How Ethical Consumption Strengthens Certification Systems and Rent Seeking Agencies

In 2021, Chobani became the first in the American dairy industry to obtain fair trade status after being certified by Fair Trade USA (FTUSA). This feat, however, was not enough to hold off a class action lawsuit over allegations that Chobani was still not doing enough to ensure fair and sustainable practices. And, unfortunately, the FTUSA has also been criticized concerning its ethical position within the certification sector.

To enhance its credibility in the marketplace, the FTUSA has enacted new policies and increasing its ties with popular and respected brands, such as Chobani and whole foods. Whole Foods has attracted interest from a variety of third-party certifiers in the area of ​​ethical marketing, due to the launch of its Source for good program. Such initiatives reinforce conscious consumption and encourage the trend towards social labeling.

Ethical marketing tactics became common in the 1990s, and companies seized opportunities to cater to more ethical consumer base Since.

Fairtrade certification, in particular, was an intriguing offering in the market given that it aligned the affluent lifestyles of advanced economies with the subsistence struggles of the Third World.

Fair Trade was born to serve as an innovative supply chain to help alleviate poverty by engaging the world’s poor in the trading system. The main objective of fair trade is to distribute more benefits to poor producers, while encouraging businesses and consumers to support development efforts by paying a higher price for certified products.

The general concept of fair trade can be widely applied as an umbrella term, but it should be noted that the terminology of “fair trade” is also used in commercial law, referring to trade liberalization and non-compliance policies. discrimination, and has nothing to do with ethical marketing. campaigns.

The desire for businesses to display a fair trade label on their product packaging or shop windows stems from the ‘halo effect‘, where the incorporation of a single certified product into a company’s product portfolio could improve the reputation and ethical position of a company as a whole. A prime example of this, known as “Fair Wash”, occurred when Proctor and Gamble’s (P&G) Millstone brand began offering Fair Trade certified coffee in 2004. This marketing strategy was easy to implement for P&G, as the sales generated by Millstone are low in 2004. compared to its Folgers brand, and yet the whole company could be perceived as supporting fair trade.

Similarly, Starbucks was also able to capitalize on “fair wash” when its brand gained a more favorable reputation, having offered fair trade coffee to its customers in 2006. And this despite the fact that certified coffee represented only about 6% of its coffee imports worldwide. this time.

Starbucks and P&G have offered new potential for fair trade certifiers, which has sometimes led to criticism as to whether the interests of large multinationals are supplanting the needs of small producers. And while some industry leaders like Chobani choose to leverage certifying agencies, others, like Starbucks, have decided to vertically integrate the process. Starbucks launched its own program, Coffee and Farmer Equity (CAFE) Practices, just a few years after achieving Fair Trade certification.

As interest in fair trade has grown, so have certification systems, which is particularly troubling for the marketing of certified products. Although fair trade may initially seem financially attractive to poor producers, it does not correct areas of instability in the macroeconomic realm, nor does it guarantee continued sales. Thus, the positioning of certified producers on the market could be compromised if supply were to exceed demand, or if another social label were to divert attention from this sector.

To address demand-side concerns, as well as ensure competitive rents, certifiers have encouraged schools and municipalities to apply for fair trade status, and with impressive success.

In 2006, Media, Pennsylvania became the first certified city in the United States and there are now 48 campaigns for Fair Trade Towns and 110 campaigns on college campuses nationwide. In 2010, Chicago adopted a resolution support all fair trade initiatives taking place throughout the city.

The power and influence of fair trade has been particularly strong in Europe, and in the UK market alone there are more than 600 communities certified And thousands of certified schools. Wales was the first nation to be certifiedand Scotland reached Fair Trade Status in 2013, after committing its parliament to advancing the promotion and public awareness of fair trade on an annual basis, and ensuring that people regularly buy fair trade products.

Obviously, the certifiers managed to get help from governments and public institutions to continue sales, and now fair trade organizations, like the FTUSApromote certification to help businesses move forward environmental, social and governance (ESG) objectives.

Clearly, the mainstreaming of fair trade has brought about new branding techniques and new networks for rent-seeking agencies – and so we would be wise to monitor the performance of this sector over time.

Fair trade appears to embolden soft forms of regulatory power, while encouraging dependency-based relationships and forced transactions. Indeed, what is most worrying about fair trade is that it standardizes the practices of producers according to what is approved by the certifiers, and takes away the choice of producers in terms of conducting business. Certification may even deter producers from exploring expansion opportunities because, according to basic economics, if you pay producers more for their current offerings, producers are less likely to pursue alternative forms of income generation. Essentially, the premium price charged for certified products serves as a form of subsidy rather than a contribution to wealth creation and, given that the label is associated with helping small farmers, it is in the interest of certifiers that farms remain small.

Fair trade reduces opportunities for innovation and entrepreneurship for those who need it most.

Kimberlee Josephson

Dr. Kimberlee Josephson is Associate Professor of Commerce at Lebanon Valley College and acts as an associate researcher with the Consumer Choice Center. She teaches courses on global sustainability, international marketing and workplace diversity; and his research and opinion pieces have appeared in various electrical outlets.

She holds a Ph.D. in Global Studies and Business and a Masters in International Politics from both La Trobe Universitya master’s degree in political science from Temple Universityand a bachelor’s degree in business administration with a minor in political science from Bloomsburg University.

Follow her on Twitter @dr_josephson

Get notified of new articles from Kimberlee Josephson and AIER.

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top