Every day, people consume products that have stories beginning thousands of kilometres away. The coffee we drink and the clothes we wear are the end points of journeys that cross borders and pass through the hands of countless farmers and workers.

In conversation with Vidya Rangan, ISEAL's Director of Policy and Engagement, we explore why supply chain sustainability cannot be achieved through compliance alone, and how standards are shifting to encourage participation from the ground up.

Supply chain sustainability is inherently complex

Many modern supply chains span multiple countries and stages, from raw materials and processing to packaging and distribution, often taking advantage of differences in labour costs, materials and regulatory environments before products reach consumers.

The number of actors involved makes supply chains difficult to govern. From smallholder farmers and processors, to traders, importers and retailers, each handover is a point where oversight can slip.

Visibility diminishes sharply beyond direct suppliers, and it is in these upstream tiers where the most serious harms tend to occur. Child labour is one example. According to the International Labour Organization, over 98 million children aged 5 to 17 are engaged in child labour globally, the majority in agriculture, a sector that underpins most of the world's major commodity supply chains.

The long journey goods take from production to end consumer also have an environmental cost. Supply chain emissions (Scope 3) account for over 70 percent of a typical company's carbon footprint.

The further goods travel, the harder those emissions are to track and reduce. For example, deforestation and water depletion run through supply chains in ways no single audit can fully capture. These are structural challenges that require a deeper understanding of root causes.

How sustainability standards emerged

Sustainability standards emerged in the late 1980s and 1990s to address governance gaps in the market. The 1992 Rio Earth Summit failed to produce binding international agreements on deforestation, prompting NGOs, social movements and businesses to develop market-based approaches to sustainability.

Standards are market-based tools that define good practices or set benchmarks for businesses or supply chain actors to adopt in given sectors or commodities. The most credible schemes work with a range of stakeholders – communities, companies, civil society, researchers and governments, creating a common understanding of what good practice should be.

When adopted at scale, standards hold the potential to fundamentally shift production practices, corporate actions and shape policy.  Standards started off with a compliance-based approach: define requirements, check if they are met and grant certification as recognition. There is still merit in this approach – for example to check if factories have the right fire protocols in place or if farms are avoiding use of a banned pesticide.

But we know that a compliance-based approach alone will not address root causes of unsustainability that often stem from structural inequities, insufficient investment and a lack of incentives to shift behaviours in the long-term. For example, although studies show that farmers adopting standards often earn more from certified crop sales, relatively few show significant increases in household income, particularly where those crops represent only a small share of income or better sales are negated by higher costs.

Compliance also does not help solve the challenge of hard-to-reach and marginalised groups such as landless farmers or migrant labourers. Standards may fail to drive any change in such contexts as certification cannot substitute for legal enforcement, basic public infrastructure or access to finance and markets.

From certification to systems approaches

Over the last fifteen years, sustainability standards have gone from being simply certification tools to a means to drive systemic change. This shift is reflected in the growing use of the term ‘systems’, recognising that a range of strategies is needed to drive sustainability in markets and supply chains.

Good examples of the transition from standards to systems are schemes adopting living income and living wage approaches, setting up ‘roundtables’ to convene stakeholders and drive sector transformation or being recognised in trade and regulatory policies to scale uptake of good practices.

Addressing structural challenges in global supply chains requires more than periodic audits. It depends on coordinated action across the full ecosystem, with producers, companies, governments and civil society working towards shared goals, supported by shared evidence.

ISEAL supports this evolution by convening stakeholders across sectors and geographies and facilitating cross-learning between sustainability systems. It also supports innovation where existing approaches fall short, and strengthens the evidence base through the Evidensia platform, a shared resource to learn about the effectiveness of market-based sustainability approaches.

The ISEAL Innovations Fund serves to drive innovation among sustainability systems. Since 2016, it has backed over 100 collaborative projects across geographies and sectors, strengthening how sustainability systems respond to critical sustainability challenges.

For example, in 2021 the Fund supported the Rainforest Alliance to develop Child and Forced Labour Risk Maps across the tea, cocoa, banana, and coffee sectors. The learning is informing how other sustainability standards approach risk-based assurance.

More recently, a project led by Better Cotton explored principles for GHG data collection, accounting and reporting in agricultural commodity production, laying the groundwork for farm-level carbon accounting methodologies that will guide future reporting.

Certification was a necessary first step, but standards have always been a means to an end. The next step is scaling systems approaches that can adapt as markets, policies and conditions evolve.

The cost and benefits of sustainability standards

Adopting sustainability standards involves direct and indirect costs that businesses must navigate. Upfront investments are often needed to upgrade manufacturing infrastructure, adjust production methods, strengthen management systems and train staff. Businesses also incur administrative costs related to demonstrating compliance, including audits, due diligence and reporting.

What is less often discussed is the time investment involved. Activities such as stakeholder consultations and data verification can be time-consuming, particularly in the early stages. This upfront investment helps build the systems and capabilities needed to meet requirements effectively over time.

Evidence shows that these investments can deliver tangible gains, particularly by improving performance and market outcomes. Investments in better practices can enhance efficiency, reduce waste and lower costs over time.

A literature and evidence review by Aidenvironment in 2022 of the business benefits of adopting standards found that operational benefits were cited in 83 percent of studies, often linked to improved performance and more effective sustainability strategies.

Benefits also extend beyond operations. The same review found that nearly 73 percent of sources highlighted gains related to sales and marketing. Stronger sustainability performance can enhance a company’s reputation and attract consumers and investors who prioritise environmental and social responsibility.

Businesses that do not adopt sustainability standards face several disadvantages that can undermine their long-term viability. Without a clear sustainability strategy, companies may struggle to identify emerging risks, respond to market expectations or access certain markets and face greater financial and legal exposure.

Smart mix of voluntary and mandatory actions

As governments introduce new regulation to address environmental and social challenges, businesses will need to adapt. New laws from the European Union now require companies to conduct due diligence on human rights and environmental risks, report on sustainability actions and ban products made with forced labour or from deforested lands.

Navigating these emerging requirements presents challenges for businesses. Credible sustainability systems are well positioned to support them, drawing on years of practical experience, established frameworks and trusted verification mechanisms.

Mandatory and voluntary approaches are not mutually exclusive, they complement one another. Regulatory measures such as due diligence obligations and environmental disclosure rules set baseline expectations and help level the field across markets.

Voluntary sustainability systems, by contrast, often raise the bar by helping business go beyond the legal minimum, innovate and think about long-term sustainability. They support progress beyond compliance through technical expertise, collaboration and enabling continuous improvement, underpinned by independent assurance.

A smart mix of mandatory and voluntary action can be highly effective in addressing sustainability challenges. Together, they provide a regulatory foundation while enabling the flexibility needed for continuous improvement and innovation and enabling progress beyond certification.