Collective Action and the Governance of Multistakeholder Initiatives

Collective Action and the Governance of Multistakeholder Initiatives:
A Case Study of Bonsucro
Paula T. Moura
Institute for International Trade Negotiations (ICONE)
Av. General Furtado Nascimento, 740
São Paulo, SP 05465-070, Brazil
Fabio R. Chaddad
University of Missouri
125 Mumford Hall
Columbia, MO 65211, USA
Abstract: Multistakeholder initiatives (MSIs) have emerged as an alternative governance
structure to address the wicked problem of sustainability with the engagement of multiple
stakeholders. This paper addresses the challenges of overcoming collective action hurdles and
governance design in MSIs. We focus our analysis on Bonsucro, an MSI that has developed a
standard and certification scheme for sustainable sugarcane products. We describe the internal
organization and governance of Bonsucro and the process it followed to implement the
sustainability standard and certification scheme. We apply collective action and governance
theories to analyze Bonsucro and draw observations as to how MSIs might be organized to
deliver sustainability in agrifood chains.
Keywords: Multistakeholder initiatives, governance, collective action, sustainability.
Paper accepted for presentation at the 10th Wageningen International Conference on Chain and
Network Management (WICANEM 2012); track session on “Managing Wicked Problems: The
Role of Multi-Stakeholder Engagements, Resources and Value Creation.”
Collective Action and the Governance of Multistakeholder Initiatives:
A Case Study of Bonsucro
Agrifood supply chains are increasingly asked by consumers and other stakeholders to deliver
credence attributes based on how the product is produced, processed or distributed. Examples
include organic, locally grown, GMO-free and sustainable products. Sustainability is an
interesting case as it displays attributes of a “wicked problem” (Batie, 2008) and as such requires
multiple stakeholder engagement to be managed and delivered (Peterson, 2009; DeWit and
Meyer, 2010). Alternative governance structures have emerged to address the wicked problem of
sustainability with multiple stakeholder engagement. In particular, collaborative roundtables and
multistakeholder initiatives (MSIs) have evolved based on the principle of “co-regulation”
(Utting, 2001). These initiatives consist of governing systems intended to regulate business
behavior and promote sustainable business practices. They are formed by a broad range of
participants, including nongovernmental organizations (NGOs), civil society organizations, trade
unions, producer groups, governments and corporations. MSIs are generally targeted towards
consensus building, interest representation, knowledge sharing and rule setting and monitoring
regarding sustainable practices (Hemmati, 2002; Haufler, 2003).
Notwithstanding the complexities of multistakeholder organizations, there are many examples of
MSIs that have achieved positive outcomes and established certification schemes for sustainable
products, such as the Forest Stewardship Council (FSC), the Marine Stewardship Council
(MSC), the Rainforest Alliance and, more recently, Bonsucro. Many questions arise as to how
these initiatives managed to overcome the challenges of even the most primary phases of
formation. The heterogeneous – and often conflicting – interests of stakeholders and the
inclusive and participatory nature of these governing systems would intuitively, and according to
the prevalent theories of collective action and group behavior, lead to organizational failure.
This paper addresses the challenges of overcoming collective action hurdles and governance
design in MSIs. We focus our analysis on one case study of a “successful” MSI in the global
sugar and ethanol chain – Bonsucro. Based on primary and secondary data sources, we describe
the internal organization and governance of Bonsucro and the process it followed to develop and
implement a certification scheme for sustainable sugarcane production. We then apply collective
action and governance theories to analyze Bonsucro’s case and draw observations as to how
MSIs and alternative governance structures might be organized to address the wicked problem of
sustainability in global agrifood chains.
Literature Review
The literature on MSIs is growing with research from a variety of academic disciplines that seek
to inform the underlying social, economic and political complexities that characterize such
governance mechanisms. The intricacy of collaborative roundtables has given rise to many
questions regarding their effectiveness and continuance. The literature on MSIs is dispersed
among different disciplines and addresses the process, structures and outcomes of these
initiatives. The research on MSIs is relatively underdeveloped and is mainly built on case
studies, primarily due to the lack of publicly available secondary data sources. The case studies
present a large variety of examples of MSIs and provide interesting and useful findings to our
understanding of these complex governance structures. However, such complexity limits the
generality of the reached conclusions and calls for further and deeper research on the topic.
A major branch of this literature is concerned with the processes and outcomes of MSIs (Selin et
al., 2000; Turcotte and Pasquero, 2001; Poncelet 2001, 2004; Van de Kerkhof, 2006; Thabrew et
al., 2009). There is still much controversy in the literature regarding the success of these
initiatives. According to these studies, there is generally a gap between MSIs expected and
attained outcomes due to the limited ability of many conflicting interests to reach consensus. The
diversity of the participants is identified as being both a necessary and a constraining condition
for MSIs to generate successful outcomes. Consensus building is generally both an objective and
a major challenge in the process of collaboration. In addition, participants generally lack
incentives to act in the interest of common and public goods. Stakeholder theory provides a
useful framework to our understanding of the interactions between multiple stakeholders
(Neville and Menguc, 2006; Roloff, 2008).
Another strand of the literature examines the variables affecting the outcomes of MSIs (Bryson
et al., 2006; Ansell and Gash, 2007; Reed, 2008). Although authors reach different conclusions
regarding the success and quality of outcomes, there is a certain level of consensus regarding the
initial conditions to establish cooperation among stakeholders (e.g. prior history of conflict or
cooperation, power and knowledge distribution) and also regarding the variables that influence
the process and outcomes of MSIs (e.g. trust building, face-to-face dialogue and presence of a
facilitator). Bryson et al. (2006) and Van den Hove (2000) also identify governance as an
important variable in determining the outcomes of MSIs.
In addition to the process and outcomes literature, there are several studies related to issues of
scale and effectiveness of MSI standards and codes of conduct (Utting, 2001; Fransen et al.,
2007). Some MSIs are structured with the sole objective of promoting dialogue or to make a
specific decision and, therefore, have a limited life cycle. Others are structured to develop and
implement certification systems, business standards or codes of conduct, which require
continuous effort of the participants to maintain compliance and quality (Zadek, 2001). Taken
together, these studies identify the limitations of MSIs as certification, audit or standard setting
mechanisms and discuss their future viability as business regulation and governance systems.
Another branch of this literature focuses on the effectiveness of MSIs, especially as substitutes
for hierarchical government structures and policies (Beierle, 2000; Van den Hove, 2000;
Lovbrand et al., 2007; Newig, 2007; Newig and Fritsch, 2009; Tang and Mazmanian, 2009).
There is much controversy about the effectiveness of MSIs and the quality of the outcomes
generated by collaborative governance, partially due to disagreements on the appropriate
measures of quality and effectiveness. However, there is a general consensus regarding the
influence of the design and structure of MSIs on processes and outcomes. This consensus
suggests the importance of developing additional studies focused on the design, structure and
governance of MSIs and their influence on outcomes.
The literature on governance and MSI design, however, is very limited. Some authors have
attempted to evaluate the legitimacy of private governance mechanisms in regulating business
practices and production and also to understand the consequences of such systems for the global
agrifood chain (Brasset et al., 2010; Fuchs et al., 2011). Fuchs et al. (2011) analyze seven MSIs
in the food retail sector using the criteria of transparency, participation and accountability and
conclude that they were not entirely fulfilled in any of the cases. Limited resources prevent
weaker actors from getting involved and there is a high level of power asymmetry among
stakeholders, which calls into question the democratic legitimacy of MSIs. Alvarez et al. (2010)
analyze the dynamics of governance in the case of the Nespresso AAA Sustainable Quality
Program and propose a framework to analyze the initial stages and evolution of this initiative.
They observe that in the initial stages of the process, characterized by uncertainty and
experimentation, personal trust and informal relationships can contribute to the successful
advancement of MSIs. Formalization of processes and structure can be introduced later on as the
initiative matures and new players engage in the process. Overall, the literature still lacks an
integrated framework on governance and outcomes based on multiple cases and findings.
The Case of Bonsucro1
Bonsucro is a multistakeholder organization founded in 2005 from the collaboration of sugar
retailers, investors, traders, producers and NGOs. It was initially hosted by the World Wildlife
Fund (WWF) until it registered a nonprofit company under the laws of England and Wales in
2009. Its initial objective was to promote sustainable production of sugarcane with the
establishment of best management practices to reduce, in measurable ways, the environmental
and social impacts of sugar production and processing. As the organization matured, its purpose
was expanded. In 2010 Bonsucro developed a certification system to verify and assure
compliance with sustainability criteria, which was implemented in 2011.
Bonsucro seeks to benefit all levels of represented stakeholders (farmers, marketers, processors,
end users and civil society) by giving them the opportunity to voice their interests, participate
actively in the definition of globally accepted sugarcane production standards and enhance their
brand image and reputation. Furthermore, Bonsucro represents an opportunity for farmers and
processors to access markets, benchmark against competitors and potentially receive premiums
for sustainably produced sugar and ethanol. It is also intended to reduce production costs, as
compliance with the standard is expected to improve energy, raw material and labor efficiency
thereby reducing resource loss and waste. Bonsucro’s sustainability standard and certification
scheme are recognized by the EU Energy Directive, which requires biofuels to be certified by a
sustainability certification system.
Reasons for Formation
Agricultural commodity production has been widely criticized for irresponsible use of natural
resources, environmental degradation and human rights infringements. The sugarcane industry in
particular has been the target of bad press in the last decade (Chaddad, 2010). Pressure is also set
by large food and beverage companies, such as Coca Cola and Unilever, which are increasingly
The main sources of information for this case study were the Bonsucro website, internal documents and personal
interviews with Bonsucro staff and board members.
procuring sugar and byproducts produced according to sustainable standards. In addition, ethanol
production has significantly increased the demand for sugarcane. Sugarcane ethanol consumers
also demand sustainability along the supply chain, which becomes a necessary condition for
access to markets such as the EU. Bonsucro emerged as a response to an increasingly globalized
and sustainability conscious market. Although individual producers and processors may be
required to follow environmental and social guidelines at a national or local level, a globally
accepted set of guidelines did not exist. An international certificate of sustainable sugarcane
production was called for to facilitate trade and to achieve measurable, significant improvements
in the environmental and social impacts of sugarcane production worldwide.
The value of establishing internationally acceptable principles and criteria for sustainable
sugarcane production was acknowledged in discussions among International Sugar Organization
(ISO) members in the early 2000s. ISO members concluded that a transparent and inclusive
process was the only way to establish an internationally recognized, credible standard. This
steered major stakeholders of the sugar supply chain to form Bonsucro with the goal of
establishing a standard for sustainable sugarcane production. The importance of having multiple
stakeholder involvement to define the standard led Bonsucro to form an alliance with the
International Social and Environmental Accreditation and Labeling Alliance (ISEAL Alliance).
This alliance was important for Bonsucro to build credibility and attract more members, as it
followed the ISEAL code of good standard setting to define the standard.
In 2011 Bonsucro had 53 members organized in five categories: growers or producers;
processors; end users; intermediaries; and civil society. Participation of all relevant industry
stakeholders is a necessity, but it poses several collective action and governance challenges for
the organization. Such heterogeneous participants are likely to encounter conflicts of interest, but
as a group they have a common goal to establish sustainable social and environmental practices
in sugarcane and ethanol production and processing. Such conflicts may arise as a result of
financial considerations, buyer-supplier relations along the supply chain, differences in size and
ideology of participants and also political matters.
Membership is voluntary and open, but Bonsucro members are expected to participate in the
sugarcane supply chain or to be interested in the production of sustainable sugarcane. Companies
and organizations that seek to become certified must be Bonsucro members, but certification is
not a necessary condition for membership. To become a member, interested organizations submit
an application form disclosing information about the organization and its reasons to join.
Applicants must also sign the Bonsucro code of conduct and constitution and disclose relevant
financial information to determine membership fees. Applications are posted on the Bonsucro
website and stakeholders are invited to provide comments during a 30-day period. If there are no
objections or concerns regarding the applicant, the board of directors has the final decision
authority to approve or reject the application. In the presence of objections or concerns, the
applicant is given the opportunity to respond. The board then determines the procedure to
guarantee that these concerns do not hold and to approve or reject the membership application.
After approval, the applicant must pay the annual membership fee to validate membership.
Bonsucro is funded mainly by membership fees in addition to donations and grants from
organizations such as the Packard Foundation. Membership fees are annual and are determined
by a formula based on membership category, organization size (turnover) and on Brandt’s NorthSouth socio-economic and political division of the world. The latter criterion is intended to foster
participation from organizations representing the developing world.
Code of Conduct and Constitution
The Bonsucro code of conduct establishes the commitments and responsibilities that participants
undertake when becoming a member of the organization. Following the code is fundamental for
Bonsucro to maintain its integrity, credibility and continued progress. The Bonsucro constitution
sets the processes and bylaws by which Bonsucro functions as an organization.
When Bonsucro was founded, it was initially formed by a select group of stakeholders involved
in the sugarcane supply chain. The relationships between group members were based on personal
trust, which was important in the initial phases of the process. Formal governance became a
fundamental concern once membership and group size increased. The definition of a governance
model in multistakeholder processes is important to promote stakeholder engagement and
facilitate decision making, while taking into account the interests and contributions of the wide
array of stakeholder members. The governance model chosen by an organization affects all
aspects of its development and is fundamental to the legitimacy of the initiative in the eyes of
stakeholders (Mallet and Smith, 2007).
In February 2009, inspired by the ISEAL code, Bonsucro members agreed on the best formal
structure to govern the organization. The governance model chosen by Bonsucro was one of
appointing decision making bodies. Although members have indirect representation in decision
making, they are able to contribute with opinions and express their interests through the standard
consultation process required by the ISEAL code. This builds stakeholder confidence as
participants can see their input being taken into account. Bonsucro’s formal governance structure
was later revised in 2010 (Figures 1 and 2). The most relevant change was related to the merger
of the supervisory board and the management committee, which were previously separate
decision making bodies. Bonsucro’s current governance structure is discussed in detail below.
Board of Directors
General members are represented by the Bonsucro board of directors (Figure 3). Each member,
regardless of size or membership contribution, has the right to one vote. A general meeting with
all Bonsucro members is held annually to discuss and approve financial reports and to elect the
The board is Bonsucro’s highest level of authority. It is elected annually at the General Meeting
by a full member ballot. Elected board members then select a chairman and a vice-chairman.
Currently, the Board is composed of twelve elected members, with at least one representative
from each of the stakeholder groups: growers or producers (both small and large scale;
processors (agro-industrial, milling and refining); end users and retail; intermediaries and
international operators; civil society and NGOs.
The board is accountable for representing the interests of Bonsucro members, as well as for the
overall decisions of Bonsucro and the content of the certification standard. The board is
responsible for the committees, which are created as needed to address specific issues. The
committees are formed by board members, other Bonsucro members and moderators or
consultants. Moderators are hired to provide assistance in the resolution of conflicts that may
exist among committee members. Consultants are engaged to provide technical assistance with
issues that are not the expertise of any members of the committee. Currently, Bonsucro has four
committees: certification; communication, claims and labeling; governance; and EU RED.
Executive Secretariat
The executive secretariat is responsible for the administration of Bonsucro. It is comprised of the
executive director; the head of engagement and communication; the head of sustainability; the
certification coordinator; the office manager; and the website manager. The executive secretariat
also includes three permanent consultants that provide leadership to the technical working
groups. The executive secretariat staff is made up of professional managers who are not
members of Bonsucro.
Technical Working Groups
Technical working groups (TWGs) were established to implement Bonsucro’s objective of
developing a standard for sustainable sugarcane production and processing. They are formed by
technical and scientific experts from different parts of the world. The TWGs are organized in
three teams including: social and labor issues; processing and milling issues; and agronomy
issues. The TWGs have three main roles: (1) to draft performance standards that reduce key
impacts to acceptable levels; (2) to suggest research on impacts where there are disagreements or
not enough data available; and (3) to identify better management practices that are published in
guidance documents to help producers reach higher performance levels.
Sustainability Standard
The Bonsucro standard is intended to reduce, in measurable ways, the key environmental and
social impacts of the production of sugarcane, while still considering the economic viability of
production and the competitiveness of sustainably produced sugar. According to Rein (2009), the
leader of the processing and milling TWG, creating sustainability standards begins with
establishing principles defined as “universal statements about sustainability.” The process
follows with defining criteria, which are “the conditions that need to be met in order to adhere to
a principle” and indicators, which are “measurable states that indicate whether or not associated
criteria are being met.” The Bonsucro standard is based on five principles and criteria agreed on
by members and industry experts: (1) obey the law; (2) respect human rights and labor standards;
(3) manage input, production and processing efficiencies to enhance sustainability; (4) actively
manage biodiversity and ecosystem services; and (5) commit to continuous improvement in key
areas of the business.
The TWGs were responsible for defining measurable indicators to determine whether the defined
principles and criteria are met. This was done through the assessment of better management
practices in many sugarcane producing regions around the world. The Bonsucro standard was
designed to achieve outcomes and measure impacts, rather than to prescribe or verify the
existence of good practices. In other words, it measures outcomes rather than prescribing how to
achieve such outcomes. The standard currently has 28 criteria and 69 measurable indicators. It is
intended to be an auditable document and not just a reporting document. In addition to the
production standard, Bonsucro has defined a set of chain of custody requirements, intended for
each economic operator along the supply chain. This set of technical and administrative
requirements allows buyers and other supply chain participants to identify, trace and verify the
sustainability characteristics of the products.
The standard setting process followed the ISEAL code of good practice for setting social and
environmental standards to assure that the process was transparent and inclusive and to promote
stakeholder engagement. The following steps were taken throughout the standard setting process:
 The procedures for the process were documented and developed with the involvement of
and input from a balanced set of interested parties.
 A complaints resolution mechanism was put in place for the impartial handling of any
procedural complaints. All interested parties had access to this complaints resolution
 The Bonsucro standard public review phase took place in two rounds of comment
submissions by Bonsucro members and interested parties. The first and second rounds
included a period of 60 days for the submission of comments.
 All comments were recorded and a synopsis of how they were dealt with was made
available to the public on the Bonsucro website.
 The final round of comment submissions for the second version of the standard was
closed on January 10, 2010. Public comments were reviewed and discussed by the
Bonsucro board and the final version of the standard was approved in March 2011. The
final standard was posted on the Bonsucro website and will be reviewed on a periodic
basis for continued relevance and effectiveness.
In July 2011, the Bonsucro certification was recognized by the European Union for meeting the
sustainability criteria established by the EU Renewable Energy Directive (RED). The Bonsucro
EU standard includes an additional section of criteria to be met by producers and processors who
wish to market ethanol in the European market.
Although self-assessment must be undertaken by certified organizations, third party assessment
is critical to ensure legitimacy and that a premium is added to certified products. Members are
required to comply with the standard and to be certified by Bonsucro. To be compliant, members
must meet the five core criteria and at least 80% of all production indicators and 80% of all chain
of custody requirements. The five core criteria are:
 To comply with relevant applicable laws;
To comply with ILO labor conventions governing child labor, forced labor,
discrimination and freedom of association and the right to collective bargaining;
To provide employees and workers (including migrant, seasonal and other contract labor)
with at least the national minimum wage;
To assess impacts of sugarcane enterprises on biodiversity and ecosystem services;
To ensure transparent, consultative and participatory processes that address cumulative
and induced effects via environmental and social impact assessment (ESIA) for green
field expansion or new sugarcane projects.
Bonsucro’s certification model was officially launched in November 2010 at the Annual General
Meeting. It follows an accreditation system based on third-party certifiers trained to assess
conformity with the Bonsucro standard. This is the most inexpensive and widely used model
among other multistakeholder roundtables. There are currently seven certification bodies
recognized to audit against Bonsucro standards. The certificate is valid for three years, but
surveillance audits must be carried out every harvest year after the initial audit. The unit of
certification for the production standard is the sugarcane mill, where compliance is verified
through sampling of the supply area. In the case of the chain of custody standard, any agent that
takes ownership of the physical product (sugarcane or derived products) along the supply chain
is the unit of certification. The first Bonsucro certification was issued in June 2011 to a sugar
mill in Sao Paulo, Brazil. By March 2012 another eleven mills, also in Brazil, have become
certified. Furthermore, Bonsucro has issued three chain of custody certificates to other agents in
the supply chain.
Communication, Claims and Labeling
Bonsucro has established a claims and labeling system as a source of income to cover the costs
of accreditation and to offer members a sustainability seal. Members can claim sustainable
production or processing in two ways: in-product or off-product. The first is exclusive to
companies that use sugarcane as single product or as ingredient. If the company fulfills these
requirements, it may use the Bonsucro logo and sustainability claim in packages of the goods
produced. If it does not fulfill these requirements, only off-product claims are allowed. Offproduct claims consist of only communicating Bonsucro membership. These are authorized for
all Bonsucro producer-members, members in the process of obtaining certification and
companies that do not fulfill the requirements for in-product claims. In addition, members who
wish to use the Bonsucro certificate logo and make sustainability claims on products must pay a
fee determined by the board.
According to Rein (2009), the main limitations of the Bonsucro sustainability standard and
certification system is that it does not take into consideration some major issues in the sugarcane
industry, such as indirect land use change effects and rising food prices. These limitations
emanate from the difficulty of establishing indicators to measure impact reduction or effects of
these complex issues. Another challenge for multistakeholder roundtables such as Bonsucro is
maintaining credibility. Voluntary sustainability initiatives have been accused of “greenwash” or
“not practicing what they preach” and have had their lifecycles and legitimacy drastically
reduced as a result. There are also several unsuccessful examples of MSIs, which threaten to
destroy the credibility of such initiatives as a whole. The ability of these initiatives to attract new
members without losing the integrity of the certification process will determine their scale and
effectiveness in achieving sustainability goals.
Analysis and Discussion: Collective Action and Governance of MSIs
Bonsucro has achieved some positive outcomes – in particular, the development and
implementation of a sustainability standard and membership growth. It is interesting to analyze
whether certain aspects pertaining to the structure of this MSI have allowed it to achieve positive
outcomes. The main question addressed in this paper is whether the theories of Mancur Olson
and Elinor Ostrom can inform the case of Bonsucro. Is there something about the way that this
MSI is structured that facilitates the provision of the collective good in question? Bonsucro is
only one observation and conclusions derived from this study cannot be generalized. We intend
to draw from a larger number of observations, with variation across agrifood chains, to derive
more general conclusions.
To inform the analysis of Bonsucro from a collective action perspective, it is crucial to define the
collective good, its providers and appropriators (Olson, 1971; Ostrom, 1990). According to
Ostrom (1990), a collective good can be classified as one of four different types: private goods,
club goods, common pool resources and public goods. This classification is based on the
feasibility of excluding others from consuming the good and on the presence of rivalry in the
consumption of the good. The goods provided by Bonsucro have characteristics of both public
and club goods. From a broad perspective, with the provision of more sustainable business
practices and the reduction of the social and environmental impacts of producing sugarcane,
Bonsucro creates positive externalities benefiting society as a whole. In this case, the good
provided by the MSI is a public good, because it can be consumed or enjoyed by anyone without
rivalry in consumption. Members and certified parties provide the good and society as a whole
appropriates the good, even though costs are incurred by the providers. Because exclusion is not
feasible from the consumption of this good, the presence of free riders becomes an issue, which
will be addressed in more detail below.
On a different level, when analyzing participation in the organization, Bonsucro provides a club
good because, even though there is no rivalry in consumption, exclusion is feasible. Bonsucro
membership is open, but selective, since new members are subject to the approval of existing
members and the board. Although broad participation of relevant stakeholders is necessary and
strongly encouraged, membership is limited to organizations that are directly or indirectly
involved in the sugarcane supply chain. This is an important factor for the organization to thrive,
since it maintains stakeholder interests aligned. However, it excludes other parties from
participating in the decision making process, which classifies Bonsucro as a club. The providers
of the good are Bonsucro members, who are accepted in the club and help in the provision of the
good through their participation and collectively bear the costs of provision (through the
payment of membership fees). The appropriators are also the members because they are able to
capture the value being created through participation in Bonsucro and also by capturing value
associated with the sustainability standard.
The certification system is a product of Bonsucro and can also be categorized according to
Ostrom’s (1990) classification of collective goods. Bonsucro certification is a club good because
it excludes those who do not chose to comply with the standard from enjoying the benefits of
certification: premium prices, market access, reputation, etc. Members provide certification and
parties that wish to consume the good need to comply with the standard to appropriate the good.
However, exclusion may be feasible only to some extent and free ridership may become an issue.
For example, a consumer company that is not a member will be able to buy certified sugar from
a certified producer. Although a premium will be charged for that sugar, it will be possible for
this company to extract some of the value (brand image, reputation) created by the certification
system without complying or contributing to the standard. In that sense, the Bonsucro
certification system has characteristics of a public good, because exclusion is not entirely
possible and there is no rivalry in consumption. Bonsucro provides the good and the
appropriators range from non-members that are certified to free riders that can reap benefits
indirectly from certified parties in the supply chain.
The logic of collective action and the Bonsucro case
Olson (1971) argues that the existence of a common goal or interest is not sufficient for a group
of individuals to engage in collective action, even if all members in that group would benefit
from the provision of a collective good. He suggests that collective action only takes place in
small groups or in groups where there is coercion or selective incentives for individuals to help
further the group interest. Olson posits that in latent groups with many participants “each
member, by definition, is so small in relation to the total that his actions will not matter much
one way or another” (Olson, 1971: 62). Because no individual member of a latent group can have
a decisive impact on outcomes and because social pressure is unlikely to be present, firms have
no reason to organize for collective action. Furthermore, free ridership will be an issue in any
group of individuals attempting to provide a public good. To avoid free ridership benefits must
be limited to active participants.
It is interesting to assess how these collective action challenges apply to MSIs in general and also
to the Bonsucro case. When it is analyzed as the provider of a public good, the issues relative to
latent groups portrayed by Olson are easily identified. The large group of individuals that can
benefit from the provision of a more sustainable environment (whether companies or individual
consumers) have no incentives to organize for collective action because their individual
contribution is not likely to have an impact on the final outcome. The provision of the good
would only be possible with the organization of a small or intermediate group of individuals with
incentives to participate in the group and bear some of the costs of organizing and providing the
The provision of the public good by Bonsucro was possible because a small group of major
stakeholders directly involved in the sugarcane supply chain was pressured by consumers and
NGOs to produce more sustainable sugar. This select group of firms recognized consumer
pressure for more sustainable business practices as an opportunity to charge premiums for
sustainably produced sugar and access markets, but also as a necessity to maintain their business
legitimacy and reputation. Still, the MSI required coordination and organization to form.
According to Olson’s (1971) taxonomy, Bonsucro may be considered an intermediate group and,
as such, the provision of the collective good is indeterminate. The heterogeneity of stakeholder
interests and the group size require coordination and selective incentives in order to make
cooperation feasible. The importance of having multiple stakeholder participation in the process
of establishing and maintaining the standard was a challenge that Bonsucro, and MSIs in general,
need to address.
Stakeholder heterogeneity presented itself as a barrier to the achievement of common group
goals. However, Bonsucro started out with members who were socially connected and aware of
the importance of collaborating to keep the group alive. Participants were able to make
concessions based on the individual benefits they gained from cooperating. More important than
knowing they needed to cooperate, they had incentives to do so. Consumer companies were
responding to pressures from society by seeking to buy sugar produced in a sustainable manner.
Brand reputation and company image provided strong incentives for consumer companies to join
the MSI and to cooperate with other organizations to provide sustainable sugarcane production
standards and certification. In the same way, producers and processors were responding to
pressures from consumer companies requiring that the sugar they use as an ingredient be
produced in a sustainable manner. Also, some markets, such as the EU, may refuse to buy sugar
not produced in a sustainable manner. Market access and the possibility of charging a premium
for certified sugar were economic incentives that provided the impetus for producers and
processors to form the MSI. Collective action was possible because of the incentives available to
this select group of stakeholders to provide the public good. Free ridership is, however, still a
challenge as it is not possible to exclude other parties from reaping the benefits of the provision
of the public good.
Bonsucro is formed by a select group of stakeholders that have incentives to provide a public
good – sustainable business practices to reduce the negative social and environmental impacts of
sugarcane production. As an organization, Bonsucro considers its membership as being open but
selective, which means that any organization can apply but new members are subject to approval
by existing members. Because exclusion is feasible, participation in the decision making process
is a club good. Participation in the definition of the standard and general Bonsucro issues can be
thought of as an incentive for organizations to join the MSI.
The standard setting process is inclusive and participatory. Although the governance model
appoints decision making bodies, the wide array of members is represented in a balanced way
and all members are given the opportunity to voice their interests during the standard
consultation process described in the case. Knowing that their individual inputs will be taken into
consideration is an incentive for companies and organizations to join the group and participate in
the standard setting process. Only active participants will benefit from the provision of the good.
The selection of participants is a way to avoid free riders and keep interests aligned. If Bonsucro
allowed any organization or individual to participate in its decision making process, it would
most likely be very hard to reach any agreement, because of the heterogeneity of interests and
size of the group.
The certification model was implemented as a means to assess and verify that producers and
processors comply with the standards. The certification system has characteristics of a club good
and of a public good. The certification label will divide the market between sustainable and nonsustainable products. The creation of a label that is recognized by market participants as a
certificate of sustainability is an incentive for producers and processors to join Bonsucro. By
seeking to become certified, producers and processors become part of a club and agree to comply
with the standard established by Bonsucro. However, non-certified parties are able to appropriate
some of the benefits provided by the certification system. Sustainably produced sugar will be
available for any organization or individual to buy possibly at a premium.
Although Bonsucro’s intention is to attract more members, the organization’s existence could be
put in jeopardy as group size increases. The costs of organization and decision making are likely
to increase with a larger group. Also, as group size increases, the marginal contribution of each
party may get lost in so many different opinions and thus incentives to join may be significantly
reduced as a result.
In summary, Bonsucro was able to overcome collective action hurdles and provide a public good
because it is formed by a select group of individuals, who have incentives to participate and
share in the costs of providing such good. Its membership structure, governance model, and
transparent and participatory standard setting process are fundamental factors in determining the
incentives of companies and organizations to join.
Governing the Commons
Ostrom (1990) was mainly concerned with the governance of common pool resources. She
challenged the “tragedy of the commons” argument by presenting examples of societies that
have created voluntary institutional arrangements to manage common pool resources in a
sustainable manner. She showed that voluntary institutions can be more effective than state
coercion in the resolution of common pool resource problems. Also, she proposed a polycentric
approach to managing common pool resources – due to their complexity, ecosystem and
environmental problems must be managed as close to the actors involved and to the scene of the
event as possible. Based on the analysis of self-governing institutions created to manage
common pool resources, eight design principles were identified that characterize “long-enduring
common pool resource institutions” (Ostrom, 1990: 90).
The idea behind multistakeholder initiatives seems to fit well with Ostrom’s (1990) polycentric
approach. They evolved as alternative governance mechanisms to decentralize policy and
manage complex sustainability issues. Bonsucro is a voluntary organization, created to regulate
business behavior and to promote the sustainable production of sugarcane. Multiple stakeholder
involvement is the basic condition for its existence, operation and legitimacy. Could it be that
Bonsucro, like the voluntary institutions studied by Ostrom (1990), is an example of effective
collective action to manage wicked problems such as sustainability?
Even though the collective good offered by Bonsucro is not a common pool resource, almost all
of the eight design principles identified by Ostrom (1990) were found to be applicable to
Bonsucro to some extent.
 Clearly defined boundaries. Membership in Bonsucro is open, but selective. Only parties
who have a stake in the sugarcane supply chain or have a justified interest in the
sustainable production of sugarcane are accepted as members. Prospective members must
meet the Bonsucro standard requirements and pay annual membership fees to be part of
the group. Participation in the decision making process is limited to members. These
criteria define the boundaries of Bonsucro and mitigate free riding by other parties who
do not contribute to the provision of the collective good.
Congruence between appropriation and provision rules and local conditions. Bonsucro
rules were crafted following similar organizations and based on conditions and factors
particular to the sugarcane industry and its stakeholders. The constitution sets the rules
for appropriation and provision of the collective good. It defines that Bonsucro must
follow a transparent and participatory process to establish the sustainability standard and
determines the rights and duties of members, decision making bodies and other third
party appropriators. Adherence to the ISEAL standard setting code is also a fundamental
part of the Bonsucro rules. The importance of taking into consideration local conditions
in setting and implementing the standard is reflected in the wide array of stakeholder
groups that participate in the processes and in the way that the standard is crafted. The
technical working groups’ assessment of best management practices in different parts of
the world was part of the standard setting process to consider local conditions. The
standard was designed to have indicators that measure reduction in key impacts of
sugarcane production because local conditions vary. The standard does not prescribe
methods for reducing key impacts. No single prescription would fit the specific context of
the diverse set of sugar producing regions around the world.
Collective choice arrangements. In any MSI such as Bonsucro, with multiple levels of
stakeholders involved, it is important that the decision making process is well defined and
that voting rights are distributed accordingly. To facilitate decision making, Bonsucro
adopted a governance model that appointed decision making bodies, while still
considering the interests and opinions of all members. The Board is the highest authority
but is necessarily formed by an equal number of representatives from each major
stakeholder category. Equal voting rights are clearly defined in the constitution and
enforced by the governance model. Major issues are resolved by general member ballots.
Members are given the opportunity to participate in the standard setting process through
the standard consultation phases and stakeholder outreach meetings.
Monitoring in Bonsucro is mainly undertaken by the appropriators themselves, but
complemented with third party audits. The certification system is fundamental to verify
and guarantee that the appropriators are compliant with rules and processes.
Graduated sanctions. The constitution establishes sanctions for members who do not
comply with the rules. However, these sanctions are not gradually worse, as suggested in
Ostrom (1990). Members that fail to comply with the rules or are considered to be in
some way detrimental to the interests of Bonsucro are immediately excluded from the
Conflict resolution mechanisms. Bonsucro relies on third party conflict resolution
mechanisms. Conflicts between members are resolved with the assistance of technical
experts, consultants or facilitators.
Minimal recognition of rights to organize. Bonsucro is registered as a limited, nonprofit
company under the laws of England and Wales.
Nested enterprises. This principle does not apply to the Bonsucro case.
In summary, Bonsucro appears to be well structured and can be considered a robust selfgoverning institution according to Ostrom’s (1990) design principles. Although sanctions are not
gradual, they are still present. This design analysis of Bonsucro’s governance structure may be
useful for other organizations engaging multiple stakeholders with heterogeneous interests.
Appropriate institutional design can enhance an organization’s ability to deliver sustainability
goals and maintain its integrity and credibility with society at large.
Bonsucro is a relatively new organization that has achieved some of its main purposes: the
creation of a standard for the sustainable production of sugarcane and the implementation of a
certification system to verify compliance with the standard. Yet Bonsucro still needs to establish
its standard and certification system as an internationally recognized sustainability certificate.
That will require attracting more members, while maintaining the integrity and credibility of the
initiative and certification system. As the group size increases, however, Bonsucro may
encounter new collective action problems. Decision making may become more difficult in a
model that takes into consideration the inputs of all members. Monitoring in large scale will
become more costly.
However, at the present stage, Bonsucro has achieved positive outcomes that other
multistakeholder initiatives have not yet been able to achieve. The complex nature of such
organizations often leads to many questions about their survival and effectiveness. The theories
of Olson (1971) and Ostrom (1990) provide useful concepts to the analysis of the Bonsucro case
and its ability to achieve positive outcomes.
This case analysis suggests that certain characteristics of the Bonsucro governance structure are
related to the positive collective action outcomes achieved by the organization. The incentives
provided for group participation are strong and the selective membership structure allows only
active participants to benefit from the collective good. Additionally, the overall design of the
institution is consistent with most principles identified by Ostrom (1990) as fundamental for
managing environmental and ecosystem problems. Bonsucro was able to overcome the
challenges of the initial formation phase, attracting all relevant levels of sugarcane industry
stakeholders and promoting dialog between them. Is has also managed to create a standard that is
accepted by its wide array of stakeholders. This positive outcome is associated with an
institutional design that favors collective action coupled with selective incentives that promote
cooperation between organizations with diverse interests and goals. Understanding the factors
that influence the outcomes of organizations such as Bonsucro is fundamental to their long-term
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Figure 1: BSI organization and governance before changes
Supervisory Board
Elected by Management
Committee; overall
responsibility for BSI
Elected by member
ballot; responsible for
day to day activities.
Bonsucro Executive
& grievance
Accreditation SC
Working Groups
Chart key:
Bonsucro members
Not Bonsucro members
Sub-committees forming
Figure 2: BSI organization and governance after changes
Board of Directors
Elected by member ballot;
responsible for day to day
Claims and Labelling
Executive Secretariat
Technical Working
Bonsucro members
Not Bonsucro members
Figure 3: Bonsucro Board Composition
Membership Category
Sven Sielhorst
Civil Society
Kevin Ogorzalek
Civil Society
Paloma Berenger
End Users & Intermediate
Denise Knight
The Coca-Cola Company
End Users & Intermediate
Dave Howson
Bacardi-Martini BV
End Users & Intermediate
Farideh Bromfield
ED & F Man
End Users & Intermediate
Luiz Fernando do Amaral
Grower & Producer
Dr. MC Gopinathan
EID Parry India Ltd
Grower & Producer
Robert Quirk
Grower & Producer
Hari Morar
Tate & Lyle Sugars
James Primrose
BP Biofuels
Robert F. Dovlo