Focus on Private Sector: Why fair trade may never work

The Fairtrade Foundation recently reported that sales of its products are falling in the United Kingdom as shoppers increasingly turn to discount retailers that stock fewer Fairtrade goods. In response, the charity is loosening some of its certification standards.

Some experts suggest the binary model of branding some products fair trade and others not needs replacing. US philosopher Nicole Hassoun argued in her 2014 book Globalization and global justice for a relative system that rewards companies that are ‘more ethical’ than their peers. [1] There are also newer ethical consumption schemes such as those run by the Rainforest Alliance or as part of the UN’s REDD initiative.

Let’s begin by properly defining the true goal of ethical consumption efforts: to convince businesses to behave ethically, including by paying fair wages or using clean energy sources. The UN Sustainable Development Goals recognise this. Goal 12 in the current proposal combines targets for consumers with targets for businesses to “ensure sustainable consumption and production patterns”.

The trouble is, research is beginning to show that promoting ethical consumption will never deliver these desirable business practices.

“Ethical consumption emerged in the twentieth century because businesses advocated for it, to transfer their own responsibility onto consumers. Let’s now transfer that responsibility back to firms.”

Maha Rafi Atal

For example, in 2002 Eva Alfredsson from the Swedish Agency for Growth Policy Analysis used data on household energy use and budgets to model what the energy market and carbon dioxide emissions would look like in an economy where most households switched their spending as far as financially possible to green consumption, as represented by a sample basket of ‘green’ household purchases. [2] She found that even a full transition to green consumption will only reduce emissions by 13 per cent by 2020 and 30 per cent by 2050.

This might sound significant but she says reductions on this scale will be outpaced as economies naturally grow and more consumers begin to buy more goods. She concluded that, without reductions in overall consumption, we won’t achieve sufficient carbon dioxide reductions to halt the effects of climate change.

There’s another line or evidence around how consumers make decisions. Marketing psychologist Julie Irwin at the University of Texas at Austin in the United States and her coauthors have shown that the thought processes that lead consumers to make ethical choices are too rare to turn ethical consumption into a mainstream movement. [3]

In a series of experiments offering Americans choices between ‘standard’ and ethically produced products, Irwin found that most won’t opt for the ethical option unless they have extensive background information about it. She also found that consumers will actively avoid learning about ethical issues to give themselves ‘permission’ to purchase the standard, less ethical item, which is usually cheaper.

So Irwin suggests that the greatest potential for ethics as a marketing tool is lies with companies. When firms proactively implement ethical production and make education about their processes part of their branding, some consumers will respond positively.

These studies are part of a wider body of research raising questions about the efficacy of ethical consumption. All this suggests the ‘ethical consumption’ movement is misguided. Although well meaning, schemes based on individual consumer choices cannot curtail global emissions or end labour exploitation, if their size relative to the market at large remains as small as research suggests it will.

Ethical consumption emerged in the twentieth century because businesses advocated for it, to transfer their own responsibility onto consumers. Let’s now transfer that responsibility back to firms.

Governments can encourage more firms to become ‘public benefit corporations’ with ethical obligations in their legal structure, as some US states have done. They can mandate minimum wages, restrict zero-hour contracts and integrate labour standards into international trade agreements. Finally, they can require energy companies to green their supply to be licensed to trade.

Maha Rafi Atal is a PhD candidate at the University of Cambridge, where she is researching the political effects of multinational firms acting as public service providers in the developing world. She was previously a journalist, including at Forbes, where she covered the intersection of business, development and international affairs. You can contact Maha on [email protected] or follow her on Twitter: @MahaRafiAta