1. Fair Trade Organisations in Europe: A Significant Field of Social Enterprise? 5th Social Enterprise Research Conference London, 26th June 2008 Benjamin HUYBRECHTS & Jacques DEFOURNY Centre d’Economie sociale HEC-Management School University of Liège

2. Context and research question Context = rapid evolution of the Fair Trade (FT) sector and diversification of its organisational landscape Context = rapid evolution of the Fair Trade (FT) sector and diversification of its organisational landscape Fair Trade Organisations (FTOs) increasingly depicted as Social Enterprises (SEs): implicit link considered as obvious (and legitimate?) Fair Trade Organisations (FTOs) increasingly depicted as Social Enterprises (SEs): implicit link considered as obvious (and legitimate?) Question: what are the elements that make FTOs eligible as SEs? Question: what are the elements that make FTOs eligible as SEs?

3. Structure Theoretical framework (SE) Theoretical framework (SE) Fair Trade and FTOs Fair Trade and FTOs Organisational dimensions Organisational dimensions Governance structure Governance structure Linking dimensions and governance Linking dimensions and governance Conclusion Conclusion

4. Theoretical framework: Social Enterprise 1

5. 1. Theoretical framework Social enterprise, social entrepreneurship and social entrepreneurs = 3 entries for the same reality (SE)? Social enterprise, social entrepreneurship and social entrepreneurs = 3 entries for the same reality (SE)? American–anglo-saxon approaches (Dees & Anderson 2006) = 2 schools of thought: American–anglo-saxon approaches (Dees & Anderson 2006) = 2 schools of thought: –« Social Enterprise » school: focus on market income and blurring frontiers –« Social Innovation » school: focus on innovation and outcome (not income) –Dees & Anderson propose to aim the intersection between the 2 = « Enterprising Social Innovation »

6. 1. Theoretical framework European approach = EMES network European approach = EMES network –SEs = mainly Third Sector legal forms –Specific governance models –Multiple resources (not only market) –Focus on innovation Common to most approaches: Common to most approaches: –Social value as the primary aim –Innovation –At least part of market resources

7. Specific field: Fair Trade 2

8. 2.1. Evolution of the movement Origins after WWII; first institutionalisation with « Alternative trading organisations » (IFAT, EFTA, NEWS!,…) Origins after WWII; first institutionalisation with « Alternative trading organisations » (IFAT, EFTA, NEWS!,…) Second institutionalisation = labelling (Max Havelaar and other national initiatives; creation of FLO in 1997) Second institutionalisation = labelling (Max Havelaar and other national initiatives; creation of FLO in 1997) FT composed of two main wings: FT composed of two main wings: –Integrated system (IFAT) –Labelled system (FLO) After 2000: increased complexity After 2000: increased complexity –Hybrid cases (integrated AND labelled) –New small businesses focusing on a particular product or distribution channel = Third FT wave? (Poos, 2008)

9. 2.2. The FT concept FT concept includes different dimensions: FT concept includes different dimensions: –Trade = economic activity –« Fairness » = producer support –Education –Advocacy and regulation

10. 2.3. The 3 dimensions of SE Link with three dimensions of SE (Nyssens, 2006) Link with three dimensions of SE (Nyssens, 2006) Wide array of possible positioning for FTOs Social Producer support Political Education & advocacy Economic Trade Importers Worldshops Distributors IFAT FLO

11. 2.4. Sample and methodology 2.4. Sample and methodology  Interviews with 62 FTOs in 4 European regions: - Belgium = 14 FTOs (2006-2007) - France (Rhône-Alpes) = 24 FTOs (2007-2008) - United Kingdom (England) = 12 FTOs (2008) - Italy (Rome) = 12 FTOs (2008)  FTOs = organisations dealing exclusively with FT products and linked to a network or support structure  Semi-directed interviews with the manager/director of each FTO (1h-1h30) including qualitative and quantitative information

12. FTOs with regard to the 3 dimensions of SE 3

13. 3.1. Economic dimension Market activity: « Continuous activity of production of goods and/or of selling of services » (Defourny, 2001) – « creating value » (Dees, 2001) Market activity: « Continuous activity of production of goods and/or of selling of services » (Defourny, 2001) – « creating value » (Dees, 2001) Significant level of economic risk = many failures Significant level of economic risk = many failures Minimum amount of paid work = most FTOs Minimum amount of paid work = most FTOs Market resources: Market resources: –100% for new businesses –>80% for pioneers (increasing trend; subsidies, gifts and voluntary work decreasing)

14. 3.2. Social dimension Social value: « aiming to benefit the community » (Defourny, 2001) – « creating social value for the public good » (Austin et al., 2006) Social value: « aiming to benefit the community » (Defourny, 2001) – « creating social value for the public good » (Austin et al., 2006) = common aim of FTOs, in spite of heterogeneous practices = common aim of FTOs, in spite of heterogeneous practices Social embeddedness: social value in the very nature of FT products, viewed as « contingent goods » (Becchetti & Rosati, 2005) Social embeddedness: social value in the very nature of FT products, viewed as « contingent goods » (Becchetti & Rosati, 2005) = quality of the product lies in the production conditions (« who produces » and « how it is produced ») = innovation in SEs’ products (Defourny, 2001) and « blended value creation » (Emerson & Bonini, 2004)

15. 3.3. Political dimension Goal = to act on the wider system in order to change the context in which SEs operate (Martin & Osberg, 2007) Goal = to act on the wider system in order to change the context in which SEs operate (Martin & Osberg, 2007) = at the heart of the FT project Education = targeting citizens/consumers Education = targeting citizens/consumers Advocacy & regulation = targeting governments and economic actors Advocacy & regulation = targeting governments and economic actors = stronger involvement for pioneers; Less and differently for newcomer FTOs

16. The governance structure 4

17. 4.1. Leaders (« social entrepeneurs ») 2 types of profiles for FT leaders: 2 types of profiles for FT leaders: –« Social activists »: idealistic people wanting to build new trading rules; e.g. Frans van der Hoff (founder Max Havelaar) –« Business leaders »: idealistic entrepreneurs with business background and/or experience; e.g. Penny Newman (Cafédirect + « SE ambassador ») Many mixed profiles; distinction not always clear-cut Many mixed profiles; distinction not always clear-cut

18. 4.2. Legal forms In the SE literature: legal form important for EMES approach but much less American/anglo-saxon approaches (idea of « sector-bending » and « blurring frontiers ») In the SE literature: legal form important for EMES approach but much less American/anglo-saxon approaches (idea of « sector-bending » and « blurring frontiers ») In the FT sector: mixed legal forms In the FT sector: mixed legal forms –Nonprofit FTOs: mainly pioneers, but decreasing proportion –Co-operative FTOs: minority but strong identity –Individual ventures and business forms: now in majority in most countries (except Italy) = focus on « doing business instead of charity » and demand for credibility –FT groups: nonprofit AND business (e.g. Miel Maya, Oxfam- Wereldwinkels, Traidcraft, Twin,…) –Timid participation to new « SE legal forms » (SCIC, CIC,… except social co-ops in Italy)

19. 4.3. Stakeholders’ involvement Stakeholder management Stakeholder management –Informally: all « multi-stakeholder » –Formally: stakeholder dialogue (e.g. Traidcraft) and/or stakeholders’ representation on the Board Producers: mainly in UK – debates on motivations and effects Producers: mainly in UK – debates on motivations and effects Consumers: rarely (only Cafédirect) Consumers: rarely (only Cafédirect) Volunteers (if any) Volunteers (if any) Investors (shareholders and financial institutions) Investors (shareholders and financial institutions) Other NGOs and FTOs Other NGOs and FTOs Founders, managers, employees… Founders, managers, employees… Broadly speaking, two (or more?) types of FTOs: Broadly speaking, two (or more?) types of FTOs: –Quasi-individual businesses = closer to American approach –Multi-stakeholder, participatory and/or democratic FTOs = closer to European approach

20. Linking goals and governance 5

21. 5.1. Leaders « Social activists » more focused on education & advocacy VS « Business leaders » more focused on growing the trading activity « Social activists » more focused on education & advocacy VS « Business leaders » more focused on growing the trading activity In small and individual FTOs: leader’s positioning has a strong influence on the FTO In small and individual FTOs: leader’s positioning has a strong influence on the FTO In bigger FTOs and « FT groups »: group of specialised leaders or « mixed profile » In bigger FTOs and « FT groups »: group of specialised leaders or « mixed profile »

22. 5.2. Legal forms Nonprofit FTOs more politically-oriented, business FTOs more business-oriented and co-operatives in between (although exceptions and nuances) Nonprofit FTOs more politically-oriented, business FTOs more business-oriented and co-operatives in between (although exceptions and nuances) FT group as a strategy to cover a wider array of dimensions FT group as a strategy to cover a wider array of dimensions On the social dimension: heterogeneous practices but not linked to legal form On the social dimension: heterogeneous practices but not linked to legal form Few differences on profit-making and profit distribution Few differences on profit-making and profit distribution

23. 5.3. Stakeholders’ involvement Volunteers, partner NGOs and FTOs bring more attention to social political dimensions Volunteers, partner NGOs and FTOs bring more attention to social political dimensions Shareholders, managers and financial institutions) bring more attention to business Shareholders, managers and financial institutions) bring more attention to business Possible specialisation of Boards in FT groups (e.g. Miel Maya) Possible specialisation of Boards in FT groups (e.g. Miel Maya) Some stakeholders can bring attention to several dimensions = not a direct link Some stakeholders can bring attention to several dimensions = not a direct link

24. Preliminary conclusions FTOs respect basic features of SE: social mission, limited profit distribution, innovation and self-financing (strong importance of market resources) FTOs respect basic features of SE: social mission, limited profit distribution, innovation and self-financing (strong importance of market resources) Above these basics: much heterogeneity (in terms of legal forms, political activity, governance models,…) Above these basics: much heterogeneity (in terms of legal forms, political activity, governance models,…) Diversity of FTOs reflects variety of SE approaches and practices; FT can feed conceptualisations of SE Diversity of FTOs reflects variety of SE approaches and practices; FT can feed conceptualisations of SE Link FT-SE needs to be explored further Link FT-SE needs to be explored further