Module 3: Case Studies: The Organic and Fair Trade Movement

Equal Exchange, Inc.

Company Profile

The published mission statement for Equal Exchange, Inc. describes the organization’s efforts “to build long-term trade partnerships that are economically just and environmentally sound, to foster mutually beneficial relationships between farmers and consumers and to demonstrate… the contribution of worker cooperatives and Fair Trade to a more equitable, democratic and sustainable world.”(1) To accomplish this goal, Equal Exchange trades directly with small farmer cooperatives, facilitates small farmers’ access to credit, supports sustainable agriculture and reforestation efforts, and pays producers a guaranteed Fair Trade minimum price. Supporting farmer cooperatives allows smallholding farmers to pool their resources to increase productivity, facilitate global market accessibility, and gain organic certification. Equal Exchange reports that its farming cooperatives have used profits from their fair trade partnerships with Equal Exchange to fund a variety of local development projects, from training doctors in Mexico to building new schools in Peru.(2)

Founded by Rink Dickinson, Jonathan Rosenthal, and Michael Rozyne in 1986, Equal Exchange was a pioneer in the Fair Trade movement.Today, the company is one of the largest worker-owned cooperatives in the United States and is partnered with more than 40 farmer cooperatives in twenty-three countries in Africa, Asia, Latin America, and the United States.(3) Equal Exchange’s products include organic coffee, tea, chocolate, bananas, olive oil, sugar, and other products and in 2017 they reported sales of more than $70 million.(4) The company sells its products in natural food stores, consumer cooperatives, cafés, restaurants, and at major food retailers. Equal Exchange was named the 2017 Massachusetts Sustainable Business of the Year by the Sustainable Business Network of Massachusetts.(5)

Controversy: Fair Trade Certification

Equal Exchange has been a vocal opponent of Fair Trade USA’s decision to split from Fairtrade International, which coordinates fair trade marketing activities in over 70 countries. In January 2012, Fair Trade USA (FTUSA) officially split from Fairtrade International, implementing new criteria for fair trade certification that expanded fair trade eligibility to larger plantations and allowed products to be FTUSA certified Fair Trade if 10% of their ingredients were fair trade, compared to the 20% minimum in other countries.(6) FTUSA claims that making the fair trade industry more inclusive will benefit more impoverished farmers and increase global fair trade sales. Responding to criticism of the certification change, FTUSA stated:

“We believe the future of Fair Trade lies in a more inclusive approach that supports everyone in the global coffee supply chain that is willing to commit to a journey of sustainability, responsibility, empowerment and impact.”(7)

FTUSA hopes to double sales in the United States by 2015, up from $1.3 billion in 2010. However, Equal Exchange and many other fair trade organizations oppose FTUSA’s decision, arguing that small farmers will be overwhelmed by the production capabilities of larger plantations and that companies will include “only the minimum amount” of fair trade ingredients in their products. Rink Dickinson, president of Equal Exchange, called FTUSA’s decision “a betrayal.” Green Mountain Coffee Roasters and Starbucks currently plan to continue to work with FTUSA, although Starbucks has not decided whether it will place a fair trade label on coffee from large plantations. Whole Foods has also joined FTUSA.

Theo Chocolate, Co.

Theo Chocolate, Co., founded by Joseph Whinney, produces organic and Fair Trade certified specialty chocolates.(8) The company “pioneered the supply of organic cocoa beans” in the United States in 1994 and built an organic and fair trade chocolate factory in 2006, establishing the company as the first roaster of organic and fair trade cacao in the U.S. Theo Chocolate currently has a staff of fifty and annual net sales of $5,000,000.(9) Theo Chocolate’s website describes the company’s “standards for social and environmental responsibility” establishing long-term partnerships with producers and using sustainably grown ingredients, green energy sources, and sustainable packaging methods. Theo buys cacao beans directly from farmers and grower cooperatives that utilize organic practices such as “integrated pest management” instead of pesticides, and farm shade-grown cacao to promote biodiversity and reforestation. Theo places particular emphasis on the science of chocolate; a laboratory at the Theo factory allows COO Dr. Andy McShea, a Harvard-educated research biochemist, to evaluate Theo’s cacao supply for quality and antioxidant content during the production process.

Theo also offers a variety of “partner chocolate bars” that reflect Theo’s partnerships with a number of organizations promoting environmental sustainability and social responsibility. For instance, Theo reports that proceeds from Theo chocolate bars carrying the Jane Goodall “Good for All” seal will “benefit cocoa farmers, promote conservation in the tropical rainforest and directly contribute to the Jane Goodall Institute’s efforts to save chimpanzees, develop community-centered conservation efforts, and direct youth education programs around the world.” Proceeds from another Theo chocolate bar help support the PCC Farmland Trust’s efforts to preserve organic farmland in the United States, while proceeds from a different product go to the World Bicycle Relief, which strives to increase productivity and provide educational opportunities in rural Africa by providing bicycles to students, health care workers, and entrepreneurs.(10)

External Evaluation

Theo Chocolate was recognized by Whole Foods Market as a winner of one of the company’s “Supplier Awards”, awarded to “natural and organic vendors who best embody the grocer’s mission and core values” of selling high-quality organic products, establishing strong relationships with communities, and preserving the environment. Whole Foods Market recognized Theo Chocolate for “supporting ethical sourcing [and] for creating high quality products that are sparking consumer demand for ethically-sourced cocoa.”(11) Theo Chocolate was awarded the 2016 Community Impact Gold Award: Sustainability in Business Operations by Seattle Business.(12)

eFarm

Company Profile and Goals

Enabling Farmers to Reach Markets, or eFarm, is a social enterprise based in Chennai, India that works to streamline India’s agricultural supply chain. The company’s founder, Venkata Subramaniam, holds a degree in architecture from IIT Kharagpur and a Master’s in Computer Science from the State University of New York. After working in IT positions for twelve years, Subramaniam left to lead Matchbox Solutions, a social entrepreneurial firm in Chennai. eFarm, one of Matchbox Solutions’ projects, was founded in 2008 to address the unreliability of India’s agriculture market.(13) The organization’s goal is to communicate with farmers, distributors, and vendors with a mission to create a more efficient supply chain that will provide farmers with better prices for their produce, information on market demands, and an expanded consumer base, while offering consumers stable prices and consistent produce quality.(14) In 2009, eFarm won the IIM-Kozhikode White Knight business plan contest, a business school contest designed to “provide a platform to enterprising and ambitious people with ideas for profitable and scalable businesses to make their dreams a reality.”(15)

The quality and consumer price of Indian agricultural products are highly variable because the produce must pass through many “middlemen” before reaching its final sale destination. Excessive handling contributes to a 300 to 400% mark-up in price from production to purchase and a 40% waste of food products. Intermediaries often take advantage of farmers by under-reporting product weight and under-valuing product quality. In addition, produce packaging is not standardized (causing more waste), transportation is often conducted by independent trucks, existing storage rooms go under-used, and there is minimal use of technology to coordinate the trading process.(16)

Methodology

eFarm operates by collecting product information from farmers and demanding information from consumers before “matching the demand and supply using a simple IT-driven order matching system and supplying the produce.”(17) By allowing farmers to fulfill customers’ specific requests instead of only supplying in bulk, produce waste is minimized. Furthermore, eFarm employees help farmers achieve fair prices by providing them with weight standards, teaching them how to grade their produce, and explaining how to calculate the minimum price they should demand for their goods. In exchange, eFarm establishes rural collection centers where farmers sell their produce to eFarm, which then oversees the delivery process. Technology also allows eFarm to provide farmers with consumer demand data that can help prevent over-production and poor crop selection for the next planting season. This may lead to a more productive, fair, and sustainable agricultural model for others to follow as well.(18)

Footnotes

(1) “Equal Exchange: Our Co-op”. http://equalexchange.coop/.

(2) Ibid.

(3) Ibid.

(4) Equal Exchange 2017. Annual Report. https://bit.ly/2OCT3TT.

(5) Ibid.

(6) Neuman, W. “A Question of Fairness.” (November 23, 2011) New York Times. https://www.nytimes.com/2011/11/24/business/as-fair-trade-movement-grows-a-dispute-over-its-direction.html.

(7) Associated Press. “Too much caffeine? Fair trade coffees fighting.” (May 22, 2002) Portland Press Herald. https://www.pressherald.com/2012/05/22/too-much-caffeine-fair-trade-coffees-fighting/. 

(8) "Theo.”www.theochocolate.com.

(9) Dun & Bradstreet, Inc. “Theo Chocolate, Inc.” Global Duns Market Identifiers. As cited by LexisNexis Academic: Company Profile.

(10) “Theo.”www.theochocolate.com/.

(11) Ibid.

(12) West, K. "2016 Community Impact Awards: Sustainability in Business Operations." (November 2016) Seattle Business Magazine. https://www.seattlebusinessmag.com/2016-community-impact-awards-sustainability-business-operations.

(13) Jagannathan, B. “eFarm’s efficient supply chain pays farmers better.” (November 28, 2011) https://yourstory.com/2011/11/efarms-efficient-supply-chain-pays-farmers-better/.

(14) “eFarm.” Retrieved 6 June 2012 from http://www.efarm.in/overview.

(15) Jagannathan, B. “eFarm’s efficient supply chain pays farmers better.” (November 28, 2011) https://yourstory.com/2011/11/efarms-efficient-supply-chain-pays-farmers-better/.

(16) Ibid.

(17) Ibid.

(18) Qiangyi, Y., et al. “eFarm: A Tool for Better Observing Agricultural Land Systems.” Ed. Assefa M. Melesse. Sensors (Basel, Switzerland) 17.3 (2017): 453.