To say that everybody is talking about ethical trading would perhaps be an exaggeration. But there’s no doubt that consumers as well as companies are becoming increasingly concerned about the origin of the products they buy and the treatment of the people that make them.
Fairtrade is the current buzzword. Aimed at giving local farmers in developing markets better trading conditions, Fairtrade food and drink items are now an established part of mainstream consumerism after years as niche market products.
According to Fairtrade Labelling Organizations International (FLO), the international body that sets the standards and deals with the certification of Fairtrade products in its 20 member countries, global sales of Fairtrade-labelled products reached €1.1 billion ($1.38 million) in 2005, an impressive increase of 37 percent over the previous year. In terms of take-up, the UK and the US are the biggest revenue generators while Australia/New Zealand, Canada, Finland and Sweden have seen the steepest rise in sales in 2005.
Historically, since the inception of FLO in 1997, retailers have been the main channel of distribution for Fairtrade-labelled products, and some of the world’s largest players, including Carrefour and Tesco, have stocked a limited range for a number of years. In the UK, Tesco is the leader in Faitrade revenue terms for food and beverage products. Marks & Spencer meanwhile pipped everyone to the post by becoming the first major UK retailer to sell clothing made from 100 percent Fairtrade cotton. It also switched its range of coffee to Fairtrade.
That’s all well and good, but what does it all have to do with office products? After all, Fairtrade, with only a few exceptions, is all about food and drink.
Quite a lot in fact, given that many OP dealers as well as the large contract stationers aim to provide a one-stop-shop for their customers, with catering products making up a sizeable proportion of their portfolio and indeed their revenues. And a lot of tea and coffee is drunk during the working day…
Demand for Fairtrade products comes from a wide-ranging audience – local authorities, schools and government institutions, small and medium-sized businesses and, ever more so, the big corporates. Andy Hirst is the UK-based category manager at Office Depot International. He explains that Office Depot and Viking Direct have been stocking Fairtrade products for about two years – at the specific request of customers. "Many of our major customers on the contract side of the business now specify that they want Fairtrade products as a first priority, then environmentally friendly products and then whatever else. Fairtrade has overtaken the environment as a chief purchasing criteria. Within Viking, small and medium-sized enterprises have also pretty much dictated that we stock more of these products."
Large UK dealer Oyez Straker has had a similar experience, according to marketing manager Phil Crowe: "We launched our Fairtrade range in January as a result of direct demand from our customers. A number of clients have in fact completely switched to Fairtrade tea and coffee."
Predictably, Fairtrade products are priced somewhat higher than their non-Fairtrade equivalents. Whether that acts as a deterrent to potential buyers is debatable. Martin Coller from independent dealer Almo certainly thinks so. He says: "In our experience, price is an issue. Yes, demand for Fairtrade products is increasing, but the pledge to Fairtrade or to the environment for that matter often gets tested when customers are being asked to pay a few pounds more."
Global player Lyreco agrees that the products’ higher prices are a factor that can make the overall proposition less appealing – to buyers and sellers alike. Group marketing director John Watson says: "We do sell Fairtrade-branded catering products in some of our countries and the demand is starting to grow, but I don’t think there is a strong maturity yet in our market for these ‘ethically correct’ products. It was identified as an axis for development of Lyreco Group’s product range listing during this year’s product selection phase, but we in the end decided against the listing due to relatively low forecasted demand, high minimum order quantities and also a high price difference versus the brand (more than 30 percent)."
Melanie Holmes, marketing project manager at Kingfield Heath, disagrees that price is an issue. She says: "People expect to pay a higher price for Fairtrade products. We have never had any price queries, nor have we had any feedback saying that we’re uncompetitive on these products. Price is not a main factor for companies that decide to buy Fairtrade products. Companies get used to paying a certain price for them and that becomes the norm – everybody is comfortable with that.
"As far as the price from our supplier is concerned, yes, it’s noticeably higher, but only in the same way that it would be from the consumer to the dealer. And again, Kingfield Heath would expect to pay more for that type of product."
The wholesaler has been offering Fairtrade products for the past three years and has alerted many of its dealers to the potential of this range. "We’ve helped dealers in pushing Fairtrade products, because we regard the range as a new opportunity for them. Local authorities, particularly schools and council offices tend to be very environmentally and ethically aware. And dealers that can provide the type of products they want have the edge.
"In the UK, towns can get awarded Fairtrade status and many of our dealers play on that. They look at which town is nearest to them and then launch a full-blown marketing campaign, with sampling campaigns and promotional offers. And in several cases, this has been a real success."
Kingfield Heath itself, meanwhile, is more than happy with the positive uptake of the range. Says Holmes: "Kingfield Heath has absolutely soared on Fairtrade products so far this year, on products such as tea, coffee, hot chocolate and sugar. We always run promotional activities during Fairtrade Fortnight which happens in March, and have historically seen a pick-up in demand in the immediate aftermath. This year, the spike after Fairtrade Fortnight has never subsided. We’re so far showing a 60 percent increase in revenues for this product segment alone.
"And it’s all incremental sales – we haven’t encountered a loss of revenue in other catering products. It seems there’s a market for both types of categories."
Kingfield Heath is expanding its range again next year, with Fairtrade orange juice and more teas and coffees. A lot of that is due to more demand – people basically want a bigger choice.
Indeed, it’s the issue of choice that has been the deciding factor in financial consulting firm KPMG’s move towards Fairtrade products across its UK offices. All tea, coffee, KPMG house wine and sugar is exclusively Fairtrade, while there’s a host of non-exclusive food products available in staff canteens as well. Interestingly, while the firm pays higher prices for these products from its suppliers, it doesn’t pass them on to staff.
In addition to choice, it’s also a question of corporate social responsibility (CSR), as Ian Barlow, London senior partner at KPMG, said during a recent Fairtrade wine tasting: "Fairtrade is about ensuring fairer trading arrangements for marginalised and disadvantaged producers in the developing world. The choices and actions we make here in our everyday lives both at home and at work can have a huge impact on the lives of people halfway across the world."
Along with the undoubted benefits of the Fairtrade movement comes the wider-leading question of ethical trading – buying and selling Fairtrade products is just one small aspect of the overall debate. And while the media focus has been mostly on the food and clothing industry, the issues of human and labour rights are just the same in the office products. For now, however, this does not appear to be on the customers’ radar.
Says Depot’s Andy Hirst: "Customers don’t ask for fairly and ethically traded office products. In that sense, there’s a much stronger focus on environment. They ask for FSC accreditation, for example." So it falls to the companies themselves to put ethical trading on their CSR agenda. And at this time of outsourcing, moving facilities to regions with cheaper and larger pools of labour and, of course, the growing influx of private label, the issue has never previously been more important.
And some companies have embraced it wholeheartedly. Global retail and contract giant Staples has put its money – and resources – where its mouth is. In December of last year, the company launched a new social accountability (SA) audit programme specific to Southeast Asia and India – where the majority of its supplier factories are located – to better address continuing issues with working conditions in those areas. The new audit covers eight key areas, including minimum age, wages and benefits, health and safety, overtime, environmental protection, forced or compulsory labour, disciplinary practices and freedom of association.
According to the company, violations for overtime, health and safety, and wages and benefits are particularly prevalent with the factories audited in China, India, Indonesia and Thailand. And in line with expectations, just a few months after the new SA audit programme came into force, a much larger percentage of factories require corrective action. A company statement said: "It’s because we’re digging much deeper into specific working condition issues. But rather than focusing strictly on the percentage of factories requiring corrective action, we’re more concerned with driving improvements in the factories we audit over time."
UK stationer WH Smith, meanwhile, has joined many of the country’s retailers in their support of the Ethical Trading Initiative (ETI) and its ethical sourcing Base Code. Head of communications and social responsibility Sarah Heath says: "We are always looking to where we can make improvements to make sure everybody in our supply chain is constantly improving labour standards and meeting the standards of the ETI."
Knowing your supply chain is in fact the crucial factor in the whole debate, says the ETI. It sounds straightforward, but can be a difficult task when just one single product may have as many as 20 places of origin.
Global operator Lyreco is acutely aware of its responsibilities – and of the challenges. Says Watson: "We have integrated a clause into all of our supplier contracts ensuring that they, and their contractors, adhere to our strict principles on ethical sourcing. Furthermore, we manage the implementation of this with documented and managed plant visits, especially in Asia."
Jan van Belleghem from European wholesaling alliance interACTION meanwhile cites child labour and patent infringement as the two chief criteria that auditors look for when checking private label-producing factories in Europe and Asia.
For now at least, ethical trading standards are still somewhat loose and there are no equivalents in that regard to, say, ISO 9000 or ISO 14000.
Portraying the right image is, of course, vitally important for a company’s brand image. And any CSR programme clearly says a lot about the firm itself. As somebody once said: CSR should really stand for Common Sense Responsibility. If only.