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The contribution of fair trade to social enterprise

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  • 1. The Contribution of Fair Trade to Social Enterprise
    Dr Alex Nicholls MBA
    University Lecturer in Social Entrepreneurship
    Fellow of Harris Manchester College
    Alex.Nicholls@sbs.ox.ac.uk
  • 2. Three Societal Fields
  • 3. Community
    Profit-Non Profit Economy
    Private-Public Economy
    Formal-Informal Economy
    Private Sector
    Public Sector
    Boundary Spanning
  • 4. The Big Idea, huh?
  • 5. Competitive Strategy Now
    Old thinking: competitive market analysis contextualized by PESTLE as risk factors
    New thinking: switch the background and the foreground
    Context = market, not simply a frame of reference
    Opportunities lie in better understanding embededness of markets
    Creating new institutional arrangements
  • 6. Economic Drivers
    • Globalization 3.0
    • 7. Age of Empire
    • 8. Age of Trade
    • 9. Age of Common Threats
    • 10. New market opportunities
    • 11. BoP
    • 12. FDI
    • 13. Changes in consumption patterns
    • 14. Supply chain transparency
    • 15. Rolling back of Commodity Fetishism
    • 16. Decoupling of enterprise and business
    • 17. New agenda for Civil Society/Social Movements
  • Sociological Drivers
    Technological innovation
    Global connectedness
    New localism
    Pro-Am culture
    Web 2.0
    Growth in scope and influence of citizen sector
    Challenges of affluence
    Growing inequalities
    Economy of Virtue
  • 18. Political Drivers
    1980s
    Neo-conservative monetarism
    Free market deregulation/privatisation
    Rolling back taxation and state provision
    ‘Enterprise culture’
    Individualism/entrepreneurial revolution
    1990s
    ‘Third Way’
    New Public Management
    Quasi-markets and welfare reform
    2000s
    New welfare consensus
    Bankruptcy of public finances
  • 19. Reinventing Government
    Increased privatisation of government and public services
    Search for better quality/efficiency/legitimacy
    Reduction in taxation
    Formats:
    Outsourcing contracts
    Voucher schemes
    PFIs/PPPs
  • 20. Sustainable Business
    Enhanced CSR
    Triple Bottom Line strategies
    Pressure to act as corporate ‘citizen’
    Role in solving social problems
    Role in social institution building
    BoP opportunities
  • 21. Social Sector Effectiveness
    Move towards more ‘efficient’ business models in social sector
    For-profit subsidiary ventures
    Cross sector partnerships/hybrids
    Drive towards ‘sustainability’
    Better responsiveness
  • 22. Social Entrepreneurship
    Public Sector
    Private Sector
    Private-Public Partnerships
    Reinventing Government 2.0
    Corporate Social Responsibility 2.0
    Social Entrepreneurship
    Social Enterprise Policy
    New Mutuality
    ‘Big Society’
    Community
  • 23. Nicholls and Cho (2006)
    Defining Features
    Sociality
    Context; process; outcomes
    Innovation
    Spectrum of change
    Blurring institutional logics
    Market orientation
    Accountability and performance focus
  • 24. Sociality
  • 25. Innovation
    Schumpeterian notion of change agents
    Creative destruction
    Resourcefulness: bricolage approach
    Innovation in institutional structures
    Reconfiguring (social) needs, wants, demands
  • 26. Innovation
    Incremental
    To address identified market failures more effectively
    Negative externalities
    Institutional voids
    Institutional
    To reconfigure existing market structures and patterns
    • Mobile telephony
    • 27. Carbon trading
    • 28. Fair Trade
    Disruptive
    To change the cognitive frames of reference around markets and issues
    Social movements
    Microfinance
  • 29. Market Orientation
    Performance focus
    Impact measurement
    Stakeholder accountability
    Competitive strategy
    Combines value creation and strong values
  • 30. Market Orientation
    Addressing Market Failures
    Private/Commercial Market Failure
    Free Rider/Capturing Full Economic Value
    Public/Government Market Failure
    Collectivity/Democracy
    Social Sector Market Failure
    Resource dependency
    Supplyside bias
  • 31. Spectrum of Social Entrepreneurship
    Institute For One World Health
    FB Heron Foundation
    Greenpeace
    Benetech
    Grameen Phone
    cafedirect
    Social Movements
    Corporate Hybrids
    Charities
    Social Business
    Social Change
    Social Enterprise
  • 32. A business with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or the community, rather than being driven by the need to maximise profit for shareholders and owners
    DTI (2002)
    Social Enterprise
  • 33. Key Characteristics
    Purpose is social/environmental
    Vehicle is business
    Generate earned income
    Not necessarily profitable
    Create blended value
    Social + financial (accounting)
    Agnostic about legal form
    Method not the means
    Strong market orientation
    Performance measurement
  • 34. Social Change
    Social movements
    Groups, organisations, networks
    Individuals?
    Acting in a coordinated way to change
    Policies
    Social structures
    Distribution of goods and services
  • 35. Social Movements
    They are a kind of grievance machine for creating and aggregating demands for change
    Davis et al (2005)
  • 36. Frame Analysis
    Social movements mobilise cognitive frames
    Positioning advocacy in an existing frame (eg ‘social justice’)
    Developing a new frame (‘environmentalism’)
    Diagnostic frames
    Identify and contextualise issue
    Prognostic frames
    Offer solutions
  • 37. http://www.youtube.com/watch?v=pumcD7bB2hU
  • 38. FT Defined
    Fair Trade is a trading partnership, based on dialogue, transparency and respect, that seeks greater equity in international trade. It contributes to sustainabledevelopment by offering better trading conditions to, and securing the rights of, marginalized producers and workers – especially in the south. Fair Trade Organizations, backed by consumers, are engaged actively in supporting producers, awareness raising and in campaigning for changes in the rules and practice of conventional international trade
    www.fairtrade.net/about_fairtrade.html
  • 39. Fair Trade Mission Discourses
  • 40. Fair Trade
    • An innovative development tool
    • 41. Market-driven ethical consumption
    • 42. A new supply chain model
    • 43. Reconnects producer and consumer
    • 44. Reconfigures value across the supply chain
    • 45. Two elements:
    • 46. Social enterprise action
    • 47. Development through trade
    • 48. Social change advocacy
    • 49. Trade justice
    • 50. A good story for retailers
  • Fair Trade Certification
    Two models:
    FLO (c 80% of market)
    Coffee, tea, cotton, bananas etc
    Cafedirect
    Day Chocolate Company
    WFTO (c 20% of the market)
    Textiles, woodwork, crafts etc
    People Tree
    Traidcraft
    SFTM pilots
  • 51. FT Labelling Organizations
    Rooted in social movement developing alternative economy beyond neo-liberal market hegemony
    Original institutional actors were alternative trading organizations (ATOs) (Tallontire 2000)
    1988: first FT label = Max Havelaar
    1997: FLO established
    Association of 24 organizations: 19 national labelling initiatives, three producer networks, and two associate members
    15 European countries, Canada, the USA, Japan, Australia, and New Zealand
  • 52. FLO Certification
    Sets standards
    Typically for commodity products
    Third party annual audit
    FLO-Cert
    Fee system
    Producers
    Labellers
    2002: international FT Certification mark launched
  • 53. FLO Certification: Coffee
    Floor price: US$1.25 per pound (Arabica, washed)
    Organic premium: US$20 cents per pound
    Fair Trade Premium: US$10 cents per pound
    Small farmers must be organized in organizations which they own and govern (co-ops)
    Democratic decision making is required
    Everybody has equal right to vote
    No use of agrochemicals
    Pre-export lines of credit up to 60 % of the purchase price
  • 54. FT Coffee Price: Arabica
  • 55. FT Coffee Price: Robusta
  • 56. FLO Place Certification
    • FT Towns
    • 57. Launched 2001, Garstang, Lancashire
    • 58. Now >800 in 17 countries
    • 59. FT places of worship(UK)
    • 60. >4,000 churches
    • 61. >40 synagogues
    • 62. FT universities and colleges (UK)
    • 63. Launched by Oxford Brookes 2003
    • 64. 120 (2010)
  • Fair Trade Towns
  • 65. Social Enterprise Action
    Fair price
    Locally determined
    Long-term contracts
    Advance payment
    Minimum labour standards
    No child labour
    Capacity building/technical assistance
    Additional premium (10% of contract)
    Community development
    Marketing assistance
  • 66. UK Certified FT Sales (£m)
  • 67. Social Enterprise Action
    2009: global certified sales £2.2bn (+47%)
    Total FT sales > £3bn
    Engages with >6 million producers in 60 countries
    >750 certified producer organizations
    >3000 certified products
    2009: > £200m extra income to FT producers
    Cafedirect >£16m
  • 68. Social Enterprise Action
    Mainstreaming
    Marks and Spencer cotton
    9.5m units (2009)
    Tate & Lyle switch own label retail sugar (2009)
    Benefits >6,000 farmers in Belize
    Fair Trade premiums c £2 million p.a.
    Cadbury switch all Dairy Milk chocolate bars (2010)
    X3 volume of FT cocoa from Ghana
    £45m investment
    Nestle Kitkat (2010)
  • 69.
  • 70. High Margin
    Typically premium products
    High value added for customer
    Strong brand statement
    Opportunities for range development
    Own label
    FT ‘value’ products
  • 71. High Value Customer
    Typically AB demographic
    Female
    30-45
    High degree of loyalty
    Capture younger ‘radical’ customers
  • 72. Strategic Value
    Fashionable
    ‘Ethical Halo’
    High levels of consumer trust
    Part of a broader brand strategy
    Organic products
    GM free etc
  • 73. WFTO Certification (FTO)
    Principles based
    Countries with no national labelling initiatives
    FT organizations in non-commodity markets
    Self-monitoring and self-reporting
    No fees
    Sustainable FT Management System (version 2)
  • 74. WFTO 10 Standards of FT
    Standard One:  Creating Opportunities for Economically Disadvantaged Producers 
    Standard Two: Transparency and Accountability 
    Standard Three: Trading Practices 
    Standard Four:  Payment of a Fair Price 
    Standard Five:  Child Labour and Forced Labour 
    Standard Six:  Non Discrimination, Gender Equity and Freedom of Association 
    Standard Seven:  Working Conditions 
    Standard Eight:  Capacity Building 
    Standard Nine:  Promotion of Fair Trade
    Standard Ten:  Environment 
  • 75. WFTO: ‘Fair Price’
    A fair price is one that has been mutually agreed by all through dialogue and participation, which provides fair pay to the producers and can also be sustained by the market. Where Fair Trade pricing structures exist, these are used as a minimum. Fair pay means provision of socially acceptable remuneration (in the local context)considered by producers themselves to be fair and which takes into account the principle of equal pay for equal work by women and men. Fair Trade marketing and importing organizations support capacity building as required to producers, to enable them to set a fair price
  • 76. FT As A Social Movement?
    Consumption as political choice
    Rise of ‘ethical consumption’
    Rewinding commodity fetishism
    ‘In and out of the market’
    ATOs and mainstreaming
    Boundary blurring: market-driven ethics
    Cognitive reframing of the relationship between supply-chain and value chain
    Creating new social capital
    FT Towns
  • 77. Fair Trade Mission Discourses
  • 78. Mainstreaming Or Fairwashing?
  • 79. Mainstreaming Or Capture?
  • 80. Summary
    • Fair Trade combines both social enterprise and social change logics
    • 81. Encapsulates whole social entrepreneurship spectrum
    • 82. But these are in tension
    • 83. Institutionalization may result in dilution, capture/co-option or mission drift
    • 84. What are the implications for social entrepreneurship when it moves from the margins to the mainstream?
  • Discussion
    53