Role of Standards in Business
Senior 4 · Entrepreneurship
Role of Standards in Business
Lesson 2 of 4
25 min
A beekeepers' cooperative in Nyamagabe sells honey at the roadside in reused bottles. Buyers like the honey, but they bargain hard: some have been sold honey stretched with sugar syrup before, and they cannot tell by looking which jar is pure. A supermarket in Kigali offers to stock the cooperative's honey at a much better price, on one condition: every jar must carry the S-Mark, which means meeting the national honey standard and passing RSB's tests. (The cooperative and its prices are illustrative.)
The condition is real enough. According to RSB's page on certification by sector, read in October 2026, RSB had certified fourteen honey products made by twelve companies against RS EAS 36: 2020, Honey: Specification, and two of those companies were also certified for food safety under the Rwanda Standard for hazard analysis and critical control points (HACCP).
Think about it: why would a supermarket pay more for honey with a mark on the jar, when the honey inside may be exactly the same?
In 1970 the economist George Akerlof published "The Market for 'Lemons'", which helped win him the 2001 Nobel Memorial Prize in Economic Sciences. His point: when sellers know the quality of what they sell but buyers cannot see it, buyers will only pay an average price. Then the honest, high-quality sellers cannot cover their costs and leave, the average quality falls, buyers pay even less, and the market for good products can collapse. Standards and certification marks attack the problem at its root: they make hidden quality visible, so a buyer can pay more for the better product with confidence. Worked example 1 puts numbers on this.
Definition
Information asymmetry: a situation in which one side of a deal (usually the seller) knows more about the quality of a product than the other side.
Example: the beekeeper knows whether syrup was added; the buyer at the roadside does not.
Definition
Technical regulation: a document, made compulsory by law, that sets product characteristics or production methods, often by making a standard mandatory. A standard on its own is voluntary; a technical regulation must be obeyed. In Rwanda, regulators such as Rwanda FDA and RICA inspect businesses and enforce standards and technical regulations (RSB).
Example: a rule that a type of food may be sold only if it meets a named Rwanda Standard.
Definition
Harmonised standard: a standard adopted in the same form by several countries, so that one test result is accepted in all of them. East African Standards (EAS), adopted in Rwanda as "RS EAS …", are examples.
Example: RS EAS 36: 2020 for honey, which is an East African Standard adopted as a Rwanda Standard.
Definition
Technical barrier to trade: a difference in standards, regulations or testing between countries that makes it harder or costlier to sell abroad. The World Trade Organization's TBT Agreement aims to make sure that technical regulations, standards and conformity assessment are non-discriminatory and do not create unnecessary obstacles to trade.
Example: having to test the same batch again in every country you export to.
| Group | How standards help | Rwandan example (source) |
|---|---|---|
| Consumers | Protect health and safety; let buyers compare products and trust labels and marks; make sure the quantity paid for is the quantity received; give a clear basis for a complaint | RSB publishes a list of substances prohibited in cosmetic products (RSB website, 2026) |
| Industry and entrepreneurs | Open markets at home and abroad; cut costs through fewer rejects, standard parts and less repeated testing; build trust with buyers, lenders and tender boards | RSB says the S-Mark is registered at the EAC Secretariat and recognised in all EAC partner states, removes the need for repeated re-testing, and gives credibility in government contracts and tenders (RSB, product certification page, 2026) |
| Government | Gives a technical basis for regulations, inspections and public procurement; supports trade agreements; supports industrial policy such as Made in Rwanda | RSB is Rwanda's WTO/TBT National Enquiry Point, telling exporters and importers about other countries' standards and regulations (RSB, 2026) |
| Society | Protects the environment and workers; makes buildings and infrastructure safer; builds the trust that trade and development need | RSB links its product certification to SDG 1 (no poverty) and SDG 2 (zero hunger) (RSB, product certification page, 2026) |
Tip
Exam technique. When a question asks for the importance of standards "to" one group, write from that group's point of view and give a reason with each point: not just "safety", but "consumers are protected from harm because products must pass tests before they can carry the mark".
A balanced answer also weighs the costs. Meeting a standard costs money: better equipment, testing, record-keeping and training. A standard written for large factories can shut out small producers, and an out-of-date standard can hold back a better product. Countries can also misuse standards to keep out imports, which is why the WTO's TBT Agreement forbids unnecessary obstacles to trade and encourages countries to base their rules on international standards. Rwanda lists "prevention of unnecessary obstacles to trade" and "development dimension" (helping SMEs take part) among the principles RSB follows when it writes standards.
Rwanda has also acted on the cost problem. Under its Zamukana Ubuziranenge programme, RSB states that from January 2025 all its quality services (technical assistance, testing, calibration and certification) are free of charge for micro, small and medium enterprises, except those funded by NGOs or development partners, which pay a subsidised cost.
Worked example 1: a market for "lemons", in honey
Buyers know that half the honey on a market is pure, worth Frw 8,000 per kg to them, and half is diluted, worth Frw 4,000 per kg. They cannot tell the two apart. Pure honey costs Frw 6,500 per kg to produce; diluted honey costs Frw 3,000. (Illustrative figures.) (a) What will buyers pay? (b) What happens to pure-honey producers? (c) What changes with a trusted certification mark?
(a) A buyer who cannot tell quality pays the expected value:
(b) The pure-honey producer's margin is
so pure-honey producers lose money and leave. Buyers soon learn that only diluted honey is left, and the price falls to Frw 4,000.
(c) With a mark that buyers trust, pure honey is recognised and sells at its full value:
Interpretation: the mark does not change the honey; it changes what buyers know, and that keeps good producers in the market.
Worked example 2: is meeting the standard worth it for the cooperative?
To meet the honey standard, the cooperative spends Frw 2,400,000 once on a stainless-steel extractor, settling tanks and a clean packing room, and Frw 600,000 a year more on new jars, labels and record-keeping. As an MSME it pays nothing for RSB's testing and certification. The supermarket pays Frw 1,200 per kg more than the roadside price, for 3,000 kg a year. (Illustrative figures.) Find (a) the extra profit per year; (b) the payback period of the one-off spending.
(a)
(b)
Interpretation: the spending is recovered in under a year. The judgement could change if the supermarket bought much less: to cover just the yearly running cost the cooperative must sell at least kg a year. You will meet payback properly in the Financial Management unit.
Warning
Don't confuse a standard with a law. Most standards are voluntary; they become compulsory only when a technical regulation makes them so. And don't write "standards are only for big companies": the S-Mark, the Zamukana Ubuziranenge programme and the free MSME services exist precisely so that small firms can comply.
ISO (International Organization for Standardization), "Every day is a 'standards' journey!". A two-minute walk through one ordinary day. Count how many of the things shown depend on a standard, and sort each one into the four groups in the diagram above.
Practice
Key points
Sources and credits
Written by Ganzaa: the Nyamagabe case, the hub diagram, the table, the worked examples and the practice items. The cooperative and all prices are illustrative (2026). This lesson adapts CC BY-SA material and is shared under CC BY-SA 4.0.
Quick check
Buyers cannot tell pure honey from diluted honey, so they offer only an average price. What is the most likely result?
