The trend for guilt-free shopping is seeing a rise in sales of ethically sourced goods.
Growing demand is taking once-alternative ethical marks into the mainstream
The past decade has seen a steady rise in the number and prominence of ethically and sustainably produced goods on supermarket shelves. There are about 50 certification marks to be found in Australia alone, including Rainforest Alliance/SAN (Sustainable Agriculture Network) and UTZ Certified, but the one with the most global recognition is Fairtrade.
Carrying the Fairtrade mark declares that a company has paid a fair price, rather than the cheapest price, for ingredients sourced from some of the world’s poorest farmers and small producers. The idea is that while the final product may be a little more expensive, consumers can buy it with a clear conscience and the belief that they’re helping to change the world at the checkout.
The first Fairtrade label, Max Havelaar, was launched by Dutch development agency Solidaridad in 1988, when it sold Fairtrade coffee from small Mexican producers to Dutch supermarkets. Max Havelaar was a fictional character who opposed the exploitation of coffee pickers in Dutch colonies.
Twenty-six years later, the non-profit certification organisation is an almost €5 billion (A$7.5 billion) global powerhouse that is shifting the way multinationals do business.
Fairtrade International CEO Harriet Lamb says building the Asia-Pacific market is high on the agenda.
“Up until now Fairtrade has been much weaker in Asia as a whole, including in cocoa,” says Lamb. “That’s one of the areas we as a movement will need to invest in, because clearly some of the cocoa producing origins of the future are countries like Indonesia, and we absolutely want to scale up our work with farmers there.”
"We are seeing more of a shift to values – people want to understand what has happened to this product … price is important but values are the core." – Valentina Tripp CPA
Fairtrade Australia & New Zealand, the local licensing arm of the international group, was only established nine years ago in 2005, but with a new chairman and new CEO taking the reins into 2014, it has set itself some strong targets.
Today's buyers are prepared to reward businesses that show sustainable practices.
Today's buyers are prepared to reward businesses that show sustainable practices
Valentina Tripp CPA, 39, a KPMG director, was appointed head of Fairtrade Australia & New Zealand’s board of directors late last year. Its new CEO, global sustainability leader and former Fairtrade International chair Molly Harriss Olson, came on board in February.
XTripp believes that within 10 years the group can achieve a recognition rate in Australia rivalling that in The Netherlands and the UK, where 80 per cent of consumers know the Fairtrade mark and what it stands for. But there’s still the challenge of converting that rising recognition into supermarket purchases.
Australians bought A$191 million worth of Fairtrade certified products in 2012, up from A$165 million in 2011 and a significant increase on the 2009 figure of just A$36.5 million. But that’s still well short of the €186.1 million (A$281.8 million) spent on Fairtrade goods in 2012 in The Netherlands, with its smaller population.
Social media and technology play a big part in building consumer awareness. They also have a key role in convincing major manufacturers to include sustainability in their core business values, says Tripp. “We’ve noticed from consumers that the biggest trend is people want more information … there is nowhere to hide anymore,” she says. “Information will get out. If you haven’t thought about it, the consumer has.”
She believes buyers are prepared to reward businesses which show sustainable practices. “We are seeing more of a shift to values – people want to understand what has happened to this product … price is important but values are the core.”
This consumer pressure is what will drive the change and Fairtrade, she says, provides a system to make it happen.
Fairtrade works in two ways: it secures farmers a fair minimum price for their products, which protects them from world market fluctuations.
It also pays the farmers’ cooperative in that village or region an additional amount, known as the Fairtrade Premium, to re-invest in the community. It’s typically put into education and healthcare, or into farm improvements or processing facilities to increase income.
In 2012, an estimated €80 million (A$121 million) in Fairtrade Premium was paid to producers. But to be eligible, farmers need to meet agreed labour, environmental and development standards. There are now Fairtrade standards covering more than 300 raw products, which benefit more than 1.3 million farmers and workers across 70 countries, mostly in Latin America, Africa and Asia.
In Australia and New Zealand, the majority of Fairtrade-labelled supermarket sales are associated with Fairtrade cocoa, due to Cadbury’s participation with its number-one selling Cadbury Dairy Milk Chocolate block. Coffee, however, has the highest number of licence holders, including Starbucks and Coca-Cola Amatil, makers of Grinders Coffee.
Fairtrade tea and cotton are also sold in Australia, however Fairtrade has certified a variety of ethically sourced products around the world including bananas, sugar, cut flowers, watermelons, rice, quinoa, sports balls, cosmetics and, more recently, gold.
According to Tripp, the market for sustainable products and services has almost doubled in the past four years and, despite rising living costs, more Australians are continuing to embrace eco options. An average of 15 new businesses enter the Fairtrade system in Australia each year, sourcing raw products or goods from small producers in developing countries.
But as the Fairtrade brand gains prominence it’s had to make changes to keep up with the growing interest in its certification system. That has included partnering with multinationals – just the sort of companies that have previously been seen as exploiting farmers in developing countries.
For some people that has been a bitter pill to swallow, says Professor Stewart Lockie, director of The Cairns Institute at James Cook University in Queensland.
“As Fairtrade grows it has to be stocked by the big retailers, whether that is the supermarkets or coffee powerhouses and chains like Starbucks,” says Lockie.
“Small sellers have to deal with big sellers and there are people for whom that is making a pact with the devil.”
Valentina Tripp CPA: "Doing good is good for business"
Lockie points out that Fairtrade has copped criticism from both sides of the political fence, with free market advocates arguing that setting a minimum price potentially distorts markets and rewards people for poor quality produce. In his opinion there is little evidence to support this “theoretical argument”, as at the moment Fairtrade claims just 1 per cent of global trade.
“The largest impact Fairtrade has is the secondary impact of consumer interest. Fairtrade forces a lot of businesses to look at their social and environmental responsibilities more seriously,” says Lockie.
“It can be difficult for bigger companies to go entirely Fairtrade because of the limitations in supply and, possibly, they are a bit cynical and going with other responsibility labels that don’t do as much with small farmers.
“Fairtrade’s presence and growth in the market has driven the development of other responsibility standards and forced them to be more fair dinkum,” he adds. “They may not be as rigorous as Fairtrade, but it is better than the alternative.”
Lockie says with the exception of tea, Fairtrade only sources its goods from small producers who “don’t sell the lion’s share of food in mainstream commodity markets”. As such, Fairtrade items will always remain something of a niche.
“Unless it is switched into plantations, Fairtrade has a built-in limitation on its reach. However it puts pressure on the plantations to justify their own existence in the way they treat their own employees and local communities.”
In seeking to expand its reach Fairtrade has just developed a new Fairtrade Sourcing Partnerships model which will allow businesses to use a Fairtrade mark on their packaging for sourcing 100 per cent of a specific ingredient from Fairtrade farmers, instead of insisting every raw product possible is certified, as previously happened.
This too has come under fire from some who see this as watering down the organisation’s stringent compliance regulations, but on its website Fairtrade International says it needs to create market access.
“Producers are not selling enough on Fairtrade terms and current and prospective partners will not increase their Fairtrade sales under the current product certification (All That Can Be) model,” it states
“Fairtrade Sourcing Partnerships offer cocoa and sugar farmers significant new sales opportunities and the potential to deliver major impact in their farms and communities.”
It says the new model meets Fairtrade’s vision for “a world in which all producers can enjoy a secure and sustainable livelihood, fulfil their potential and decide on their future.”
Tripp isn’t too concerned if ethically sourced products are certified by Fairtrade or other sustainability labels including Rainforest Alliance and UTZ. Indeed, she doesn’t view them as competition.
“We see our competitors as everyone who is not in an ethical system,” she explains. “That is who we are trying to convert – those that don’t see that as important or haven’t got to the point to change their supply.”
Rather than market share, the challenge is to have an impact on sustainability. Tripp believes the world is on the verge of much greater awareness, which will force industry to consider these issues and rebuild their business models around them.
“Doing good is good for business,” she says.
Taking the chair at Fairtrade
Valentina Tripp CPA has had a long involvement in the food and grocery industry, with more than 20 years’ experience in corporate and business strategy, finance, market entry, and supply chain and operations.
A senior director with KPMG Consulting, based in Melbourne, the 39-year-old is the national sector leader for KPMG’s Retail and Consumer Products division and has published the Australian Food and Grocery Council’s annual State of the Industry report for the past five years. Today she serves on the KPMG Global Consumer Sector Leadership Group.
Tripp joined the board of Fairtrade Australia & New Zealand in May 2012, serving as the chair of the Finance and Risk Committee before being appointed the organisation’s chair in December 2013.
“Issues addressing ethical supply have become common in the last three years or longer,” she says. “Fairtrade and its systems of support have been of interest for me and the opportunity arose to join the Fairtrade board 18 months ago when it was looking for more of a consumer-products enlightened approach to put some more value into the brand.
“As an organisation, and as a movement, Fairtrade must continue to innovate in our systems and processes to ensure that we remain relevant and continue to grow and thereby keep making a difference to the farmers and workers who benefit from being part of the Fairtrade system.”
This article is from the April 2014 issue of INTHEBLACK.