“It’s a coloured graph: it’s even more real” Presented by Alastair M. Smith Performance and Legitimacy in Social Enterprises 3 rd -4 th March 2011 – HEC.

“It’s a coloured graph: it’s even more real”

Presented by Alastair M. SmithPerformance and Legitimacy in Social Enterprises3rd-4th March 2011 – HEC Management School University of Liege

Performance and Legitimacy of Fair Trade in Public Procurement

Supply Chains

‘It’s a well known coloured label: it must be legitimately fair trade.

Mustn’t it?’

ArgumentArgument

UK Government policy encourages procurement UK Government policy encourages procurement of “fair” and “ethical” goods to promote of “fair” and “ethical” goods to promote sustainable developmentsustainable development

Terms signify heterogeneous practices with Terms signify heterogeneous practices with different legitimacy and performance different legitimacy and performance characteristicscharacteristics

However, arguably legitimacy a greater influence However, arguably legitimacy a greater influence that performance for local decisionsthat performance for local decisions

Empirical investigation of social enterprise Empirical investigation of social enterprise suggests legitimacy and performance are not suggests legitimacy and performance are not necessarily correlated in public procurementnecessarily correlated in public procurement

Although it depends on your perspective… Although it depends on your perspective…

UK Gov’ Discourse on Fair (& Ethical) UK Gov’ Discourse on Fair (& Ethical) TradeTrade

Anthropocentric and Anthropocentric and essentially an issue of essentially an issue of

Social Justice Social Justice (Langhelle 2000)(Langhelle 2000)

‘‘the essential needs of the the essential needs of the world’s poor to which world’s poor to which

overriding priority should be overriding priority should be given’ given’

(WCED 1987: 43)(WCED 1987: 43)

OGC Discourse on Fair Trade…OGC Discourse on Fair Trade…(and ethical trade)(and ethical trade)

Discourses and Practices of FTDiscourses and Practices of FT

More longstanding, ‘more More longstanding, ‘more radical’, ‘more militant’radical’, ‘more militant’

A whole new way of A whole new way of trading; solidarity and trading; solidarity and

partnership; to promotes partnership; to promotes cooperation, deliberative cooperation, deliberative decision making, mutual decision making, mutual

accountability and income accountability and income redistribution. To empower redistribution. To empower southern stakeholders to southern stakeholders to

compete and prosper.compete and prosper.

Social Enterprises

Internal norms

Legitimised by reputation

Profit Orientated

Certification Approach

‘‘Softer, more commercial’ Softer, more commercial’ ‘reformist’ version‘reformist’ version

Promotes more equitable Promotes more equitable trade through existing trade through existing

structures and commercial structures and commercial channels which have no channels which have no

social objectives and bring social objectives and bring less benefit to small less benefit to small

farmers. To internalise cost farmers. To internalise cost traditional ‘externalised’ to traditional ‘externalised’ to

south.south.

Fairtrade InternationalFairtrade International

Product (arifood goods)Product (arifood goods)Min PricesMin Prices

Up-front CreditUp-front CreditPredictions of DemandPredictions of Demand

Social PremiumSocial Premium

World Fair Trade OrganisationWorld Fair Trade Organisation

Organisational (crafts & food)Organisational (crafts & food)Negotiated or min pricesNegotiated or min prices

Up-fron creditUp-fron creditStable Supportive RelationsStable Supportive Relations

Direct Capacity BuildingDirect Capacity Building

Consequences?Consequences?

Fischer (2009, p. 995) has suggested that the incorporation of fair trade within public

procurement could either raise standards or, ‘because some companies supplying the public

sector can be categories as “market driven buyers” (Raynolds 2009) or “corporate

licensees” (Reed 2009), [equally] associated with the more worrying dimension of

mainstreaming’.

OGC Discourse on Fair Trade…OGC Discourse on Fair Trade…(and ethical trade)(and ethical trade)

Academics DifferentiationAcademics DifferentiationFair TradeFair Trade Ethical TradeEthical Trade

Conditions of productionConditions of production Conditions of productionConditions of production

Mostly food goodsMostly food goods Manufactured & foodManufactured & food

Southern producersSouthern producers North and southNorth and south

Fair pricesFair prices

Capacity buildingCapacity building

Long term relationsLong term relations

Up front creditUp front credit

No requirements for buyersNo requirements for buyers

1st

Buyer

ProducerProducer1st

Buyer

Research QuestionsResearch Questions

1.1. How is the concept of ‘fair trade’ How is the concept of ‘fair trade’ incorporated and interpreted in public incorporated and interpreted in public procurement discourse?procurement discourse?

2.2. What factors have shaped these What factors have shaped these interpretations?interpretations?

3.3. How does the contestation of the term fair How does the contestation of the term fair trade impact the actual procurement trade impact the actual procurement strategies of public institutions?strategies of public institutions?

4.4. What are the consequences of this What are the consequences of this process for producers in the global process for producers in the global south?south?

Scotland as a Case StudyScotland as a Case Study

Scotland and Wales developed the Trade Nation Scotland and Wales developed the Trade Nation scheme:scheme: Developed out of partnership between civil society in Developed out of partnership between civil society in

Wales and WAG.Wales and WAG. Long consideration of criterion:Long consideration of criterion:

Practical need to make quantitative requirements.Practical need to make quantitative requirements. Wanted to work with what was out there.Wanted to work with what was out there.

Wales was declared first Fair Trade Nation 2008.Wales was declared first Fair Trade Nation 2008. Scotland has embedded objective to attain status Scotland has embedded objective to attain status

in International Development policy.in International Development policy.

The Fair Trade Nation CriterionThe Fair Trade Nation Criterion

• 100% of Local Authorities have Fair Trade groups working toward Fairtrade Zone status

• 55% of our Local Authorities having achieved Fairtrade Zone status. In following years, this must increase 10% per year until all 32 are Fairtrade Zones

• 100% of cities have achieved Fairtrade City status

• At least 55% of towns have Fair Trade groups working toward Fairtrade Town status

• 60% of universities have active Fair Trade groups working toward Fairtrade status

Fairtrade Foundation’s Fairtrade Foundation’s Fairtrade Town schemeFairtrade Town scheme

The local council must pass a resolution supporting The local council must pass a resolution supporting FairtradeFairtrade, and serve , and serve FairtradeFairtrade coffee and tea at its coffee and tea at its meetings and in offices and canteens.meetings and in offices and canteens.

FairtradeFairtrade products must be used by a number of local work products must be used by a number of local work places, places, educational establishmentseducational establishments, faith communities and other , faith communities and other community organisations. A flagship employer is required for community organisations. A flagship employer is required for populations over 100,000.populations over 100,000.

Sample Council MotionSample Council MotionThe initiative involves a commitment to:The initiative involves a commitment to:

•Widely offer FAIRTRADE Marked food and drink Widely offer FAIRTRADE Marked food and drink options internally and make them available for internal options internally and make them available for internal meetingsmeetings•Promote the FAIRTRADE Mark using Fairtrade Promote the FAIRTRADE Mark using Fairtrade Foundation materials in refreshment areas and Foundation materials in refreshment areas and promoting the Fairtrade Towns initiative in internal and promoting the Fairtrade Towns initiative in internal and communications and external newsletterscommunications and external newsletters•Use influence to urge local retailers to provide Use influence to urge local retailers to provide Fairtrade options for residentsFairtrade options for residents•Use influence to urge local business to offer Fairtrade Use influence to urge local business to offer Fairtrade options to their staff options to their staff and promote the FAIRTRADE Mark and promote the FAIRTRADE Mark internallyinternally•Engage in a media campaign to publicise the Fairtrade Engage in a media campaign to publicise the Fairtrade Towns initiativeTowns initiative•Allocate responsibility for progression of the Fairtrade Allocate responsibility for progression of the Fairtrade Town initiative to a member or group of staffTown initiative to a member or group of staff•Organise events and publicity during national Fairtrade Organise events and publicity during national Fairtrade Fortnight - the annual national campaign to promote Fortnight - the annual national campaign to promote sales of products with the FAIRTRADE Marksales of products with the FAIRTRADE Mark

Empirical Impact in ScotlandEmpirical Impact in Scotland

Majority (6/8) of LA motions with a Majority (6/8) of LA motions with a general commitment use the term general commitment use the term ‘Fairtrade’.‘Fairtrade’.

4/9 motions which make procurement 4/9 motions which make procurement commitments specify Fairtrade commitments specify Fairtrade certification.certification.

4/9 use the phrase ‘fair trade (such as 4/9 use the phrase ‘fair trade (such as the Fairtrade Mark)’ the Fairtrade Mark)’

1/9 uses ‘fairly traded goods’.1/9 uses ‘fairly traded goods’.

Empirical Results in ScotlandEmpirical Results in Scotland General preference for FLO (fair trade) certified General preference for FLO (fair trade) certified

goods over Rainforest Alliance and Utz Café goods over Rainforest Alliance and Utz Café (ethical trade).(ethical trade).

‘‘because we are a Fairtrade City under the Fairtrade because we are a Fairtrade City under the Fairtrade Foundation scheme, we should only be using tea or Foundation scheme, we should only be using tea or coffee with the FLO Mark’.coffee with the FLO Mark’.

Examples of more reflexive thinking:Examples of more reflexive thinking: Ensuring Fairtrade MARK for hot drinks but thinking Ensuring Fairtrade MARK for hot drinks but thinking

more widely for other products.more widely for other products.

A More Creative ExampleA More Creative Example Local authority highly and reflectively Local authority highly and reflectively

embedded in community Fairtrade group.embedded in community Fairtrade group. Purchased non-certified ‘fairly traded’ rice Purchased non-certified ‘fairly traded’ rice

based on reputation of ‘social economy’, based on reputation of ‘social economy’, ‘not from profit’ social enterprise importer.‘not from profit’ social enterprise importer.

Local Authority

Just Trading Scotland

NASFM

Scotland

Imani

Development

Malawi

‘‘Producer’ PerspectiveProducer’ Perspective Malawi 160/182 UN HDIMalawi 160/182 UN HDI NASFAM’s Initial mission to NASFAM’s Initial mission to

support smallholders during support smallholders during liberalisation of tobacco farming.liberalisation of tobacco farming.

Also facilitates diversification of Also facilitates diversification of community and national community and national production production

Tobacco Tobacco Groundnuts & Rice Groundnuts & Rice Provide inputs and support. Acts Provide inputs and support. Acts

as buyer.as buyer. Pays prices based on cost of Pays prices based on cost of

sustainable productionsustainable production

Radical Fair Trade?Radical Fair Trade?

Kaporo Small Farmers Association Kaporo Small Farmers Association is democratic farmers associationis democratic farmers association

Just Trading Scotland (JTS) is a Just Trading Scotland (JTS) is a not for profit actornot for profit actor

JTS pay what is calculatedJTS pay what is calculated Proactive efforts to add as much Proactive efforts to add as much

value in Malawi and Kaporo as value in Malawi and Kaporo as possiblepossible

JTS & Imani have invested in rice JTS & Imani have invested in rice processing plant in Karongaprocessing plant in Karonga Value chain upgrading is fundamental Value chain upgrading is fundamental

to sus developmentto sus development Provided scholarshipsProvided scholarships

NASFAM and Fair TradeNASFAM and Fair Trade

Some FLO certification for groundnutsSome FLO certification for groundnuts Assisted market access, premium beneficial:Assisted market access, premium beneficial:

‘‘Without Fairtrade we would have never exported ground Without Fairtrade we would have never exported ground nuts to Europe’.nuts to Europe’.

‘‘Fair Trade provides a great market angle!’.Fair Trade provides a great market angle!’.

‘‘Fair Trade is a very important market, the brand Fair Trade is a very important market, the brand recognition side, if you are supplying to Fair Trade in recognition side, if you are supplying to Fair Trade in Europe, any other conventional buyer will know that you Europe, any other conventional buyer will know that you are able to comply with the standards and that you are are able to comply with the standards and that you are probably not able to cheat the farmers’.probably not able to cheat the farmers’.

Limitations to FLO CertificationLimitations to FLO Certification Costs of CertificationCosts of Certification

‘‘Fees are quite high and management was of the view that it is Fees are quite high and management was of the view that it is like we are subsidising Fair Trade...Yes the farmer members like we are subsidising Fair Trade...Yes the farmer members are maybe benefiting in one way or another, but from a are maybe benefiting in one way or another, but from a corporate point of view we are subsidising Fairtrade’.corporate point of view we are subsidising Fairtrade’.

Geographic restrictions:Geographic restrictions:FLO certification for rice is only currently available for small FLO certification for rice is only currently available for small farmers in Benin, Egypt, India, Laos, Sri Lanker and Thailand.farmers in Benin, Egypt, India, Laos, Sri Lanker and Thailand.

NASFAM are seeking cheaper WFTO membership NASFAM are seeking cheaper WFTO membership for KSFA as a means to legitimise Fair Trade for KSFA as a means to legitimise Fair Trade credentials.credentials.

Producer knowledge about fair trade depends on Producer knowledge about fair trade depends on ‘who shouts the loudest’‘who shouts the loudest’

AnalysisAnalysis Fairtrade Foundation Towns scheme has Fairtrade Foundation Towns scheme has

influenced government procurement.influenced government procurement. Fair trade and particularly FLO certification Fair trade and particularly FLO certification

prioritised over Ethical Trade and particularly prioritised over Ethical Trade and particularly Rainforest Alliance certification.Rainforest Alliance certification.

Procurement likely to reinforce softer version of FT Procurement likely to reinforce softer version of FT due to best value for money criteriadue to best value for money criteria

But: local steering groups can shape council policy But: local steering groups can shape council policy and procurement decisions to differentiate.and procurement decisions to differentiate.

Such choices shape opportunities for producers Such choices shape opportunities for producers and set limitations for who gets assistance.and set limitations for who gets assistance.

De facto requirement for FLO certification might De facto requirement for FLO certification might bar some producers from market opportunities.bar some producers from market opportunities.

Questions and comments please!