Companies, Brands, and Fair trade. Its just good business....isn't it?

 Slight diversion from television in this post but as fair trade fortnight just passed by I thought I would blog about the increase in fair trade and why we’re seeing the increase in brands supporting fair trade and the much loved fair trade logo. 


This post is a long one so bear with me.

Fairtrade is ‘‘a trading partnership, based on dialogue, transparency and respect, that seeks greater equality in international trade. It contributes to sustainable development by offering better trading conditions to, and securing the rights of, marginalized producers and workers – especially in the South.’’ (Fair trade website)

Definition-done! But what does this actually mean for businesses?


Not only do Fair trade companies have to pay a fair wage to cover the cost of production, they also have to pay a social PREMIUM to provide funding for social projects.
Now the cynic has to ask why are companies choosing to take part in this costly ethical activity if, by law, they don’t have to?

One argument is that the changing culture and increasing awareness of business practices means companies now want to avoid unethical practices as it can lead to a public back-lash. In today's world the consumer has more knowledge available to them which has led to a culture shift to a consumer which is now more concerned with values and morals. Due to increased media and the internet, consumers have easy access to information about global issues.  The media and the Internet regularly expose unethical business behaviour and it is clear that such information can harm a business's reputation and have a negative impact on sales. 

More and more companies now want to promote a fair, decent and principled company image which will hopefully appeal to their target market. Indeed there is a lot of evidence to suggest that ethical products sell very well and sales are continuing to grow. For example one year after Sainsbury's and Waitrose decided to only stock Fairtrade bananas, UK sales of Fairtrade bananas rose 130 per cent from 2006 to 2007 (The Independent 2008). On a global scale there was an estimated 47% increase in sales from 2007 to 2008 (Mintel).

This then leads to the other motivation as to why more and more companies are practising and promoting fair trade – profits!

Over the past ten years there has been a significant increase of Fair trade products, for example total UK Fairtrade certified products has risen from £32.9 million in 2000 to £712 million in 2008 (source: Fairtrade Foundation). The price of Fairtrade products is usually higher than those which are not sourced or produced through fairtrade.  This can be assumed that the premium price is to cover the additional cost given to fair trade farmers. Customers are effectively asked to pay a premium price to contribute to a social cause. However CQ researcher 2010 states "Fair trade growers generally receive only a small fraction of the extra margin consumers pay".

For example in 2001 Costa Coffee started to offer fair trade coffee, charging customers an extra 10p per cup.  However, it wasn’t until several years later that Financial Times writer Tim Harford investigated the additional charge. He calculated that the real additional cost to Costa was less than 1p per cup. Therefore Costa was using strategic pricing, knowing that some customers would be happy to pay an extra 10p for fair trade coffee, assuming the additional 10p was going to fair trade causes (CQ Researcher 2010)

In addition to profits, companies who support fair trade want consumers to know they’re supporting it by using the Fair trade logo, they want their brands to be associated with the fair trade values.

The Fairtrade logo carries with it widespread popularity and “a certain cachet”, that if a company can associate their brand with the image of the fair trade logo it will enhance their brand image of goodwill with consumers. 

However the Fairtrade logo is certified ONLY to PRODUCTS, not BRANDS, or COMPANIES. Therefore companies and retailers could attempt to enhance their social reputation by adopting a Fairtrade logo for only one product line. This may lead to the situation where consumers may believe a company to be a dedicated fair trade practitioner, but in reality only a small percentage of its product lines are actually bought under the terms of Fair Trade labelling. 

For example in recent years Nestle and Starbucks have begun to produce a small percentage of fair trade products. Both companies offer their fair-trade coffee lines as a new speciality coffee brand, rather than offering Fairtrade in their existing coffee lines.Therefore both companies have associated itself with the “good will” associations of the Fair trade, but have done so with minimal expenditure on a small percentage of new product lines. For example in 2005 when Nestle offered to buy 3000 bags of fair trade coffee a year, this amount only made up 0.02 percent of the company's purchases.


So it seems Fair trade is just good business. Companies are to various degrees, starting to reflect the values of its customers, and are using the FairTrade logo to associate its brands with these values, which are seeing healthy financial returns.

However, supporting fair trade does not guarantee success. Obviously the end product has to meet the customers expectations, and customers have to know about your product. Lets look at the case of fashion company People Tree.

Fashion company "People Tree" was set up in 1991. The founder, Safia Minney had worked within the fashion industry for many years and believed that she could be doing more to help developing countries out of poverty. 

The People Tree supports 50 Fair Trade producer groups, in 15 developing countries. People Tree teaches developing communities to hand weave, hand knit and hand embroidery and pay them a fair wage for their work. People Tree insists on production by hand as it creates more jobs within the community. This is an example of how People Tree go above and beyond the mandatory fair trade standards. In an interview Safia Minney stated that she views fashion as a tool to help developing countries escape from poverty (Fair trade in action: 2008).

People Tree are also registered with the Fairtrade labelling organisation since its launch in 1991, however the cost of certification can cost up to £3000. Safia delayed getting certified because she argued "for the cost of two to three thousand pounds for certification one might want to spend it instead covering the running costs for a school for 300 children in the developing area”. This shows  Safia weighing up the consequences of her actions of whether or not to pay for the Fairtrade logo which is recognised by 70 % of the population, with the cost of knowing the initial amount of money may be better spent elsewhere. However no good deed goes unpunished. In 2008 Safia stated that "People Tree has been running for six years and hasn't made a profit yet"(Fair trade in action: 2008). This isn't helped by the use of People Tress's hand production techniques,which means lead times from design to the shops is 18 months, compared to an average of 3 months for conventional fashion. So in the highly competitive fashion market, the challenges of Fair trade leave an uphill battle for People Tree. 

Keep the Faith

However in 2008 People Tree won the Cosmopolitan Best Ethical E-tailer Award. In 2009 they won The Observer Ethical Awards for Fashion. In 2009 the People Tree founder was honoured with an MBE. They are now stocked in over 50 stores in the UK, including; John lewis, and Peter Jones. They can also be found on Asos. In addition to this they have now got celebrity endorsement from Emma Watson.


In conclusion, due to increased media and the internet, consumers now have easy access to information about global issues. This has resulted in companies promoting a higher sense of social responsibility, and some use the fair trade model and logo to do so. The case of People Tree however shows why the majority of companies who use the fair trade model don't usually go further than the minimal to receive fair trade certification - its expensive.

Admittingly this particular post had very little to do with television.....deal with it.
In the words of Seth Mcfarlane 
" I don't follow the rules, I make my own rules, and sometimes I don't even follow them"

Fair trade facts

In 2008 reports showed that 72% of the UK population recognise the Fair trade logo (Fairtrade Foundation 2009).

Further findings showed understanding of the concept behind the logo has increased, with 64% of the population linking the logo to an improved deal for producers in poorer countries.

Despite the fair trade movement starting over 40 years ago, it was not until 1988 did the additional aspect of the Fairtrade logo appear on products

Since the introduction of Fairtrade certified cotton in 2005, annual sales have risen from a humble 200,000 to a marvellous 7.79 million in 2008

Consumers are spending more on Fairtrade with the average purchase of Fairtrade goods increasing by 5.5% this year.

Sales of Fairtrade are also increasing and  reached an estimated £700m in 2008, a 43% increase on the previous year. 


Starbucks fair trade coffee only comprised 3.7% of the company's purchases in 2009