Fairtrade resolute on welcoming in big business

Posted by Nicole Eckersley on 9th March 2010

As Fairtrade Fortnight concludes in the UK, Ben Cooper takes a look at the way big business has moved into the Fairtrade sector and asks whether this has created reputational risks for the movement.With Fairtrade Fortnight in the UK drawing to a close, those who support the idea of a more ethical marketplace and a fairer deal for farmers will no doubt be pausing to pay tribute to those bastions of the Fairtrade sector – companies like Nestlé, Kraft Foods and Tesco.

Not the names you might have expected? Well, of course, the likes of Divine, Traidcraft and Café Direct are still there. But the big players have woken up to the possibilities Fairtrade offers. And given the volumes involved when brands like Cadbury’s Dairy Milk and Nestlé’s Kit Kat switch to Fairtrade, they instantly become giants of the sector.

The high-profile switches by Cadbury and Nestlé are by no means isolated examples. Other companies that have made similar moves include Unilever, with its Ben & Jerry’s brand, Starbucks and Tate & Lyle. UK supermarket chain Sainsbury’s now lays claim to being the world’s biggest Fairtrade retailer, while the other supermarket companies have all backed Fairtrade to varying degrees.

While it is true that the trend is stronger in the UK than elsewhere, the UK has tended to lead the way for other markets. There is every reason to expect this trend to strengthen in other countries as a natural consequence of Fairtrade growth. The enthusiastic backing of Fairtrade by major retail chains – the early corporate adopters in the UK – is also a factor in the progress in other European markets.

While not everybody in the movement is comfortable with the idea of welcoming in the likes of Nestlé, Harriet Lamb, chief executive of the Fairtrade Foundation in the UK, staunchly defends the strategy. “Mainstream brands such as Kit Kat bring the critical mass that is needed to tip the balance of trade in favour of disadvantaged cocoa farmers,” she said in December when the Kit Kat move was announced.

And while there is some concern within Fairtrade, sentiment in the wider NGO community runs stronger. The Fairtrade movement, while reserving the right to exclude companies which are deemed to be completely at odds with its ideals, has deliberately opted to make judgments on a product-by-product basis. Therefore, reservations that other NGOs may express about Nestlé regarding baby milk formula for instance are outweighed by the benefits of having Kit Kat as Fairtrade.

“Commentators are looking at the whole of Nestlé and all of its practices worldwide, whereas Fairtrade is a product mark,” Lamb says. “When you put that on a product you know it has come from disadvantaged farmers, that they’ve been paid a fair price. We’re not trying to make any other comments about the company as a whole.”

However, John Hilary, executive director of War on Want, takes issue with this policy. “We would say that there is a problem in handing the badge of honour of the Fairtrade mark to companies whose other operations really would preclude them from having that,” Hilary tells just-food.

In terms of what the involvement of multinationals means for suppliers it needs to be borne in mind that Fairtrade is a peculiar animal. The entry of mass retailers and conglomerates does not mean dilution of return as far as the primary supplier is concerned as it would in a normal commercial model. The payment of the Fairtrade minimum price and the investment premium are effectively ring-fenced and underpinned by a robust certification process. “The real reason the public can trust the Fairtrade mark is because we trust no-one,” says Lamb.

But activists suggest big companies are using their Fairtrade products for PR purposes and therefore can worry less about how they work with their core suppliers. Clearly, the Fairtrade products are functioning as ‘halos’ in the marketing sense and some vigilance in that regard may be warranted, but can companies really view their Fairtrade brands in complete isolation?

An opposing view would suggest that these are not just halos but also mirrors on to the companies’ core operations. Treating some suppliers more equitably means the potential for negative publicity from being accused of exploiting Fairtrade while ignoring issues elsewhere in their supply chains is actually greater. In other words, making a public commitment to Fairtrade raises the reputational stakes and could result in improvement across the board.

Indeed, savvy campaigners will be using companies’ Fairtrade pronouncements as a lever to encourage them to change their practices in general.

As Lamb puts it: “That’s what’s exciting for us: how can we engage with companies, not to do Fairtrade as a nice sideline but to take it right to the heart of their businesses?”

However, Hilary believes there is a weak case for this, suggesting that such action by companies tends to “feed through to their PR and not their behaviour”.

For the Fairtrade movement, the current eagerness of big companies to engage in the sector has one benefit which arguably overrides all the other issues. It provides scale.

How the Fairtrade sector can scale up has been one of the central challenges that has occupied strategists in the movement for some years. There are a number of challenges. Raising volumes is clearly key, along with developing new or fledgling Fairtrade sectors, possibly expanding into more manufactured goods and expanding the number of countries Fairtrade operates in. The involvement of big business could help in the pursuit of all these goals.

With a development objective in mind, Fairtrade strategists arguably worry less about how the involvement of big business is perceived and more about the direct benefits it can bring to impoverished farmers and suppliers.

Furthermore, remaining aloof – if it were a viable strategic option – would seem out of step at a time when organisations like Greenpeace are prepared to sit down with the corporations they have often railed against and discuss solutions. Today there is far more communication and cooperation between NGOs and companies than there was in preceding decades. One could say that Fairtrade is simply in tune with that zeitgeist.

Nevertheless, Hilary believes there are reputational risks for Fairtrade. “I think it is a credibility risk for the entire Fairtrade movement and I absolutely appreciate the [movement’s] desire to mainstream, and it’s had spectacular success,” he says. “It’s just whether or not that success comes at a price.”

Certainly as the market grows the continuing robustness of the certification process will be critical. As the whole operation scales up, the risk of occasional lapses may increase, and the fact that the likes of Nestlé and Tesco are now in the tent means that any lapses will be dealt with less understandingly than they might have been in the early days.

Once Fairtrade is more identified with Kit Kat and Kraft than with some of the more homespun pioneers of the movement, there may be no going back.