House of Commons - International Development

Select Committee on International Development Seventh Report

6 THE ROLE OF DONORS

90. DFID has provided funds for raising awareness of development issues in the UK. These are not restricted to fair trade organisations although about £1 million has so far been allocated to fair and ethical trading initiatives in this area. DFID told us that, in part as a result of such awareness-raising activities, the growth in the fair trade sector has been mirrored by a significant shift in mainstream business practices towards improved corporate social responsibility.[158] The Fairtrade Foundation writes that:

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The Divine Chocolate Company told us how useful the Development Awareness Funds had been in terms of benefiting both producers in developing countries and consumers in the UK. The £200,000 they received enabled them to create an education plan, supported by BBC television, which sent education packs into schools. They also created a website for children.[160]

91. DFID told us that its own approach was to "encourage many flowers to bloom" and to support many different initiatives as they sought to raise awareness across supply chains about fair, ethical and sustainable trade.[161] DFID has provided considerable support to awareness-raising through its grants to the Fairtrade Foundation, support to the ETI and engagement of Ministers on fair and ethical trade issues.[162]However DFID has not taken the initiative to bring together practitioners in one of its funded areas with those in another. As part of its role in raising awareness of development DFID should consolidate its learning and create a formal mechanism to promote an exchange of information between the fair trade movement, mainstream companies and donors.

Labelling

92. It is clear to us that consumers need to be given full information. The Development Committee of the European Parliament recommended that:

"the Commission and Member States take appropriate measures to ensure that consumers have access to all the information they need in order to make informed choices; and believes that consumers must have the right to access quickly product information, which must be easily comprehensible and presented in a transparent way."[

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This call becomes more relevant as consumers become increasingly interested in reducing their carbon footprint. In a recent speech on climate change, Hilary Benn said that inadequate information for consumers on food miles risks harming agricultural exports from Africa if consumers begin to choose products made locally.[164] Consumers need to be able to weigh up easily the pros and cons of the different products that they purchase.

93. Statistics from the Fairtrade Foundation indicate that the FAIRTRADE mark is recognised by 57% of the population and that it is associated with a better deal for farmers.[165] The FLO note that recognition of the fair trade label in many European countries is over 60%.[166] However at the same time as fair trade is becoming widely recognised, many companies have their own private corporate responsibility schemes, while others join established schemes such as Rainforest Alliance. As noted in Chapter 2 these may not have the same objectives as fair trade, but we are not convinced that consumers can easily distinguish between them. We agree with the European Parliament Development Committee's recommendation that product information on the conditions of production should be displayed in such a way as to ensure that it is easily understood.

94. The Department for Environment, Food and Rural Affairs (Defra) has carried out a study on informing consumers about different environmental labels including funding Newcastle Business School to assess the carbon footprint of a basket of groceries to help inform new eco-labelling.[167] Hilary Benn has expressed his hope "that we can move to products being labelled with two things—information on their carbon cost, and information about the livelihoods of poor people in developing countries who have produced them."[168] The FAIRTRADE mark has achieved a significant level of recognition in the UK but only covers a limited range of products. There are many other credible certification schemes with social and environmental objectives. Consumers should be given sufficient, and easily accessible, information about products made available under these schemes to enable them to make informed choices. We recommend that the Government commission research on the feasibility of creating a labelling scheme which gives consumers information on the share of the retail price that producers receive for a product. Supermarkets already know how much farmers are paid for each kilogram of fruit or vegetable they sell, and companies know how much they pay per kilogram of coffee, or for each tee-shirt. Passing this information on to consumers should not be a difficult task.

Public procurement

95. The principal government guidelines on ethical purchasing are contained in the Office of Government Commerce (OGC) note on 'Social Issues In Purchasing' which outlines how to take account of social issues, including fair trade, in public procurement, while remaining within EC public procurement rules. According to DFID there are no legal reasons why public authorities should not include fair and ethical trade criteria in their procurement practices:

"Current European procurement directives allow governments to decide to include social and environmental criteria in purchasing procedures. Similarly, the UK Office of Government Commerce guidelines do not prevent public bodies such as government departments, schools or local authorities from specifying fair and ethical goods being supplied as part of a supply contract. However, it has to be recognised that a budgetary trade-off will exist where there are significant price differentials between fair and ethical trade goods and conventional alternatives."[

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96. In practice it appears that some local authorities consider the OGC interpretation of EC procurement rules restrictive, and there is uncertainty about whether or not it is possible to specify fair trade products during tendering.[170] Evidence from the Ethical Trading Initiative claims that "far from exploring the full scope for promoting ethical public procurement, these guidelines are so cautious and negative in tone as to actively discourage meaningful initiatives."[171] The ETI also notes that the interpretation of EU public procurement rules is much less restrictive in France and Belgium, particularly with regard to incorporating compliance with ILO core conventions.[172] DFID told us they had started a review of the guidance.[173]

97. If companies and public bodies are finding it difficult to interpret the Office of Government Commerce guidance, and if other EU member states are interpreting EC procurement rules differently, there is obviously a lack of clarity which the Government must address. We are pleased that DFID has made a start on this and look forward to the review of the guidelines. We expect to be advised of the probable end date for such a review.

98. The lack of clarity in the OGC guidance may account for the fact that, according to DFID, only a few Government Departments make available a range of fair trade products.[174] In addition there is no collated data on the spending of Government Departments on fair trade. DFID has estimated that fair trade goods accounted for £70,000 of its total expenditure on food and drink in 2005-06. DFID has now decided to write to Government Departments to see what, if anything, they are doing to increase procurement of fair trade products.[175]

99. We are glad to note that the House of Commons Refreshment Department spent £45,000 buying-in fair trade products between April 2006 and January 2007 and a further £40,000 on souvenir products sourced under various ethical initiatives.[176] Both Houses of Parliament make available fair trade tea, coffee and chocolate in restaurants, bars and cafeterias.

100. Government Departments seem to be less advanced than public authorities and the general public in the procurement of fair trade products. We believe the Government should be leading by example in this regard. We recommend that DFID be much more proactive in encouraging other Government Departments to procure fair trade goods.

Level of funding

101. In addition to raising awareness and encouraging purchasing practices, primarily activities related to the consumption of fair trade products, the Government has a role to play in terms of encouraging the production of fair trade products. The 2005 Commission for Africa recommended that:

"Increased funding from developed countries would help increase the participation of producer groups in fair trade. The demand for products carrying the fair trade mark is growing, but investment is needed in building the capacity of producer groups in Africa to meet the rigorous demands of developed country markets."[

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102. As discussed in Chapter 5, the Fairtrade Foundation and the Fairtrade Labelling Organisation are both seeking donor funding in order to develop new products and to increase the number of producers who benefit from fair trade. Both proposals envisage a number of donors making contributions along with the private sector over a five year period. The UK Government has to date invested relatively modest amounts of funds in fair trade. The returns on this investment have arguably been high. Fair trade has grown more quickly than expected in terms of product coverage and consumer demand. Supermarkets cannot keep pace with the demand for an increased variety of fair trade products.[178]

103. The Government has invested £150 million over the past ten years to help British farmers switch to organic production. The sums requested by the Fairtrade Foundation and the Fairtrade Labelling Organisation in comparison seem small.[179] The decision on whether to fund one or more of these proposals is a matter for DFID after detailed consultation with the relevant organisations. We have already discussed the value of orientating fair trade to reach more of the poorest farmers. We believe that there is a crucial role for the Government to play in helping the poorest producers access international markets and that fair trade is one means of doing this. We recommend that DFID encourage and fund proposals for the expansion of fair trade where such proposals demonstrate that the outcomes would be beneficial to the very poorest farmers.

104. DFID says it is working to encourage the private sector to invest in innovative supply chains which deliver more returns to small scale farmers and farm workers.[180] We regard this as a valid policy objective and one which should be vigorously pursued. The Fairtrade Foundation maintains that its private sector partners are willing to invest in the development of new product ranges but that they would like a clear signal from the Government that it recognises the value of fair trade as a tool for development. Both Marks & Spencer and Sainsbury's said that they believe the Government should complement the role of the private sector. Marks & Spencer told us that retailers were already contributing through the licence fee, the fair trade price premium and by developing markets in the UK.[181] Sainsbury's invested over £4 million in their conversion to fair trade bananas in a single year.[182] These investments demonstrate the commitment of the private sector which should be further encouraged to invest in the development of an expanded range of fair trade products with the support of the Government.

105. Given that fair trade already has the commitment of major UK companies, it provides an easy conduit for engaging the private sector in development by investing in innovative supply chains with a focus on small scale farmers and workers. We recommend that the Government regularly reassess the balance between levels of funding from the private sector and from donors to the Fairtrade Foundation to determine how Government support can best add value to the fair trade movement and its scope, in the context of a rapidly changing market-place.

158 Ev 75 [DFID] Back

159 Ev 89 [Fairtrade Foundation] Back

160 Q 108 [Ms Tranchell]; Ev 87 [Divine Chocolate] Back

161 Q 287 [Mr Thomas] Back

162 Ev 82 [DFID] Back

163 European Parliament, Fair trade and development, 2006. Back

164 Climate change and poverty, Speech by Hilary Benn, Brussels, 17 April 2007 Back

165 Fairtrade Foundation, TNS Omnimas, Topline results, April 2007. Back

166 FLO, Strategic fair trade funding programme, March 2007. Back

167 Q 279 [Mr Thomas] and Defra funds carbon footprint study, 2 April 2007, www.foodmanufacture.co.uk Back

168 Climate change and poverty, Brussels, 17 April 2007. Back

169 Ev 83 [DFID] Back