4 - Changing the Market

Summary

Chapter 4 examines the success of standards in changing prevailing market mechanisms in the conventional commodity chain, and providing reliable market incentives for behavior change. It first takes note that only two out of the seven standards under analysis have the clear aim of fundamentally changing pricing structures. Yet, during a period of mainstreaming and competition between sustainability initiatives, these standards have been overtaken by more industry–friendly alternatives that offer negotiation–based price premiums. Standards’ failure to limit participant entry through strict rule–setting and the existence of information asymmetry regarding buyers’ future purchasing patterns has led to a large oversupply of certified coffee, driving down such premiums. They are also likely to be absorbed by other supply chain actors. The chapter further shows the difficulty of isolating the market–based effects of market–driven regulatory governance from the multitude of simultaneous signals related to quality, origin, or timing. Price incentives trickling down to producers have thus substantially weakened, putting into question their motivation to comply with costly behavioral rules.