The contribution of fair trade to social enterprise


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The contribution of fair trade to social enterprise

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