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Posts Tagged ‘trade’

Today I’m going to tackle Public Responsibility instead of Corporate Responsibility – the responsiblity of governments and government agencies within the broader sustainability and development debate. My focus is stakeholder engagement and materiality as seen happening in the discussions on Foreign Aid Reform in the US.

I must applaud the US government for taking on some reform that is way late – foreign aid. I don’t know any group, including USAID, that’s happy with the US foreign aid policies and practices. So it was great to read that Foreign Aid Reform is being discussed right now. And I like those already at the table – Oxfam America (full disclosure, I worked for Oxfam GB and love them to bits no matter what issues I might have with them – they remain an incredible organization doing incredible work), Center for Global Development and InterAction to name but a few. Good start and good company – but a few groups are missing and reform won’t work if we don’t have them around the table.

First let me just say that the idea of aid reform should be seen in the broader context of economic and social development. I read somewhere that Tony Blair asked for a shift from aid to trade. Nice to see you catching up Mister Blair… Trade not aid has been a slogan of African civil society for almost 10 years now. Others have caught on as well and nice to see world leaders starting to see the light. The US and EU actually agreeing on a trade regime that will benefit trade with the developing world is another question all together. Doha anyone?

Anyway, this trade not aid slogan and Blair now catching up highlights a major group absent from direct consultation on aid reform – African civil society. I know that the NGOs present will argue that they represent those interests and that they have a few of those participants in the meetings. That is not good enough though. I worked in Africa and represented African NGOs at numerous meetings in my life and the one thing I’ve learned is that we African civil society organizations tend not to tackle the big guys around the table too much or too often as it would be seen as biting the hand that feeds us. Really, we should speak out more often in public and not do it in the safety of our “homes” only.

We need these African (and other) civil society organizations to participate in these reform discussions to ensure that reform will reflect the actually reality on the ground and not what has been told through a game of “telephone”. In the case of Africa; if we truly believe that the “solution” to Africa lies in Africa then they need to be at the table and be the majority voice on all things Africa – especially on aid reform. The western NGOs do not represent Africans (or others). They have not been elected or appointed. They have their own expertise and should be at the table but not to represent the civil society (or society in general) of those countries who will bear the brunt of any reform.

Furthermore, a big challenge of aid is the role of the middle man or, as I call them, the NGO wholesaler – the western NGO. They do great work and have strong voices but they do act as a barrier to aid in many cases. Too often aid is given to the western NGO who then give the money to their “partners” on the ground. Good old Reagan and trickle down economics – but this time on a global scale. The NGOs from developing countries should be the lead voices in reform talks to make sure that more money goes straight to programs on the ground instead of going through too many middle men and wholesalers – heck, even developing country NGOs are middle men, just much closer to the ground. The first principle of reform should be to get the aid to those who need it quicker, more efficient and a larger slice of the pie.

Lastly, if we truly believe in trade not aid then we should have more business voices at the table. Again, Western businesses should be present but it should be led by businesses from developing countries. They know what is needed to operate and be succesful in their countries and regions. Remember, it is about helping them be better equiped to trade with the West and not (just) to trade Western made goods in developing countries. For trade to replace aid we should get more developing country made goods sold in developing and developed countries. Bring those who will drive this to the table. They will tell you what stops them from trading with the West (higher tariffs on manufactured goods, non-tarrif barriers, infrastructure etc.)

This is a golden opportunity for aid to work and for trade to drive development. Let’s not forget to add the voices of those who are meant to benefit from these changes. It’s the number one principle of stakeholder engagement – ensuring that every important stakeholder is sitting at the table. We can talk about Corporate Responsibility but we should also remember that Public Responsibility should have the same materiality assessment we use for companies when it determining their CSR and sustainability work – what is material to your key stakeholders. So how can you discuss what is material to your stakeholders when you don’t have those stakeholders directly participating in those discussions? Look at your whole value chain and include all your key stakeholders from the ground up and right through your wholesalers. If not, then it just won’t be responsible or material. And it won’t be reform.

(Another issue I did not get into due to relevancy to this specific discussion and limited space: Another benefit of having the developing country stakeholders directly participating – identifying the changes they have to make to ensure your reform works. They will have to work within the new reforms and part of the reforms should be about how to ensure that the intended changes are implemented on the ground. It could require changes in how they work, new efficiencies on their side or new rules – whatever it is, their participation will ensure that they also change and reform to bring to life the changes we need in aid. Do not be surprised if even the best reform fails when your key stakeholders are not at the table.)

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Most people know that I am not the biggest Fairtrade fan. Heck, just read My beef with Fairtrade for more of my rantings on Fairtrade. But Brendan May (good guy also in the sustainability field – his Twitter feed is bmay) made me think a bit more about Fairtrade. He had a series of Twitter arguments to tackle Fairtrade and some of the claims they make. Brendan made a few good arguments that highlighted some of the flaws of Fairtrade compared to other certification system and the seriously flawed misunderstood claims most consumers have around Fairtrade. Especially some of the marketing claims made by Fairtrade and the assumption by Fairtrade and their supporters that they are the best out there to help farmers. Show some hard facts please Fairtrade and less unsubstantiated claims. A premium is no reflection on the “wealth” of farmers – we need a bit more on agreeing on measurements and then do a comparative study.

Okay, so Fairtrade make claims they shouldn’t and push their luck on a few things such as helping the poorest farmers (no they don’t, only those organized in cooperatives), strong environmental claims (there are others out there with much better environmental criteria) etc. But there is one area where I believe Fairtrade is fundamentally different from anyone else out there. They might have forgotten this basic principle over the years – especially since they have grown so big and started operating more like a traditional business. The foundation of Fairtrade is one that is very different from any of the other certification schemes out there and one that asks a much more fundamental question about the world trade system than any other system… And it comes down to the premium that Fairtrade pays.

Why pay this premium? Why did they start off with this idea of a premium in the first place? The figure is so artificial so why have it in there in the first place? To answer this you have to start with the world trade system and everything that is wrong with it in the agricultural commodities field.

Activists like Oxfam (a Fairtrade founder and supporter) have long argued that the global trade system is one of imbalance. The rich nations in Europe and the US have all the freedom in the world to pretty much do what they want. More importantly, they subsidize their agricultural sector to the hilt. Corn, sugar – you name it and they subsidize it. Don’t argue that subsidies are gone – that is a technicality as these countries spend billions of dollars each year on agricultural support where semantics rule. Call it research support but anything over a few billion dollars ending up in the pockets of large commercial farmers are subsidies dressed as research.

But back when the Fairtrade idea started the subsidies were even more blatant. The EU and US were happy to call it subsidies back then. So here you have a global agricultural commodity trade system where the rich countries support their farmers with subsidies because they can’t compete with farmers in emerging markets and developing countries – of course hidden as food security, national security, national interests, etc. The poorer countries? How did they fare on the subsidies front? Not so well…

Not only could they not support their farmers but the WTO rules (that they stupidly agreed to) stipulated that they couldn’t give their farmers subsidies in any case. Great trade system isn’t it? The rich can get richer thanks to the subsidies and the poor will remain poor – or get poorer.

This was where Oxfam and mates stepped in and created Fairtrade. Not to just give farmers a premium for their products but to address the fundamental injustice in the world trade system. The premium they pay and guarantee is a non-government subsidy. It helps farmers from poorer countries to compete against richer nations through a subsidy system that completely passes the WTO system by and is paid for by the people who also pay for the subsidies in their own system – richer nations. Pure genius.

The Fairtrade system has major flaws and I am not always that impressed with the work they do or the claims they make. But do not misunderstand their claims and the true benefit of this system. You need a system that undermines the global trade system if the trade system is so unjust as it is. Fairtrade is needed as long as the world trade system, in especially agricultural commodities, benefit the rich nations over the poor nations. There is no level playing field and the free market is a myth when it comes to argiculture – and Fairtrade plays a key role in trying to level the playing field a bit more. Not perfect but fundamental in trying to address something that is outside of the control of farmers in poorer markets.

No other system can claim the same. They might be better in helping farmers become more efficient or improve their environmental impact but none of the other systems actually addresses the much bigger challenge of a fundamentally flawed and imbalanced world trade regime. We need Fairtrade in a world where free trade does not exist in any other place but empty words and the worthless pages of world trade agreements.

So what about companies that argue against Fairtrade? Maybe they should look a little bit closer to their own supply chain. Do you sell food stuff? Anywhere in the US or EU? Do you by any agricultural products in any of these countries in the US or EU? I can guarantee you that your company benefit from subsidies being handed out to farmers in corn if you sell one single soda or chocolate in the US. Sip your subsidized wine Europe. Spread those subsidized jam and dairy products on those subsidized breads. Slap another subsidies steak on the bbq. The list goes on and on. Almost every single food and beverage company in the US and EU indirectly benefit from some form of subsidy through their subsidized supply chain. Why are they not arguing against subsidies of these farmers a little harder? It sounds like double standards to me that companies are against Fairtrade because of the subsidies but willing to take the subsidized products in Europe and the US and sell that to us. Another slice of double standards anyone?

I think Fairtrade was a genius idea. I just wish they would go back to their roots and remember why they were started in the first place – to take on a fundamentally flawed world trade regime. No other system can claim the same.

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Fairtrade has the perfect brand name – it tells people that this brand is about being fair and implies that anything else is unfair. And Fairtrade is a great certification system. Yes, I know, they don’t like to be called a certification system. But they are. And an excellent one. Maybe even the best global certification system dealing with poverty. I can’t think of a single other certification system that tries to deal with poverty more effectively than Fairtrade. And they have, by far, the most recognizeable logo amongst ethical certification systems.

But, unfortunately, that doesn’t mean much in a world of such low standards. Bloody hell, everyone raves about ISO 14001 and all that ‘guarantees’ is that you do have an environmental management system. Mmm, not what your environmental impact is or whether it is good or bad. I like Fairtrade and always buy their brands when I can (affordability and availability rules apply), but I think they can do so much better.

I have 5 issues. Five issues they should focus on to truly make Fairtrade fair. Just 5 little things that really annoy me beyond what is good for me.

Firstly, Fairtrade focuses almost exclusively on small farmers who are organized in cooperatives and associations. Unfortunately, this excludes small framers who are not organized in this way. Most small farmers are not organized in this way – at least not where I come from – Africa. And the problem is that the poorest of the poor farmers are not organized in cooperatives. So, Fairtrade actually doesn’t work with the poorest of the poor – more like the “middle class” of the poor. To really affect change for the poorest of the poor, Fairtrade does not have a choice but to include ALL farmers in their system. Including those not organized in cooperatives. I know that it makes it more expensive, but it also makes it more fair.

Secondly, Fairtrade really needs to jack up on their environmental criteria. They have always had a half hearted attempt at sustainability. But what it came down to was poverty – but not a systematic way of addressing this. Only paying the price and not looking into making it better for the farmer in a sustainable way. Fairtrade needs to strengthen on the environmental side of sustainability – but also strengthen the labor rights aspect. This will ensure that Fairtrade is truly fair for everyone involved – farmer, environment, worker, Oxfam and consumer. I know that they have strengtened these areas, but there are huge gaps that still needs to be filled. They do work with the farmers to make them more sustainable, but they lag behind say a Rainforest Alliance when it comes to this.

Thirdly, Fairtrade should be a bit more clear about what the farmer actually gets paid and stop false advertising. They don’t need to do this as they are already better than almost all other systems. No need to lie or hide the truth – it will only come back to bite you. Really, the farmer does NOT get $1.25 per pound of coffee. Not even close. It varies from cooperative to cooperative – and what the cooperative decides the farmer should get. In some cases the farmer will receive as little as 70 cents/pound. The rest is distributed to other parts of the cooperative. Nothing wrong with that. But don’t try to spin it to make it sound as if the farmer receives $1.25/pound. They don’t – and never have.

Fourthly, if you really want more companies to take up Fairtrade then say so, be consistent and ensure your business model can handle it. Not everyone within Fairtrade agrees that large businesses should become part of Fairtrade. But don’t tell them your system is the best if you don’t want them to join. A classic example was when Oxfam asked Nestle (and others) to start buying Fairtrade. And when Nestle agreed? Well, certain Fairtrade bodies refused to sell to Nestle. Lesson? Be careful what you ask for, you might get it.

Finally, stop charging farmers such a ridiculous amount of money to qualify for certification. In many cases the yearly fee is way more than what the average income in the poorest of the poor countries – and well over $1 a day. The financial commitment that cooperatives must make to become Fairtrade suppliers is ridiculous. Not everyone believes that suppliers should carry the burden of compliance or certification – neither Starbucks or Nestle charges their suppliers – and they shouldn’t, and neither should you. And Oxfam and others generally ask for the company to pay in any case for any certification – just ask Nike or Levi’s – so way is Fairtrade different? All Fairtrade suppliers pay to become certified. The financial commitment by producers to be certified can vary from over $5,000.00 dollars for initial certification – and that does not guarantee certification, only assessment. Annual fees are over $500, and then another few cents per pound certified as well. I wonder how much the farmer actually gets in the end of the day? I know they benefit from Fairtrade, but they could benefit more if they didn’t have to pay Fairtrade for certification.

Another extra one thrown in. Remember that it is only the commodity that is certified Fairtrade. The coffee bean. Not the making, grinding, roasting, container, wages in manufacturing or anything else that is certified. Only the raw material – the coffee bean. Same with cotton. Not the manufacturing – only the cotton. One can make a general assumption that buyers of the Fairtrade commodity will also be good employers and manufacturers, but these parts are not certified – only implied and assumed.

Okay, I have one more problem. Not every country has a Fairtrade organization. Even when a Fairtrade organization is present, a purveyor of Fairtrade goods will have to negotiate with each Fairtrade organization in each country to be able to sell in that specific country alone. There are 19 national Fairtrade organizations – covering mostly Europe and North America. If someone wants to sell in each country – they have to negotiate with 19 different organizations to enable them to sell in each of those countries. And no guarentee that they will allow you to sell in each country – just ask Nestle. Yes for the UK, no for Italy. Furthermore, what if you want to sell in every part of the world – and in most cases there isn’t any Fairtrade presence at all. This makes it extremely problematic to sell a Fairtrade certified product in countries where there are no Fairtrade offices to negotiate with. Supporting Fairtrade would be much easier if there was a single co-ordinating body through which each buyer, or any other large multinational for that matter, could drive all its Fairtrade needs. Hum, something like a cooperative…

But the aim was not to slam Fairtrade. I worked with them and in support of them for many years. It is not a perfect system. And I don’t expect it to be perfect. But imagine if we get it to push on a bit and work at 80% of potential – not 50% of potential. Now that would be closer to being fair to all those who need it most – the farmer in Africa and elsewhere. Come on Fairtrade, try to be a bit more fair.

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