Creating Fairer Trade

Creating Change Through Expanding Fair Trade
Creating Change Through Expanding Fair Trade

Creating Change Through Expanding Fair Trade

While fair trade has traditionally been associated with niche markets, the movement is growing, and small organisations in the Philippines and elsewhere are gradually breaking into the big league. BY JOANNA MAYHEW

Fair trade’s goal is clear and simple: offering an alternative, and just, approach to trade in order to improve the livelihoods of workers, ranging from small-scale farmers to factory-based sewers – and everyone that fits in between.

In recent years, the movement has become largely synonymous, at least in the mind of Western consumers, with knick-knacks, cotton and coffee. But the sector is diversifying, now boasting an array of value-added products, and has considerable business potential within Asia.

“Fair trade is not just about a label,” says Christine Gent, executive director for the World Fair Trade Organization (WFTO) Asia. “It’s about changing the way we do business.”

WFTO and Fairtrade International are two globally recognised leaders of the charge towards fairness. Fairtrade International is best known for its certification system designed for commodity products – and holds the well-known yellow and blue ying-yang logo – while WFTO adopts an organisational approach, measuring different points of a supply chain against various principles, such as fair payment and ensuring no child labour.

For small- and medium-scale producers, particularly those in poor countries, these networks can serve as a platform to lobby governments for fair returns, access new markets and gain product recognition via approved fair trade logos.

Fair trade’s goals may be socially oriented, but in business terms it is big and growing. In 2013, WFTO reported a turnover of $65 million in Asia alone. The same year, Fairtrade International cited sales of approximately $6.2 billion worldwide, representing a 15 percent increase between 2012 and 2013.

“We only work with businesses who sustain their activities through selling products,” says Gent, adding that WFTO partners with 400 businesses in 75 countries. “None of them are charities.”

Czarina Gragera, CCAP’s Fair Trade social enterprise development programme manager. “So we rely heavily on profits we incur.”

CCAP coordinates 25 community-based groups that employ about 800 workers, all based in the export sector. Its partnership with WFTO – since 1998 – has reaped huge benefits, as 90 percent of CCAP’s buyers belong to the network.

But CCAP’s recent partnerships with commercial buyers demonstrates a growing trend, namely that partnerships between mainstream businesses and fair trade organisations can be mutually beneficial. CCAP now supplies home décor to US-based retail stores. Breaking into the commercial sector has meant increased market exposure, giving its producers additional opportunities and guaranteed continuous year-round orders.

Other examples include Bangladesh-based fair trade organisation Prokritee, which sells hemp body mitts to The Body Shop, and Philippines- based BMPC, which ships a container bi-monthly to US-based pet shops.

These success stories often remain untold – promoting the idea that fair trade is just small business – simply because organisations do not want to reveal their secrets to the competition. “Those who are successful don’t tend to shout about it,” says Gent.

Other organisations have struggled to make similar deals due to a perception that fair trade products are overpriced. “There is a misnomer that if it’s fair trade, it’s expensive,” says Marla Palileo, CCAP’s entrepreneurial development programme manager. “So we were having a hard time breaking in, to sell the product.”

While fair trade items can be priced 30 percent higher than their commercial counterparts, this represents the true price of production, according to CCAP. These costs are often hidden or ignored, as a result of companies underpaying workers or cutting social or environmental corners. “People don’t know enough about supply chains,” says Gent. “When you buy a t-shirt for $10, how much of that is really going to the person who made it in the first place?”

But the movement’s efforts to raise buyer awareness are slowly beginning to pay off. In CCAP’s case, the organisation had to reduce its prices by 5 percent to break into the commercial side – sacrificing profit for volume – but buyers were still willing to pay 25 percent more for fair trade products.

Fair trade advocates argue that such partnerships make good business sense for commercial buyers. One reason is they can result in improved staff retention and commitment, argues Gent. “Staff feel far more motivated to give the best years of their life to a company when they realise they’re not just selling products, but they’re also reaching out to communities that benefit from fair trade,” she says.

Another potential plus is market differentiation, with fair trade offerings often being innovative and unique, as a result of coming from isolated communities.

But perhaps most significant of all, is permanency. Gent does not know of any of WTFO’s 400 members ever entering bankruptcy. “They’re incredibly reliable partners,” she says, adding this is because they are required to adhere to fair trade principles. “Working in countries where honesty and transparency isn’t the norm, to have partners that are delivering on that is actually, financially, a very safe investment.”

Fair trade is also a natural fit for global green movements and the increased uptake of corporate social responsibility programmes. And fair trade organisations now represent a variety of labour-intensive industries, whether agricultural or smallscale production, encompassing inter alia traditional weaving, crafts, bags, paper products and uniforms.

“Increasingly we need to have more complex fair trade products to reach markets, and to value add,” says Gent. “We don’t want people to stay at the bottom of the supply chain. If you only have one product that’s derived from one source, you’re less likely to be moving up that supply chain.”

In Asia, WFTO has 127 partners, 32 of which are in ASEAN, and is seeing steady growth both in sales and members, with a 16 percent increase last year. A recent analysis in Cambodia, Thailand and the Philippines found that 94 percent of registered fair trade organisations are micro, small and medium industries, and 6 percent are large. Though South Asia currently exceeds ASEAN in terms of fair trade, ASEAN holds much potential for growth, not just as a production house but as a market as well, according to Gent.

While European and North American markets are further advanced in embracing fair trade products, CCAP already supplies to companies in Hong Kong, Taiwan and Japan, with the home front next on its target list. “We plan to market domestically by next year,” says Gragera. Arguably fair trade could have even greater potential in ASEAN than in more developed markets, such as the EU and US, where the concept of the community has eroded.

“The wonderful thing about ASEAN is this huge level of community awareness, which is part of the culture,” says Gent. “Fair trade builds on that, [so] it’s got an advantage here that it doesn’t have in the West.”

Upcoming changes through the ASEAN Economic Community could also benefit the fair trade movement, particularly with open trade, as taxes are often prohibitively high for fair trade products, according to Gent.

But first, awareness must be improved across the region and abroad. As buyers adapt, the movement has the potential to spread. If a farmer is getting paid less than her neighbour, she may feel entitled to ask for more from her own buyer. Buyer by buyer, and consumer by consumer, change can spread, making fairness the trend.

“It has this ripple effect beyond the immediate beneficiaries,” says Gent. “And anything that’s pushing the goalpost higher is good.”