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

1. Fair Trade Organisations in Europe: A Significant Field of Social Enterprise? Benjamin HUYBRECHTS & Jacques DEFOURNY Centre d’Economie sociale HEC-Management School University of Liège 5th Social Enterprise Research Conference London, 26th June 2008

2. Context and research question • Context = rapid evolution of the Fair Trade (FT) sector and diversification of its organisational landscape • Fair Trade Organisations (FTOs) increasingly depicted as Social Enterprises (SEs): implicit link considered as obvious (and legitimate?) • Question: what are the elements that make FTOs eligible as SEs?

3. Structure • Theoretical framework (SE) • Fair Trade and FTOs • Organisational dimensions • Governance structure • Linking dimensions and governance • Conclusion

4. Theoretical framework:Social Enterprise 1

5. 1. Theoretical framework • Social enterprise, social entrepreneurship and social entrepreneurs = 3 entries for the same reality (SE)? • American–anglo-saxon approaches (Dees & Anderson 2006) = 2 schools of thought: • « Social Enterprise » school: focus on market income and blurring frontiers • « Social Innovation » school: focus on innovation and outcome (not income) • Dees & Anderson propose to aim the intersection between the 2 = « Enterprising Social Innovation »

6. 1. Theoretical framework • European approach = EMES network • SEs = mainly Third Sector legal forms • Specific governance models • Multiple resources (not only market) • Focus on innovation • Common to most approaches: • Social value as the primary aim • Innovation • At least part of market resources

7. Specific field:Fair Trade 2

8. 2.1. Evolution of the movement • Origins after WWII; first institutionalisation with « Alternative trading organisations » (IFAT, EFTA, NEWS!,…) • Second institutionalisation = labelling (Max Havelaar and other national initiatives; creation of FLO in 1997) • FT composed of two main wings: • Integrated system (IFAT) • Labelled system (FLO) • After 2000: increased complexity • Hybrid cases (integrated AND labelled) • New small businesses focusing on a particular product or distribution channel = Third FT wave? (Poos, 2008)

9. 2.2. The FT concept • FT concept includes different dimensions: • Trade = economic activity • « Fairness » = producer support • Education • Advocacy and regulation

10. Political Education & advocacy IFAT Worldshops Economic FLO Distributors Social Importers Trade Producer support 2.3. The 3 dimensions of SE • Link with three dimensions of SE (Nyssens, 2006) Wide array of possible positioning for FTOs

11. 2.4. Sample and methodology • Interviews with 62 FTOs in 4 European regions: - Belgium = 14 FTOs (2006-2007) - France (Rhône-Alpes) = 24 FTOs (2007-2008) - United Kingdom (England) = 12 FTOs (2008) - Italy (Rome) = 12 FTOs (2008) • FTOs = organisations dealing exclusively with FT products and linked to a network or support structure • Semi-directed interviews with the manager/director of each FTO (1h-1h30) including qualitative and quantitative information

12. FTOs with regard to the 3 dimensions of SE 3

13. 3.1. Economic dimension • Market activity: « Continuous activity of production of goods and/or of selling of services » (Defourny, 2001) – « creating value » (Dees, 2001) • Significant level of economic risk = many failures • Minimum amount of paid work = most FTOs • Market resources: • 100% for new businesses • >80% for pioneers (increasing trend; subsidies, gifts and voluntary work decreasing)

14. 3.2. Social dimension • Social value: « aiming to benefit the community » (Defourny, 2001) – « creating social value for the public good » (Austin et al., 2006) = common aim of FTOs, in spite of heterogeneous practices • Social embeddedness: social value in the very nature of FT products, viewed as « contingent goods » (Becchetti & Rosati, 2005) = quality of the product lies in the production conditions (« who produces » and « how it is produced ») = innovation in SEs’ products (Defourny, 2001) and « blended value creation » (Emerson & Bonini, 2004)

15. 3.3. Political dimension • Goal = to act on the wider system in order to change the context in which SEs operate (Martin & Osberg, 2007) = at the heart of the FT project • Education = targeting citizens/consumers • Advocacy & regulation = targeting governments and economic actors = stronger involvement for pioneers; Less and differently for newcomer FTOs

16. The governance structure 4

17. 4.1. Leaders (« social entrepeneurs ») • 2 types of profiles for FT leaders: • « Social activists »: idealistic people wanting to build new trading rules; e.g. Frans van der Hoff (founder Max Havelaar) • « Business leaders »: idealistic entrepreneurs with business background and/or experience; e.g. Penny Newman (Cafédirect + « SE ambassador ») • Many mixed profiles; distinction not always clear-cut

18. 4.2. Legal forms • In the SE literature: legal form important for EMES approach but much less American/anglo-saxon approaches (idea of « sector-bending » and « blurring frontiers ») • In the FT sector: mixed legal forms • Nonprofit FTOs: mainly pioneers, but decreasing proportion • Co-operative FTOs: minority but strong identity • Individual ventures and business forms: now in majority in most countries (except Italy) = focus on « doing business instead of charity » and demand for credibility • FT groups: nonprofit AND business (e.g. Miel Maya, Oxfam-Wereldwinkels, Traidcraft, Twin,…) • Timid participation to new « SE legal forms » (SCIC, CIC,… except social co-ops in Italy)

19. 4.3. Stakeholders’ involvement • Stakeholder management • Informally: all « multi-stakeholder » • Formally: stakeholder dialogue (e.g. Traidcraft) and/or stakeholders’ representation on the Board • Producers: mainly in UK – debates on motivations and effects • Consumers: rarely (only Cafédirect) • Volunteers (if any) • Investors (shareholders and financial institutions) • Other NGOs and FTOs • Founders, managers, employees… • Broadly speaking, two (or more?) types of FTOs: • Quasi-individual businesses = closer to American approach • Multi-stakeholder, participatory and/or democratic FTOs = closer to European approach

20. Linking goals and governance 5

21. 5.1. Leaders • « Social activists » more focused on education & advocacy VS « Business leaders » more focused on growing the trading activity • In small and individual FTOs: leader’s positioning has a strong influence on the FTO • In bigger FTOs and « FT groups »: group of specialised leaders or « mixed profile »

22. 5.2. Legal forms • Nonprofit FTOs more politically-oriented, business FTOs more business-oriented and co-operatives in between (although exceptions and nuances) • FT group as a strategy to cover a wider array of dimensions • On the social dimension: heterogeneous practices but not linked to legal form • Few differences on profit-making and profit distribution

23. 5.3. Stakeholders’ involvement • Volunteers, partner NGOs and FTOs bring more attention to social political dimensions • Shareholders, managers and financial institutions) bring more attention to business • Possible specialisation of Boards in FT groups (e.g. Miel Maya) • Some stakeholders can bring attention to several dimensions = not a direct link

24. Preliminary conclusions • FTOs respect basic features of SE: social mission, limited profit distribution, innovation and self-financing (strong importance of market resources) • Above these basics: much heterogeneity (in terms of legal forms, political activity, governance models,…) • Diversity of FTOs reflects variety of SE approaches and practices; FT can feed conceptualisations of SE • Link FT-SE needs to be explored further