Impact Assessment on Local Fair Trade Organisations in Central America, Africa and Asia
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Durham E-Theses Impact assessment on Local Fair Trade Organisations in Central America, Africa and Asia NUNN, ANDREW,DAVID,ROBERT How to cite: NUNN, ANDREW,DAVID,ROBERT (2015) Impact assessment on Local Fair Trade Organisations in Central America, Africa and Asia , Durham theses, Durham University. Available at Durham E-Theses Online: http://etheses.dur.ac.uk/11143/ Use policy The full-text may be used and/or reproduced, and given to third parties in any format or medium, without prior permission or charge, for personal research or study, educational, or not-for-prot purposes provided that: • a full bibliographic reference is made to the original source • a link is made to the metadata record in Durham E-Theses • the full-text is not changed in any way The full-text must not be sold in any format or medium without the formal permission of the copyright holders. Please consult the full Durham E-Theses policy for further details. Academic Support Oce, Durham University, University Oce, Old Elvet, Durham DH1 3HP e-mail: [email protected] Tel: +44 0191 334 6107 http://etheses.dur.ac.uk 2 Impact assessment on Local Fair Trade Organisations in Central America, Africa and Asia By Andrew Nunn Abstract Despite the rising popularity of Fair Trade, a relatively small amount of academic research has been done on its impact on Local Fair Trade Organisations (LFTOs). This paper uses a unique set of data from Shared Interest Society Ltd, the UK based ethical investment co-operative, of 25 LFTOs across Central America, Africa and Asia to make a quantitative assessment of the impact of Fair Trade on them. They have a pivotal role as the buyers from the producer households and the suppliers to both Fair Trade and commercial buying organisations. The key issues are about the ability of LFTOs to achieve an “efficient technology” and diversify into other markets as otherwise they are fragile and may not be in a position to serve the interests of the producer households in the medium to long term. If they are accessing other markets, it suggests they are reaching an efficient technology thereby reducing risk and becoming stronger organisations. The findings suggest, while not confirmed statistically, the possibility that LFTOs in the Coffee Market and All Product Markets might be reaching efficient technology, able to compete with conventional firms, thereby reducing their dependence on Fair Trade markets. It also suggests, while not confirmed statistically, the possibility that the Fair Trade Market is helping the growth of the Local Market through reaching efficient technology. This study leaves open some questions however one option to answer these is rerunning this analysis in 5 years’ time when more data is available or looking for other avenues where data may be available such as Root Capital or FLO. A combined methodology based on the type of analysis conducted here with more data, and a case study-based method with a smaller number of LFTOs, might be a possible way forward. 1 Impact assessment on Local Fair Trade Organisations in Central America, Africa and Asia Are LFTOs reaching an efficient technology enabling them to compete with conventional firms or remaining dependent on Fair Trade? By Andrew David Robert Nunn Masters by Research Durham Business School Durham University 2015 2 Table of Contents Chapter 1: Introduction ........................................................................................... 8 1.1 Overview of this study ................................................................................... 8 1.2 What is Fair Trade ? ....................................................................................... 9 1.3 History of Fair Trade .................................................................................... 11 Chapter 2: Dependency Theory ..............................................................................16 2.1 Dependency Theory and Fair Trade ...............................................................16 2.2. Fair Trade’s Response to Dependency Criticisms ..........................................18 Chapter 3: Mainstreaming ......................................................................................37 3.1 Increased Sales & Awareness ........................................................................38 3.2 Reputational Risk .........................................................................................40 3.3 Co-option Risk .............................................................................................42 3.4 Dilution Risk ................................................................................................43 3.5 Lower Fair Trade Standards ..........................................................................44 3.6 Global Value Chains .....................................................................................51 Chapter 4: Impact Analysis ....................................................................................53 4.1 Farmer and Household Analysis ....................................................................53 4.2 Value Chain Analysis ....................................................................................55 4.3 LFTOs Analysis ...........................................................................................57 Chapter 5: Methodology.........................................................................................59 5.1 Data Overview .............................................................................................59 5.2 Hypothesis ...................................................................................................62 5.3 Growth Rates Calculated Using Moving Averages .........................................62 5.4 Significance Testing .....................................................................................66 5.5 Coffee Supplementary Analysis ....................................................................67 Chapter 6 : Analysis ...............................................................................................70 6.1 Results .........................................................................................................70 6.2 Coffee Analysis ............................................................................................71 6.3 Food and Drink (Excluding Coffee) Analysis ................................................71 6.4 Non Food Analysis .......................................................................................71 6.5 All Products Analysis....................................................................................72 Chapter 7: Conclusion ............................................................................................74 7.1 Reaching Efficient Technology .....................................................................74 7.2 Remaining Dependent on Fair Trade .............................................................74 7.3 Fair Trade Market Growing Faster than the Non Fair Trade ............................75 7.4 Local Coffee Market Growing Faster than Fair Trade Market .........................76 7.5 Further Research Needed ..............................................................................76 7.6 Concluding Remarks ....................................................................................78 Appendix ...............................................................................................................80 Appendix 1: Calculation Tables ..........................................................................80 Bibliography ..........................................................................................................85 3 List of Illustrations Figure 1.1 Fair Trade Mark…………………………………………………………..13 Figure 1.2 WFTO Mark……………………………………………………………....14 Figure 1.3 Fair Trade Federation Logo………………………………………………14 Figure 2.1 Coffee Value Chain……………………………………………………….22 Figure 2.2 Wet and dry coffee processing flow chart………………………………...23 Figure 2.3 Robusta Coffee Market 1989 - 2013: Comparison of Fairtrade price and London LIFFE price………………………………………………………………….34 Table 5.1 Total Market Breakdown by Geography in 2007………………………….59 Table 5.2 Total Market Breakdown by Channel in 2007……...……………………...59 Table 5.3 LFTOs Classification………………………………………………………60 Table 5.4 Total Market Breakdown by Product in 2007……………………………..61 Figure 5.5 Growth Rate Calculation…………………………………………………63 Figure 5.6 Example Annual Review…………………………………………………64 Figure 5.7 Example Accounts………………………………………………………..65 Figure 5.8 Conversion rates………………………………………………………….65 Figure 5.9 Exporting Countries Total Production……………………………………67 Figure 5.10 ICO Indicator Prices………………………………………………..…...68 Figure 5.11 Coffee Deflators…………………………………………………………69 Table 6.1 Average Growth Rates Comparison by Channel………...….……………..70 Table 6.2 ANOVA Test Results by Market…………………………………………...70 4 List of Abbreviations 3YMA - 3 Year Moving Average ANOVA – Analysis of Variance APPBOSA - Asociación de Pequeños Productores de Banano Orgánico Samán y Anexos ATO - Alternative Trade Organisation CDS - Cercle Des Secheurs CECOCAFEN - Coffee Cooperatives Central Association in Northern Regions COCLA - Central de Cooperativas Agrarias Cafetaleras CSR - Corporate Social Responsibility DCTM - Direct Contact Trade Model EFTA- European Fair Trade Association EU - European Union FAO- Food and Agricultural Organisation of the United Nations FF – Fair Trade Foundation FLO - Fair Trade Labelling Organisation FTAO – Fair