Fair Trade USA CEO Paul Rice on conscious capitalism, the plight of U.S. farmers
From coffee to clothing, U.S. retail sales of items certified by nonprofit Fair Trade USA topped $6 billion in 2016 with well-known brands such as Starbucks, PepsiCo, Target, Costco, Walmart, Patagonia, West Elm and Gap Inc. among its 1,300 corporate supporters.
Even more notable considering the mission of the fair trade movement: The organization generated an additional $500 million in income over the past two decades for more than a million farmers and factory workers touched by its programs in more than 45 countries worldwide.
Last year, Fair Trade turned its attention toward the business of cows, with an initiative led by yogurt maker Chobani aimed at establishing a Fair Trade certification for dairy farms. Among the issues that will be considered: worker well-being; environmental stewardship; animal care; local sourcing; and community and farm investments.
It’s one of Fair Trade’s first major programs for U.S.-based farmers, according to Paul Rice, founder, president and CEO of the nonprofit. Fair Trade certified its first U.S.-based agricultural operation, an Arizona tomato farm, in 2016.
"The dairy initiative fits within that bigger initiative of what we're calling domestic Fair Trade, so certifying labor conditions here in the U.S. because as you may know, labor conditions in the dairy sector, and more broadly speaking in U.S. agriculture, are pretty bad, looking at wages and how low wages are," Rice told GreenBiz.What smart capitalists are realizing, conscious capitalists are realizing, is not only can you be both sustainable and profitable, but in the future, you're going to have to be both.
Ahead of his plenary appearance at GreenBiz 20 in early February, Rice spoke with GreenBiz Editorial Director Heather Clancy about the Chobani relationship, Fair Trade’s expansion into apparel and home guides, and the human side of sustainability. This interview excerpt was edited for length and clarity.
Heather Clancy: Why should fair treatment of workers become a more integral part of corporate sustainability strategy?
Paul Rice: From my perspective, the concept of sustainability as it was defined many years ago, and kind of codified by the United Nations, is a three-pronged concept which includes economic, environmental and social criteria.
I would argue that the environmental side of sustainability has gone forward first, if you will. Corporate America, public policy and consumer consciousness has probably gone forward more quickly on the environmental side of sustainability than it has on the human side of sustainability.
And I think we're in a moment that began probably five to 10 years ago, we're in a moment of transition where the social side of sustainability or the human side of sustainability is now becoming more of a concern, more of a focus, so we're catching up. And, oh, by the way, Fair Trade, while it addresses all three pillars of sustainability, I would say that our claim to fame is really focusing in on the social and economic dimension, and giving companies a shared value model for addressing sustainability insofar as it affects workers and farmers and families and communities.
Why should companies care? First, I would say for reputational risk mitigation. As we learned five years in the Rana Plaza disaster in Bangladesh when a factory collapsed and 1,300 workers were killed, even though the brands that sourced from that factory didn't own the factory, they were ultimately held accountable. Their reputations were impacted by the fact that they sourced from a factory that was so unsafe.
In a day and age where every farmer and worker in the world has a phone, there really are no more secrets in the global supply chain. If factories collapse in the future, we will hear about it. If child labor in the West African cocoa sector persists, we will hear about it. If horrific labor conditions in the Mexican tomato sector persist, we will hear about it....
Why should companies care about the social or labor side of sustainability? The most basic and self-interested reason is because if they don't care, they run the risk that their reputations will be impacted by bad labor practices in those supply chains. But to use more forward and positive thinking, there are real value creation opportunities around the social side of sustainability.
Looking at the supply chain, we work with so many companies that base their business success on product quality. Starbucks, Peet's, high-end coffee companies, their success depends on getting very high-quality coffee beans.
Well, guess what? You get what you pay for. If the farmer is starving, she's not going to have the economic means to invest in product quality, and the product quality is determined largely on the farm. There's a real alignment of interests there. The farmer needs to make a living wage, and Starbucks and Peet's want to make sure that the money that they're paying for that coffee is trickling all the way back to the farmer, and that she's able to produce quality and keep her kids in school. …
Many companies are looking either through their own efforts or through third-party certification for ways to meet this apparent growing consumer interest, concern and demand for products that are socially responsible. None of this is in juxtaposition to or in contradiction to concerns around environmental sustainability. The research suggests that there's a strong overlap…If you look at the last 10, 20, 30 years and how far we've come in the mentality of corporate leaders, there's lots of reason to feel really excited and optimistic about the next 10, 20, 30 years.
The great environmentalists have already concluded that if you want to save the trees, you have to work with the people who live under the trees. You can't fix the environment without addressing the community and the families that live in that ecosystem.
Clancy: How can businesses really go out into their supply chains, into these communities, into U.S. rural communities as well, and treat farmers and agriculture innovators and entrepreneurs less like victims and more like partners?
Rice: The fair trade movement, which has been around since the 1950s, is really anchored in this notion of a global partnership in which farmers and workers, companies and consumers all come together not to redistribute wealth, but to create new wealth, to create shared value.
We're not asking companies who buy Fair Trade products to take a hit in terms of their margins and their profits. We actually believe — and the evidence confirms — that this growing conscious consumer movement is willing to pay a little bit more in order to ensure that farmers and workers are taken care of, and the ecosystems are taken care of.
So it is a value creation opportunity. For us as consumers, we get this powerful emotional value of feeling like we're not on the wrong side of history, that we're actually helping to alleviate poverty, that we're helping to reduce climate change. And companies are able to tap into this market segment and grow sales and make supply chains more resilient. Farmers and workers are getting increased wealth and improving their lives, and they're protecting their environment.
Clancy: You teamed up with Chobani last July to work on a way to certify economic, environmental and social impacts of the dairy industry. Why is that important, and what progress have you made?
Rice: As I mentioned, fair trade is a movement that emerged in the 1950s, so it's been around for a long time. It started in Europe. It's bigger and stronger in Europe. We're a smaller movement here in the U.S.
We launched the label, the Fair Trade label, certification seal, in 1998, so that's been around for 21 years, and that kind of accelerated growth. But for most of our collective history, both in Europe and here in the U.S., we focused exclusively on certifying farms and factories in the global south, in Africa, Asia and Latin America.
The mentality was can we enlist the support of relatively better-off consumers in Europe and the United States to buy products from relatively disadvantaged farmers and workers in Africa, Asia and Latin America to accelerate the improvement of livelihoods? The banner in those early years was trade, not aid. Fair trade was seen as an antidote to that perhaps somewhat broken model of international development aid and the dependency that often creates…
Our realization about eight years ago was that there are potential Fair Trade farmers and workers and potential Fair Trade consumers in every country in the world and that this global north versus global south mentality needed to evolve.
That led us in 2016 to certify the very first U.S. farm in Fair Trade history, a tomato farm in Arizona. That kind of set us on the current course of certifying not just farms and factories in the developing world, if you will, but also here in the United States.
The dairy initiative fits within that bigger initiative of what we're calling domestic Fair Trade, so certifying labor conditions here in the U.S., because as you may know, labor conditions in the dairy sector, and more broadly speaking in U.S. agriculture, are pretty bad. Looking at wages and how low wages are, [there are] huge problems with farmworker housing, huge problems with worker safety and health. Human Rights Watch estimates some 40 percent of the women working in the U.S. agriculture sector have been victims of sexual assault or sexual harassment. Forty percent.
Because most of these workers are immigrants, most of them are unwilling or unable to raise their hand and ask for the help of the law if something bad happens. As Hamdi Ulukaya, the founder of Chobani, put it, the workers in our supply chain are living in the shadows. They don't really enjoy the labor protections that most workers enjoy in other sectors of the U.S. economy.
Can Fair Trade as a voluntary third-party standard and auditing mechanisms, can Fair Trade shine some light on this sector and help farmers and workers and brands all come together to improve labor conditions, to improve livelihoods, both for the workers and for the farmers? Because let's not forget, the small family dairy farmer in the U.S. is also struggling to survive in the face of very low dairy commodity prices, milk commodity prices…The dairy initiative fits within that bigger initiative of what we're calling domestic Fair Trade.
What the smart capitalists are realizing, the conscious capitalists are realizing, is that not only can you be both sustainable and profitable, but in fact, in the future, you're going to have to be both. Sustainability will be the key to being profitable.
I think we're in the early stages of probably a 50-year transition in capitalism toward what some call conscious capitalism or business with purpose, green business, right? We're all talking about the same phenomenon, which is the business community realizing that sustainability is in its own interest, and in fact is the key to its survival.
You asked for progress on the dairy initiative. We're in the research and stakeholder engagement phase right now. And our expectation is to develop a standard and start piloting it by the end of this year, by the end of 2020. So you won't see our label on products until the end of 2020 or maybe even early 2021.
Clancy: Another place where you've been helping people come out of the shadows if you will, is in apparel and home furnishings. Why is that important, and what companies are setting examples others should emulate?
Rice: If you think about our experience as consumers and how we experience products, probably the products with which we have the most intimate and strongest connection and feeling is what we eat and what we wear. So, if ever there was a product to kind of engage the imagination of the consumer around a more mindful and conscious model of consumption, it's apparel.
We've long dreamed that we could evolve the model of Fair Trade food, from coffee and tea to bananas and sugar and all kinds of other fresh fruits and vegetables, and chocolate — don't let me forget chocolate, right? My favorite food, right? And we've long dreamed that we could evolve the model or adapt the model of food for Fair Trade apparel. And so we did our first pilot in 2010. It didn't really have a whole lot of uptake from the industry. Then we signed prAna. What a great brand, making yoga wear, so a great fit with the kind of consumer that would probably be an early adopter of Fair Trade apparel.
It sold really well, and then Patagonia signed in 2014, and that really put us on a pretty rapid trajectory. Today, we're working with leading apparel brands, such as J. Crew and Madewell, Gap Inc. and Athleta. Of course, Patagonia, which is the leading seller of Fair Trade apparel right now. But Target has recently joined, and Target wants to convert whole segments of their apparel to Fair Trade in the next few years. So that's really exciting because we're going to see Fair Trade apparel and kind of a mid-price point as opposed to a higher price point.
Along the way, home goods companies like West Elm, Pottery Barn, Williams Sonoma and Target as well came to us and said, "Well, OK, addressing sustainability in a factory seems pretty similar, whether the factory's making clothing or couches. So could you adapt the apparel model to home furnishings?" And we said, "Sure."
So that's what put us in now about 100 factories making apparel and home goods, mostly in Asia. We're in Vietnam, we're in India, we're in China. We have a few factories certified in Latin America and Central America, mostly. The Fair Trade standard there is really keyed in on the condition of the worker. It's living wage, it's worker safety and health, it's the integrity of that building, but it's also the training of the workers in how to work in a safe way.
It's also the environmental impact of the factory, right? So we've started certifying blue jean factories. They all have closed-loop water processing, so they can't be dumping blue water into a river. That won't pass the Fair Trade certification.
Suffice to say, we're just really excited about the apparel and home good initiative, and it's the fastest-growing segment of our business right now. And I think it reflects a real appetite on the apparel industry to address ethical fashion, and it's becoming commonly termed, in a more meaningful way, and recognizing that wages are still very low in most of these factories throughout Asia, and the only way to improve livelihoods in a single generation is to provide additional wages or bonuses, and that's what Fair Trade does.
Clancy: What advice do you have for chief sustainability officers about how to overcome that C-suite mentality that there's got to be a tradeoff between being more sustainable and more profitable?
Rice: I think we have to make the case for why the sustainability initiatives are value creation initiatives, right? And we have to make the case, not just kind of philosophically, but we have to make it with numbers.
We work with a lot of companies who have taken a given line of coffee or tea and changed the sourcing practices of raw coffee or tea going into that. They've taken that, a given line, and added the Fair Trade label, and they've seen sales jump immediately.
All of those attributes or motivational pieces that we talked about at the beginning of the conversation, those all come into play as we seek to cement the idea and advance the idea that sustainable business is actually, in the end, going to be a more profitable business…
We're in this kind of inflection point moment in history, an inflection point moment that might last 20 years, or 50. It's painful. It's painful because we're pioneers of something that we see so clearly, and yet not everyone sees it yet.
I would say probably half of the businesses that we work with see it super clearly, and they go all-in with Fair Trade and other sustainability attributes, and the other half are kind of dipping their toes in the water, so they realize that their competitors are doing it, so they don't want to be left behind. But there's a lot of toe-dipping right now from companies that are putting some sustainable products out there and seeing how the market reacts.
And that's OK. I agree with you, it's happening too slowly. I would love to see us all pick up the pace. But I like to say I'm tactically impatient and strategically very patient and confident, because if you look at the last 10, 20, 30 years and how far we've come in terms of the mentality of corporate leaders, I think there's lots of reason to feel really excited and optimistic about the next 10, 20, 30 years and where we'll get to.