How Sustainable Is Our Latte?

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How Sustainable Is Our Latte? The Jus Semper Global Alliance Living Wages North and South Cost of Investment in Responsible Labour Endowments How Sustainable is Our Latte? An Assessment of Trends and Standards in Fair-Trade From the Perspective of a New Truly Sustainable People and Planet-Centred Paradigm Álvaro J. de Regil The Jus Semper Global Alliance: Sustainability of Fair Trade The Jus Semper Global Alliance How Sustainable is Our Latte? An Assessment of Trends and Standards in Fair-Trade From the Perspective of a New Truly Sustainable People and Planet-Centred Paradigm Álvaro J. de Regil May 2007 © 2007. The Jus Semper Global Alliance Web portal: www.jussemper.org/ E-mail: [email protected] The Jus Semper Global Alliance: Sustainability of Fair Trade The Jus Semper Global Alliance: Sustainability of Fair Trade Table of Contents Table of Contents Introduction............................................................................................................. 9 Executive Summary................................................................................................. 13 I. Context. 13 II. Envisioning the new ethos: 13 III. Fair Trade in the new ethos 13 IV. Market assessment of Fair Trade Coffee – Identifying barricades in the current market ethos 14 V. Market assessment of Fair Trade Coffee – Identifying positive trends in the current market ethos 15 VI. Assessment of FLO system in the coffee trade: 15 VII. Corollary of the FLO’s Fair-Trade ethos 16 VIII. Challenging the system. Building a new fair trade ethos with a long-term vision 16 IX. The social responsibility of consumers 17 X. Recommendations 18 I. Context................................................................................................................ 21 From Social Darwinism to Envisioning a New Ethos – Fulfilling the Democratic and Sustainability Ideal................................................................................................................................................. 21 Democracy and Social Justice 21 The Meaning of Sustainable 22 True CSR 24 II. Envisioning Fair Trade in a New Ethos................................................................ 27 Sustainability with a Holistic Vision ..................................................................................................27 What is Fair Trade? 27 Sustainability, the Declared Mission 27 Fair Trade and True CSR – A Holistic Concept 27 III. Market Assessment of Fair-Trade Coffee............................................................ 33 Identifying Barricades in the Current Market Ethos.......................................................................... 33 How FT-Certified Coffee Works 33 Barricade: Starbucks – Prostituting the concept 35 Barricade: Starbucks and its Corporate Citizenship Misdeeds in Ethiopia 37 Barricade: The Big Boys Assault 39 Barricade: Structural Quagmire 43 Barricade: Pressures to water down the FLO ethos 44 Barricade: Corruption 45 IV. Market Assessment of Fair-Trade Coffee............................................................ 51 Identifying Positive Trends in the Current Market Ethos.................................................................... 51 A Comprehensive Holistic Approach – North America 51 A Comprehensive Holistic Approach – Europe 52 V. Market Assessment of the FLO System in the Coffee Trade................................. 57 How Much to Go Before True Sustainability?................................................................................... 57 The FLO Standards in the Coffee Trade 57 FLO Social Development – Standards for Small Producers 57 TC - I The Jus Semper Global Alliance: Sustainability of Fair Trade Table of Contents FLO Price-Setting Procedures for Small Producers 57 FLO Standards on Labour Conditions for Hired Labour 60 Development Potential and Capacity-Building Standard 60 VI. How Sustainable is Our Latte?.......................................................................... 65 Corollary of the FLO Ethos............................................................................................................... 65 How Sustainable is FLO’s Fairness? 65 A North-to-South Vision 65 Darwinian-Market Logic 65 Congruency with Mission 68 A Truly Sustainable Price Scheme 68 Large Plantation Coffee Producers and Global Corporations 70 VII. Challenging the System.................................................................................... 73 Building a New People and Planet-Centred Paradigm...................................................................... 73 Building a New Fair-Trade Ethos – Lifting the Bar of Fair Trade with a Long-Term Vision 73 Revamping democracy 73 Redefining key standard concepts 74 A people and planet trade system 79 VIII. The Social Responsibility of Consumers.......................................................... 83 Building a Parallel Market of Conscientious Consumers.................................................................... 83 The Fundamental Role of Consumers 83 Emergence of Consumer Sustainability Consciousness 84 Realistic Consumer Leverage 87 North’s Critical Mass 90 Sustainability and the Morals for Survival 90 A Parallel Truly Sustainable Market of Conscientious Consumers 91 One set of standards certifying actual producers 92 The conscientious consumer market 92 IX. Concluding Remarks and Recommendations..................................................... 97 Appendix................................................................................................................ 99 Bibliography: 101 Acronyms: 103 The Jus Semper Global Alliance: Sustainability of Fair Trade TC - 2 Table of Contents List of Graphs and Tables Graph 1. Green to retail coffee ratios in the U.S. 34 Table 1. How major Fair-Trade coffee players and code-setting organisations address the issue of a living wage 42 Table 2. Assessment of FLO’s social development 57 Table 3. Assessment of FLO’s price-setting-procedure 58 Graph 2. Equalisation of selected South’s small-producer household incomes with rural Nebraska, U.S., basic household living income of $31,080 59 Table 4. Assessment of FLO’s standards for hired labour 60 Graph 3. Sustainable FT coffee price required to produce basic living income for Ethiopian farmers with U.S. farmers as benchmark using 2004 PPPs 66 Table 5. Analysis of FT coffee price to make it sustainable for Ethiopian farmers using North’s standard as the dignified living-income benchmark 67 Graph 4. Producers’ share in value chain of retail price for roast and ground coffee 69 Table 6. Coffee roasters fear of fair trade 69 Table 7. Core principles of corporate redesign 74 Graph 5. Current FLO fair-trade price and long -term sustainable fair-trade price 77 Graph 6. Projected increase of FT coffee to achieve sustainability in thirty years 78 Table 8. Consumer values in younger echelons of society 85 Table 9. Consumers International position regarding CSR 87 Table 10. Cost of investment in responsible labour endowments versus cost of a consumer boycott 88 Table 11. Comparative analysis of a global corporation’s CSR investment versus refusal to invest 89 Table 12. Certification 92 TC - 3 The Jus Semper Global Alliance: Sustainability of Fair Trade Table of Contents The Jus Semper Global Alliance: Sustainability of Fair Trade TC - 4 Introduction Introduction As in the case of Corporate Social Responsibility (CSR), there are two distinct versions of Fair Trade (FT). In the past two decades both FT and the social responsibilities of business have received diverse interpretations that have been advanced by various players. On one side of the fence, the greed and hypocrisy of big corporations have prostituted both concepts. To no ones’ surprise, in the case of FT, the token advanced by the big corporations has become the most prevalent due to the sheer size of their business and their power to convey their message. Indeed, as I will expose in this paper, the sole motive of big players, such as Starbucks, to participate in FT is not to improve the lives of people. It is anchored instead on their commitment to increase shareholder value by increasing their intangible assets: the enhancement of the perceived image of a “good corporate citizen” through token gestures, which presumably will translate into greater market share and consumer loyalty. In reality, as with the broader concept of CSR, these are nothing more than attempts to dodge criticism and control the activity to their mercantilist advantage, which destroys the authentic origin and purpose of FT. On the other side of the fence, there are other businesses, usually much smaller, that believe that it is possible through FT to make a profit and also bring meaningful positive changes to the livelihoods of many producers. This is definitely a step in the right direction. Indeed, regardless of how much hoopla big players try to give to their token Fair Trade in pursuit of good old shareholderism, FT is only truthful to its meaning when it is comprehensive –as some genuine coffee fair traders argue– and each stakeholder deems it to be sustainable. Yet, even on this side of the fence, to achieve true sustainability, the bar has to be lifted significantly; not only to guarantee an existence just above the poverty line, but to guarantee equitable terms of trade that provide a dignified life to all stakeholders in the South in line with that enjoyed by equivalent stakeholders in the North. With the current market-driven structures governing societies worldwide, for the small landholders and labourers of the
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