Thursday, March 31, 2011

The cost of doing things differently

Most people in the Fair Trade movement are aware of the difference between the Alternative Trading Organisations like Divine, Cafe Direct, Traidcraft and Liberation Nuts, and the other Fairtrade certified products e.g. supermarket own brand goods,* although having said this, increasing this awareness to the general public is a different matter! However, in the same way, there can also a big difference in the type of producer groups who are part of the Fair Trade system. Just as there are those at the retail end who do the minimum in order to get the badge and cash in on markets,  you can also find the same situation at the producer end. And just as Divine’s market is threatened by Cadbury’s Fairtrade chocolate or Cafe Direct’s by Tesco own brand Fairtrade coffee, so too are Fair Trade Alliance Kerala (and others like them) threatened by those certified producer companies who can offer products at a lower price, basically because they don’t have the high costs associated with doing business in a truly different way.
Despite what the Adam Smith Institute and others think, Fair Trade is part of the market driven competitive world and all must fight to stay in it. Fair Trade retailers must convince the public to buy their product above the other Fairtrade certified goods, and Fair Trade producers must convince the Fair Trade retailers to buy theirs! The producer groups and Fair Trade Organisations who do being a ‘Fair Trade producer group’ or being a ‘Fair Trade Organisation’ the best will necessarily be more expensive and both have challenges ahead about how to fight their corner in the ethical market place. The Fairtrade label’s greatest achievement- to communicate at a glance an ethical seal of approval of a product- is also the main obstacle for those who want to say “yes we are all this but also so much more!”

There has been talk for a long time in the Fair Trade movement about how to differentiate those organisations set up with the sole aim of fair trading, to those who have the main aim of creating wealth for shareholders (at the core these are very different motivations!). And we are getting to a stage where we need to have the same conversations about the producer groups, so that Fair Trade buyers who for so long have asked the public not to fall into the trap of joining the race to the bottom, don’t make the same mistake themselves.

* I’m just using supermarket own brand products as an example but it isn’t a rule that they do only  the minimum. Sainsbury’s, for example, were trailblazers in bringing the first Fairtrade certified coffee over from the war torn Democratic of Congo to market and the Co-operative have been key in growing the Fair Trade market.
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  1. The WFTO offer accreditation (through membership) for organisations working in all parts of fair trade supply networks. This is explicitly designed to identify 100% dedicated fair trade organisations. However, knowledge of such accreditation is very low in consumer markets and this presents an inherent limitation on the value of this approach. There is also no evidence that such governance actually produces higher standards - indeed, as far as I know there are no independent investigations into the operations of WFTO members.

    It does seem that this issue of differentiating commitment to fair trade will be best resolved through grass roots consumer initiatives - the power of which has been seen from the momentous uptake of the FLO mark.

  2. Its clear that there remains a vital need for conversations, but how do you converse with the entire world at each and every level?! ...hmmmmmmm ...

  3. I find it remarkable that Fair Trade retailers and wholesales remain absent from these types of discussions.

  4. The problem with the World Fair Trade Organisation (WFTO) is although if you are a member it means that you are 100% Fair Trade Organisation, it doesn't follow that if you are NOT a member that you aren't, for example neither Cafe Direct, Divine or Fair Trade Alliance Kerala are members.

    The Fairtrade certification mark clearly works and I haven't been party to the discussions but I imagine that the 100% Fairtrade companies would like a version of the Fairtrade mark which indicates their higher standards, rather than using a different logo.

  5. Sorry no idea how to use the 'comment as' system

    Equal Exchange is a 100% fair trade company and pioneered the first commercial sale of fair trade through independent retailers in the natural food trade in the 1980's, thereafter becoming one of Fairtrade’s first licensee and co-developing and selling the cafedirect brand to the Coop, Safeway and other supermarkets for the first time. More recently, we pioneered most of the emerging Fairtrade nut category by importing brazil nuts and cashew nuts (especially from FTAK…200 tonnes last year) over last three years for Liberation’s efforts in supermarkets.
    Our efforts go relatively unrecognised by London-centric efforts focused on supermarket growth which now has to cope with unbelievable competition from mainstream importers who can manage the risks of buying Fairtrade against non Fairtrade profits in their business.
    That's the route we chose when we developed a market based approach! It is important that campaigners and NGO’s continue to champion these 100%er’s efforts as the market grows.
    Even in our sector we now face competition from so-called ethical distributors who sell a range of products from Fairtrade certified through animal friendly to mainstream non Fairtrade commodities. In this situation and with this pressure on costs, it is difficult to justify the huge cost of maintaining additional certification costs whilst developing new supply chains , and when consumer recognition is so low. It is not just the direct cost but the indirect cost of salaries and administration which has to be paid for by sales. Even much larger companies with lower costs chose not to stay members of WFTO. Unless WFTO can find a way of reducing the cost of certification more and more northern 100%ers will leave as competition in other countries increases.
    The main competition to FLO (which does at least have some stakeholder influence in its governance) is from RainForest, used by competitors of major FLO licensees to buy low cost of entry into ethical markets.
    Many organic certifiers are also developing social certification fast. For instance the IMO 'Fair for Life' seems to have a natural home and shared values with small scale farmers. I see these as having beneficial advantages over the WFTO proposals. For instance traceability is already established using any organic certifier.
    The choices for the major certifiers is hard. Maintain standards and cede some of the growth to newer low cost certifiers or reduce standards to admit the larger licensees who have less interest in tough rules. 100%ers have a competitive role to keep the pressure on high standards whilst exposing short cuts taken in name of growth.

  6. Dear Kate, I have gone through your blog and have an understanding of your passion for Fairtrade in India. I do share the same passion and at present pursuing my MBA from Cambridge. I Have chosen Fairtrade and its contribution in India as my major subject and would seek your help to finish it. I have series of question which I wish to use as an interview in my study.

    Is it possible to mail you my questionnaire and seek help.

  7. Dear kate, I have seen your blog and got much information about fair trade in India..

    Arshiya international - free trade and warehousing zone