At the Fairtrade Foundation, we are sometimes prone to talk more like a business than a charity. To launch Fairtrade Fortnight last week we announcedthat retail sales values for Fairtrade products rose again in the UK by 12% in 2011. Fairtrade sales are one proxy figure for value back to producers. From their sales, producers earn a ‘premium’ or extra cash. In 2011, the premium returned to farmers rose by over 10% to £20.5 million, according to estimates based on the volumes of UK product sales we audit. We are now working with over 700 businesses in the UK, so it’s not surprising that terms like “supply chain”, “sell-in” and “product category management” crop up as often as the language of sustainability, trade justice or farmer and workers’ rights.
Straddling the worlds of both business and charity, there are many similar ways we need to behave. But I would argue this doesn’t make charities business-like any more than it makes businesses charity-like. Businesses have to know their target market, whilst charities their fundraising or campaigning targets. Businesses must be accountable to their owners or shareholders and customers, charities to their founders, donors, the public and, in the case of Fairtrade, most of all to the producers. Having clear strategies, being efficient and cost effective, are features of being charity-like, not just business-like.
We may, however, evaluate overall performance differently. For charities, success is judged by the political, environmental or social change we are able to bring about, not the sales figures and profit margins which remain the bottom line for most businesses. For Fairtrade, the barometer of whether we are succeeding is the change in public attitudes and behaviour at this end of supply chains, change in business or trade policy and practice in the middle, and most importantly of all changes in producer and community lives at the other end. Our ‘dividend’ is the sense of pride that comes when you hear of the 30% increase in sugar productivity in Belize, the 82 houses now connected to electricity in a village in Malawi, the 90 cocoa farmers whose lives have been saved by hernia operations done at the clinic they built themselves in Cote d’Ivoire, or the cotton coop in Mali that now has 95% of its primary school aged children in school, against a national average of around 40%. How would you sell that in a boardroom?
Whilst many companies have adopted ‘triple bottom line’ targets, and now incorporate social and environmental targets as part of core business practice, it is still rare for social or environmental externalities to be costed into business plans, and virtually unheard of for them to be incorporated into calculations of share value, or the analysis of the ratings agencies so beloved of investors. Carbon reductions that deliver simultaneous cost savings are clearly a win-win in the boardroom. Fairtrade’s core business, demanding a greater share of the value chain back to the producer, or deliberately sourcing from extremely poor and fragile origins, or from small farmer collectives instead of larger industrial plantations, can be a tougher and riskier sell - unless not doing so also threatens the very viability or sustainability of future business.
For these reasons, we have recently started a piece of work to see where the social and economic needs of smallholder farmers can be bridged with needs of buyers and retailers and how the two can be met. Do Kipling’s words, ‘Oh, East is East, and West is West, and never the twain shall meet’ apply? Or will we find alignment between business and broader social development and equity objectives? Watch this space.