Profit at the expense of good business
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Carmen K. Iezzi, Special to CNN
April 4, 2011
 

Editor’s Note: Since 2006, Carmen K. Iezzi has served as executive director of the Fair Trade Federation, a trade association based in Washington, D.C., that supports North American organizations committed to fair trade.

At what expense do we maximize profits?

At the cost of children’s lives?

At the cost of the planet’s resources?

At the cost of good business sense?

CEOs, you may tell us that in order to maximize profit for your shareholders, you must turn to cheap, even child, labor. Yet, these practices come at the expense of good business sense, on top of the clear social, moral, and environmental costs.

Exploitation hampers productivity
While it may seem beneficial in the short term, the constant pursuit of the cheapest workers for the meagerest wages in the lowliest conditions results in individuals producing your products with the most limited skill sets and lowest efficiency.

Companies may claim that the behavior of suppliers down the chain is not their concern. Yet, their own profitability and sustainability depends on the ways in which these suppliers treat workers. As Rodney North of Equal Exchange, the oldest and largest for-profit Fair Trade company in the United States, explains, when companies “squeeze their laborers, who in turn work under duress without rest or any support to work better and smarter… they have incentive to ‘give as they get’ e.g.. cut their own corners, slack off, etc.”

When companies move away from exploitative practices and invest in capacity building, though, they enhance one of their main assets: the people behind the products. They support workers who can generate creative solutions, identify greater efficiencies, and mitigate risk, thus improving the bottom line. Ending such practices even enhances productivity. World Bank research in Africa shows that addressing a challenge like structural gender inequality can increase agricultural yields by more than 20%; and, “in 2001, the United Nations reported that eliminating gender inequality in Latin America would increase national output by 5%.”

No matter where in the supply chain your company falls, your business’ position improves when you move away from exploitative labor towards respectful treatment and capacity building throughout the supply chain.

Transparency builds loyalty
Numerous studies show the benefits of customer loyalty – –in cost savings, in word of mouth marketing, in time and effort. Loyalty comes from customers believing in your credibility, feeling engaged to a larger community, and experiencing a sense of personal connectivity with you and your work.

Cooperative Coffees, a green coffee importing cooperative of 22 roasters in Canada and the USA, builds sustainable trading relationships for the benefit of farmers and communities. To further its relationships, it launched FairTradeProof.org in 2009, a website where consumers can track their coffee from the crop to their cup by following the transactions between farmer cooperatives and roasters affiliated with Cooperative Coffees. The site names each producer organization and allows consumers to see copies of contracts, and invoices, as well as background information about the cooperatives and their communities.

Since the site’s launch, more than 94,000 unique visitors have explored their coffee supply chain. Sharing these documents builds credibility behind the claims that Cooperative Coffee makes about the treatment of producers and engages customers in a process greater than simply consuming coffee.

“We hear repeatedly that customers value the transparency we offer,” says Anna Canning of Peace Coffee, a fully Fair Trade coffee roaster in Minneapolis, Minnesota and member of Cooperative Coffees. “People become passionate Peace Coffee drinkers for a variety of reasons – firstly because it tastes so good, and secondly because they feel that they can trust us, because of the open and honest way that we do business through tools like Fair Trade Proof.”

Tripp Pomeroy of Café Campesino, a fully Fair Trade coffee roaster and Cooperative Coffees member in Americus, Georgia, agrees. “In an age of so much spin and green-washing,” he says, “FairTradeProof.org shows our customers the value in supporting our company [over others]. Customers can judge for themselves and choose to support us, because we show that farmers really are getting a fair deal.”

Building loyalty through transparency binds your customers to your producer partners and – thereby – to your business. Customers come back, because they clearly recognize their role in the larger supply chain and tie their choices to the well-being of the farmers.

Companies are succeeding by recognizing the practical ways in which investing in responsible behavior grows their business. Ending exploitation and increasing transparency can deliver greater returns for your business, too.

Profit at the expense of good business

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