Everybody involved in the bioeconomy should understand that standardization is a requirement for a successful institutionalisation of biobased markets.
Standardization is a prerequisite for trade
One of the basic assumptions is that market parties need to establish standardization because they need standards to control the variables in the supply chain operation. In this way bio-products can become commodities and be traded easily. Apart from safeguarding specific regulations, governmental authorities are not involved.
Of course a market can also function without standards. When lacking generally accepted agreements, a market performs on the basis of bilateral trade agreements. Without well-defined commodities, such an ‘Over-the-Counter’-, or OTC- market involves high transaction costs. Apart from that, an OTC-market is non-transparent, can only offer limited security, and carries the risk of exploiting any power imbalance. This alone will make it more difficult for an OTC-market to operating according to sustainability principles.
Standardization then, unless we want to get caught up in autonomous biobased production chains with sub-optimal added value within an economy. But developing standardization will need a lot of effort: a thesis from 2010, studying the impact of standardization on the market for biobased fuels found that for coal alone currently there are up to 161 global formal technical ISO-standards. In contrast there were no ISO-standards for biofuels.
Standardization will take much time
The latter is not very strange. It takes a lot of time to develop a specific formal standard to describe requirements, at least five years. And a certification scheme might also need to be drafted to describe the implementation rules. Another five years. And after all that work, the value of the standard does not depend on its content, but in the extent to which the standard is used or embedded in social and economic processes, and on the amount of standard adopters.
The successful standardization of a specific biobased market will require a network of a certain minimum size for this specific market, and above all well-defined and transparent network interconnections between market stakeholders and actors. A broadly experienced demand for commoditisation will prove essential. Fostering such an ambition will considerably support institutionalizing a large-scale and successful bioeconomy.
Also published on Wijnand’s private blog.