October 21, 2017
By Rejaul Hasan
Consumers want to buy products that are produced while preserving human rights and honoring the global or domestic supply chain. A study by the marketing firm Cone LLC showed that 94 out of 100 people would choose to buy the product that supported a good cause. Traditionally different product certification programs have guided consumer to make conscious purchase decision. According to www.confectionerynews.com, 85 percent of the respondents to research by Lake Research Partners found that the Fair Trade Ingredients label “would help them make better choices.” But are the certification labels actually serving the purpose they are intended for? Do they really bring any substantial benefits to the producers, farmers or workers?
Prof. Andreas Wieland and Prof. Robert Handfield critics on the Fairtrade certification system, talked about the future of the human rights preservation in end-to-end global supply chain in their review paper “Fair Trade and Human Rights in the End-to-End Supply Chain”.
Fair Trade: Certification vs. Reality?
In 1988, the Max Havelaar Foundation applied the first Fairtrade label to packs of Mexican coffee sold in Dutch supermarkets as an “ethical” and “sustainable” product and since then Fair Trade has gained popularity across a huge range of consumer products in the U.S. and Western Europe. Fair Trade claims that “Look for the FAIRTRADE Mark on products. It’s your guarantee that disadvantaged farmers and workers in the developing world are getting a better deal.”
Fair Trade's approach is to offer higher prices to farmers through cooperatives, expecting the money will trickle down to farmers and their communities to alleviate poverty and improve their lives. While the Fair Trade’s approach has yet to be empirically validated, research shows some serious doubt on Fair Trade’s ability to alleviate poverty of rural farmer participated in global supply chain. The high overhead cost of the Fair Trade (53 percent) and the vaguely defined remaining 47 percent budget for “guidance,” “networking,” and “relationships,” is criticized by the researchers. When Fair Trade claims to pay money directly to the farmers, the reality is farmers rarely receive any meaningful portion of the price premium and the Fair Trade organization itself has little information about where this money goes beyond the cooperative. Research criticizes that certifications like Fair Trade have intensive focus on product marketing campaigns in the developed world and it often fails to generate significant benefits for the poorest farmers in most important areas like productivity gains through working input financing, improved planting material, and other agronomic interventions.
Addressing the limitations of the Fair Trade label, researchers mentioned that putting a label on the product to certify that product is “Fair” is too one-dimensional. This is a limited type of approach when trying to solve the real, complex, and challenging problems of human rights in a global supply chain. Often the label has limited scope to tell consumers how suppliers and sub-suppliers are treated in the upstream supply chain. Modern day consumers are more aware of such brand limitations.
Sustainable Supply Chain and Analytics
While supply chains were initially designed to make production safe, it is now time to make products more sustainable and transparent, the researchers commented. Companies should now work on providing safe and ethical working conditions for their suppliers, since the traditional solutions of putting a label on a product is now supplemented with solutions like providing consumers with digital maps that visualize how brands end-to-end supply chain are networked and possibly treated. Such supply chain thinking enables consumers to be their own controlling body instead of trusting the controlling body behind a label. But such initiatives require costly end-to-end supply chain data and also need a supply chain manager to have sophisticated analytical knowledge. This capability will enable a brand to trace their data, store many types of data in a complex database, generate meaningful analytical insights relating to the control functions which will ultimately provide the assurance of compliance to code of conduct.
Tracking Entire Supply Chains
The end-to-end supply chain mapping of a computer mouse by the German organization NagerIT, the use of “Respect Code” (see www.respect-code.org) by a Swiss company called Switcher that enables consumers to visualize the entire supply chain associated with the product they are buying. Several other examples in the paper showed that tracking entire supply chains is indeed possible, which is contrary to the statement of major brands.
Though there are gaps between omnipresent supply chain data, smart devices, and analytical tools; recent attempts are identified to close the gap as IBM and Apple announced a partnership aimed at bringing IBM’s capabilities about Big Data analytics to Apple’s smart devices to transform enterprise mobility. The research extends that, this is not about only having enough data about the social and ecological status of a certain supply chain entity; more it is about how to integrate the data of hundreds of such entities across a fuzzy system as complex and dynamic as a typical electronic or apparel supply chain, about how to gain new knowledge from these combined data sources, and about potential new ways this data could easily be accessed by final consumers.
The paper concluded by adding one more element which is essential in ensuring human rights in end-to-end supply chain. Companies should invest in areas that are traditionally very poor and create long-term partnerships with suppliers. Partenrships are recognized as effective ways to ensure improved working conditions; since workers recognize the companies that continue to invest in them.
Wieland, Andreas & Handfield, Robert. (2014). The Challenge of Ensuring Human Rights in the End-to-End Supply Chain. Supply Chain Management Review. 18. 49-51.