Balancing Public and Private Regulation

Voluntary Sustainability Standards (VSS) might develop into a viable alternative to public regulation. However, it turns on the (regulatory) circumstances whether that holds true in practice. If public regulation on CSR topics is lacking, governments are unable to agree upon certain topics on a global level or diverging public regulation exists, VSS can be helpful to set global standards. Obviously, private standards will especially be helpful if they are commensurate with local public legislation (and e.g. treaties) and/or are accepted by local governments. If one neglects this, numerous domestic structures might exist that frustrate VSS. Furthermore, governments have to remain vigilant as to whether these private regimes do not result in market disruption, consumer detriment or hamper trade. VSS might also compete with public arrangements which might limit the uptake of VSS. However, if public regulation exists VSS might be a viable alternative if compliance with not too compelling public norms by market participants is rather poor and the public policymaker is aiming to incentivize the better performing part of the market to embark on higher standards and thus only desires to regulate the less performing part of the market. However, of paramount importance is the effectiveness of VSS in order to be a viable alternative to public regulation. The effectiveness of VSS should be assessed using an integrated multi-disciplinary (comparative) approach entailing legal, impact-assessment, legitimacy, governance and behavioural aspects. Only effective VSS in the aforementioned sense are a true alternative to public regulation.
Beyond that, the legal perspective in connection with (the effectiveness of) VSS is discussed, featuring FSC and UTZ Certified as an example. It is important from this perspective that VSS have a clear and sufficiently selective objective and sufficiently specific norms, are regularly evaluated, entail ‘conflict of law rules’ and an effective grievance mechanism, provide sufficient means for monitoring and enforcement and contribute to a more balanced risk attribution between producers and (ultimate) buyers.