Guaranteed Sustainability Label:
is it a way of promoting sustainable agriculture?
Cristina Marta-Pedroso
Gonçalo M. Marques
Tiago Domingos
Environment and Energy Section, DEM,
Instituto Superior Técnico, Lisbon, Portugal
Project EXTENSITY
Environmental and Sustainability Management Systems in Extensive Agriculture
www.extensity.ist.utl.pt
Extensity Approach in promoting to Sustainable
Extensive Agriculture to Extensive
Biodiversity
Sown biodiverse
permanent pasture
rich in leguminous
Productivity
increase
Stocking
rate increase
Soil organic
matter increase
Water
retention
increasing
Commercial
fertilizers
use decrease
Economic
viability
increasing
Carbon
sequestration
Erosion
decreasing
Flooding
regulation
Decrease of
Greenhouse gas
emission
Norm of Guaranteed Sustainability
Guaranteed Sustainability Label:
is it a way of promoting sustainable agriculture?
A consumers preferences assessment
for sustainability labeled beef
Cristina Marta-Pedroso
Gonçalo M. Marques
Tiago Domingos
Environment and Energy Section, DEM,
Instituto Superior Técnico, Lisbon, Portugal
Project EXTENSITY
Environmental and Sustainability Management Systems in Extensive Agriculture
www.extensity.ist.utl.pt
Outline
 Motivation and Objectives
 Method and Experimental design
 Results
 Conclusions
Motivation and Objectives (1)
 The label is expected to convey consumers relevant
information for their purchase decisions;
 The label aimed to differentiate beef regarding:

Production process (environmentally friendly)

Animal welfare (decrease of the confinement period)

Health and food safety (rastreability)

Independent control of quality
 Voluntary labelling mechanism
Compliance with the Guaranteed Sustainability Norm
 Farmers will adopt the label if it would become a
mechanism that effectively facilitates farmers capturing
the rewards of their superior performance in relation to
the conventional production process.
Motivation and Objectives (2)
 There is a general agreement on the increasing of
consumers’ preference for green and safety agri-food
products
 Only a few studies aimed at investigating the
Portuguese consumers’ preferences for certified agrifood products have been carried out.
 Research on ascertaining the preferences of
Portuguese’s
consumers
for
such
differentiated
products is then needed.
Objectives
 Estimating the maximum WTP for SLB
 Obtaining a demand curve for SLB
Method and Experimental Design (1)
 In the recognition of the importance of revealing
consumer preferences for such differentiated products a
contingent valuation survey was carried out across a
sample of Portuguese consumers.
The contingent valuation survey
 Face to face interviews were used for administering
contingent valuation questionnaire;
 Only beef consumers were approached;
 Interviews were carried out by a survey and opinion
studies company at hypermarkets
area of Lisbon.

in the metropolitan
Visual material was used as interview support.
Method and Experimental Design (3)
WTP Elicitation Design
Visual
Support
Yes
Description of
SLB against
conventional
you would
pay more for
Interaction
with the
good description
Price
Yes
offer
Guaranteed
pay for a
Share
kilo of
Sustainabilit
Labeled Beef than
y labeled
you pay for
beef?
be willing to
Guaranteed
Sustainability
conventional
Visual
Support
€/kg
maximum
Are you willing to
1st
What is the
No
No
beef?
€/kg
Comparação
entre modos
de produção
Production
systems
Convencional
Conventional
Pastagens naturais ou semi-naturais
temporário ou permanente
Sustentabilidade Garantida
de
carácter
Temporary or permanent
natural or semi-natural pastures
A engorda dos novilhos é feita em confinamento
(15
meses) e à(steers
base de rações
Fattening
after compostas
weaned) por
concentrados de alimento prod uzidos
occurs
in confinement
(15
months).
industrialmente
Diet is based on concentrates.
Guaranteed Sustainability
Pastagens semeadas permanentes e biodiversas
ricas em leguminosas, mais produtivas o que permite
um maior
encabeçamento
e evita abiodiverse
invasão por matos.
Permanent
Sown
pastures rich in leguminous.
More productive
Higher stocking rate
A engorda dos novilhos é feita
predominantemente
em
regime in
de direct
pastoreio
Steers fattening
occurs
directo suplementada com forragens produzidas
grazing
supplemented
by
localmente. O período de confinamento dos
hay
and
silage
novilhos, se aplicado, não pode exceder os 3 meses
Impactos ambientais
Environmental
Impact
Gases com efeito de estufa
Gases com efeito de estufa
Emissões:
9,1 KgCO
carne/ano
2eq/kg
Emissions:
9.1
kgCO
eq/kg/meat
Emissões:
10,1 KgCO
carne/ano
Emissions:
9.12eq/kg
kgCO2eq/kg/meat
Sequester:
kgCO2eq/kg/meat
Sequestro:
0 KgCO 20
eq/kg
carne/ano
Sequestro:
25,2 KgCO
carne/ano
Sequester:
25.2
kgCO2eq/kg/meat
2 eq/kg
Greenhouse Gases:
2
Greenhouse Gases:
There
is a deficit
400
kgCO2eq/inhabitant
Existe um
déficit previsto
para 2010of
de about
cerca de 400
kgCO
2 eq/habitante, no que diz respeito ao
das obrigações
impostas pelo
Protocolo
Quioto. Protocol
for 2010cumprimento
in terms por
of Portugal
Portuguese
compliance
with
thedeKyoto
Erosão do soloSoil
erosion
12.8 kg
12,8solo/kg/meat/year
kg solo/kg carne/ano
Erosão do soloSoil
erosion
7.2 kg
7,2solo/kg/meat/year
kg solo/kg carne/ano
A formação do solo é um processo muito lento sendo por isso este considerado um recurso finito e não
Soil formation is a very slowly
process (non-renewal resource)
renovável
Uso de fertilizantes
Industrialazotados
fertilizers
75.3
kgN/kg
meat
75,3
kgN/kg carne
Uso de fertilizantes
Industrialazotados
fertilizers
51.9
kgN/kg
meat
51,9
kgN/kg carne
Redução
das fontes causadoras
da diminuição
qualidade da água
Decrease
of diffuse
water da
pollution
Quality
food safety
Controlo
decontrol
qualidade and
e segurança
alimentar
Autocontrolo
Self control
Independent
certification bodies
Certificado por entidades independentes
Comparação
entre modos
de produção
Production
systems
Convencional
Conventional
Pastagens naturais ou semi-naturais
temporário ou permanente
Sustentabilidade Garantida
de
carácter
Temporary or permanent
natural or semi-natural pastures
A engorda dos novilhos é feita em confinamento
(15
meses) e à(steers
base de rações
Fattening
after compostas
weaned) por
concentrados de alimento prod uzidos
occurs
in confinement
(15
months).
industrialmente
Diet is based on concentrates.
Guaranteed Sustainability
Pastagens semeadas permanentes e biodiversas
ricas em leguminosas, mais produtivas o que permite
um maior
encabeçamento
e evita abiodiverse
invasão por matos.
Permanent
Sown
pastures rich in leguminous.
More productive
Higher stocking rate
A engorda dos novilhos é feita
predominantemente
em
regime in
de direct
pastoreio
Steers fattening
occurs
directo suplementada com forragens produzidas
grazing
supplemented
by
localmente. O período de confinamento dos
hay não
andpode
silage
novilhos, se aplicado,
exceder os 3 meses
Impactos ambientais
Environmental
Impact
Gases com efeito de estufa
Gases com efeito de estufa
Emissões:
9,1 KgCO
carne/ano
2eq/kg
Emissions:
9.1
kgCO
eq/kg/meat
Emissões:
10,1 KgCO
carne/ano
Emissions:
9.12eq/kg
kgCO2eq/kg/meat
Sequester:
kgCO2eq/kg/meat
Sequestro:
0 KgCO 20
eq/kg
carne/ano
Sequestro:
25,2 KgCO
carne/ano
Sequester:
25.2
kgCO2eq/kg/meat
2 eq/kg
Greenhouse Gases:
2
Greenhouse Gases:
There
is a deficit
400
kgCO2eq/inhabitant
Existe um
déficit previsto
para 2010of
de about
cerca de 400
kgCO
2 eq/habitante, no que diz respeito ao
das obrigações
impostas pelo
Protocolo
Quioto. Protocol
for 2010cumprimento
in terms por
of Portugal
Portuguese
compliance
with
thedeKyoto
Erosão do soloSoil
erosion
12.8 kg
solo/kg/meat/year
12,8 kg solo/kg carne/ano
Erosão do soloSoil
erosion
7.2 kg
solo/kg/meat/year
7,2 kg solo/kg carne/ano
A formação do solo é um processo muito lento sendo por isso este considerado um recurso finito e não
Soil formation is a very slowly
process (non-renewal resource)
renovável
Uso de fertilizantes
Industrialazotados
fertilizers
75.3
kgN/kg
meat
75,3
kgN/kg carne
Uso de fertilizantes
Industrialazotados
fertilizers
51.9
kgN/kg
meat
51,9
kgN/kg carne
Redução
das fontes causadoras
da diminuição
qualidade da água
Decrease
of diffuse
water da
pollution
Quality
food safety
Controlo
decontrol
qualidade and
e segurança
alimentar
Autocontrolo
Self control
Independent
certification bodies
Certificado por entidades independentes
Bid
vector:
11-25 €
Given
as
baseline
Varied
across
subjects
Experimental Design and methodological approach (4)
Modelling Framework
0,

P(WTP <w)= p,
p+(1-p)F(w),

n
p
i 1
i
1 i
(1  p)f (Wi )

w<0
w=0
w>0
n
 p (1  p)   f (W )
1
i
i 1
n
i 1
i
wi 0
 p (1  p)
i
i
1  i
 f (W )
wi 0
i
Experimental Design and methodological approach (5)
Modelling Framework
L  i ;  p  
n
 1  exp(X 
i 1
i
€/kg
Yes
exp( X i  p ) i
p
What is the
)
maximum
you would be
Yes
Are you willing to
Price
willing to pay
offer
for a kilo of
Guaranteed
pay more for
Sustainability
Guaranteed
labeled beef?
Sustainability
No
Labeled Beef than
€/kg
you pay for
conventional

 W  X i  F 1     bi 
1
L Wi 2 ;  F ,  ,     
  i 2
1    
i 1 
 1     
beef?
N
1  Ii

 
 
  X i F 
     

 
No
Logistic Regression
Log Linear Regression
Anchoring correction
Ii
Results (2)
Logistic Regression (Probability of WTP=0)
P(WTPi  0) 
exp(   log Incomei )
1  exp(   log Incomei )
Variable
Income = 1, 2, 3, 4, 5
μ
-1.055

- 0.801
Predicted Probability
1- [385.91 - 771.82]
0.258
2- [771.83 - 1,157.73]
0.167
3- [1,157.74 - 1.543,64]
0.126
4- [1,583.65 - 1,929.55]
0.103
5- [≥ 1,929.56]
0.088
Results (3)
Log Linear Regression; Anchoring correction
Without anchoring
With anchoring
p-value
p-value

13.56260709
0 **
11.9832191
0 **

2.15012219
-
3.1253616
-

0
-
0.3713805
0 **
Log(Income)
0.78938883
0.00037 **
1.1234402
0.00051 **
Children
-0.24550912
0.293
-0.6762203
0.047 **
Comp Import
0.05443948
0.466
0.2244985
0.040 **
Log-Likelihood
-1204.04
-1141.08
Results (3)
Log Linear Regression; Anchoring correction
wi1  Xi F   i
wi    1 ln Incomei  2Childreni  3CompImporti
Variable
Estimated WTP Spike adjusted WTP
Income = 1, 2, 3, 4, 5
Children = 1 / 0
1- [385.91 - 771.82]
12.879
12.135
2 - [771.83 - 1,157.73]
13.657
13.048
3- [1,157.74 - 1.543,64]
4 - [1,583.65- 1,929.55]
5- [  1,929.56]
14.113
14.436
14.686
13.594
13.979
CompImport = 1, 2, 3, 4, 5
μ
11.983
γ
0.371
1
1.123
14.276
2 - 0.676
3
0.224
Results (4)
Demand Curve for sustainability labeled beef
Empirical data:
 Respondent i total monthly consumption of beef
 Consumption pattern of SLB (share,   [0,1])
Assumptions:
 Respondent i total monthly consumption of beef is
constant (Q)
 Respondent i total expense with beef is constant;
substitution takes place
Q  q1WTP  q2WTP
q1WTP  Q 
q2WTP  Q(1   )
ETot  q1WTP  WTPMax  q2WTP  10
Results (5)
Demand Curve for sustainability labeled beef
WTPMaxi  10 

q1i (p)  Min  Qi , Qii

p

10


Results (6)
Demand Curve for sustainability labeled beef
In average, monthly household consumption
of SLB decreases 0.8 kg per 1 € increment in
its price.
Conclusions
 Consumers are willing to pay an extra price premium ranging between 3
and 3.5 € per kilo of SLB.
 In average, household consumption of SLB decreases 0.8 kg per 1 €
increment in its price.
 Regarding
my
initial
broad
question
about
whether
guaranteed
sustainability label beef is a way of promoting sustainable agriculture we
concluded that there is demand and that the estimated WTP should be framed
in farms financial analysis.