Sustainable Consumption

Fair trade has not had much resonance in India till now, but a group of grass-roots producers is hoping to change that

Livemint.com, Monday June 20th 2010

Free can be the enemy of fair—at least in the opinion of a growing band of activists and consumers in Western countries who seek out products that have been bought from farmers and artisans in the developing world at premium prices and which meet social and environmental standards.

Estimated to be a $4 billion (Rs18,440 crore) industry worldwide, fair trade has not had much resonance in India till now, but a group of grass-roots producers is hoping to change that as the middle class expands and looks beyond price when it decides what to buy.

The Fair Trade Forum-India (FTFI), with a membership of 75 organizations, is working with marketing experts at B-schools to promote sustainable consumption through Indian retailers, even as the global economic downturn hit export sales.

“Fair trade exports are not growing fast enough to accommodate all the producers in the country to lift them out of poverty,” says I. Mallikarjuna, the forum’s executive director. “The new initiative is designed to leverage brand equity as the country’s middle-class spending grows.”

Indian fair trade products—from cotton and coffee to cane baskets and candles—are sold overseas each year. But little of this finds it way in the Indian market.

India’s own version of the fair trade movement, however, may just be taking off. On 8 May, which was World Fair Trade Day, Hindi rock band Airport volunteered to play at Inorbit mall in Malad, a Mumbai suburb, at an event organized by Shop for Change Fair Trade, India’s first not-for-profit company to certify fair trade goods to be sold within the country. In New Delhi, it was a more sombre affair; practitioners gathered for sessions and presentations at the Jawaharlal Nehru University campus.

In January, Shop for Change kicked off its operations by certifying T-shirts that use fair trade cotton, retailed at Mother Earth stores in which Kishore Biyani’s Future Group holds an equity stake. In April, fashion designer Anita Dongre became its new customer. Sixteen new styles in the new season use fair trade cotton under her “And” label, and carry the Shop For Change tag.

Seth Petchers, Shop for Change’s chief executive officer, says 5,500 cotton farmers across four states, including Andhra Pradesh and Maharashtra, where a majority of farmers’ suicide took place in the last decade, benefit from fair trade.

For Dongre’s dresses, around 600 quintal of organic cotton was purchased from Chetna Organic Agriculture Producer Co. Ltd, which is supported by a group of donors, including Solidaridad of The Netherlands. The raw cotton was purchased by Kohlapur-based West End Fashions Ltd, to manufacture 8,000 pieces for Dongre in the first run.

The farmers sold the cotton at Rs3,350 per quintal when the market price was Rs2,800 per quintal.

Ashutosh Deshpande, Chetna Organic’s chief executive officer said it exported 30,000 quintal of cotton last year. Above the market price, the importers also pay a fixed premium of Rs320 per quintal that goes towards funding community projects such as setting up a nursery school or constructing toilets. “One village in Andhra Pradesh wanted a warehouse. They today earn alternate income by leasing it out as a marriage venue.”

Fair trade producers are largely active in the unorganized sector, where workers fall outside the ambit of wage and social security protection. Deshpande says it probably cannot replace conventional markets, but over time, social awareness starts improving and people become “conscious” about how they can help by what they buy.

For FTFI, which is affiliated to the Netherland-based World Fair Trade Organization Trade, a beginning has been made. With Rs5 crore assistance from the European Union, it plans to launch a project called Pro-Sustain next month—a series of actions which will involve designing a model to certify handicraft and organic food to be sold in India.

The forum has roped in three professors of Management Development Institute to assist the FTFI project. “We are mostly teaching mainstream business like how IBM and Coca Cola operate around the world. But it’s silent on many issues important for the country,” says Neelu Bhullar, who teaches marketing at the Gurgaon-based institute and has been instrumental in linking producers with corporate houses for discussions on developing markets for grassroots producers.

Largely, the domestic retail thrust has been triggered by the global economic crisis, says Moon Sharma of Tara Projects, one of the country’s biggest fair trade producers with a turnover of Rs12 crore. Her business suffered 25% decline in volumes in 2008.

“There is a lot of exploitation in villages that go on, contractors run away without paying workers. While to run a business ethically, there are development costs involved, we can’t always give work to artisans during bad economic times,” Sharma, who supplies 5,000 oil burners to beauty care chain Body Shop every month, says.

The biggest challenge for fair trade producers is how to keep retail rates attractive for India’s price-conscious customers.

R.S. Rekhi, chief executive officer of Indus Tree Crafts Pvt. Ltd, which runs five Mother Earth outlets in Delhi, Mumbai and Bangalore, says fair trade products have a higher markup because its primary effort is to pay fair minimum wages to producers, which works out to 15-20% higher. For unique items, the mark-up could be as high as 30-35%.

And customers can come in variety of colours. At Tatsat, a retail store that sells fair trade accessories in New Delhi, Lady Okoroama, a Nigerian tourist says she cares little about the origin of how the products have been made. “They have to be nice, first,” she says. Shourie Anand, a young lawyer, on the other hand, says he takes consolation from the fact that artisans aren’t ripped off. “When you are shopping big brands, you don’t know where the money actually goes,” he says.

Like what Starbucks did to coffee, producers believe that even fair trade need strong ambassadors to promote the concept and, often, a dose of glamour helps.

Much of designer Dongre’s fair trade dresses is sold-out this season, claims Shreya Haridas of And Designs Pvt. Ltd. “We’ve ordered a rerun of 2,000 pieces more. Some people drop by because they have read about it and are curious, others have not heard of it at all,” she says.

“This is really all about bringing ethics back in business,” says N.C.B. Nath, who teaches marketing at Indian Institute of Management, Bangalore and is closely involved with implementation of FTFI’s initiative.

Around the world, management education is moving from command-control opportunism to a value system based on trust, says Nath. And balance sheet appraisals are no longer just about bottom lines; the jargon today is “triple bottom lines” that seek to take into account profit, people and the planet.

“We are telling young students to be human today and I think they respond well,” he says.

Critics usually point out that it’s free, not fair trade that improves opportunities for people. Adherents on the other hand, believe free trade is exploitative. And nothing upsets fair trade believers when they are branded as a charity case.

“What we are doing is not a handout. It’s a market-based model to improve livelihood of workers. Through guaranteed fair trade, we are adding value to the supply chain,” asserts Shop for Change’s Petchers.

And, it’s not asking much by telling consumers to be conscious about labels, he says. “We are offering a concrete action that will make a difference to people’s lives. Customers get a trendy product and farmer a fair deal.”

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