Voluntary Sustainability Standards: Bridging Governance Gaps and Strengthening EU-Latin America Trade
Two recent papers (Dolabella & Saeteros, 2026; Bemelmans, Depoorter, Marx & Maertens, 2026) contain important insights on the trade effects of voluntary sustainability standards which are crucial in European Union – Latin America relations.
As sustainability requirements become increasingly central to international trade, Voluntary Sustainability Standards (VSS), or eco-labels and eco-certificates, have emerged as a critical mechanism connecting producers in developing countries with consumers and markets in advanced economies. VSS prescribe a set of social, economic and/or environmental standards that private actors can voluntarily adopt to make their production and processing practices and sourcing strategies more sustainable (Marx et al., 2024; UNCTAD, 2022). Upon verification of compliance with the standards certificates are issued that serve as proof of compliance.
For the European Union (EU) and Latin America, this development is particularly significant. The region supplies many of the agricultural commodities that are essential to European consumption and production systems, including coffee, cocoa, bananas, soy, palm oil, and sugar. Yet differences in regulatory capacity, monitoring systems, and sustainability governance often create barriers to trade. In this context, VSS are increasingly functioning as bridges across governance gaps, helping to facilitate market access while promoting more sustainable production practices.
Both papers provide strong evidence that VSS are not only sustainability instruments but also important trade facilitators. A large-scale analysis of agricultural exports from developing countries found that increasing VSS certification coverage leads to significant export gains, particularly for commodities such as bananas, palm oil, tea, and cotton. Similarly, research covering seven tropical commodity sectors concludes that VSS coverage is generally associated with higher trade volumes and improved market access. These findings challenge the perception that sustainability standards are merely compliance costs or disguised trade barriers. Instead, they demonstrate that well-designed standards can support competitiveness in international markets.
The key contribution of VSS lies in their ability to address governance gaps (difference in governance scores between trading countries). International trade increasingly depends not only on price and quality but also on information about how products are produced. Importers, retailers, and consumers in Europe often seek assurance regarding environmental protection, labour conditions, human rights, and traceability. However, regulatory capacities differ substantially across countries. In many developing economies, public institutions may have limited resources to monitor and verify compliance with sustainability requirements. VSS help fill this gap by providing credible third-party verification systems that reduce information asymmetries between producers and buyers. In effect, they create a common language of sustainability that can be understood and trusted across borders.
The importance of this governance function is particularly visible in trade relations between Latin America and the EU. Empirical evidence shows that the positive trade effects of VSS are strongest when there is a large institutional gap between exporters and importers. Certification appears to compensate for differences in regulatory capacity by providing trusted assurances regarding sustainability performance. Dolabella & Saeteros (2026) find that trade gains are especially significant for lower-income exporters selling into high-income markets, while Bemelmans et al. (2026) demonstrate that VSS can mitigate the trade-inhibiting effects of governance distance between trading partners. In other words, certification helps Latin American producers access European markets even when governance systems differ substantially.
This finding is highly relevant in the current policy environment. The EU is implementing increasingly ambitious sustainability regulations, including measures related to deforestation, corporate sustainability due diligence, and supply-chain transparency. While these initiatives aim to promote sustainable production globally, they also raise concerns about the ability of producers in developing countries to meet new requirements. VSS can play an important complementary role by providing existing infrastructures for auditing, monitoring, traceability, and continuous improvement. Rather than viewing voluntary standards and public regulation as competing approaches, policymakers should explore how they can work together to facilitate compliance and promote sustainable trade.
Latin America offers several examples of how sustainability standards can support both trade and sustainability objectives. Research highlights strong positive effects for certified banana exports from countries such as Ecuador, Costa Rica, Guatemala, and Honduras, all major suppliers to European markets. More broadly, certification has become embedded in important regional value chains, helping exporters meet buyer expectations while maintaining access to premium destinations. As EU demand for sustainably produced commodities continues to grow, certification can support the region's efforts to maintain competitiveness while advancing environmental and social objectives.
However, the benefits of VSS are not automatic. Other studies cited in the two papers reveal important challenges (see also Marx et al., 2025 for an overview of challenges). Certification systems can become fragmented as multiple standards compete within the same sector, creating duplication and increasing compliance costs for producers. Evidence suggests that the trade benefits of certification tend to decline when too many overlapping standards emerge. Likewise, the advantages of certification may diminish as markets become saturated, and certification becomes the norm rather than a differentiating factor. These findings suggest that future efforts should focus not only on expanding certification but also on improving coherence, mutual recognition, and interoperability among standards.
For the EU-Latin America partnership, the policy implications are clear. Rather than treating sustainability requirements solely as regulatory obligations, policymakers should recognize VSS as governance tools that facilitate trust, reduce information asymmetries, and strengthen market integration. Greater cooperation between governments, standard-setting organizations, businesses, and producers could help align private standards with emerging public sustainability frameworks. Such an approach would support both sustainable development and economic integration across the Atlantic.
Ultimately, VSS demonstrate that sustainability and trade need not be opposing objectives. When effectively designed and implemented, they can help overcome governance gaps, strengthen supply-chain transparency, and create opportunities for sustainable economic development. For EU-Latin America relations, they offer a practical pathway to reconcile growing sustainability ambitions with the continued expansion of mutually beneficial trade.
Axel Marx is Deputy Director of the Leuven Centre for Global Governance Studies at KU Leuven, a multidisciplinary research centre recognized as a KU Leuven Centre of Excellence and a Jean Monnet Centre of Excellence. He has coordinated more than 80 research projects and regularly advises international institutions on global governance and sustainability policy. He serves as co-chair of the Academic Advisory Council of the United Nations Forum on Sustainability Standards, sits on the Evidensia Research Council and the ILO Labour Provisions in Trade Agreements Hub, and is affiliated with the Jean Monnet Centre of Excellence on Business and Human Rights at FECAP Business School in Brazil.
The opinions expressed in this blog are solely those of the author and do not reflect the views of the EULAS Network.
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