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CRITICAL JOURNAL REVIEW

MK. Pengauditan II
PRODI S1 Akt - FE

Skor Nilai :

TUGAS CRITICAL JOURNAL REVIEW

NAMA : M.FIRMANSYAH

NIM : 7182220003

DOSEN PENGAMPU : MUHAMMAD RIDHA HABIBI Z,SE,.M.Si.,Ak.,CA

MATA KULIAH : PENGAUDITAN II

JURUSAN AKUNTANSI FAKULTAS EKONOMI

UNIVERSITAS NEGERI MEDAN

MEDAN

MARET 2021
KATA PENGANTAR

Dengan memanjatkan puji syukur kehadirat Allah SWT, yang telah memberikan
taufik dan hidayah – NYA,sehingga saya dapat menyelesaikan tugas Critical jounal report
materi Pengauditan II ini dengan baik.Meskipun di dalam nya masih terdapat banyak
kesalahan atau pun kekurangan. Dan tak lupa pula saya berterima kasih kepada Bapak
Ridha Habibi selaku dosen pengampuh mata kuliah Pengauditan II di Fakultas Ekonomi
Universitas negeri Medan yang telah memberikan tugas ini kepada kami.

Semoga tugas CJR yang sederhana ini dapat di pahami oleh siapa pun yang akan
membacanya. Sekian laporan yang telah di susun dapat berguna bagi saya sendiri maupun
orang lain yang akan membacanya.sebelum-nya saya mohon maaf apabila terdapat
kesalahan kata – kata yang kurang berkenan dan saya memohon kritik dan saran yang
membangun dari Bapak demi perbaikan tugas ini di masa yang akan datang.

Medan, 23 Maret 2021

M.Firmansyah

TUGAS CRITICAL JOURNAL REVIEW 2


A. Identitas Jurnal
JURNAL

Judul Private sustainability


governance, the Global South
and COVID-19: Are
changes to audit policies in light
of the pandemic exacerbating
existing inequalities?

Nama penulis Graeme Auld a, & Stefan Renckens b


Nama jurnal World Development
Tahun 2020
Volume & Page 139
Reviewer M.Firmansyah
Hasil / Temuan Utama Pandemi COVID-19 telah mengganggu
hubungan ekonomi global. Program
regulasi swasta transnasional, seperti
sertifikasi keberlanjutan dan skema
pelabelan ramah lingkungan yang
menetapkan standar untuk praktik produksi
yang bertanggung jawab di pasar global,
harus bereaksi. Kredibilitas pasar regulasi
swasta sebagian dibangun di atas audit,
yang mencakup kunjungan lapangan yang
digunakan untuk menilai apakah operator
yang berpartisipasi sesuai dengan standar
program. Tetapi pembatasan kesehatan dan
bisnis terkait COVID-19 telah memaksa
penyesuaian pada kebijakan audit lapangan.
Literatur tentang tata kelola swasta telah
mengidentifikasi beberapa hambatan
partisipasi operator Global South, termasuk
biaya sertifikasi, ketersediaan auditor yang

TUGAS CRITICAL JOURNAL REVIEW 3


memenuhi syarat, dan manfaat sosio-
ekonomi yang tidak pasti. Apakah
perubahan kebijakan audit dilakukan karena
pandemi COVID-19 memperburuk
hambatan ini? Kami memeriksa pertanyaan
ini melalui kumpulan data yang dibuat
antara April dan November 2020 yang
berisi informasi tentang tanggapan
kebijakan audit terkait COVID-19 dari 98
regulator keberlanjutan swasta
transnasional. Kami menjelaskan
transparansi campuran dari penyesuaian ini
hingga saat ini dan lima cara di mana
penyesuaian tersebut menciptakan
hambatan eksplisit dan implisit bagi
operator dari negara-negara Global Selatan.
Perubahan tersebut menciptakan hambatan
melalui (1) kondisi yang ditetapkan tentang
kapan dan bagaimana penyesuaian pada
audit diizinkan, (2) terbatasnya substant
eksibilitas standar substantif, (3) biaya
potensial untuk beralih ke audit jarak jauh,
(4) fokus pada akomodasinya. peserta yang
ada atas pelamar baru, dan (5) potensi
tantangan mengakses auditor untuk
melakukan penilaian.
Kesimpulan Tanggapan terhadap COVID-19
bergerak cepat. Kami telah
menawarkan analisis awal dari
penyesuaian cepat ini dari satu
jenis organisasi tata kelola.
Kami menemukan variasi yang
relevan di
seluruh program regulasi swasta
dalam hal program mana yang

TUGAS CRITICAL JOURNAL REVIEW 4


mengumumkan perubahan
kebijakan
audit dan jenis perubahan yang
mereka usulkan. Transparansi
penyesuaian kebijakan audit
tidak
lengkap. Dari program-program
yang membuat penyesuaiannya
menjadi publik, sebagian besar
melakukannya sekitar waktu
atau dalam sebulan setelah
Organisasi Kesehatan Dunia
mengumumkan pandemi global
pada Maret.
11, 2020. Sebagian besar
program memilih untuk
menunda audit dan / atau
memperkenalkan audit
jarak jauh dan virtual.
Sebaliknya, sangat sedikit yang
mengizinkan modifikasi atau
pengecualian
terhadap standar substantifnya.
Penilaian kami tentang implikasi
dari perubahan ini bagi operator
di Dunia Selatan menunjukkan
bahwa mereka dapat
memperburuk hambatan yang
ada untuk partisipasi dan dapat
menciptakan
hambatan baru, setidaknya untuk
sementara. Teknologi yang

TUGAS CRITICAL JOURNAL REVIEW 5


diperlukan untuk melakukan
audit jarak
jauh dan virtual dapat
membebankan biaya tambahan
pada operator. Kondisi tentang
kapan
kebijakan audit baru dapat
berlaku, termasuk ketersediaan
teknologi ini dan tingkat risiko
kepatuhan
yang dapat diterima, secara
implisit dan dalam beberapa
kasus secara eksplisit
menargetkan
operator Global South.
Fleksibilitas yang terbatas pada
kepatuhan terhadap persyaratan
substantif
dari program swasta, dan fokus
pada peserta program yang ada
daripada yang baru, juga dapat
merugikan operator Selatan.

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B. Laporan Hasil Kritik Artikel/Jurnal:
Pertanyaan
1 Apakah judul artikel sudah jelas?
2 Apakah isi abstrak tergambarkan dengan spesifik? Representatif dengan isi artikel?
Dan di buat dengan format yang benar?
3 Apakah tujuan penelitian/Artikel dipaparkan dengan jelas?
4 Apakah ide/isu diangkat relevan dan penting ?
5 Apakah desain dan metode penelitian sesuai dengan tujuan penelitian?
6 Jika penelitian menggunakan desain eksperimen atau quasi eksperimen.Apakah
metode tergambarkan dengan jelas?apakah cukup detail jika sewaktu-waktu
penelitian tersebut diulang?
7 Apakah di temukan kesalahan atau error atas fakta interpretasi hasil penelitian?
8 Apakah pembahasan hasil temuan relevan?
9 Apakah penulis atau peneliti menggunakan kepustakaan yang berkaitan dengan
topik penelitian?apakah peneliti mengunakan kepustakaan yang tidak relevan?bila di
temukan di sarankan untuk di hilangkan!
10 Apakah di temukan ide yang terlalu dilebih-lebihkan atau sebeliknya tidak di
paparkan?Bila di temukan,sarankan untuk revisi yang lebih spesifik?
11 Apakah beberapa bagian artikel yang masih dapat dipaparkan lebih lanjut?atau
perlu disederhanakan dan dipadatkan?Atau mungkin dihapus?
12 Apakah pernyataan penulis/peneliti jelas? Atau chalenging? Atau malah
ambigous?bila ada, sarankan bagaimana cara membuatnya agar lebih jelas.
13 Apakah asumsi yang mendasari pemikiran penulis/peneliti?
14. Apakah penulis/peneliti telah objektif pada pembahasan hasil?
15. Apakah kesimpulan jelas? Singkat dan padat? Serta merefleksikan temuan/ hasil
penelitian?

TUGAS CRITICAL JOURNAL REVIEW 7


Jawaban atas pernyataan kritik:

1. Judul dari artikel atau jurnal sudah sesui dan jelas, memaparkan isi keseluruhan dari
jurnal tersebut.
2. Isi dari abstrak dalam jurnal tersebut sudah tergambarkan dengan spesifik,
representatif dengan isi artikel, dan telah dibuat dengan format yang benar.
3. Tujuan dari penelitian/artikel sudah dipaparkan dengan jelas dan sudah sesuai
dengan isi jurnal.
4. Ide/isu yang diangkat oleh jurnal tersebut sangat relevan dan penting.
5. Desain dan metode penelitian sudah sesuai dengan tujuan penelitian.
6. Tidak ditemukan kesalahan/ error atas fakta dan interpretasi dari hasil penelitian.
7. Pembahasan sudah relevan terhadap hasil/temuan.
8. Penulis/peneliti telah menggunakan kepustakaan yang berkaitan dengan topik
penelitian dan peneliti juga sudah menggunakan kepustakaan yang relevan
9. Tidak ditemukan ide yang terlalu dilebih-lebihkan didalam jurnal tersebut.
10. Pernyataan dari penulis/peneliti telah jelas / chalenging
11. Penulis/peneliti telah objektif pada pembahasan hasil.
12. Kesimpulan dari jurnal sudah jelas, singkat dan padat, serta merefleksikan temuan/
hasil penelitian.
13. Penulis/peneliti ingin menunjukkan bahwa pada musim panas mereka mempunyai
universitas dengan akselerasi.
14. Iya,penulis sangat objektif dalam penelitiannya.
15. Kesimpulan yang diberikan sangat jelas dan mudah dipahami oleh berbagai kalangan
yang membacanya.

TUGAS CRITICAL JOURNAL REVIEW 8


World Development 139 (2021) 105314

Contents lists available at ScienceDirect

World Development
journal homepage: www.elsevier.com/locate/worlddev

Regular Research Article

Private sustainability governance, the Global South and COVID-19: Are


changes to audit policies in light of the pandemic exacerbating existing
inequalities?
Graeme Auld a,⇑, Stefan Renckens b
a
School of Public Policy and Administration, Carleton University, Canada
b
Department of Political Science, University of Toronto, Canada

a r t i c l e i n f o a b s t r a c t

Article history: The COVID-19 pandemic has disrupted global economic relations. Transnational private regulatory pro-
grams, such as sustainability certification and eco-labeling schemes that set standards for responsible
production practices in global markets, have had to react. Private regulation’s market credibility is par-
Keywords: tially built on audits, which include field visits used to assess whether participating operators conform
Private regulation with a program’s standard. But COVID-19-related health and business restrictions have forced adjust-
COVID-19 ments to field-audit policies. Literature on private governance has identified several barriers to participa-
Crisis
tion of Global South operators, including the costs of certification, the availability of qualified auditors,
Inequalities
Sustainability
and uncertain socio-economic benefits. Are audit policy changes made because of the COVID-19 pan-
Certification demic exacerbating these barriers? We examine this question through a dataset constructed between
April and November 2020 that contains information on COVID-19-related audit policy responses of 98
transnational private sustainability regulators. We describe the mixed transparency of these adjustments
to date and five ways in which the adjustments create explicit and implicit barriers to operators from
Global South countries. The changes create barriers through (1) the conditions set on when and how
adjustments to audits are permitted, (2) the limited flexibility of substantive standards, (3) the potential
costs of shifting to remote audits, (4) the focus on accommodating existing participants over new appli-
cants, and (5) the potential challenges of accessing auditors to conduct assessments. We conclude with
implications for research on private regulation post-COVID-19.
Ó 2020 Elsevier Ltd. All rights reserved.

1. Introduction observe. Well-known examples are programs like Fairtrade Inter-


national, which has certified over 12 percent of the global coffee
The transnationalization of supply chains and economic net- production area; Rainforest Alliance, which certifies over 16 per-
works has generated considerable concerns about the sustainabil- cent of global tea production and 33 percent of global cocoa pro-
ity implications of these global connections. Non-state actors, such duction; and the Marine Stewardship Council (MSC), which has
as non-governmental organizations, firms and industry associa- certified 15 percent of global marine catch (International Trade
tions, have taken up an important role in providing regulatory gov- Center, 2017; MSC, 2019).1
ernance instruments to verify the sustainability of global economic The COVID-19 pandemic, however, is posing challenges to the
activities, most notably in the form of sustainability certification globalized economy. Early on, food and consumer product supply
and labeling schemes (e.g., Rueda & Lambin, 2013; Tolentino- chains were disrupted. Disruptions remain for business activities
Zondervan et al., 2016). This type of private regulatory governance and the personal freedom of mobility that many individuals, in
aims to uncover features of products, services and organizations— particular in the Global North, had been accustomed to, while
such as the sustainability of production processes, or a firm’s car- the underlying free market or neoliberal ideology is being chal-
bon footprint—that consumers and service users cannot readily lenged too (e.g., Clapp, 2020; Oi & Hoskins, 2020; Financial

⇑ Corresponding author. 1
The figures for Rainforest Alliance are combined figures of the certification
E-mail addresses: Graeme_auld@carleton.ca (G. Auld), stefan.renckens@utoron- programs of Rainforest Alliance and UTZ Certified, which announced the merger of
to.ca (S. Renckens). their programs in 2018.

https://doi.org/10.1016/j.worlddev.2020.105314
0305-750X/Ó 2020 Elsevier Ltd. All rights reserved.
G. Auld and S. Renckens World Development 139 (2021) 105314

Times, 2020). Private regulatory programs have not been immune future. What adjustments have private rule-makers made to their
to these disruptions. As countries imposed increasingly wide- auditing policies? And what are the implications for operators in
reaching restrictions on business activity and travel, private regu- the Global South?
lators have needed to adjust their ways of operating, including We assess these questions by examining the audit policy
moving to remote operations in their head office and regional changes of 98 private regulatory programs. Disclosure is partial
offices. Participants in these programs have also faced tremendous at best. Fifty-one programs have made these policy changes pub-
upheaval and financial strain. Markets for their products have van- licly available, with the earliest policies announced in late January
ished or dramatically declined. The international cut flower mar- but the bulk coming into effect in March around the time the WHO
ket, as an example, saw prices and trade flows plummet causing classified COVID-19 as a global pandemic. Policy adjustments vary
considerable problems for producing countries, such as Kenya that in their scope and types of permitted modifications to normal in-
exports a $1 billion worth of cut flowers a year (Faux, Herbling, & person audits. The dominant modifications focus on the three typ-
Munsterman, 2020) and has 30 percent of its flower workers ical audit processes – initial audits, surveillance audits, and recer-
employed on farms certified by Fairtrade International tification audits – with programs focusing on postponements,
(Frederburgh, 2019). Concerns over food shortages, moreover, extensions or remote audits as acceptable temporary measures in
sparked a wave of trade restrictions that the United Nations Food light of COVID-19. Very few programs made any modifications to
and Agriculture Organization (FAO), the World Health Organiza- their standards’ substantive requirements. The policy changes also
tion (WHO), and the World Trade Organization warned would dis- included conditions specifying when modifications would be per-
proportionately harm low-income, food-deficit countries (FAO, mitted and reporting requirements on the application of the policy
2020). by auditors and certificate holders.
How do these global disruptions affect sustainability gover- Five facets of these changes create explicit and implicit (or
nance and operators in the Global South? This question is impor- unintentional) barriers for operators from countries in the Global
tant, since existing research shows that operators in Global South South. First, barriers are created by the conditions for when mod-
countries face specific barriers to participation in private regula- ifications to existing audit practices are allowed, which in some
tory programs (Neilson, 2008; Ponte, 2002; Renckens & Auld, cases explicitly excludes operators from Global South countries
2019). These barriers include the costs of certification, such as or small producers in these countries. Second, the limited flexibil-
audit fees, data requirements and changes to practices to comply ity regarding private programs’ substantive requirements means
with private standards. In addition, scholars have found that smal- no leniency will be in place in spite of the potentially dropping
ler producers are disadvantaged, and that a relative lack of avail- market interest in certification in the short and potentially med-
able auditors and uncertain socio-economic benefits of ium term. Third, costs to be certified may increase as a result of
certification are obstacles to participation for producers in Global shifts to new types of audits, such as remote audits, that require
South countries. Inequalities resulting from these barriers may be different infrastructure and competencies. Fourth, programs show
exacerbated, and new barriers developed, by the programs’ a greater concern for operators that are already participating in a
responses to the COVID-19 pandemic, making the situation during program, rather than those that are trying to get access – a prefer-
the pandemic even more precarious for producers in the Global ence that exacerbates existing biases toward high-capacity and
South. well-resourced operators. Finally, access to auditors to conduct
In this paper, we assess how transnational private regulatory assessments may be more challenging for operators in the Global
programs have adjusted to the COVID-19 crisis by changing their South, due to the varying timing of country restrictions, audit pol-
audit policies and how these changes may affect operators in the icy changes, and the organizational policies of individual auditors.
Global South. While rule making is a core function of private regu- Our analysis proceeds as follows. In the next section, we discuss
latory programs, audits are crucial as efforts to verify whether the importance of audits in private regulatory programs and the
firms and operators meet a particular level of performance mea- impact that the COVID-19 pandemic may have based on the liter-
sured against the certification and labeling rules. Audits provide ature’s discussion of barriers to Global South operators. After out-
assurances to buyers and consumers that sustainability claims lining the data gathering process, the article discusses the variation
are credible; audits are essential for facilitating governing at a dis- in the audit policy changes and highlights five potential barriers for
tance in a globalized market (Loconto & Busch, 2010). In many operators from Global South countries. We conclude with limits
instances, audits include in-person or on-the-ground, physical vis- and implications of the current analysis.
its to the firms, farms, production sites, and organizations that
apply to be certified.
Thousands of these visits occur under the auspice of private reg- 2. Credibility of private regulatory governance amidst
ulatory programs in a given year, in the form of initial certification disruption
audits, annual surveillance audits, recertification audits (usually
every three to five years), or unannounced control audits. For Credibility is a key concern for private regulatory programs. Pri-
example, FLOCERT, the independent organization that conducts vate regulators aim to provide marketplace assurances that opera-
audits for Fairtrade International, carried out 2,760 audits in tors, certified against a program’s standards, can make
2017 and 3,001 audits in 2018 (FLOCERT, 2020a). The 26 member environmental and ethical claims. Examples include a fishery that
companies of the Together for Sustainability initiative were is not using harvesting techniques that harm aquatic ecosystems;
involved in 14,000 supplier evaluations in 2019 (Together for or a cattle farm that is allowing cows to pasture graze. The pro-
Sustainability, 2020). The Program for the Endorsement of Forest grams we examine regulate practices that can create environmen-
Certification (PEFC) has certified (through its accredited auditors) tal and social harms – practices that are invisible to the buyer or
individually or collectively 750,000 forest owners in 53 countries, user, even when they use the good or service. In the absence of
with 12,000 companies certified against the program’s chain-of- some mechanism to create trust (Shapiro, 1987), these credence
custody standards (PEFC, 2019, 2020b). Through group and indi- attributes (Darby & Karni, 1973) – like pasture grazing or benign
vidual assessments, these forest owners and supply chain compa- fish harvesting techniques – will be under produced (Akerlof,
nies must be assessed via an annual surveillance audit as well as 1970). Audits are one mechanism devised to foster the kind of trust
a full recertification audit after five years. Yet, the COVID-19 pan- needed in these situations. The credibility of private regulation is
demic has made in-person, field audits nigh impossible for the near partly defined by the efficacy of these audits, although many other
2
G. Auld and S. Renckens World Development 139 (2021) 105314

institutional, political, and sociological processes will also matter smaller producers cannot and hence reduce the certification costs
for how the legitimacy, credibility and authority of a private regu- per unit (Cashore, Auld, & Newsom, 2004; Ebeling & Yasué, 2009;
lator is viewed by outside audiences (Bernstein & Cashore, 2007; Ponte, 2008). Relative cost may further increase for operators in
Black, 2008; McDermott, 2012). the Global South since accredited auditors are not as widely avail-
Audits have become increasingly separated from standard set- able in Global South countries, while Global North governments at
ting. This separation happens to varying degrees (Loconto, 2017). times have offered financial assistance to their domestic operators
In most instances, a private regulatory program sets a standard, to be certified, which gives them a competitive advantage (Jacquet
often with expert and stakeholder input. Audit organizations then et al., 2010; Morris & Dunne, 2004; Pattberg, 2006; Renckens &
seek the opportunity to certify operators against this standard by Auld, 2019). Global South participation in private regulatory pro-
being accredited by the regulatory program or via a separate grams has also been hindered by the use of western science stan-
accreditation organization (e.g. Assurance Services International dards in developing sustainability rules and data requirements for
performs accreditation for programs like the Forest Stewardship audits (Ponte, 2008; Stratoudakis et al., 2016), the uneven and
Council (FSC) and the Global Sustainable Tourism Council (GSTC)). uncertain expected socio-economic impacts of certification on
Audit organizations sometimes hire inspectors on a one-time or local communities in the longer term (Cashore, Gale, Meidinger,
recurring basis, or they use their own employees, to perform the & Newsom, 2006; Grabs, 2020; Mohan, 2016; Naegele, 2020;
audit assessments. Stakeholders and outside experts are typically Neilson, 2008), and local resistance to what are perceived to be
engaged in the audit processes. In other instances, the private reg- Northern-dominated programs, both in terms of their stakeholder
ulator will control and oversee the audits, using an appointed engagement and substantive requirements (Hospes, 2014;
expert panel or committee. Like the auditors, the private regulator Schouten & Bitzer, 2015; Sun & van der Ven, 2020). Rather than
may hire inspectors that report directly to it or its appointed expert empower producers in the Global South, private governance pro-
panel or committee. Finally, external audits may be a voluntary grams are also viewed increasingly as mechanisms that reinforce
component of a program, which applicants may consider undertak- and strengthen the power of lead firms – particularly retailers
ing if they have reason to seek greater assurances that they are in and brand owners – in global value chains, allowing these firms
compliance with a program’s standard. to define the terms of sustainability according to their interests
Regardless of the actors doing the audits, all audits provide an (Levy, Reinecke, & Manning, 2016; Marques, 2019).
external evaluation of practices against some pre-determined stan- The global COVID-19 pandemic presents evident challenges for
dard to provide assurances in the market and to other evaluative in-person audits, which may exacerbate and come on top of these
audiences like environmental groups or local communities. Most existing barriers for operators in countries of the Global South. Due
private regulators include three types of audits. An initial audit to restrictions on travel and business activities for personal health
checks to ensure a new applicant to a program meets some thresh- and safety reasons, private regulators have had to consider adjust-
old of performance as measured against the standard. Once certi- ments to their auditing practices. Shifts to new types of audits,
fied, periodic surveillance audits check for non-conformances and such as remote or virtual audits, may partly compensate for some
to ensure corrective action requests are being addressed on agreed of these challenges. Yet, they may also create new requirements in
timelines. Recertification audits usually occur after five years. Vari- terms of data provisions, including risk assessments, and technolo-
ants on this three-part model exist. Carbon offset programs include gies to perform the audit. Allowing more time for the audit process
additional steps such as a preliminary requirement that project will likely be necessary. Delaying in-person audits until the pan-
developers engage a stakeholder consultation process before demic is over, or until audits can be safely performed, may impede
beginning the program that they are then required to submit to Southern operators more than others. These countries initially
the program for review (e.g. Gold Standard asks for this and has lagged behind Northern countries in terms of the spread of the
preliminary documents reviewed by SustainCERT, the program’s virus, which implies they may also be lagging behind in terms of
internal auditor). External audit organizations then play a role in when authorities deem it safe to allow business activities to return.
validating and verifying (in the language of offset programs) the More limited governmental capacities to effectively respond to the
design and performance of a carbon offset project. Product- virus—both in terms of health care provisions and financial assis-
focused standards usually add laboratory testing. tance to citizens and businesses—may create additional delays.
All of these audit modalities include in-person and remote With vaccines now available, the global distribution and vaccina-
forms of assessment, sometimes termed desk reviews or desk tion may also be uneven, which again may create delays that are
audits. In-person audits, however, are seen as central to the rigour more pronounced in some (poorer) countries. Thus, inequalities
of compliance checks and thus feature prominently, particularly in created by the response of private regulators to COVID-19 may
the initial certification and recertification processes. This is impor- (unintentionally) exacerbate existing barriers for producers in Glo-
tant given the standards’ focus on credence attributes. In-person bal South countries.
audits seek to obtain objective information – by observing an oper-
ator in situ – about the production of credence attributes to ensure
they can be credibly marketed through on-product claims. 3. Data collection

2.1. Impacts on the Global South We explore these issues building from our previous work which
identified 98 private regulators, derived from existing datasets and
Previous research highlights an inherent bias in private regula- listings as well as our own research (Abbott, Green, & Keohane,
tion, in that operators from Global South countries face additional 2016; Bulkeley et al., 2012; Fransen, Schalk, & Auld, 2016; Hale &
barriers to participate in private regulatory programs and enter the Roger, 2014; Hoffmann, 2011; Perez, Cohen, & Schreiber, 2019;
market for sustainably produced goods and services. The barriers van der Ven, 2015; Big Room Inc., 2017; International Trade
relate, among other things, to the fact that certification costs can Center, 2018; MSI Integrity, 2017; United Nations Climate
be high for operators as a result of the costs involved in adjusting Initiatives Platform, 2017). Private regulators are defined as inde-
practices to adhere to private programs’ standards and the require- pendent organizations that have a regulatory (or standard-
ment to have to pay for audits to verify compliance (Carter, Scott, & setting) function addressing sustainability issues; are private (i.e.,
Mahallati, 2018). Research has shown that larger and vertically not administered or created solely by state actors); and are
integrated firms can generate economies of scale in ways that transnational (i.e., operate in more than one country). Importantly,
3
G. Auld and S. Renckens World Development 139 (2021) 105314

this definition excludes programs that are operated or managed by on programs operating in sectors that are relevant for Global South
organizations that predominantly have other functions than rule- countries, we see that 74 percent of them announced changes: 73
making (e.g., an industry association that also has developed a percent of programs in agriculture and food; 86 percent of fisheries
standard-setting scheme). Ours is not an exhaustive list of private and aquaculture programs; 68 percent of forestry/wood products
regulators. However, the 98 in our dataset should give us a reason- programs; and 69 percent of metals/mining programs.
able picture of what these organizations are doing in response to
the COVID-19 pandemic. For each program, we have information 4.1. Audit policy scope
from previous work on their headquarters location, sector of work,
and certification procedures. We use these as correlates to identify Forty programs provided information on the scope of their audit
patterns in the timing and nature of responses to COVID-19. policy changes. These generally focused on the three features of
Our COVID-19 data collection occurred from April to November audits typical to private regulators – initial audits (22 mentions),
of 2020. We collected the url addresses for each program and surveillance audits (21 mentions), and recertification audits (25
searched these for references to COVID-19 and related terms. These mentions). In 15 cases, all three were noted, and the combinations
searches focused on identifying any public statement about of recertification, surveillance audits, and/or initial audits were
changes to the program’s audit policies. But we also collected infor- also frequent. RSPO, for example, mentioned all three types of
mation on other references to the pandemic. Furthermore, we audits. Very few programs mentioned just one of these forms of
coded the policy announcements in several ways, including audits, without mentioning any others. One such program is B
whether one was noted before the end of October 2020 (a feasibility Lab (which certifies companies for their overall environmental
cut-off for this rapid analysis) and how much information was and social performance) that only mentioned recertification;
made available and to whom. For programs that disclosed their pol- another is MPS (which certifies companies in the horticultural sec-
icy (51 instances out of 98), we coded the policies to report on when tor) that only mentioned surveillance audits.
they first came into force, how long they were to last (if an end date Several programs included issues beyond these three typical
was set), what the scope was, and what types of changes to audit audit processes. Two programs (SAI and Better Cotton Initiative)
practices were permitted and in what circumstances. made specific reference to provinces in China where the policy
would apply, in light of the early outbreaks of the coronavirus in
the regions. Other programs typically treated geography as one
4. Adjusting audits to account for COVID-19 condition along with others (see further discussion below) that
might affect the policy’s application. Other atypical scope consider-
A total of 51 private regulators (or 52 percent of our sample) ations dealt with the specific nature of a program’s processes –
announced changes to their audit policies before the end of Octo- such as verification and validation for carbon offset programs or
ber 2020 (Fig. 1). Consistent with the literature, transparency has lab testing for certain product standards. There were also explicit
been incomplete (Schleifer, Fiorini, & Auld, 2019). Forty-one of exclusions. For instance, the Marine Stewardship Council’s (MSC)
these policies were made fully public. The other 10 were made policy covered initial audits, surveillance audits, and recertification
available to key stakeholders, such as the audit organizations and audits, but it excluded objection procedures to certification deci-
the certificate holders. sions that are overseen by an external adjudicator (for discussion
The effective start dates of announced policy changes began in of this process, see Gulbrandsen & Auld, 2016; MSC, 2020).
January. Two programs (the FSC and Social Accountability Interna-
tional (SAI)) announced policies that entered into force on January 4.2. Audit modifications
30, 2020. This was just 17 days after the first COVID-19 case out-
side of China was announced (namely in Thailand on January Thirty-nine programs noted the types of modifications they
13). But the biggest growth period came in March. Six programs would permit. Postponements, extensions and remote audits were
had announced policy changes by the end of February; 34 the most frequent options: 31 programs offered postponements or
announced policies by the end of March. extensions and 29 programs offered remote audits. Twenty-four
Transparency was also partial on the key issue of the time per- programs offered both these options, with five offering just remote
iod a policy change would be in place: 51 programs provided a audits, and seven offering just postponements or extensions. Post-
clear start date, and only 20 noted a specific end date. Those that ponements and extensions are the simplest solution to the pan-
did not mention an end date usually referenced ongoing review demic disruption. The Alliance for Water Stewardship (AWS), for
of the situation and future announcements about when the policy instance, posted a note on their website on April 22, 2020 explain-
would sunset. A little over five months was the average duration of ing that all surveillance and recertification audits would receive a
the policies with clear end dates. The longest duration was around two-month extension; no information was provided on procedures
11 months, and the shortest was two and a half months. By the end for new applicants (Alliance for Water Stewardship, 2020). B Lab
of our data collection period (November 2020), six programs had took a similar approach, giving participants a six-month grace per-
extended their end dates given the continuation of the pandemic; iod for recertification (B Lab, 2020). The IFFO Global Standard for
one program (the Alliance for Water Stewardship) had added an Responsible Supply (IFFO RS, now MarinTrust) had more specific
end date when the program had updated its policy in June 2020. rules, combining remote audits and postponements or extensions:
Since some of the programs in our dataset are specific to geo- initial and recertification audits were eligible for an extension of
graphic areas outside of the Global South (14 in total), we excluded six months (or until restrictions are lifted), and surveillance audits
these for the remainder of the analysis. Of the remaining 84 pro- were permitted four months, after which a remote audit would be
grams, 47 (or 56 percent) announced audit policy changes. Of the required (MarinTrust, 2020).
four programs in our dataset that have headquarters in the Global Remote audits are a catchall. They encompass a wide range of
South, the Roundtable on Sustainable Palm Oil (RSPO) was the only practices, some of which are very poorly explained in the public
program to publicly announce a policy change.2 Yet, when we focus documents we reviewed. Green Seal, for instance, provided the fol-
lowing on their website: ‘‘Green Seal will conduct virtual audits
2
RSPO has its headquarters in Malaysia. The other programs are Fair Trade Tourism
instead of in-person audits where necessary. This will allow any
(FTT), with headquarters in South Africa; LIFE Certification, with headquarters in companies that have submitted for a new certification evaluation
Brazil; and Small Producers Symbol (SPP), which is based in Mexico. to achieve conditional Green Seal certification in a timely manner”
4
G. Auld and S. Renckens World Development 139 (2021) 105314

Fig. 1. Date of announced changes to audit policies. Legend: ASC = Aquaculture Stewardship Council; ASI = Aluminium Stewardship Initiative; AWS = Alliance for Water
Stewardship; BCI = Better Cotton Initiative; EITI = Extractive Industries Transparency Initiative; EP = Equator Principles; FLO = Fairtrade International; FoS = Friend of the Sea;
FSC = Forest Stewardship Council; GAA = Global Aquaculture Alliance; GAP = GlobalG.A.P.; GOTS = Global Organic Textile Standard; GS = Gold Standard; GSTC = Global
Sustainable Tourism Council; IFFO RS = IFFO Global Standard for Responsible Supply; ISCC = International Sustainability and Carbon Certification; ISSF = International Seafood
Sustainability Foundation; LEAF = Linking Environment and Farming; MSC = Marine Stewardship Council; PEFC = Program for the Endorsement of Forest Certification;
RA = Rainforest Alliance; RBA = Responsible Business Alliance; REC Std = International REC Standard Foundation; RJC = Responsible Jewellery Council; RSB = Roundtable on
Sustainable Biomaterials; RSPO = Roundtable on Sustainable Palm Oil; RTRS = Round Table on Responsible Soy; SAI = Social Accountability International; SBP = Sustainable
Biomass Program; SFI = Sustainable Forestry Initiative; SGPP = Sustainable Green Printing Partnership; TE = Textile Exchange; UEB = Union for Ethical Biotrade;
WHC = Wildlife Habitat Council; WRAP = Worldwide Responsible Accredited Production.

(Green Seal, 2020). Friend of the Sea noted that they will use the visions concerning security and data protection, the needed ICT
pandemic as an impetus to move to sustainable augmented reality infrastructure on the part of the applicant and the auditor, compe-
audits, which they opined ‘‘will become the future global audit pro- tencies for conducting remote audits, and knowledge of the risks
cedure. . . [allowing] the qualified auditor to carry [out] the onsite and limits of ICT-based information for the validity, effectiveness
inspection from a control panel commanding remote ‘eyes’ and and efficiency of audits. As another example, Fairtrade Interna-
recording a complete video of the audit, following strict inspection tional, and its certifier FLOCERT, had a helpful FAQ document that
procedures.” Blockchain technologies would also be used to ensure answered a range of questions about the application of remote
the integrity of the audit report and video recordings (Friend of the audits, including concerns about necessary technology and Inter-
Sea, 2020). In these cases, the specifics of the virtual, augmented net connections (FLOCERT, 2020c). In these cases, programs
reality, or remote audit were left under specified. appeared to have understood the implications of remote audits
Other programs took greater care to detail the nature of their and determined ways to prepare to address the potential limits
remote audits. These were not all made publicly available, how- and downsides of this audit technique.
ever. Some programs indicated that careful guidelines were being A much rarer type of modification to the audits was a change to
developed, and that these would be made available to the auditors the program’s substantive standards. Seven programs offered this
(GOTS, 2020). Other programs disclosed detailed explanations of form of accommodation. The Wildlife Habitat Council noted that
the nature and expectations around remote audits. Six programs during the pandemic applicants could submit incomplete informa-
– FSC, PEFC, Aluminum Stewardship Initiative, MarinTrust, and tion and their eligibility would be determined on the basis of par-
Aquaculture Stewardship Council (ASC) – that discussed remote tial data (Wildlife Habitat Council, 2020). Extractive Industries
audits made specific reference to the International Accreditation Transparency Initiative allowed similar flexibility on reporting
Forum’s (IAF) Mandatory Document for the Use of Information requirements (EITI, 2020), while Equator Principles noted flexibil-
and Communication Technology (ICT) for Auditing/Assessment ity on the environmental and social due diligence process based
Purposes (IAF, 2018). This document sets out a number of on a risk analysis (Equator Principles, 2020). Worldwide Responsi-
provisions – that are mandatory for IAF members – including pro- ble Accredited Production (WRAP) offered some flexibility on rules

5
G. Auld and S. Renckens World Development 139 (2021) 105314

about working hours, conditional on transparent reporting and and auditors are willing to accept modifications to existing audit
careful documentation (WRAP, 2020). For the International Sea- practices and the reporting requirements auditors must follow.
food Sustainability Foundation (ISSF), participating companies Conditions limit the application of these policies. In certain cases,
and vessels that were unable to provide audit-related evidence they explicitly target operators in the Global South. The ASC, as
due to COVID-19-related disruptions in record-keeping (such as we mentioned above, referenced a risk-tool for determining the
on forbidden transactions with vessels engaged in illegal, unre- countries eligible for remote audits for initial and recertification
ported and unregulated fishing, or those involved with shark fin- audits. The risk-tool – called the ASC Country Social Profile – builds
ning) would not be penalized with a non-conformance (ISSF, a country-level risk score using the World Governance Indicators,
2020). The Better Cotton Initiative allowed granting producers Trafficking in Person, Transparency International, and the Global
engaged in a reassessment ‘‘COVID-19 Compliance Exemptions” Slavery Index along with non-conformances identified on social
when a core indicator of the standard could not be complied with, indicators during ASC farm audits. Of the Global South countries
which would give producers additional time for implementing cor- that were explicitly mentioned by ASC, 16 were indicated as high
rective actions (Better Cotton Initiative, 2020). Textile Exchange, risk, seven as medium risk, and none as low risk, while all of the
finally, was requesting brands show flexibility when suppliers Global North countries that were mentioned were indicated as
were not able to show compliance with certain parts of the stan- low risk, except for three that were considered medium risk. The
dard due to COVID-19 disruptions (Textile Exchange, 2020). tool helped determine eligibility for modified audits. For instance,
Programs also detailed conditions under which the modified farms in high risk countries, according to this tool (e.g. Bangladesh,
auditing practices could be used and the kinds of reporting that Belize, China, Colombia, Ecuador, and others), would not face addi-
would be necessary. Roughly half of the programs with publicly tional barriers to using remote initial audits, which farms in low
available policy changes detailed conditions for when audit prac- and medium risk countries would not face (ASC, 2020a).3 Other
tices could be modified. Implicit and explicit references to risk programs were less explicit about the nature of the risk assessment,
analysis were apparent in these conditions. For instance, programs but the implied logic was that remote audits would present a risk to
advised auditors to consider past non-conformities and unresolved the credibility of audits in certain cases more than others. Auditors
corrective action requests, potential supply chain integrity issues, needed to document their assessment of these risks and justify their
and stakeholder complaints as factors that might limit the applica- decisions (PEFC, 2020a, 2020c).
tion of remote audits (FSC, 2020; Gold Standard, 2020). Others Certain policies contained implicit or unintentional barriers.
mentioned the need for risk assessments, but specified little of ASC, for instance, did not permit group certification to be con-
what this should involve (GOTS, 2020). Certain programs included ducted by remote audits. The group certification methodology
explicit risk-based tools, such as ASC that developed a country- was introduced in April 2019 with the explicit purpose of helping
level risk index to establish whether aquaculture farms would be small producers get access to the ASC. In a news release about the
eligible for remote audits (ASC, 2020a; see also, RSB, 2020). methodology, the Head of ASC Programme Assurance noted that:
Auditors were often empowered to determine the nature of the ‘‘We are delighted to have launched this in Vietnam, where there
responses on a case-by-case basis. Bonsucro, for instance, are so many smaller producers who can benefit from the opportu-
explained that desk audits and postponing would be options for nity to implement ASC’s requirements” (ASC, 2019). The ASC does
certificate holders with audits due between March and June stand out as having more Global South country farms involved in
2020, but that certificate holders would need to discuss these with the program (six of the top ten producing countries are from the
their audit organization that would then confer with Bonsucro Global South, with Chile being the largest ASC producer of all)
(Bonsucro, 2020). The Rainforest Alliance provided a template for (ASC, 2020b). Still, the restrictions on the group certification
auditors to fill out that details the kinds of exceptions they were methodology do implicitly work against the intention of expanding
seeking approval for (Rainforest Alliance, 2020a). Auditors were opportunities for the program among Global South producers,
also expected to report on the performance of audits during especially small-scale farmers.
COVID-19. Some were simple requirements, such as retaining a list A second barrier-creating feature of the audit policy changes is
of all the instances where the modified audit policy had been used the limited flexibility of private regulators on their substantive
that could be accessed by the private regulator (MSC, 2020). requirements. Recall that only seven programs noted they would
Others, for instance the Roundtable on Sustainable Biomaterials adjust their performance rules in light of the COVID-19 pandemic.
(RSB), spelled out lengthy reporting requirements for the applicant The most explicit of these came from WRAP that offered some flex-
and the auditor, including details on the scope of the audit, the ibility on rules about working hours and Bonsucro’s ‘‘COVID-19
kinds of documents to be provided, the systems the auditor would Compliance Exemptions”. The lack of flexibility is particularly
be able to access remotely, and a completed risk analysis (RSB, striking given the hardship being experienced by producers
2020). The frequency of reports was also sometimes noted; FSC, involved in these programs. Travel restrictions, border closures
for instance, required quarterly reports from auditors on the appli- and other measures have disrupted supply chains, creating finan-
cation on the policy (FSC, 2020). cial hardship for the participants in private regulatory programs
By late October 2020, 25 programs had published updated poli- that, in theory, are meant to provide market opportunities. The
cies. Several programs changed the scope and the types of modifi- cut flower market has suffered, and other export crops, such as
cations of their policies, for example by including surveillance tea and coffee, have faced similar challenges, leaving farmers and
audits in their policy scope, and by limiting postponements to producers, in particular smallholders, in potentially precarious sit-
audits and allowing more remote audits. Most of the updated poli- uations (Committee for the Coordination of Statistical Activities,
cies offered more details on how remote audits were to be exe- 2020; Fairtrade International, 2020b; Guido, Knudson, & Rhiney,
cuted, with several mentioning specifically that on-site audits 2020; Morton, 2020).
would be required once travel restrictions are lifted.

3
5. Consequences for inequalities in global markets There is some ambiguity about the extent to which additional barriers are placed
on farms in high risk countries given different potential readings of how restrictions
on remote audits for assessing social indicators (point 6.2.1. in the policy) are meant
A first feature of the changes that may exacerbate inequalities to condition the options for using remote initial audits (set out in table 1 of the
comes with the conditions placed on when the private regulators policy).

6
G. Auld and S. Renckens World Development 139 (2021) 105314

Programs do recognize the hardship that the pandemic has cre- have no access to auditors due to travel restrictions and other mea-
ated. The Rainforest Alliance, for instance, provided a list of almost- sures the auditors and assessors are facing due to the location of
daily updates on the impacts being experienced by farmers work- their operations or headquarters.
ing with the program (Rainforest Alliance, 2020b), and it offered an
opportunity to donate to support its participants. Other programs
have set up similar funds; for instance, Goodweave established 6. Conclusions
the COVID-19 Child and Worker Protection Fund to help the pro-
ducers it works with in Nepal, India, and Afghanistan Responses to COVID-19 have been fast moving. We have offered
(Goodweave, 2020). But there is still a sense that the programs an initial analysis of these rapid adjustments from one type of gov-
view their credibility and the need for certification as essential. ernance organization. We found relevant variation across the pri-
MPS (a horticultural certification program that includes a standard vate regulatory programs in terms of which programs announce
for cut flowers) notes the serious challenges and hardships facing audit policy changes and the types of changes they proposed.
the sector, but suggests that certification remains important and Transparency of the adjustments to audit policies is incomplete
will be demanded again when things return to normal (MPS, 2020). at best. Of those programs making their adjustments public, the
A third implication of the audit policy changes is the cost of the vast majority did so around the time or within a month after the
proposed new audit practices. Remote and virtual audits require World Health Organization declared a global pandemic on March
technologies to which operators may not have access. Even the 11, 2020. Most programs opted for postponing audits and/or intro-
availability of a stable and sufficiently fast Internet connection ducing remote and virtual audits. Very few, in contrast, allowed
for the transfer of documents cannot be taken for granted. If it is modifications or exemptions to their substantive standards.
assumed that operators have to carry the costs of acquiring the Our assessment of the implications of these changes for opera-
technologies—and several audit policies mention the availability tors in the Global South showed that they may exacerbate existing
of these technologies as a prerequisite for remote audits—this barriers to participation and can create new barriers, at least tem-
places an additional burden on poorer operators seeking (re)certi- porarily. The technologies necessary to engage in remote and vir-
fication. As mentioned, some programs, such as Fairtrade Interna- tual audits may impose additional costs on operators. Conditions
tional, are attentive to these additional costs. Possible remediation on when the new audit policies can take effect, including the avail-
can come from financial assistance that is made available, like ability of these technologies and acceptable levels of compliance
through the funds we noted above. Fairtrade International, for its risks, implicitly and in some cases explicitly target Global South
part, launched in early May a ‘‘Fairtrade Producer Relief Fund” operators. The limited flexibility on compliance with substantive
and a ‘‘Fairtrade Producer Resilience Fund,” which could be used, requirements of the private programs, and the focus on existing
among other things, to cover short term ‘‘business continuity rather than new program participants, may also disadvantage
costs” or longer term ‘‘technology-based capacity building” Southern operators. These barriers are additionally troubling given
(Fairtrade International, 2020a). Nonetheless, even this program producers in these countries face the direct challenges presented
did not see an alternative solution than postponing the audit if by the COVID-19 pandemic.
such technological hurdles could not be overcome (FLOCERT, Our analysis has several limits. We are unable to capture policy
2020b). and practice changes that programs did not announce on their
Fourth, and related, the audit policy changes tend to favor oper- websites. In time, we may be able to determine if this is the case,
ators that are already in the program, not those that might be try- by examining audits performed during the COVID-19 pandemic
ing to get access. We know that there are considerable barriers to to determine if practices shifted with or without formal policy
operators in the Global South, including the cost of certification. changes. Our analysis was also unable to trace the small adjust-
But the initial entry into a program is also highly consequential ments programs made to their policies as the pandemic unfolded.
for operators: it provides them access to the market for sustainable The documents we collected noted earlier versions of standards.
goods and services for which the private programs to a degree act We noted the earliest start date as the beginning of a policy adjust-
as gatekeepers. Not having the ability to acquire this access due to ment, but we were not able to trace all the modifications and
the COVID-19 pandemic increases the costs to operators in terms updates certain programs made. For instance, by the beginning of
of lost revenue and operating costs to maintain the likelihood of May, SAI had developed a sixth edition of its policy; on May
access later on when in-person audits are possible again. The 15th, GlobalG.A.P. announced a new remote audit policy that was
ASC, for instance, limits the application of remote and remote developed through extensive stakeholder engagement. It offered
assisted audits (which are audits that involve some in-person a more elaborate explanation of remote audits as an alternative
assistance). Applicants that are seeking to certify new sites (that to merely postponing audits for six months (GlobalG.A.P, 2020).
have not been operational for a full production cycle), are not eli- According to our data, 25 programs had announced revised policies
gible for remote audits. Instead, they need to wait to complete a in the late summer and early fall, which often extended the time-
full audit following the standard rules and procedures (ASC, frames of their original policy changes and clarified when remote
2020a). audits and on-site audits would be needed. Further work ought
Finally, another consideration is the policies of the audit organi- to track these changes carefully to determine if such adjustments
zations themselves. The COVID-19 outbreak has affected countries are improving or worsening the opportunities for producers in Glo-
in different ways and at different times. The operating location of bal South countries.
the private regulator and auditors thus is likely to also matter for Broader implications of the COVID-19 pandemic for private reg-
how accessible audits have been for operators in certain countries, ulatory governance emerge from our work and require future
particularly those in the Global South that did not experience attention. For a couple of months in the second quarter of 2020,
COVID-19 outbreaks as early as countries in the Global North. the global economy was brought to a virtual standstill, with signif-
Our previous work has identified that auditors and assessors are icant impacts on global trade. The economic downturn that follows
often not from producing countries in the Global South will put additional stress on global supply and demand at a time
(Renckens & Auld, 2019). At the same time, the modified audit poli- that public finances are stretched. How will these short- and
cies put in place by private regulators in light of COVID-19 often medium-term economic conditions impact private sustainability
exclude operators that are not in affected areas. Thus, there might governance? Will firms and consumers still be willing and able
be situations where operators cannot benefit from the policies, but to spend resources on certification? Will only certain programs
7
G. Auld and S. Renckens World Development 139 (2021) 105314

survive as funding sources change priorities or certification and work was presented to a virtual speaker series on International
licensing fees decline? Affairs in the Time of COVID-19 hosted by the University of Ottawa,
Our preliminary analysis suggests that capacity is highly varied Graduate School of Public and International Affairs on May 20,
across the programs. Indeed, there is a strong correlation between 2020. We thank Gina Bateson, Mike Beale, Jennifer Clapp, Janina
membership in the ISEAL Alliance (a member organization focused Grabs, Andrea Khan, Jochen Markard, and Yixian Sun for helpful
on advancing credible social and environmental certification and comments on our initial thinking and drafts. Financial support
labeling initiatives) and disclosure of an audit policy that accounts was provided by Carleton University’s Faculty of Public Affairs
for COVID-19; all but one of ISEAL’s relevant full members dis- Research Excellence Chair, the Connaught New Researcher Fund
closed their audit policy changes, while for non-ISEAL members of the University of Toronto Scarborough, and the Social Sciences
around 60% did not disclose these changes. Declining resources and Humanities Research Council of Canada (SSHRC IDG 507273
for and support of private regulation as an organizational form and SSHRC Insight Grant 435-2013-2072).
may lead to greater program attrition, as expected by theories of
organizational ecology (Abbott, Green, & Keohane, 2016). At the References
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