Sustainability standards: Voluntary versus mandatory regulation. Their role in facilitating transition to sustainable agri-food systems

This report presents a 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 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 review found also that only a very limited number of papers compared mandatory and voluntary sustainability standards. To address the research question, an illustrative model was developed based on existing literature on safety and quality standards. The model found that the relative performance of voluntary and mandatory standards depends on market conditions (including demand and cost variables and competition) and the policy objectives. 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.