Do we need a Fairtrade-style labelling system for manufactured products?

Summary

Can such a labelling system help shoppers make the conscious choice to buy products manufactured under more humane and environmentally sustainable conditions? Or will it require legislation?

This blogpost follows on from “I don’t want your charity, I demand my rights!”  the one about the factory collapse in Dhaka, the death toll of which has now topped 1,000, and in which working conditions were described by the Pope of all people as ‘slave labour‘. Let’s see Primark put that on the front page of their 2013/14 annual report.

I accused Primark of presiding over a massive failure of corporate governance in my blogpost mentioned above. Primark publicise in a very high profile manner what it does ethically. It failed catastrophically in Dhaka. One thing Greenpeace, Friends of the Earth and similar organisations may wish to do is to buy shares in the firm’s holding company, AB Foods, and grill executives at the next AGM on why the firm’s corporate governance failed so badly. It’s a tactic that a number of NGOs have tried for years – although to what effect? [Edited to add: Adam Ramsay of People & Planet informed me that the Workers' Rights Consortium campaigns in universities, getting students to put pressure on manufacturers to stick to their published codes of conduct].

A failure of markets as well as a failure of law?

I mentioned in my previous blogpost that local laws had not been enforced regarding the building. Part of the ‘market failure’ on not just clothing, but on imported manufactured goods in general is clear and understandable information that allows customers to decide whether to buy something on ethical grounds. Remember all that stuff about choice I was jumping up and down about? Yes, lets have the information there but have it in a manner where people who might be short on time and/or ability to process that information can do so thus allowing ‘informed choice’.

“Yo Pooffles, do we really need another label? Isn’t this just more red tape?”

It doesn’t need to be. It depends on who sets the standards, who monitors and how they are enforced.

Who should set the standard – the state?

It doesn’t need to be. Two standards many people will be familiar with at least ‘brand wise’ are ‘Organic and Fairtrade‘.

The point with both of these brands of ethical standards is one of trust: Can the shopper trust the labelling when it is listed as ‘organic’ or ‘fairtrade’? As far as the law is concerned, retailers definitely can be prosecuted for labelling food as organic when it is not. Both the Soil Association (that owns the ‘Organic’ brand) and the Fairtrade Foundation (that owns the ‘fairtrade’ brand) keep watch on misuse of their brands. Although it is local Trading Standards that prosecute for criminal offences. In particular Part 2 of The Consumer Protection from Unfair Trading Regulations 2008. In particular Regulation 5 (2)(b) where the action

“causes or is likely to cause the average consumer to take a transactional decision he would not have taken otherwise”

So…yeah, just by looking at that it looks like the labelling of goods as ‘Organic’ or ‘Fairtrade’ without the consent of the brands’/standards’ owners is in breach of the above-mentioned regulations. Oh – and there’s a possible prison sentence in one of the offences.

So the state is setting the standard?

No. The standard is set by independent organisations who then license them. It’s that licensing that in part funds the assessment and monitoring activities to ensure the terms of the license regarding the standards required, are being met. Because the branding provides a commercial advantage over non-branded competitors (that otherwise cannot claim to meet the same standards), there is an incentive for the latter to misuse the brand if it is not enforced. As this potentially misleads the shopper (who ends up with a product that doesn’t meet the standards they desired) and leads to a market failure, the law gets involved.

Could ‘Fairtrade’ be expanded to clothing?

It already does with cotton. But at the moment it feels very small scale. It would be interesting to see the impact of a large-scale marketing campaign backed by the major retailers listed in the weblink above. One for Fairtrade Fortnight in early 2014?

But it’s not just cotton – what about other materials that clothes are made from? 58% of all clothing fibres manufactured in 2009/10 were synthetic. With cotton, you’ve got issues around the wages farmers are paid (bearing in mind too the huge subsidies Western cotton farmers get) as well as environmental issues around water use & pesticides. With polyester as an example, it means getting your hands dirty with fossil fuels. Can you have an ethical labelling system that incorporates such a synthetic fibre? Because if it fails on those grounds, then why would manufacturers of polyester products – whose brands include the big sportswear brands, bother with the rest when it comes to manufacturing clothing? Remember that the aim for the ‘ethical label’ is one that is easy for consumers to understand & trust, with both limited time and knowledge.

Ethical electronics, ethical manufacturing

It’s not just clothes but electronics too that has issues with how it manufactures its products – as Apple for example has found out.  The challenge here for something like the Fairtrade label is how to go about moving into the realm of manufacturing.

When I first became aware of Fairtrade in my childhood, it was all about helping farmers in poor countries. When you look at the international website, the recent updates it has posted reflects this. (What its website doesn’t say is that during the 1980s & 1990s it was churches running Fairtrade stalls that did a lot of the groundwork to get the whole thing up and running). In a nutshell, could people use their consumer power to have an impact? In 2011, €4.9billion was spent on Fairtrade products. (Source – their 2012 annual report, which is worth a read).

One for the global NGOs

After all, they’ve got more than a few executives on six-figure salaries! It shouldn’t be beyond them to get their organisations & partners together and produce a robust ethical standard for clothing and consumer goods – and an easily recognisable brand to match. Isn’t this something where they could link up with the international trade union movement too? ‘Industriall’ has spoken up over this – in particular on CSR and ‘greenwashing’ (Len McCluskey of the Unite Union is one of their UK reps).

“If harnessing consumer power in this manner has little impact, then we’ll legislate”

It’s a tactic that has been used in other fields. You tell those operating in ‘the market’ to sort things out within a specific time frame, and if they don’t, you threaten to pass laws to do the job for them.

Actually, as I’ve mentioned before my own view is that the EU should adopt a system where it sets the minimum working standards that all goods sold in the EU should be manufactured to, irrespective of where they were made. My point is ‘European Society’ has decided very poor working conditions inside the EU are unacceptable, therefore goods imported to the EU under working conditions prohibited within the EU should either be prohibited, or slapped with such a tariff that any competitive advantage gained as a result of poor working conditions is nullified. But you can imagine the outrage from big business that would occur if such a move was adopted.

What can we expect from UK politicians?

Not a lot given the rhetoric around EU membership in general.

Leadership is conspicuous by its absence. To give you a couple of examples:

In 2012, the UK’s non-financial corporate cash surplus was estimated by Deloitte to be at £750billion. (Others have suggested that is an overestimate and the real figure is a lot lower, but still in the hundreds of billions). What would political leadership look like? The Chancellor and the Business Secretary getting the heads of those corporations (and their political EU counterparts) to say: “OK, we are going to co-ordinate a stimulus of both public sector and private sector investment to get the economy going. We’re all going to jump in at once.” But that simply hasn’t happened.

Another example could be on the ethical labelling of products – telling the NGOs and manufacturers to get together and come up with a workable system in X number of years, or the EU will legislate. But that requires leadership, of which the EU is completely lacking. Eurozone members are tied up with the economic stagnation, while the major economy outside the Eurozone is playing with the idea of leaving the EU altogether, rather than doing something constructive. Constructive in that it could raise living standards across the world, and at the same time lead to the movement of some manufacturing jobs back to the EU.

One thing that minsters – in particular cabinet ministers have, is the ability to bring ‘decision makers’ together to act upon something. One nice example of an otherwise junior minister doing this in Cambridge – but not for Cambridge University, was Richard Caborn’s intervention that saved Cambridge United Football Club. (The transcript of the original report is here).

Who’ll step forward?

There’s the challenge. Which senior politicians are going to step forward and either set in train the railroad to a more comprehensive ethical labelling system, and who will carry the stick that is the threat of legislation?

This entry was posted in Business economics and finance, Campaigning, protesting and demonstrating, Charities and Big Society, Employment and job hunting, Law and legal issues, Party politics, Public administration & policy. Bookmark the permalink.

5 Responses to Do we need a Fairtrade-style labelling system for manufactured products?

  1. Tim Haire says:

    Don’t blame Primark, blame the people who shop there. Primark like all these other wicked organisations are just filling a need. Why don’t we blame the consumers for once.

  2. Keith Edkins says:

    Laying aside the vague suspicion that I’m feeding a troll, I think in the 21st century it’s time to move on from Mr Haire’s model of business as a morality-free zone. If you had asked Primark customers to estimate how much of the price of a £6 t-shirt went to the seamstresses, I doubt even the cynics would have gone below 5p. Apparently the answer is 2p. £6 t-shirts are not unique to Primark – M&S sell them, for instance. Can Mr Haire tell me how much of the price of a £6 M&S t-shirt goes to the seamstresses and whether I should avoid shopping there too, if I were a woman? Does any more of the price of a £27.50 M&S t-shirt actually go to the seamstresses or is that just an even greedier mark-up?

    It won’t do, Mr Haire. Consumers do not have the information to scrutinise the ethical practices of companies which claim they have standards.* Companies must take the responsibility, governements, unions & NGOs must hold them to it.

    * BTW Primark’s ethical standards FAQ which the OP links to seems to have gone unavailable, for some reason.

  3. Tim Haire says:

    It wouldn’t surprise if the seamstresses get little more from the M and S bargains. No I don’t shop there as a rule either. My point is like politicians and newspapers consumers get the businesses they deserve.

  4. Tim Haire says:

    And if companies are making claims that aren’t true there are already plenty of laws that can deal with them. But as to consumers even those with the meanest intelligence must be able to infer that whoever has produced a t-shirt that is retailing for 6 pounds can be making little money. We have to take responsibility for our own actions.

  5. anadapter says:

    And include farmers? They deserve to get a decent amount for any produce they sell too (and it would be good as a consumer to know they weren’t being ripped off by supermarkets.)

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