How Does Fair Trade go from inspiring examples to Transforming Capitalism?

January 31, 2019 14 By Duncan Green

Erinch Sahan, an exfamer who now heads the World Fair Trade Organization network, wants to pick your brains about how to transform capitalism

I think I’m sitting on a goldmine of examples that could help efforts to transform business and economies. I lead a global community of 330 real examples of alternative business models. These are the social enterprises that make-up the WFTO community, and I need advice on how they can galvanise efforts to achieve broader change.

Positive deviants like our Fair Trade Enterprises are great. They inspire and support each other whilst having direct impact on the people they’re built to benefit (about 1m workers, farmers and artisans in 70+ countries, north and south). But I joined this community primarily to broaden its impact. This means working with new actors, taking our examples to other movements/thought-leaders and supporting them to drive the economic changes that are so sorely needed.

And the moment seems ripe. Global debates have evolved, new economic thinking has emerged, new challenges (like inequality) have come to the fore and shareholder capitalism is now recognised as driving ever-growing inequality and ecological destruction (it has become supercharged in recent decades). Our WFTO community is well placed to show that alternatives are possible, and explicitly propose models that fundamentally shift the power structures and drivers within businesses themselves.

Alternatives like PODIE in Sri Lanka exemplify our 300+ members. They are structured to give their 2,000 spice farmers majority control on their board and ensure all profits are used to benefit these farmers. Other examples are Township Patterns in South Africa or Global Mamas in Ghana, businesses that exist solely to support artisan-owned producer groups, reinvesting profits for that purpose. Or Maquita in Ecuador, which runs several social businesses, investing all profits to benefit their community and ensures communities are represented on their board. In India, models like Creative Handicrafts and Last Forest demonstrate worker and farmer ownership can compete with profit hungry apparel factories and clothing outlets. Or Mahaguthi in Nepal, which protects its social mission by requiring all profits are reinvested to benefit its workers and artisans. The chief executives of such businesses aren’t pressured to drive down costs and squeeze their suppliers. On the contrary, the workers and farmers are the voices that dominate their board rooms, forcing management to run the business in their interests. You can hear their stories on our podcast series, FairTradio.

Imagine most firms and factories operated like these, giving power and priority to their workers, or that brands invested the value they capture to eliminate their environmental impacts and benefit their communities. Suddenly, we wouldn’t live in a world of cost-cutting and profiteering, but a world where businesses serve a social mission. This would change our economies from one based on greed and inequality to one built to benefit society.

Such a broader transformation needs deep changes in the underlying business ecosystem. This means a transformation in accounting rules, business schools, legislative frameworks (e.g. legal forms), tax codes, business regulations and trade agreements so they truly foster mission-led businesses (rather than profit maximising ones). Perhaps most critical is to reshape financial markets so they’re designed to finance mission-led businesses.

So back to my dilemma: I have a small(ish) team, focused on verifying and supporting our members (the Fair Trade Enterprises). We cannot lead the charge to remake the global business ecosystem, but we can be part of efforts to legitimise and inspire it. Think of us as a Proof of Concept. So who do we need to link up with to catalyse this debate? Should we find a star-economist or academics (e.g. should we chase Piketty or Sachs, trying to get them to use our example to show a new business world is possible) ? Or deepen our links with emerging movements demanding a new economic paradigm, or the social solidarity economy and social economy movements? All these have pros and cons, but we are at least in discussion with all these movements (I speak at their conferences, cross-promote on social media etc). There may be others that should be on our radar also.

The broader Fair Trade movement (beyond WFTO) is itself global and going strong. For instance, there are now over 2,000 Fair Trade towns powered by grassroots groups promoting Fair Trade. This movement focuses on promoting Fair Trade products and achieving practice change in mainstream businesses (including via regulation) – both critically important goals! But what the Fair Trade movement doesn’t focus on is promoting alternatives to shareholder capitalism, nor has it focused on shaping a business ecosystem that would foster such alternatives.

One obstacle is that people think “ah yes, I already know about and support Fair Trade – I drink the coffee/wolf down the chocolate,”. They’re often referring to the commodity certification system. That’s not who we (WFTO) are. We work with our friends who run the Fairtrade commodity system, who offer a solution to any business to buy raw materials like cocoa, sugar or cotton on Fairtrade terms. They work to get Fairtrade products onto the shelves of mainstream supermarkets.

Our approach is a bit different: we bring together businesses that are built in their entirety on benefiting their producers (including all their supply chains, their own premises and their very business DNA). This means the mission is reflected in their core structural features (like board, constitution, profit-distribution model) as well as in their behaviour and in their impacts (this is what our system verifies). We are essentially the social enterprise wing of the Fair Trade movement. But it’s often a challenge to convince people to think beyond commodities and Fairtrade products. This is why we have a communications challenge in getting the attention of movements/advocates/thought-leaders so they understand how we can help.

Our potential to support initiatives to transform economies is huge. But we need to decide where to focus our efforts. I think we have four viable options. Which should be our priority?

OPTIONS

  • Work with academics (research into our models will galvanise the interest of other movements)
  • Focus on the social and solidarity or social economy movements
  • Partner with INGOs to promote these business models in their campaigns and programmes
  • Present Fair Trade Enterprises as part of new economic paradigms

Advice please – and cast your vote (you’re allowed two each)!

Where should WFTO focus its efforts to transform the business environment for fair trade enterprises?

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