How is fair trade financed?
20.10.2015 | Group
Fair trade is by no means a new idea: the concept first appeared in the United States in the late 1940s in response to inequalities between rich and poor countries. By 1950, the English NGO (Non-Governmental Organization) Oxfam put forward the idea of importing and selling products made by disadvantaged craftsmen. In 1964, the founding slogan “Trade, not Aid” was first used at an UNCTAD (United Nations Conference on Trade and Development) conference. The concept was an instant hit. In 2014, fair trade accounted for €6 billion of commerce worldwide.
Fair trade and sustainable development: shared goals
Fair trade aims to institute greater equality in global commerce through dialogue, transparency and respect. It also shares the basic values of sustainable development, by working to improve business conditions for marginalized producers and to achieve the common goal of enabling disadvantaged workers to live sustainably, and with dignity, from their work.
To achieve this objective fair trade relies on the following set of notions (established in article 94 of French law no. 2014-856 from July 31, 2014 relating to the social and solidarity economy) :
• Fair price, calculated on the basis of production costs, instead of supply and demand
• Reinforcing worker production capacity and autonomy through additional contributions to support collective projects (purchasing materials to improve production, for example)
• Long-term commercial relationships and respect for basic social rights
Fair trade and socially responsible financing: complementary concepts
The economic crisis fueled the rise of the socially responsible economy, which aims to set up an alternative method of production. Fair trade and socially responsible financing serve as complementary economic models in this effort. Both share the same ambition: to give people the means to act as responsible agents of their own development. While fair trade enables producers (mostly from poor countries) to receive better compensation for their labor, socially responsible financing lends them the funding they need to keep their business activity going.
According to a report by Oikocredit and Max Havelaar France, two major players in the socially responsible economy, French investors are largely in favor of fair trade and socially responsible financing efforts to support small producers and entrepreneurs. Not only is fair trade more widely known (93%) than socially responsible financing (51%), it is also seen as more effective (76% to 70%).
Fundamental need for funding
The socially responsible economy often relies on dedicated structures (cooperatives, mutual funds, associations, foundations, etc.) to carry out its social mission which includes helping people to find work, social housing and, of course, fair trade. Financial results are not a priority. But to remain in operation, these structures still need to secure a measure of financial viability.
Here they can count on socially responsible financing methods. Public entities can also provide aid through special programs, such as the National Action Plan in Favor of Fair Trade in France (Plan d’action national en faveur du commerce equitable en France).
Additional support comes from traditional sources of capital like banks. These financial institutions have developed special financing methods adapted to their needs and values. BNP Paribas supports social entrepreneurship by teaming up with non-profits and setting up dedicated representatives, special products and services and conditions adapted to their specific needs (including, for example, an adapted credit policy).
FAIR TRADE KEY FIGURES
In 2014, fair trade accounted for €6 billion of global commerce, generating revenue of €499 million in France (up 16% over 2013).
Food products make up 80% of sales (by revenue volume). Cosmetics (13%) and textiles (4%) share the rest of the market.
In France, the most popular fair trade product is coffee (50%).
A strong convergence has emerged between organic agriculture and fair trade: 70% of the sector’s revenue came from the sale of organic fair trade products in 2014.
In addition, 10 million people, including producers and their families (from some 1,500 producer groups) benefit from fair trade.