Studies in Comparative International Development

, Volume 42, Issue 3, pp 256–278

Ecocertification of Ecuadorian Bananas: Prospects for Progressive North–South Linkages

Authors

    • Department of International RelationsFlorida International University
  • Steven A. Wolf
    • Department of Natural ResourcesCornell University
Article

DOI: 10.1007/s12116-007-9009-1

Cite this article as:
Melo, C.J. & Wolf, S.A. St Comp Int Dev (2007) 42: 256. doi:10.1007/s12116-007-9009-1
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Abstract

Results of our 2003 survey of Ecuadorian banana producers’ farming practices indicate that firms engaged in labeling schemes generate lower environmental risks than uncertified firms. Certified firms exhibit relatively comprehensive environmental management systems, while noncertified farms exhibited limited, uneven, and unstructured adoption of best management practices. We explore the specific circumstances that differentiate the more environmentally friendly firms from their conventional counterparts, and we identify the sustainability pathways available to differently situated firms engaged in banana production. We find that small certified operations mobilize social capital to engage alternative markets and add value to their products, while large certified firms rely on financial backing of international organizations to modernize their operations. For both large and small firms producing bananas in Ecuador, the sustainability gains we observe are premised on mobilization of external resources from actors in the industrialized world. We demonstrate that improved environmental performance of commodity production cannot be attributed to local resources, local dynamics, and local institutions. Our analysis also points to the limits of export of sustainability from rich nations to developing nation firms. Only a fraction of the industry participates in certification programs, and large segments of the population of firms are likely to remain unattractive and inaccessible to external resource providers. In this context, it appears that the state must define and enforce minimum environmental standards to progressively raise performance.

Keywords

Ecuadorian bananasEcocertificationEcuador

Introduction

Contemporary weakening of the regulatory power of the state, combined with acknowledgement of the historically contradictory position of the state as an agent of sustainability, has resulted in a pragmatic turn in governance, characterized by a broad array of strategies aimed at harnessing economic self-interest to spur investment in environmental conservation and social justice (Mazmanian and Kraft 1999; Christmann and Taylor 2001; Cashore et al. 2004). Policymakers, advocacy nongovernmental organizations (NGOs), and entrepreneurs seek to make environmental protection pay, and more generally valorize production of public goods to align private incentives—of both consumers and producers—with public purposes. An important subset of these market-based strategies focuses on adding value to products through claims of embodiment of superior environmental and social values (Reardon et al. 2001; Goodman 2000). These messages of environmental protection and social responsibility are communicated at a distance through certification of products and producers of these differentiated goods and services.

Certification regimes in the agricultural and natural resources sectors place commercial firms at the center of efforts to foster environmental and social sustainability in developing countries. Given the centrality of ecocertification in regulating North–South trade, surprisingly little is known about the performance of these strategies (OECD 1997). In particular, two relevant policy questions remain largely unanswered. First, do behaviors of certified firms differ from noncertified peers in ways consistent with sustainability claims? Second, to the extent that certified firms actually produce public benefits (including production of fewer public costs relative to peers), what socioeconomic processes underlie these achievements?

We explore the significance of certification through a case study of Ecuadorian banana production, an industry that has been subject to sustained and substantial environmental and social criticism. Citing bananas as the fifth most widely traded commodity on the globe and Ecuador as the world’s leading exporter, the case offers a useful entry point to a debate on the status and significance of private sector actors regarding sustainability. Based on a 2003 assessment of farming practices of paired samples of banana producers, we evaluate the behaviors of Fairtrade certified producers, a social justice oriented initiative, and Rainforest Alliance certified producers, an environmental management oriented initiative, relative to noncertified peers. Extending previous empirical analysis (Melo and Wolf 2005), we use interview data and secondary sources to explore the innovation processes that underlie the observed technical and organizational changes of the distinct sets of commercial actors engaged in these contrasting sustainability initiatives.

Our study highlights a paradoxical dimension of the “greening of the firm” in the global South. Linkages between entrepreneurs in the global South and well-endowed actors in the North support vital flows of developmental resources; these flows are essential elements of contemporary processes of innovation supporting sustainability gains. Our analysis highlights the essential role of nonlocal resources (i.e., industrial world financial capital, market access, technology, and knowledge) that are combined with domestic resources to differentiate Ecuadorian bananas, banana producers, and the respective value chains. As we will see in our empirical case, access to the external resources of industrialized nations is a determinant of which Ecuadorian firms achieve certification and thus enhance their competitiveness. We demonstrate that access to such external resources and ability to integrate such resources into production routines are premised on domestic, and in some cases highly localized, resources. Thus, sustainability is advanced through various combinations of local and nonlocal resources.

At the same time, such flows create potential dependency relations, which Mutersbaugh (2002: 1181) cites as an “ecological neocolonialism” that can accompany ecocertification. Developing-country agriculture is characterized by farming arrangements that force primary commodity producers to assume the risks of agriculture while elites and multinational companies extract surpluses to capitals in the so-called “core” (Talbot 1997: 86; see also Grossman 1998; Striffler 2002). Ecocertification has the potential to reinforce, rather than ameliorate such dynamics.

We analyze here the ambiguity of relationships between firms in the South and resource providers in the North, as expressed in the case of ecocertification of Ecuadorian bananas. We first review the literature on ecocertification, highlighting contending interpretations of its effectiveness in fostering environmental and social sustainability by developing-country agricultural producers. We then shift focus to our analysis of ecocertification by Ecuadorian banana producers. Our data show that ecocertification is linked to improved firm-level environmental performance. Moreover, we find that external resources are central to successful ecocertification. We conclude our analysis by noting that voluntary certification cannot effectively substitute for state-based regulation in a setting where large firms can effectively shield themselves from scrutiny and deflect criticism and small and medium sized firms lack access to financial, social, and human capital needed to achieve environmental and social improvements. Theories of the role of commercial firms in the developing world concerning sustainability must account for the limited resources of the vast majority of these entities and the particular historical and institutional settings in which they are situated.

Firm Greening, Ecocertification, and Developing Country Agriculture

In seeking to understand the contemporary and potential roles of firms in developing nations, with respect to environmental sustainability, we are immediately intrigued by the question of the applicability of theory derived from industrialized settings. Dominant theories of the “greening of the firm” emphasize competition as a selection mechanism. In the business literature of strategic management, firms generate sustained competitive advantage in a world of environmental limits through exploitation of resources that are valuable, nonsubstitutable, rare and difficult to replicate (Hart 1995). Clean technologies, such as a mode of banana production that does not degrade water resources, can be a basis of competitiveness and a profit center. From the perspective of environmental sociology, ecological modernization is premised on a hypothesized, emergent form of capitalism where competition among firms will be waged in a context in which polluters pay and accountability mechanisms explicitly include measures of environmental performance (e.g., Mol and Spaargaren 2005). Both of these perspectives emphasize a dynamic process whereby firms re-allocate proprietary resources to adapt to shifting institutional constraints, and simultaneously invest in efforts to shape the institutional environment in line with their interests (Pfeffer and Salancik 1978).

How much this type of thinking is applicable to the study of greening of firms in the developing world is not clear, particularly concerning agriculture. Despite substantial industrialization, the farming sector remains largely populated by small and medium enterprises, with limited internal resources and weak ability to participate in crafting the institutional context in which they operate. As Wilson and Riggs (2003) demonstrated in their analysis of the applicability of the notion of “post-productivist” agricultural regimes to the global South, indicators and material processes of a shift toward sustainability are not readily transferable.

Recognizing how commercial logic (i.e., social relations of neoliberal forms of capitalism, see McCarthy and Prudham 2004) has tended to undermine agriculturally based development, certification attracts our attention because it has the potential to modify the institutional environment in progressive ways.1 We must recognize that partnerships between developing country firms and rich-nation sponsored ecocertification are ambiguous.

First, such relationships have historically supported capital-intensive, export-oriented agriculture, which has led to rising inequalities (Key and Runsten 1999; Peet and Watts 1993). These capital intensive investment and development schemes divert land from peasants, yet do not produce sufficient high quality jobs, thus fostering “exclusionary and inegalitarian” patterns of accumulation (Evans and Timberlake 1980). Finally, export-oriented agriculture is dependent on a cluster of technologies that are often inappropriate (Chambers et al. 1989)—i.e., poorly suited to local social and ecological conditions—and result in local and regional degradation and displacement (Altieri 1992; Torres Zorilla 1994; Soluri 2000).

Second, these relationships suggest a further evolution of patterns of investment in that firms’ access to external sources in developing country depends on how well they fit the particular accountability concerns, whether ecological or social, of donors and commercial partners. While a developing country firm may voluntarily enter into a partnership with a certification organization, ecocertification becomes a mean by which actors in the industrialized world impose expert-determined, nonnegotiable requirements, a form of “top-down” sustainability (Mutersbaugh 2002). Certified firms cannot easily “exit” such arrangements because individual competitiveness rests heavily on their collective commitment to certification norms.

In the ecocertification arena, we can identify two general orientations (see also Bryant and Goodman 2004). There are those that privilege ecological integrity and tend to exclude social concerns from their agendas, and there are those that privilege social concerns, including environmental ones, most notably, public health and environmental justice (Dryzek 1997; Goodland 1995). Following Goodland and Daly (1996), we refer to the former as Environmental Sustainability (ES) and the latter as Social Sustainability (SS).

ES-oriented certification schemes, generally known as ecolabels, are now applied to a large variety of goods and services, including food products, wood products, and tourism, which are sectors vital to many developing nations. These initiatives seek to address the environmental failings of conventional production systems by stimulating adoption of best management practices aimed at reducing environmental risks stemming from production practices. These programs were conceived as voluntary, and are designed to distinguish better performing firms from others by awarding adherents with a trademarked label that allows customers to recognize these differentiated goods (Constance and Bonnano 2000). Compliance with technical guidelines is ostensibly assured by audits of certified producers’ operations. While some ecolabels have been launched and managed by state agencies (i.e., Swedish Environmental Choice, the German Blue Angel, the Nordic Swan, the Canadian Environmental Choice Program), some of the best known programs have grown out of NGO initiatives (OECD 1997). For example, the U.S. based Rainforest Alliance was one of first nongovernmental organizations to engage industry in ecolabeling programs, beginning in 1994 (Murray and Raynolds 2000; Taylor and Scharlin 2004).

SS-oriented certification initiatives seek to address social, economic, and environmental problems of contemporary commodity systems. Proponents of such a balanced approach argue that globalization is eroding the livelihoods of small farmers, a significant and vulnerable class, particularly in the developing world. The cost-price squeeze stemming from trade liberalization places farmers in a “race to the bottom” that leads to displacement, poverty, and environmental degradation (Porter 1999). In such a setting, SS proponents argue that focusing exclusively on environmental improvements allows large, capital-rich firms to claim corporate citizenship without responding to demands for social accountability and economic justice (Murray and Raynolds 2000; Frundt 2005). In response to structural problems such as farmers’ position as price takers (i.e., monopsony conditions), scale-biased regulatory regimes and lack of incorporation of a meaningful set of ecological and social costs in market prices (costs borne disproportionately by the poor and those dependent on natural resources), SS-oriented certification efforts are aimed at development of parallel system of trade. Based on belief that the economic playing field is not level, proponents advocate investment and regulations toward “fair trade” rather than free trade. Several NGOs operate under these principles, including Oxfam, Transfair, and Max Havelaar. These groups generally define themselves through reference to fair trade and enforce certification guidelines set by a coordinating body, Fairtrade Labeling Organizations International (FLO) (FLO 2006a).

Fair trade networks are based on alternative institutional arrangements through which the social, economic, and environmental benefits generated by small-scale, low-input agricultural producers are valorized (Moberg 2005). Under these trade arrangements, groups of farmers organized as cooperatives are guaranteed premium prices for their crops and a portion of retail revenues are reinvested community resources such as schools and health care facilities. Household economic security and community services are viewed as an engine of development and an alternative to resource degradation fed by high discount rates. Environmental concerns are not a secondary consideration within fair trade, as environmental management and conservation are prominent components of certification requirements, largely due to identification of public health, access to natural resources, and environmental quality as a prerequisite to sustainable development.

In evaluating the environmental agency of developing-country agricultural producers within the institutional framework offered by ecocertification, three issues need to be addressed. First, does ecocertification (ES or SS) lead to positive environmental sustainability outcomes? Second, what are the consequences for developing-country agricultural producers? And third, what is the scope of ecocertification as a pathway to fostering environmental sustainability in the developing country agricultural sector?

Ecuadorian Bananas: A Controversial Harvest

Ecuador’s banana industry powerfully reflects the contradiction between economic benefits of commodity production and the social and environmental consequences of this activity. Banana trade accounts for 22% of Ecuadorian exports, and ranks as its second most important trade good behind oil (UNEP 2002). According to the results of Ecuador’s Third National Agriculture Census (SICA 2002), 28,619 Ecuadorian producers produce bananas on 189,331 ha; 270,000 workers are employed in the sector (UNEP 2002); and 1.1 million people (of a population of 12.5 million) are supported directly or indirectly by these wages (FAO 2001).

The majority of land dedicated to banana production is owned by Ecuadorians or Ecuadorian companies producing for export (Striffler 2002; Brenes and Madrigal 2003). Bananas are sold under contract to one of the main transnational firms (Dole, Chiquita, Del Monte, Fyffes, and Bonita) or their Ecuadorian subsidiaries. The relationships between producers and exporters are contentious. While the Ecuadorian government attempts to regulate the market by imposing an official price, producer strikes occur on an almost annual basis. Producers argue that prices paid for a box of bananas (an 18.45 kg box is the standard unit of measure) do not cover the cost of production (Redaccion Quito 2003). Exporters argue that this statutory price does not reflect seasonal market price fluctuations, thus compromising the competitiveness of the sector (Redaccion Guayaquil 2003a).

As in other banana producing nations, small- and medium-sized production units confront pressures to adopt more capital-intensive production systems, shift out of banana production or sell their holdings to larger operations (Striffler 2002; Soluri 2000; Euraque 1996). According to the UNEP (2002), by 1998, most banana production had shifted from small plots to medium and large farms. Despite a tendency toward concentration, “40% of the production is managed by small and micro producers” as defined by holdings of less than 30 has (Brenes and Madrigal 2003).

In a concrete example of deregulation, the government relinquished most of its controls over the industry and it is unable to enforce whatever environmental or social standards remain (Melo and Wolf 2005; HRW 2002; UNEP 2002). The National Banana Program (NBP), charged with monitoring and regulating the industry, was suppressed in neoliberal reforms of 1998 and was replaced by the policy-making National Banana Council. This newly created body was charged with development of the industry and fixing the referential price, but it does not have monitoring or enforcement functions (UNEP 2002). Moreover, UNEP (2002) concluded that while some of the agricultural extension services provided by the NBP have been assumed by exporters and producers’ unions, the “functions relating to the creation and implementation of controls and monitoring are still missing,” and “many producers do not comply with the existing standards and regulations.”

Deregulation and general lack of social controls has led to investigative efforts resulting in harsh criticism of banana production in Ecuador. While data from the environmental impact on banana production in Ecuador is sparse, it is widely acknowledged that commercial banana farming is a high-input monoculture that exerts a heavy toll on the ecosystems that support it (Clay 2004). Banana monocultures have replaced highly diverse ecosystems, with a narrow set of cultivars related to the Cavendish variety (Clay 2004; Henriques et al. 1997). The practice of using bamboo for staking banana has led to overharvesting wild bamboo from stream banks (Cleuren and Henkemans 2003). To maintain a high rate of production and consistent yields, contemporary banana cultivation is premised on intensive use of agrochemicals and other inputs (i.e., irrigation), generating both on-site and off-site degradation (Clay 2004; Castillo et al. 2000; Henriques et al. 1997; Muños-Carpena et al. 2002). Risks of agrochemical usage are increased by poor pesticide management and storage practices, lack of pesticide-related training for farm workers, failure to use protective equipment, and use of pesticides heavily regulated in developed countries (Henriques et al. 1997). Organic and inorganic wastes stemming from production and processing, and improper disposal, pose additional risks to people and ecosystems (Clay 2004; Henriques et al. 1997; UNEP 2002).

Looking at social considerations, Human Rights Watch (HRW) has pointed out that oligopolistic structure of banana trade has had serious consequences for farmers and farm workers. Their results suggest that while the big four (Chiquita, Dole, Del Monte, and Bonita) may not directly employ minors, they acquire bananas from independent producers that rely on child labor. HRW (2002) argues that the low production cost of Ecuadorian bananas was achieved by exploiting children, repressing unionization efforts, and ignoring legally mandated environmental controls. Activist organizations such as the U.S.-based Labor Education in the Americas Project, Banafair, and Banalink have targeted Dole and Bonita operations, arguing that companies that source bananas from Ecuador are the leaders of the banana industry’s “race to the bottom” (Feral et al. 2006). The lack of effective checks in Ecuador on composition of the workforce, wages, and working conditions, combined with tolerance for environmental degradation, allows multinational exporters purchasing fruit in Latin America to use Ecuador to effectively suppress prices and demands for reform across the region (Brenes and Madrigal 2003; Frundt 2003, 2005).

Materials and Methods

Our study draws on mixed methods. First, we compare the environmental risk reduction practices of Ecuadorian banana producers holding ES and SS certifications with paired samples of noncertified producers. Environmental risk reduction is defined as the product of the application of farming practices, worker training, and management routines aimed at eco-efficiency and mitigation of resource degradation. Second, we draw on interviews and publicly available data to analyze the socioeconomic processes underlying firm decisions to seek ecocertification. Our analysis focuses on a sample of large firms, which have sought ES-certification and a second sample of smaller firms, which are SS-certified. We compare the firms in both samples to references groups of large and small noncertified firms.

Sampling

Two organizations, Conservation and Development (Conservacion y Desarrollo, the Rainforest Alliance’s Ecuador partner) and the Association of Banana Producers of El Guabo, provided sample frames from which to draw random samples of ES and SS-certified farms. All ES farms in our study are owned by Reybanpac C.A., an Ecuadorian-owned subsidiary of Favorita Fruit Company (see Table 1). Favorita Fruit Company (hereafter Favorita) is legally constituted in the British Virgin Islands, but 95% of its shares belong to the Ecuadorian Wong Group of Companies. As of 2000, all of Favorita banana farms were certified by Rainforest Alliance and its Sustainable Agriculture Network partners. All of these farms are larger than 50 ha and are categorized as “large certified farms” in our study. Our sample of large certified farms is composed of 10 of the 30 Favorita-owned Rainforest Alliance certified farms.
Table 1

Profile of two types of Ecuadorian banana producers

Size of farms

Small certified farms (<50 ha)

Large certified farms (>50 ha)

Name

Association of Banana Producers of El Guabo (Ecuador)

Favorita Fruit Company (British Virgin Islands)/Reybanpac C.A. (Ecuador)

Description

Vertically integrated Ecuadorian small-scale banana producers association that manages all the phases of the business

Vertically integrated agribusiness for the production and exportation of tropical fruits

Stakeholders

350 members5 Partnership with Fairtrade organizations (Max Havellar, Transfair)

Wong Group 95.83% of shares2 International Finance Corporation (IFC), 4.17% of shares3

Strategic partners

SNV (Netherlands) Agrofair (Netherlands) GTZ (Germany) Projects developed with Ecuadorian Ministry of Agriculture

International Finance Corporation Andean Development Corporation CDC Capital Group (U.K.) DEG (Germany)

Net worth (2003)

n/d

$153,468,00033

Holdings

2,000 ha5

9,125 ha4

Workers

~2,000

~8,000

Workers Insurance

National Farmer’s Insurance

National Farmer’s Insurance

Services provided by the firm

Employees received compensation for medical cost, 344 children received school materials (2004), childcare is provided, foodstuffs

Wong Foundation maintains 33 schools for 3000 children (30% of the alumna are siblings of company workers), and protects “Rio Palenque” Reserve Outreach and training for independent banana producers

Certifications held

Fairtrade [100%], Skal (Organic) [20%], EUREPGAP [n/d]

Rainforest Alliance [100%], ISO 9000, EUREPGAP [n/d]

Tax contribution (2003)1

$18,643

Reybanpac: $7,078 Other Favorita’s companies: n/d

n/d = no data.

12003 data from the Ecuadorian Internal Revenue Service of Ecuadorian exporters.

2Until Aug 2004, Commonwealth Development Corporation (CDC Capital Partners) held 10% of Favorita’s shares.

3Favorita (2003).

4Rainforest Alliance (2005).

5FLO (2006b).

SS farms in our study are Fairtrade certified members of the Association of Banana Producers of El Guabo (hereafter El Guabo), a farmer’s cooperative. In keeping with Fairtrade requirements, all farms in this category are smaller than 50 ha and are treated here as “small certified farms.” Our sample of small certified farms was composed of 13 of the approximately 350 farms owned by members of El Guabo. Each of these farms is Fairtrade certified. See Table 1 for details on Favorita and El Guabo and their respective networks.

No reliable sample frame exists for independent banana producers in Ecuador. Small producers are particularly difficult to identify and contact systematically. Beyond technical constraints to developing a random sample, there is deep suspicion of outsiders in the banana business, as there have been a series of recent scandalous reports of child labor on Ecuadorian banana farms (HRW 2002). Additionally, in 2003, there was a series of national strikes around banana prices and considerable civil unrest (Redaccion Guayaquil 2003b). These events discouraged responding to researchers’ questions. Based on our expectation of widespread unwillingness to participate and resulting problems of potential nonresponse bias, we elected to rely on “snowball” sampling to identify noncertified farms. Starting with two prominent and receptive growers and through chains of personal referrals, we were able to identify a set of large and a set of small noncertified producers willing to participate in the study. While some of these producers had some knowledge about the existence of Ecolabelling and certification, none of them reported contact with certification organizations. Inability to generate a random sample of noncertified farms introduces a potential bias, as owners agreeing to be interviewed presumably are more progressive and less likely to be out of compliance with national laws. Thus, our data on practices of noncertified farms should be interpreted conservatively. It is likely that our sample includes more farms in the high part of the risk reduction distribution than would be the case under random sampling. As we will see, this methodological weakness does not importantly affect our results. Snowball sampling yielded a control group of 14 farms greater than 50 ha (large) to compare with our sample of ten Rainforest Alliance certified farms (ES), and a control group of nine noncertified farms of less than 50 ha (small) to compare with our sample of 13 Fairtrade certified farms (SS).

We conducted fieldwork in 2003 in the western provinces of Los Ríos, Guayas, El Oro, Canar, and Azuay, a region that produces 81% of Ecuadorian bananas (SICA 2002). Farm practices inventory was executed through a semi-structured interview with the owner or manager on-site and field inspection of all relevant facilities. The semi-structured interview focused on enterprise characteristics, farming practices, farm administration, supervision of workers and facilities, and environmental conservation. A checklist provided the structure for field inspection and served to validate and clarify data from interviews on farm organization, infrastructure, and technical practices.

Environmental Risk Reduction Indices

Based on existing studies of environmental impacts of banana production (see review in previous section), we derived 29 assessment criteria to structure farm practices assessment (see Melo and Wolf (2005) for details of our methodology). These readily observable field- and farm-level indicators are used to compile risk reduction indices for four categories of environmental risk: land management (LM), water quality management (WQ), agrochemical management (AM), and waste management (WM). These four indices are aggregated to represent total risk reduction score (TRR) for each farm. See Appendix 1 for list of all practices and variables used to define this set of five risk reduction indices. See Appendix 2 for construction of the five indices. All scores are normalized on a scale of 0–1, with 1 equivalent to maximum possible risk reduction as defined in Appendix 2.

Statistical Analysis

Nonparametric Mann Whitney U tests were used to establish the statistical significance (α = 0.05) of differences between risk reduction scores of paired samples (Ryan and Joiner 2001). We rely on median values because data from certified farms are highly skewed and samples are relatively small. Under such conditions, the median is considered a more appropriate representation of central tendency (Ott and Longnecker 2001).

Institutional Analysis

To understand processes through which firms gained certification, we analyzed public comments and presentations of industry representatives, as well as reports, news’ releases and publications produced by nongovernmental organizations, investors, and commercial partners. Data also are developed from companies’ websites and publicly available records in addition to interviews with key representatives of the certifying bodies.

Results

We divide our presentation of results into two parts. We first respond to whether ecocertification leads to positive environmental sustainability outcomes based on a statistical analysis of our environmental risk reduction data. Then we address the implications of ecocertification for participating firms and for prospects for environmental sustainability.

Results (I): Field Survey

The results of our 2003 survey indicate clear differences between certified and uncertified farms (Melo and Wolf 2005). Both large and small certified farms exhibited relatively comprehensive environmental management systems. In contrast, noncertified farms exhibited limited, uneven, and unstructured adoption of best management practices. Both large and small certified farms exhibit higher risk reduction than comparable noncertified farms as represented by the observed combinations of farming practices, worker training, and management routines. Differences in behavior are dramatic since the lowest scoring ES Rainforest Alliance and SS Fairtrade certified farms had higher risk reduction scores than their highest scoring noncertified peers.

Large Farms and ES-certification

Large certified producers outperformed large noncertified producers on all the risk reduction indexes (Table 2 and Fig. 1). The differences were statistically significant (p < 0.0000) for LM, WQ and AM, and TRR. Significance test was not performed on the WM index because all large certified farms achieved the maximum possible score. The distributions for TRR do not overlap, with a gap of 0.20 between the minimum score of a large certified farm and the maximum score of a noncertified. In other words, the best performing noncertified producer scored 0.20 points lower than the worst performing certified producer.
https://static-content.springer.com/image/art%3A10.1007%2Fs12116-007-9009-1/MediaObjects/12116_2007_9009_Fig1_HTML.gif
Fig. 1

Large (>50 ha) farms median risk reduction score by index

Table 2

Median risk reduction scores for large and small farms (1.0 = maximum possible risk reduction)

 

Large farms (>50 ha)

Small farms (<50 ha)

Certified (n = 10)

Noncertified (n = 15)

Certified (n = 13)

Noncertified (n = 9)

Land management

0.65

0.25

1.00

0.25

Water quality

0.73

0.27

0.82

0.46

Agrochemical management

0.86

0.36

0.92

0.41

Waste management

1.00

0.33

1.00

0.67

Total risk reduction

0.78

0.34

0.91

0.46

Certified large farms’ median yield was of 39.9 MT/ha/year, while noncertified farms reported a median yield of 32.7 MT/ha/year. These relatively high yields (national average yield is 26.9 MT/ha/year) are linked to heavy use of agrochemicals and intensive, high-input production systems utilized by all large farms in our samples. In considering how certification is related to input use and yields, we note that large certified firms we studied have made investments that increase the productivity of investments in agrochemicals. For example, all of the workers on certified large farms were reported to have attended regularly scheduled training events produced by the farm manager or from experts from other units of the company. None of the uncertified farms hosted training events in our sample. The technical and organizational practices of certified farms suggest that heavy input use translates into less on- and off-site environmental degradation and less risk to workers and other people. Some agrochemical use behaviors suggest that choices of certified farms are influenced by certification requirements, for example, choice of a pesticide’s active ingredient, while noncertified farms select on the basis of price and efficacy. We found that Favorita farm’s practices follow a distinctive pattern and conform closely to requirements of Rainforest Alliance ecocertification.

Small Farms and SS-certification

Certified small farms outperformed their independent, noncertified counterparts in all the risk reduction indexes (see Table 2 and Fig. 2). The differences were statistically significant for LM (p < 0.0002), WQ, AM, and TRR (p < 0.0001). Significance test was not performed on the WM index because 100% of the small certified farms achieved the maximum possible score. The distributions of TRR do not overlap, with the lowest scoring certified small farm scoring 0.19 higher than the best performing noncertified farm.
https://static-content.springer.com/image/art%3A10.1007%2Fs12116-007-9009-1/MediaObjects/12116_2007_9009_Fig2_HTML.gif
Fig. 2

Small (<50 ha) farms median risk reduction score by index

We note that small certified farms achieve crop yields that are lower than the national average. For certified small farms using agrochemicals, the median reported yield was 16.3 MT/ha/year and the highest yielding farm reported 27.2 MT/ha/year. The median yield of certified small farms under organic management was 14.5 MT/ha/year. In contrast, median yield of small noncertified farms was 27.2 MT/ha/year and the highest yield reported among these farms was 32.6 MT/ha/year. In comparison, the national average yield was 26.9 MT/ha/year. These results suggest that, at least in this case, Fairtrade changes in practices may be linked to an initial lower yield.

Membership in El Guabo presents small certified farm owners with benefits not available to independent noncertified producers. Some of these benefits relate to capturing economies of scale generally available only to larger producers (i.e., discounts on fertilizers, negotiating delivery contracts), but the association also provides other services. For instance, El Guabo provides its members with training in agrochemical handling, mixing and loading, and provides centralized agrochemical storage in a high-quality facility. Members also are able to bring inorganic wastes from production and packaging (plastic tethers and bags) to the Association’s recycling center. Conversely, only 11% of the noncertified small farm owners provided agrochemical management training to their workers, 79% had no procedures for disposal of inorganic waste, and 66% of their agrochemical storage facilities lacked one or more of the five basic safety requirements we evaluated (e.g., the storage facility had a door that can be locked, a noncombustible floor, ceiling, and walls; and noncombustible, impermeable shelves, and posted warning signs).

In sum, ES and SS certified farms exhibit distinctive patterns of risk reduction compared to noncertified farms. In some cases, certification requirements present the farms with opportunities to achieve production efficiencies through better management, to valorize previous investments and preexisting sets of farm practices, or to mobilize resources in novel ways. Certification imposes restrictions that make adherents strive to find alternatives to dominant technical practices. Finally, certified farms are required to make investments and engage in risk-reducing behaviors in ways their noncertified counterparts are not, even if these systems are mandatory under local law. We also note that noncertified farms are consistently out of compliance with Ecuadorian laws addressing water quality, agrochemical usage and storage, worker safety, and waste management. Since only a small percentage of Ecuadorian bananas are regulated by certification, the state’s failure to enforce existing legal controls is highly significant.

Results (II): Pathways to ES and SS Certification

While we can contest the intensity of investment required by one or another certification program, the similarity of the observed risk reduction behaviors among the participating firms in the two certification programs is telling. There appears to be general agreement over sources of environmental risk and which agricultural practices should be regulated. Yet we must clarify the different paths that large farms in the Favorita network and small producers in the El Guabo network followed to reach what appears to be a similar outcome.

A variety of complementary logics motivate firms to seek certification: certification as a competitive tactic (marketing logic) (Kärnä et al. 2003); a strategy of nontariff trade protectionism (barrier to entry logic) (Kaplinsky et al. 2002); a project of protecting a right to operate (public relations or accommodation logic) (Bartley 2003); a recognition of sustainability as a mid- and long-range strategic concern (self-preservation and collective action logic) (Cashore 2002); and a manifestation of evolving commitments of owners, managers, and workers (moral logic) (Levi and Linton 2003). These logics are not exclusive and combinations are relevant in various settings.

In the case of large certified farms in our study, an infusion of international capital occurred before certification. Favorita’s efforts to improve environmental performance started as early as 1996 (Rainforest Alliance 2005). The first certification of their farms occurred, however, in 1998, after Favorita received significant loans from the Commonwealth Development Corporation and the International Finance Corporation (Favorita 2003; IFC 1998). We can argue that Favorita’s close commercial relationship with Chiquita Brands International, whose Central America plantations were the testing ground for Rainforest Alliance certification, also influenced the decision to adopt this certification system. Rafael Wong, executive vice president of Favorita, declared that “when we [Favorita] first obtained financing from IFC, the environmental standards seemed like an obstacle, but we realize now that they have helped us [to] build a strong business” (Jannsen 2000). Apparently, initial motivation to seek certification did not originate in Favorita and stemmed from dependence on outside capital and the conditions external organizations imposed. Wong’s comments suggest that Favorita recognizes value in these investments and has internalized a commitment to conservation.

Favorita reported that the company had to update or rebuild 65–95% of their farms’ existing infrastructure to become certified, including packing stations, warehouses, bathroom and shower facilities, cafeterias and lunch areas, medical care facilities, employee housing, offices, schools, and recreational areas (Wong 2001). These investments totaled US$ 8.2 million between 1994 and 2003 (Wong 2003). This is equivalent to 5% of Favorita’s net worth (US$ 153 million), or 10% of the investments and loans (US$ 80 million) that the company received during the period (Favorita 2003; Wong 2003). Data about the annual costs of maintaining certification are not available, but the company has voiced concerns about the “high costs of maintaining three certification programs” (Rainforest Alliance, ISO, and EUREPGAP) (Favorita 2004). Clearly certification was and remains a large project supported by the commitments and capital of industrialized nations. These investments helped Favorita to emerge, consolidate, and grow in a market dominated by other older Ecuadorian companies, as indicated by its growth (from 7,000 ha in 1997 to 9,000 ha in the 2001), as well as in the amount of exports (from 1 million boxes in 1997 to 35 million in 2003) (Wong 2001; Favorita 2003).

Small certified farms in our study also benefited from external investment by international organizations in developed nations. External resources included financial capital as well as direct action. SNV (Netherlands) technical advisors and the Dutch Solidaridad assisted El Guabo in creating an export company that allowed them to ship their fruit independently, bypassing traditional exporters (FLO 2006b; SNV 2004). The Fairtrade movement was also critical to create the conditions that allowed El Guabo to sell their fruit, sponsoring the creation of a fair trade importing company, Agrofair. El Guabo also received technical training on composting of organic waste from the German Technical Cooperation (GTZ). At the time of our research, El Guabo’s extension services were financed by the Ecuadorian Ministry of Agriculture and the Inter American Development Bank (GTZ 2003; MAG 2002). These varied forms of assistance have been critical for the farmers of this locality because 1998 El Niño Southern Oscillation flooded Ecuadorian lowlands (UN 1998). Jorge Ramirez, the association’s late president, declared at that time, “Fairtrade is the reason that small farmers in our association still have a livelihood at all” (Fairtrade Foundation 2002: 4). In capitalizing on external resource provision, local farmers have not been passive, as producer’s representatives have been deeply involved in Fairtrade strategic planning and policymaking. FLO’s Board of Directors includes five representatives from labeling initiatives, four representatives from producer’s organizations, two representatives from traders, and two independent board members (FLO 2006c). This structure suggest that producers have the ability to influence FLO policies, but they do not control a majority of votes.

The links between El Guabo and the Netherlands are particularly strong. While the cooperative association’s president is an Ecuadorian farmer, a Dutch woman holding an MBA is the general manager of the Association (FLO 2006b). El Guabo producers supply 63% of the bananas shipped to Agrofair, the Dutch sponsored company that imports fruit to Europe (Agrofair 2004). El Guabo is the founding member of the International Producers Cooperative, which holds a 50% of the shares in Agrofair Europe. Lastly, through this network and contacts with other Dutch organizations (DOEN Foundation and the Interchurch Organization for Development Co-operation, ICCO), El Guabo was able to implement EUREPGAP certification (El Guabo 2006). This certification is layered on top of Fairtrade certification and is administered by an association of European supermarkets concerned about food safety.

Infusion of substantial external resources explains reductions in environmental risks linked to production activities on these two different sets of farms (Wolf and Hufnagl-Eichiner 2007). Resources include financial capital, human capital, and social capital residing with actors other than the farmers we surveyed. In the case of Favorita, there is the argument that environmental sustainability initiative of Rainforest Alliance and its Ecuadorian affiliate provided an external structure “fomenting, guiding, monitoring and verifying the changes at [Favorita’s] Reybanpac” (Willie 2006). CDC and IFC provided the investment capital required to innovate while the environmental policies of these investment bodies powerfully reinforced Favorita’s commitment to improved environmental performance. Finally, Favorita had in Chiquita a sympathetic and committed commercial partner since their contracts “stipulate that they [Favorita] must provide as much fruit as possible from these [Rainforest Alliance] certified farms” (Chiquita Brands International 2002).

As for El Guabo, SNV support allowed the cooperative and its members to develop their organization, valorizing the social capital of the association. Fairtrade linked the cooperative sources of knowledge and legitimacy within the EU social sustainability network. Fairtrade labeling and retailing capabilities also enabled the farmers and their partners to command support from other sources, including the ailing Ecuadorian agricultural extension system and additional nongovernmental organizations. These cases suggest that small- and medium-sized firms in developing settings exhibit potential for sustainability (i.e., conservation of natural capital) through linkages with external (Northern) sources of various types of capital.

Data from sources other than our survey suggest that the resources needed to achieve similar risk reductions are not widely available among Ecuadorian banana producers. For instance, of the 33 companies registered in the Ecuadorian Banana Exporter’s Association (Asociacion de Exportadores de Banano del Ecuador, AEBE), only two produce Fairtrade certified bananas (El Guabo and FRUTA RICA) (AEBE 2005, 2007; El Guabo 2006; Fruta Rica 2007). Because AEBE’s members control 98% of the total exports, and membership is open (but not mandatory) to all banana exporters without size limitations,2 this finding suggests that only a minority of Ecuadorian firms can meet fair trade standards, despite the promise of economic premiums (fair trade bananas receive U.S. $1.00 per box over and above the market price) and rising demand for fair trade certified bananas (Butler 2006).

For established medium and large firms, empirical data suggest that factors other than the challenge of changing practices act as barriers to joining an ES program. According to Rainforest Alliance (2007), since 2005, only one Ecuadorian company and four Ecuadorian farms (other than Favorita) have become certified under their banana standards. Analysis of the adoption of other ES certifications suggests that low engagement in certification is not restricted to Rainforest Alliance. In studying the websites of the 33 companies registered on the AEBE (other than the four major multinationals Chiquita, Del Monte, Dole and Fyffes), we found that by 2006 only five declared that they have farms certified under EUREPGAP, a leading European ES initiative (El Guabo, EXCELBAN, KIMTECH/Le Fruit, Bonita and Favorita’s Reybanpac) (El Guabo 2006; Excelban 2005; Le Fruit 2007; Bonita Bananas 2007; Favorita 2006). One firm has plantations certified under the USDA National Organic Program norms (JORCORP) (Dusal Fruit 2007).

Because some firms are becoming certified, it suggests that the technical and organizational challenges can be met by local medium and large firms, and that these firms can make the required investments. The relatively low level of engagement is puzzling since certification secures access to highly contested markets (see Campbell 2005). Other constraints appear to mediate enrolling in ecocertification. Favorita’s experience suggests that some coercion, as exercised by a commercial partner that sees itself as vulnerable to public criticism, an environmentally-concerned financial institution, or a state regulatory agency is required before firms commit resources to ecocertification.

Conclusion

The resource dependence firms in the South show raises questions about whose interests are represented in certification efforts and where agency can be attributed. Further, the linkages we point to in these networks blur the boundary of firms in our case study. To what extent these commercial actors are Ecuadorian firms and how much their achievements and shortcomings stem from their status as firms of the South is unresolved, but it is clear that caveats exist for sustainability achieved by developing countries firms linked with Northern-led ES or SS programs.

Certification is producing local and global benefits. Through partnerships, small farmers become highly organized, which enhances their environmental and socioeconomic well-being (see Kydd and Dorward 2001). Technical and organizational requirements that define certification programs have the potential to modify the behavior of both small and large firms. Ecocertification is arguably most effective in addressing concerns regarding foreign investment, as certification norms constrain how capital of participating foreign firms can be used. Beyond immediate benefits in terms of health, environmental quality, and ecological integrity, certification requires that firms reinvest locally on a recurring basis. Maintenance of certification demands that infrastructure be maintained and that training must be continually updated. While little data exist to help us understand its significance, the “continuous improvement” requirement attached to certification represents a potential resource for expanding environmental benefits and expanding the capabilities of local people and local firms on a recurrent basis.

As we stated earlier, certification has the potential to alter patterns of investment, behavior, and learning, each of which has specific implications for local people. To the extent that the distribution of political and economic power is shaped by control over knowledge, the potential for certification to enhance and valorize local people’s knowledge and capabilities warrants our attention. By knowledge production, we refer to the competencies required to compete and innovate successfully under a given set of “upwardly mobile” certification norms. If certification is a pathway that allows firms in developing nations to create and exploit sustainable agricultural production systems that are valuable, nonsubstitutable, rare, and difficult to replicate (Hart 1995), it is possible to envision a self-reinforcing dynamic in which private incentives are aligned with social objectives. In this sense, commitment to strict certification requirements can lead to positive outcomes for both participating producers and society more generally (Porter and van der Linde 1995).

While attractive in concept, a model of innovation based on large numbers of firms mobilizing resources and transforming themselves in response to changing incentives is not readily applicable in Ecuadorian banana production. Our observations lead us to question the wisdom of relying on industry self-regulation to deal with environmental management (see also Christmann and Taylor 2001; OECD 2003). Much of the Ecuadorian banana industry seems to be winning “the race to the bottom,” and seems to be “stuck at the bottom” because most individual producers are largely isolated from incentives and resources enticements for improvement (Porter 1999: 133). In the current situation, it is improbable that many independent producers can access the resources required to achieve progress toward sustainability. As Barrett et al. (2001) have noted, conservation amid weak state, market, and civil society institutions is unlikely, in part because of lack of mechanisms to align private priorities with social values. Under these conditions, it is also improbable that many independent producers can access the resources needed for achieving even a moderate degree of environmental sustainability.

Our data indicate that ecocertified firms are likely to produce lower public risks than noncertified counterparts. There are material differences in behavior and we found no evidence of green washing (i.e., unsubstantiated claims). It is important to mention that credible certification systems are currently relevant only for the top segment of the relevant populations. Voluntary certification systems do not reach firms that lack the resources to improve their production practices or are simply reluctant to jeopardize their brands by adopting the distinctive ecolabel associated with a business rival (see also Jansen 2004). Most producers and acreage will remain uncertified. Consequently, we advocate for institutional plurality. In addition to support for diverse certification schemes, there is a continued need for state engagement in regulation and development and for politicization of production and consumption relations.

Finally, the environmentally relevant achievements of the developing country firms we studied reflect the interests and the resources of nonlocal actors. Financial capital and social capital derived from developed nations are an essential part of this development dynamic. The interplay between commodity producers in developing nations and their rich-world partners and sponsors raises questions about the agency of developing country firms to achieve environmental sustainability. We have documented an externally imposed version of environmental sustainability. Beyond highlighting that achievements to date cannot be attributed to local resources, dynamics, and institutions, we offer an additional finding that some may find sobering. Since this form of sustainability depends on developing country firms being attractive and accessible to actors in the North, it is likely to remain out of most producers’ reach. The top-down sustainability we observe at work in Ecuadorian bananas is not likely to diffuse across the entire population of firms, thus raising doubts about the scope of this approach.

Footnotes
1

See Mutersbaugh (2002) for critical discussion of the contradictions embedded in ecocertification.

 
2

The AEBE groups 33 Ecuador’s banana exporters. Five members are subsidiaries of multinationals (Chiquita, Dole, Del Monte, Fyffes, and Bonita). Twenty-eight others are Ecuadorian medium or small firms (among them El Guabo, and Favorita’s Reybanpac).

 

Acknowledgement

We acknowledge valuable contributions to this article by Juliet S. Erazo, Ryan Galt, Simone Pulver, and anonymous SCID reviewers.

Copyright information

© Springer Science+Business Media, LLC 2007