A conversation between Ana Garzon (Assurance and Operations Manager at Textile Exchange) and Joost Backer (Senior Consultant at NewForesight)
As of 2023, the sustainability space is faced with two trends: a growing urgency of sustainability challenges (climate, human rights) and an increasingly high-risk market context around sustainability systems, including voluntary sustainability standards and private company verification schemes. This dual challenge underlines the necessity for assurance systems to prioritize efficiency and effectiveness while remaining alert to evolving operating conditions. Assurance management innovations are needed to meet stakeholder needs while effectively managing risks to program integrity.
What exactly does it mean for assurance systems – and the organizations that run them – to be ‘effective and efficient’? Read the conversation below between Ana Garzon, Assurance and Operations Manager at Textile Exchange, and Joost Backer, Senior Consultant at NewForesight.
What is ‘assurance’, and what is its role in sustainable market transformation?
Joost:
Let’s take a step back and position ‘assurance’ within the wider goal of achieving sustainable markets. One of the core questions in sustainable transitions often is: ‘What is the desired behavior of market actors in a given context (e.g. uphold human rights in the supply chain), and how can we verify compliance with this behavior?’ The answer to this is often a standard, a benchmark, or a similar sustainability tool that defines, verifies, and promotes the desired practice in the production, handling, and sourcing of products.
This is where assurance comes in. Assurance (and in this case, ‘certification’) provides the security that a claim made against a particular standard is accurate, impartial, and transparent (or ‘credible’). An assurance system is the coordination of people, process, and information that come together, usually through conducting audits, to assure the credibility of a ‘certified’ product claim. This system can be managed by a not-for-profit scheme owner (such as Textile Exchange), but is increasingly adopted by companies in private, internal assurance or other types of verification systems. The focus of this article is predominantly on the first group (not-for-profit organizations).
Without an effective assurance system, it is difficult to assert that a standard or other sustainability tool provides verifiable evidence of conformity to specific requirements. Having a fit-for-purpose assurance system therefore allows participating organizations to be assessed in a consistent and credible way, thereby making sustainability claims robust and verifiable.
‘Assurance’ is a phenomenon that has been around for decades already. Why has it become increasingly important to have robust, effective and efficient assurance systems in sustainability in 2023?
Ana:
Conditions are changing for assurance systems which require them to evolve. Changing circumstances include an increasing consumer demand for sustainably sourced products across a growing range of industries and market risk contexts. The growing number of (to be) certified organizations across complex supply chains and geographic contexts exerts greater pressure on assurance systems, such as managing the corruption and fraud risks that come with a growing reach. Furthermore, regulatory changes in the EU and United States increasingly require companies’ sustainability claims to be backed by trusted, verifiable data for sustainability reporting. Standards and assurance systems play a crucial role to deliver on this.
These conditions put greater pressure on assurance systems to improve effectiveness and monitoring of assurance operations across geographies, commodities, and stakeholder groups. However, assurance systems cannot address everything, everywhere, all at once. In order to address this range of needs with limited resources, assurance systems must therefore upgrade and evolve their practices using a proactive risk intelligence lens to anchor assurance system design, policy and processes. In other words, they must prioritize their activities, and proactively target their limited resources (expertise and capacity) towards the most critical integrity risks – such as corruption, insufficient auditing rigor, but also climate change or a changing political context.
Joost:
I agree with Ana, and would like to add that a risk-based approach helps identify and improve on (potential) inadequacies in the standard or assurance system, before it escalates into a public concern.
Why? As long as sustainability claims have been made, those claims have been scrutinized. And they should be. For the past years, we have seen examples of assurance systems being criticized in public: claims are criticized to be hollow statements of ‘greenwashing’, carbon credits supposedly do not result in as much emission reduction as stated, or human rights violations continue to take place in organizations that are certified to prevent them. This public concern is both necessary and desirable.
However, in response to this criticism, organizations, movements, or consumers often choose extreme measures. Responses include boycotting a commodity, rather than trusting certification to assure its sustainability. Think of palm oil, in which increasingly, brands are differentiating themselves by claiming they are ‘100% palm oil free’, whereas certified palm oil may be at least as, if not more, sustainable than using other ingredients.
As a standards organization with a supporting assurance system, you therefore want to proactively subject your assurance system to scrutiny before others do. Be transparent in what a standard and assurance system offers and what sustainability claims can be made based on the standard. Have internal monitoring, evaluation, and learning structures in place. And identify risks and errors before it goes wrong – especially in a public context. In 2023, it is an absolute necessity for assurance systems to do what they are built for: building trust, accountability and collaboration towards a shared sustainability vision, by ensuring sustainability claims are credible and addressing errors well in time.
What is the main challenge assurance systems face today, and how can this challenge be addressed?
Ana:
I believe the tension between growing pressure to meet the demand for certified products on the one hand, and the need for high-quality, credible assurance forms a great challenge.
Sustainability standards system assurance relies on consistency, rigor, and replicability of a set of processes. Many standards systems adhere to norms such as ISO standards and ISEAL Alliance best practice requirements that reinforce the importance of these characteristics and lend credibility to assurance.
However, there is a growing trade-off between efficiency and effectiveness. Growing demand for certified products reinforces the need for assurance systems to be efficient and handle ever higher volumes of (certified) products in a short amount of time. This need for efficiency can run counter to established assurance practices that ensure credibility and effectiveness, such as high quality in-person audit processes, strong relationships with stakeholder groups, and well-documented audit results. An example where assurance processes are impacted is the growth in remote auditing as a common practice since the Covid pandemic. If not done right, or when in-person audits are fully replaced by remote audits, this is a practice that carries additional risk to assurance process integrity.
Assurance systems today must therefore balance the dual challenge of addressing a range of assurance operations and market risks in a credible yet efficient manner. They can do so by building intelligence from their efforts to make good, risk-based decisions. Assurance systems can leverage the conditions of the digital age to collect and analyze data and use it to inform risk-based decision-making. In this way, verifiable data from audits needs to be the raw material for fueling assurance system design and management. This requires assurance systems to carefully devise data collection efforts, augment their system intelligence, and use it to improve and innovate the assurance process.
But let’s be careful: we should also take care not to focus on technology to create value with data, since we continue to see that technology alone does not lead to data value creation. This requires upgrading the risk management function while strengthening data management and governance. This would allow assurance systems to ably identify risks and target risk treatment measures needed to protect standard integrity.
How did Textile Exchange and NewForesight collaborate to build a risk-based assurance system that balances effectiveness and efficiency?
Ana:
The Textile Exchange assurance model review was aimed at strengthening the assurance system across key assurance system functional areas that could benefit from enhanced efficiency, innovation, and performance incentives. By looking at these areas of the system in depth and gathering external inputs from stakeholders (certified sites; certification & accreditation bodies; ISEAL members) on their experience with our assurance system, we were able to prioritize a specific set of activities that could enable our system to meet enhanced credibility, efficiency, and performance measures. We also identified assurance innovations that peer organizations are undertaking to answer similar questions about assurance effectiveness.
Project recommendations include a set of activities in a logical sequence that will enable us to build a next-generation assurance model that centers assurance on risk management to meet stakeholder needs and strengthen system performance.
NewForesight’s previous experience and background working with other sustainability standards systems were helpful in providing a high-level, balanced view of assurance system challenges today along with concrete approaches to assurance innovations.
What recommendation would you give those who read this article?
Ana:
Take a fresh look at how the current market risk context for sustainability systems could inform innovations in how assurance risk and data management work together to meet assurance objectives. This requires building capacity and expertise within assurance teams in order to create high visibility of assurance data value chains and understand how they are connected to risk management.
Joost:
Take a step back and reflect upon what ‘assurance’ really means for your organization. Dare yourself to think out of the box: what should it be, what is the role of assurance in the long-term sustainability mission your organization is pursuing? This will provide you with new insights on what your assurance system should be – and what data you should collect in what manner. From there, you can assess what the most urgent or important changes to your current system are for you.
Interested in learning more about the assurance of the future? Contact Ana Garzon (Textile Exchange) or Joost Backer (NewForesight).
About the authors
Textile Exchange is a global non-profit driving a positive impact on climate change across the fashion and textile industry. It guides a growing community of brands, manufacturers, and farmers towards more purposeful production from the very start of the supply chain. By 2030, its goal through the Climate+ strategy is to guide the industry to achieve a 45% reduction in greenhouse gas emissions within fiber and raw material production.
NewForesight drives transitions towards sustainable economies. We believe that sustainable transitions can be managed and offer many business opportunities. You can benefit from these opportunities while making a credible impact. Since 2008, we have partnered with leading businesses, governments, civil society organizations and multi-stakeholder platforms to power transitions in over 35 sectors and 45 countries. From transitions in agriculture, social and economic empowerment, infrastructure and the built environment, energy, and circularity.
Our services cover the complete sustainability journey: from inspiring the change, diagnosing the current state, strategizing the plan, to implementing the changes, and assessing the impact of your sustainability efforts.
Contact us today to discuss your specific needs and to learn more about our services.
Joost Backer: joost.backer@newforesight.com
With the support of NewForesight, Textile Exchange recently completed a review of its assurance system to identify areas of strengthening and innovation.