[Part IV: the "What about the farmers" argument. The whole Certification Challenges series is here.]
It’s a good thing I still tutor kids for their SATs, cuz I’m using those long-abandoned math skills for this post.
We’re talking money now. Specifically, the money at TransFair USA, the nonprofit that provides the fair trade certification label for US companies.
Check out TransFair USA’s 2004 annual report (PDF), recently made avaliable on its website. If you do, you’ll see that 69% of TransFair USA’s operating budget came from license fees (Total revenue: $2,748,290. License fees: $1,895,395).
This means that close to 70% of TFUSA’s budget came from companies paying to use the fair trade certification logo.
Starbucks did 21% of all the fair trade coffee that came into the US last year. That means that Starbucks’ licensing fees accounted for roughly 14% of ALL of TransFair USA’s total revenues.*
You can see why TransFair USA loves Starbucks.
Now fair trade accounted for only 3.7% of Starbucks’ total coffee purchases in the last fiscal year. The fact that that 3.7% makes up 21% of all fair trade coffee coming into the US is a stat for both awe and fear.
What’s clear is, even with a minimal commitment to fair trade certification, Starbucks can wield much financial power over TFUSA.
Which explains why Cindy and other Starbucks reps tell me about how Starbucks has Paul Rice (TFUSA’s CEO) and Steve Sellers’ (TFUSA’s COO) support. When I talked to Cindy during the United Students for Fair Trade conference, she said that Paul had been up at Starbucks’ offices just last week. Meaning: TFUSA loves Starbucks. Why don’t you, green LA girl?
Now this love affair continues despite Starbucks not being so nice to fair trade certification all the time. For a company that says it has “similar goals as fair trade,” Starbucks really takes a lot of sideswipes at TransFair. For example, check out Starbucks’ latest letter to the Seattle Times, which implies Starbucks’ own C.A.F.E. practices does better than fair trade certification.
In fact, Starbucks hasn’t done much to follow TFUSA’s “recommendations.” One of them: To convert at least 5% of total green coffee purchases to fair trade within 2 years of launching labelled products. When did a Starbucks blend get a fair trade label? In 2000. How much of their coffee purchases is fair trade now, 6 years later? 3.7%.
So why’s TransFair so nice to Starbucks? I mean, check out the nice letter that Lloyd Gray, PR manager for TransFair USA, wrote for Starbucks’ Fall CSR newsletter.
Why’s TFUSA so nice to transnational companies doing miniscule percentages of fair trade coffee in general? Well… The other biggies — Protctor & Gamble, Sara Lee, and Dunkin Donuts — aren’t as open as Starbucks is in terms of the amount of fair trade they do. But you can imagine how large a percentage of TFUSA’s budget these companies make up, even if, as individual companies, fair trade doesn’t make up much of their purchases.
Which explains why TFUSA’s so eager to get these big multinational companies on board. And when smaller, 100% fair trade companies complain, they’re given the “What about the farmers” argument.
Update, 2/22/06: I wanna clarify that TFUSA is a nonprofit org — So I’m not saying that TFUSA employees would see any personal financial gain by working with big companies. But the big money that big companies bring in makes a big splash, and that splash of publicity could make TFUSA overeager to work with these companies, especially in the absence of formal mechanisms for input from other stakeholders in the fair trade movement.
*The reason the percentages are approximate is because TFUSA’s licensing fees run between 5-10 cents per lb, depending on volume and percentage. In addition, TFUSA offers a discount for paying bills on time
Updates: Part VI: Presong Seesa-Ard’s comments.
[The whole Certification Challenges series is here.]
Hmmmm…thanks for the food for thought. What’s your overall take on this issue?
Comment by Jasmin — February 22, 2006 @ 7:32 am
anyone with a memory in the fair trade movement knows that there’s not a lot of love between Starbucks and TransFair. if you look at how Starbucks finally got on board with Fair Trade, you’d realize that it’s not a love affair. at all. of course, that depends on your definition of love. talk to someone who was at Global Exchange when it all happened years ago and get some perspective.
Comment by bay area fair trade dude — February 22, 2006 @ 10:14 am
looks like transfair is sleeping with the mermaid, that doesnt have to be considered love if your paying for it right bay area fair trade dude?
Comment by m — February 22, 2006 @ 3:33 pm
“looks like transfair is sleeping with the mermaid, that doesnt have to be considered love if your paying for it right bay area fair trade dude?”
don’t you just love the power of the internet to inform and educate?
Comment by Anonymous — February 22, 2006 @ 4:18 pm
“I believe everything I read. I think it makes me a more selective person.”
-Nigel Tuffnel, Spinal Tap, 1988
Comment by mateotemprano — February 22, 2006 @ 5:24 pm
“It goes to eleven.”
-ibid
Comment by Anonymous — February 22, 2006 @ 6:01 pm
Okay kids — Admittedly, I’ve had a nightcap, but I’m v. confused as to what the last 3 comments are trying to say…
Anyway — I’ve written about the Global Exchange issue, here.
Comment by Siel — February 22, 2006 @ 11:37 pm
I don’t see why it necessarily follows that just because the bulk of its operating budget comes from licensing fees, most of which are paid by one large licensee, Starbucks, that TFUSA is then assumed to be unduly influenced by Starbucks.
The goal is to grow the Fair Trade market and increase certification. Does TFUSA turn away applications for certification just so that no one entity pays more licensing fees? That defeats the purpose.
As you point out, TFUSA is a non-profit, the “revenues” that exceed normal operating costs are required by law to be put back into “public service,” in other words, grow the organization.
TFUSA has a board of directors, to which the CEO and other officers are beholden. It may well be that there are weird things at work behind the scenes, but really, unless I’m missing something, I don’t think licensing fees automatically equals undue influence, especially to the degree you imply.
Comment by BirdBarista — February 23, 2006 @ 3:55 am
Hey Siel:
My post was a feeble attempt at humor. Also, I have always wanted to use a “Spinal Tap” quote. I think maybe we all were having night caos at the time of publication…
Comment by mateotemprano — February 23, 2006 @ 4:11 pm
Hey BirdBarista — I think one of the concerns is that there are no formal mechanisms for NGOs or mission-based companies or activist groups to get heard at TFUSA — let alone a seat on the board of directors for these groups. On the other hand, TFUSA in general is organized like a business, setting the scene for at least the fear of undue financial influence on the part of bg companies, especially when TFUSA chooses to come out against activist groups to stand up for companies like Starbucks.
I agree — The money alone doesn’t equal undue influence. But I do feel I see a lot of proof of that influence, you know? I’m a bit at a loss to figure out why TFUSA seems to be willing to go along with Starbucks, even at the detriment of its relationship with activist groups…
mateotemprano — Sorry — My confusion might just be my ignorance re: Spinal Tap in general…
Comment by Siel — February 23, 2006 @ 10:12 pm
Umm… I really don’t get it. Are you saying that Starbucks is providing TSUSA with too much business… buying TOO MUCH Fair Trade coffee from TFUSA? Where else are they supposed to get their FT coffee - it is my impression that TFUSA is the ONLY body that licenses FT coffee in the U.S.A., is it not? So is Starbucks buying TOO MUCH or TOO LITTLE Fair Trade coffee? It can’t be both…
Comment by Liz — July 19, 2006 @ 4:04 pm
Dude, no. You’re looking at this from a way too Starbucks-centric viewpoint. I want Starbucks to do MORE fair trade.
In this post, I’m saying that perhaps TFUSA is allowing itself to get swayed by the money that comes from Starbucks. I’m questioning TFUSA’s policies, NOT Starbucks (at least in this post).
After all, companies are expected to ramp up their fair trade commitments to 5% after 2 years. Starbucks has been a fair trade licensed roaster for SIX years. And it’s STILL not at 5%. I’m hoping TFUSA will put the pressure on to get Starbucks to do more, instead of just writing nice articles for Starbucks’ newsletters.
Comment by Siel — July 19, 2006 @ 11:10 pm