INSEAD

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INSEAD

• FAIR TRADE
• Impacts at the Bottom of the Pyramid
• January 24th 2008
• Michael Wray and Tony Hall

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Tony Hall (MBA 83) MichaelWray (MBA 75)

• Tony Hall held operational managerial posts with
  GE and then moved to Silicon Valley where he has
  worked for 15 years in software VC funded
  start-ups.
• Michael has worked for Caterpillar, Valeo, United
  Technologies and TI plc before moving to Silicon
  Valley in 2000

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Tony Hall (MBA 83) MichaelWray (MBA 75)

• Consultants in the Fair Trade/Ethical movement
  since 2003
• Income generation projects for workers at the
  bottom of the pyramid.
• Also working on developing Fair Trade Retail
  operations in Europe USA

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MBAs in Fair Trade
FairWind, Crouch End, London N8
London Business School INSEAD
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The Green Test

• Give us a recent example of your Buyer Behaviour
  that demonstrates ethical influences.
• Will these issues play an important role in your
  future business career?

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The Ethical Consumer
X
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GWEN

• Female
• 35-45 years old
• Mid-High Income
• Social Awareness
• Gives lots of Gifts
• Travels
• Will not pay premium for social programs
• US..Netherlands..UK

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The Ethical Consumer
Environmental Issues
Social Issues FAIR TRADE
X
Sustainability Issues
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Fair Trade

• Fair Trade - a strategy for poverty alleviation
  and sustainable development. Its purpose is to
  create opportunities for producers who have been
  economically disadvantaged or marginalized by the
  conventional trading system.
• 
  IFAT Web Site

Source IFAT website
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Fair Trade Market

• Estimates are around 1 Billion in both Europe
  and USA
• Food is the majority, around 70
• Crafts at 30 (are priced at retail)
• Penetration varies enormously by product type and
  geographic market

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Coffee, tea and chocolate are biggest Fair Trade
products
20 of coffee sold in UK is Fair Trade Marks
Spencer, Leclerc, Starbucks, McDonalds. moving
into Fair Trade
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Fair Trade Organizations

• IFAT International Federation for Alternative
  Trade.
• 280 members. 65 in South mainly
  craft 10 standards. Self assessment of Members
• FLO Fair Trade Labeling Organizations
  International. Standards and certification body
  for the Fairtrade movement. Certifies Products,
  mainly food, such as coffee, tea, etc.
• Discussions continue on inclusion of handicrafts.

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Fair Trade Principles

• Creating opportunities for economically
  disadvantaged producers who have been
  economically disadvantaged or marginalized by the
  conventional trading system.

Source IFAT website 9.12.07 02.38 GMT
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How do Products get from Artisans to the
Consumers?
Nepal
Kolkata
Gouda
Culemborg
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Export Supply Chains
Conventional Trading System

• Producer
• Exporter
• Importer/
• Wholesaler
• Retailer
• Customer

Big Stores
Producer Importer/ Wholesaler Retailer Custo
mer
eCommerce
Producer Large Retailer Customer
Producer Customer
Mark up 5 10 X
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Fair Trade Principles

• 2. Transparency and accountability.
• 3. Capacity building.
• 4. Promoting Fair Trade.
• 5. Payment of a fair price.

Source IFAT website 9.12.07 02.38 GMT
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What is a fair price or fair wage ?

• Fair price provides acceptable living
  conditions for independent workers.
• Benchmark Grameen Bank criteria ??
• Fair Wage benchmarks
• national minimum wage ??
• 1 or 2 per day
• US FTO World of Good (www.worldofgood.com)
  has created Fair Wage Guide which compares labour
  component of an artisan product with such
  standards.

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Fair Trade Principles (cont.)

• Gender Equity
• Safe and healthy working environment for
  producers.
• Child Labour - the participation of children in
  production processes of fairly traded articles
  (if any) does not adversely affect their
  well-being, security, educational requirements
  and need for play.
• Environment - better environmental practices and
  the application of responsible methods of
  production.
• 
  
• 10. Trade Relations - concern for the social,
  economic and environmental well-being of
  marginalized small producers do not maximise
  profit at their expense maintain long-term
  relationships based on solidarity, trust and
  mutual respect

IFAT Web Site December 2007
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AFTF Assessment Programs

• SCANS
• Asia Fair Trade Forum (AFTF) program. Started
  2003. One week visits to FTO to assess all
  business areas.
• Implemented by three consultants - Lawrence
  Watson, Tony Hall, Michael Wray.
• 26 SCANs completed in India, Bangladesh, Sri
  Lanka, Thailand, Nepal, Philippines and East
  Timor.

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Practical Examples

• MW Overview of Asian Fair Trade
• TH Alola Foundation, Dili, East Timor

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Fair Trade Companies can vary widely in size
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Facilities
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Product Lines
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Internal Production
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Producers
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Health Safety
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But all are dedicated to the Principles of Fair
Trade
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They are keen to learn and develop
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and welcome consultants who understand their
problems and can give practical advice.
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Issues

• Are Fair Trade initiatives positively impacting
  the lives of low-income and disadvantaged people
  in the South?
• Are income standards (such as Millennium Goals of
  1 per day) the best way to measure living
  standards?
• How do you incorporate local traditions, products
  and skills in to product lines that are
  attractive to consumers in the North without
  compromising these traditions? How do you market
  these goods?

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Issuesmore

• 4. The traditional supply chain for artisans
  contains many links this produces multiples of
  5 to 20 times between that received by the
  artisan and that paid in a shop. What is the
  impact of the Internet on this situation?
• 5. What is the impact of mainstream companies
  such as Nestle, Tesco, McDonalds, Marks Spencer
  and Starbucks launching Fair Trade initiatives?

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Some Key Issues

• Positive Impacts?
• Validity of Income Standards?
• Keeping Local Traditions?
• Impact of eCommerce on Supply Chains?
• Entry of Large Corporations?

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Thank You

• Michael Wray
• michael_at_wraybizdev.com 1-650-224-6768
• Tony Hall
• hallconsult_at_gmail.com 1-650-207-2519
• Consultants in the Fair Trade/Ethical movement
  since 2003

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Grameen Bank criteria

• Adequate housing. Family sleeps on beds.
• Pure water
• All children going to school
• Sanitary latrine.
• Adequate clothing and mosquito-nets
• Fall back sources of additional income
• Three square meals a day throughout the year
• Afford adequate health care.
• Saves a regular amount of money each week.

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Grameen Bank criteria

• The family lives in a house worth at least 350
  or a house with a tin roof and each member of the
  family is able to sleep on a bed instead of on
  the floor. (Link to IFAT Standards 1 and 5)
• Family members drink pure water from tube-wells,
  boiled water or water purified by using alum,
  arsenic free purifying tablets or pitcher
  filters.(Links to IFAT Standards 1 and 5)
• All children in the family over six years of age
  are all going to school or have finished primary
  school.
• The family uses a sanitary latrine.
• Family members have adequate clothing for every
  day use, warm clothing for winter such as shawls,
  sweaters, blankets etc. and mosquito-nets to
  protect themselves from mosquitoes.
• The family has sources of additional income, such
  as a vegetable garden, fruit-bearing trees, etc.
  so that they are able to fall back on these
  sources of income when they need additional
  money.
• The family experiences no difficulty in having
  three square meals a day throughout the year i.e.
  no member of the family goes hungry at any time
  of the year.
• If any member of the family falls ill, the family
  can afford to take all the necessary steps to
  seek adequate health care.
• The family household head is able to save a
  regular amount of money each week.
• The family household head maintains an average
  balance of 75 in her savings account.