The world’s premier alliance of multi-stakeholder change networks is reviewing standards that operationalize their change strategy. The ISEAL Alliance is the global association for social and environmental standards.  Members include the Forest Stewardship Council (FSC), the Marine Stewardship Council (MSC), Social Accountability International (SAI), the Fair Labelling Organization (FLO: fair trade) and the International Federation of Organic Agriculture Movements (IFOAM).

You know ISEAL organizations by their labels:  Fair Trade’s on coffee, MSC’s on seafood,  FSC’s label on paper and wood products. ISEAL’s Impact Code helps define what to measure and how to measure in order to be awarded the labels. Highly relevant is the work of 2009 economics Nobel Prize winner Elinor Ostrom.

The Change Strategy

The change issues are sustainability and economic justice.  A basic Code element of the change strategy is multi-stakeholder engagement.  This produces a “whole systems” perspective about how companies’ actions impact social, environmental and economic outcomes. This is a big change from the traditional exclusive corporate focus on its own financial welfare.

Currently the standard does a good job of defining who stakeholders are.  However, how they must be engaged is defined under the very general concept of “consultation” that raises questions.

For MSC and FSC, certifiers who meet certain standards are hired by a “client” (usually a forestry or fishery company) to determine whether certification standards are being met.    Typically certifiers interview stakeholders individually and there is not necessarily a collective meeting of stakeholders.  Nor is there any requirement that a multi-stakeholder group be developed to manage the fishery/forest or ensure the certification standards are being met between the certification renewals.

This is distinctly different from the strategy of the Global Fund to Fight AIDS, Tuberculosis and Malaria (the Global Fund) and the Extractive Industries Transparency Initiative (EITI).  The former only accepts funding applications from multi-stakeholder groups;  the latter, a spin-off of Transparency International, requires that applications for “validation” of transparency standards come from multi-stakeholder bodies.

“EITI offers a platform for dialogue to discuss transparency issues,” Tim Bittiger, EITI Regional Director explained to me.

The Nobel Prize

Ostrom won the Nobel Prize for her analysis of economic governance. The media release announced her win this way:

“(Ostrom) has challenged the conventional wisdom that common property is poorly managed and should be either regulated by central authorities, or privatized. … She observes that resource users frequently develop sophisticated mechanisms for decision-making and rule enforcement to handle conflicts of interest, and she characterizes the rules that promote successful outcomes.” (Royal Swedish Academy of Sciences 2009)

She spent decades studying successful resource management at the local level by multi-stakeholder groups.  Most of ISEAL’s members are multi-stakeholder networks at the global level, which reflects their theory of change.  This would lead you to expect that they would find this a compelling arrangement locally, as well.

Empowerment

Paddy Doherty who is managing the Impacts Code review process, says that ISEAL members talk about the importance of “empowering” stakeholders.  This suggests the importance of creating new governance arrangements locally where differences can be worked out, and collective planning and heightened standards can be advanced.

As might be expected, there is already experience with cross-stakeholder groups locally.  FLO deals with cooperatives that cross the traditional labor-management divides.  MSC Project Manager Amanda Stern-Pirlot comments that: “If a fishery has certification conditions (i.e. has to make improvements over the course of their certification) often the cooperation of others is needed to fulfill these conditions, particularly when improvements to management systems are needed. In lots of situations, having a good collaborative relationship with stakeholders outside the client group is essential.”

Multi-stakeholder Platform Issues

The idea of forming multi-stakeholder groups for certification raises skills issues. Typically certifiers have traditional auditing expertise (eg.: from Arthur Anderson) and would not be equipped to handle some of the dynamics and associated goals.  Making multi-stakeholder platform development would require a very different set of competencies.

Doherty raises the valid point that the Global Fund and EITI are dealing with different situations:  handing out large amounts of money in the one case, and working with large corporations and governments in the other.  However, maybe this simply suggests a modified strategy to foster formation of a multi-stakeholder group.  It could be made a condition of renewal of certification, for example, so the initial certification ushers is contingent upon a plan and commitment to develop a local platform.

The big product and attraction to multi-stakeholder platforms is their ability to coordinate their very distinct resources and capabilities, and challenge each other’s parochial perspectives, to produce very wonderful innovation…to do what none of them could imagine doing on their own.  This is the type of change that is required to realize the objectives of ISEAL Alliance members.  This has been well-documented, including in my last book Societal Learning and Change:  How governments, business and civil society are creating solutions to complex multi-stakeholder problems.

Until 30 April 2010 you are invited to contribute your ideas for improvement, discuss key issues, and propose changes to the code.

I was leading discussion by a half dozen executive directors of Global Action Networks on the topic of competencies critical to success when we turned to the question of resource mobilization.  I was surprised that none of the leaders thought of financing as a major issue for them, in comparison to the other competencies.

“But what if you think about barriers to your network really flourishing and realizing its goals?” I asked.  That moved the issue of financing to the top of the list of challenges.

The question of financing is wrapped up with stage of development discussed last week and featured in a webinar March 3.  At early stages, less money is required and the question is about finding a venture investor to explore possibilities.  Later stages require more funds and a sustainable business model.

Gathering finance information is very complicated for a network, since it requires defining what part of the network the data cover. As networks develop, most increasingly depend upon sub-parts (regional, particular program) raising their own funds.  In May last year I surveyed 11 networks[1] ranging from 8 to 15 years of age with the initial question:

What was the total income (revenue) that came to/through the Secretariat for the most recent fiscal year including funds that may have gone to other parts of the network?

The response ranged from $500,000 to $11.4 million, with the average of $3.6 million.

Sources of Income

But the finance question is also wrapped up in strategy.  Being multi-stakeholder, the networks could be expected to have tax-based contributions from government, civil society-based funding from foundations and revenue generation from services and fees.  Table 1 gives responses to the question:

Please indicate the approximate percent of funds that flow to/through the Secretariat that come from the following sources.

Most networks perceived potential conflicts of interest with business revenue generation.  One way the Global Compact addresses this is with a foundation to receive business donations;  the foundation does not fund core Secretariat costs, but only the broader network.

Reasons for Funding

Strategy also raises Secretariat-network relationship questions.  For example, Transparency International Secretariat’s role in putting together up to 30 National Chapters for joint funding proposals has recently increased dramatically from less than €1 million a year to more than €5 million.  Table 2 gives responses to the question:

Please indicate the approximate percent of the types of funding/reasons for funding.

These global networks are all really producing “global public goods”…something funded at the national level through taxes.  Substantial global network funding comes through taxes with funding from donor agencies like DFID and multilaterals like the World Bank.  However, as Ernest Ligteringen who heads up the Global Reporting Initiative commented to me, it is fitting a round peg in a square hole.  A much more robust solution must be found to do the important work of global public good financing with categorical national tax transfers or a global tax.

What are your experiences with financing?  What sort of more robust solutions should we strive for?

We depend on networks to voluntarily provide information like this, for on-going development.  If your network is not listed below as a participant in the survey, please have someone fill out the survey by clicking here.  Data is for the 2008 fiscal year, and individual responses remain confidential.  The survey takes only an hour.