There is considerable evidence that adopting Level 1 private food safety and quality standards such as GlobalGAP is especially challenging for small-scale farmers (Ashraf, Giné & Karlan, 2009; Graffham et al., 2007; Roy & Thorat, 2008). Compliance with standards entails high upfront investments in farm facilities and equipment, which smallholders are often not able to incur, especially if they lack access to credit (Jaffee et al., 2005). In addition, the costs of compliance with standards are, to a large extent, fixed costs, which disadvantage small-scale producers (Chemnitz, 2007; Jaffee et al., 2005). Besides, the technical and information requirements of standards are high. Farmers have to adopt more sophisticated farming practices, and they require producers to be informed about changing requirements of standards. However, acquiring information is also subject to economies of scale (Narrod et al., 2009; Roy & Thorat, 2008). Poor education levels and a lack of access to extension services and training programmes further hinder the implementation of food safety and quality standards by small-scale farmers (Markelova, Meinzen-Dick, Hellin & Dohrn, 2009).

In the light of the above-mentioned challenges, several donors, governments and NGOs in Thailand and India—as in other developing and emerging countries have initiated development programmes to facilitate the adoption of private standards by small-scale farmers (McCullough, Pingali & Stamoulis, 2008). Most initiatives focused on the GlobalGAP standard, which became increasingly mandatory to supply the European market in the mid-2000s and therewith threatened to exclude small-scale farmers from high-value markets (Humphrey, 2008; Will, 2010). These programmes supported the creation of farmer groups and offered financial assistance, training and information to the groups to achieve certification (Humphrey, 2008; Kersting & Wollni, 2012; Roy & Thorat, 2008). Moreover, public–private partnerships were formed between donors and exporters to enable small-scale farmers to adopt the standard as part of exporter–outgrower schemes (Holzapfel & Wollni, 2014a; Humphrey, 2008; Narrod et al., 2009; Roy & Thorat, 2008).

Notwithstanding these developments, the number of GlobalGAP-certified producers remains low. In 2016, 188 F&V producers in Thailand and 8006 F&V producers in India were GlobalGAP-certified according to the GlobalGAP database. These are low numbers given that there are almost six million farms in Thailand and more than 263 million farms in India. In Thailand, the number of certified producers has even declined.While in 2009, 809 producers in Thailand were certified with GlobalGAP, this number declined continuously until 2015 where only 55 producers were certified (Table 3). In 2016, the number of certified producers again slightly increased to 164 producers (GlobalGAP, 2016). According to Thai experts, the decline in the number of GlobalGAP-certified producers can be explained by a high number of Rapid Alert System for Food and Feed (RASFF) notifications. To avoid a ban by the EU on Thai exports of F&V, the Thai government started in September 2010 to inspect 50% of produce intended for the European market. Earlier, only 10% of produce was randomly sampled. In addition, the government introduced an establishment list for exporters to the EU to increase the level of control. These measures have led to Thai F&V exporters supplying the EU market to limit their production and activities.

A shift from group certification towards individual certification can be observed in the case of Thailand. Compared to individual certification, group certification can make compliance with GlobalGAP feasible for small-scale farmers by reducing the costs of compliance for the individual producers and by making it easier for external service providers to provide farmers with advice and training (Will, 2010). Two main group types exist under GlobalGAP option 2. The first is farmers' association or cooperative where the group is managed by farmers, and the second is an outgrower scheme of a company, where the company organizes smallholders and manages the group (GTZ, 2010). In Thailand, in 2009, only 29 producers were certified under option 1 while 780 farmers were certified in eleven farmer groups. In 2015, only two small producer groups with a total of 12 farmers were certified while the number of producers certified under option 1 increased to 43. This indicates that GlobalGAP adoption by smallholders is extremely challenging and often not sustainable as has also been shown by Holzapfel and Wollni (2014b). The case of India, however, shows that group certification can work. The number of farmers and groups certified in India has steadily increased from 2125 farmers (42 groups) in 2008 to 8006 farmers (87 groups) in 2016.

In addition to programmes supporting smallholders in adopting the GlobalGAP standard, both Thailand and India started developing their own national private standards, ThaiGAP, IndGAP and IndiaGAP, with the aim of achieving GlobalGAP benchmarking status, i.e. recognition as GlobalGAP equivalent. The standards are adapted to local circumstances and are thus expected to be easier and less costly to comply with than the GlobalGAP standard (Indian Agricultural and Processed Food Products Development Authority, 2011; Keeratipipatpong, 2010).

The ThaiGAP standard is a product of cooperation between the Thai Chamber of Commerce, Kasetsart University, the National Food Institute, the National Metrology Institute of Germany and the German Technical Cooperation Agency (Keeratipipatpong, 2010). The standard achieved benchmarking status in 2010, but benchmarking was not renewed for GlobalGAP version 5 due to a low demand for the standard, which is reflected in the decreasing number of GlobalGAP-certified producers. It is not clear to what extent the ThaiGAP standard was successful in lowering costs of compliance and in making compliance less challenging.

The Indian case is rather complicated as there are two national standards with two different owners, namely: IndiaGAP owned by the Bureau of Indian Standards (BIS) and IndGAP owned by Quality Council of India (QCI). Both IndiaGAP and

*Source* GlobalGAP (2016) IndGAP still seek benchmarking against GlobalGAP (Punjabi & Mukherjee, 2015; see www.qcin.org). The IndiaGAP, owned by BIS, was drafted by the Agriculture and Processed Food Export Development Authority (APEDA) in 2007 but was first officially released in 2010. Though a public standard, APEDA designed the IndiaGAP closely around the GlobalGAP but fitted to Indian conditions. IndiaGAP aims to help in the adoption of good agricultural practices all over the country and is oriented for Indian producers (both big and small farmers) that are in the high-value export market for agricultural products. Similar to the GlobalGAP, under the IndiaGAP certification scheme, farmers have two options for certification: individual and group certifications. It is expected that if IndiaGAP is properly implemented through certification of model farms, exports will increase by 25–30% (Food Industry India, 2007; see also www.bis.org.in).

The IndGAP was drafted and released by QCI in 2014. According to a 2016 interview with a QCI representative, APEDA, after creating the draft IndiaGAP, turned over the draft documents to QCI to use as the basis for developing IndGAP. So, while APEDA was occupied promoting IndiaGAP, QCI developed IndGAP (national standard for high-value exports) and basic IndGAP (local standard for domestic market). Meanwhile, IndGAP originates from an institution created through private– public partnership (PPP), with up to 50% funding from the government and the rest coming from industry bodies. QCI was set up as an accreditation body in India, and although its chairman is appointed by the Prime Minister, operationally, QCI is liberated from government control. QCI has a third-party verification system for the IndGAP in place.

IndiaGAP from APEDA and BIS is government-owned and government-led. Since its inception in 1980, BIS has been mandated by Parliament to prepare various Indian national standards and therefore had the legal authority to own and publish IndiaGAP. However, its implementation posed some problems. The structure of Indian government ministries is such that the Ministry of Agriculture is responsible for anything related to domestic agriculture whereas the Ministry of Commerce has the mandate for activities related to exports. Thus, since the original IndiaGAP refers to agricultural products that are destined to go outside of India, APEDA and BIS had to deal with two different Indian ministries whose jurisdictions overlap in the implementation of this certification scheme. A second issue is that unlike IndGAP, IndiaGAP does not allow for third-party verification. There is no third-party certification system that was built around IndiaGAP when the standard was drafted, creating problems of legitimacy and robustness of the standard. Thus, although efforts to have IndiaGAP benchmarked against GlobalGAP have been made, its lack of third-party verification needs to be resolved.

#### *2.3 Level 2 Standards: Local GAP Standards for Broad-Scale Adoption*

Both the public and private sectors in Thailand and India have introduced local GAP standards for the high-value domestic markets and the export supply chain, resulting in two coexisting standards and confusion among producers and exporters.

#### **2.3.1 Thailand**

In Thailand, the government passed the 'Road Map of Food Safety' and introduced the Q-GAP standard, a national voluntary standard for good agricultural practices, in 2004. The aim was to implement effective food safety controls at all levels of the value chain (Ministry of Public Health, 2004; Sardsud, 2007a). The road map defines three goals: to maintain exports of agricultural commodities and food at the current level, to reduce quarantine problems and to reduce the number of illnesses from contaminated food in Thailand (FAO & WHO, 2004).

Q-GAP initially consisted of 31 crop-specific protocols and was later extended to cover 169 commodities (Pongvinyoo, 2015; Sardsud, 2007a, p. 59). The Q-GAP scheme is implemented by the government at all stages. The government sets the standards, the National Bureau of Agricultural Commodity and Food Standards (ACFS) under the Ministry of Agriculture and Cooperatives (MOAC) serves as the accreditation body, and the Department of Agriculture (DOA) acts as a certification body. Since 2010, the certification and advisory function are partly outsourced to the private sector and to farmer organizations (Pongvinyoo, 2015). The Q-GAP is a requirement of several domestic retailers, and a requirement to export (Sardsud, 2007a; Wannamolee, 2008). In 2013, the Q-GAP standard was newly issued as Thai Agricultural Standard (TAS) of food crops and was harmonized with ASEAN GAP (Korpraditskul & Ratanakreetakul, 2015), a standard developed by members of the Association of Southeast Asian Nations (ASEAN) to facilitate harmonization of GAP programmes among ASEAN member countries (ASEAN Secretariat, 2006). The private sector, however, assesses the Q-GAP standard as insufficient.3 To export to high-value markets, in particular Europe, the GlobalGAP standard is needed, which is challenging to adopt and entails high compliance costs for producers and exporters. Supermarkets operating in Thailand also assess the Q-GAP standard as insufficient.

Recognizing this, the Thai Chamber of Commerce, owner of the ThaiGAP standard, kicked off the development of ThaiGAP Level 2 for the domestic market. The ThaiGAP standard for the domestic market ensures a higher level of food safety than the Q-GAP standard, but is less challenging to comply with than the GlobalGAP/ThaiGAP standard (Wattanavaekin, 2010). It is seen as a tool for local

3The standard is criticized for lacking credibility because both certification and accreditation are in the hands of the government and the agencies responsible for certifying farmers lack adequate financing (Sardsud, 2007).

producers to gain and maintain access to retailers and supermarkets in Thailand (Korpraditskul & Ratanakreetakul, 2015). It is also used to promote the fruit and vegetable sector after the export crisis. The development of the ThaiGAP standard for the domestic market was supported by the Thai Retailers Association and several Thai supermarkets, among them Siam Makro, Tops Supermarket, Tesco Lotus and CP All Plc. Participating retailers aim to use ThaiGAP to ensure consumer safety and to differentiate their products. Thai consumers have been found to be sensitive to food safety and to shift from wet markets to supermarkets because they expect a higher level of food safety (Reardon et al., 2010; Reardon, Timmer & Minten, 2012). The first producers became certified against the ThaiGAP standard for the domestic market in 2015.

#### **2.3.2 India**

Similarly, in India there are two parallel standards: the government-owned IndiaGAP—initiated by the BIS in cooperation with APEDA in 2010—and the IndGAP standard, introduced in 2014 by a (semi-)private actor, QCI. Like ThaiGAP, both IndiaGAP and IndGAP have two levels: Level 1 for the high-value export market and Level 2 for the domestic market and to allow gradual upgrading to international standards. At Level 2, the revised IndiaGAP that was introduced in 2013 originated from BIS/APEDA while the basic IndGAP that was introduced in 2014 was developed by QCI (Punjabi & Mukherjee, 2015; Jairath & Purohit, 2013). The revised IndiaGAP was a simpler and less stringent certification scheme that would allow farmers to get used to domestic standards so that transition of crop production practices towards IndiaGAP and GlobalGAP accreditation would be easier. Both Level 2 local GAP standards were set up to address the fact that the GlobalGAP and IndiaGAP/IndGAP schemes that are currently in operation in India are meant only for the export market and are being operated by large farmers and farmer groups, overlooking the domestic market. Moreover, both schemes recognize the difficulties smallholders face in getting their produce accredited in order to enter high-value domestic markets. A Level 2 national accreditation is a small step that might eventually make Level 1 accreditation much easier for smaller farmers.

There has already been a certified model farm for IndGAP according to QCI. As of now, both the revised IndiaGAP and basic IndGAP are rather new and therefore no empirical evidence on their impact is available. However, our earlier research in India has shown that the majority of retailers, including international retailers, do not apply food safety and quality standards in India although they might apply them elsewhere (interview with IFPRI, 2014; Hampel-Milagrosa et al., 2017). Primary data from producers and retailers that were interviewed in the state of Andhra Pradesh show that modern retailers tend to implement basic product standards for fruits and vegetables but do not apply farm-level GAP standards. Supermarkets, for their fruits and vegetables portfolio, do not abide by public and private food safety standards (Cohen, 2013). Thus, modern Indian retailers' main criteria for selection of produce tend to neglect critical issues of food safety, including pre- and post-harvest practices, and workers' health and safety.

In addition, traditional markets still encompass a majority of the market share for fruits and vegetables in India, a contributing reason why standards are difficult to implement in the country (Babu, 2012; Gulati, 2007). Foreign direct investment (FDI) in retail is currently the key that allows modern retail chains to operate in the country, but actual investment is still very low (Baskaran, 2012). Many experts believe that once retail FDI enters on a bigger scale, stricter standards that conform to international criteria may be implemented and lead to improvements in the whole sector (interview with Global Agrisystems, 2014; Chari & Madhav Raghavan, 2012).

#### **3 Implications and Impacts of Standards on Farmers**

This section summarizes the existing literature on the implications and impacts of standards on smallholders in Thailand and India. The analysis is carried out separately for Level 1 and Level 2 standards. In addition, we distinguish between Level 2 standards promoted by public actors and those demanded by domestic retailers since these were found to differ in their level of difficulty.

#### *3.1 Level 1 GAP Standards for High-Value Export Market*

Research on Level 1 standards focuses on the GlobalGAP standard. Findings from both countries on the factors influencing adoption, the impacts of adoption and the sustainability of certification show a similar pattern. Studies from India (Roy & Thorat, 2008) and Thailand (Kersting & Wollni, 2012) on the factors influencing GlobalGAP adoption find that if farmers are supported by external actors in the adoption process, such as a donor, an exporter or a marketing partner to a producer cooperative, it is not land size, but farmers' human and organizational capacities that are the main determinants of adoption. Small-scale farmers are unlikely to adopt the standard without support and need external assistance at all stages of the adoption process: to obtain the relevant information, to decide on whether or not to adopt the standard and to implement the requirements at farm level (Roy & Thorat, 2008).

Studies show that once farmers have adopted the GlobalGAP standard, on an average, they gain from certification (Bourquin & Thiagarajan, n.d.; Holzapfel & Wollni, 2014a, 2014b; Punjabi & Mukherjee, 2015; Roy & Thorat, 2008). Using panel data of 218 farm households in Thailand, Holzapfel and Wollni (2014a, 2014b) find that GlobalGAP adoption, on an average, has a significant positive impact on F&V prices as well as on farmers' household incomes. The impact on prices and household incomes depends highly on the type of institutional arrangement smallholders are certified in. Farmers certified in producer-managed groups had very high benefits and on average received 62% higher prices and 14,678 USD higher net household incomes. In contrast, farmers certified in exporter-managed groups did not benefit from higher prices or incomes. Exporters covered expenses for certification and provided trainings, but farmers were not paid higher prices. Holzapfel and Wollni (2014b) also find that larger farmers in producer-managed certification groups realize high net income gains while smaller farmers only benefit as long as they do not have to incur the costs of compliance, i.e. as long as certification costs and costs for technical assistance, equipment and laboratory analyses are paid for by a donor.

For the case of India, Bourquin and Thiagarajan (n.d.) analysed the impact of a USAID-funded project supporting mango producers in India and found that GlobalGAP-certified farmers selling to the domestic high-value market receive 20– 30% more and farmers selling to the export market 50% higher returns than farmers selling through traditional channels. However, they also found that the additional revenue is not sufficient to pay for the costs of certification during the first year. Similarly, Punjabi and Mukherjee (2015) found that grape growers contracted by an exporter and producing under GlobalGAP have a 60% higher gross margin than farmers supplying to the traditional market. In addition, contracted farmers benefit from a lower price risk because of a minimum guaranteed price and from lower production risks. The export company's extension agents regularly inform farmers on weather and infestation risks and provide advice on the issues.

Small-scale farmers, however, need continuous support to make GlobalGAP certification sustainable. Holzapfel and Wollni (2014b), for the case of Thai F&V producers, find that certification in donor-supported producer-managed groups is not sustainable. There are two main reasons for this. First, when donor support ends, small-scale farmers are often not able to cover the recurrent costs of compliance. Second, donor support focused on initial adoption and one-time certification and not on improving the long-term capacities of farmers and farmer groups to manage certification on their own. The results also showed that farmers certified in exportermanaged groups had a 85% higher probability of becoming re-certified (Holzapfel & Wollni, 2014b). Exporters continued to support their contract farmers after donor support ended through extension services, input provision and management of the quality management system and by covering the certification costs.

A lack of sustainability of donor-supported GlobalGAP certification was also found in a USAID project supporting GlobalGAP certification of mango farmers in India. Only 26 out of 62 farmers who became certified in 2006 and 2007 sought recertification in 2008 (Bourquin & Thiagarajan, n.d.). One of the lessons learned from the projects is that farmer groups that were not artificially formed for GlobalGAP certification but that had existed before (self-help groups, cooperatives, clusters) are more successful (Bourquin & Thiagarajan, n.d.). Punjabi and Mukherjee (2015) also stress the importance of longer-term support to GlobalGAP-certified small-scale farmers. Record keeping about farm practices (e.g. pesticide and fertilizer use, and hygiene) is a particular problem for small-scale farmers. Extension agents of the contracting exporting company help farmers to maintain records for the first 2–3 years of certification until farmers acquire the capacity to fulfil the task themselves.

The case of Mahagrapes (Roy & Thorat, 2008), a marketing partner to producer cooperatives in India, shows a very successful example of collective action and farmer-led GlobalGAP certification. Mahagrapes provides a range of services to its member cooperatives and to farmers, such as procurement of information on standards and export markets, negotiation of contracts, provision of inputs, and training about grape growing and handling methods. It succeeded in providing GlobalGAP certification to all its member cooperatives. Member farmers only have to pay \$28 annually for certification due to economies of scale, which is much lower than has been found in other studies. The grape sector in India is a success story, and 6409 of the 8107 farmers in India currently certified against GlobalGAP are certified for grapes.

#### *3.2 Level 2 GAP Standards*

As shown above, Level 2 GAP standards for fresh fruits and vegetables exist in both Thailand (Q-GAP/TAS/ThaiGAP) and India (basic IndGAP/revised IndiaGAP). However, since basic IndGAP and the revised IndiaGAP have recently been introduced in India and only one farmer had been certified till 2015, the impacts on farmers are yet to be assessed. For this reason, this section focuses on the GAP standards in Thailand. The case of Thailand provides important lessons learned for India and other countries that have initiated basic voluntary GAP standards.

#### **3.2.1 Level 2 GAP Standards Promoted by Public Actors**

The TAS (previously Q-GAP) is widely known in Thailand. In 2016, 112 thousand farms in Thailand were certified against the standard (Department of Agriculture, 2016). This is almost as many producers as are certified with GlobalGAP worldwide (GLobalGAP, 2014),4 but a huge decline from more than 220,000 producers that were Q-GAP-certified in 2012 (Amekawa et al., 2017). The decline started with the introduction of the TAS in 2013 (TAS 9001-2013), which replaced Q-GAP and made it more challenging for Thai farmers to obtain a certificate.5,6 The revision of the Q-GAP standard is an attempt of the Thai government to improve the effectiveness of the standard and to increase its acceptance in international markets. Several studies

4According to GlobalGAP (2014), more than 139,000 certified producers in over 110 countries were certified in 2014.

5The TAS standard has 116 control pointsand farmers have to comply with 100% of 23 control points and with 60% of 41 control points. A total of 54 control points are recommendations (Amekawa et al., 2017). In comparison, the Q-GAP standard has only 84 control points and farmers were required to comply with only 51% of the control points (Amekawa, 2013).

6The GlobalGAP Integrated Farm Assurance standard Version 5 includes 218 control points, thereof 87 major must (100% compliance), 113 minor must (95% compliance) and 18 recommendations (GlobalGAP, 2015).

have dealt with the impacts of the Q-GAP standard on food safety and farm practices and have analysed the benefits and problems associated with the standard.

Amekawa (2013), based on 64 structured interviews with Q-GAP-certified pomelo producers in Northern Thailand, analysed farmers' understanding of the Q-GAP standard and the effect of Q-GAP on farming practices and pesticide use. They find that only half the producers surveyed were able to relate the Q-GAP standard to the official food safety goal, the proper use and control of agrochemicals and other production practices. They also find that the level of implementation of Q-GAP requirements is low (especially record keeping) and that changes in pesticide management undertaken by farmers were unrelated to Q-GAP. Similarly, Schreinemachers et al. (2012), who compared pesticide use and handling practices among Q-GAP adopters and nonadopters, showed that a Q-GAP certificate does not have a significant effect on the amount of pesticides used nor on pesticide handling practices. It did, however, have a small impact on the use of hazardous and banned pesticide and has increased farmers' awareness of the dangers of hazardous substances.

The impact of Q-GAP on prices and income has been analysed by Krause, Lippe and Grote (2014) for cut orchids and by Pongvinyoo, Yamao and Hosono (2014) for coffee. Both find that Q-GAP does not influence prices and that certified and non-certified producers sell to the same buyers and markets. The lack of economic incentive for farmers to comply with Q-GAP requirements can be named as one of the reasons for farmers' non-compliance with Q-GAP requirements (Krause et al., 2014). More importantly, however, there are several problems associated with the design and implementation of the Q-GAP standard which lead to a low level of adoption of the standard requirements and ultimately to a lack of credibility.

First, accreditation and certification are both in the hands of the Ministry of Agriculture and Cooperatives, which creates doubts about the credibility of the certification system (Sardsud, 2007a). Second, overambitious targets to certify at least 145,000 farmers from 2004 to 2008 have put too much pressure on the responsible government agencies who lack capacities to carry out appropriate training, or inspection and certification services (Sardsud, 2007a). This has resulted in farmers applying for Q-GAP receiving insufficient training and in lax audit and control. For example, Schreinemachers et al. (2012) state that according to the DOA there are only 120 DOA auditors in Northern Thailand but more than 140,000 registered farms. The government has decided to outsource auditing to private contractors, but these are often only insufficiently trained. Third, auditing has focused mostly on final stages of production (pesticide residue testing and record keeping of pesticide applications) although the Q-GAP standard covers a much broader range of issues. Moreover, farmers are not sufficiently provided with alternatives to the use of synthetic pesticides, such as integrated pest management (IPM) methods (Schreinemachers et al., 2012).

Experiences from Thailand with the implementation of the Q-GAP standard provide important lessons for India. It is important that the APEDA and the QCI, which have launched IndiaGAP and IndGAP, ensure that farmers have access to sufficient information and training, that the quality of infrastructure is upgraded and that certification bodies have adequate capacities to carry out inspections. The development of a joint standard shared between APEDA and QCI is an option that we recommend. Not only will this joint standard unify the two seemingly competing public (IndiaGAP) and semi-private (IndGAP) standards but also reduce confusion among producers and among international buyers with regard to which standard has authority. Joining forces to create a joint standard will also increase capacities in terms of certification. There is always a trade-off between certifying as many farmers as possible and investing in training and auditing to ensure that farmers know and apply GAP principles and that certified farmers comply with the requirements of the standard.

#### **3.2.2 Private Level 2 GAP Standards Imposed by Domestic Retailers**

The impact of private standards applied by retailers in the domestic market is still very low in India but much stronger in Thailand where supermarkets have a much higher market share. With increasing market share of supermarkets and rising consumer concerns for food safety and quality, the impacts of standards are expected to increase significantly over the next decade.

As described in Sect. 2.3, supermarkets in India do not yet apply GAP standards. The situation in Thailand is different. Thai supermarkets use labels for fruits and vegetables, such as the Q-mark, pesticide-free or organic. In addition, supermarkets have introduced supply chain management programmes to ensure a basic level of food safety, developed their own food safety standards (e.g. Makro) or require certification with Q-GAP (e.g. Tops). This has certain implications for producers. For example, a case study of Tops carried out in 2006 showed that Tops, following a supply chain restructuring programme, significantly reduced its involvement with smallholders. Following a screening, Tops only chose those farmers as suppliers who already applied 'intelligent pesticide management' and started to require Q-GAP certification from suppliers (Buurma & Saranak, 2006).

Fruits and vegetables are 2–6 times more expensive in supermarkets compared to local open-air markets (Wanwimolruk et al., 2016). Thai consumers are prepared to pay the price also because they expect produce to be safe. Wanwimolruk et al. (2016) in a recent study, however, found that fruits and vegetables from supermarkets exceed MRLs at a rate of 35% for Chinese kale (local markets 48%), at a rate of 55% for *pak choi* (local markets 71%) and at a rate of 49% for morning glory (local market 42%). A similar study by the Thai Pesticide Alert Network (Thai-PAN) showed that produce labelled as Q-GAP-certified exceeded MRLs in 57% of the cases and produce labelled as organic in 25% of the cases (Thailand PAN, 2016). These findings put high pressure on supermarkets as well as on ACFS which is responsible for the Q-GAP standard. Under these circumstances, the ThaiGAP standard for the domestic market, which is now piloted, may receive a boost.

There are not yet many experiences with the ThaiGAP standard for the domestic market, because the standard has only recently been introduced and uptil 2015, only 18 producers had received a certificate. Like GlobalGAP, the ThaiGAP (domestic

**Table 4** Comparison of the ThaiGAP standard for the domestic market with GlobalGAP

*Source* Korpraditskul and Ratanakreetakul (2015)

market) standard is a private, voluntary standard, but is adapted to the local circumstances and has a significantly lower number of control points (Table 4). The standard owner, the Thai Chamber of Commerce, has decided to offer only one certification option, individual certification for ThaiGAP (domestic market). The main reason provided by Thai Chamber of Commerce is that the experience of the GlobalGAP option 2 project has shown that the group certification process, especially the quality management system, is too complex.

It is yet to be seen whether ThaiGAP (domestic market) will also be an option for small-scale farmers. The 16 farmers that have already obtained a certificate have been proposed by the supermarkets involved in the ThaiGAP project. All of them are large-scale farmers that own between 8 and 32 hectares, which is much larger than the Thai average of 3.6 hectares (Pongsrihadulchai, 2009). However, some smallholders have been included in the certificates via contract farming arrangements.

Potentially, the ThaiGAP standard can play a big role in future in Thailand. Almost all major supermarkets in Thailand have supported the development of the standard which shows their high demand for safe fruits and vegetables. If applied at a broader scale and eventually made a requirement of Thai supermarkets, the standard is likely to improve the level of food safety for the domestic consumer and to decrease adverse environmental and health effects of pesticides. At the same time, there is the risk that small-scale farmers who are not able to comply will lose access to the lucrative supermarket channel. It is therefore important to identify ways to also enable smallscale farmers to adopt the standard.

#### **4 Conclusion and Recommendations**

Donor programmes on food safety and quality over the past decade have mainly focused on the GlobalGAP standard (Level 1 standard). The results of studies in Thailand and India show that even if access to donor support is available, it is the wealthier and more educated small-scale farmers who adopt and benefit from the GlobalGAP standard, indicating that the poorest segment of smallholders has not benefited from donor interventions. In addition, the vast majority of smallholders serve domestic markets or lower value export markets, where GlobalGAP is not a requirement.

Local Level 2 GAP standards applied in developing countries' domestic supply chains can potentially reach a much larger number of producers and as a result may have a much higher impact. On the one hand, if imposed by supermarkets, local standards may lead to changes in the supply chain. Although the standards applied to the domestic market are usually less stringent than GlobalGAP, they pose a similar threat and may lead to the loss of market access for resource-poor smallscale producers with limited human and social capital. On the other hand, they play an important role in introducing more sustainable agricultural practices and in improving the level of food safety for domestic consumers.

We found coexisting and overlapping local GAP standards (Level 2) initiated by public and private actors in both Thailand and India. In Thailand, the public sector has introduced the Q-GAP (now TAS) in 2004. The standard is a requirement for export, and the Q-GAP label is used by domestic supermarket chains. However, studies found that the level of implementation of standard requirements among certified farmers is low. The government lacks the resources and capacity to monitor compliance, and credibility is low because both certification and accreditation are in the hands of the government. As a result, the standard is assessed as insufficient by the private sector. Recognizing this, the private sector decided to develop its own local GAP standard, the ThaiGAP standard. ThaiGAP is a third-party standard based on GlobalGAP standard, but more adapted to local circumstances and with lower number of requirements. The four largest major supermarket chains in Thailand participated in the development of ThaiGAP, and if made a requirement, ThaiGAP may have major impact on the F&V value chain.

In India, we found IndiaGAP (introduced by APEDA—a public institution) and IndGAP (introduced by QCI—a public/private institution) as two competing GAP standards geared for the same producers that are in the same high-value export market. Similar to Thailand, levels of implementation of standard requirements among farmers are low for both standards. However, whereas IndiaGAP was introduced much earlier with dismal certification rates among farmers, the IndGAP was only recently introduced and uptake could still increase. Also, similar to the case of Thailand, lack of resources hounds both institutions and the capacity to monitor compliance among farmers is low. The decision to introduce revised IndiaGAP (APEDA) and basic IndGAP (QCI) came in order to allow farmers to gradually ease into GlobalGAP standards. This was equally an opportunity to certify smaller farmers in India and provide assurance of food safety and quality to local consumers. Owing to the large numbers of smallholders in India, proper and widespread implementation of revised IndiaGAP and basic IndGAP is expected to have a profound impact on domestic markets.

Parallel standards—as found in both Thailand and India—lead to high transaction costs and uncertainty among producers, exporters and consumers. We therefore encourage public and private actors to harmonize existing GAP standards. Instead of aiming to certify as many smallholders as possible, governments are recommended to invest in upgrading the quality of the infrastructure needed for standard adoption (in particular, metrology and accreditation) and in extension programmes and media campaigns that disseminate GAP on a larger scale. The widespread awareness and application of GAP principles are particularly important to improve the level of food safety for domestic consumers.

Moreover, institutional arrangements that allow large numbers of small-scale farmers to adopt local GAP standards should be supported. Here, lessons can be learnt from the example of GlobalGAP, in which large-scale producers and enterprises support small-scale farmers in adopting standards. In addition, the support of service providers and producer cooperatives that offer access to financing and training to enable standard adoption by small-scale farmers is crucial. The grape sector in India is a particularly successful case, showing how large numbers of smallholders can be sustainably integrated into GlobalGAP group certification schemes and benefit from certification.

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University of Life Sciences Prague., September 17–19, 2014, Prague, Czech Republic. http:// www.tropentag.de/2014/abstracts/full/648.pdf.

**Open Access** This chapter is licensed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

The images or other third party material in this chapter are included in the chapter's Creative Commons license, unless indicated otherwise in a credit line to the material. If material is not included in the chapter's Creative Commons license and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder.

# **Chapter 11 Making the Local Work for the Global Best: A Comparative Study of Vehicle Efficiency Standards Implementation in China and Mexico**

**Juan Carlos Mendoza and CAO Jiahan**

#### **1 Introduction**

The invention and dissemination of road vehicles globally constituted a major technological shift in the transportation, economic productivity and competitiveness paradigms. While the social and economic benefits flowing from this innovation are overwhelming, the use of fuels to get this technology "on the move" has had a deep ecological impact, resulting in adverse local as well as climate change effects. The transport sector is a key contributor to worldwide greenhouse gas emissions (GHGs) and other volatile compounds, and over 63.7% of the world's total oil consumption is related to fuel usage (IEA, 2014, p. 33), making the transport sector responsible for approximately 23% of the total energy-related CO2 emissions (6.7 GtCO2 in 2010) (Sims et al., 2014, p. 602). Road transportation represents 73% of such contributions, making it one of the top priority areas for formulating and achieving mitigation efforts globally. Due to accelerated urbanization processes, economic and population growth, transport demand per capita is expected to grow at a faster rate in the developing and emerging countries in the coming decades (Sims et al., 2014, p. 603).

In order to address the ever-increasing concerns about climate risks, fuel efficiency norms and standards have been key policy tools to lead the transformation towards achieving a drastic reduction in the use of fuel and/or the total amount of aggregated emissions derived from light and heavy-duty vehicles. Through technological and market adjustments and institutional arrangements, it is estimated that potential GHG emissions reduction coming from the adoption of vehicle efficiency standards could go up from 1.6 to 3.5 GtCO2 by 2030 (Stec & Baraj, 2009, p. 304)—a figure higher

J. C. Mendoza (B)

C. Jiahan Shanghai Institutes for International Studies (SIIS), Shanghai, China

https://doi.org/10.1007/978-981-15-3473-7\_11

Deutsche Gesellschaft Für Internationale Zusammenarbeit (GIZ), Mexico City, Mexico e-mail<EMAIL_ADDRESS>
© The Editor(s) (if applicable) and The Author(s) 2020 A. Negi et al. (eds.), *Sustainability Standards and Global Governance*,

than the total amount of GtCO2 emissions in Latin America and Africa together in 2012 (EIA, 2015). The adoption of such standards becomes more relevant in emerging economies where along with population dynamics and economic growth, fuel use, vehicle fleets and automotive industries show major growth trends.

Fuel efficiency norms and standards are not only relevant in terms of climate change mitigation1 but also because of the co-benefits they provide locally. According to the Global Fuel Economy Initiative (GFEI, 2010), the implementation of such standards could lead to cleaner and healthier cities, foster green mobility, ensure sustainable energy use and improve economic opportunities (GFEI, 2015). Accordingly, the multi-dimensional effects of fuel efficiency relate to the global development agenda framed by the Sustainable Development Goals (SDG),2 and for specific sectoral supporting agendas such as the Global Energy Efficiency Accelerators Platform promoted by the UN's Sustainable Energy for All Initiative (SE4All), aiming to double the global rate of improvement in energy efficiency in six key sectors (including transport)3 by 2030.

While the global benefits of fuel efficiency standards are well accepted, their implementation at the national level varies from country to country. Although there is no "one-size-fits-all" global standard on fuel efficiency, there are two general reference standards: those used in the European Union4 and those used in the USA.5 Both regulations cover elements and parameters regarding the automotive sector production processes such as technologies to improve litre per kilometre efficiency, CO2 grams per kilometre measurement, time frames, testing methods, fleet requirements, etc. The selection of those parameters is based on the industry and market production necessities and consumption patterns, satisfying and prioritizing the criteria to be covered on a dominant technological basis.

1The IPCC AR5 recognized in 2014–2015 that one of the key developments in the transport sector in terms of GHG emissions reduction potential has been the fuel economy standards and GHG vehicle performance standards implemented for light and heavy-duty vehicles (Sims et al., 2014, p.605).

2The goals that have a direct link to the fuel efficiency standards in the final adopted document at the UN Sustainable Development Summit in September 2015 are: Goal 3: Ensure healthy lives and promote well-being for all at all ages; Goal 7: Ensure access to affordable, reliable, sustainable and modern energy for all; Goal 9: Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation; Goal 11: Make cities and human settlements inclusive, safe, resilient and sustainable; Goal 12: Ensure sustainable consumption and production patterns and; Goal 13: Take urgent actions to combat climate change and its impacts.

3According to the SE4All Agenda, these sectors are: lighting, electrical appliances, building, industry, district heating/cooling and fuel efficiency.

4Road transport contributes about one-fifth of the EU's total emissions of CO2. While these emissions fell by 3.3% in 2012, they are still 20.5% higher than in 1990. Transport is the only major sector in the EU where greenhouse gas emissions are still rising.

5Japan's experience in fuel efficiency standards shouldn't be, however, diminished. Japan has historically had the lightest, most fuel-efficient vehicle fleet in the world. Historically, Japan's fuel economy standards have been rigorous in comparison to other countries, but in the current conditions it has set lower targets for the coming years. For the purpose of this research project, we aim to focus on the EU and US regulations.

This chapter analyses the implementation of fuel efficiency standards in two developing economies: China and Mexico. The second section introduces the methodology used for the comparative analysis. The third section analyzes the use of fuel efficiency standards in emerging economies, underlining the idea that the local economic, political and institutional context must act as the determinant in implementing external standards in national contexts. In two subsections, both national cases are discussed while a third subsection comparatively analyses determinants and barriers in both cases regarding the fuel efficiency implementation process. Challenges and lessons learned are presented in the final section as conclusions.

#### **2 Methodology**

The methodology applied in this study is a comparative analysis based on the typology6 proposed by the International Council of Clean Transportation (ICCT) on fuel and vehicle groups (Kodjak, 2015). Countries that have implemented policy actions towards fuel efficiency are divided into three main groups based on the implementation stage/policy action status. Under this typology, Mexico and China share certain attributes; both employ processes involving clean, low-sulphur, available or planned standards, but both also partially adopt external (de facto "global") standards (Euro or US EPA). Derived from this categorization of countries, it is possible to draw a two-country case-oriented comparison based on interpretation of literature and review of policies rather than bearing a set of variables. The study is focused on making an appropriate comparison in respect of fuel efficiency implementation processes in emerging economies.

Due to the governance and economic asymmetries between these two countries, the strategy adopted was based on a "Most Different Systems Design" method. According to Lor (2012), this method implies a selection of different countries that share a phenomenon which constitutes a societal challenge based on attributes rather than merely variables. The strategy aims to define a boundary of comparability useful for limiting the scope of the comparison. Nevertheless, the typology is used for reference purposes only because several countries even within the proposed groups may differ in their implementation stages of fuel efficiency standards. The criteria offered by this strategy are logical and consistent for the purposes of the research objectives.

6Mouton and Marais (1990, p. 137) define a typology as a conceptual framework in which phenomena are classified in terms of characteristics that they have in common with other phenomena.

#### **3 Fuel Efficiency Standards in Emerging Economies**

Fuel efficiency standards are understood as having a strong regulatory component; the adoption and scope of implementation of such standards depend on the stage of the value chain where they are intended to be applied. Fuel efficiency standards establish emission limits in the automotive industry; the indirect effect on the private or productive sector entails the adoption or development of new and clean technologies in order to make cars produce fewer emissions by making fuel usage more efficient. The adoption of this technology is voluntary; each company decides where and in which fleet investments would be feasible in order to comply with the standard. Several co-effects result from the adoption of such standards: improved air quality and public health caused by lessening particulate matter, nitrogen oxides and ozone molecule concentrations in the atmosphere, mobility and renewed automotive fleet in urban and peri-urban areas, among others (GFEI, 2010). The interplay between voluntary and/or mandatory standards on fuel efficiency remains in many emerging economies dependent on its implementation stage. For instance, USA and Mexico have both fuel economy and GHG standards, and manufacturers must satisfy both. By contrast, South Korea's light-duty vehicle manufacturers have the option to choose which standard to meet—fuel economy or GHG standard (IEA, 2015a).

In most scenarios, emerging economies usually adopt and implement fuel economy/efficiency standards based on a reference to the EU/US regulations that are modified according to its own national conditions and economic structures. This entails a complex process of norm diffusion from the global to the local level. Such adoption is in some cases mixed—this means incorporating elements from both (and other) regulations into a unique standard; in other cases, it is part of a homologation process on a regional basis. China and Mexico are clear examples of the above. As Mikler (2008, p. 1) suggests, fuel economy/efficiency implies that "sharing sovereignty in the process of making and implementing national regulations produces opportunities for global regulation"; fuel economy/efficiency standards require complex public–private governance where incentives, regulation and communication are vital. Therefore, fuel economy/efficiency standards are key components of a regulation process that could be analysed from the multi-level governance approach (Payne & Phillips, 2015; Evans, 2012), with the benefit of allowing the national implementation to be examined under the light of its own specific conditions without disregarding the global processes. The local–global inter-linkages that a regulation such as the fuel economy/efficiency one creates could be enablers/drivers for societal change (Hughes, 2010), not only in terms of environmental benefits, but under a wider sustainability scope.

The analysis of the China and Mexico cases aims to provide an overview of the implementation process of fuel efficiency standards in particular economies, in order to find their comparability elements. The idea of a differentiated local political and economic arrangement connecting with the global efforts to impulse fuel efficiency underlies this study.

#### *3.1 The Case of China*

The Chinese vehicle fuel economy standard is a weight class based, per vehicle and corporate average standard that is mandatory for every domestically made vehicle and is more stringent than its European counterpart (EIA, 2015). Light-duty vehicle manufacturers in China must meet a fuel-consumption standard at each weight class level and must meet an overall corporate average fuel-consumption standard. Vehicle fuel economy standards in China are based on 16 weight classes, ranging from vehicles weighing less than 750 kg (approximately 1500 lb) to vehicles weighing more than 2500 kg, or approximately 5500 lb. Based on the New European Driving Circle (NEDC) testing standard system, China has set a new fuel economy target for 2020, which would require the fleet average fuel economy to reach 5l/100 km. This target could translate into about 53 mpg US equivalent, or about 116 CO2g/km EU equivalent (Arena & Mezzana, 2014).

China initially based its vehicle emission standard on that of Europe. In 2000, the Chinese government issued the first national emission standard for both heavy and light-duty vehicles that was equivalent to Euro I, followed by several more stringent standards in later years. The China National V emission standard was implemented nationwide by harmonizing the Euro V emission standard. Meanwhile, the China National VI emission standard was announced by the government at the end of 2016 to be implemented nationwide from 2019. Since the EU upgrades emission standards every 4–5 years or so, China sets new targets every 4.5 years on average in order to catch up with EU standards as early as possible, as the implementation of China's national emission standards usually lags behind Europe by 5–9 years (Table 1). With the acceleration of urbanization as well as localization of the auto industry, China has begun to design its own emission standards system. When setting the National VI emission standard for light-duty vehicles, the Chinese government introduced the US (California) standard, but at the same time it also developed a new National VI emission standard for heavy-duty vehicles, with no reference to the EU or the US model.

**Table 1** Year of implementation of vehicle emission standards in China and EU

*Source* Authors

There were basically two factors that drove China to adopt the EU's emissions standards in the beginning. The first was its social circumstances; China's vast rural areas and population imply widespread need for the use of diesel trucks, rural and non-road vehicles, just as diesel vehicles are prevalent in the European market. The other was the late development of the auto industry, which meant that most of the domestically made vehicles depended on technologies from Europe.

Nowadays, China's urban population has exceeded its rural population and gasoline vehicles, especially passenger cars, have gained a dominating proportion in the cities and even in some rural areas. Meanwhile, although European car companies still retain a certain market share in China, American and Japanese automakers have been enlarging their business, which has diversified China's autoindustry. The changing landscape of China's urbanization and auto industry has led the Chinese government to create its own standards by taking the US (California) standards as reference. China's geographic area covers similar latitudes as those of the USA. What is more, diesel vehicles that enjoy less stringent regulations (when compared to gasoline vehicles) still dominate the European market, while 99% of China's vehicles today are gasoline vehicles, falling into a situation similar to the USA. Adopting fair regulations on gasoline and diesel vehicles, the US standards are a better fit for China's current situation.

In China, it is notable that all the vehicle efficiency standards are set by the central government, with severalMinistries and state-owned oil companies involved.7 These governmental institutions or enterprises with vested interests sometimes have conflicting views with regard to how to formulate vehicle efficiency standards. One typical example is that the Ministry of Ecology and Environment (MEE), which used to lack the authority to set standards, as the lead agency for developing and enforcing vehicle emission standards, can now exert a strong influence on specifying fuel quality parameters. In contrast, the auto industry seems to have a relatively weak voice in the process, while the participation of NGOs is negligible.

Since retail prices of gasoline and diesel have always been set by the National Development and Reform Commission (NDRC) on behalf of the central government in China, it is difficult for the oil industry to recoup capital investments on refinery upgrades without a market pricing mechanism. In addition, small refineries with outdated technologies are not cost effective to upgrade. Concerns about unemployment and other economic impacts from facility closures in some regions where these small refineries are located could cause more delay in tightening fuel standards. This is why China's fuel efficiency standards have consistently lagged behind the fuel requirements corresponding to the emission standards.8 Since the best vehicle

7Some of these institutions are the National Development and Reform Commission (NDRC), Ministry of Industry and Information Technology (MIIT), Ministry of Science and Technology (MST), Ministry of Ecology and Environment (MEE), State Administration for Market Regulation (SAMR), China National Petroleum Corporation (CNPC) as well as China Petroleum and Chemical Corporation (SINOPEC).

8China's State Council issued the *Air Pollution Prevention and Control Action Plan* in September 2013, vowing to greatly improve air quality by 2017 in most Chinese cities, especially the metropolises. To implement this plan, the central government urged state-owned oil giants to quicken

emission performance can only be achieved if fuel and emission standards are implemented in parallel and a compliance program is established to enforce both fuel and vehicle standards, the staggered implementation of fuel standards has become a major roadblock in bringing down vehicle emissions.

Beijing, being the capital city, was one of the few exceptional places in China that could employ the highest fuel and emission standards simultaneously. For the sake of improving air quality, Beijing has pioneered the setting and implementation of these national standards. Most of the standards, from National I to V, were first piloted in Beijing and then fully applied across the nation after a gap of two or three years. For instance, in 2013, Beijing put the National V emission standard into practice, five years ahead of its proposed implementation nationwide.

#### *3.2 The Case of Mexico*

Mexico's fuel economy standard was first set in 2013, after several rounds of negotiations. NOM-163-SEMARNAT-ENER-SCFI-2013 (NOM 163) regulates year-model automobiles starting from 2012 productions. The norm that is referred to is the US Code of Federal Regulations vol. 40 parts 85, 86 and 600 and the Light-Duty Vehicle Greenhouse Gas Emissions Standards and Corporate Average Fuel Economy Standards Final Rule (EPA, 2010). NOM 163 complements the existing regulations on fuel limits and average methods,9 which, nevertheless, had never included components such as emission goals (g-CO2/km) and Corporate Average Fuel Economy Standards. When published, this standard became a model in the region, being the first Latin American standard of its type (with other countries such as Peru, Chile and Argentina developing similar schemes), reflecting a complex relation within the North American region.10

The major drivers for the implementation of such a standard are linked to air quality (health effects) and climate change. Since the mid-1980s, air pollution became a major problem in urban areas in Mexico, mainly in the Metropolitan area of Mexico City. According to Molina (2005), some policies were implemented aiming to establish major pollutants' permissible limits, gaining some results for certain pollutants

their pace on fuel quality upgrading, in order to keep up with the more stringent vehicle emission standards. Chinese Premier Li Keqiang has reiterated the significance of domestic gasoline and diesel standards improvement in coping with environmental pollution. He encouraged further investment and technological innovation by major oil companies, which could lead to an early accomplishment of the set goals.

9Mexico uses the US-combined test cycle officially, although several companies—mainly the European ones—may incorporate the New European Driving Cycle (NEDC) into their plants' processes.

10In fact, the Mexican standard on fuel efficiency was created with an effort to look for a homologation with the USA standard proposed by then President Barack Obama in 2009, followed by Canada in 2010. The Mexican norm tries to homologate the 2016 USA goals of 35.5 miles per US Gallon (mpg). However, depending on the priorities of the newly elected Mexican Government, the Mexican standard's revision could point to another direction.

(mainly lead, carbon dioxide and sulphur dioxide), but retaining high levels of particulate material (PM10 and PM2.5), carbon monoxide and ozone. In 2003, norms on vehicles were first issued, trying to reduce smog and limit pollutant emissions, followed by health-related standards on limits to all pollutants. Also, implementation of specific public policies for reducing emissions coming from mobile sources (such as Vehicle Verification Programs or the circulation restriction program (*Hoy no circula*) fostered an awareness of the high impact of transport on air quality.

Mexico has used the US EPA reference and test method as a "global best" reference for its own national standard setting. The Mexican fuel efficiency norm is aligned in design and depth with the US and Canadian standards (ICCT, 2012), trying to equal efficiency levels by 2016. In 2012, then US President Barack Obama announced a new 54.5 mpg (20.9 K/l) goal for USA fuel efficiency by 2025 (The White House, 2012)—considerably higher than the Mexican 2016 goal (whose revision process started in 2018). However, in 2018, the Trump administration announced a new policy shift, abandoning the standards and freezing them to the 2020 values, arguing they were too high and expensive (Walsh, 2018). US EPA announced a new rule named "Safer Affordable Fuel-Efficient" (SAFE) for the years 2021–2025, which was criticized by a group of scientists (Bento, et al., 2018). In order to match this goal, the subsequent Mexican regulation has to be more solid and set higher thresholds. This, however, could be contested by the private sector—as was the case in 2012. This is notwithstanding the recent environmental concerns regarding urban air pollution, alteration and corruption in the vehicle verification testing methods and technologies used by international automotive companies, which undermined fuel efficiency governance, and the regulatory challenges in getting the standard updated on the basis of robust modelling instruments.

The transport sector is therefore a complex issue in terms of standards-related processes in the country, either for climate change reduction schemes or fuel efficiency. During the standards negotiation process, some of the concerns of the automotive sector were the cost effectiveness and terms of its mandate. Mostly dependent on foreign technology, imports would modify the commercial chain of technology associated with autoparts and engines in terms of compliance, posing serious challenges to the industry actors. Another barrier to the implementation of the standard was the absence of an overall standards policy that provides direction to all the standards related to a certain area. Although there is, for instance, a clear relation between the fuel economy standards and both health and climate change policies, the standard was negotiated separately with the automotive industry with a focus on industry implications rather than on health impacts. In-depth analysis is also likely to show that there are significant gaps in the standard setting process (standard cycle), which does not link development planning and normative analysis in a clear fashion. The Mexican experience shows that a wide vision of integral and multi-dimensional policies is needed in order to create a clearly-articulated policy that has governance mandates for all sectors involved.11

11The necessity of updating the NOM 163 in Mexico has been supported, however, by parallel environmental policies. In preparing a new national communication for the United Nations Framework

#### *3.3 China and Mexico: A Comparative Analysis*

Both country cases demonstrate that there are several attributes and features related to their fuel efficiency standards implementation processes that are similar. First, the transportation sector in both countries is currently regarded as one of the main contributors to overall GHG emissions, mainly because commercial vehicles have become one of the most important sources of air pollution. In Beijing, Shanghai and other Chinese metropolitan areas, passenger vehicles are major contributors to the overall GHG emissions due to traffic congestion. Similarly, in Mexico the transport sector contributed in 2015 with 25.1% of total GHG emissions in the country, mainly dominated by freight and passenger vehicles (23.4% of total GHG emissions) (INECC, 2018). According to Mexico's Climate Change Special Program, 94% of the current transport GHG-related emissions come from road transportation. Besides, Mexico is the second largest market for new vehicles in Latin America, with a medium annual growth rate of 7.09% from 2013 to 2017 (1.3 million units per year projected average) (PROMEXICO, 2014, p. 16). A future increase in automobile consumption in both countries could exacerbate the global warming effect.12

Second, China and Mexico rank among the 15 largest automobile producers (first and thirteenth place respectively in 2018) and are leading automobile exporters in the world (JATO, 2019). According to the International Organization of Motor Vehicle Manufacturers (OICA), Chinese and Mexican car industries represented 30.7% of the global total of cars and commercial vehicle production in 2017 (OICA, 2018). At the same time, light-duty vehicles sales and exports in both countries have been increasing significantly (PROMEXICO, 2014).13 Through exports, China and Mexico could bring about some indirect impacts for importing countries in terms of their national GHG emissions.

Third, both China and Mexico have to fulfil their individual commitments on combating climate change as a part of the global efforts and seek alignment in climate actions based on their own national interests. By the end of June 2015, both

Convention on Climate Change (UNFCCC), Mexico is preparing technological routes in which fuel efficiency standards for light vehicles will play a very relevant mitigation role. Discussions on a new standard for heavy duty-vehicles, and discussions on the energy transition requirements seem to pose new challenges for future debates.

12Mexico City entered into an environmental air quality crisis in early 2016 because theMetropolitan Index of Air Quality (IMECA) was surpassed for more than 150 points after 14 years of stability. Allegedly, one of the main causes of this was a court decision in June 2015 that allowed particular vehicle owners to get a protection against the assignation requirements for the vehicle verification programme based on year-model rather than emissions, which changed the criteria allowing for circulating cars. This, along with altered verification schemes, increased the number of cars circulating in the city to more than one million per day.

13The new international context for the car industry has affected the traditional car manufacturing geography. While the US, Canada, Japan and France have showed a decline in their production rates, emerging producers such as China, India, Brazil and Korea have showed considerable growth. Although in the last year (April 2018–2019) Mexico showed an important decrease on its car sales (−10.4%), it has shown growth and stability in the period 2012–2016. Investment announcements and growing road infrastructure are complementary elements for these dynamics.

China and Mexico had presented their new climate mitigation and adaptation targets after 2020, under their Nationally Determined Contributions (NDC)14 to the United Nations Framework Convention on Climate Change (UNFCCC), where the transport sector is a key player.

The standard setting and implementation processes in both China and Mexico have been quite different. Norm diffusion rests on a diversity of factors within each country: socio-economic structure, regulatory framework, private sector engagement, industry and investments and even sub-regional standards application. The key dissimilarity is the adoption of different reference standards: while China has been working under the EU's regulatory framework, Mexico has set a partial homologation with the US EPA regulation. Consequently, the adoption of different targets, indicators, testing methods, fleet targets, penalties, incentives, etc., opens the possibility of analysing how the implementation process of fuel efficiency/economy standards in both economies has aligned with global commitment while at the same time being aligned with their own national development conditions.

#### **4 Conclusion**

Fuel efficiency is at the core of a local–global solution for GHG emissions reduction by addressing the negative impacts of vehicle fuel-consumption patterns, and generating significant local impacts that could be translated into global benefits. It is notable that a series of efficiency programs such as Europe's Euro VI and US's EPA 2010 have been undertaken on a global scale, thus becoming the de facto "global" standards, but it is relevant to analyse how this standardization process has been translated and adapted in emerging economies where fuel use, GHG emissions and economic growth will tend to increase.

When applying the European or American models to some emerging economies like China and Mexico, we found a difference in situations. Although EU/US standards are relevant for ensuring comprehensive frameworks for action, standards do not always consider national contexts of the emerging countries, neglecting their specific economic and sectoral conditions. At the same time, although standards are a recognized policy tool and a cost-effective strategy for private investment in many emerging economies (both at the national and local levels), there is a lack of proper standard setting or application processes related to the respective economic and political structure. The result is a domestically challenging multi-stakeholder process that leads to ineffective operations and local–global dialogue, resulting in insufficient mitigation mechanisms that could harm both economic development and environmental balance in emerging markets.

Fuel efficiency standards could be considered as both performance and sustainability standards, for they aim at reducing environmentally and socially harmful

14Mexico has started the national revision of its NDC mitigation and adaptation goals, under the mandate of Article 4 of the Paris Agreement, for its completion in 2020.

impacts of vehicles. Almost all of these standards are set up by national government agencies to provide legally binding requirements for general market access, thus becoming public mandatory sustainability standards. In terms of the geographic and systemic reach as well as ambition, vehicle fuel efficiency and GHG emissions standards adopted by a single country could also generate sustainability benefits transnationally. Such standards are focused on both product performance and the production process, and will in most cases apply strict criteria for the sake of climate and environment in both the national and international contexts. At the domestic level, frequent interactions between public and private sectors finally shape these standards that become legally mandated. Meanwhile, dialogues between national and international standards or regulations are conducted from time to time. As the International Energy Agency (IEA) suggests (2011, 2015b), fuel efficiency standards are at the core of sound transport and mobility policies that care for environmental and social effects, and promote a technology transition from fossil fuels to clean technologies. Measures such as labelling, eco-driving policies, electric mobility, transport batteries and efficiency together could play a transformational role in re-shaping energy systems nationally and globally.

The application of efficiency standards in emerging economies should guide public policies, investments and other partnerships in a holistic and in-context manner, responding to sustainable development, green economy, climate change and industrial sector priorities. Fuel efficiency standards represent an illustrative example of how this could be translated into practice, with governance playing a key role. "Global" (EU/US) standards should not be considered as a "one-size-fits-all" solution, but rather as a sustainable guideline to reduce emissions worldwide.

#### **References**

**Open Access** This chapter is licensed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

The images or other third party material in this chapter are included in the chapter's Creative Commons license, unless indicated otherwise in a credit line to the material. If material is not included in the chapter's Creative Commons license and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder.

# **Chapter 12 Standard-Setting in Water Use and Sustainable Development: A Comparative Critical Analysis of Grey Water Recycling in the Tourism Sector**

**André Coelho, Alexandre Domingues, Maria Cândida A. de M. Mousinho, and Cassia Saretta**

#### **1 Introduction**

Tourism is a key sector for studies related to sustainability and the use of natural resources towards truly inclusive development. The sector is responsible for nearly 10% of the world's GDP and for the generation of 280 million jobs. In 2015, approximately 1 billion tourists performed domestic or international trips, circulating trillions of dollars in the world economy (World Travel & Tourism Council, 2016). The number of international tourist arrivals worldwide is expected to increase by an average of 3.3% a year over the period 2010 to 2030 (UNWTO, 2016). Cited by the United Nations (UN) as the strongest sector for job creation (United Nations General Asembly, 2014), it is, however, also responsible for an aggressive use of resources such as water, food, wood and fossil fuels. Despite the fact that it is an industry related to leisure and cultural awareness, the sector has a deep impact on the use of natural resources and natural services.

In contemporary society, water is, in its most simple form of understanding, synonymous with life. It is no wonder that the astronomical sciences search for this natural resource in other spheres of the universe as evidence of the possibility of life. More concretely, the fact is that human beings have always needed this natural

A. Coelho (B)

Fundação Getulio Vargas (FGV), Rio de Janeiro, Brazil e-mail<EMAIL_ADDRESS>

#### C. Saretta Ministry of Environment/Brazilian Forest Service (BFS), Brasília, Brazil

© The Editor(s) (if applicable) and The Author(s) 2020

A. Negi et al. (eds.), *Sustainability Standards and Global Governance*, https://doi.org/10.1007/978-981-15-3473-7\_12

resource as a source of livelihood and it is an unassailable reality that they will continue to do so. The scientific and technological advances in the areas of food, health, transport, for example, would not have been possible without the systematic use of water, which shows that this source is not only a fundamental need for human existence, but crucial for the realization of all other needs.

The implementation of up-to-date sustainability standards or practices aligned with a multi-stakeholder regulatory framework for water use may complement the international collaboration on new solutions at local, national and regional levels. In order to establish a pilot study, this chapter aims to understand to what extent standards and regulations apply to the sustainable use of water in the hotel industry. The study highlights the multi-stakeholder nature of sustainability standards, using the tourism sector in an exploratory and comparative analysis of the tourist areas of two major cities. Rio de Janeiro, in Brazil, was used as an example of an internationally appealing Latin American city without any formal standards for water use. Berlin, in Germany, was used as a seemingly contrasting example for the implementation of sustainability standards.

#### **2 Tourism and Sustainable Development**

Several authors have studied the tourism industry from the perspective of sustainability, focusing on aspects relating to its carbon footprint (Sun, 2014), energy, culture, water and environmental impacts as a whole (Aall, 2011; Collins, Jones, & Munday, 2009; Law & Cheung, 2007; Li, Wichmann, & Otterpohl, 2009; Radwan, Jones, & Minoli, 2012). They have all gained prominent attention in recent years as the notion of the environmental externality of tourism growth has found focus.

The conceptual framework of sustainability seems to be in accordance with the growth of the leisure industry, as the main tourism products (segments) in the world are directly linked to natural resources (Beach & Sun, Ecotourism and Cultural Tourism). Sustainability is a concept that focuses on the fate of the next generations; it is based on the challenge of maintaining the lifestyle of the present in the future (Georgescu-Roegen, 1971). The effects of the increase of tourists circulating in the world are thus not to be measured in terms of their current status but are to be viewed in the context of their long-lasting impact.

The activities of tourists at destinations are additional to those of local residents and regular transit visitors, and their presence adds to the overall environmental impact at the location. Several studies prove that the use of natural resources by someone who is not a local resident is at least two times higher than the optimal use by a local user (Aall, 2011; Gössling et al., 2012; International Network on Regional Economics, Mobility and Tourism & World Tourism Organization, 2012; Law & Cheung, 2007; Martinez-Alier, 2015). According to Li, Yang, Liu, and Zheng (2014), tourist flow has a seasonal diversity, with strong effects in the peak season (usually the summer half of the year in most destinations) and weak effects in the off-season (usually the winter half of the year in most destinations) (Gatt & Schranz, 2015). Local destinations with high tourist flow are certain to experience environmental effects, comparable to cities. Similar to urban island effects in cities, tourist destinations are expected to have destination island effects, in which one or more environmental indexes are significantly higher than those of the surrounding non-tourism areas.

The hospitality business—especially hotels—has been studied as a driver of sustainability standards in tourism as the main employer (workforce) in the sector and as one of the biggest sectors in terms of financial movements for investments (Gatt & Schranz, 2015; Li, Yang, Liu, & Zheng, 2014; Rahman, Dayang-Affizzah, & Edman, 2012). Hotels are involved in several aspects of sustainability, from white papers and corporate commitments to cleaner operation that is recognized by the client, who, sometimes, endorses that by expressing loyalty to the brand. From the used towels that should be hung and reused to solar panels that capture energy to warm up pools and spa areas; from water reuse procedures to roof panels that capture rainwater for gardening use, big chains and small hospitality businesses have been studied in several contexts, but the literature does not show a major concern for expanding the sustainbility impacts of local tourism as a worldwide concern.

Focusing on tourism accommodation as the locus of tourism, water consumption and conventional water indicators are reviewed and discussed, and knowledge gaps identified. From the tourism sector to regular home use, industrial consumption or agricultural irrigation, the use of water is key to pursuing a quality of life. Its use has proved contentious both in economic terms and in socio-cultural and environmental terms. The relationship between humankind and nature sometimes lacks complementarity—as when usage that is necessary for self-sufficiency turns into usage in a hegemonic, exploitative mode.

#### **3 The Use of Water and Sustainability**

Not only is water the most important natural resource in all economic cycles, it is central to the very survival of human beings on the planet. How to properly use this source is a crucial challenge in contemporary society—especially considering a scenario in which the demand for water is expected to increase by 55% by 2050. In addition to this, we must consider the lack of accessibility to this source—approximately 800 million people do not have access to quality drinking water in the world. Environmental issues are significant as well—projections indicate change in temporal and spatial distribution of water resources, potentially leading to hydrological disasters (WWAP, 2015).

Water management standards may become the norm in the future (Styles, Schoenberger, & Galvez-Martos, 2015). A general review of the use of water is an urgent issue when it comes to human needs and consumption. Even considering that most of the water available in the world is used in agricultural and industrial operations, regular personal use also needs to be addressed (Charara, Cashman, Bonnell, & Gehr, 2011; Gössling, 2015; Li, Wichmann, & Otterpohl, 2009; Millimet & Roy, 2015; Styles et al., 2015).

Several normative standards apply to a variety of water management and recycling techniques. The International Organization for Standardization (ISO) has more than 200 norms on water recycling systems, from portability criteria to equipment installation processes. Most countries also have local norms that apply and that follow the same path. Table 1 shows examples of ISO standards regarding water reuse.

Thus, the management of water resources does not depend exclusively on public entities, but also on a range of private actors (Jiménez-Cisneros, 2014). The entry of the business sector, taking advantage of an emerging green market (Montibeller-Filho, 2004), was characteristic of environmentalism in the 1990s and a positive factor for sustainable development. It should be noted that, already in the mid-1990s, the concept of sustainable development had been translated into a model to guide business practice that would be economically viable and at the same time socially and environmentally sustainable (Vizeu, Meneghetti, & Seifert, 2012). Similarly, the ever-growing number of voluntary sustainability standards (VSS)—many of them

**Table 1** Examples of ISO standards regarding water reuse

**Table 1** (continued)

*Source* Authors: compiled from https://www.iso .org

developed by coalitions of non-state actors—have provided market-based mechanisms for sustainability in production and consumption, e.g. for sustainable resource use.

Among the several procedures and practices for the sustainable use of water (which may or may not be required by a specific sustainability standard), the use of grey water is a reference to saving fresh, clean or treated water from regular human use. In the context of this chapter, we will focus on water use by tourists and corresponding opportunities for grey water recycling.

#### *Grey Water as a Driver for the Safer Use of Natural Resources*

Grey water is a type of wastewater generated in hotels, households or office buildings from sinks, showers, baths, washing machines or dishwashers. It is considered as containing fewer pathogens than domestic wastewater and is generally safer to handle and easier to treat and reuse onsite for toilet flushing, landscape or crop irrigation and other non-potable uses. The application of grey water reuse in major buildings such as hotels provides substantial benefits for both the water supply subsystem by reducing the demand for fresh clean water as well as the wastewater subsystems by reducing the amount of wastewater required to be conveyed and treated. It is economically viable in most aspects for major operations and simple to implement (Al-Jayyousi, 2003; Gatt & Schranz, 2015; Styles et al., 2015). Grey water, by definition, is different from discharge of toilets and contaminated wastewater, which is designated as black water to indicate that it contains human waste. The implementation of the system is technically feasible; it is basically a matter of civil engineering arrangements to reallocate pipes that will be connected to an alternative discharge system.

#### **4 Methodology**

This chapter evaluates two hotel samples in two major tourist cities in the world and checks the use of grey water recycling systems. This is not a statistical study, but an exploratory analysis with both primary and secondary data. Therefore, the process of separation of the sample follows two basic criteria: (1) geographical criteria, which means that the hotel should be in a predominantly tourist area; (2) a qualification criterion, which means that within the selected areas, only the best-evaluated hotels1 (three to five stars) were selected to respond. After the methodological criteria application, not more than thirty hotels were selected in each city and contacted over telephone in the second half of 2015 to respond to three questions: (1) existence of grey water system; (2) total number of rooms; and (3) number of rooms connected to the system.

The chosen cities were Rio de Janeiro in Brazil and Berlin in Germany. For the Brazilian sample, 27 hotels responded to the research, all located in the Copacabana tourist region. In the German sample, 18 hotels responded to the research, mostly located in Berlin Mitte. All hotels contacted were members of major alliances or had a capacity for meeting international sustainability standards.

The data references were based on the literature for grey water use, which estimates that freshwater consumption for high-end hotels with more than 100 rooms is, for example, 126 litres per day (l/day), considering exclusive individual use (shower/bath/sink) plus the use of 12 l/day for cleaning (Styles et al., 2015). This adds up to 138 l/day, without the consideration of toilet use (aim of this article). Other studies based on Nolde (2000) complement the findings of Gössling (2015) and suggest 95 and 81 l/day as references for individual use (shower/bath/sink). Experiments conducted in a summer hotel on the Spanish island of Mallorca suggest 110 l/day (March, Gual, & Orozco, 2004), a number that was considered for our calculations of annual water use in hotels of the Copacabana region (Sample 1). For hotels in Berlin (Sample 2), a different value (81 l/day) was used to reflect different toilet water discharge equipment, cultural factors and weather conditions influencing water use.

The parameters for toilet discharge of water (not suited for recycling) were also derived fromMarch et al. (2004) for Sample 1 (Copacabana) and amounted to 36 l/day for individual use; Styles et al. (2015) (38 l/day), Nolde (2000) (57 l/day) and Gössling (2015) (21 l/day) do not differ much from this number. For the above-mentioned

1Evaluations based on Trip Advisor's standards. The hotels were investigated in specific tourist areas.

reasons (technical, cultural and weather-related factors), the lowest number (21 l/day) from this row was again used to calculate annual values for Sample 2 (Berlin).

Given their exploratory and approximate character, the quantitative results in Table 3 (Sect. 5) are not meant to statistically evaluate and rank the two tourist regions under review, but rather to present a broad spectrum of different water use patterns and saving potentials based on two simplified examples.

In addition, eight hotel maintenance managers were willing to complement our quantitative estimates with more detailed interviews. They were interviewed in order to check for two conditions: (1) whether the implementation was driven by an external requirement or by a strategic decision of the hotel managers and (2) whether there were sustainability standards or procedures on grey water to be followed.

#### **5 Results and Analysis**

In the hotel business, several procedures are currently applied to mitigate the environmental impacts of major hospitality operations in tourist destinations, but, in most cases, they are driven by internal regulations, market strategies or certification. According to the literature referenced in this chapter, the reuse of grey water is currently one of the easiest procedures used by hotels to reduce the use of freshwater, but its use is restricted to some hotels only and the reasons for this limited application are still not clear.

For the qualitative questions, seven out of eight managers interviewed highlighted that there was no specific sustainability standard mandating them to use grey water systems. In fact, each company implemented the equipment based on its own evaluation. One manager mentioned public incentives for hotels following specific sustainable criteria related to electric energy and water use. Table 2 shows the requirements and standards implemented by hotels.

The qualitative results indicate that hotels using recycling systems were driven by interests related to their own evaluations and expectations—from economic

**Table 2** Qualitative interviews with hotel maintenance managers

*Source* Authors

savings to recognition through clients and contributions to international brands' white papers. This suggests that standards towards sustainable tourism and the common good, unlike standards for technical operations, are not yet common, at least in the sample sector and regions, even though such initiatives in principle exist (e.g. Rainforest Alliance Verification Standard for Tourism Services, Travelife Award, Global Sustainable Tourism Criteria/GSTC and a range of regional/national schemes). Additionally, the companies did not follow any regulatory procedure that could work as an incentive to the implementation of a recycling water system.

The quantitative results are displayed in Table 3. Out of 27 hotels analyzed in Rio de Janeiro, only four had a grey water management system in operation, while out of 18 hotels consulted in Berlin, seven of them had one. Since water use and saving rate per unit were assumed to be higher for the Brazilian sample than for the German one, the total amount of savings was also higher (Table 3) although less hotels had a recycling system in place. In turn, as the proportion of hotels using a recycling system was much lower in the overall Brazilian sample compared to the German one, the amount saved in Rio de Janeiro was proportionally lower than in Berlin. However, even considering that the results for Berlin were better than for the

**Table 3** Major quantitative results for water savings

*Source* Authors aEstimated total (fresh) water use per year of the Brazilian sample (27 hotels, all rooms)

bEstimated total (fresh) water use per year of the German sample (18 hotels, all rooms)

cEstimated water savings in one year of operation of grey water recycling for the Brazilian sample (4 hotels out of 27, only those rooms connected to the system were considered)

e, fTotal possible savings if 100% of the sample had the system gAverage Olympic pool with 2.5 million litres

dEstimated water savings in one year of operation of grey water recycling for the German sample (7 hotels out of 18, only those rooms connected to the system were considered)

Brazilian sample, the majority of hotels consulted did not have the system in either country.

Among our findings, there is a clear conclusion that the use of recycling systems for water is relevant in terms of the volume saved in the tourism industry. Just considering water savings in the studied sample, the results show that 6.86% and 8.07%, respectively, of the total water used in one year across the two samples were saved. Translating these results into commonly understood terms, in the Brazilian sample there was a total saving equivalent to 11 Olympic water pools in one year of operation among the rooms with the system installed. In Germany, 8 Olympic water pools could be saved within the sample analyzed. A greater result could be expected if the whole industry in one city would be using this recycling system.

Exploring our data and case studies from literature, on average, hotels using recycling systems may save between 20 and 25% of all the water used in their rooms. Since neither standards nor regulations play a major role across these samples as a driver for sustainability yet, they needed to be rebalanced, especially towards more regulatory procedures. At present, hotels are simply taking their own initiatives.

#### *Towards a Regulatory Framework*

The primary research has highlighted a trend. Across the globe, there are significant differences in water consumption with respect to resource endowment, pollution, technical composition, natural cycle, recycling, etc. In addition to estimating and comparing the use of freshwater for human consumption and commercial use we came across a simple conclusion: there is a need to eliminate endogeneity and transform the process of saving this natural resource into a regulatory framework, where private and public sectors could benefit from reduced consumption and from recycling.

The process of "greening" the tourism industry is not an easy task. However, for the cases studied, environmental regulation can exert a significant effect on commercial productivity. It is a matter of implementing voluntary standards and mandatory regulations before relevant economic variables reach the critical point affected by the scarcity of water. Here, we have made an empirical estimation of the threshold characteristics of environmental regulation for tourism, and simple suggestions can already be put in place.

In the voluntary field, the adoption of sustainable practices is already happening in the hotel industry, but, as we could map, even for high-end brands the adoption of technical procedures to save water is not related to political encouragement or pressure but to an economic motivation. This is not a bad thing, but it could be much better executed if there would be an official yet voluntary framework to guide market actions. The Sustainable Development Goals (SDGs) could be a relevant starting point to link voluntary practices of the tourism industry, such as grey water recycling, to broader questions of sustainability and the management of natural resources in the global arena. Voluntary standards for sustainable tourism, as mentioned in Sect. 5, can constitute an important instrument to substantiate and implement the SDGs in this sector.

Within the SDGs framework, there are several topics that relate to the discussion raised in this chapter and the proper adoption of these concepts could lead to betterorganized activities for saving freshwater. Table 4 highlights the potential of selected SDGs to guide transformation in three categories related to this chapter: sustainability cooperation, water use and tourism.

In addition to voluntary standards adoption based on SDGs, mandatory regulation may be required. Considering that regulatory actions for protecting the environment vary significantly from industry to industry (including tourism), while different industries may respond differently to the same regulation, it is important to introduce more effective regulatory incentives towards the sustainable use of water. Indeed, environmental regulation has a significant positive correlation with increased environmental productivity

**Table 4** Themes of this chapter as reflected in selected SDGs

*Source* Authors' compilation based on the 2030 Agenda for Sustainable Development

A regulatory framework towards the better use of water in tourism and other commercial activities could be the result of an evolution. Continuous changes must be achieved because as the recycling water concept matures, policymakers have to face new challenges. The introduction of mandatory regulation for water use in tourism should be based on at least three considerations:

Policymakers play a key role in shaping policy regulatory actions and public support schemes such as financing lines. According to González and Lacal-Arántegui (2016), the proper design of a scheme and of the administrative procedures for accessing it is essential in order to reduce uncertainty. This would not only avoid discouraging investors, but also reduce the overall cost of the support scheme. Higher risk needs to be compensated with higher remuneration levels in order to keep the support scheme attractive for investors. The best sustainability practice is one with clear economic and social benefits and substantial environmental protection, and this seems to be the case for grey water recycling.

#### **6 Policy Recommendations**

Regarding the use of water by tourists, it is clear that tourists use more water than regular citizens in similar activities. Recycling systems are the future of water use in major hotels, but the existence of standards does not have any strong relationship to present activities towards sustainability in this matter. In this context, reflection on the sustainable use of water becomes essential. The choice is not between socioeconomic development and the environment, but between development models, sensitive or not to the environment. Sustainable development should be underpinned by the ethical idea of avoiding harm to what is necessary to preserve, regardless of the existence of formal restrictions. In the end, it is the behaviour of any social actor that defines outcomes (Sachs, 2015).

To a relevant extent, sustainable development requires good governance: public and corporate. As such, combining public and private initiatives regarding standards and regulations might be a way of moving forward more effectively, given the issue's global scale and the need for transparency as well as participation. Sustainable behaviour begins with voluntary actions as an ethical idea although it is likely that positive and negative incentives are needed.

Free market believers would argue that, in the absence of rules clearly declaring that certain behaviour is not allowed, corporate enterprises would not have a moral obligation to their shareholders to pursue any objective other than maximizing profits, even given that some measures are possible only due to circumstantial legal loopholes (Sachs, 2015). In this light, it is relevant to create social understanding on how society could together reshape thinking that might help tackle ongoing problems and, consequently, develop a more successful path towards sustainability.

Significantly, regulation is a concept that must be addressed in addition to the relevant (voluntary) standardization of sustainable action. The idea that regulation should go hand in hand with standards is much more promising than merely negative incentives, i.e. much more can be done than just restricting behaviour and preventing undesirable activities. It is feasible to develop policies that would enable, or at least facilitate, the flourishing of values through a positive approach. In sum, not only is it important to develop measures to restrict unsustainable behaviour—penalties, sanctions etc.—but it is also necessary to create opportunities for the development of public goods such as funds, technical assistance and capacity building (Baldwing, Cave, & Lodge, 2012). By taking full advantage of positive and negative regulatory approaches, it is possible to handle policy issues with a variety of tools and standards, and consequently achieve better outcomes.

As a contribution to future debates, it is important to highlight some key aspects. First, this chapter aimed to make a pilot study of a sensitive issue that has a massive impact on people's lives: water use. It would be relevant if further research could explore this idea and evaluate what is happening in the other strategic tourist cities of the world. Those studies would allow the creation of more objective evidence-based policies. Moreover, it is clear that the UN World Tourism Organization (UNWTO) should improve its framework in relation to water use standards. The lack of transparency and guidance, on the one hand, makes it difficult for the industry to develop proper voluntary sustainability investment decisions, and, on the other hand, for the consumers to choose wisely between different products. Both sides are acting in the absence of proper information and are not necessarily making the best possible choices. Last and more importantly, it is relevant to take advantage of the SDGs to develop a smart international policy framework on the issue. Taking the SDGs as a reference point seems to be the most effective way of designing balanced (voluntary and mandatory; positive and negative; local and international) governance models to enable not only improvements in touristic practices all over the world but also to tackle instances of improper green washing behaviour.

Finally, as an incentive for further research on the topic, three policy recommendations may be collected from our exploratory research:

3. To use the SDGs framework as a reference for the development of specific voluntary standards and mandatory regulations that could guide stakeholders to achieve the best levels of sustainability, meaning, not only protecting natural resources, but also achieving economic and social development.

#### **References**

**Open Access** This chapter is licensed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

The images or other third party material in this chapter are included in the chapter's Creative Commons license, unless indicated otherwise in a credit line to the material. If material is not included in the chapter's Creative Commons license and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder.

# **Chapter 13 Conclusions**

#### **Jorge Antonio Pérez-Pineda, Johannes Blankenbach, and Archna Negi**

The complexity of current global challenges necessitates innovative and strategic solutions and, in particular, better models of governance. The twenty-first century began with the launch of the Millennium Development Goals (MDGs), followed by the adoption of the Sustainable Development Goals (SDGs) in 2015. This new set of goals has evolved from a governmental approach to a multi-stakeholder approach, introducing a comprehensive management framework for sustainable development worldwide that goes much beyond the aid-centred focus of the past.

International institutions such as the United Nations (UN) and the Organisation for Economic Co-operation and Development (OECD) have extended support to governments and other actors in achieving development and sustainability goals through various mechanisms and strategies. World summits such as Rio + 20 in 2012, the First High Level Meeting of the Global Partnership for Effective Development Cooperation in 2014 and the Third International Conference on Financing for Development in 20151 made it clear that any effort towards economic growth and combating poverty must be achieved with a commitment to environmental sustainability, human rights, inclusion, transparency, accountability and coherence.

Inclusive economic growth, poverty reduction and sustainable development are still considered to depend on "trade as an engine for development" (UNGA, 2015, p. 37) and the World Trade Organisation (WTO), despite the failure of the Doha

J. A. Pérez-Pineda

Faculty of Economics and Business, Universidad Anáhuac México, Estado de México, Mexico

J. Blankenbach Business & Human Rights Resource Centre, Berlin, Germany

A. Negi (B)

1The Addis Ababa Action Agenda (AAAA) was agreed upon at this conference.

Centre for International Politics, Organization and Disarmament (CIPOD), School of International Studies, Jawaharlal Nehru University, New Delhi, India e-mail<EMAIL_ADDRESS>
© The Editor(s) (if applicable) and The Author(s) 2020

A. Negi et al. (eds.), *Sustainability Standards and Global Governance*, https://doi.org/10.1007/978-981-15-3473-7\_13

Round and its other troubles, continues to be central to the trade agenda. In addition, we witness increasingly frequent interventions of the private sector in the global development agenda (Severino & Ray, 2010, pp. 8–10). Despite the projected importance of trade for development, when companies from emerging economies and developing countries enter the international markets, their products often face nontariff barriers (NTBs), which could include a range of sanitary and phytosanitary measures (SPMs) as well as technical barriers to trade (TBTs). Mandatory sustainability regulations as well as voluntary sustainability standards (VSS) may amount to such barriers under certain circumstances. Trade statistics of the United Nations Conference on Trade and Development (UNCTAD, 2015, p. 17) reveal that TBTs

impact almost 70% of world trade, whereas SPMs impact around 10% of world trade.

VSS, unless referenced in mandatory regulation, are not formally categorised as NTBs and therefore not covered by official trade rules. A market survey of the International Trade Centre (ITC) for 14 leading VSS found that "all standards in the report continue to show growth of total certified area, albeit not at the same pace as in the past" (Lernoud et al., 2017, p. ii). In the light of such trends, while there needs to be a better understanding of whether and how VSS could be used as a tool to achieve the SDGs, the extent to which they constitue barriers to market entry for emerging economies and developing countries and serve corporate opportunism, also needs to be examined. Within these countries, marginalised regions and smallscale producers seem to be at greatest risk of exclusion (UNFSS, 2016, p. 4). In either case, there exists a clear need to comprehensively review current normative and policy frameworks at the global level relating to sustainability standards and regulations.

The first section of this volume—"Global Governance Frameworks for Sustainability Standards"—introduced the 2030 Agenda for sustainable development as a governance framework, against which to measure the performance of sustainability standards. The 2030 Agenda, by guiding the design of sustainability regulations, standards and corresponding impact assessments, can strengthen the link between sustainable development and the use of sustainability standards and regulations. The mutually reinforcing relationship between the SDGs and human rights is emphasised in this context, as is the importance of implementing the UN Guiding Principles on Business and Human Rights (UNGPs) in order to operationalize corporate respect for human rights across global operations and value chains: "[T]he implementation of the UNGPs can be the single most important contribution by business to the realisation of the SDGs" (Morris et al., 2019, p. 9). Even though the UNGPs recommend a "smart mix" of voluntary and mandatory measures (OHCHR, 2011, p. 5), it remains to be seen whether VSS can play a role in supporting human rights (and environmental) due diligence—the key operational principle put forward by the UNGPs. A matter of concern is that the kind of audits used for certification and verification of VSS have not always proven reliable for detecting human rights and environmental abuses. Also, due diligence is about companies *internalising* processes for human rights and environmental risk assessment, mitigation action and monitoring across their value chains, as well as corresponding reporting and remediation, rather than outsourcing these steps. External VSS initiatives can at best support, but not replace, companies' own due diligence policies and practices—and potentially legal obligation—to respect human rights and the environment across their global operations and value chains.

Regarding other institutionalised frameworks, the WTO is of key importance even though it does not cover private VSS (Henson, 2008, p. 76). It has gathered vast experience in governing the use of SPS as well as technical regulations and standards from public and international sources. Annex 4 of the Second Triennial Review of the WTO's TBT Agreement establishes criteria for international standards: "transparency", "openness", "impartiality and consensus", "effectiveness and relevance", "coherence" and "development dimension" (WTO, 2000, p. 24). These have also been taken up and extended by the International Social and Environmental Accreditation and Labelling Alliance (ISEAL), an umbrella organisation for private standards schemes, notably in its "Credibility Principles" (ISEAL, 2013). Also, in the context of trade, it appears that stagnation at the WTO has led to an increase in bilateral and regional preferential trade agreements (PTAs), which may constitute a new framework of global governance and, as they become "greener", provide a conducive environment for sustainability standards and regulations.

Sustainability reporting, which is discussed as an instrument for sustainability governance in this volume, has also found mention in several other publications that have looked at global reporting as a "multi-stakeholder governance arrangement" (Flohr, Rieth, Schwindenhammer, & Wolf, 2010, p. 219). Legitimacy seems to be the key question here; in their analysis of the Global Reporting Initiative (GRI), Flohr et al. (2010, p. 221) emphasise "the high legitimacy potential of a highly institutionalised and consensus based transnational multi-stakeholder initiative in which corporations act as norm-entrepreneurs". Haufler, as early on as 2001, argued that "all sides view industry self-regulation as a potential new source of global governance", while highlighting that there is disagreement on "whether this is a legitimate and effective means to achieve public policy goals" (Haufler, 2001, p. 1). Several factors that hamper the legitimacy and effectiveness of industry-driven multi-stakeholder initiatives are addressed in this volume, ranging from the lack of means of implementation to the formal or de facto exclusion of crucial local actors and rights-holders from governance arrangements. When it comes to reporting in particular, it should be noted that even where sustainability and/or human rights reporting is required by mandatory national or regional regulation, governments are now being pushed to move towards legally mandating certain types of company *action* rather than mere *reporting,* as the latter has failed to drive real improvements in responsible business conduct across industries. A briefing put forward by the Corporate Responsibility (CORE) Coalition—and endorsed by many others—on the subject of the Modern Slavery Act in the United Kingdom (UK) reads: "[T]he UK Government must now look beyond reporting and introduce an additional legal requirement for companies to carry out human rights due diligence (HRDD) in their global operations, activities, products, services, investments and supply chains." (CORE, 2019, p. 3).

The International Labour Organisation (ILO) Conventions are referred to as concrete requirements in many sustainability standards and regulations, which again underlines their close global governance link. The statistical finding in this volume that strengthening labour standards may in fact improve poorer countries' export performance is an important argument in favour of both public and private initiatives to effectively enforce and respect workers' rights.

While the second part of this volume—titled "Sustainability Standards in Sectoral and Country Contexts"—has a more local focus, implicit global governance linkages remain. The different challenges that are identified in this second part of the volume regarding the national/local implementation of globally operating VSS and their interplay with (local) mandatory regulations underline the need for further research and clarity on the global governance aspects of sustainability standards in the future. Challenges pertaining to sustainability standards take many different forms. In some contexts, there seems to be a contradiction between socioeconomic benefits for smallholders and large-scale environmental benefits such as reduced/halted deforestation. Those farmers that can afford certification may even cause more environmental damage by enlarging their cultivated area, which stands in contradiction to the general purpose of VSS (and at the same time proves that VSS cannot prevent over-production/consumption). The case of PEFC and FSC certification in Indonesia shows that, at a formal level, private standards can complement local regulation well if they comprise more detailed and far-reaching criteria than public stipulations. It seems likely, however, that out of the two VSS under review, more concession holders may opt for PEFC as it is less stringent than FSC.

Comparing various types of global and national food safety and quality standards for farmers, there is a challenge for emerging countries to comply with global standards, particularly in high-value supply chains both for foreign and local markets. Due to the market power of large retailers and supermarket chains, they may, in a purely commercial sense, become de facto mandatory and act as barriers to market entry. There is also a critique that global VSS such as GlobalGAP seem to benefit wealthier and more educated small-scale farmers, whereas local interpretations of the same standard may have broader coverage. However, local interpretations of VSS may also lead to parallel standards (e.g. there are both public and private local GAP versions in Thailand and India) resulting in high transaction costs without necessarily leading to better sustainability outcomes. There is thus a case for standards harmonisation among private and public actors at national levels. Public mandatory sustainability standards (i.e. sustainability regulations) from individual or groups of industrialised countries may have global implications, as the special case of vehicle efficiency standards implementation in China and Mexico shows. However, aligning emerging economies' fuel efficiency norms with EURO VI (European Union) and EPA 2010 (USA) does not always lead to the best results as there may be a mismatch with the specific economic and sectoral conditions on the ground.

The two parts of this volume have sought to shed light on global governance and sustainability standards from within and beyond the analytical mainstream. Not all institutions and processes have got the attention they deserve in this context, such as the UN Treaty process. Negotiations to develop a treaty on business and human rights started in 2015 with the first meeting of the UN Human Rights Council's open-ended intergovernmental working group on transnational corporations and other business enterprises with respect to human rights (OEIWG).2 It has a mandate to elaborate an international legally binding instrument, requiring companies to respect human rights in their operations including value chains. While negotiations have been difficult so far, this treaty has the potential to become an important global governance framework for responsible business conduct in line with human rights and the SDGs.

Apart from the UNGPs, which have been mentioned above, the ILO Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy (ILO, 2017a) as well as the OECD Guidelines for Multinational Enterprises (OECD, 2011) also deserve attention. These sets of principles, guidelines and recommendations all strive to promote responsible and sustainable business conduct and must thus even be characterised as global public meta-standards, bridging the gap between public and private actors in global governance. For instance, the ILO Tripartite Declaration is "the only global instrument in this area that was elaborated and adopted by governments, employers and workers from around the world" (ILO, 2017b). The OECD Guidelines, first adopted in 1976, were updated in 2011 to incorporate the UNGPs' notion of human rights due diligence. A more recent OECD document, the Due Diligence Guidance on Responsible Business Conduct (OECD, 2018), spells out the possible steps and design of human rights due diligence in greater detail. It is likely to be "the most authoritative international elaboration of due diligence that is likely to be available for many years" according to civil society network OECD Watch (OECD Watch, 2018, p. 1).

Three of the above-mentioned guidelines are also highlighted in the Group of 20 (G20) Leaders' Declaration adopted at the 2017 Hamburg Summit:

In order to achieve sustainable and inclusive supply chains, we commit to fostering the implementation of labour, social and environmental standards and human rights in line with internationally recognised frameworks, such as the UN Guiding Principles on Business and Human Rights and the ILO Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy. Those countries that adhere to the OECD Guidelines for Multinational Enterprises (OECD MNE Guidelines) commit to fostering them and welcome others to follow. (G20, 2017, p. 4)

The Think 20 (T20), one of the G20's outreach groups meant to provide policy advice, suggests a "Global Pact for Sustainable Trade" in its policy brief on "Fostering the Sustainability of Global Value Chains (GVCs)":

Our proposal is to bring this process of governmental regulations strategies to govern responsibility in complex GVCs in different countries to the global stage, possibly with the participation of the major international institutions, government, business, especially SMEs [small and medium-sized enterprises], and other non-state actors. This would take the form of a Global Pact for Sustainable Trade, which would set minimum standards for environmental protection as well as for labor conditions and human rights protection. (Blumenschein et al., 2017, p. 7)

VSS are covered in the policy brief in the context of both opportunities and challenges. For instance, the authors find that issues of "cost/benefit sharing yet have

2See the Business & Human Rights Resource Centre's web portal and blog series on a "Binding treaty" at https://www.business-humanrights.org/en/binding-treaty.

to be overcome within and across voluntary standards systems" (Blumenschein et al., 2017, p. 7).

Governments who, for often legitimate reasons, were sceptical of importing countries' sustainability standards and regulations, dismissing them as (Western) protectionism in disguise, seem to have become more open towards them, including private VSS, which bear distinct risks, as some of the chapters discussed. The co-creation of semi-governmental VSS platforms in India (March 2016), Brazil (May/June 2017), China (June 2017) and Mexico (April 2018) for coordination, knowledge-sharing and stakeholder support has been a strong signal that emerging economies, through their national standards bodies, are ready to critically and constructively address the issue of VSS. They are generally moving from being standards-takers to being standards-makers. These platforms as well as other institutions looking into the issue should now ensure proper worker and rights-holder engagement, and also explore legislative options.

The new national VSS platforms were founded jointly with the UNFSS, an initiative of five UN agencies born of the WTO's initial inaction on private standards (UNFSS, 2017; see also Sect. 2). Under UNFSS auspices and with additional support from the Managing Global Governance (MGG) programme of the German Development Institute/*Deutsches Institut für Entwicklungspolitik* (DIE), a global community of experts and stakeholders has started to form, connecting national VSS platforms and actors. Momentum for similar semi-governmental platforms—to address potentials and pitfalls—is also building in South Africa and Indonesia.

There is an indication that sustainability standards, including VSS, are increasingly engaging the attention of policy makers, companies and certification agencies, while awareness of their limitations is also rising. Sustainability standards generally, complemented by multi-stakeholder structures for their national and global governance, can potentially evolve into tools for the realisation of the 2030 Agenda, but reinforced co-operation and, in part, legislation is required on issues of financing, technical co-operation, impact evaluation, multi-stakeholder dialogue, worker voice, as well as accountability and liability. The escalating proliferation of sustainability standards and regulations has the potential to translate into asymmetric compliance burdens for the developing and emerging economies, if simply passed down supply chains, and an effective rationalisation is clearly the need of the hour, along with an assessment of what really works best for workers, communities and the environment. Further, one of the main constraints for smallholders and SMEs in emerging markets, independent of the sector, is the lack of financing for standards implementation, considering that cost-sharing arrangements are still very nascent. Several options may be explored to bridge this gap, such as combining public and private standards to reduce transaction costs or launching funding lines with multilateral development banks and local financial institutions. For instance, "[e]mbedding standards compliance into the terms and conditions of lending contracts would facilitate access to finance on the part of sustainability-oriented SMEs" (Sommer, 2017, p. 61). It will need to be ensured, however, that this does not translate into excessive technical burdens for these SMEs in developing countries and emerging markets but truly supports them in addressing their human rights and environmental risks, while maximizing positive impacts.

The implementation, especially of environmental standards, almost always requires technical skills, appropriate equipment, knowledge of supply chain characteristics and market data, etc. Again, development agencies, local governments and international institutions such as ITC, UNFSS or UNCTAD could provide assistance, complemented by South–South and triangular co-operation. In addition, private enterprises and large-scale producers should offer support to small farmers, through fair purchasing practices and proper supplier engagement, and possibly supported by fundamentally reformed VSS schemes or national multi-stakeholder VSS platforms. While this book has taken shape over the past years, mandatory human rights due diligence and environmental legislation in line with the UNGPs has become a tangible opportunity in European countries, at EU-level and other countries of the world. The objective is to make sure companies' respect for human rights and the environment, including in their global value chains, is no longer an externalized and voluntary option, but an internalized and legal requirement.

There is still a lack of evidence-based assessment of the real impacts of VSS across different sectors and countries. At first sight, it seems obvious that the adoption of standards can potentially have positive impacts on the environment, on society and on the economy. However, as some of the chapters in this volume show, there may be trade-offs and contradictions. It is therefore necessary to collect, compare and analyse more data on the benefits and pitfalls of VSS, shedding light on critical issues such as possible market exclusions at the microlevel and macrolevel, as well as (social) audit failure and lack of accountability. In terms of processes and resources, sustainability standards impact assessment seek synergies with national SDG monitoring and evaluation, for instance, by using joint indicators and data.

There are many concerns at all levels regarding the legitimacy, fairness, quality and effectiveness of multi-stakeholder dialogues, e.g. for the setting or implementation of standards. Power asymmetries are often visible, and some brands and companies may use these initiatives to 'free-ride' on leading practice by others while actually not changing much in the way they do business. Local chambers of commerce, national standards bodies and international organisations should seek to establish mechanisms for better assurance and against unnecessary proliferation, duplication or overlap of standards as this may imply an extra burden of work and extra costs especially for small-scale producers, without necessarily improving developmental, social and environmental outcomes. Coordination tasks may also be undertaken by public– private VSS platforms in more countries under the auspices of the UNFSS. Some of the necessary resources could be channelled through South–South co-operation. UNFSS-facilitated exchange across existing and future platforms may improve the interplay of globally operating private VSS with public VSS and mandatory public regulations in different countries, maximising their contribution to SDG implementation. A network of sustainability standards platforms could also promote public support mechanisms at the national, regional and global scale for smaller producers seeking to implement sustainability standards and practices. And last but not the least, such a network may evolve into a "Southern" building block for global multistakeholder governance of sustainability standards, including VSS, based on common guidelines, rules and "standards for standards".