Some multinational companies dismiss ‘fair trade’ as a narrow concept, whereas their own approaches to ethical trade are more broadly based. But fair trade as a brand is becoming larger and cannot be ignored.
Sales of fair-trade products have grown exponentially since the late 1980s, when Mexican coffee farmers formed a co-operative in response to the collapse of global prices and declining demand. In 2004, sales of all products approved by the UK’s
Fairtrade Foundation totalled £140m, up 52% from a year earlier, as the range of goods available with the Fairtrade mark expanded. Yet fair-trade products are still confined to niche markets, as multinationals prefer to take their own route to
ethical trading.
A trading partnership
Fair trade is a trading partnership, based on dialogue, transparency and respect, that seeks a guarantee of greater equity in international trade. It contributes to sustainable development by offering better trading conditions to, and securing the rights of, marginalized producers and workers -especially in the South.
Standard-setting and certification is administered internationally by the Fairtrade Labelling Organisation (FLO) through 17 national bodies, including the UK’s Fairtrade Foundation. Depending on prevailing market conditions, fair trade will usually mean suppliers receive a guaranteed minimum price to cover the cost of raw materials and production plus some profit. But critics of fair trade argue that artificially inflating the price of commodities is counterproductive and essentially
unsustainable in the long run.
The free market approach
As Nestlé argues in its Faces of Coffee report, guaranteeing a minimum price draws farmers back into the market, leading to increased production and then further price falls. Although Nestlé recognises that fair trade is a good
way to raise consciousness about coffee issues, the company prefers an alternative ‘free market’ approach. Using buying stations in the countries it operates in, the scale of Nestlé’s direct procurement (110,000 tonnes of green coffee a year compared with less than 25,000 tonnes of fair trade coffee) means farmers can retain a greater portion of the price paid for their beans. Cadbury Schweppes also says it shares the same goals as the fair-trade movement, but it argues fair trade is not the only way to ensure farmers receive a decent return for their crops. Cadbury’s own approach involves helping cocoa farmers improve their standard of living by developing sustainable crops of quality beans that demand high prices and managing programmes that help farmers boost investment in social infrastructure. The company says communities receive greater total benefits than they would otherwise receive under a fair trade system, such as new water wells.
Branding
In today’s market, multinational companies cannot afford to completely ignore burgeoning consumer demand for fair-trade products. Cadbury recently acquired organic chocolate producer Green & Blacks, the maker of Maya Gold Chocolate – the first product to be awarded the Fairtrade mark in 1996 – and has agreed to maintain the Green & Black’s ethos. And in May, Nestlé was rumoured to be planning a fair trade coffee brand. Another alternative approach has seen Kraft produce its own ethical coffee, Kenco Sustainable, certified by the Rainforest Alliance. Yet despite rising commercial interest,
multinationals are unlikely to fully integrate fair trade into their trading operations, preferring instead to pursue their own ‘CSR route’.
As Mark Palmer, marketing director of Green & Blacks was recently quoted as saying: “Ethical trading will be a requisite. But there will be some blurring and confusion. In 10 years’ time there will be the super-ethical niche brands, and bigger brands that carry that spirit into the mainstream”.
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