I think third-party certifications have become increasingly important. But the goal is to find a match with a certification that drives growth in revenues, not just mitigates risk. Sorting through all the options can be challenging. Too often, I’ve seen companies develop strategies that they believe are close to best practice, but don’t realize where the market has moved and how quickly. Certifications typically do the work to define best practices or tiers to a leading level. Certifications can take away the risk of overstating progress -- a nice way of saying inadvertent “greenwashing”, which I find is prevalent. I do not believe a lot of companies plan to greenwash; rather, they do not have the right team in place to understand where the market has gone. They may be aligning with practices five or more years old, believing they are leading on an issue when that issue has actually moved much further along. Finally, various stakeholders have challenged companies on “greenwashing” their sustainability initiatives in the past, but now these stakeholders are more attuned to authenticity, for which certifications provide support. Employees, especially younger ones, want to see commitments to third-party verification. Media outlets have also deepened their understanding of sustainability issues and are better at stress-testing communications from companies.

Absolutely. Let’s start with a few where certifications have become almost mainstream. • Buildings & Real Estate: While I’ve seen options here explode, the big 4 in the U.S. are still LEED, WELL, Living Building Challenge, and Energy Star. People want to work in a certified building in part because it can be better for their health. It’s rare to see marketing materials for new office buildings that don’t discuss certifications. • Food Products: These companies are on the front line. Certain types of food certifications—take organic or non-GMO as examples – attract consumers. Retailers and restaurants have committed to purchasing only certified products such as McDonald’s commitments to purchasing certified palm oil and fish certified by the Marine Stewardship Council (MSC). Walmart’s commitment to offering certified seafood ranges from products certified by the MSC to products certified by the newer Aquaculture Stewardship Council. • Textiles: Product labels often indicate the fabric is organic, recycled, or the fabric has been certified by the Sustainable Apparel Coalition’s Higg FEM Assessment. • Retail Sector: Retailers have embraced other certifications for non-food products, such as personal care products and cleaning products. An example is Home Depot working to have more suppliers certify to EPA Safer Choice, which for some suppliers means re-formulating products to use safer ingredients. Fair Trade and the Leaping Bunny certification of no animal testing are other examples. • Building materials: These companies are moving to include more information on certifications like FSC-certified wood and certification of construction materials ranging from carpets (i.e., Cradle-to-Cradle) to insulation (SCS Indoor Advantage) • Manufacturing: Excellent operations are the backbone of managing energy, water, and other natural resource consumption during the manufacturing process. ISO 14001 and ISO 9001 are certainly important to customers, but I think these are perhaps examples of where the certification process is even more important to employees and customers who understand the commitments to quality that align with these certifications. • Appliances: Consumers now readily understand Energy Star when looking to buy appliances, and WELL – a water conservation certification – is another recent addition from EPA.

First, if any certifications overlap with a business’s offerings, someone in the company should, at minimum, be informed about the certification, who is using it, the requirements, and etc. Companies should also continuously listen to their customers and track their peers to understand which certifications enhance sales, then pursue those that will attract customers as soon as possible. When competitors add a new certification, I always advise a company to look carefully at whether they can add that certification as well. In terms of timing, it all depends on the level of resources necessary – including time and possibly added costs – but as a rule of thumb, first-mover advantage is a real dynamic for certifications. The most pressure comes when the majority of companies in an industry have moved to a certification, then laggards that haven’t locked in compliant suppliers can pay high costs for access to products – we saw this with a big move to certified palm oil due to a very effective NGO campaign. Companies that had committed to having certified palm oil and had signed long-term supply contracts were much better positioned than those that had to rely on spot markets.

It’s important to research the participants and the process for developing and awarding certifications. I look for one of three things: (1) government-led programs such as EPA’s Energy Star program, Safer Choice, or the Department of Agriculture’s USDA Organic label; (2) certifications developed and run by associations like the International Standard of Organizations (ISO); or (3) certifications managed by multi-stakeholder groups such as the Sustainable Apparel Coalition’s Higg FEM Assessment; the Forest Stewardship Council’s “FSC” certification for lumber and paper; the Roundtable for Sustainable Palm Oil; Cradle-to-Cradle Certified by the Products Innovation Institute; or the Marine Stewardship Council (MSC).

The certification process will drive new data needs that may have to be updated annually in addition to new flows of information between buyers and their supply chains down to third, fourth, etc. tier suppliers. But I would also note that certifications are a process, and often only a few products or a few buildings meet the criteria initially. It’s very common and credible to have goals of having 50% certified by ‘X’ date, 75% by ‘Y’ date. Then, the company can both track progress for internal reporting and decide what to report externally. There may be less credibility in reporting 10% progress, but having a line of sight to how to grow that number is notable and companies should not hesitate to report on early steps. The only exception is when the rest of the industry is already at 80% or 100%. In those cases, the lagging company can provide some explanation or may want to wait a year if its numbers are poised to improve significantly. In any case, all progress towards certifications should be disclosed to the board with additional context – what customers are asking for, if there’s a price premium and for how long, and what competitors are doing.

I think there are only 2 hurdles, but both are complicated. First, changing operating practices for a company and its suppliers is often required. Some technical innovations may even be necessary to meet the certification. This is hard work, as anyone who has ever worked in operations knows. Second, although costs are typically well-defined, the benefits of added market share or premium pricing are less certain, so the ROI of certifications is not black and white. There has been a lot of great academic work to refine the numbers, such as the impact of green building certifications on occupancy rates and other financial metrics, but those in the role of CSO should have a point of view on the value of a certification and ways to measure their success in creating that value.

The B Corp certification process can align well with annual sustainability reporting, but it does take the involvement of many different departments at the company and requires a lot of data. Luckily, a company only needs to renew every 3 years, which is smart because it can take that long to show measurable progress on key issues. Many of the questions overlap with topics that would logically be included in an annual external sustainability report, such as diversity statistics, energy and water consumption, renewable energy purchases, use of recycled materials, company policies, and so on. The B Corp certification is also a great way to refine a company’s road map to improvement. As an overall certification of excellence in managing environmental, social, and governance issues, I’ve been very impressed with the comprehensive and rigorous nature of B Corp certification. I do think consumers recognize the label more than investors. One lesson we learned was that we needed to do a better job of educating our investors about the value of the certification. At the same time, I underestimated the pride our colleagues took in reaching the certification in our early days as a public company – one of the first public B Corps. Many companies apply and don’t earn the certification for years.

There is a clear trade-off between doing one certification well – having all products meet that standard – and trying to move forward on multiple paths. When funds are limited and certifications add costs, I would opt for doing one well versus spreading too thin. However, NGOs, customers, and competitors may be forcing action on multiple fronts at once. It is a judgment call. Many of the organizations managing certifications are also terrific resources for how to get there and can provide a lot of excellent free advice— another benefit often overlooked. It’s a free class in best practices. Finally, one additional layer of complexity is that some retailers such as Amazon, Target, and Whole Foods are developing their own labelling programs. These programs often complement third-party certifications, but companies need to monitor these bespoke “labels” as well. For further information on green labels by sector, see EPA’s summary of eco-labels: https://www.epa.gov/greenerproducts/introduction-ecolabels-and-standards-greener-products