Fair Trade's Growing Pains: Pivoting a Successful Model
When Paul Rice launched Fair Trade USA 14 years ago, it wasn’t easy. He didn't draw a paycheck for six months. The second year, he went without for another six months. But the early struggles, he says, were cake compared with the challenge he faces shifting an already successful business model.
“Once you have actually built something, once you have a successful venture that is creating value and creating jobs,” he says, “there is so much more to lose.” But, he adds, to grow you have to be willing to think critically about your assumptions and existing systems.
Fair Trade USA is a non-profit, third-party certifier of sustainably produced goods, often coffee, tea, and chocolate, in the U.S, branding 95% of fair trade products sourced directly from farmers in countries across Latin America, Central America, Africa, and Asia. The Oakland, Calif.-based organization works with about 800 companies. Last year, U.S. sales of Fair Trade certified goods reached $1.5 billion. Fair Trade has entered agreements with such companies as Whole Foods, Dunkin’ Donuts, Green Mountain Coffee, Sam’s Club and Starbucks.
By cutting out the middlemen, farmers get more of the profits directly. Also, fair trade companies pay an additional premium fee that goes into a separate bank account for social and environmental programs, such as build schools, roads, hospitals, or other local infrastructure. The certification is good for companies here because consumers are willing to pay more for ethically sourced goods.
The program's success has led to growing pains. Traditionally, the fair-trade movement has connected cooperatively-owned farms -- where independent farmers collectively own small plots of land -- directly with manufacturers and distributors. But now Rice is seeking to make the same opportunities available to farmers outside co-ops.
In part, the move is to expand sustainable supply as demand for fair-trade goods increases. Also, Rice wants to extend the program to farmers already working with larger brands. Rice launched a pilot program to source from larger plantations and estates, not just small co-op farmers. The move has proven controversial. Critics say that the competition from the larger estates that small co-op farmers will have to face will make it hard for them to survive.
Changing the model is a risk. Not only is Rice dealing with pushback from the fair-trade community, but his organization is responsible for the livelihoods of 60 employees, in addition to farmers across the globe that depend on his organization’s services.
“It is very much like the start-up phase. There is kind of a leap of faith involved in reinventing your business, and if you don’t have total conviction to that new vision and total commitment to that new vision, there is no way to prevail in the face of all the obstacles,” says Rice.
The first products to be awarded the “Fair Trade” brand that are produced from a larger farming estate will be hitting the shelves of Whole Foods sometime in June. Because of the increased revenue flow, some of the elderly farmers on the Brazilian coffee estate were able to get the glasses they need to be able to see clearly, according to Rice.
It's been key to communicate his message effectively to those involved in and dependent on his organization. Rice says he has had to “go a little slower” to be sure to keep his stakeholders involved in his move. “That is really hard for me," he says.
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