Fair Trade Organisations in Europe: Fair Trade Organisations in Europe: A Significant Field of Social A Significant Field of Social

Enterprise?Enterprise?

5th Social Enterprise Research Conference5th Social Enterprise Research ConferenceLondon, 26th June 2008London, 26th June 2008

Benjamin HUYBRECHTS & Jacques Benjamin HUYBRECHTS & Jacques DEFOURNYDEFOURNYCentre d’Economie sociale Centre d’Economie sociale HEC-Management SchoolHEC-Management SchoolUniversity of LiègeUniversity of Liège

Context and research Context and research questionquestion

Context = rapid evolution of the Fair Context = rapid evolution of the Fair Trade (FT) sector and diversification of its Trade (FT) sector and diversification of its organisational landscapeorganisational landscape

Fair Trade Organisations (FTOs) Fair Trade Organisations (FTOs) increasingly depicted as Social increasingly depicted as Social Enterprises (SEs): implicit link considered Enterprises (SEs): implicit link considered as obvious (and legitimate?)as obvious (and legitimate?)

Question: what are the elements that Question: what are the elements that make FTOs eligible as SEs? make FTOs eligible as SEs?

StructureStructure

Theoretical framework (SE)Theoretical framework (SE)

Fair Trade and FTOsFair Trade and FTOs

Organisational dimensionsOrganisational dimensions

Governance structureGovernance structure

Linking dimensions and governanceLinking dimensions and governance

ConclusionConclusion

Theoretical Theoretical framework:framework:

Social EnterpriseSocial Enterprise

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1. Theoretical framework1. Theoretical framework

Social enterprise, social entrepreneurship Social enterprise, social entrepreneurship and social entrepreneurs = 3 entries for and social entrepreneurs = 3 entries for the same reality (SE)?the same reality (SE)?

American–anglo-saxon approaches (Dees American–anglo-saxon approaches (Dees & Anderson 2006) = 2 schools of thought:& Anderson 2006) = 2 schools of thought:– « Social Enterprise » school: focus on market « Social Enterprise » school: focus on market

income and blurring frontiersincome and blurring frontiers– « Social Innovation » school: focus on « Social Innovation » school: focus on

innovation and outcome (not income)innovation and outcome (not income)– Dees & Anderson propose to aim the Dees & Anderson propose to aim the

intersection between the 2 = « Enterprising intersection between the 2 = « Enterprising Social Innovation »Social Innovation »

1. Theoretical framework1. Theoretical framework

European approach = EMES networkEuropean approach = EMES network– SEs = mainly Third Sector legal formsSEs = mainly Third Sector legal forms– Specific governance modelsSpecific governance models– Multiple resources (not only market)Multiple resources (not only market)– Focus on innovationFocus on innovation

Common to most approaches:Common to most approaches:– Social value as the primary aimSocial value as the primary aim– InnovationInnovation– At least part of market resourcesAt least part of market resources

Specific field:Specific field:Fair TradeFair Trade

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2.1. Evolution of the 2.1. Evolution of the movementmovement

Origins after WWII; first institutionalisation with Origins after WWII; first institutionalisation with « Alternative trading organisations » (IFAT, EFTA, « Alternative trading organisations » (IFAT, EFTA, NEWS!,…)NEWS!,…)

Second institutionalisation = labelling (Max Havelaar Second institutionalisation = labelling (Max Havelaar and other national initiatives; creation of FLO in and other national initiatives; creation of FLO in 1997)1997)

FT composed of two main wings:FT composed of two main wings:– Integrated system (IFAT)Integrated system (IFAT)– Labelled system (FLO)Labelled system (FLO)

After 2000: increased complexityAfter 2000: increased complexity– Hybrid cases (integrated AND labelled)Hybrid cases (integrated AND labelled)– New small businesses focusing on a particular product or New small businesses focusing on a particular product or

distribution channel = Third FT wave? (Poos, 2008)distribution channel = Third FT wave? (Poos, 2008)

2.2. The FT concept2.2. The FT concept

FT concept includes different FT concept includes different dimensions:dimensions:– Trade = economic activityTrade = economic activity– « Fairness » = producer support« Fairness » = producer support– EducationEducation– Advocacy and regulationAdvocacy and regulation

2.3. The 3 dimensions of SE2.3. The 3 dimensions of SE

Link with three dimensions of SE (Nyssens, 2006)Link with three dimensions of SE (Nyssens, 2006)Wide array of possible positioning for FTOsWide array of possible positioning for FTOs

SocialProducer support

PoliticalEducation & advocacy

EconomicTrade

Importers

Worldshops

Distributors

IFAT

FLO

2.4. Sample and 2.4. Sample and methodologymethodology

Interviews with 62 FTOs in 4 European regions:Interviews with 62 FTOs in 4 European regions:- Belgium = 14 FTOs (2006-2007)- Belgium = 14 FTOs (2006-2007)

- France (Rhône-Alpes) = 24 FTOs (2007-2008)- France (Rhône-Alpes) = 24 FTOs (2007-2008)

- United Kingdom (England) = 12 FTOs (2008)- United Kingdom (England) = 12 FTOs (2008)

- Italy (Rome) = 12 FTOs (2008)- Italy (Rome) = 12 FTOs (2008)

FTOs = organisations dealing exclusively with FTOs = organisations dealing exclusively with FT products and linked to a network or support FT products and linked to a network or support structurestructure

Semi-directed interviews with the Semi-directed interviews with the manager/director of each FTO (1h-1h30) manager/director of each FTO (1h-1h30) including qualitative and quantitative informationincluding qualitative and quantitative information

FTOs with regard to FTOs with regard to the 3 dimensions of the 3 dimensions of

SESE

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3.1. Economic 3.1. Economic dimensiondimension

Market activity: « CMarket activity: « Continuous activity of production ontinuous activity of production of goods and/or of selling of servicesof goods and/or of selling of services » (Defourny,  » (Defourny, 2001) – « creating value » (Dees, 2001)2001) – « creating value » (Dees, 2001)

Significant level of economic risk = many failuresSignificant level of economic risk = many failures

Minimum amount of paid work = most FTOsMinimum amount of paid work = most FTOs

Market resources:Market resources:– 100% for new businesses100% for new businesses– >80% for pioneers (increasing trend; subsidies, gifts and >80% for pioneers (increasing trend; subsidies, gifts and

voluntary work decreasing)voluntary work decreasing)

3.3.22. . Social dimensionSocial dimension

Social value: « aiming to benefit the community » Social value: « aiming to benefit the community » (Defourny, 2001) – « creating social value for the (Defourny, 2001) – « creating social value for the public good » (public good » (AustinAustin et al. et al., 2006, 2006))

= common aim of FTOs, in spite of heterogeneous = common aim of FTOs, in spite of heterogeneous practicespractices

Social embeddedness: social value in the very Social embeddedness: social value in the very nature of FT products, viewed as « contingent nature of FT products, viewed as « contingent goods » (Becchetti & Rosati, 2005) goods » (Becchetti & Rosati, 2005)

= quality of the product lies in the production = quality of the product lies in the production conditions (« who produces » and « how it is produced ») conditions (« who produces » and « how it is produced »)

= innovation in SEs’ products (Defourny, 2001) = innovation in SEs’ products (Defourny, 2001) and « blended value creation » (Emerson & Bonini, 2004)and « blended value creation » (Emerson & Bonini, 2004)

3.3. Political dimension3.3. Political dimension

Goal = to act on the wider system in Goal = to act on the wider system in order to change the context in which SEs order to change the context in which SEs operate (Martin & Osberg, 2007)operate (Martin & Osberg, 2007)

= at the heart of the FT project= at the heart of the FT project

Education = targeting citizens/consumersEducation = targeting citizens/consumers

Advocacy & regulation = targeting Advocacy & regulation = targeting governments and economic actorsgovernments and economic actors

= stronger involvement for pioneers; = stronger involvement for pioneers; Less and differently for newcomer FTOs Less and differently for newcomer FTOs

The governance The governance structurestructure

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4.1. Leaders 4.1. Leaders (« social (« social entrepeneurs »)entrepeneurs »)

2 types of profiles for FT leaders:2 types of profiles for FT leaders:– « Social activists »: idealistic people wanting « Social activists »: idealistic people wanting

to build new trading rules; e.g. Frans van der to build new trading rules; e.g. Frans van der Hoff (founder Max Havelaar)Hoff (founder Max Havelaar)

– « Business leaders »: idealistic entrepreneurs « Business leaders »: idealistic entrepreneurs with business background and/or experience; with business background and/or experience; e.g. Penny Newman (Cafédirect + « SE e.g. Penny Newman (Cafédirect + « SE ambassador »)ambassador »)

Many mixed profiles; distinction not Many mixed profiles; distinction not always clear-cut always clear-cut

4.2. Legal forms4.2. Legal forms

In the SE literature: legal form important for EMES In the SE literature: legal form important for EMES approach but much less American/anglo-saxon approach but much less American/anglo-saxon approaches (idea of « sector-bending » and approaches (idea of « sector-bending » and « blurring frontiers »)« blurring frontiers »)

In the FT sector: mixed legal formsIn the FT sector: mixed legal forms– Nonprofit FTOs: mainly pioneers, but decreasing Nonprofit FTOs: mainly pioneers, but decreasing

proportionproportion– Co-operative FTOs: minority but strong identityCo-operative FTOs: minority but strong identity– Individual ventures and business forms: now in majority in Individual ventures and business forms: now in majority in

most countries (except Italy) = focus on « doing business most countries (except Italy) = focus on « doing business instead of charity » and demand for credibilityinstead of charity » and demand for credibility

– FT groups: nonprofit AND business (e.g. Miel Maya, FT groups: nonprofit AND business (e.g. Miel Maya, Oxfam-Wereldwinkels, Traidcraft, Twin,…)Oxfam-Wereldwinkels, Traidcraft, Twin,…)

– Timid participation to new « SE legal forms » (SCIC, CIC,… Timid participation to new « SE legal forms » (SCIC, CIC,… except social co-ops in Italy)except social co-ops in Italy)

4.3. Stakeholders’ 4.3. Stakeholders’ involvementinvolvement

Stakeholder managementStakeholder management– Informally: all « multi-stakeholder »Informally: all « multi-stakeholder »– Formally: stakeholder dialogue (e.g. Traidcraft) and/or Formally: stakeholder dialogue (e.g. Traidcraft) and/or

stakeholders’ representation on the Boardstakeholders’ representation on the Board Producers: mainly in UK – debates on motivations and effectsProducers: mainly in UK – debates on motivations and effects Consumers: rarely (only Cafédirect)Consumers: rarely (only Cafédirect) Volunteers (if any)Volunteers (if any) Investors (shareholders and financial institutions)Investors (shareholders and financial institutions) Other NGOs and FTOsOther NGOs and FTOs Founders, managers, employees…Founders, managers, employees…

Broadly speaking, two (or more?) types of FTOs:Broadly speaking, two (or more?) types of FTOs:– Quasi-individual businesses = closer to American approachQuasi-individual businesses = closer to American approach– Multi-stakeholder, participatory and/or democratic FTOs = Multi-stakeholder, participatory and/or democratic FTOs =

closer to European approachcloser to European approach

Linking goals and Linking goals and governancegovernance

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5.1. Leaders5.1. Leaders

« Social activists » more focused on « Social activists » more focused on education & advocacy VS « Business education & advocacy VS « Business leaders » more focused on growing the leaders » more focused on growing the trading activitytrading activity

In small and individual FTOs: leader’s In small and individual FTOs: leader’s positioning has a strong influence on the positioning has a strong influence on the FTOFTO

In bigger FTOs and « FT groups »: group In bigger FTOs and « FT groups »: group of specialised leaders or « mixed profile »of specialised leaders or « mixed profile »

5.2. Legal forms5.2. Legal forms

Nonprofit FTOs more politically-oriented, Nonprofit FTOs more politically-oriented, business FTOs more business-oriented and co-business FTOs more business-oriented and co-operatives in between (although exceptions and operatives in between (although exceptions and nuances)nuances)

FT group as a strategy to cover a wider array of FT group as a strategy to cover a wider array of dimensionsdimensions

On the social dimension: heterogeneous On the social dimension: heterogeneous practices but not linked to legal formpractices but not linked to legal form

Few differences on profit-making and profit Few differences on profit-making and profit distributiondistribution

5.3. Stakeholders’ 5.3. Stakeholders’ involvementinvolvement

Volunteers, partner NGOs and FTOs bring Volunteers, partner NGOs and FTOs bring more attention to social political dimensionsmore attention to social political dimensions

Shareholders, managers and financial Shareholders, managers and financial institutions) bring more attention to institutions) bring more attention to businessbusiness

Possible specialisation of Boards in FT Possible specialisation of Boards in FT groups (e.g. Miel Maya)groups (e.g. Miel Maya)

Some stakeholders can bring attention to Some stakeholders can bring attention to several dimensions = not a direct linkseveral dimensions = not a direct link

Preliminary conclusionsPreliminary conclusions

FTOs respect basic features of SE: social FTOs respect basic features of SE: social mission, limited profit distribution, innovation mission, limited profit distribution, innovation and self-financing (strong importance of market and self-financing (strong importance of market resources)resources)

Above these basics: much heterogeneity (in Above these basics: much heterogeneity (in

terms of legal forms, political activity, terms of legal forms, political activity, governance models,…)governance models,…)

Diversity of FTOs reflects variety of SE Diversity of FTOs reflects variety of SE approaches and practices; FT can feed approaches and practices; FT can feed conceptualisations of SEconceptualisations of SE

Link FT-SE needs to be explored furtherLink FT-SE needs to be explored further