Reducing Certification Costs for Smallholders? Potential for Participatory Guarantee Systems in GLOBALGAP

Diploma Thesis, 2008

87 Pages, Grade: 1






1 Introduction
1.1 Problem
1.2 Objective
1.3 Procedure and methods

2 Description of the GLOBALGAP standard version 3.0-2_SEP
2.1 History and development of the GLOBALGAP standard
2.2 Definition of producer groups within the GLOBALGAP standard
2.3 Certification process of producer groups within the GLOBALGAP standard
2.4 Certification costs for producer groups within the GLOBALGAP standard.
2.5 Smallholders within the GLOBALGAP standard

3 Existing Participatory Guarantee Systems
3.1 Introduction to Participatory Guarantee Systems
3.2 Participatory Guarantee System in India
3.2.1 History and development
3.2.2 Assembly of the Indian Participatory Guarantee System
3.2.3 Certification process of the Indian Participatory Guarantee System .
3.3 Participatory Guarantee System of Rede Ecovida in Brazil
3.3.1 History and development of Rede Ecovida
3.3.2 Assembly of Rede Ecovida
3.3.3 Certification process of Rede Ecovida
3.4 Summary of the cognitions concerning Participatory Guarantee Systems

4 Integration of a Participatory Guarantee System into the GLOBALGAP standard
4.1 Comparison of a Participatory Guarantee System with Third Party Certification Schemes
4.2 Proposal for an integration of Participatory Guarantee System principles into the GLOBALGAP standard
4.3 Influence of the proposal on certification costs
4.4 Impact of the proposal on credibility

5 Evaluation of the proposal
5.1 Participants in the expert discussion
5.2 Development of an interview guideline
5.3 Results and discussion of the interviews
5.4 Data interpretation and summary of the evaluation

6 Summary and conclusion
6.1 Main findings
6.2 Future prospects




Figure 1: GLOBALGAP Governance

Figure 2: IFA Standard Structure

Figure 3: GLOBALGAP Option 2, Group Certification

Figure 4: Development of the Certified Producers

Figure 5: Certification Options

Figure 6: Key Groups

Figure 7: Certification Process. Building Credibility

Figure 8: The Ecovida Agroecology Network and its regional nuclei

Figure 9: Proposal of a producer group certification using PGS principles


Table 1: Different types of expenses for a GLOBALGAP Option 2 certification process

Table 2: External certification costs for a producer group

Table 3: Comparison of PGS and Third Party Certification

Table 4: Comparison of the original Option 2 elements and the new approach

Table 5: External certification costs built on the proposed approach

Table 6: Profile of strengths and weaknesses of GLOBALGAP and PGS


illustration not visible in this excerpt

Die vorliegende Arbeit wurde am Institut für Lebensmittel- und Ressourcenökonomik (Professur für Unternehmensführung, Organisation und Informationsmanagement) der Landwirtschaftlichen Fakultät der Rheinischen Friedrich-Wilhelms-Universität Bonn in der Zeit von Juli 2008 bis Dezember 2008 unter der Leitung von Prof. Dr. oec. Gerhard Schiefer angefertigt.

1 Introduction

1.1 Problem

The requirements for food safety and therefore, for retailers, suppliers and producing entities have immensely increased throughout the last decades, due to different food scandals (e.g. BSE, aftosa, avian flu, pesticide residues etc.). Within industrialized countries a development of legal regulations as well as private food standards have emerged (WORLD BANK 2007). The most important international organizations in connection with consumer health and food standards are the United Nations Food and Agriculture Organization (FAO) and the World Health Organization (WHO). Together they created the Codex Alimentarius Commission (CAC) in 1963. The CAC has developed “a collection of guidelines, codes of practice, and other food safety-related recommendations” (WORLD BANK 2005, p. 14). The most common guideline of the CAC is the hazard analysis and critical control point (HACCP) system. Additionally, a food safety authority on the level of the European Commission exists. Consequently, a development of private food standards, based on the above mentioned generic guidelines, took place. The requirements of these private food standards are often located on a higher level than legal regulations, because they are aimed at minimizing not only the risk for retailers but also at ensuring the quality of agricultural products (FULPONI 2007). Moreover, the private voluntary standards, which represent the base for certification and certificates, can refer to processes, services, personnel or products and they “are characterized by a quality management system approach, with third party audits to certify conformity and represent a fundamentally different approach from simple product controls” (FULPONI 2007, p. 6).

However, private standard requirements - mostly set by leading food companies - implicate in some cases significant problems for poor or small-scale producers - especially in developing countries (WORLD BANK 2005). But, small-scale producers or smallholders play an important role in the economy of most developing countries. The production of a single farmer might be marginal, nonetheless, the total output of all production units “represent[s] a significant share of the GNP” (BOUSSARD 1992, p. 2). In connection with their productions and turnovers smallholders face different problems. On the one hand, a market access is often avoided due to the requirements of importing countries and retailers. On the other hand, new requirements can implicate an exclusion of those producers who already have market access, but are not able to fulfil these new requirements. Consequently, the compliance with a private voluntary standard or at least with the legal regulations of the importing countries is almost the only possibility for producers to gain access to international markets (FULPONI 2007).

Furthermore, the implementation and maintenance of standards on small-scale farms in developing countries are limited by a lack of infrastructure, know-how and capital (WORLD BANK 2007). Especially, “the increasing need to meet not only the production standards but also to integrate the set of supply chains logistic (…) raises the cost of entry to leading retail chains” (FULPONI 2007, p. 10). Another limiting factor is the illiteracy rate of the rural population in most developing countries, which is distinctive in some cases, e.g. the illiteracy rate of the population in Niger and Afghanistan that is about 72% (CIA 2008). Illiterate farmers cannot read and prove the standard requirements and fail to fulfil the requested documentation without external help. Partially, the producers can lower the limitative factors by aligning with each other, e.g. in cooperatives or producer groups. For this reason, most of the standard owners have developed the option of a producer group certification. However, most of the small-scale producers in developing countries have no market access as it is prevented by legal regulations or private food standards of importing countries. Thus, a simplification to gain certification is demanded.

Participatory Guarantee Systems (PGS) could provide an opportunity to small-scale producers in order to acquire a certificate for their production based on a foundation trust, social networking and capacity building. The Participatory Guarantee Systems mostly focus on local markets and on organic produce. These systems are working well for farmer groups in countries like India, Brazil, New Zealand and others (IFOAM 2008). The objective of this thesis will be to find out whether there is a possibility to integrate a Participatory Guarantee System or several principles of such a system into the GLOBALGAP standard to provide an easier and economical way for small-scale producers to gain certification.

1.2 Objective

This thesis will analyse the potential for an integration of a Participatory Guarantee System or several principles of it into the GLOBALGAP standard version 3.0-2_SEP07. Thereby, a reduction of expenses for smallholders and an easier way to gain a GLOBALGAP certificate is imaginable. However, the acquired level of credibility and integrity of the GLOBALGAP standard to retailers and consumers must not be affected by such an integration.

If smallholders or small-scale producers in developing countries may receive a better chance to access international trade channels, they should gain an easier possibility to implement the GLOBALGAP standard version 3.0-2_SEP07 or to comply at least with the legal regulations of importing countries. Therefore, it is very important to support the producers of developing countries by implementing such product standards, so that they can obtain an economic benefit.

Through this assistance an improvement of the agricultural sector in developing countries is expected and the possibility to pave their ways for the world market and the global supply chain is given. This could be seen as a crucial step of developing countries to escape the vicious circle of poverty.

1.3 Procedure and methods

First of all, the thesis will deal with a brief description of the GLOBALGAP standard version 3.0-2_SEP07. Therefore, chapter 2 will outline the history and development of this private voluntary standard. Secondly, a closer look at the section of the standard that is dealing with producer groups, which is the most relevant part of the standard in connection with the content of this thesis, will be given. A definition of the notion ‘producer group’ based on the GLOBALGAP standard and a description of the certification process of a producer group will be found, as well. The chapter will end with the positioning of smallholders within the GLOBALGAP standard.

Because of the fact that the possibility to integrate a Participatory Guarantee System or several of its principles into the GLOBALGAP standard will be researched within the thesis, chapter 3 will deliver insight into examples of already existing Participatory Guarantee Systems (PGS) in India and Brazil. This will be done by the use of specific case studies. Mostly, these PGS handle organic produce and are normally used for local markets. To impart knowledge of these systems, a description of their histories and developments will follow. Besides, the assembly of the organizations or networks as well as their certification process will be explained. The result of this section will be a summary of the findings about these two Participatory Guarantee Systems.

Chapter 4 will investigate a possible integration of a Participatory Guarantee System or several of its principles into the GLOBALGAP standard. First, the two different systems will be compared and hence, the similarities and extremes will be generated. Subsequent to this, a proposal of how to integrate a Participatory Guarantee System or principles of it into the GLOBALGAP standard will be composed. Chapter 4 will close with an investigation of the proposal’s influence on the certification costs as well as its impact on the standard’s credibility.

In the following chapter, the proposal, which will be described in chapter 4, and its feasible impacts, which could appear by implementing the proposal into the GLOBALGAP standard, will be discussed with experts of the agricultural and food sector in terms of face-to-face interviews. The interviews were carried out as semi- structured conversations based on an interview guideline. Therefore, the development of this interview guideline as well as a preparation of information material about Participatory Guarantee Systems will be described and the results of the interviews will be written down subsequently. Finally, chapter 5 will conclude with a summary and an interview evaluation.

Chapter 6 will summarize the thesis and the main findings of the preceding chapters. Ultimately, future prospects concerning the integration of a Participatory Guarantee System or several of its principles into the GLOBALGAP standard will be outlined.

2 Description of the GLOBALGAP standard version 3.0-2_SEP07

2.1 History and development of the GLOBALGAP standard

The standard „EUREPGAP started in 1997 as an initiative by retailers belonging to the Euro-Retailer Produce Working Group (EUREP) [with the idea] (…) to harmonise their own often very different standards (…) [, which] was also in the interest of producers“ (GLOBALGAP 2007a).

Since then, the development of a standard for Good Agricultural Practices (GAP), which is meeting the requirements of EUREP, has taken place. After the release of the first two EUREPGAP standard versions, the third version - GLOBALGAP version 3.0-2_Sep07 - was launched in September 2007. To ensure the topicality of the standard regarding technological and market developments, it is revised at regular intervals. According to the GLOBALGAP website, the next revision for version 4.0 will be done in 2011 (GLOBALGAP 2008b). Meanwhile, the EUREPGAP standard has achieved global importance and because of that, the EUREPGAP board decided to change the name of the standard from EUREPGAP to GLOBALGAP in 2007 (GLOBALGAP 2007a). The standard owner is represented by the FoodPLUS GmbH, “a non-profit limited company based in Cologne, Germany” (GLOBALGAP 2007a).

The standard is enhanced and governed by the above mentioned board, the Sector Committees and the GLOBALGAP Secretariat. The board’s “decisions are based on a structured consultation process” (GLOBALGAP 2007a). The GLOBALGAP Secretariat, represented by the FoodPLUS GmbH, supports the work of the board and the Sector Committees. Both, the board and the Sector Committees, have a 50% retailer and 50% supplier/producer participation to create an equal partnership (GLOBALGAP 2007a). This organizational structure is depicted in figure 1.

illustration not visible in this excerpt

Figure 1: GLOBALGAP Governance

(Source: GLOBALGAP 2007a)

The GLOBALGAP standard version 3.0-2_SEP07 is a private “voluntary standard(s) for the certification of agricultural products around the globe” (GLOBALGAP 2007a), which is audited and inspected by independent third party certifiers, who are accredited against EN45011 or ISO/IEC Guide 65. These international standards contain general requirements for organizations operating product certification systems (GLOBALGAP 2007c). Producers, who are certified against the GLOBALGAP standard, comply with the requirements of the legislation, retailers and producers themselves. The certificate guarantees that all operated processes to manufacture a product meet the standard requirements. This applies for the farm inputs until the untreated product leaves the farm. In addition to this, it is possible to equate other standards with GLOBALGAP through benchmarking activities to avoid multiple audits for producers. The GLOBALGAP brand is comparatively unknown by the majority of the population, because the standard is a business-to-business (B2B) standard and therefore, the trademark does not appear at the point of sale and is not in sight of the consumers’ view.

The focus of this thesis is the GLOBALGAP standard for Integrated Farm Assurance (IFA), which contains crops, livestock and aquaculture as product groups. The base of the standard is built by the normative documents, namely the GLOBALGAP General Regulations, the GLOBALGAP Control Points and Compliance Criteria as well as the GLOBALGAP Checklist. The standard itself is subdivided into different modules, e.g. fruits and vegetables (cp. Figure 2). In consideration of the different product groups, the producer and certification body has to choose the appropriate normative documents; for instance, if a producer wants to sell GLOBALGAP certified apples, he or she has to fulfil the requirements concerning the whole farm, crops base as well as fruit and vegetables.

illustration not visible in this excerpt

Figure 2: IFA Standard Structure

(Source: GLOBALGAP 2007a)

To gain certification against the GLOBALGAP standard, producers have the opportunity to select among four different options of certification (GLOBALGAP 2007c):

- Option 1 is reserved for individual producers. Thereby, the individual

producer will be the certificate holder and all production units of the certified product will be inspected by the certification body once a year. This option is mostly used by larger production units and it is unproblematic concerning the credibility and integrity of the GLOBALGAP standard. Therefore, this alternative will not be covered within this thesis in more detail.

- Option 2 is a possibility for producers to gain certification as a group.

However, the recognition of the so-called producer group certification is lower than an Option 1 certification, because retailers and suppliers see a lack of credibility and integrity. Certainly, this option is very important for small-scale producers to obtain a GLOBALGAP certificate and to gain the possibility to access international trade channels. Because of that, this thesis will be very occupied by the Option 2 certification and a detailed explanation of producer groups, the process of their certification and the description of certification costs of producer groups.

- Option 3 and 4 are equivalent to Option 1 respectively 2, but they refer to benchmarked standards, e.g. QS-GAP.

2.2 Definition of producer groups within the GLOBALGAPstandard

The GLOBALGAP General Regulations Part III for Integrated Farm Assurance of the GLOBALGAP standard version 3.0-2_SEP07 is concerned with the producer group or Option 2 certification. The so-called producer group is defined as “a group of producers (with their respective producing locations) (…). The structure of the producer group must enable the application of a Quality Management System across the whole group” (GLOBALGAP 2007b, p. 2). Later on, a description of the Quality Management System (QMS) will be given. Moreover, all members of a producer group must be separate legal entities and it is required that: “the applicant producer group is or belongs to a legal entity (…) [, which] must have ultimate responsibility over the production, handling and ownership of the products (…). The legal entity will enter into a contractual relationship with GLOBALGAP (EUREPGAP) through the signature of the GLOBALGAP (EUREPGAP) Sub-Licence and Certification Agreement with a GLOBALGAP (EUREPGAP) approved CB, and becomes the sole holder of the GLOBALGAP (EUREPGAP) certificate” (GLOBALGAP 2007b, p. 2).

In addition to this, the producer group must have a documented administrative structure as well as written and signed contracts between the legal entity and each individual producer. To ensure transparency of the system all producers and applicable sites have to be registered in a producer register, individually as well as on the GLOBALGAP database. There a public validity check of the certificates is available (GLOBALGAP 2007b). Furthermore, the producer group must have a documented management and organizational structure, which “shall include:

(i) GLOBALGAP (EUREPGAP) management representative (…)
(ii) Internal inspector(s) - person(s) responsible for the internal inspections of each producer member of the group annually (…)
(iii) Internal auditor(s) - person(s) responsible for the internal audit of the Quality Management System (…)
(iv) Agricultural or livestock technical person/department (…)
(v) Quality Systems Management (QMS) person/department (…)” (GLOBALGAP 2007b, p. 3)

Within the General Regulations it is required that all personnel with responsibilities shall be “adequately trained and [have to] meet defined competency requirements” (GLOBALGAP 2007b, p. 4).

As mentioned before, the producer group has to create and maintain a Quality Management System (QMS), which has to be documented and controlled periodically. The components of the QMS are:

Description of the GLOBALGAP standard version 3.0-2_SEP07 10

“(i) The Quality Manual
(ii) GLOBALGAP (EUREPGAP) operating procedures
(iii) Work instructions
(iv) Recording forms
(v) Relevant external standards, e.g. the current GLOBALGAP (EUREPGAP) normative documents” (GLOBALGAP 2007b, p. 4).

The group has to prescribe procedures for the record-keeping of internal controls, complaint handling of customer complaints, internal audits and inspections, product traceability and segregation, sanctions and non-conformances whether a single producer doesn’t meet the GLOBALGAP requirements. Further aspects are the withdrawal of certified products as well as the development of procedures in conjunction with subcontractors (GLOBALGAP 2007b).

If the members of a producer group are sure to comply with all these requirements, they can apply for certification against the GLOBALGAP standard.

2.3 Certification process of producer groups within the GLOBALGAP standard

Generally, the GLOBALGAP standard requires that the producer group has to apply for the certification of single products and “the entire crop of a registered product must be certified” (GLOBALGAP 2007b, p. 2). This leads to the following: If a farmer produces strawberries, which are a registered product of his producer group, he “must include all the production locations with strawberries for certification” (GLOBALGAP 2007b, p. 2).

At the beginning of the certification process, the producer group has to be sure that all requirements being necessary for the certification of the product, are fulfilled. Therefore, an internal self-assessment, which includes an audit of the QMS and inspections of each production unit, must be proceeded. First of all, the Quality Management System (QMS) “must be audited internally, at least annually by the internal producer group auditor” (GLOBALGAP 2007c, p. 25) and the internal inspectors or subcontracted external personnel must carry out an inspection of each registered producer group member once a year (GLOBALGAP 2007c).

Subsequently, the producer group has to contact one of the approved Certification Bodies (CB), which are listed on the GLOBALGAP website, and apply for certification. The employees of a CB are the external auditors and inspectors, who are responsible for the procedure of the independent certification process. Figure 3 shows a schematic overview of the GLOBALGAP producer group certification, which will be explained in more detail in the following.

illustration not visible in this excerpt

Figure 3: GLOBALGAP Option 2, Group Certification

(Source: Own illustration on the basis of GLOBALGAP 2008a)

During the certification process an announced audit of the producer group’s Quality Management System (QMS) will be carried out by the external auditor. In addition to this, an external inspector will control a sample of the registered producer group members. This sample “as a minimum, is the square root (or next whole number rounded upwards if there are any decimals) of the total number of GLOBALGAP (EUREPGAP) registered producers within the producer group” (GLOBALGAP 2007c, p. 25). If these controls are successful, the producer group, as the legal entity, will receive the GLOBALGAP Option 2 certificate of one year validity. After the expiration of this term, the re-certification in form of a further QMS audit and an inspection of another sample of farmers will take place.

For the audit and the inspections, the CB personnel has to use the checklists released by the GLOBALGAP Secretariat. Those checklists contain the control points and compliance criteria. One checklist is for the QMS audit and the inspector has to choose the appropriate checklists for the inspections of the production units and in accordance to producer group’s relevant scopes and sub-scopes, e.g. all farm, crops base as well as fruit and vegetables (cp. Fig. 2). Furthermore, the different control points of the checklists are subdivided into major musts, minor musts, and recommendations and each registered member of a producer group has to comply with 100% of the major musts and 95% of the minor musts. Concerning the recommendations, no minimum percentage of compliance is determined (GLOBALGAP 2007c).

Within the certificate’s validity period of one year, “the CB will carry out an unannounced inspection on a number of producers in the producer group equivalent to 50% of the inspection sample size inspected in the previous announced inspection” (GLOBALGAP 2007c, p. 26). If there appears no non-conformities during this unannounced inspection and the following regular QMS audit, there will be a reduction of fifty percent of inspected producers for the next announced control.

Furthermore, the GLOBALGAP standard requires that ten percent of all certified producer groups that are registered by one CB have to be audited in “additional unannounced surveillance audits (…). These unannounced surveillance audits will only cover the Producer Group Quality Management (QMS) system” (GLOBALGAP 2007c, p. 26) and the producer group will be informed about this audit forty-eight hours in advance.

Finally, all these requirements that are requested by the GLOBALGAP standard provide the basis for the certification costs of producer groups.

Description of the GLOBALGAP standard version 3.0-2_SEP07 13

2.4 Certification costs for producer groups within the GLOBALGAP standard

The expenses for certification are an important influencing factor for the decision of producers to apply for a GLOBALGAP certification. Therefore, this thesis will analyse, whether a reduction of these costs is possible in relation to the certification of producer groups. Consequently, the different cost types have to be highlighted and described. The expenses for a producer group certification could be divided into four main groups, which are illustrated in table 1, and are defined as the costs for third party certification or external expenses, the internal expenses as well as short- and long-term costs.

Table 1: Different types of expenses for a GLOBALGAP Option 2 certification process

illustration not visible in this excerpt

Source: Own illustration according to GLOBALGAP 2007b, pp. 2-11

All mentioned expenditures are difficult to specify, because they vary for the individual cases and many factors, which will be described in the following, can impact them.

First of all, the certification body (CB) is one of the most important factors for external costs. Therefore, it is recommendable to compare offers from several certification bodies, because they charge different fees for their operational hours, which they need for travelling, inspections and audits. In addition to this, they charge a Certification License Fee and a Producer Registration Fee, which are defined in the General GLOBALGAP Fee Table (Annex 1) and are transferred to the GLOBALGAP Secretariat. Nevertheless, these expenses can be calculated easily for short- and long-terms as well as for each individual case. In a fictitious example these expenses will be depicted and

Description of the GLOBALGAP standard version 3.0-2_SEP07 14

assessed in the following. The data, on which this example is based, was generated in September 2008 during a discussion with Mr. Andras FEKETE, Manager of the GLOBALGAP Integrity Program.

Example of a calculation for the external expenses of a producer group with 150 members

A producer group with 150 small-scale producers (< 2 ha of land under production) applies for certification against GLOBALGAP Option 2 for one crop. Consequently, the CB will charge the expenses for the journey of the auditor and inspector, as well as the working hours that will be needed for the inspections and the audit. In the end, the operational hours will be aggregated in the form of days. The certification costs are depending on the amount the CB charges for one working day ranging between 200-800 Euro. Based on the experience of Mr. FEKETE, most of the CBs charge about 400 Euro per day. The external auditor will need about one working day for the audit of the producer group’s QMS. Additionally, an external inspector has to control a sample of registered producer group members. What means for this special case that thirteen production units ( 150=12,2) have to be inspected. During one working day, the inspector will be able to manage 3-4 of them. Consequently, he/she will visit the thirteen production units within four days. So, if the external inspector and auditor needs four days of travelling each, the expenses which accrue for the work of the CB will be 5,200 Euro (cp. Table 2).

Furthermore, the CB will charge additional fees that are levied by the GLOBALGAP Secretariat. Referring to the General GLOBALGAP Fee Table (Annex 1), these fees are the Certification License Fee of 20 Euro for the producer group’s QMS audit, 20 Euro per inspected production unit as well as the Producer Registration Fee. The last fee depends on the size of the production unit and has to be paid for each registered producer of the producer group. For a production unit with a maximum acreage of 2 ha this fee amounts to 3 Euro. Finally, the overall costs for this fictitious example are 5,930 Euro, which represent annual certification costs of 39.50 Euro for each member of the producer group. Table 2 will give a summarized overview of the external certification costs for this notional case. If there are no modifications of the fees, these expenses will remain constant during the years.

Description of the GLOBALGAP standard version 3.0-2_SEP07 15

Table 2: External certification costs for a producer group. Fictional example of a producer group with 150 members.

illustration not visible in this excerpt

Source: Own illustration. Data based on information of Mr. A. FEKETE

Secondly, there are internal short- and long-term costs for the producer group. Their calculation raises more problems, because they can only be partially estimated and they depend on the current conditions of the producer group as well as the region. However, in particular cases it is possible to evaluate the costs for some specific requirements set by the GLOBALGAP standard. For example, the costs for the construction of a fertilizer storage, a store for plant protection products as well as expenses for purchasing first aid kits and protective clothing for workers can be figured out. Nevertheless, the calculation of short- and long-term organizational costs is much more difficult. These organizational costs accrue by the creation and the continuation of the Quality Management System (QMS). The following section will specify these expenses more precisely and in reference to the GLOBALGAP General Regulations for Integrated Farm Assurance Part III.

- The documentation and the control of the documents are important and extensive parts of the GLOBALGAP standard. All requirements mentioned in chapter 2.2 have to be documented and controlled by the person(s) responsible for managing the QMS. The group has to maintain records of the QMS controls, which “shall be kept for a minimum of 2 years” (GLOBALGAP 2007b, p. 5). The documentation, control and record-keeping occupy a huge amount of operational hours and expenses.

- The necessity of qualified and trained staff which is responsible for compliance with the standard raises the expenses as well.
- The group must develop “a system for effectively managing customer complaints” (GLOBALGAP 2007b, p. 5).
- Annually, all production units must be controlled by an internal inspector and an audit of the QMS by an internal auditor must be carried out. The realization and documentation of these two items are expensive as well as the employment of an internal auditor and inspectors, which have to fulfil special requirements, such as holding a post-high school diploma (GLOBALGAP 2007b).
- The compliance of traceability and the segregation of all certified products leads to more laborious procedures and raise the costs.
- A system for procedures in case of infringement to declare non- conformances and to sanction individual producers has to be developed by the group.
- Processes for a product recall, which have to be tested annually, must be generated.
- If the producer group works together with subcontractors, the group has to assure through assessments that these subcontractors work in conformance with the GLOBALGAP standard.

To sum up, the four different cost types raise financial problems, especially for small- scale producers in developing countries. Therefore, they can hardly gain certification independently, even if the farmers are combined in a group, which is often the only opportunity to gain certification for producers owning a small-scale production. Through this kind of certification, smallholders can benefit from the advantages of sharing expenses as a group, e.g. for purchasing machinery. Contrariwise, the organizational costs for the implementation and maintenance of a QMS are high and have no relation to the production itself. In fact, the QMS guarantees the credibility and integrity of the group certification to retailers, suppliers, and consumers. Without external support it is nearly impossible for small-scale producers in developing countries to invest this amount of money and time to implement and maintain the required Quality Management System. For this reason, standard owners like the FoodPLUS GmbH in the case of the GLOBALGAP standard are faced with the challenge to establish an easier access to certification for small-scale producers or smallholders. In the following, the position of smallholders inside the GLOBALGAP standard will be described.

2.5 Smallholders within the G LOBALGAP standard

First of all, the notion ‘smallholder’ has to be defined, what in general implicates some difficulties. According to BOUSSARD (1992), it is possible to generate a farm size index “and below a certain size a farmer is called a smallholder” (BOUSSARD 1992, p. 3). However, the size of a farm can be different from the size of the cultivated area and it also draws a distinction of what products are cultivated. For example, “a vegetable grower with 5 ha is obviously larger, from an economic point of view, than a cereal grower with 10 ha” (BOUSSARD 1992, p. 3). The gross income or the weighted sum of outputs are further possible characteristics for a definition (BOUSSARD 1992). Apart from that, in many developing countries it is already difficult to define the notion of a farm and a farmer. “In these countries, land-use decisions are made at different levels, and by different individuals, so that the notion of ‘farmer’ is not clearly identified” (BOUSSARD 1992, p. 5). In comparison with the European and North American situation, which is completely different and where a:

“farmer is a well-identified decision-maker (…) [and] the farm itself is well defined by a set of clearly identified plots, which either belong to the farmer (…) or are hired from a landlord (…). Land is supplemented by machinery, cattle, buildings and trees, each of which has a clearly identified owner” (BOUSSARD 1992, p. 3).

Therefore, the notion ‘smallholder’ or ‘small-scale producer’ cannot be defined universally, because the definition depends on the respective region and conditions and therefore has to be created for the individual case.

This thesis will focus on smallholders as farmers or decision-makers who operate a small-scale production. In reference to the General GLOBALGAP Fee Table 2008 (Annex 1), the smallest unit in a crop based scope and for non-covered crops cultivates < 2 ha of land (area under production) and therefore, should be defined as a smallholder in the context of this paper.

Smallholders are often united in the so-called producer groups to benefit from the advantages. Mostly, producer groups are the only chance for an individual farmer to fulfil the requirements of a standard and to gain market access through the certification of the whole group. Moreover, the producer group can benefit from a cost reduction by buying larger quantities of chemicals or by sharing the expenses and usage of the bought machinery, for example. Usually, the so-called producer groups are certified against the GLOBALGAP standard Option 2 or producer group certification, respectively Option 4, if the group utilizes a benchmarked scheme. A closer look on figures 4 and 5 depicts that producer groups represent a considerable percentage of all GLOBALGAP certified producers. As of July 2008, 92,000 producers were certified in more than eighty-five countries and 71% of these producers are certified against GLOBALGAP Option 2 respectively Option 4 (GLOBALGAP 2008b).


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Reducing Certification Costs for Smallholders? Potential for Participatory Guarantee Systems in GLOBALGAP
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