Fair Trade Proving Anything But in $6B Market
By Simon Clark and Heather Walsh - Dec 22, 2011 7:01 PM ET
In a coffee-scented conference room near Lake Geneva, Ramon Esteve, a sixth-generation commodities trader, sits amid his father’s collection of centuries-old grinders and explains why he’s helping impoverished farmers grow more coffee, cotton and cocoa.
He’s embracing a goal, first laid out by fair-trade activists, so he can secure more sustainable supplies for his company and clients such as Nestle SA, the world’s largest food company, and Starbucks Corp. (SBUX), the biggest coffee-shop operator.
“For us it was survival,” said Esteve, 56, chairman of Pully, Switzerland-based Ecom Agroindustrial Corp., one of the largest coffee traders. “We’re not philanthropists. We’re businessmen.”
Esteve’s blunt acknowledgement shows how a mission-driven movement is transforming into a corporate push for productivity and profit. The cause begun in the 1980s by a Dutch priest and his activist-acolyte to help coffee farmers in the southern Mexican state of Oaxaca now includes some of the world’s biggest sellers of coffee (Nestle), lingerie (Limited Brands Inc.), chocolate (Kraft Foods (KFT) Inc.’s Cadbury unit) and bananas (Wal- Mart Stores Inc.), to name a few.
New research has quantified the benefits to the bottom line: In a study released earlier this year, researchers at the Massachusetts Institute of Technology, Harvard University and the London School of Economics found they could boost bulk coffee sales by 10 percent just by adding a fair-trade label on the packages. Sales of goods approved by Fairtrade International, the world’s largest certifier of such products, soared 27 percent in 2010 to more than $5.7 billion.
Going Mainstream
The push to increase sales of goods deemed to be free of child labor and other practices has divided the movement, raised questions of whether going mainstream will undermine the cooperative farmers it was created to help and, most of all, strained the integrity of the certification systems that vouch for the fair-trade stamps that allow companies to charge consumers more.
“The fair-trade movement has profoundly lost its way,” said Aidan McQuade, who has advised Cadbury on cocoa buying as director of London-based Anti-Slavery International, a human rights organization founded in 1839. “Its focus on volume -- unless they have got all their systems in place to address fundamental issues like ethical trade, child labor and child slavery -- is problematic.”
Policing Trouble
The strains are evident in the work of Fairtrade International, a Bonn-based network of 25 organizations that certifies more than 100 products from cotton to gold around the globe. The labeling group approved cotton in a Burkina Faso program that Bloomberg News recently found is using child labor. That program supplies fiber to Limited Brands’ Victoria’s Secret division, which said it is investigating the issue.
Fairtrade also signed off on soccer balls made in Pakistan by suppliers that violated fair-trade standards, according to an International Labor Rights Forum report last year by the Washington-based nonprofit. Over the years, Fairtrade’s auditors have found breaches of standards in the industry that led to the suspension of certification until the necessary corrective action was taken, said Barbara Crowther, spokeswoman for the Fairtrade Foundation, a nonprofit that licenses use of the Fairtrade brand in the U.K.
Fairtrade International took a year and a half to commission an independent review after BBC disclosures in March 2010 that children harvested Ghanaian cocoa certified by the group for suppliers to Cadbury and other companies, McQuade said.
Tackling Child Labor
“It has taken longer than we originally planned to get this underway,” Crowther said of the independent review, which she described as not just a response to the BBC report, but “an assessment of Fairtrade’s whole approach to tackling child labor in cocoa in the region.”
The problems illustrate the difficulty in broadening the reach of ethical commerce.
“To spread the benefits of fair trade we have to mainstream. It’s challenging, but we are determined to do that with integrity,” Crowther said. “We have done a huge amount to improve and strengthen and professionalize the certification system, and we are still working on it.”
The group’s struggles to police its own system come as the number of so-called ethical labels has mushroomed. The creation of 202 new ones in the past decade boosted the total tracked by Ecolabel Index to 424. That includes those created by companies, such as Starbucks’s own stamp for its producers, CAFE Practices.
The growth has thrown into question the very definition of fair trade and exposed rifts between the movement’s founders.
Much more:
http://www.bloomberg.com/news/2011-12-23/fair-trade-proving-anything-but-to-farmers-with-6-billion-sales-at-stake.html
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