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Fair Trade : Market-Driven Ethical Consumption Fair Trade Market-Driven Ethical Consumption Alex Nicholls & Charlotte Opal eBook covers_pj orange.indd 86 21/4/08 15:34:02 Nicholls Prelims.qxd 5/9/2005 12:21 PM Page i FAIR TRADE Nicholls Prelims.qxd 5/9/2005 12:21 PM Page ii Nicholls Prelims.qxd 5/9/2005 12:21 PM Page iii FAIR TRADE MARKET-DRIVEN ETHICAL CONSUMPTION Alex Nicholls and Charlotte Opal SAGE Publications London ●●Thousand Oaks New Delhi Nicholls Prelims.qxd 5/9/2005 12:21 PM Page iv © Alex Nicholls and Charlotte Opal, 2005 Chapter 5 © Whitni Thomas, 2005 First published 2004 Apart from any fair dealing for the purposes of research or private study, or criticism or review, as permitted under the Copyright, Designs and Patents Act, 1988, this publication may be reproduced, stored or transmitted in any form, or by any means, only with the prior permission in writing of the publishers, or in the case of reprographic reproduction, in accordance with the terms of licences issued by the Copyright Licensing Agency. Enquiries concerning reproduction outside those terms should be sent to the publishers. SAGE Publications Ltd 1 Oliver’s Yard 55 City Road London EC1Y 1SP SAGE Publications Inc. 2455 Teller Road Thousand Oaks, California 91320 SAGE Publications India Pvt Ltd B-42, Panchsheel Enclave Post Box 4109 New Delhi 110 017 British Library Cataloguing in Publication data A catalogue record for this book is available from the British Library ISBN 1 4129 0104 9 ISBN 1 4129 0105 7 (pbk) Library of Congress Control Number: 20041012345 Typeset by C&M Digitals (P) Ltd., Chennai, India Printed in Great Britain by The Cromwell Press Ltd,Trowbridge,Wiltshire Printed on paper from sustainable resources Nicholls Prelims.qxd 5/9/2005 12:21 PM Page v Let us spread the fragrance of fairness across all aspects of life. Professor Shyam Sharma, TARA projects (Hanoi, 2004) Nicholls Prelims.qxd 5/9/2005 12:21 PM Page vi Nicholls Prelims.qxd 5/9/2005 12:21 PM Page vii Contents About the Authors viii Acknowledgements ix Abbreviations x Part One: The Rise of Fair Trade 1 Introduction 3 Chapter 1 Fair Trade:The Story So Far 16 Chapter 2 The Economics of Fair Trade 32 Chapter 3 Supply Chain Ethics 55 Part Two: Fair Trade Operations 77 Chapter 4 Fair Trade Industry Structures and Business Strategies 79 Chapter 5 Financing Fair Trade 105 Chapter 6 Fair Trade Certification 127 Chapter 7 The Marketing of Fair Trade 151 Part Three: The Impact of Fair Trade 179 Chapter 8 The Fair Trade Market 181 Chapter 9 Measuring Impact 201 Chapter 10 Fair Trade Futures 229 References 256 Index 271 Nicholls Prelims.qxd 5/9/2005 12:21 PM Page viii About the Authors Dr Alex Nicholls, PhD (King’s College, London) and MBA (Saïd Business School, University of Oxford), is a university lecturer in Social Entrepreneurship at the Skoll Centre for Social Entrepreneurship within the Saïd Business School, University of Oxford. He has worked extensively on Fair Trade as a writer and researcher for the last five years and has published articles and spoken at international conferences whilst con- tinuing to teach and research on the topic. Charlotte Opal, M.Phil and MBA (both as a Rhodes Scholar at Oxford University), is the New Products Manager at TransFair USA, the Fair Trade certification and marketing agency in the USA. She has worked in Zambia, Swaziland, Mexico, South Africa, and Belize and at the World Bank headquarters in Washington, DC. Both authors have carried out Fair Trade consultancy work for commercial partners and the United Nations Development Programme. In 2000, the authors were jointly awarded first prize in The Guardian/Association of Business Schools’Award (Business and Society category) for their project work on new product development with Cafédirect. Whitni Thomas, MSc (London School of Economics) is Head of the Access to Finance Initiative at NEF (the New Economics Foundation). Her work at NEF includes research and consultancy around improving access to finance for financially excluded individuals and for socially driven businesses. She is also an associate of Twin Trading Ltd, a leading Fair Trade organization based in the UK. She has worked in Mexico on international development projects, and spent six years as an investment banker for JP Morgan in New York and London. Nicholls Prelims.qxd 5/9/2005 12:21 PM Page ix Acknowledgements There are so many people to offer our thanks to who have materially helped us in the writing and production of this book that space does not allow us to acknowledge them all here.A good number are,or have become,close friends.All are worthy of our sincere appre- ciation.The brave cohort of interviewees who gave of their time in helping us to research this book have played a huge role in giving this work relevance and deserve a special men- tion: Hamish Renton; Diana Gayle; Sarah Hoole; Bruce Crowther; Ian Bretman; Alistaire Menzies; Carol Wills; Steve Sellers; Kim Easson; Luuk Zonneveld; Paul Rice; Joe Osman; Pauline Tiffen;Rob Everts; Sophi Tranchell;Jeroen Kroezen; José Luis Zárate; Ben Huyghe; and Terry Hudgton. Furthermore, many of our colleagues have also been invaluable in providing com- ments and thoughts on this book while it was in progress and we are greatly indebted to them: Professor David Waller; Dr Andrew Alexander; Peter Cullen; Dr Doug Foster; Dr Steve New; Dr Jesse Rothstein; Dr Tim Jenkinson; Mark Magers; and Katie Feiock. The (certified) award for patience and support goes to our editor, Delia Alfonso. Alex Nicholls Particular thanks also go to my academic ‘patrons’ – Jeff Skoll and Professor Anthony Hopwood – without whose material support this book could never have been written. My personal gratitude goes to my mother Catherine Nicholls for repeated investments (emotional and financial) in my academic vocation and to Adele, Sam, and Harriet for their love and support above and beyond the call of duty. This book is dedicated to my father, Peter Nicholls. Charlotte Opal I would like to express my admiration for René Ausecha Chaux, Pedro Haslam, and the legions of others who risk life and limb to fight injustice.You are an inspiration and it is an honour to be ‘fighting the good fight’ with you. Many thanks also to Mark Magers, from TransFair USA, for allowing me to take brief breaks from said good fight to finish this book. It is dedicated to my grandparents, Chet and Zee Opal, in loving memory of my father, Chet Brian Opal. This book is a celebration of the extraordinary and inspiring work being done by Fair Trade campaigners, retailers, wholesalers, labelling initiatives, other support networks, and, above all, by heroic producers.We owe them our single biggest debt of gratitude. Nicholls Prelims.qxd 5/9/2005 12:21 PM Page x Abbreviations ATO Alternative Trading Organization EFTA European Fair Trade Association FLO Fairtrade Labelling Organizations International FTO Fair Trade Organization (registered by IFAT) IFAT International Federation of Alternative Trade MNC Multinational Corporation NEWS Network of European World Shops NGO Non-Governmental Organization NI National (Certification) Initiative SME Small or Medium-sized Enterprise US United States of America UK United Kingdom VC Venture Capital(ist) A NOTE ON CURRENCY CONVERSIONS This book includes figures in US dollars ($), Canadian dollars (CA$) UK pounds (£) and Euros.The exchange rate calculations used at the time of writing (October 2004) are as follows: Currency Conversation Rate €1 $1.23 €1 £0.69 $1 £0.56 £1 $1.79 CA$1 $0.79 CA$1 £0.44 Nicolles-Introduction.qxd 5/9/2005 12:23 PM Page 1 PART ONE The Rise of Fair Trade Nicolles-Introduction.qxd 5/9/2005 12:23 PM Page 2 Nicolles-Introduction.qxd 5/9/2005 12:23 PM Page 3 Introduction Fair Trade is … More Money to the World’s Poor I used to live in a thatch hut with a mud floor. Now I have two concrete houses. And I have been able to educate my children. Sophia is at university in Belmopan and Laurence is a teacher.They had to work in a shrimp farm when they were younger, but my children now only go to school.We don’t need them to work. Jeronimo Tush, Cocoa Grower, Belize (Sutcliffe, 2004: 20) A Success Story I am enormously pleased with the way things have gone in the past five years, because more and more organizations across the world have come forward and identified them- selves as being Fair Trade organizations … and I think that indicates the degree of inter- est that there is in this rather special kind of trade that deliberately sets out to make a difference to the lives of marginalized people. Carol Wills,The International Federation of Alternative Trade (Interview, 2004) A Rethinking of Global Trade In the end, what Fair Trade is about is working with marginalized producers – people on the edge of the international trading system. It’s bringing them in and building their sus- tainability, their understanding of selling and trading and allowing them to survive often in situations where they probably wouldn’t.What Fair Trade brings is a long-term rela- tionship and the ability to plan ahead. So it’s about empowerment and the growth of out- put and quality for the groups and to get to a point where they no longer need to engage with the Fair Trade relationship. Diana Gayle,The Fairtrade Foundation (2003) A Market Opportunity We wouldn’t be selling this stuff if there wasn’t something in it for us in the context of sales benefits, the halo of Fair Trade, and brand benefits.
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