Sustainability standards: Voluntary versus mandatory regulation

This report presents the results from an extensive review of economic and managerial literature about mandatory and voluntary sustainability standards. The review addresses the study question: “Do mandatory standards or voluntary standards do better job in stimulating the transition to sustainable agri-food system?”. A bibliometric review identified four main branches in the academic literature on sustainability standards: Fairness and farmer welfare, Governance, Management and Consumption. The review of the most cited scientific articles in each branch concluded that sustainability standards can promote the transition toward a more sustainable food system, provide profit opportunity for farmers, improve vertical coordination, but they can be used to increase large firms’ bargaining power. The survey found also that the comparison between mandatory and voluntary sustainability standards is not one of the most debated topics in the literature. To address the research question, an illustrative model was developed to extend the conclusions from industrial organization literature on safety and quality standards to sustainability standards. If the main objective of the policy action is helping efficient firms to be even more sustainable, voluntary standards may be preferable. Instead, if the main objective is to lead all firms (and the least efficient ones in particular) to ensure at least a minimum level of sustainability, mandatory standards may be preferable.