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October 30, 2008

Downturn set to put ethical trade to the test

The UK's Ethical Trading Initiative (ETI) marked its tenth birthday last week with a major conference in London. A multi-stakeholder initiative aimed at improving labour standards in supply chains, ETI has been a major influence over the growth in ethical trade during its first decade. However, the question many are asking is the degree to which ethical considerations will be jettisoned as economic conditions worsen. Ben Cooper reports.

The UK’s Ethical Trading Initiative (ETI) marked its tenth birthday last week with a major conference in London. A multi-stakeholder initiative aimed at improving labour standards in supply chains, ETI has been a major influence over the growth in ethical trade during its first decade. However, the question many are asking is the degree to which ethical considerations will be jettisoned as economic conditions worsen. Ben Cooper reports.

The last decade may have been marked by huge progress in the ethical trade movement and the rise of ethical consumerism but, as more sceptical observers are wont to point out, much of this development was seen during comparatively good times. As the global economy takes a decided turn for the worse the $64m question is the degree to which consumers and companies will remain committed to the ethical trade ideal.

Arguably there are few better barometers of the current state of the ethical trade movement than the Ethical Trading Initiative (ETI), the UK-based multi-stakeholder initiative which aims to address ethical issues in the food and non-food supply chains.

ETI is ten years old this year, and marked the anniversary with a major conference last week. If attendance at and interest in the conference is anything to go by, the ethical trade movement appears to be in no danger of losing momentum, even in these troubled times.

“We were completely overwhelmed by the amount of interest to be honest; we had to turn people away,” says ETI’s Julia Hawkins. “For us it’s really good that people are clearly keeping ethical trade on the agenda despite the downturn and possibly even think about it being just as important if not more so.”

Caroline Miller, corporate responsibility governance manager at Sainsbury’s, who attended the conference, also believes the strong interest in the conference underlines the continued emphasis being placed on ethical issues. “Our most recent data has shown that, while price will continue to be the primary motivation for our customers, once they’ve switched into higher ethically sourced tiers they are less prepared to switch out of them again.”

However, it could also be pointed out that we are just beginning to see the impact of the downturn, and things are likely to get a lot worse. “Obviously we don’t know how serious this recession is going to become,” Miller continues. “But at the moment the signs are that people value the ethics behind what they buy and they will continue to do so.”

Miller goes on to stress how ethical trade is now firmly implanted in many corporate cultures and those companies that have embraced it are not likely to desert these ideas because of a change in economic conditions.

Ingraining ethical awareness throughout companies has been one of ETI’s key priorities. The rationale is that in order to give a company the best chance of reflecting ethical aspirations in buying practices, all employees working with suppliers must be aware of the issues surrounding ethical trade, what constitutes best practice and the implications of their actions further down the supply chain. Campaigners are wary if ethical trade seems to be primarily the domain of CSR professionals, so some were disappointed at the heavy bias towards corporate affairs and CSR personnel at the conference.

In fact, at one point a speaker asked how many people in the audience were involved only in buying, and the response was an extremely sparse show of hands.

“We would have liked to have seen a greater proportion of commercial staff, particularly buyers, at the conference,” Hawkins concedes. “There’s clearly a lot more work to be done to convince companies that ethics needs to become part of the way they do business, rather than being some kind of philanthropic ‘add-on’.”

Meanwhile, Miller contends that if ethical values are seen to define a company’s identity it can be a compelling point of difference from competitors. Naturally she cites Sainsbury’s as an example. “We’re performing very well and the whole core of our brand is based on our values and how they differentiate us from our competitors. We don’t just compete on price. We compete on value and values.”

Miller continues: “It’s also important to recognise that [ethical trade] doesn’t necessarily have to come at a premium.” One example she gives to illustrate this point is Fairtrade bananas, which are sold at Sainsbury’s at the same price as in the mainstream market.

Interestingly, while the Fairtrade Foundation is a member of ETI, and the two concepts are very firmly linked, it has been suggested that the strong consumer recognition which Fairtrade has gained has to a degree eclipsed the work of ETI in raising labour standards across the entire food supply chain in the eyes of the public.

It is certainly fair to say that the organisation’s activities in non-food segments had greater prominence at the conference than those in the food market, and this to a degree reflects the profile of the organisation at large. This is in spite of the fact that this multi-stakeholder initiative includes among its members some of the most prominent food producers and retailers in the UK.

Hawkins agrees that the extremely high profile gained by the Fairtrade movement in the UK has attracted a lot of publicity and may to a degree have deflected attention from the work on broader ethical initiatives in the food supply chain. “I think they’ve certainly done a lot to raise the profile of the needs of commodity producers,” Hawkins says. “I think it’s really important that we do better at getting the message out that when we’re talking about ethical trade, it’s covering the whole of the supply chain, and not just what’s happening in the field.”

To a degree, the disparity between the ETI’s public profile in food and clothing owes more to the attention its work has gained in the apparel sector, rather than a lack of activity in food. Indeed, the organisation estimates that its food retail members account for just over 60% of the total UK food market, or about 75% of the top ten food retailers. Food companies and retailers represented at the conference included Sainsbury’s, Tesco, Asda, Marks & Spencer, Premier Foods and Chiquita Brands International.

“It’s important to point out that some of our greatest achievements have been with our food members including the work we did with gangmasters,” says Hawkins. “In the absence of legislation we set up a voluntary scheme to help drive up standards but we also lobbied the Government to introduce the [gangmasters] licensing system.”

Hawkins also points to the setting-up of a ground-breaking multi-stakeholder initiative among food producers in South Africa, which began just in the wine industry and has now been extended to the entire agricultural sector, as a major achievement, in addition to raising standards for smallholders.

Nevertheless, she concedes that the headline-grabbing news recently has tended to be in the fashion sector. “It’s definitely true to say that there are some big examples of really exciting and innovative approaches in the fashion industry,” Hawkins says. “Recently there hasn’t been as much of that in the food industry.”

In keeping with ETI’s underlying commitment to being a ‘learning forum’ for companies, the conference was by and large looking forward to future challenges, and the question of how ETI can address consumers directly is one of the key debates for the organisation in the coming few years.

There are a number of key distinctions between something like the Fairtrade movement and ETI in terms of scope and aims. However, one key distinction is that Fairtrade is highly focused on the consumer, whereas ETI is not. The consumer message with Fairtrade is concise and simply communicated. Given the success Fairtrade has had in the food sector in particular in recent years, the degree to which ETI may become a more consumer-facing entity will be one of the keenly debated subjects among its corporate and non-corporate members.

While ETI has stated that it does not believe trying to develop an ETI ethical mark for products is viable or desirable, the organisation has said it aims to raise its consumer profile as it moves into its second decade. An example of this is its new ‘Be an ethical pest’ campaign which urges consumers to take retailers to task over the ethical credentials of the products they are selling.

This new direction was endorsed at the conference by Gareth Thomas, Minister for Trade and Development. “Despite the economic downturn, sales are rising in ethical goods as are consumer concerns,” Thomas told the conference. “The public are obviously committed to the idea of helping developing countries through their weekly shopping but there’s not enough information out there to help people shop ethically.”

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