Fair Trade Organizations and Social Enterprise

Social Innovation through Hybrid Organization Models

Benjamin Huybrechts

• Publisher: Routledge
• Year: 2012
• ISBN:
  9781136330315
• Edition: 1
• Topic: Business
• Subtopic: Industria agricola
• Index: Business

For several decades, social enterprises have been pioneers in the conception and implementation of a pathbreaking social innovation: Fair Trade (FT). Fair Trade Social Enterprises have created a movement which has challenged mainstream trading practices and offered development opportunities for disadvantaged producer groups in the South. Starting from a niche market aimed at convinced customers, FT has expanded and entered mainstream retailing outlets, growing in visibility and market share, while simultaneously experiencing diversification of its organization models. While pioneer Fair Trade Social Enterprises in the early years were largely nonprofit organizations relying on voluntary work, they have become increasingly diversified in terms of legal forms, governance models and organizational practices. These diversified models seem to reflect the hybrid nature of FT itself, through different ways of combining a commercial activity (trading of FT products), a social mission (support to producers), and an explicit or implicit political message (often expressed through education and advocacy).

Based on the study of Fair Trade Social Enterprises across Europe, this book builds a typology of organization models for FT. Author Benjamin Huybrechts further examines how the different organization models combine the economic, social, and political dimensions of FT, and how they manage the possible tensions between these dimensions. Fair Trade Organizations and Social Enterprise proposes a range of theoretical approaches to interpret the diversity of Fair Trade Social Enterprises and offers concrete avenues for managing social enterprises and hybrid organizations in general.

Part I

Diverse and Innovative Organizational Models in a Hybrid Field

1 Fair Trade

A Hybrid Concept and Practice

In this first chapter, the history and notion of Fair Trade (FT) are examined as well as its affiliation with other concepts and initiatives that have inspired it. FT is interpreted as being composed of three interrelated dimensions: an economic one, a social one, and a political one. Then, the need for innovative organizational models allowing for the pursuit of these hybrid goals is highlighted based on the study of the affiliated concepts.

THE EMERGENCE OF THE FT MOVEMENT¹

Most authors situate the origins of the FT movement just after the Second World War, with experimental initiatives of import and distribution of handicraft, led by NGOs and charitable organizations with a religious background (e.g., Nicholls and Opal 2005; Raynolds, Murray, and Wilkinson 2007; Diaz Pedregal 2007; Moore 2004). The most often mentioned initiatives include Oxfam UK, SOS Wereldhandel in the Netherlands, the Mennonite Central Committee (MCC; later Ten Thousand Villages), Self-Help Crafts program in the US, as well as the Church of the Brethren’s Sales Exchange for Refugee Rehabilitation and Vocation (SERRV) program (also in the US). A number of authors describe these initiatives as successive waves having inspired FT, together with the cooperative movement (Gendron, Bisaillon, and Rance 2009a). The various names used to refer to these initiatives—charity trade, solidarity trade, developmental trade, alternative trade, etc.—each emphasized a particular dimension (Gendron, Bisaillon, and Rance 2009; Low and Davenport 2005a). Charity trade emphasized the charitable logics that were often inherent in religious groups during that period (Low and Davenport 2005a). Solidarity trade had a more political meaning; trading was considered as a means to support producers from countries excluded from the international trading arena (socialist countries at the time, such as Cuba, Nicaragua, and Vietnam). Developmental trade focused on the assistance provided by NGOs to producers in the production and exportation processes.

While several authors locate the birth of FT in these initiatives, others highlight the striking differences that distinguish them from the current practice of FT. Often, these trading initiatives were punctual and constituted only a small part of the NGOs’ activities (Anderson 2009b; Tallontire 2000). Moreover, the producers whose products were sold, were not necessarily those who were basically supported by the NGOs (Gendron, Palma Torres, and Bisaillon 2009). Finally, contrary to a common view on these initiatives as being noncommercial and partnership based, Anderson (2009b) emphasizes how Oxfam UK and other pioneers organized such trading in order to generate profits and thus revenues for the developmental activities.

According to Anderson (2009b), it is only in the 1970s that fair trading partnerships were set up as a model with explicit rules and that organizations were created specifically for this purpose. These organizations were called alternative trading organizations (ATOs), “a name stemming from the early days of Fair Trade where ‘fair’ seemed too weak a description of the vision that these companies had” (Moore 2004, 76). Products were sold through worldshops and volunteer-based networks. After two decades of practice and rule-setting, a first step² of institutionalization and consolidation was achieved in the late 1980s with the creation of several international networks (Diaz Pedregal 2007; Moore 2004; Crowell and Reed 2009; Raynolds and Long 2007). In Europe, the largest FT pioneers (CTM in Italy, Gepa in Germany, Oxfam in the UK and in Belgium, etc.) joined together in the European Fair Trade Association (EFTA) in 1987. Two years later, the International Federation for Alternative Trade³ was launched; it gathered producer organizations, importers, and worldshops in a worldwide network. The international networks formalized the practices of the ATOs, which had been active for several years or decades.

It was during that same period that labeling initiatives appeared, starting in the late 1980s with “Max Havelaar”⁴ in the Netherlands. This label emerged from the joined efforts of a Dutch priest involved in a Mexican coffee cooperative (UCIRI) and Dutch NGOs (Roozen and van der Hoff 2001). Standards were set up and implemented through different national initiatives. These initiatives joined together into Fairtrade Labeling Organizations International (FLO or FLO-I), now Fairtrade International, in 1997. Most academics and practitioners agree that the emergence of certification⁵ brought a fundamental change in the evolution of FT (Moore, Gibbon, and Slack 2006; Reed 2009; Raynolds and Long 2007). Indeed, the possibility of having products recognized as meeting the FT standards by an external certifying body and not by the importer (or distributor) itself, as was the case previously with ATOs, opened the door of the FT sector to any type of company. Mainstream businesses, including supermarkets and food multinationals, started selling FT products. This resulted in a huge increase in the volume of FT sales but also in debates about the possible “dilution” or “capture” of FT. Much of the literature on FT has been analyzing the consequences of mainstreaming on the FT movement (Moore, Gibbon, and Slack 2006; Nicholls and Opal 2005; Raynolds and Wilkinson 2007; Jaffee 2010).

The formalization of the international networks and the emergence of labeling constituted two steps of institutionalization during the late 1980s, period that can thus be seen as a crucial momentum in the FT movement (e.g., Reed 2009; Raynolds and Long 2007; Gendron, Bisaillon, and Rance 2009). Following the distinction relayed by Gendron and her colleagues (2009), while the first institutionalization step was a rather political one, the second step was closer to an economic one. This concretized into two distribution strategies: the historical, alternative one, consisting of worldshops and volunteer networks; and the mainstream one, consisting of supermarkets and other nonspecialized shops. It is common in the practice⁶ and in the FT literature to divide the movement into two main spheres according to these two distribution strategies (e.g., Renard 2003; Gendron 2004b; Moore 2004; Nicholls and Opal 2005; Raynolds, Murray, and Wilkinson 2007).

The first sphere, integrated FT, is mainly composed of craft producers and importers, and is often associated with a radical or political vision of FT, embodied by a large part of the pioneers grouped in the WFTO network as well as in other local networks of worldshops (e.g., NEWS: Network of European World Shops), importing FTSEs (e.g., EFTA in Europe) and WFTO-member producer organizations (COFTA in Africa, IFAT-LA in Latin America, AFTF in Asia) (e.g., Raynolds and Long 2007; LeClair 2002; Renard 2003; Gendron 2004a). WFTO differentiates itself from the Fairtrade labeling model in various aspects. First, it boasts its membership, the majority of which is composed of producers, and its democratic functioning, to claim a stronger representation and thus legitimacy (Raynolds and Long 2007). Second, it has developed a more demanding definition of FT, based on a trust relationship rather than on standardized control (e.g., Wilkinson 2007). Such differentiation has translated into the development, in 2004, of its own certification scheme, namely the Fair Trade Organization Mark. The FTO Mark applies to organizations rather than products and aims to help consumers and FT supporters identify the “true Fair Trade organizations,”⁷ 100% dedicated to FT and complying with standards that include fairness within the organization (e.g., democratic decision-making) and involvement in education and advocacy.

The second sphere, certified FT, mainly deals with food products⁸ and is associated with a more commercial or pragmatic vision of FT (e.g., Diaz Pedregal 2007; Gendron, Bisaillon, and Rance 2009; Renard 2003). The focus here is on expanding the FT market as the main strategy to improve the producers’ livelihoods. The rise and legitimacy of the labeling sphere is linked to several factors. Crowell and Reed (2009) point out that several NGOs and FTSEs have supported the development of labeling and mainstreaming, beyond labelers themselves. Moreover, it is often suggested that most producer organizations have welcomed positively the perspective of reaching the mainstream and thereby increasing their production volumes. Although producers’ visions are far from homogeneous (Poncelet, Defourny, and De Pelsmacker 2005; Lemay 2007), the latter’s assumed positive attitude toward mainstreaming is a key argument put forth by labelers and stakeholders to justify mainstreaming (Low and Davenport 2005b).

Despite their diverging orientations, these two spheres and visions of FT dialogue with each other at the institutional level through FINE.⁹ The goal of FINE is to maintain a minimal consensus around FT principles and orientations. For that purpose, a common definition was established in 1999, revised in 2001 and completed by a charter of FT principles in 2009 (see next section). Beyond the definition of FT, a major issue for the four international networks constituting FINE is advocacy. In order to coordinate the advocacy activities, particularly toward the European Union, FINE created the Fair Trade Advocacy Office (FTAO)¹⁰ in Brussels in 2004.

While this dual picture of FT is useful insofar as it explicitly reveals the fundamental tension in the FT movement (e.g., Wilkinson 2007), it has become insufficient to capture the whole diversity and complexity of the current FT landscape (Özçağlar-Toulouse et al. 2010). Certain authors call for a reconciliation of the two spheres (e.g., Gendron, Bisaillon, and Rance 2009; Nicholls 2010). As Wilkinson states (2007, 220), “[i]n spite of the more obvious tensions, there are also unexpected synergies and, it is, precisely, the multifaceted nature of the movement that has accounted for its success to date.” Furthermore, recent work also brings nuances to the distinction between the two spheres, observing that several organizations and supply chains are based on both distribution strategies (Wilkinson 2007; Ballet and Carimentrand 2008). For instance, Traidcraft in the UK or Oxfam Fairtrade in Belgium sell their products—some of which are labeled, and others not—both through specialized channels (worldshops, catalogs, etc.) and through supermarkets. In the same way, some businesses launched by pioneer FTSEs themselves, such as Cafédirect or Divine Chocolate, have a strong positioning in the mainstream market while at the same time being WFTO members and being partially owned by FT pioneers as well as by producer organizations (Davies and Crane 2003; Doherty and Tranchell 2007).

The distinction between the two spheres seems even less adequate when considering the local level (Özçağlar-Toulouse et al. 2010; Sarrazin-Biteye 2009). In many places, new FT-focused businesses are emerging, selling nonlabeled FT products through a variety of channels, both mainstream (e.g., B2B sales) and specialized. In recent years, many small businesses have engaged in a “100% FT” practice¹¹ without belonging to one of the traditional FT systems (Özçağlar-Toulouse et al. 2010): they constitute what some have started calling a third wave or third institutionalization of FT, after the foundation of FT by pioneers (first wave) and the certification-mainstreaming process (second wave) (Poos 2008). These new companies have often established links with other FTSEs leading to the emergence of local “bottom-up” networks that cannot be captured through the classical distinction in terms of affiliation to a particular sphere. Before further exploring the current organizational landscape, the next section defines and analyzes the concept of FT as well as that of FTSE.

FAIR TRADE AND ITS PARTICIPANTS

Fair Trade as a Hybrid Concept

The definition developed by FINE, which is based on a consensus among several FT networks, is the one that is most commonly used in practice and in the academic literature (e.g., Moore 2004):

Fair Trade is a trading partnership, based on dialogue, transparency and respect, that seeks greater equity in international trade. It contributes to sustainable development by offering better trading conditions to, and securing the rights of, marginalised producers and workers—especially in the South. Fair Trade organizations (backed by consumers) are engaged actively in supporting producers, awareness raising and in campaigning for changes in the rules and practice of conventional international trade.

A first draft of this definition was written in 1999. It focused on producers (not on workers) and insisted on FT as being an alternative to conventional trade. The evolution of the definition toward a less radical standpoint has been seen by some as an adaptation of FT “aimed at making it more palatable to corporations” (Crowell and Reed 2009, 148). In 2009, FLO and the WFTO completed the definition of FT thanks to a common charter of Fair Trade principles.¹² The goal was to be more explicit about the implementation of FT through the two types of distribution strategies embodied by the two networks. Besides the statement of a common vision of FT and a comparison with the ILO standards,¹³ five core principles were identified and detailed: market access for marginalized producers, sustainable and equitable trading relationships, capacity building and empowerment, consumer awareness raising and advocacy, and long-term commitment “in the context of a social construct” (as stated in the charter).

Since the FINE definition and the charter of principles result from compromises among different approaches to FT, they remain relatively general, allowing for a wide range of interpretations and practices. What clearly appears in these definitions is that FT is an innovative and highly hybrid concept¹⁴, which is made of paradoxes (e.g., Renard 2003; Schümperli Younossian 2006). The study of these paradoxes, which will further be examined here at the organizational level, first requires to define more precisely the different dimensions of FT and the elements that they entail. Among the various possible categorizations, three dimensions are identified here: producer support (the ultimate goal); trade (the means to achieve this goal); and education, regulation, and advocacy (the actions to scale up the initiative and influence the broader context).¹⁵

Producer Support

FT aims to practice trade under conditions that are “fair” for producers, in order to support them beyond what they would obtain from a traditional trading exchange. These conditions constitute the core of the FT concept: fair price, social premium, pre-financing, provision of market access, long-term relationship, and so on (Raynolds and Wilkinson 2007; Moore 2004; Nicholls and Opal 2005). Such tools are supposed to orient the trading relationship in a way that genuinely improves the livelihoods of the producers in the South. The content and the impact of producer support may, however, vary across FTSEs, even when a label aims to homogenize practices.¹⁶

The ambition of fairness in FT partnerships can be considered as a social dimension, and more precisely as the heart of FT as a social innovation. “Social” means that FT aims to serve a specific category of people considered as disadvantaged.¹⁷ In other words, an FTSE aims, at least as one of its goals, to provide benefits to people who would normally not—or only to a very small extent—enjoy the fruits of equitable trading partnerships. The idea of improving the livelihoods of certain producers in the South is central to FT, and FTSEs’ practices and decisions are often justified in the light of this central goal (Davies and Crane 2003). It is mainly through their social mission that FTSEs distinguish themselves from traditional businesses. The importance of producer support does not mean that this is the only social dimension of FT. For instance, FTSEs may seek to provide employment to low-skilled people or to provide ethical products to poor consumers in the North. But producers in the South are generally the primary declared beneficiaries of FTSEs’ activities. Specific to FT, compared to development projects, is the idea of pursuing the social aim through an economic partnership with these producers.¹⁸

Trade

Trade refers to all the market activities (import, transformation, distribution), which are similar to those carried out by any company. Albeit “fair,” FTSEs are running trade and using market mechanisms: FT as a whole relies on the market to achieve its social goals (Nicholls and Opal 2005). The positioning of trade within the overall strategy of FTSEs, however, can vary on a continuum between “trade as a means” and “trade as a goal” (Gendron 2004b).

Such a trading activity can be described as the economic dimension of FT. It is often used to distinguish FT from traditional charity or development cooperation initiatives. There may be confusion, however, on the term “economic.” Indeed, in the broad sense, “economic” refers to the production of goods and services, which does not necessarily take the form of trading on the market. In a more restricted sense, “economic” may mean “marketoriented.”...

Table of contents

• Cover
• Halftitle
• Title
• Copyright
• Contents
• List of Figures
• List of Tables
• Abbreviations
• Foreword
• Acknowledgments
• Introduction
• PART I. Diverse and Innovative Organizational Models in a Hybrid Field
• PART II. Theoretical Perspectives
• PART III. Managing Hybridity in Fair Trade
• Conclusion
• Notes
• Bibliography
• Index