A seeming major new report from the World Fair Trade Organisation (WFTO), Traidcraft Exchange, University of York and Cambridge University, is challenging leaders to foster business models that put people and planet first.
The report unveils key features of such mission-led business models and provides a direct contrast with profit-primacy businesses.
Titled, Creating the new economy: business models that put people and planet first, the report challenges government, business and finance leaders to foster mission-primacy business models in order to kick-start the new economy.
The report gives specifics to the idea of stakeholder capitalism, which is the focus of leaders gathering in Davos this week are asking. A broad range of senior voices from academia and international organisations have already expressed support for the ideas in the report (see below).
Related story on University of Cambridge site. Press release on University of York page. Business models report launch page.
Based on a recent study of Fair Trade Enterprises, a member-body of WFTO, the report unveils pivotal governance, management and profit reinvestment models that are already working across the world. These models ensure that business is focused on benefiting society and the planet.
These are also more resilient enterprises and are better able to pioneer sustainability efforts. Key insights about Fair Trade Enterprises include: 92 per cent reinvest all profits in their social mission; 52 per cent are led by women; four times less likely to go bankrupt; and 85 per cent report actively sacrificing financial goals to pursue social or environmental goals while retaining commercial viability.
The report concludes that these characteristics give Fair Trade Enterprises an ability to prioritise social and environmental goals in their investments, practices and impacts. The report includes case studies where the ownership of an enterprise by workers, farmers or artisans results directly in them prioritising the interests of these producers.
Manos del Uruguay, for instance, is a fashion producer and brand owned and governed by 12 women’s producer cooperatives across Uruguay. Holy Land Co-operative is another such example in Palestine that is profiled.
The report also includes case studies of Fair Trade Enterprises that have innovated other governance, management and profit-distribution models that ensure mission-primacy.
For example, Miquelina in Colombia (a high-performance garment manufacturer) deploys a foundation-ownership model that locks in the social mission, and Mahaguthi in Nepal (mostly focused on fashion manufacturing) has formally locked-in a 100 per cent profit-reinvestment model to ensure any surplus from trading goes back into supporting marginalised communities. Gebana in Switzerland has deployed a similar model in food and agriculture.
While practising a radical model of Fair Trade (Fair Trade across their operations and with their suppliers), these enterprises also pioneer ecological practices. For instance, Prokritee in Bangladesh has built a business model that upcycles waste fabrics into bags and baskets. Chile’s Green Glass collects discarded bottles and transforms them into drinking glasses, while Chako in Zanzibar turns waste glass into light fittings. Cambodia’s Village Works makes bags from various waste bags and produces reusable bamboo straws.
As enterprises built on mission-primacy, they have prioritised initiatives like minimising plastic use many decades before strong market demand emerged (e.g. the 1980s ‘Jute not Plastic’ campaign of European WFTO members, including EZA in Austria).
Chief Executive of WFTO and co-author of the report, Erinch Sahan, says: “Profit-primacy as a business idea is outdated and is hurting people and planet. While leaders in Davos explore the concept of stakeholder capitalism, 364 Fair Trade Enterprises representing over EUR 750 million in turnover already made this a reality. One million people already benefit. Now is the time for action to spread such enterprise models far and wide.”
In response to the new research, a growing number of academics, non-governmental organisations and business networks are now signing a letter calling for action to promote these models of business.
Their letter challenges governments, finance institutions and corporations to take real steps to foster such business models. A range of thought-leaders from across academia and international organisations have already demonstrated strong support for the insights and ideas in the report.
“The extractive economy of profits at any cost has brought us to an ecological brink and polarised society between 1% and 99%. Fairtrade based on ecological sustainability and social justice has become a survival imperative. Fairtrade is based on giving back to the Earth and society .” – Vandana Shiva, Environmental activist, food sovereignty advocate, founder and director of Navdanya International
“Fair Trade Enterprises are not just a niche; they are a laboratory for what all business should become. In a world of scarce resources and growing inequalities, the corporate world must reinvent itself. This report shows how it can grow from being an obstacle to becoming part of the solution.” – Olivier De Schutter, former UN Special Rapporteur on the right to food and Member of the UN Committee on Economic, Social and Cultural Rights
“This report is a timely contribution to our search for innovative strategies to accelerate the achievement of the Sustainable Development Goals. Fairtrade enterprises, particularly those that have gone through the WFTO verification process, represent a mature segment of social enterprises – new models of business that are social mission-driven and have a distributive enterprise philosophy. This means that they are key in any strategy to resolve systemic poverty and widening inequality. Rather than accumulating wealth for stockholders, Fair Trade and other social enterprises distribute the wealth they create to uplift the lives of the poor and marginalized as stakeholders in equitable and sustainable development.” – Dr Marie Lisa Dacanay, founding President of the Institute for Social Entrepreneurship in Asia
“There is growing evidence from around the world that links shareholder capitalism to growing inequalities. The Davos Manifesto seems to indicate that the world’s biggest corporations may be ready to move toward adopting a more purpose-driven business model that prioritizes social and environmental goals along with profit motive. This will no doubt need to be closely monitored. For over a century cooperatives and other social and solidarity economy enterprises have been community-based, value-driven businesses with principles of solidarity, self-help and mutualism, and tenets of democratic governance, autonomous and independent management, reinvestment of surplus to their communities, voluntary and open membership. Enterprises that are part of the fair trade movement are a good example of such a mission-led model for the future. They are, therefore critical partners that need to be recognized and supported by local and national governments and international organizations alike.” – Simel Esim, Head of the Cooperatives Unit at the International Labour Organization
“The Cooperative Movement and Fair Trade are natural partners, promoting and advocating for alternative business models centred around people and values instead of profit maximization – this gives greater power and value to producers and consumers all over the world.” – Georgia Papoutsi, Policy Coordinator on International Development at the International Cooperative Alliance
“Fair Trade enterprises are one of a number of exciting alternatives to business as usual. Placed together, these alternative models that prioritize people and the planet represent a new business ecosystem fit for the purpose of supporting a wellbeing economy.” – Michael Weatherhead, Organisation and Projects Lead and Business Cluster Coordinator at the Wellbeing Economy Alliance
“We can all make a change, as a consumer, as a citizen, as a politician and as a business leader. For my organisation Oxfam-Magasins du monde, doing business and taking into account human rights and the planet is the norm. Mission-led enterprises such as Fair Trade Organizations are structured to tackle in an integrated way both the inequality and ecological issues, the main struggles of our times.” – Pierre Santacatterina, General Director of Oxfam-Magasins du Monde
“Fair Trade Enterprises are demonstrating that an alternative business model is economically viable and ecologically sustainable – another world is possible. This is a message that now urgently needs to be heard and acted on by policy-makers, investors and business leaders.” – Dr Matthew Anderson, Senior Lecturer in Business Ethics, Portsmouth Business School at the University of Portsmouth
“With their business model based on redistributing wealth back to communities, prioritizing the social and environmental needs, and organizing bottom-up, Fair Trade Enterprises are the inspirational organizational models that demonstrate an alternative, fair and just economy is already possible.” – Dr Ozan Alakavuklar, Associate Professor of Organisation Studies at Utrecht University
“Social Mission plus Economic Mission equals Fair Trade Enterprise.” – Prof. Somboon Panyakom, Department of PhD (Peace-building) at the International College of Payap University
“The ‘business models that put people and planet first’ report is a remarkable demonstration of how ‘mission-led’ enterprises such as Fair Trade enterprises are much more successful than the profit-maximisation ones when it comes to creating a positive social impact, reducing poverty and increasing wellbeing, re-investing in social and environmental causes, increasing opportunities for farmers, workers, artisans and communities. Not only: gender equality is greater in Fair Trade enterprises and in general they have more diverse and representative governing boards. As social solidarity enterprises, they are usually more financially resilient. What does this all mean? It means that in today’s unsustainable globalised financial market economy, not only it is possible to survive with different business models that care for community and environment, but that on the long run, those enterprises – networking with each other and in cooperative and SSE circuits – will have much better chances to emerge and to be part of the change of economic system we urgently need.” – Jason Nardi, European Coordinator of RIPESS
“Our economy should not generate poverty, inequality and climate change. This report shows how a different approach to organizing business can empower the poorest and give ordinary people a say in their jobs and communities. Taking back the economy from those who use it to speculate and make themselves rich, this is business practised with ethics at its heart. It should be essential reading on all business school courses.” – Martin Parker, Lead for the Bristol Inclusive Economy Initiative
“WFTO and Traidcraft Exchange’s research gives us hope that there are practical and realistic ways to make our economy work in a way that is fairer for people living in poverty. The alternative to the shareholder first business model is thriving and we urge governments, investors and businesses to adopt the paper’s recommendations to help achieve the Sustainable Development Goals.” – Alex Maitland, Head of Oxfam GB’s Future of Business Initiative
“Putting fairness at the heart of the demographic, digital and green transitions is the challenge of our times. Fairtrade based on decent social and labour standards at the global level is key to sustainable development. New business models aiming at generating positive social impact will play a key role in this. The example of Fair Trade Enterprises shows that new thinking in business and social responsibility can support more resilient and inclusive communities, by creating fair jobs and promoting gender equality, and altogether contribute to socially and environmentally sustainable economies and societies.” – Nicolas Schmitz, European Commissioner for Jobs and Social Rights
“While the business community has been taking ever more steps to embrace its responsibility to help address the environmental and socio-economic crises facing the world, it isn’t evolving fast enough to avert catastrophe. For-benefit businesses, including Fair Trade Enterprises, are pioneering a new kind of business structured to prioritize people and planet, demonstrating how to accelerate the transition to a sustainable and inclusive global economy.” – Heerad Sabeti, CEO, Fourth Sector Group