Its time for Fairtrade 2.0
This is taken from a lively fair trade discussion with some of my fair trade Twitter friends: @angryafrican @Kon_Ioannidis @otherdiscovery @gentlemandad @fairtradelu @rhyminsimon
Here are some things that I believe.
Business will always act in its own self interest – profit driven. Therefore the onus is on the consumer to dictate what is in business’ best interest through the purchases that they make.
In order for consumers to do the right thing (make ethical choices when they make their purchases) millions of pounds have to be spent educating and informing. Part of this is the establishment of a trusted mark/certification that consumers readily recognise as symbolising an ethical decision.
These realisations have given us Fairtrade 1.0. I think we all agree that Fairtrade works to some degree, but it is not enough. What we need is Fairtrade 2.0.
The problem with Fairtrade 1.0 is that the emphasis on being ‘fair’ is on the producer – from the legal structure (co-operative) to environmental standards, working conditions and wages of the workers. For the most part, all the buyer needs to do is to prepay a certain percentage for each order and then ensure that the price paid meets the minimum price required by the scheme. The amount of effort to comply with Fairtrade standards is disproportionate favouring, yet again, the buyer.
This has basically allowed companies like Starbucks and Cadburys to reap huge marketing benefits with very little associated costs and having absolutely no skin in the game. Whilst this is better than nothing, the affect that Starbucks and Cadburys have on producers is nothing like the effects derived from the relationships between Divine, CafeDirect, Traidcraft, etc and the producers with whom they work. To fully understand the depth of the true fair trade buyer/seller relationship, I recommend visiting the Twin Trading website (thanks for the tip Dr. Scott).
The problem is that the consumer doesn’t understand that not all Fairtrade is equal. Until they do, they will continue to buy Starbucks thinking that they’ve done their part to save the world.
Fairtrade 2.0 will occur when FLO requires buyers to comply with much higher ethical standards, like those that are already being practiced by the previously mentioned companies. With these new standards, FLO must introduce a new mark (e.g.Fairtrade Gold) that tells the consumer that purchasing this product does more for sustainability than simply purchasing a similar product that only carries that traditional Fairtrade mark.
I believe that people will make the distinction and will choose to do more with their purchasing power. This, in turn, will make it more profitable for businesses to do whatever it takes to get the gold level certification.
Real change only takes place when consumers demand it and it’s time that FLO started holding buyers to higher standards.
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Comments
Thanks Patrick, this was an interesting post to read, I agree with many of your points.
On a related note:
http://www.time.com/time/magazine/article/0,9171,1926007-1,00.html
This article begs the question of how much Fair Trade is and can do for Fair Trade coffee producers. As you rightly point out: is it right for FLO to be trying to bring in more large retailers like Starbucks, or should it be focussing on more than just a minimum price?
On the subject of the minimum price we, must remember, is only a minimum. If with the minimum price, after FLO certification costs, operating costs and taxes, producers only make half the minimum wage of their country, is it really time for the consumer to start congratulating themselves?
This is, of course, only one persepective, and I am of the opinion that Fair Trade is definitely a step in the right direction, but I think we need to remember that there is still plenty to be done.
-Rachel
Well said Patrick.
The most important difference between Starbucks and Cafedirect or Cadburys and Divine is who owns and controls them.
When Fairtrade Gold is introduced I hope that it will be a requirement for all businesses involved to have co-operative or ethical ownership and control structures.
Hi Patrick,
A good summary. I am interested in the idea of introducing a Gold Fairtrade standard to distinguish between decent companies like Traidcraft, Cafe Direct et al and companies in fair trade for the marketing value (companies like Starbucks, Cadburys etc.)
Would a gold standard not just confuse consumers?
My ideal solution would be making the current Fairtrade mark a gold standard and telling the companies that are participating for reasons of profit alone that they must comply with the new, tougher standards, or face losing their fair trade status.
Losing the Fairtrade mark would be a marketing disaster for the large companies so they would be put in a situation where they either do more to help the producers or risk losing a lot of hard-earned positive spin. I would guess (or maybe just hope) that most would choose to change their practices in line with the new requirements.
The question is, does the FLO have the power to introduce these measures and force the very powerful companies now participating in their scheme to adopt far tougher regulations?
You are absolutely right…of course buyers should be held to much higher ethical standards. There is too much misunderstanding and “fair trade washing” going on. It’s gets even weirder when the only third party fair trade certifier (is that a word??) in the US is going after all the big companies like Starbucks and Walmart…
I agree…I’m ready for Fair Trade 2.0!
Frans van der Hoff, best known for co-founding Max Havelaar (precursor to FLO International), gave an interview in September where he stated that the Fair Trade certification of companies like Nestle and Walmart is the biggest threat that Fair Trade faces. He also is promoting and taking steps towards implementing Fair Trade 2.0 with a new label.
Full interview here (fast forward to 10:35min):
http://coopcoffees.com/all_news/media/articles/Dispatches%20Fair%20Trade.mp3/view
(10 min long)
“Business will always act in its own self interest – profit driven.”
That’s a dangerous overgeneralisation that insults the large number of Fairtrade-supporting benefit-driven businesses, including many of the co-operatives producing and supporting Fairtrade goods. How can we avoid it and differentiate benefit-driven businesses from profit-driven ones? Would Domestic Fairtade labelling play a part in it?
MJ,
When you take into account that the ‘number of Fairtrade-supporting benefit-driven businesses, including many of the co-operatives producing and supporting Fairtrade goods’ is actually not large at all, but rather represents a fraction of the businesses participating in international trade, then I can’t see how my statement was an over generalisation.
Whilst I like doing business with ‘benefit driven businesses’ as you put it, Im not sure that businesses who are providing the same types of benefits simply because its profitable should be shunned. As long as we had a transparent way of evaluating which businesses were providing those benefits, then their motivation for doing so is irrelevant in my opinion.
I’m not sure I understand what you mean by a ‘domestic Fairtrade labelling organisation.’ Could you explain what you mean by that term?
Thanks for joining the discussion.
Patrick
Patrick,
What do I mean by “domestic Fairtrade”? As you may remember from the recently-discarded part of the FLO Fairtrade Mark (there used to be another square which read something like “Guarantees a better deal for Third World Producers”, Fairtrade doesn’t care about the conditions for workers based in the UK or other developed countries who distribute the goods. There has been some pressure for a domestic Fairtrade label which could be applied to that, or to locally-grown produce which hasn’t been processed by arguably sub-minimum-wage labour staring at conveyor belts in freezing factories.
Their motivation for doing so is relevant, because if they are not driven by the benefit, then they will revert to prioritising profit over society as soon as they think it will make them more money. We need to embed this change in the heart of businesses, not encourage privateer cuckoos into the ethical nest.
You write that only a fraction of international trade involved cooperatives. What are the figures?
Thanks, MJR
Hi MJ,
Thanks for the clarification on domestic Fairtrade. Personally, I don’t see this as a pressing concern. Labour laws are already in place and do a decent job of protecting workers’ rights in the developed world. Could conditions be improved? Sure. But in my opinion, the focus of Fairtrade should be focused on the developing world where there is not strong local advocacy for workers’ rights and trade justice.
Whether driven by benefit or by profit, it matters not if the results are the same. The way to ensure that businesses act ethically is for consumers to make their purchasing decisions based on whether the manufacturer/distributor is acting ethically. My entire Fairtrade 2.0 proposition is based on the premise that businesses will always act in their own self interest – profit driven. If we as consumers want them to act ethically, then we need to make it unprofitable not to do so.
My source for FT representing a small percentage of overall trade was taken from Wikipedia – http://en.wikipedia.org/wiki/Fair_trade.
Cheers,
Patrick
And my point is that your Fairtrade 2.0 proposition fails to be a general solution because there are businesses like cooperatives which are not driven by profit (in theory – in practice, sometimes that gets lost). Your idea will help adjust profit-driven businesses for a short while, but the long-term solution is to support businesses which embody and support cooperative values and principles including concern for the community. Shared Interest is a co-operative lending society, so we should be convinced about the benefits of cooperatives already, not only for FT producer countries, but in our own places.
OK, I was interested in how much FT trade involved co-ops on “our” side. Wikipedia is not a source itself and the page you link cites figures which were allegedly from FLO but are no longer available, and also WTO figures. I’m not sure I trust the WTO’s numbers.
HI Patrick,
You make many interesting and valid points about the significance of consumer influence and issues with the Fairtade 1.0. in particular the onus of trading ‘fairly’ resting mainly with producers in the fair trade supply chain!
I was also very interested to hear about your thinking around what Fairtrade 2.0 might look like and your ideas of a “Gold Standard”!
I was wondering whether these issues and this idea of the gold std has been voiced before? Has there been any discussion with FLO about such an idea or similar ideas? Do others within the fair trading community support such an idea? Has there been any discussion with producers or producer groups about how the onus for trading fairly can be more effectively balanced across the supply chain?
I suppose most importantly the real question is what plans or strategies do you and SharedInterest have in influencing FLO to address these issues and move towards Fairtrade 2.0.
Thanks for sharing!
Cheers
Scott (@otherdiscovery)