3 Reasons to Adopt Fair Trade Practices [VIDEO]

by Ellen Lee on May 30, 2012
iStock_000018717831XSmall1-300x290.jpg

Can adopting fair trade practices lead to better business? Paul Rice thinks so.

Rice is the founder and CEO of Fair Trade USA, a nonprofit that inspects and monitors products under the Fair Trade Certified label. Rice started the group more than a dozen years ago to help farmers who cultivate coffee, flowers, and other sought-after crops in developing countries negotiate better prices for their harvests. Since then, more than 800 brands have become Fair Trade USA partners, including large corporations such as Starbucks and Whole Foods, and smaller operations such as TCHO chocolate.

“Most of our business partners are small companies,” Rice says. “They don’t have any particular problems getting involved or signing up for fair trade. It’s pretty easy for companies of any size to start sourcing fair trade products and ingredients, and consumers inevitably reward them for doing that by buying products with the Fair Trade Certified label. So, fair trade is good business for companies of any size.”

Fair Trade USA partners must buy ingredients from certified farms, pay a fair price (usually a premium), and submit to a supply-chain audit.

Still in doubt? Here are three reasons your small business should adopt fair trade practices:

  1. It’s good for business. “Companies do it because they believe in it and because it’s good for business,” Rice says. “They wouldn’t do it if it weren’t good for business.” You can start small: Many businesses are not 100 percent fair trade, but they source some of their products as fair trade.
  2. Consumers increasingly want to support brands with a cause. Assuming that the product is about the same in price and quality, a Cone Communications report last year found that 94 percent of consumers are likely to switch brands to one that supports a social issue, especially economic development.
  3. Consumers are willing to pay a premium for Fair Trade products. In another 2011 study, researchers at the Massachusetts Institute of Technology, Harvard University, and the London School of Economics found that the fair trade label leads to an increase in sales. The study, conducted with “a prominent national grocery retailer,” looked at how much coffee consumers purchased with and without a fair trade label. It also found that consumers were willing to pay up to 8 percent more for a product with the Fair Trade Certified label. When the price of the fair trade coffee was raised higher than coffee without the label, sales of the fair trade product still increased.

Want more info on fair trade? Here’s Rice speaking at the TED Conference.

Advertisement