Calculating the Cost of Certification
My wife recently convinced me to buy a push mower. After looking at the price tag, my first reaction was that even with the gasoline savings; it would take years to break even. I still purchased the mower intent on saving the world from fossil fuel emissions, but after a few uses it has become apparent there were hidden savings unaccounted for in my calculations. First, it takes much less time to pull out a push mower and go versus preparing a conventional mower with gasoline, oil, and getting it started. Second, I am not catching the grass clippings but letting them fall to give nutrients back to the soil. Third, the noise, smell from fumes, and danger of running a high speed blade have all vanished. And of course, there are the health benefits to using my brawn while breathing clean air.
“What are the fees for getting certified?”
This is the number one question we get in regards to certification. There is confusion between some brands and their suppliers about the actual costs of certification. The direct costs from certification bodies are generally not a problem for medium to large companies, but companies should also consider the indirect costs of complying with the requirements of the standard. Some producers already have all the procedures in place and will few additional conformance costs, but others may need to radically change operations. The indirect costs could be writing policy manuals, purchasing equipment, hiring specialized staff, or changing site layouts for segregation of materials or workflow. Note that these may also turn into additional benefits, as the company becomes more efficient and effective.
A straightforward breakeven cost analysis on product certification for your company will not capture all the benefits. Many benefits are too difficult to calculate or cannot be measured at all.
“What are the costs to not be certified?”
This is the question we wish more companies would start asking. With consumers wanting to know where products came from and how it was made, the threat of negative publicity or litigation increases. Certification can protect your company by substantiating your product claims. Even if a company can substantiate their claims on their own, the costs of cleaning up PR scandals are substantial. Third party certification shows the general public that someone other than the company has confirmed their claims.
The benefits of certification include much that is difficult to assign dollar amounts to. The documentation requirements can improve internal processes and efficiency. Some standards, like Bluesign, for example, look to improve resource utilization, which is direct cost savings for a manufacturer. Standards such as GRS or GOTS include a social aspect resulting in happier employees, attracting higher skilled labor and improving quality. Supply chain standards spread benefits throughout the entire chain of custody, whether through input savings or quality improvements. Offering assurance of your products through certification can open up opportunities with new customers, or increase business with existing customers.
Low prices driven by mass consumerism can never truly encompass all the costs of the workers producing it or in the destruction of the environment where they live and work. We look forward to the day when all businesses are motivated to address the full life cycles of their products, when suppliers that undergo certification are rewarded with additional business by brands, and when consumers are willing to pay for the actual costs of production to the people and environment.
Direct and indirect costs of certification are described in detail in the soon to be released Certification Toolkit: Section 5 – Costs. Look for more information on this next week.