Governance Issues 26

5 Options 29

Conclusions 30


1 Introduction

The governance model (or models) that you

choose influences all other aspects of the

initiative’s development. It is a fundamental part of

planning and is likely to affect the initiative’s

legitimacy in the eyes of stakeholders. The key

question is how to best combine a legitimate

governance structure that meets the needs of

stakeholders with an efficient decision-making

model.

The answer to this question varies depending on the scope of

activities you are considering. Depending on the diversity of

interests involved, it can be complex and multi-faceted or

simple and straightforward. Governance models need not be

uniform. You can implement three or more inter-linked

governance structures within a cohesive whole, with each one

addressing a different component of your operations. For

instance, the governance model for setting standards could be

quite different from the model applied to certification or

accreditation.

This module provides examples of a number of existing

governance models and suggests where each approach may

be most appropriate. The models are not mutually exclusive

and it is likely that you will identify appealing elements from

each approach that can be combined to address the unique

features of your initiative. We start with a consideration of

some of the key issues to keep in mind as you explore

governance options. The description of different approaches

taken by existing initiatives then informs a comparison of how

these initiatives address each of the main components of a

governance system. The final sections highlight key decisions

that you will need to make in developing your initiative’s

governance system.


2 Key Considerations

Governance structures evolve as an initiative

matures. It is unlikely and probably unnecessary

that you have a well-developed governance

structure in place at the outset of your standard

development process. However, one of the

incentives for stakeholders to participate is to know

that they are able to influence decisions within the

initiative. This suggests that the earlier you

establish the basic elements of a governance

structure, even if these are not well-defined, the

better.

The basic elements of a certification system are highlighted in

the diagram below. Each function, be it standards, certification,

accreditation or labelling, requires some form of governance.

The governance structure required for each activity can be a

separate legal entity or can be housed in one or more

composite governing bodies. For example, certification and

accreditation bodies are usually separate legal structures

though they often maintain some relationship with the parent

standard-setting body. In contrast, standard-setting and

labelling are often managed within the same organisation.

Figure 1: Elements of a certification and labelling system

When considering which governance model is appropriate for

your system, you should first define which activities your

initiative engages in and how they are related. It may be useful


to imagine that your system has one overarching governance

structure, under which a number of related structures may sit.

At the top of the governance pyramid is the highest decision-

making body, usually a Board of Directors, which is responsible

for oversight and decision-making on the various aspects of

your initiative. Under this decision-making body, there may be

different but related governance structures for standard-setting,

logo or trademark management, training or capacity building

and any other activities in which you are engaged. Certification

and accreditation governance structures may initially fall within

this overarching structure but will likely become independent at

some point in time.

In terms of the overall governance structure, one of the first

decisions to make is whether to be a membership-based

organisation or whether to invest decision-making authority in a

governance board. These two options are not mutually

exclusive - there are many forms of governance bodies, some

appointed and others elected. The choice of overall

governance model should be based on a balance of

administrative efficiency, cost effectiveness and legitimacy in

the eyes of stakeholders. However, as we shall see from the

following case studies, it is not always the case that the more

participatory models of governance are seen as more

legitimate. Stakeholder empowerment can come through a

variety of mechanisms at different levels of the organisation.

When deciding upon the overall governance structure,

additional questions to consider can be grouped into three

parts:

1 What are the different governing bodies, committees, and

entities, and what are their respective powers,

responsibilities and relationships?

2 Who are the members of each body, how are they selected,

whose views do they represent, and to whom are they

accountable?

3 How are decisions reached by each of these bodies? Is

there a formal voting system? If so, who votes, how is

voting power distributed, and what are the formal rules for

decision making?

The most appropriate model will address the diversity of

interests and objectives of potential stakeholders and users of

the system and how the interests of system owners are

reflected in both management and accountability. The

governance structures should consider geographic and product

diversity, and then define the simplest, most efficient approach

to meeting the objectives of key stakeholders.

“The choice of

overall governance

model should be

based on a balance

of administrative

efficiency, cost

effectiveness and

legitimacy in the

eyes of

stakeholders.”


3 Governance Models

The following examples outline the different approaches to

governance taken by a number of bodies operating international

standards and conformity assessment systems. The examples

illustrate how the choice of governance model can contribute to:

multi-sector participation; representation and efficiency; risk

management; and dispute resolution. The different models both

reflect the interests of stakeholders supporting the schemes

and have an impact on the scheme’s ability to act effectively in

some areas.

3.1 International Federation of Organic Agriculture Movements (IFOAM)

The International Federation of Organic Agriculture Movements

(IFOAM) is an international membership organisation with more

than 750 members from 105 countries. Its mission is to lead,

unite and assist the organic movement in its full diversity. Its

goal is the worldwide adoption of ecologically, socially and

economically sound agricultural systems based on the

principles of organic agriculture.

IFOAM's membership includes associations, institutions,

traders, and certification bodies that are active in the organic

sector. Organisations whose activities are predominantly

organic are granted voting rights. Others may join as non-

voting associates, and individuals may join as supporters. The

membership is not formally sub-divided into particular interest

or regional groupings. IFOAM's highest decision making body

is its General Assembly.

IFOAM's governing body is its World Board, which consists of

10 IFOAM members and is elected by the membership at the

General Assembly. The World Board is not formally balanced

between different interest groups or regions though members

are conscientious about maintaining such a balance which is

reflected in the number and type of candidates presented, as

well as in voting results. Candidates must be endorsed by five

IFOAM members.


Figure 2: Governance structure of IFOAM

General Assembly: The IFOAM General Assembly takes place

every three years. Assembly decisions are taken by a vote on

formal motions, put forward through a formal process several

months in advance of the assembly. Decisions are taken by

simple majority. In between General Assemblies, decisions

may take place with a quorum of 25% of the IFOAM

membership and voting based on a simple majority. If a

quorum is not reached the IFOAM World Board can make a

decision on behalf of the membership. In 2002, the IFOAM

membership decided to separate the General Assembly from its

role in approving standards, in order to leave more room for

longer-term strategic decisions. This has also encouraged

broader membership engagement in the now-separate

standard-setting and review process.

World Board: The World Board decides all issues not

determined by the General Assembly, and implements

programs, policies and objectives related to the decisions taken

by the General Assembly. The World Board establishes rules

and procedures for the World and Executive Board and the

General Assembly, which are then approved by the General

Assembly. The World Board may set up working groups,

committees, and regional or thematic task groups, and may


delegate specific tasks to such bodies or to individuals. The

World Board takes decisions by simple majority with at least

half of the members present and by open vote. The World

Board may appoint up to three further World Board members,

and chooses an Executive Board from among its elected

members.

The World Board appoints IFOAM members to a broad range of

official committees, working groups and task forces based upon

the recommendations of the IFOAM membership. IFOAM

member organisations also establish regional groups and

sector specific interest groups.

Executive Board: The Executive Board is constituted by three

to five members of the World Board: the President and two to

four Vice-Presidents. The Executive Board represents IFOAM,

executes the decisions of the General Assembly and World

Board, decides on issues not yet decided upon by the General

Assembly or the World Board, reviews organisational

performance and addresses weaknesses. Executive Board

decisions are taken by simple majority with at least half of the

members present and by open vote. IFOAM is legally

represented by two members of the Executive Board acting

jointly.

Accreditation: IFOAM does not engage in conformity

assessment but invests that responsibility in a legally separate

organisation, the International Organic Accreditation Service

(IOAS). IOAS is a not-for-profit organisation that delivers

accreditation services for organic agriculture certification bodies

and is the sole body responsible for implementing the IFOAM

Accreditation Programme. In addition to IFOAM accreditation,

the IOAS offers accreditation against ISO Guide 65 General

Requirements for Bodies Operating Product Certification

Systems and compiles reports addressing a certification body’s

conformity with organic regulations such as EU Regulation

2092/91.

The IOAS is comprised of a Board of Directors and an

Accreditation Committee drawn from different sectors of the

global organic community. The day-to-day work is carried out

by five professional staff and one support staff located in offices

in the US, Europe and Australia. The IOAS is self-financed and

80% of its income comes from the accreditation process. The

remainder comes from technical projects, all related to organic

standards and development of better regulatory systems in this

field.

IFOAM originally created an interim IFOAM Accreditation

Program Board (IAPB) in 1992 which became the IOAS in

1997, with IFOAM as the sole legal member. IFOAM continues

to appoint the Board Members of the IOAS. The IOAS


Accreditation Committee was formally constituted in 1998 to

make decisions regarding conformity (based on

recommendations from IOAS accreditation staff).

3.1.1 Discussion

IFOAM is the oldest of the models discussed here. It was

founded only after nationally-based certification bodies,

standard-setters and their associated brands and logos had

become well-established. IFOAM's role has been to support

these bodies, fill in the gaps and develop common standards

and tools to encourage the improvement and expansion of

organic agriculture around the world. It does not have a

marketplace logo and legitimacy is derived from its ability to

represent the voices of the global organic agriculture

movement.

In terms of governance, the IFOAM model is characterised by a

constitutionally powerful World Board, directly accountable to

an active membership with clear interests. The IFOAM

membership is relatively homogenous in that it is dominated by

organic practitioners. Organic standard-setting bodies and

certification bodies generally have staff that are highly

committed to organic principles, and are often involved in

organic production themselves. The organic movement has a

strong history of grassroots involvement.

IFOAM members engage actively in IFOAM processes,

including the General Assemblies. IFOAM's large, empowered

and dedicated membership and its elected Board mean that it is

highly credible in representing the organic movement

worldwide. However, the interests of its membership are

primary, and IFOAM cannot impose constraints on its members

without their consent. Rather than establishing a single

international standard, it has been moving toward a standard for

standards (the IFOAM Benchmark for Standards) for the myriad

of existing and emerging organic standards worldwide, covering

essential performance elements.

IFOAM is, in a sense, a federation of organic movements within

the agricultural sector as a whole. Prior commitment to organic

principles is the key characteristic of membership. IFOAM's

governance structure appears well-suited to the role of unifying

and supporting a membership with a shared commitment to a

key idea. However, it has had limited success in imposing

common standards on the organic movement as a whole given

the relatively unique situation of strong government and

regulatory engagement in organic agriculture. The Benchmark

for Standards is an attempt to create a framework that

encourages both voluntary and regulatory bodies to base their

standards in commonly accepted principles.

“IFOAM's large,

empowered and

dedicated

membership and its

elected Board mean

that it is highly

credible in

representing the

organic movement

worldwide.”


3.2 Forest Stewardship Council (FSC)

The Forest Stewardship Council is an international, not-for-

profit membership organisation. Its mission is to promote

environmentally appropriate, socially beneficial and

economically viable management of the world's forests. It

currently has about 650 members from 65 countries. Members

include social and environmental NGOs, academic institutions,

consultants, forest management companies, traders and

retailers. The essential membership requirement is

demonstrated support for FSC and its mission. The key

governance institutions are FSC's General Assembly and its

Board of Directors.

FSC General Assembly: The FSC General Assembly is the

highest decision-making body in FSC and takes place every

three years. The membership is divided into three chambers:

social, environmental and economic, and valid decisions require

a quorum of at least 50% of the full membership in each

chamber. Chambers are further divided into northern and

southern sub-chambers, based on per capita GDP for the

countries in which members are located. Decisions are taken

by a weighted majority of the membership, with each of the six

sub-chambers having equal weight.

The General Assembly is formally responsible for approving

any changes to FSC's international standard and to any

changes to its statutes. In addition, the General Assembly can

hear and vote on policy motions relating to any aspect of FSC's

work. Policy motions have a strong political weight, but are not

legally binding. Formal policy decisions rest with FSC's Board

of Directors.

FSC Board of Directors: The Board of Directors is elected by

the FSC membership and consists of nine members, three from

each of FSC's three chambers. Within each chamber one

Board member is from the northern and one from the southern

sub-chamber, with the third member alternating between north

and south. The Board of Directors takes all formal decisions on

behalf of FSC that are not reserved for the FSC membership,

including decisions on new members and recognition of

national standards. Board decisions aim to achieve consensus

but in the case of a vote, decisions are required to achieve

support from six of the nine Board members. The Executive

Director, appointed by the Board of Directors, is responsible for

FSC’s daily operations.


Figure 3: Governance structure of Forest Stewardship Council

FSC National Initiatives: In addition to its international

governance structure, FSC has a national governance structure

consisting of National Initiatives. The main roles of National

Initiatives are to develop national interpretations of the FSC

Principles and Criteria, and to support the promotion of FSC

and FSC-certified products at the national level. National

Initiatives’ governance mirrors FSC’s international structures,

but the National Initiatives do not have a formal role in FSC's

international governance. Finally, national interpretations of the

Principles and Criteria must be approved by the FSC

International Board of Directors before coming into effect.

Accreditation: FSC used to have an accreditation unit that was

responsible for carrying out accreditation audits of Certification

Bodies. However, they recently separated the accreditation

function into a legally separate organisation, Accreditation

Services International (ASI). ASI is an independent

accreditation body which delivers accreditation and other

relevant services to FSC and other certification schemes

worldwide. In addition to accreditation, ASI is also responsible

for the training framework and registration programs for


auditors, national initiatives and national standards, and for

trademark management and licensing schemes for the FSC

trademark.

ASI is a limited liability company (GmbH) registered under

German law, with FSC as its sole shareholder. The Director of

ASI makes recommendations on accreditation to an ASI

Accreditation and Appeals Committee, which is responsible for

the decisions on accreditation. ASI currently also carries out

accreditation on behalf of the Marine Stewardship Council

(MSC) for fisheries certification.

3.2.1 Discussion

FSC's governance model is similar in many ways to IFOAM's: it

has an international membership committed to a basic mission

of change within its sector (sustainable forest management in

FSC's case, organic agriculture in IFOAM's); its membership

directly elects its Board of Directors; its Board of Directors

oversees the development and implementation of systems and

procedures for standards setting; and it has out-sourced its

accreditation to a separate legal entity.

However, there are also key differences between IFOAM and

FSC. FSC's membership is more explicitly and formally diverse

than IFOAM's: it includes practitioners and traders, but has two

additional chambers to represent the interests of environmental

and social stakeholders, whether or not they are directly

involved in forest management or the trade in forest products.

This membership structure reflects the broad social and

environmental externalities and the more dispersed access,

tenure and ownership arrangements associated with forest

management. It also reflects FSC's history, characterised by

external actors seeking to drive change in forest management

practice. The organic movement's origins are in an established

group of producers seeking to promote their own philosophy to

consumers (and other practitioners). FSC's structure reflects

the highly polarised nature of the forestry debate at the time of

FSC's establishment, and it was explicitly designed to cope with

this situation. FSC's whole governance model is, in effect, a

dispute-resolution mechanism. The division of voting weight

(and therefore decision-making power) between the three FSC

chambers (social, environmental and economic) and, within

each chamber, between the north and the south is a central

feature of this model. This structure was devised by the

stakeholders themselves to ensure that no interest could

dominate requirements or processes. All six sub-chambers

must be in broad agreement in order to implement change.

As with IFOAM, the ability of the FSC Board of Directors to act

quickly and independently is limited, because the Board of

Directors is elected by and accountable to the membership.

“FSC’s membership

structure reflects the

broad social and

environmental

externalities and the

more dispersed

access, tenure and

ownership

arrangements

associated with

forest management.”


This reflects the contingent nature of the members' support for

FSC, and the Board of Directors' understanding of their

responsibility to the members themselves. Legally, the Board

of Directors can make all decisions other than changes to

FSC's statutes or to the FSC Principles and Criteria. Politically,

the Board of Directors knows it must maintain the broad support

of the FSC membership for all of its decisions.

The diverse nature of FSC's membership, the open debate at

FSC General Assemblies, the freedom of FSC members to put

forward motions on any subject they choose, and the ongoing

contact between FSC and activist members means that the

FSC system is generally good at promptly identifying

controversial issues and seeking solutions with the involvement

of interested parties. The need to maintain the support of its

membership, reflected in its culture of seeking cross-chamber

agreement on policy issues, limits FSC's ability to take policy

decisions quickly.

The need for membership support is not, however, purely a

governance issue. FSC's credibility and the value of its brand

depend on the active support of its members in the market

place: on endorsement from major NGO's; on demand from

retailers and consumers; and on investment from forest

managers who subscribe to FSC standards. FSC's governance

structure is, to a large extent, a reflection of its business model.

You cannot define your governance structure without also

considering its implications for your business model, and vice

versa.

FSC is able to implement a fairly 'top down' approach to the

implementation of its standards, with all FSC approved

standards required to comply with the FSC Principles and

Criteria. This contrasts with the organic model in which IFOAM

members' own standards exist in parallel to the IFOAM

Benchmark for Standards. IFOAM’s main role is to harmonise

and unite a broad global industry, with the Benchmark for

Standards being one tool to achieve this. Certifiers that are

accredited by IOAS under the IFOAM Accreditation program

must use standards that are compliant with the IFOAM

Benchmark for Standards.

It is interesting to note that both IFOAM and FSC originally

developed their accreditation programs under their existing

governance structures, but eventually chose to split this

function into legally separate organisations. This is due in part

to the desire to comply fully with international expectations for

independence in the delivery of accreditation, and in part to

create a better business model. While IOAS is a not-for-profit

company, ASI is registered as a for-profit company. One

important consideration is that both IOAS and ASI have

sufficient business (number of accreditations) to make their

“You cannot define

your governance

structure without also

considering its

implications for your

business model, and

vice versa.”


operations financially viable. For new initiatives, the likelihood

of being able to support an independent accreditation body is

minimal due to the (initially) lower volume of business. Given

the relatively generic nature of accreditation services, if you are

considering accreditation it is advisable to consider whether

out-sourcing this activity is the best option.

3.3 Program for Endorsement of Forest Certification Schemes (PEFC)

The Program for Endorsement of Forest Certification (PEFC)

aims to provide a framework for the development and mutual

recognition of national or sub-national forest certification

schemes. It provides an assurance mechanism to purchasers

of wood and paper products that they are promoting the

sustainable management of forests; it contributes to the

environmentally appropriate, socially beneficial and

economically viable management of forests for present and

future generations; and it aims to strengthen and improve the

positive image of forestry and of wood as a renewable raw

material.

PEFC is overseen by a national membership body called the

PEFC Council. The members of the PEFC Council are the

governing bodies of PEFC schemes at the national level. The

national PEFC schemes must be established by the national

forest owners' organisations in each country, and are

responsible for inviting other national organisations to take part

in the national body. The PEFC Council is currently made up of

thirty-one national bodies, predominantly from temperate

countries. New members are admitted on the basis of a

majority vote by existing members. Other associations can be

accepted as 'extraordinary members' without voting rights.


Figure 4: Governance structure of PEFC

PEFC Council member bodies meet annually at a General

Assembly. Each PEFC member country has between one and

four votes, depending on the volume of timber harvested in the

country. General Assembly decisions are taken by a simple

majority vote, unless otherwise specified in PEFC statutes.

PEFC Board of Directors: The PEFC General Assembly

elects a Board of Directors consisting of a Chairperson, two

Vice-chairpersons and between two and ten additional

members to administer and manage the PEFC. The Board

membership is not formally balanced but ‘should aim to reflect

the major interested parties who support the PEFC, the

geographical distribution of the members, the diversity of their

annual cutting categories and an appropriate gender balance'.

Board decisions are taken by a simple majority vote, with the

Chairman having the deciding vote in case of a tie. The Board

of Directors appoints a Secretary General to manage the PEFC

Council on a daily basis. Any decisions which bind the PEFC

Council ‘financially or politically' are taken by the Board of

Directors.


3.3.1 Discussion

PEFC was created as a defensive reaction to the establishment

of FSC. Its main objective is to provide an alternative model of

forest certification that maintains the authority and power of

landowners and governments in defining and verifying

standards of sustainable forest management. Its governance

structure reflects this.

The PEFC governance model provides a high level of security

for forest owners, essentially giving them final decision-making

power. Forest owners can choose the extent to which they

respond to demands for change by other interest groups, based

on their assessment of market factors, government influence,

reputational concern, etc. Forest owners are not obliged to

seek agreement with other parties through the PEFC

governance model. This allows PEFC to guarantee a relatively

consistent and reliable supply of raw materials, and protect the

interests of forest product industries. However, PEFC has

always had to compete with FSC for credibility and legitimacy

(as well as market share), which tends to push forest owners

into decisions which are at least minimally satisfactory for other

stakeholders.

The PEFC system has proved weak in identifying and solving

problems that are perceived as weaknesses by NGOs.

Arguably it is better at identifying problems that are preceived

as weaknesses by industry, and in particular by the processing

industry. FSC tends to identify and confront issues of conflict

between forest owners and other stakeholders, and PEFC

tends to react to solutions put forward by FSC.

PEFC has successfully convinced many governments of its

legitimacy as a representative network of forest industry

stakeholders, but is not widely supported by broader social or

environmental interests. However, PEFC does not use a label

aimed at green consumers, and therefore does not require

support from social or environmental groups.

To date, PEFC's business model has depended on dues paid

by forest owners' organisations and on contributions from

industry (no information is publicly available on the relative

contributions). Willingness to pay reflects the desire of forest

owners' organisations and some parts of the forest product

industry to counteract the perceived threat of FSC

requirements. Recent government recognition of PEFC-

affiliated schemes in public procurement policies has boosted

market demand.

The PEFC scheme shows that NGO involvement in governance

is probably not critical if a new initiative’s objective is only to

convince governments and mainstream industry of the benefits

of the system. If your initiative requires active NGO support,

“PEFC does not use

a label aimed at

green consumers,

and therefore does

not require support

from social or

environmental

groups”


then NGO involvement in governance is essential. If your

initiative aims to provide a global framework for dispute

resolution, the support of a broader range of stakeholders is

also likely to be critical.

3.4 Marine Stewardship Council (MSC)

The Marine Stewardship Council (MSC) is a non-profit

organisation that promotes responsible fishing practices first

established by WWF and Unilever. It has an environmental

standard for sustainable fisheries (the MSC Principles and

Criteria) and uses a product label to indicate environmentally

responsible fishery management. As noted above, it has out-

sourced its accreditation to ASI.

MSC has three bodies responsible for governance: the MSC

Board of Trustees (the MSC Board), a Technical Advisory

Board (TAB), and a Stakeholder Council (SC). The MSC

membership consists formally of the Board of Trustees.

Figure 5: Governance structure of Marine Stewardship Council

MSC Board: The MSC Board has between ten and fifteen

members. New board members are appointed by the current


Board for a three-year term and automatically become trustees

of the charity. The Chair of the TAB and the two Co-chairs of

the SC automatically become members of the MSC Board as

well. The MSC Board is not otherwise formally balanced in

terms of stakeholder groups or interests, but in practice the

members are selected to ensure the participation of NGOs,

retailers and producers. Board decisions are taken by a simple

majority.

In addition to their responsibility as charity trustees the MSC

Board members have specific responsibility for:

> approving plans, targets and strategies;

> ensuring that MSC is properly financed;

> appointing the Chair and new members of the MSC Board,

appointing members of the TAB, appointing members of the

SC;

> approving the MSC Principles and Criteria based on a

recommendation from the TAB;

> approving other MSC policies.

The MSC Board takes advice from the TAB and the SC,

although, with the exception of standard-setting, it is not obliged

to follow this advice. MSC Board decisions may be taken by a

simple majority of Board members present, with a minimum

quorum of 40% of eligible members. The Chair has a deciding

vote in the event of tie.

Technical Advisory Board: The TAB has up to fifteen

members appointed by the MSC Board. The TAB is not

formally balanced, but appointments are made based on a

matrix of identified technical needs. The TAB appoints its own

Chair, who also serves on the MSC Board. The two Co-chairs

of the SC have official observer status at all TAB meetings.

The TAB's role is to advise the MSC Board on technical matters

including the setting, review, interpretation and implementation

of the MSC Principles and Criteria, and technical issues relating

to certification, accreditation, chain of custody, and sustainable

fisheries practices. Before making final recommendations to

the MSC Board, the TAB may circulate its proposed

recommendations to SC members and other relevant interest

groups. The TAB considers all feedback and advises the MSC

Board accordingly when submitting final recommendations.

The TAB has specific decision-making responsibilities

delegated to it by the MSC Board, in particular the approval of

the methodology for implementing the MSC Principles and

Criteria. Decisions are taken by a simple majority of all

members. A simple majority of all members is also the quorum

for decision-making.


Stakeholder Council: The SC consists of thirty to fifty

members initially appointed by the MSC Board. Once

established, the SC assumed responsibility for appointing its

own members. The role of the SC is to provide advice, views

and recommendations to the MSC Board and to the TAB on

standards, policy and strategic issues.

The SC is formally divided into two categories: a public interest

category, and a commercial and socio-economic interest

category. Each category is subdivided into four interest

groups (see Box 1) .

Box 1: MSC Stakeholder Council

The public interest groups are

1 scientific, academic and resource management interests;

2 general conservation NGO interests;

3 marine conservation NGO and specialist interests; and

4 general interests and organisations (e.g. FAO, funders, UN

bodies).

The commercial and socio-economic groups are

5 catch sector interests;

6 supply chain and processing interests;

7 retail, catering and distribution interests; and

8 developing nation and fishing community interests.

Each interest group puts forward one member to serve in an SC

Steering Group, designed to enrich and streamline

communication between the MSC Board, TAB and SC. The SC

appoints two Co-chairs, one from each category, who also serve

as MSC Trustees.

3.4.1 Discussion

While the highest authority in the MSC governance model is its

Board of Directors, it is self-appointing rather than being elected

by any wider body or membership. The MSC Board is the key

decision-making authority; the TAB provides high quality

technical advice; and the SC ensures additional stakeholder

legitimacy.

The MSC model is interesting in that it was designed to learn

from and correct the apparently overly burdensome democratic

governance structure of FSC, while having an essentially

identical business model. In terms of outcomes, the differences

do not appear that great. Both FSC and MSC have achieved a

fairly broad level of support among NGOs and businesses and


both are slowly gaining recognition from governments. At the

same time, they have both faced scepticism and occasional

hostility from some industry stakeholders and more radical

NGOs. The MSC Board is free to make decisions quickly but,

in practice, decisions still require consultation with both the TAB

and the SC. Although they are often less costly, it is not clear

whether MSC’s decisions are made more quickly, or are of

higher quality, than in FSC’s more explicitly democratic system.

MSC's processes for reviewing and revising its systems are

overtly technical, investing advisory and some specific decision-

making responsibility in the TAB. In practice, the degree of

technical expertise involved in MSC processes is similar to that

of FSC processes, and in both cases final decisions on policy

issues are made by the respective Boards of Directors, with

relatively little direct input (at the final stage) from broader

stakeholder groups.

There are some key differences between MSC and FSC: the

MSC SC, being smaller, can meet more regularly (once a year)

than the considerably larger FSC General Assembly (which

meets every three years); the FSC General Assembly exercises

a stronger role in initiating new areas of work for FSC than the

MSC SC appears to. Furthermore, FSC's members may have

a stronger sense of ownership and higher expectations of FSC,

which may also mean that they are much more vocal in their

criticism.

Formally, the main differences are that the MSC Board can

change MSC's statutes without the approval of a wider group of

stakeholders. However, while the MSC Board is responsible for

final decisions on changes to the MSC Principles and Criteria,

their decisions must be based on the recommendations of a

broader balanced group of stakeholders.


3.5 Fairtrade Labelling Organisations (FLO) International

Fairtrade Labelling Organisations (FLO) International,

established in 1997, is an association of twenty national

labelling initiatives that promote and market Fairtrade-certified

production in their respective countries. FLO members

currently operate in 15 European countries as well as Australia,

New Zealand, Canada, Japan, Mexico (associate member) and

the United States. FLO consists of two separate legal entities,

FLO International e.V., which is responsible for standard-setting

and other policy and producer support functions, and FLO-Cert

GmbH, which carries out certification. FLO-Cert inspects and

certifies compliance with FLO standards in more than 50

countries in Africa, Asia and Latin America. The national FLO

members are responsible for advocacy and marketing in their

respective countries.

Figure 6: Governance structure of Fairtrade Labelling Organizations

(FLO) International

FLO International e.V. is a non-profit multi-stakeholder

association involving FLO’s twenty labelling initiatives, producer

organisations, traders and external experts. It develops and

reviews standards and supports the marketing of Fairtrade


products. FLO works closely with other Fair Trade networks:

the International Fair Trade Association (IFAT) with 150

members, the European Fair Trade Association (EFTA) with

eleven members, and the Network of European World Shops

(NEWS) with 2500 members, effectively increasing its

legitimacy in the sector. FLO-Cert GmbH is registered as a

limited company.

Board of Directors: FLO International is governed by a Board

of Directors consisting of:

> Five representatives from the Labelling Initiatives

> Four representatives from Fairtrade-certified producer

organisations (two from Latin America, one from Africa, one

from Asia)

> Two representatives from Fairtrade-registered traders

> Two independent Board Members

The Board’s mission is to make FLO the worldwide reference

for consumer and producer choice in Fairtrade certification.

The representatives on the Board of Directors are elected by

their constituencies. The Board appoints the members of:

> The Standards Committee, setting its priorities and

approving its work plan and recommendations

> The Finance Committee

> The Governance/Nominations Committee

The Board normally takes decisions by consensus. If

consensus is not reached, decisions are taken by vote, with

each Board member having one vote. The Chair of the Board

leads the activities of the Board and Committees.

Standards Committee: The FLO Standards Committee

supervises and guides development of FLO standards.

Membership comprises ‘all stakeholders of FLO (national

members, producers and traders) and external experts while

making sure all necessary expertise is around the table to take

informed decisions.’ The Standards Committee consists of

between five and eleven members and the number of members

must be uneven. Membership is for a renewable three-year

period.

The Standards Committee is balanced between suppliers and

users of the Fairtrade certification system and mark, together

with additional experts who are considered neutral. Table 1

breaks down the interest groups that should be represented on

the committee:


Table 1: The Fairtrade Committee should include:

A. Suppliers

> members drawn from producers: preferably, candidates are nominated by one of

the three regional producer networks, covering Latin America, Africa and Asia. If

more than one representative has a seat they shall be from different continents

and represent different groups targeted by generic standards if possible.

> members drawn from FLO Liaison (FLO staff members whose responsibility is to

liaise with producer groups for a given commodity)

> members drawn from workers, preferably linked to trade unions

B. Users > members drawn from Labelling Initiatives (thereby representing trading and

consumer interests as well)

> members drawn from traders: if more than one representative has a seat, then

one of them shall represent the Fair Trade organisations

C. Experts > independent external experts (especially if they bring in complementary

expertise)

> members drawn from the FLO inspection and certification system (voice without

vote)

> members drawn from FLO Producer Business Unit (voice without vote)

Additionally, independent external experts may also be

nominated only for specific issues to the SC or to specific

working groups.

3.5.1 Discussion

FLO's origins are more similar to IFOAM's than to FSC's or

MSC's. Its membership is relatively homogenous in that it

consists primarily of practitioners, whether they are producers,

traders or national Fair Trade organisations themselves. The

Fair Trade movement as a whole also has a strong history of

grassroots independence and involvement, but FLO’s model is

less explicitly democratic than IFOAM's in that it does not have

the same type of broad, formal, international membership base.

However, FLO enjoys a high level of international recognition

and legitimacy in representing the interests of the Fair Trade

movement. This is interesting, given the proprietary nature of

their certification program, where only one certification body,

FLO-Cert, is authorised to assess producer group compliance

with FLO standards. FLO standards are developed on a

product by product basis which limits the scope of products that

can be certified Fairtrade. Moreover, the scope of FLO’s

standards applies only to developing country producers and, for


some commodities, only to smallholders. Partially as a result of

this, half a dozen new Fair Trade standards are being

developed by other certification bodies as a response to a

demand for Fair Trade certification for products other than

those covered by FLO International.

FLO provides an interesting case study for centralising a

diverse country-based membership. It has been able to adapt

the national origins of the Fair Trade labelling movement to

create a cohesive international system, complete with a

common logo that almost all national initiatives have adopted.

This is no small accomplishment considering the movement

was comprised of 17 autonomous national organisations, each

with their own market logos and marketing strategies. When

these national initiatives first decided to create a central body,

they maintained a high level of control in its decision-making,

which has, over time, become more balanced through the

participation of other stakeholders from the supply chain.

Although seeking a common logo was a long term process,

FLO has successfully transitioned to a single international

trademark. National members retain strong control over the

FLO decision-making structure, partly through the governance

structure and partly because they are responsible for gathering

fees from retailers for logo use. They then pass a portion of

these fees to FLO International, providing the majority of FLO’s

financing.

FLO used to have a business model where the producer groups

did not pay for certification; the certification cost was covered by

fees charged to the manufacturers putting the label on the

product. However, as FLO transitioned to an independent

certification body, FLO-Cert, they also introduced a new cost-

recuperative certification fee schedule to support the financial

sustainability of their program. Moving to a cost-recovery basis

also provided a solution to the previous bottleneck at the point

of certification, where a backlog of producer groups had been

on waiting lists to get certified.

One lesson from the FLO model is that if the key stakeholders

are relatively homogenous in their objectives then it is possible

to achieve international legitimacy and support without a broad,

international membership. In FLO's case, there is high level of

agreement on standards, and the interests of FLO producers,

processors and retailers are well aligned - they all want to

promote Fairtrade products and achieve the optimal

combination of volume and price as a premium product.

“Moving to a cost-

recovery basis

provided a solution

to the previous

bottleneck at the

point of certification,

where a backlog of

producer groups had

been on waiting lists

to get certified.”


4 Summary of Governance Issues

The examples presented above are all taken from

programs that claim to be multi-sectoral and

representative. However, the diversity of

stakeholders involved, the origins of the initiatives,

and their roles in governance and decision-making

are quite different.

Diversity of Membership: None of the programs have mass

membership in the sense of a political party or open

membership organisation. The IFOAM and FSC programs

have the largest memberships, with about 760 and 650

members respectively, most of whom are organisations in their

own right. FSC could legitimately claim to have the most

diverse membership, ranging from social organisations,

indigenous peoples groups, labour organisations and

environmental NGOs, through to mainstream forest managers,

saw-millers, manufacturers and retailers. For IFOAM and FLO,

membership is tied more tightly to particular concepts: organic

agriculture and Fair Trade principles respectively, and their

memberships consist of organisations involved primarily in the

production, trade, promotion or support of organic or Fair Trade

products. PEFC's membership consists of forest owner

organisations or their nominees. MSC is a membership

organisation only in the technical sense that its Board of

Directors are legally members. However, this arrangement is

paired with a balanced Technical Advisory Board and a more

diverse advisory Stakeholder Council.

Board Election: For FSC and IFOAM, the Board of Directors is

formally elected by the full membership. In the case of FLO,

Board members are elected by different sectors to specific

sector positions. In PEFC the Board members are formally

elected, though from a very narrow base. In MSC the Board is

mainly self-appointing, but includes three existing members,

two from the Stakeholder Council and one from the Technical

Advisory Board.

Board Representation: In all the organisations described, the

Board attempts to represent the diversity of its membership. In

FSC and FLO this is achieved formally by having a statutory

allocation of Board positions representing different interest

groups. In IFOAM and MSC balance is consciously maintained

through nominating processes, but is not required by statute.


The PEFC Council aims to achieve geographical and gender

diversity.

Member Categories: FSC and FLO divide their memberships

into different categories or chambers. For FSC the chambers

are formally defined, with voting weight equally divided between

six sub-chambers. For FLO the categories consist of different

groups of stakeholders: Labelling Initiatives, certified producers,

and certified traders. IFOAM does not formally divide its

membership or weight their votes. PEFC does not divide its

membership, but allocates different numbers of votes

depending on the volume of timber produced in each member's

country. MSC has a chamber-based Stakeholder Council,

although it has an advisory rather than decision-making role,

and no formal voting mechanism.

Decision-Making: In FSC and IFOAM decisions to approve

international standards (or the equivalent) are taken by the full

membership at the organisations' General Assemblies. In FSC,

changes to its principle international standard can only be made

with the approval of the full membership, with demanding

requirements for quorum and cross-chamber support. IFOAM

has less demanding requirements for quorum and support, and

if a full membership vote is inconclusive its Board of Directors

can take decisions on behalf of the membership. For both FLO

and MSC, decisions related to international standards are

formally the responsibility of the Board of Directors. In the case

of FLO, the Board has divested its decision-making

responsibility to a stakeholder-based Standards Committee. In

MSC, the Board is required to follow the recommendation of the

Technical Advisory Board though can reject their

recommendation if they feel that the procedure followed was

not adequate.

Income Generation: The governance model needs to be

aligned with the business model and funding mechanisms. In

all models except for MSC's, the membership provides a

relatively stable source of funding. IFOAM and FSC have

broad memberships that could pay significant membership

dues. PEFC and FLO have member organisations that

contribute significant funding. Members who pay dues are

likely to want a strong role in governance.

Standard-Setting: As ISEAL members, FSC, IFOAM, FLO and

MSC all comply with the ISEAL Code of Good Practice for

Setting Social and Environmental Standards. In terms of

governance, this means that they have decision-making

structures for standard-setting that ensure an open and

transparent stakeholder consultation process and balanced

stakeholder engagement. PEFC does not have an international

standard as such, and major decisions are taken by its Board of

Directors. Both FSC and PEFC have systems to recognise

“Compliance with the

ISEAL Code of Good

Practice means that

organisations have

decision-making

structures for

standard-setting that

ensure an open and

transparent

stakeholder

consultation process

and balanced

stakeholder

engagement.”


national standards developed by stakeholders at the national

level, and in both cases the decision to approve national

standards is taken by the Board of Directors.

Conformity Assessment: Whether they offer certification or

accreditation, IFOAM, FSC, MSC and FLO have all chosen to

legally separate conformity assessment and standard-setting in

independent organisations. IFOAM and FSC have spawned

independent accreditation bodies; MSC has out-sourced its

accreditation to the FSC accreditation body, and FLO has

created an independent certification body. Interestingly, all of

these systems initially chose to develop their conformity

assessment program within the parent organisation, before

eventually choosing legal separation. PEFC has a mutual

recognition agreement among national forest certification

systems which each, in turn, carry out certification in their

respective countries.


5 Options

A range of models have been represented in this

module. It is not necessary or even desirable to

find an existing model that perfectly fits your

circumstances. Models can be combined to create

a cohesive governance structure that reflects the

needs of your system and those of your

stakeholders.

Table 2: Key Decisions Include

a.

Do you wish to establish a governance structure in which the members are the highest authority,

appointing or electing a Board of Directors (as for FSC, IFOAM and PEFC); a structure in which the Board

of Directors is the highest authority and appoints its advisors (as for MSC); or an intermediate structure

similar to FLO's, in which the Board members are elected or appointed by different constituents?

b. Do you wish to aim for a relatively large international membership (as for FSC and IFOAM), or do you

prefer a model in which the international organisation is composed of a limited number of bodies, for

example national bodies (as for PEFC and, in part, FLO), that may or may not have their own

memberships and constituents?

c. Do you wish to aim for a narrowly defined membership consisting essentially of economic interests (as for

PEFC); a very broad membership in which both directly and indirectly interested stakeholders are

represented (as for FSC); or an intermediate model in which members are primarily those directly involved

as producers or traders but who have a demonstrated commitment to a distinct philosophy or set of

principles (as for IFOAM or FLO)? If you opt for a limited membership, how do you engage with external

stakeholders outside of your structures? In any case, if you have a membership you need to define the

minimum requirements or commitments for membership.

d. How is decision-making power and/or stakeholder representation distributed between stakeholders: by a

formal chamber system (as for FSC, FLO at the Board level, and MSC at the Stakeholder Council level);

by economic weight (as for PEFC); or through 'one member, one vote' (as for IFOAM)? Is the decision-

making structure the same for all aspects of the initiative or do you require greater stakeholder

engagement for certain decisions, such as standard-setting?

e. What role do you choose to play in conformity assessment: a proprietary certification body (as for FLO);

an accreditation body capable of accrediting multiple certification bodies (as for IFOAM/IOAS and

FSC/ASI); outsourcing accreditation completely (as for MSC); or managing a peer review and mutual

recognition program of certification bodies as an alternative to accreditation (as for PEFC)? What is the

relationship between conformity assessment and other functions delivered by your initiative? Is the body

responsible for conformity assessment part of the overall organisation or a separate legal entity?

f. Whatever governance model(s) you adopt, you need to outline which responsibilities rest with the Board of

Directors and which with the membership (or non-member stakeholders), in particular in relation to

consultation and decision-making relating to core requirements, such as international standards. In

principle, decisions on standards could be the prerogative of a separate body or committee established for

that purpose.


Conclusions

Interestingly, the type of governance structure does

not appear to determine definitively the level of

success of a particular program. Early stakeholder

participation and support may be encouraged by

(and may create) a more open, democratic

structure, but uptake and longer term support is

likely to be determined by the delivery of expected

benefits rather than the structure itself.

Understanding and meeting those expectations is

critical to success.

All of the case studies presented have governance structures

that were developed in response to a particular set of

circumstances. In some of these cases (FLO and IFOAM),

governance structures evolve over time, becoming more

formalised and centralised, consolidating an existing network of

stakeholders and initiatives. Where a few key stakeholders

spearhead the development of a new initiative (MSC) the result

tends to be less broadly democratic, favouring a more

streamlined approach to governance.

If a major objective is to resolve conflict between stakeholders,

as in contentious business sectors such as forestry, then it is

likely that a more participatory approach will be more

successful. Stakeholders are more likely to consider a

negotiated solution to be legitimate if they have been part of the

negotiation. This approach highlights the need to empower

stakeholders, at least in relation to the policies or standards that

directly affect them, and to seek their involvement at an early

stage in the development of processes and structures. It

should be noted that none of the systems presented in this

study, and which operate in high conflict situations (MSC, FSC,

PEFC) can claim to have resolved all conflicts at international,

regional or local levels. The best outcome, based on these

examples, is a framework within which initiatives can manage

conflict.

If there are identifiable stakeholder groups with distinct and

possibly conflicting interests that need to be reconciled, then

you should consider a formal division of power, at least in

relation to areas that are crucial to the different interest groups.

FSC and MSC’s experiences suggest that effective consultation

and engagement with stakeholders in the development and

implementation of standards are likely to be as important as the

organisation’s governance structure in winning support. NGOs,


like businesses, are highly diverse in their approaches to

conflict resolution and in their understanding of, or support for,

different certification and standards. The creation of a

membership-based organisation does not necessarily help to

overcome these differences.

In terms of conformity assessment, the objectivity and credibility

of the process is paramount. Conversely, therefore, it is better

to have a governance structure for conformity assessment that

is perceived to be beyond the influence of stakeholders.

Certification and accreditation services can be operated more

as businesses, with little engagement from stakeholders.

Stakeholders naturally have an interest in decisions on

certification and accreditation but they should not exert undue

influence on those decisions through engagement in the

governance structure of the certification or accreditation body.

Acknowledgements

The Emerging Initiatives program could not exist without the contributions

of content and images from the seven founding ISEAL Alliance members:

Fairtrade Labelling Organizations (FLO) International, www.fairtrade.net

Forest Stewardship Council (FSC), www.fsc.org

International Federation of Organic Agriculture Movements (IFOAM),

www.ifoam.org

Marine Aquarium Council (MAC), www.aquariumcouncil.org

Marine Stewardship Council (MSC), www.msc.org

Rainforest Alliance, www.rainforest-alliance.org

Social Accountability International (SAI), www.sa-intl.org

ISEAL Alliance also gratefully acknowledges the financial support for this

program from:

The Overbrook Foundation, www.overbrook.org


17a Heneage Street

London E1 5LJ

United Kingdom

t/ f: +44 (0)20 3246 0066



Creating a world where environmental sustainability and social justice are the normal conditions of business The International Social and Environmental Accreditation and Labelling

Alliance is an association of leading voluntary international standard-

setting and conformity assessment organisations that focus on social and

environmental issues.

ISEAL members represent standards and conformity assessment systems

in sectors ranging from forestry and agriculture to fisheries, manufacturing

and textiles. ISEAL members are committed to the highest standards for

credibility in their work including the ISEAL Code of Good Practice for

Setting Social and Environmental Standards and relevant ISO standards.

Working together, ISEAL members represent a holistic movement that has

the potential to change the way the world does business.


17a Heneage Street

London E1 5LJ

United Kingdom

t/ f: +44 (0)20 3246 0066


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