PETA is up to some shenanigans again. Their target this time has been animal welfare certifiers and the advocacy organizations that support them, such as ASPCA, HSUS, and RSPCA.

They argue that animal welfare certifications lull consumers into a false sense of security, making them think products were produced humanely when, in fact, they were not. Their tactics include publishing critical newspaper ads and protesting outside the houses of the CEOs of these organizations.

Obviously, I’m against protesting outside the houses of the CEOs of these organizations.

But there’s a deeper reason why I think PETA is misguided. While certifiers do an admirable job at the difficult task of monitoring welfare on farms they don't control, the real issue is that third-party certification suffers from structural flaws that limit its influence on consumer behavior. PETA is protesting what is, in practice, a relatively minor factor in how consumers make decisions about animal welfare.

But that doesn’t mean animal welfare is irrelevant to consumer behavior. In today’s market it’s brands that consumers look to for assurances around animal welfare, not certifiers. To understand why this is, we first need to look at the economics of certification, and who is winning the welfare premium.

Why don’t certifiers do marketing?

Certifying organizations are all structured as nonprofits, but they can fundamentally be understood as businesses. Their business model is that they help farmers get paid more for better practices, then take a cut of the additional margin.

The more certifiers help farmers get paid, the bigger cut the certifier can take. This in turn depends on how much additional the consumer is willing to pay for the certification. From a business standpoint, the certifier’s ability to charge the producer is therefore a reflection of how much they drive consumer behavior.

But in practice, certification fees are surprisingly low, indicating that their influence on consumer purchasing decisions is limited. For example, Certified Humane, one of the main welfare certifiers in the US, charges 7 cents per case of 30 dozen eggs, or $0.0023 per dozen, and $0.001 - $0.003 per pound of chicken meat depending on the volume. Or, RSPCA Assured charges 5p per case of 30 dozen eggs, or 0.375% of the value of chicken meat sold (assuming a retail price of £2 per pound of chicken, this would be 0.75p per pound).

You might think that certifiers can’t charge very much because ...