Corporate-NGO Partnerships for Sustainable Development

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University of Pennsylvania
ScholarlyCommons
CUREJ - College Undergraduate Research
Electronic Journal
College of Arts and Sciences
5-24-2006
Corporate-NGO Partnerships for Sustainable
Development
Corinne Damlamian
University of Pennsylvania, [email protected]
Follow this and additional works at: http://repository.upenn.edu/curej
Part of the Political Economy Commons
Recommended Citation
Damlamian, Corinne, "Corporate-NGO Partnerships for Sustainable Development" 24 May 2006.
CUREJ: College Undergraduate Research Electronic Journal, University of Pennsylvania,
http://repository.upenn.edu/curej/12.
This paper is posted at ScholarlyCommons. http://repository.upenn.edu/curej/12
For more information, please contact [email protected]
Corporate-NGO Partnerships for Sustainable Development
Abstract
In the last 15 years, the trend of NGOs working in cooperation with business has developed considerably. The
global community – including leaders of international governmental institutions and of the non-profit sector
as well as some business leaders – has recognized the importance of including business in the process of
international development. NGOs, on the other hand, have become instrumental in development work
internationally, but they generally do not have the means and resources to carry out their projects efficiently in
a sustainable manner. This is why engaging business with the public and non-profit sectors to find common
solutions to problems has been an increasing trend globally. The first section of this paper analyzes the general
trend of increasing interaction between the public and the private sector. It outlines some of the benefits of
partnerships to both corporations and NGOs, the practical difficulties they present, and the elements
necessary to establishing a healthy collaboration between both actors. The second section illustrates the
potential of such partnerships by looking at their effectiveness in the fair or ethical trade movement.
Partnerships in fair trade seek to address both the economic and social/environmental aspects of sustainable
development, so they present benefits and challenges simultaneously. We shall use a case study from the coffee
industry, to analyze how a large corporation such as Starbucks works successfully with NGOs to promote
sustainable and fair coffee production practices. Finally, we shall discuss the success of partnerships, drawing
conclusions from the analysis of the case study.
Keywords
sustainable development, NGO, corporate social responsibility, partnerships, fair trade, Philosophy Politics &
Econ, David Ludden, David, Ludden
Disciplines
Political Economy
This article is available at ScholarlyCommons: http://repository.upenn.edu/curej/12
CORPORATE-NGO PARTNERSHIPS FOR SUSTAINABLE DEVELOPMENT
How corporations and nongovernmental organizations can work together,
illustrated with examples from the Fair Trade movement.
Corinne Damlamian
“Senior Honors Thesis”
“Submitted to the Philosophy, Politics, and Economics Program at the
University of Pennsylvania in Partial Fulfillment of Requirements for Honors”
Thesis Advisor: Professor David Ludden
May 2006
~ Acknowledgements ~
I would like to express my appreciation and thanks to my thesis advisor, Professor
Ludden of the History Department for his guidance and advice this semester. Thank you also
to Dr. Danielle Warren of the Wharton School Legal Studies Department, for taking the time
in her busy end-of-semester schedule to read my paper and give me much appreciated
feedback. Finally, I wish to express my gratitude to my friends and family for their
encouragement and support. Special thanks to my parents, especially to my mother for being
the person who first sparked my interest in sustainable development which has driven me to
write this paper.
1
TABLE OF CONTENTS
Introduction
PART I:
PART II:
Conclusion:
3
Corporate-NGO partnerships in general
5
A- The emerging trend of corporate-NGO partnerships
B- Benefits of corporate-NGO partnerships
C- Difficulties of partnerships and requirements for successful
implementation
5
11
Corporate-NGO partnerships in the ethical trade movement
22
A- Lessons drawn from the Body Shop’s Community Trade Program
B- Case study of a successful partnership in Sustainable Coffee:
Starbucks and Conservation International
23
Assessing the success of corporate-NGO partnerships
44
Bibliography
18
27
47
2
INTRODUCTION
The purpose of this paper is to analyze a topic that represents a concrete illustration of
how philosophy, politics, and economics are interconnected on a practical level. Partnerships
between corporations and nongovernmental organizations (NGOs) seeking to promote
sustainable development draw on themes derived from all three disciplines. They challenge
how we traditionally think about the role of business in society and toward its stakeholders;
they change how the for-profit and non-profit sectors conceive of each other and how they
interact with one and other; and they influence how we analyze the idea of international
developmental aid and the effectiveness of policy- making strategies.
Corporate-NGO partnerships can be formed and implemented in different ways. It is
difficult to evaluate the number of partnerships currently in existence, because many are
formed between small local businesses and community groups and are not publicized.
Additionally, partnerships can often involve other actors beyond NGOs and corporations such
as local or national governments, international development institutions, or privately funded
non-profit entities (such a philanthropic foundations), which makes them more complex to
analyze. In this paper we focus on partnerships that attempt to promote development in a
sustainable and ethical manner, for the stakeholders in developing countries of large
corporations that carry out business internationally.
We propose to do this in two parts. The first section of this paper analyzes the general
trend of increasing interaction between the public and the private sector. It outlines some of
the benefits of partnerships to both corporations and NGOs, the practical difficulties they
present, and the elements necessary to establishing a healthy collaboration between both
actors. The second section illustrates the potential of such partnerships by looking at their
effectiveness in the fair or ethical trade movement. Fair trade serves as a good example of an
area where partnerships can link poor producers in the South to rich consumers in the North.
Partnerships in fair trade seek to address both the economic and social/environmental aspects
of sustainable development, so they present benefits and challenges simultaneously. We shall
use a case study from the coffee industry, to analyze how a large corporation such as
Starbucks works successfully with NGOs to promote sustainable and fair coffee production
practices.
Finally, we shall discuss the success of partnerships, drawing conclusions from the
analysis of the case study. Success can be analyzed on two levels. The first entails looking at
the results of practical implementation of partnerships, which show whether corporations and
NGOs work well together and whether they achieve the set objectives of their specific
partnership projects. The second requires asking whether the trend of increasing corporateNGO partnerships can overall significantly contribute to sustainable development and poverty
reduction. We argue that while partnerships are generally a positive force in promoting
development, they also present some limitations. If this trend continues, structural and
regulatory changes that increase the transparency of projects may be necessary to make
corporate-NGO partnerships easier to evaluate from the outside. Only then, through analysis
3
informed by time and clearer, more accessible data, can we truly assess the contributions of
partnerships to sustainable development.
4
PART I: Corporate-NGO partnerships in general
A – The emerging trend of corporate – NGO partnerships
In the last 15 years, the trend of NGOs working in cooperation with business has
developed considerably. The global community – including leaders of international
governmental institutions and of the non-profit sector as well as some business leaders – has
recognized the importance of including business in the process of international development.
Business has the potential, capital, and efficiency to impact various stakeholders in a positive
way. But despite this capacity, there is a concern that business is not always attuned to the
needs of corporate social responsibility (CSR). Companies desiring to be more responsible do
not necessarily have the knowledge, training, or dedication to carry out development
programs. NGOs, on the other hand, have become instrumental in development work
internationally, but they generally do not have the means and resources to carry out their
projects efficiently in a sustainable manner. This is why engaging business with the public
and non-profit sectors to find common solutions to problems has been an increasing trend
globally.
International institutions specializing in aid and economic development have
recognized the value and importance of cooperation between sectors in promoting sustainable
development. In December 2005, the United Nations General Assembly unanimously adopted
a resolution “Toward Global Partnerships.” The text of the resolution describes the joint role
of organizations and businesses in the eradication of poverty and national development:
“Recalling […] the Millennium Development Goals, and the reaffirmation they have
received in the 2005 World Summit Outcome, particularly in regard to developing
partnerships through the provision of greater opportunities to the private sector,
non-governmental organizations and civil society in general so as to enable them to
contribute to the realization of the goals and programs of the Organization, in
1
particular in the pursuit of development and the eradication of poverty.”
The UN expressed the desire to “enhance the contribution of non-governmental
organizations, civil society, the private sector and other stakeholders in national development
efforts”2 through global partnerships. The resolution encouraged public-private partnerships
in the following areas: generation of new investments and employment, financing for
development, health, agriculture, conservation, sustainable use of natural resources and
environmental management, energy, forestry and the impact of climate change. The
development of tripartite partnerships, encouraged by UN agencies and institutions has
contributed to bringing NGOs and business closer together in order to promote development.
For example, the World Bank launched Business Partners for Development in an effort to
bring together business, NGOs and government on particular projects.
1
2
UN Resolution Toward Global Partnerships
UN Resolution Toward Global Partnerships
5
Why have business and NGOs come to be seen as major actors in the promotion of
international development? One reason is a decline in the role of the nation-state in the
context of an increasingly “globalized” international economy. Beyond the rationale of
corporate responsibility and image, transnational corporations (TNCs) or multinational
corporations (MNCs) have gained increasing power of the last decades. Stephen Chen, Chong
Ju Choi, and Carla Miller, in the article “Global Strategic Partnerships Between MNEs and
NGOs,”3 refer to this phenomenon as the “rise of global corporatism.” They argue that this
has taken place throughout the world and has shifted power from governmental institutions to
the private sector. “In the developed industrial nations, state and national governments are
often seen as doing the bidding of their major corporations, while in the less developed world,
MNCs may often be seen to have more economic power than governments.”4
Simon Heap, a former researcher for International NGO Training and Research Center
(INTRAC) who focused much of his research on corporate-NGO relations, believes that as
business has become more multinational and electronic means of communication have
advanced, there has been a “perceived reduction in the powers of the nation-state to affect
development and a rise in the powers of the business community”5. TNCs are responsible for
about 25% of the Earth’s gross national products, so that they have unprecedented resources
at their disposal. Because of their ability to have far reaching activities, there is an increasing
sense that business has a responsible role in promoting development: “the welfare state is
giving way to the business welfare.”6
However, business, especially large multinationals, is also perceived as ruthless and
exploitative in many ways, caring only about the bottom line. They tend to do what is
necessary to stay within the bounds of laws and regulations, but have little incentive to
promote practices that go beyond what is required. Yet TNCs today have a considerable
influence on national governments and international institutions, for example increasing trade
liberalization because “the preconditions to increasing trade and investment involve cutting
regulations and diminishing the role of national governments in protecting local industries and
public good services.”7 Increasing international corporate power and reach have made the
private sector much harder to regulate at the national level, and no supra-national organization
seems prepared to take on this task. Stuart L. Hart, author of Capitalism at Crossroads,8
agrees that the power of governments has eroded in the wake of globalization. He also notes
that this is due the growth of transnational corporations whose supply chains span several
continents. But he argues that “NGOs and civil society groups have stepped into the breach,
assuming the role of monitor and, in some cases, enforcer of social and environmental
standards.” 9 Hart points to the drastic increase in the number of NGOs in the last ten years as
3
Stephen Chen, Chong Ju Choi, and Carla C.J.M Millar. “Global Strategic Partnerships between MNEs and
NGOs: Drivers of Change and Ethical Issues.” Business and Society Review 109, no.4 (Winter 2004): 395-414.
4
Miller, Chen, Choi 405.
5
Heap, Simon. “NGO-Business Partnerships: Research-in-progress.” Public Management 2, no.4 (Dec 2000):
556
6
Heap. 556
7
Canadian Council for International Cooperation “Bridges or Walls? Making Our Choices on Private Sector
Engagement” 4
8
Stuart L. Hart. Capitalism at Crossroads.(Upper Saddle River, NJ. Wharton School Publishing) 2005.
9
Hart:19
6
a result of this, noting that there are currently more than 50,000 international NGOs,
compared to fewer than 20,000 only a decade ago.
The increased interest of business in CSR stems from the current importance of brand
image to a company’s performance. In “Beyond Self-Regulation,”10 Jim Bendell discusses the
effect that brand image can have on a corporation’s profitability or stock value. The rapid
development of telecommunications in the last decades has contributed to this phenomenon.
The public in general – consumers, investors, and NGOs – are more informed of business
practices around the globe, and of their negative or positive impacts. Not only does this
awareness facilitate the efforts of civil society groups in contesting business practices, but it
also can impact brand image and become a financial liability for corporations. Although their
motivations may be mostly due to public relations (PR) concerns, socially responsible
investments are increasing. In 1999, over $2 trillion were invested in a socially responsible
manner in the US, representing 13% of all professionally managed investments in the
country.11
Simultaneously, NGOs are seeking new ways to achieve their goals. John Elkington
and Shelly Fennell, in “Partners for Sustainability”12 argue that NGOs have become frustrated
in their efforts to improve environmental practices through legislation, and that therefore
some are attempting to work directly with business to achieve their goals. “Quite simply,
NGOs realized that business participation was essential to the development of any longlasting solutions.”13 NGOs are also facing the difficulty of maintaining and finding new
sources of funding. In 2001, the Canadian Council for International Cooperation (CCIC)
created a guide for NGOs called “Bridges or Walls? Making Our Choices on Private Sector
Engagement” which outlines possible ways of engaging with the private sector. It explains
that cutbacks in international development aid by governments have put pressure on the nonprofit sector to find alternative funding. Some NGOs have turned to the private sector for
funding, but they do not want to be in a position of dependency vis a vis corporations. Thus
partnerships are a way of engaging the private sector in projects in which it has an interest,
rather than simply receiving funding from a corporation that could withdraw its support at any
time.
The push for more responsible business practices has caused some corporations to
seek out NGOs as partners to help them implement solutions to development problems.
Because NGOs are usually more trusted by the public, which sees them as more reliable than
businesses on issues concerning the environment and social responsibility, a company
associated with an NGO can have a more positive public image. In 1997, the Corporate-NGO
Partnership Program was launched by the Japan Center for International Exchange (JCIE). It
was recognized that with the rise of civil society and corporate philanthropy in the AsiaPacific region, relations between NGOs and businesses were moving toward partnerships
10
Jem Bendell. “Self-Regulation: An Introduction to Business-NGO Relations and Sustainable Development.”
Greener Management International 24 (Winter 1998): 3-9.
11
CCIC : 5
12
John Elkington, and Shelly Fennell. “Partners for Sustainability.” Greener Management International 24
(Winter 1998): 48-60
13
Elkington & Fennell: 49
7
rather than simple relations of donor to recipient. The goal of JCIE was to take a case study
approach to researching the emerging realm of partnerships in order to come up with some
general principles that contribute to making them successful in a wide range of areas.
Following a conference in 1999 in Tokyo, attended by both corporate and non-profit
representatives, JCIE published the lessons learned from its study of corporate-NGO
partnerships in Corporate-NGO partnerships in Asia Pacific.14 This report, written in part by
Tadashi Yamamoto, illustrates and confirms the trends noted above:
“In addition to the expansion in the size of [NGO] sector, there has clearly
been an evolution in the scope and nature of NGO activities. NGOs have begun to
transform themselves from traditional organizations that provide charitable
contributions and services to the poor into organizations that directly involve
themselves in addressing issues in developing countries, such as rural development,
poverty alleviation, nutrition and health, reproductive biology, and education, and
global issues such as environmental preservation, human rights, refugees, and the
population crisis.” 15
The report notes the parallel need for more funding as government sponsorship is declining
while activities of NGOs are increasing. Simultaneously, “corporations appear to have started
adding a new dimension to their philanthropic activities by developing partnerships with
emerging Asian NGOs rather than merely continuing the traditional pattern of charitable
giving.”16
Yamamoto observes the recent decline of government power, and the transfer of
responsibilities to the non-profit sector, as one of the causes for this trend in Asia. In the
phases of economic boom of the “Asian Miracle” in the 1980s and 1990s, “governments were
considered the sole arbiter of public goods […] and both corporations and nonprofit
organizations were put under their control or were subject to their guidance.”17 However,
since the Asian financial crisis of 1997, governments have been relying increasingly on NGOs
to help alleviate social problems across the region. Globalization has also created new sets of
concerns about CSR and has required domestic adjustment on the part of all actors. During
the Asian Miracle, corporations experienced economic gains which enabled them to expand
their activities and role as engines of economic growth in the region, thus strengthening their
impact on society. They took on a more active and direct role in solving social problems that
went beyond charitable giving, and began to see NGOs as useful partners in their activities
involving stakeholders. “A new generation of managers and owners played a role in
transforming the way that corporations interact with the broader society [as] younger
executives hold different views from their predecessors on the roles and responsibility of their
companies.”18 They have come to recognize that the long-term success of their business is
closely related to the health and stability of the societies in which they operate.
14
Yamamoto, Tadashi. “Corporate-NGO Partnership: Learning from Case Studies.” Corporate-NGO
Partnerships in Asia Pacific. (Japan: Japanese Center for International Exchange, 1999)
15
Yamamoto:14
16
Yamamoto: 15
17
Yamamoto: 21
18
Yamamoto: 20
8
There appears to be general agreement among various actors that corporate-NGO
partnerships will increase in number and scope in the future. Elkington and Fennell’s article
was intended to present the results of research done on NGO-corporate partnerships and
relations in the context of environmental issues. The analysis was commissioned by British
Petroleum (BP -now Beyond Petroleum) in 1996, in an attempt to find out what kind of NGO
they should be engaging with, how many organizations they should be involved with, and
how to make such partnerships successful. BP hired SustainAbility to carry out the research
on this topic. In conducting their research, the authors surveyed over 60 NGOs and companies
and interviewed 20 companies that have experience with corporate-NGO partnerships. They
found that both companies and NGOs believed relations between the two sectors would
improve in the future, and 85% of the respondents believed the number of partnerships would
increase over the next five years. However, neither side foresaw an end to confrontational
relations.19 Heap notes that within the NGO community, people believe NGOs will
increasingly work in accordance with TNCs rather than against them in the future. He sites a
1998 study of 133 NGOs that supported this conclusion.20 The very fact that CCIC wrote a
guide for NGOs helping them conceptualize their relationship to business is an indicator of
increased interaction between the two sectors.
“Partnerships between business and NGOs may be a contemporary solution to
pressing present-day problems [but] a changed environment has implications for the way
NGOs and businesses think and work.”21 This is because traditionally the two sectors have
been conflicting rather than cooperating with one and other. Business and NGOs used to
interact only through confrontation or through charitable donations given by the private sector
to fund NGO activities.22 NGOs and business are often considered to be on “opposite ends of
the continuum of concern on issues of poverty and development.” 23 While business is
perceived as caring only about the financial bottom line, the non-profit sector is typically seen
as being concerned with poverty reduction, and more social or environmental goals. This has
led to stereotyping on both sides translating into mutual suspicion and resistance to change.
NGOs see themselves as the losing party in attempts at collaboration because they have
weaker bargaining power. They therefore believe that most of the benefits of partnerships are
enjoyed by corporations. On the other hand, companies view NGOs as being too idealistic and
not having enough discipline to function in the market. The most prevalent stereotypes are
rooted in the fact that “NGOs view companies as unreliable, dominated by economic selfinterest, while they in turn see NGOs as marginal ‘do-gooders’ who cannot manage their
finances.”24
CCIC’s guide illustrates the dilemma faced by NGOs in relation to business. They do
not know if they should be working in conjunction with corporations or working against them.
There is a fear that partnering would not necessarily change the way business is conducted,
but that it may negatively influence the non-profit sector. It is true that “large TNCs are of the
19
Elkington & Fennell: 50
Heap: 558
21
Heap: 556
22
Bendell: 4
23
Heap: 558
24
Heap: 558
20
9
greatest concern to the NGO community because of their direct impact on the lives of the
poor, and their power to influence the rules of global trade and investment.”25 But NGOs
regard the growing power of TNCs, and the concentration of power in their hands, as one of
the main contributing factors to the growth in disparities between the rich and poor
worldwide. “When we compare company sales figures and national GDP [in 2000], 51 of the
world’s largest “economies” are corporations; only 49 are countries.”26 This difference
illustrates the economic power of the business sector relative to macro-economies of
developing countries. NGOs face a dilemma in deciding whether they should encourage
business to use this power to further the goals of sustainable development, or whether they
should work against corporations by pushing for more private sector regulations in an attempt
to harness the power of the private sector.
David Lewis, in “Nongovernmental Organizations, Business, and Management of
Ambiguity,”27 argues that relations between business and NGOs have traditionally been seen
as oppositional because there is distrust between the two sides created by outdated, illinformed, or stereotyped perceptions of each other. These have been reinforced by how
researchers traditionally analyze corporate-NGO relations.28 But these relations are now
changing as NGOs are finding themselves increasingly involved in areas of commercial
activity. They have taken on an active role in providing credit, supporting micro-enterprises,
and have formed links with producers of various products such as handicrafts and primary
goods. These new areas of activity have led NGOs to “seek the kind of expertise and
knowledge found in the private sector” and benefit from “its practices for improvement in
efficiency and economic sustainability.”29
Accordingly, the differences between businesses and NGOs are becoming increasingly
blurred. The main perceived difference – that “NGOs have monopoly over principles while
companies focus on profit” – is still generally accurate today. But the frontier between these
sectors is breaking down as we see more and more links developing between them. Heap
points to the fact that both sectors have begun to adopt each other’s vocabulary and methods:
“both now talk about branding, niche marketing and customer satisfaction.”30 According to
him, the main NGO aid agencies may be charities, but they are managed similarly to
companies with huge turnovers, marketing strategies and revenue targets. Heap points out that
there is a move on the part of NGOs to focus more on the goal of “humanizing capitalism”
rather than simply fighting it or turning to profit-making entities for funding31. On the other
hand businesses are increasingly concerned with explaining and publicizing their social and
environmental policies. Most large corporations post mission statements, CSR reports, or
ethical codes of conduct on their company websites, and have restructured their
communications efforts to address consumer and NGO expectations.
25
CCIC: 4
CCIC: 4
27
David Lewis. “Nongovernmental Organizations, Business, and the Management of Ambiguity.” Nonprofit
Management & Leadership 9, no.2 (Winter98): 135 -151.
28
Lewis:137
29
Lewis:137
30
Heap: 557
31
Heap: 557
26
10
Thus we have seen that there is an increasing trend in the NGO and the business world
to work in a cooperative rather than a conflictual mode. In the next section we shall address
the range of mutual benefits for corporations and NGOs of such collaboration.
B – Benefits of corporate-NGO partnerships
1) Benefits to the private sector
Heap discusses the motivation for both the private sector and for NGOs to engage in
partnerships. It is often thought that NGOs would benefit more from such partnerships, but
there are positive incentives that could or should concern the private sector as well, especially
when focusing on the long-term benefits partnerships may afford. “The world has spent many
years debating what business can offer the NGOs, but what NGOs can offer the corporate
world is a recent trend.”32
Image and credibility
Company reputation is becoming more and more important to both investors and
consumers. “A company’s impact on its stakeholders is an emerging benchmark of corporate
performance since stakeholders are beginning to ask what companies can do for society, not
what society can do for companies.”33 Trust has become a driver for partnerships between
NGOs and business because the public trusts NGOs more than it does companies. In the
article “Collaborating with Activists: How Starbucks works with NGOs,”34 Paul Argenti
quotes a public opinion survey carried out by the consulting firm Yankelovich which asked
American citizens: “does business strike a fair balance between profit and public interest?” He
notes that in 1968, 70% of the population agreed that it did, while at the end of the 20th
century only 28% agreed.35 On the flipside, the “Voice of the People” survey, conducted by
Environics and the Gallup Organization in 2002 across 47 countries, showed that only 48% of
respondents believed global corporations operated in society’s best interest, and only 52% of
respondents believed national businesses to be doing so. NGOs were distrusted by only 32%
of respondents, and 59% stated that they had a great deal or some trust in NGOs.
So in the public eye, NGOs are more trustworthy than corporations in terms of
benefiting society. A company that partners with an NGO can hope to be seen as trustworthy
and be more credible in its attempts at CSR through this association. Maintaining trust
between the public and NGOs is the reason Heap believes that NGOs should not simply be
playing an endorsement role with corporations but should be instead engaging with them
critically.36 Thus, for a corporation, it is “prudent to cultivate the public impression of socially
32
Heap: 560
Heap: 559
34
Paul Argenti. “Collaborating with Activists: How Starbucks Works with NGOs.” California Management
Review 47, no.1 (Fall2004): 91-116
35
Argenti: 92
36
Heap: 560
33
11
and environmentally responsible business [because] most consumers do not trust business
claims [but] nevertheless, believe what NGOs tell them.”37
Heap contends that philanthropic activities can lead to positive or negative marketing,
deeming them a “potential minefield”38 for corporations. Some companies trying to boost
their public image have seen backlash from groups that consider their efforts to be merely
superficial and without any substance. Engaging in an actual partnership brings to a
company’s reputation a credible sense of commitment to social responsibility. Business PR
motivations are tied to economic incentives for companies to maintain interest in NGOs. The
potential for raising profits through ‘cause related marketing’39 is great, especially with
increasing consumer education. Because corporate image has become more important in
retaining a competitive edge,40 is not enough for a company to appear to be doing the right
thing anymore. “The fact that a company chooses to form a partnership with an NGO entails a
higher degree of commitment than unilateral forms of community involvement, and has a
stronger impact on the corporation itself as well.”41
Miller, Chen and Choi point to the larger role to consumers of “intangibles”
concerning goods and services they purchase. “Whereas in the routine exchange of money for
commodity goods it was possible to approximate the anonymous exchange of the pure
market-economic model, it is now important to the consumer of many tangible goods […] to
have a perception or feeling about intangible aspects accompanying these goods.”42 There is
also intensified “need to know the provenance of what is being acquired to validate and value
the provider.”43 Hart observes that groups at the ‘fringe’ of a firm’s stakeholder network can
be very outspoken publicly about the company. To avoid negative publicity from these
groups, businesses must proactively seek out these new actors that have previously been
ignored by the private sector: “to survive and compete for the future, firms must harness these
voices to identify creative new business models and opportunities.”44
Financial sustainability: entering new markets and increasing long-term profits
The market and corporate citizenship do not necessarily have to be in opposition: “if a
community is healthy […] it will thrive socially and economically, and business in turn will
benefit through increased consumerism and reduced dependence on social programs.”45 When
considering long-term economic goals and corporate sustainability, “there is scope for a more
marketing-oriented philanthropy which contributes both to the bottom line and to society.”46
Long-term profitability requires foreseeing the needs and demands of consumers in the future
37
Bendell: 5
Heap: 18
39
Heap: 20
40
Yamamoto: 26
41
Yamamoto: 27
42
Miller, Chen, Choi: 404
43
Miller, Chen, Choi: 404
44
Hart: 20
45
Heap, Simon. “NGOs and the Private Sector: Potential for Partnerships?” Occasional Paper Series no.27.
INTRAC:1999: 20
46
Heap OPS: 20
38
12
and working to create environments conducive to the continuation of business activities
toward this goal. However, as Heap points out “the difficulty for any firm considering [CSR]
relates to the distribution of costs and benefits: broader social benefits (creation and
maintenance of a stable and well-functioning society) have an impact on everybody in a
society (including business) but direct business benefit will not necessarily accrue to the
individual company within the time scale of immediate commercial decisions.”47 For these
reasons, business must adopt a more long-term vision when weighing the consequences of
taking a more socially responsible approach to their activities. Although precise calculations
are hard to obtain because of variances across different sectors and industries, socially
networked firms, in the long run, could outperform those which are not. Thus, corporate
strategy that takes into account these long-term objectives could benefit from including
partnerships into their vision.
NGOs can also facilitate a corporation’s approach to local consumption and
production markets.48 Knowledge and better understanding of market needs are some of the
benefits of working with local NGOs that possess valuable knowledge about onsite
conditions. A 1991 survey performed by Burson-Marsteller, one of the largest Public
Relations firms in the world, with UK and other European businesses and their American
counterparts facing problems breaking into new foreign markets, revealed that the most
important reason for these difficulties was lack of information about local conditions and how
these would affect the company’s financial investment.49 “Given NGO’s expertise in
language, local issues and contact facilitation, this is surely an area which could lead to
private sector engagement, especially with TNCs moving into a new market or seeking advice
on the impact of a local factory in their supply chain.”50
Miller, Chen and Choi argue that in today’s globalized economy, “international
business is increasingly about collective ownership among MNCs, states, and NGOs.”51
Therefore cooperation among all actors is necessary especially when these come from varying
cultural and professional backgrounds. Understanding and working effectively within these
parameters is essential for a company to retain and increase its competitive edge. Engagement
with local communities and demonstrating sensitivity to their concerns is dependent on a
company’s ability to penetrate and participate in local networks which is very difficult to
achieve as an outsider. Hart explains that firms desiring to tap into isolated, but potentially
profitable, markets should aim to diversify their partners. He finds that successful strategies
are ones that rely on nontraditional partners, including non-profit organizations, community
groups, and local governments. On the other hand, relying on traditional partners, such as
national governments and large local companies may prove unsuccessful because “[they] are
as far removed from low-income markets in terms of knowledge and experience as the firms
trying to launch the venture.”52
47
Heap OPS: 20
Yamamoto: 26
49
Heap OPS: 22
50
Heap OPS: 22
51
Miller, Chen, Choi: 400
52
Hart: 202
48
13
Local institutional knowledge is “strategic and fundamental for economic and business
success within the local business system.”53 Large economies need to revolve around fixed,
formal rules in order to operate with useful levels of integration. But within the overall
economic structure, there may be “subnetworks” which, on a much smaller scale, tend to
operate around informal rules and norms that stem from strong collective ideologies and
cultures: “Such subnetworks of limited size within the economy will capitalize on the
existence of such social bonds and reciprocal exchange mechanisms, [and] within this
environment, the need for linkages among subnetworks and from them to the overall network
is fulfilled by a mix of institutions, among which local NGOs are significant.”54 NGOs
possess both social capital and specific knowledge that is valuable, especially to TNCs.
Because of their participation in these localized subnetworks, NGOs are in a better position to
understand the operation of the specific informal relationships that hold them together. Thus,
NGOs can play a bridging role in the transfer of institutional knowledge to international or
foreign corporations: they possess the advantage of having a dual voice with both market and
institutional value, and they are able to work on specific localized issues while retaining a
sense of the international context in which economic development may take place.
Heap insists that NGOs must do a better job at selling themselves to businesses by
emphasizing not just their agendas but also their capabilities and assets.55 As Hart points out,
“working with non-traditional partners means going beyond the typical focus on customers
and suppliers, [and] by including civil society, community groups, and local players, firms are
better able to understand and leverage existing strengths in the environment rather than trying
to change that environment to resemble the Western way.”56
Better CSR policy as part of a corporate strategy
Partnerships can play a role in enhancing the quality of a company’s CSR policies. “It
can be argued that corporations are the only organizations with the resources, the global reach
[…] and the motivation to achieve sustainability, but at the same time there are political and
social issues that exceed the mandate and capabilities of any corporation.”57 Heap cites the
Executive Director of the World Business Council for Sustainable Development (WBCSD),
Bjorn Stigson, who in 1997 recognized the need for business to think in terms of collaboration
and include other non-business organizations in partnerships.58 Corporations have been
switching their CSR focus from charitable donations to actually becoming involved in
community activities.59 Many companies have found that such involvement is best undertaken
through working with local NGOs. Environmental issues are an area where partnerships have
been very successful: “NGOs have access to community residents, can readily identify
community needs, and are equipped with professional expertise to meet such needs.”60 In
many instances, corporate managers find NGOs have the capacity to propose innovative ways
53
Miller, Chen, Choi: 397
Miller, Chen, Choi: 400
55
Heap OPS: 36
56
Hart: 204
57
Heap OPS: 5
58
Heap OPS: 5
59
Yamamoto: 23
60
Yamamoto: 24
54
14
to solves social problems that are useful to their company. Because of their experience
working with community organizations and villages, NGOs are better trusted among local
populations, so that they may serve as a bridge between business partners and the
communities in which corporations wish to be active.
In fact, Yamamoto reports that “many corporate participants [of JCIE’s Tokyo
Conference] maintained that partnership with NGOs is an important element in establishing
their own identity in society and improving their corporate governance.”61 Yorato Kobayashi,
the chairman of Fuji-Xerox Corporation and chairman of the Japan Association of Corporate
Executives gave a keynote speech during the JCIE conference in which he contended that
profit-making was not or should not be the ultimate objective of a company but rather it is the
necessary means by which a company accomplishes its mission.62 This reflects the tendency
of companies dedicated to CSR to view collaboration with NGOs as a means of implementing
their business strategy. During his opening speech at the Tokyo Conference, Barrett Baron,
the co-chair of Asia Pacific Philanthropy Consortium and executive Vice President of the
Asian Foundation, observed that “more and more corporations have come to view corporate
citizenship in cooperation with NGOs as part of a business strategy that must respond to their
core business interests and their multiple constituencies.”63
2) Benefits to the non-profit sector
Financial sustainability and funding diversification for projects
As we have mentioned previously, NGOs are under increasing pressure to diversify
their sources of funding. Partnerships provide a source of funding independent of government
funding. One of the major problems for NGOs in acquiring private funding is that they
usually lack direct contacts in the corporate world that would be a basis for potential
donations. A partnership based on personal relations between NGO staff and corporate
executives could help solve this problem.
But partnerships entail more than a simple donation from a company. Actually
engaging with companies is recognition of the fact that “business can bring economic benefits
to poor communities by creating jobs and transferring technology.”64 This approach is taken
by those in the NGO community who consider both business and the non-profit sector as
necessary for tackling issues of poverty. They see both sides as having valuable and
complementary assets: the private sector is instrumental in creating employment and
economic growth and therefore has a direct impact on the lives of the poor; but NGOs have
expertise in working to strengthen communities to ensure that the poorest benefit from this
growth.65 Alleviating poverty requires both collaboration and coordination from both sectors.
61
Yamamoto: 26
Yamamoto: 26
63
Yamamoto: 25
64
CCIC: 7
65
CCIC: 8
62
15
Access to free marketing
Such partnerships also present an opportunity for NGOs to make their voices heard
and to publicize their activities through the marketing of a collaborating company. Since
corporations invest heavily in publicizing their involvement in social causes, NGOs in essence
get “free” advertising through what Heap calls “social marketing” on the part of corporations
that simultaneously enhance their brand image.66
Management skill for improved efficiency
From the perspective of NGOs, potential gains from partnerships with business go far
beyond financial advantages. It can be argued that private sector, although it “lacks sensitivity
to the needs of the poor”67 has much to offer the non-profit sector in the areas of financial
management and long-term planning. Individuals who work in the private sector have “insight
into different management styles and business skills; innovative, risk-taking perspective, the
injection of leadership capacity; [and] the ability to focus on making things happen and
getting results.”68 For NGOs that are venturing into selling ethical or green products, these
assets are very important. The non-profit sector needs to be more pragmatic about its mission:
there is a sense that NGOs have a tendency to focus on the process of implementing
development projects, but have not yet learned to expect results, much less account for lack of
results. On the other hand, “corporations bring to the partnership a sense of accountability and
hard-nosed, result oriented attitude that is often lacking in their NGO counterparts.”69 Costeffectiveness is important, especially when funding resources are scarce. The non-profit sector
could benefit from incorporating some efficiency standards inspired by corporate influence
into its practices: “NGOs can capitalize on the skills and expertise of the individuals involved
through board participation, project development or employee volunteerism.”70
In addition, the business sector provides access to resources in research and
development, experience and expertise in marketing support, distribution services, and
outreach. Because a large part of non-profit work is providing services to clients, NGOs need
to be able to market these services. “An increasing number of NGOs are becoming businesslike, and partnership with corporations is a powerful instrument for these NGOs to develop a
self-sustaining pattern of activities.”71 NGOs cannot usually afford to work on building better
financial management, information and technology, or strategic planning skills which would
help them to better carry out their mission. Thus help from a corporation with expertise in
these areas could be very desirable.
66
Heap OPS: 26
CCIC: 9
68
Heap OPS: 26-27
69
Yamamoto: 28
70
Heap OPS: 25
71
Yamamoto: 28
67
16
Better results by changing corporate mentality from within rather than through
confrontation
The CCIC guide illustrates the NGO sector’s different approaches to engagement with
business that need not be mutually exclusive. It shows that progressive thinking on how to
engage the private sector in a non-confrontational way is gaining terrain among NGO leaders.
As the authors point out “one approach is at times necessary to create the right conditions for
a subsequent approach to succeed.”72 However, there are advocates in the NGO community
who “believe the interests of corporations are fundamentally incompatible with the interests
of the poor.”73 They argue NGOs should be focused on pushing for a more regulated private
sector rather than working in conjunction with it.
Others believe in the potential to change the values of the business sector itself as CSR
is increasingly being taken into account by big corporations. The idea of the “triple bottom
line” which focuses on the social, environmental and economic performances of a company is
starting to become part of private sector mentality. Supporters of this view want to capitalize
on increased access to information in order to influence the mindset of consumers and
investors. They hope to encourage more demand for socially responsible and sustainable
business, and thus give companies positive incentives to change their practices. In this
context, the triple bottom line would become aligned with the financial bottom line.74
In response to those who believe only confrontation with business will lead to
productive change, the CCIC guide warns that such actions could be less effective and in
some cases counter-productive. Consumer backlash against a company’s products does not
last very long in today developed countries. Increased public access to information also means
that people can become “over-exposed” to the point of saturation, leading to desensitization or
lack of maintained focused on a particular issue. Therefore, defenders of cooperation argue
that it is better to try to change attitudes and practices from within the private sector, in order
to have a more long-lasting impact. In addition by pushing an agenda of confrontation, NGOs
may end up hurting the people they are trying to help. “By imposing northern standards of
what we consider fair working conditions on developing nations, we remove their greatest
competitive advantages.”75 Heap stresses this point by using the example of campaigns
exposing the widespread use of child labor in the textile and carpet industries of Bangladesh
and India. Some argue that such campaigns may be counter-productive because as companies
abandon their practices, children are forced to find alternative employment, generally in even
worse conditions.76
We have outlined the variety of motivations, both in the public and private sector for
desiring to work together in partnerships. They illustrate to a certain extent the differences
across sectors that can be mutually beneficial to both partners. However, these differences can
create challenges in the context of a partnership. The following section details some of these
72
CCIC: 7
CCIC: 7
74
CCIC: 12
75
CCIC: 11
76
Heap: 7
73
17
difficulties and outlines some possible solutions that enable to bridge the worlds of for-profit
and non-profit.
C – Difficulties of partnerships and requirements for implementation
Partnerships between an NGO and a corporation are usually complicated and delicate.
They come with their specific set of problems that must be addressed from the beginning of
the relationship. “The concept of sectoral ambiguity helps to explain observed problems with
confused expectations, management tensions and lack of sustainability.”77 Because
partnerships are situated in both the for-profit and non-profit world, it is a challenge to align
the interests and desired outcomes of both parties.
Partnering with corporations can lead to many sorts of issues for NGOs. Some
partnerships can create problems of coordination and policy making between different
departments. The fundraising, policy and campaign departments may not see eye to eye on
how best to interact with a corporation. Although NGOs have several credible assets
(advocacy, legitimacy, information, vision and expertise) they need to be better organized and
more certain about the goals they want to achieve by partnering with a corporation. “Everyone
would be better served if NGOs were to decide if and when to engage, and what they want,
before approaching companies.”78 If they do not adopt a more clear-cut vision of their own
expectations, business will not chose to engage with NGOs, especially since they are already
perceived as organizationally weak. Elkington and Fennell also observed a tendency in both
NGOs and companies to be in disagreement internally about the type of interaction they
desired with the other partner. They refer to this phenomenon as “internal schizophrenia.”
This can cause tensions between staff and workers in the same company or organization since
“often, the decision to enter into a partnership comes down to individuals […] and those
promoting partnerships find themselves in direct conflict with their more skeptical
colleagues.”79
Some of the difficulties underlined by Miller, Chen and Choi in the creation of
partnerships were finding qualified managers and ineffective institutional infrastructure.
Businesses must enter into partnerships with the idea that they are not looking to impose a
plan of action, but to develop a common road map to a successful project through
coordinating with NGO leaders. “It is evident that MNCs themselves risk partnerships failing
when […] through the choice of inappropriate managers to implement their policies, […] they
impose a rigid western economic model.”80 While NGOs must retain their independence and
autonomy, they also need to become more attuned to the realities of working with business if
they are to be successful in attracting corporate partners. One of the obstacles encountered by
companies in communicating with NGOs is the staff’s relative inexperience in dealing with
the corporate world and their lack of “professional expertise.”81 One solution is to turn to
intermediary NGOs that facilitate communication between the two sectors. JCIE sees itself as
77
Lewis: 136
Heap: 560
79
Elkington & Fennell: 51
80
Miller, Chen, Choi: 405
81
Yamamoto: 33
78
18
one such mediator that brings together representatives from both sectors to work on ways to
improve their interactions with one and other.
Another problem is that business must be genuinely dedicated to the goals of
partnership. Beyond mission statements, partnerships require commitment of business leaders
to achieving the goals set forth in their company’s mission statement. One factor shared by all
companies engaged in partnerships is that, not only do they clearly state their mission and
dedication to corporate philanthropy, but they also desire their contribution to take place
through community involvement.82 In the cases analyzed by Yamamoto, the corporate
statements of companies involved in partnerships all included, in one form or another, clauses
to engage responsibly with the communities in which they operated. “These case study reports
indicate that these statements are indeed buttressed by the personal commitments of senior
corporate officers to achieving these stated objectives.”83 Participating companies stressed the
importance of making social principle an integral part of corporate culture by diffusing the
CSR mission to its employees. This helps get greater employee involvement in community
issues. JCIE’s comparison of partnership projects showed that this contributed to their success
in many cases. “Participation by employees in such partnership activities enables corporations
to address the needs of their communities as they are perceived by people from the
communities themselves, and reinforces the corporation’s commitment to community
involvement.”84
Heap sets out to identify characteristics that would help build high-quality, long-term,
partnerships between corporations and NGOs. He emphasizes the fact that partnerships are
most successful when they are established with both parties thinking about the long-term
benefits to be rendered of their cooperation: “there is a need for both the NGOs and business
to play the long game on this, to see beyond the next campaign or project to where their
organization will be in a generation’s time, a time when sustainable development will be not
only the mood but the practical issue of the twenty-first century and beyond.”85 Heap also
suggests that a partnership must be tailored to addressing a specific problem or need.
“Whether safe water or access to primary health care services, the defined problem helps to
guide the nature and formation of the collaborative effort.”86 Partners must have a mutual
understanding of what the other party’s interests and needs are. Only then can their
expectations of each other be realistic and can a trusting relationship be established, both of
which are central to the success of any partnership.
Building and maintaining such a relationship requires partners to work together as
equals, and for them to minimize power imbalances as much as possible. Organizations and
corporations should be honest and specific about what they hope to achieve through
collaboration during the initial discussions before the partnership is setup. “Both sides need to
anticipate and resolve conflict; acquire a unity of vision and purpose, with an emphasis on
82
Yamamoto: 29
Yamamoto: 30
84
Yamamoto: 31
85
Heap: 560
86
Heap OPS: 30
83
19
goals defined by consensus and agree to mutually acceptable and explicit time frames.”87
Effective communication between partners plays an essential role in the successful
cooperation toward a common goal. “It is critically important from the beginning of the
partnership arrangement to focus on the desired outcomes, including which stakeholders and
constituencies the partners are aiming to serve, and how to measure the outcome of such
activity.”88 Not only is it important to have common goals and roadmaps on how to achieve
these goals, but good communication must also take place in monitoring and evaluating
projects.
Following from this, there must necessarily be organizational structures set up
between the two partners that go beyond simple contact between individuals in charge. Heap
suggests the need for “shared and explicit leadership, and mechanisms for internal conflict
resolution. There needs to be the leadership development and support within partner
organizations to enable the relationship not to depend solely on one or two people in each
organization and to ensure that the history of the partnership is known and appreciated.”89
Different partnerships are formalized in various ways: some are very informal, while others
are based in some type of legal document. Heap points out that while a formalized agreement
is desirable in order to institutionalize a partnership, it is important that it be the outcome of
thorough negotiations and discussions that lay out a specific plan of action. Formalizing a
relationship too soon could lead to unpleasant surprises down the road if both partners are not
clear on what they expect from the partnership. Similarly, a formalized agreement should
leave room for flexibility and adjustment to unexpected factors, so that partners have the
option of realigning their agreements and strategies in case difficulties are encountered during
the initial implementation of a partnership project.
Finally, partnerships between NGOs and corporations must take place within the
context of a positive relation with local authorities and the public sector in general.
“Governments have the ultimate capability to create an enabling environment for non-profit
organization [since they] have the authority to determine the incorporation and registration
processes, fiscal and tax treatment, and other factors that can serve as incentives of
disincentives for partnerships.”90 Many partnerships thus operate in the broader context of
multisectoral partnerships. These can involve government authorities, media, and the
community at large. Many partnerships are fostered under the auspices of international
governmental organizations and institutions such as the World Bank.
One of the lessons drawn from case studies was that there are multiple and very
diverse ways to undertake partnership projects and thus there is no unique model for success.
The motivations of different companies may be different as well. Some see partnerships as
incorporated into their business strategy while others believe them to be improving corporate
governance and responsibility. But the most important element contributing to success is that
all parties be willing and able to perceive each other as offering something positive to each
87
Heap OPS: 30
Yamamoto: 33
89
Heap OPS: 35
90
Yamamoto: 34
88
20
other. “Efforts must be made to further dismantle the lingering lack of trust between the two
sectors.”91
Now that we have broadly analyzed the various motivations for partnerships and the
components that can help make them successful, we propose to analyze corporate-NGO
partnerships in the context of the ethical or “fair trade” movement. This is an area where
many businesses and NGOs have collaborated, and that illustrates many of the issues
discussed above. We shall begin by discussing some lessons that can be learned from one of
the first companies to engage in the fair trade movement: the Body Shop. We shall then focus
on a case study related to ethical trading in the coffee industry, by closely analyzing how
Starbucks works in partnership with NGOs to source its coffee.
91
Yamamoto: 37
21
PART II – Corporate-NGO partnerships in the ethical trade movement
NGOs participating in market-based, income generating activities, have an opportunity
to reduce dependency on international development assistance or government contract funds.
They can build sustainability for both themselves and their clients by generating resources
more independently and seeking to increase scale and effectiveness of their activities. Ethical
or fair trade is one arena in which this can be accomplished. Lewis defines fair trade as
“linking economic benefits of trade with social ones.”92 Ethical trade sources products in
developing economies to be sold to consumers in developed countries while offering prices
that give producers in the global South a greater rate of return. Organizations working to
promote fair trade research and identify sources that do not exploit the environment or the
local people, while encouraging consumers in the North to use their purchasing power
ethically.
There are two organizational routes to undertaking fair trade. One is through nonprofit businesses that are rooted in an NGO called alternative trading organization (ATOs).
These work with the clients and beneficiaries of southern NGOs. The other is through the
financial support of a socially conscious company, usually a large corporation, seeking to use
business as an engine for social and environmental change by committing to incorporating fair
trade sources into its supply chain. Often, an NGO that certifies fair trade products will
facilitate contact between fair trade producers and companies. This is especially the case for
primary products which are certified and sold to corporations through non-profits.
Fair trade schemes can help create and increase economic benefits for small-scale
producers in developing countries by generating employment and income. They may seek to
“build local organizational capacity by improving the performance of local producers and
marketing groups.”93 Lewis explains that, in order to accomplish these goals, there needs to be
a focus not only on better redistribution of wealth generated through trade, but also on
improving the efficiency of resource allocation and promoting sustainable business. He
especially stresses the importance of the latter for the viability and success of fair trade:
“although fair trade is primarily a practical tool for redistributing wealth, as a concept it feeds
into ongoing unresolved debates about the nature of development: for example, the question
of the relationship among income growth, social equity, and environmental sustainability.”94
The main potential of fair trade partnerships lies in opening international markets to
small community producers; exploring ways to break existing patterns of resource
dependency that make progress on poverty reduction vulnerable to flows of aid lacking
sustainability; and educating consumers (particularly those in the North) to select products
made and marketed in an ethical manner.95 However, these partnerships are delicate, and the
“problem of converting producers and their organizations into successful marketing
92
Lewis: 138
Lewis: 139
94
Lewis: 139
95
Lewis: 136
93
22
operations with the ability to sell high-quality goods in competitive, complex, and rapidly
changing international markets”96 poses some problems.
A – Lessons drawn from the Body Shop’s Community Trade Program
The Body Shop started its Community Trade Program (originally “Trade Not Aid”) in
the 1980s. The company stated that it is committed to several principles.97
•
•
•
•
•
•
•
•
respecting environments and cultures;
using traditional skills and materials,
seeking to benefit primary producers,
creating sustainable trade links,
trading renewable natural resources,
encouraging small-scale community economics,
treating partners with respect and integrity,
giving people control over their own resources, land and lives.
Lewis explains that “within this vision a progressive developmental role is envisaged
for the socially aware business sector” which may be considered more efficient and effective
than official and non-government aid because the private sector is “better resourced than the
nonprofit sector, more innovative than government.”98 However, at its beginning, the project
was critiqued as being too small and insignificant to have a real impact, as only 1-2% of the
Body Shop’s overall turnover was generated by fairly traded products. The company has since
committed to increasing this percentage. In 1994-1995, fairly traded products represented
17.8% of the Body Shop spent on accessory purchases.99 In 2003/2004, 5 million worth of
natural ingredients and accessory items were purchased through the program, including 700
tons of natural ingredients.100
In “Nongovernmental Organizations, Business, and the Management of Ambiguity,”
Lewis analyzes trade links between the Body Shop and its non-profit partners in Bangladesh
and Nepal - two countries already heavily dependent on international aid - in order to draw
conclusions about which aspects of the partnerships were successful and which needed to be
improved.
1) Nepali Non-Governmental Organization (NNGO) and the Paper
Company (PC) (1988-89)
The Paper Company (PC) was a small family-owned paper business established in
1984 which supplemented its profit-making business objectives with a set of environmental,
social, and economic objectives. The industry was facing several challenges. It did not have
access to international markets, while local markets for hand-made paper goods were not
96
Lewis: 136
Lewis: 139
98
Lewis: 140
99
Lewis: 140
100
Body Shop company website. http://www.thebodyshop.com/bodyshop/values/support_community_trade.jsp
97
23
lucrative. In addition, cultivating the local shrub lokta used traditionally in paper-making was
restricted by the government because of environmental problems associated with
overcultivation. Thus, the goal of the trade link was not only for PC to gain access to export
markets but also to find an environmentally sound alternative to lokta. With the help of the
Body Shop, the PC increased its outputs and turnover rapidly. It went from employing only
27 staff in 1988 to employing 104 local members of the community in 1995. More
environmentally safe production methods were developed with Body Shop engineers that
reduced the cost of production and avoided the emission of toxic wastes or the use of nonrenewable energy. PC profits increased from only a few thousand pounds from domestic sales
in the mid-1980s to over 250 000 in 1995. Thanks to this growth, the Nepali NGO (NNGO)
was created by senior managers, owners and associates of the PC. The idea was to use the
profits from the business to benefit the community through working on credit, improving
literacy programs, and later on HIV/AIDS awareness and prevention. The NNGO “was
financed in an innovative way through the payment of a 10% premium by the Body Shop,
over and above the agreed price paid for the paper products.”101 The work on HIV/AIDS
gained so much importance nationally that in 1995, the United States Agency for International
Development (USAID) began to fund the NNGO’s activities in this area as part of a national
two-year program.
Lewis points out that, despite these successes, sustaining the partnership was the main
challenge. When the Body Shop established this trade link, the demand from Northern
consumers for paper products was high. However, this demand dropped in 1995 leading the
Body Shop to reduce its orders of paper products, forcing PC to scale down its activities. This
revealed that the problem of dependency still remained, although it had been shifted from aid
to dependency on trade with one company. PC was too reliant on a single buyer and had not
been able to diversify into other export markets. This was in part due to problems of copyright
related to selling products developed in conjunction with the Body Shop to other competitors.
Slight alterations had to be made to the products in order to sell them to other companies.
According to Lewis, “the resulting structure remained just as dependent on continuing trade
with the Body Shop as other NGOs tend to be on the flow of funds from particular aid
donors.” 102
This situation highlights the importance of diversifying trading partners in order to
avoid vulnerability to particular buyers and markets. Maintaining good relations between all
parties of a fair trade agreement involves planning a time frame and a realistic scale of
operations that should foresee the fluctuations of market demand. Learning from these
lessons, the Body Shop and the PC have downscaled their activities, identified ways to
manufacture products for other international buyers, and have successfully reentered the local
market for paper products while maintaining their social and environmental goals.
101
102
Lewis: 141
Lewis: 142
24
2) Bangladesh: partnership between the Body Shop and the Handicrafts
Organization (1993)
The importance of efficiency and quality is shown through this example. Handicrafts
Organization (HO) is an ATO that works with rural women making handicrafts out of jute
(fiber made from plants that can be used to manufacture bags and cordage) and terra-cotta.
“The jointly agreed objective was to enable the HO to improve its management practices, to
respond more effectively to increasingly competitive export markets in terms of product
design and quality control, and to leave behind its predominantly charitable image”103 for the
benefit of the rural women’s communities which it served across the country.
The Body Shop’s relation with HO started in 1993, twenty years after the
establishment of HO as a nonprofit marketing ATO by Caritas, a Catholic Bangladeshi NGO.
Although now HO functions as an independent nonprofit, it retains strong links to Caritas.
Lewis explains that in the early 1990s “consumer expectation [had] become more demand-led
and less motivated by charitable impulse, and that the HO [had] been unable to produce and
market products that [could] compete internationally.”104 While people wanted more fairly
traded goods, they wanted them to be of high quality which is not how handicrafts are
traditionally marketed. To tackle these problems, the Body Shop became the main
international trading partner for HO, buying near 30% of their products in 1995. Together
they developed a line of new terra-cotta and jute products to be produced on a higher scale
than was achieved before and capable of being competitive in the international market. HO
became educated about the expectations of Northern consumers in terms of quality and
marketing. It also learned how to work with a large commercial buyer such as the Body Shop,
which requires certain managerial demands and understanding of large-scale business.
Problems of collaboration were encountered along the way. The sudden increase in
order size required some adaptation in production capacity and skill. Many costly trips were
made by representatives of the Body Shop to try and pinpoint and solve the weaknesses of
HO. In addition, the mindset of the HO staff needed to be altered because “appeals to
potential international buyers were [still being] made on the basis of the needs of the women
producers rather than on the quality of the products offered.”105 This illustrates how staff
working in the nonprofit sector in fair trade schemes must adapt to new commercial
environments created by partnerships with corporations, instead of remaining reliant on the
goodwill and charity of their customers. “A key problem was that differences in expectations
and values between the two trading partners led to clashes of organizational culture that made
the identification of, agreement on, and meeting of joint objectives very difficult.”106
Lewis draws several conclusions from this analysis that stem from the idea that
partnerships in the fair trade arena take a lot of time to be properly established, because both
sides need time to adapt to the goals and structures of their partners. Trying to upscale
activities too quickly can lead to clashes between profit-making and social development
103
Lewis: 142
Lewis:143
105
Lewis: 143
106
Lewis: 143
104
25
priorities. While it is important for the company to be dedicated to sourcing products in a way
that enables producers to benefit even if this increases costs, NGOs must also consider fair
trade partnerships as a kind of business arrangement that must fulfill certain criteria of quality
in order to be viable and sustainable. The example illustrates the difficulty of transferring
business skills between business and nonprofit entities. Lewis notes that this is especially true
for NGOs based in countries where international aid is prevalent, because the non-profit
sector is usually shielded from competition in the market. Thus, steps must be taken to ensure
thatthis transition is gradual and as smooth as possible for both sectors.
These examples are worth consideration because they illustrate the significant
management challenges of fair trade partnerships. Lewis outlines four dimensions to fair trade
partnerships that are associated with different goals, presenting unique management
challenges for both partners. He draws the following table:
Levels and Objectives of Fair Trade
Level
Objective
Material
Well-paid producers; safe and healthy conditions;
high quality products; sound environmental
management.
Social
Resources generated for common good and public
benefit; targeted beneficiaries in the wider
community.
Educational Educated consumers in the North who can make
informed ethical market choices; educated producers
in the South who can meet expectations of Northern
markets.
Cultural
Reorientation or development of an organizational
culture in keeping with both social and business
objectives.
Source: Lewis p145
For each of these issues, “a high level of formal and informal communication
activities, joint problem solving, and frequent crisis management and troubleshooting
visits”107 is necessary in terms of operating a fair trade partnership. It is true that the private
sector must make certain compromises within partnerships, weighing increased costs and the
challenges to efficiency when collaborating with NGOs on fair trade. But fairly traded
products are bought on the basis of their quality rather than simply buyer sympathy or
solidarity toward producers. Thus the goal of fair trade is to promote development through a
certain type of profit-making business model, albeit an ethical one. NGOs traditionally
committed to non-profit work, have the added challenge of adapting to this business model
without losing sight of their original purpose.
Lewis argues that partnerships between NGOs and business contribute to the creation
of ambiguity across sectors. Fair trade initiatives are particularly vulnerable to problems
arising out of ambiguity because “fair trade explicitly mixes the objective of profit making
with the objective of social or environmental development and change [so that] organizations
107
Lewis: 144
26
within fair trade partnerships are forced to operate beyond the rules of their usual
environments.”108 For example, dependency on a large socially aware corporation can be the
result of local NGOs perceiving the company as a development agency or donor “especially if
it does not behave like a conventionally aggressive, profit-oriented business.”109 NGOs
planning a fair trade partnership must foresee some form of adjustment to the competitivemarket as part of its objectives. For example, “diversified outlets for community-level
producers are crucial because dependency on a single supplier, such as the Body Shop, runs
the risk of reproducing problems associated with conventional aid flows and projects.”110
Nevertheless, as Lewis acknowledges, ambiguity can also generate innovative
solutions through collaboration and mutual exchange between the business and NGOs. “Fair
trade partnerships are beginning to link the business and the nongovernmental sectors in
creative ways and are building the prospect of positive impacts on local livelihoods in
disadvantaged communities.”111 He suggests that much is to be learned about fair trade
experiments, through their successes and failures, which in many cases have yet to be played
out because this a relatively new area of research in the NGO and business communities. “The
success and longevity of fair trade ventures […] will depend on proponents of fair trade
successfully renegotiating and agreeing on joint interests within the ambiguous zone between
the commercial sector and the third nonprofit sector.”112
Given these difficulties generated by the overlap between sectors, we now turn to
analyzing fair trade (or more broadly ethical trade) in the coffee industry. We chose this
example because coffee is one of the most important products traded in this manner
internationally. It represents a primary product that is typically grown in developing countries,
and that is altered through various stages along an international supply chain, ending with
marketing and retail directed toward consumers located in developed countries. Coffee is also
an industry in which large roasters and retailers in the North have turned to NGO-certified
sources for purchasing coffee as part of their CSR policies. Throughout this process, there has
been concern about maintaining quality standards driven by consumer expectations and brand
image. Thus, analysis of a partnership between an NGO and a large Northern coffee retailer
can illustrate the concerns of the private and non-profit sectors, while providing an example of
how fair trade can link producers in developing countries with rich consumers in developed
countries in a way that is mutually beneficial.
B – Case study of a successful partnership in sustainable coffee: Starbucks
and Conservation International
1) Background of the coffee industry: the coffee crisis
The global coffee crisis began in the 1990s. According to Oxfam International, in
2002, 25 million coffee growers worldwide were affected by the fall in prices which reached a
108
Lewis: 147
Lewis: 148
110
Lewis: 146
111
Lewis: 149
112
Lewis: 149
109
27
20 year low. Many growers in developing countries have felt the consequences of the crisis as
the cost of producing beans exceeded the income generated by sales. Falling prices were due
to overproduction as global coffee production has increased by 15% since 1990, while
consumption has increased by only 7%.113 During the 1990s the price for green Arabica
coffee declined from a high of $2.71/lb to a low of $0.48/lb. “Coffee producers, especially the
small farmers who grow over half of the world’s coffee, earn only a fraction of this export
price because the typical pathway from producer to consumer involves several
intermediaries.”114 As a result, growers have been producing at a loss, and borrowing money
against future harvests in order to pay off their expenses. They have been unable to engage in
other income-generating activities because they do not have the resources, knowledge, and
technical support to transition from their traditional coffee crops. The crisis has left many
coffee growers indebted and in worsening living conditions for their families, especially
regarding health and education. Meanwhile, consumers in the North are continuing to enjoy
the benefits of premium prices for coffee.
By 2000, coffee was the second most traded commodity in global markets after oil,
representing an $80 billion industry.115 In 2001, 50% to 70% of coffee worldwide came from
small-scale farmers who usually do not have the resources to process their own beans. In
some cases farmers in a collectivity can own mills, but most mills are operated by large farms
that have power in negotiating prices. In turn, small producers have to sell their produce at
lower prices in order to reach markets and be able to compete with the large farms. They
typically must go through intermediary buyers, middlemen known as “coyotes” to sell their
product. Coyotes have the means to transport coffee beans to markets, which small farmers in
remote locations cannot access or afford. During the year, small growers find themselves in
financial difficulty and are forced to take out loans at very high interest rates with the coyotes,
or to sell them their crops before the harvest at lower prices in exchange for a cash advance.
“As a result, small-scale farmers are often caught in perpetual cycle of poverty: low
production levels limit their access to cash which, in turn, hinders the potential for increasing
output.”116 As market coffee prices drop due to an oversupply of poor quality coffee, and as
more and more farmers struggle to stay in business, their share of income is diminished by the
many intermediaries between farmers and consumers.
The documentary “Guatemala/Mexico – Coffee Country”117 by Sam Quinones,
illustrates the struggle of coffee farmers near the town of La Reforma in Guatemala. The only
work in this town is in the coffee industry, but as farm owners are unable to sell their beans at
a good price, workers are being let go from their jobs. Over 200,000 coffee workers in
Guatemala lost their jobs between 2000 and 2003. One worker from La Reforma who was
interviewed explained that he had to take his children out of school because he could no
longer afford to pay for their education, and because they were now needed to generate
income for the household. Farmers who own the coffee plantations feel the effects of the
113
Linton: 600
Linton: 601
115
Argenti: 97
116
Argenti: 97
117
Guatemala / Mexico – Coffee Country (PBS-Frontline, Sam Quinones)
http://www.pbs.org/frontlineworld/stories/guatemala.mexico/thestory.htm
114
28
coffee crisis as a well. One grower who was interviewed explained he could receive only
$0.07/lb for his coffee which is much lower than the cost of production. He attributed these
low prices to the fact that he could sell his beans only through the intermediary of the coyotes
who took his beans to market and sell them for him for a profit.
The percentages taken by the coyotes significantly reduce the income generated for
growers, who have no alternative to reach global markets. As a consequence, many coffee
farms have been abandoned. In some places, workers have taken them over and formed
cooperatives in order to keep the farms alive. But they too are running out of money and most
are barely surviving, without any guarantee that they will be able to sustain their activities in
the next year.
The documentary shows representatives from one cooperative of 175 workers who
took over the abandoned estate of Baluarte, meeting with Bob Stiller, the founder and owner
of Green Mountain, a specialty coffee company based in Vermont. This meeting was
important for the farmers as it established a face to face contact with a buyer willing to pay a
good price for their coffee. The documentary illustrates the need for more direct relationships
along the coffee supply chain to eliminate the impact of the coyotes. But the interview with
Stiller revealed that he could commit only to buying high quality coffee from the cooperative,
which represented only a portion of the coffee that is grown in Baluarte. Thus it is important
for the workers in the cooperatives to learn how to select the best quality beans and use
production methods that will enable them to gain some kind of certification, without which
they will continue to receive low prices for their produce.
2) Sustainable Coffee :Overview of Ethical Trade Practices
In the article “Partnering for Sustainability: business-NGO alliances in the coffee
industry,” April Linton contends that “finding a solution to the coffee crisis is thus a test of
whether trade liberalization can be made to work for poor people and poor countries”118
because part of the solution calls upon corporations and consumers in rich countries to act as
“global citizens” rather than simply global marketers and global consumers. She explains that
non-profits and NGOs have been playing a role in trying to promote coffee growing practices
that are attuned both to the livelihood of the farmers and to environmental concerns. Current
strategies aim to link producers, corporations, and consumers within the framework of
“sustainable coffee.”119 This broader categorization is necessary to encompass the many
different kinds of certifications present in the industry, of which the “Fair Trade Coffee” label
is only one type. Partnerships between NGOs that started this movement, and corporations
which serve as marketers and retailers of coffee products in the North, can play an important
role in supporting the sustainable coffee movement and broadening the scope and reach of
sustainable or fair trade coffee sales.
There are many approaches to the promotion of sustainable coffee. Some
organizations focus more on social and economic goals. For example, fair trade labeling
118
April Linton. “Partnering for sustainability: Business–NGO alliances in the coffee industry.” Development in
Practice 15, no.3/4 (June 2005): 601
119
Linton: 602
29
organizations such as TransFair USA, seek to influence consumer and retail culture in the
North. They tend to encourage and support methods for farmers to process and market their
own beans, thereby allowing them to share in a bigger percentage of the profit made on the
end product. Other organizations focus on promoting environmentally-sound growing
methods that yield more plentiful crops and better quality coffee, while reducing farmers’
dependency on chemicals and pesticides to protect the natural resources and habitat of the
areas where crops are planted. Organic and shade grown coffee are two such types of
certifications. Consequently, there is a wide variety of organizations working on the
promotion of fair and sustainable coffee. Roaster and retailers in the North, especially small
specialty labels have been trying to promote the sale of this type of coffee. As large
corporations such as Starbucks and P&G (which owns Folgers Coffee) have started to take an
interest in promoting socially responsible business practices in the last decade, they too have
turned to NGOs in the field to work with them on promoting and increasing sales of fairly
traded coffee that is produced in a sustainable manner.
“Advocacy-led certification processes represent an increasingly successful pursuit of
alternatives to the downward pressure upon social and environmental responsibility by the
refusal of the WTO to permit the use of production and processing methods as a basis for
trade policy.”120 Because regulations and legislation are often hard to pass and implement,
certifications give retailer companies positive incentives to participate in the sale of ethically
produced products. Linton presents a number of reasons why corporations would adhere to
the sustainable coffee movement and choose to partner with NGOs in order to promote it. She
identifies branding, vulnerability, risk reduction, and credibility as the main reasons.121 In
terms of marketing prospects, corporations have a much stronger ability to advertise a
certified product. Through “cause related marketing” a large brand may attach its name to a
relevant social cause, and thus become associated with it in the eyes of consumers. While
from the NGO’s perspective, access to marketing resources is greatly increased by partnering
with large corporations, companies also benefit from the positive PR generated for their
brand.
The primary goals of alliances between businesses and NGOs in the coffee industry
are to promote quality coffee, and to facilitate more direct relations between the producers and
buyers. In his documentary, Sam Quinones continues to travel with Bob Stiller to an organic
cooperative that is located high up in the mountains of Nicaragua. This secluded village,
which functions entirely around the cooperative, produces only organically grown coffee that
is certified as such. Thanks to this certification, farmers are able to directly supply specialty
companies such as Green Mountain, committed to paying a certain base price for their coffee.
In this cooperative the farmers are guaranteed a price of $1.26/lb, while other farmers in this
region who must go through the coyotes only get $0.20/lb. This makes a real difference in the
livelihood of the farmers and their families. In sharp contrast to the coffee workers in La
Reforma, one farmer from the cooperative who was interviewed explained that he was able to
send his son to university in Guatemala City to study accounting thanks to the steady income
generated by the cooperative.
120
121
Linton: 604
Linton: 604
30
However, certification and direct sales to specialty buyers imply that farmers must
produce high quality coffee that will meet the standards of consumer demand and buyers in
the North. The documentary also illustrates this problem for growers. Culturally, Guatemalans
do not drink coffee, so they do not know what a cup of coffee tastes like when it is sold in the
US. In fact, none of the workers had ever seen their coffee packaged before and were
surprised to see that Green Mountain uses images of indigenous coffee farmers to market their
coffee in American specialty stores. In another cooperative village located in Mexico, workers
did not know how to use different types of coffee making apparatuses that are considered
mainstream in the North. Traditionally, Mexican growers did not separate quality beans from
lesser grades. The workers from this particular cooperative, located in Veracruz, had to be
educated by certifiers and buyers about how to select quality beans that could be sold for a
good price. Elaborate tasting sessions determined whether the coffee they had produced that
year would be bought by Green Mountain representatives. Even though in the end only half of
their coffee was purchased, the workers explained that in working through a fair trade label
that offered contact with Green Mountain staff, they had learned a great deal about perfecting
their produce and had benefited from this advice.
Consequently, client buyers need to make regular visits to coffee farms and educate
growers about what constitutes quality coffee. In order to achieve this, more personal relations
must be established between parties and more constant communication upheld, both of which
may be facilitated by certification NGOs.122 Because “certification schemes promote direct
relationships between producers and buyers, eliminating intermediaries along the way to
market,”123 it shortens the supply chain and ensures that growers get a larger percentage of
profits, by paying a price that is higher than the market price for coffee. Thus, small growers
are able to access the global market and to sell their higher quality beans at a guaranteed
price, instead of harvesting coffee at a loss and watching their harvests spoil when they are
unable to sell them.
For a company that already enjoys customer loyalty, Linton believes these certified
labels could successfully become “brand extensions.”124 Such is the case for a corporation like
Starbucks. “Starbucks does not aim to single out one particular certification, but rather to
offer a whole line of products that have been produced and obtained through socially
responsible means.”125 In dealing with certification coffee and ethical purchasing guidelines,
Starbucks has come to work with several different label and organizations which encompass
Fair Trade Certified Coffee, Farm Direct, and various Conservations Coffees. The company
has worked with organizations such as TransFair USA and the Rainforest Alliance, and has
formed a long-term partnership with Conservation International. The purpose of the next
section is to explore in detail the types of engagements Starbucks has had with NGOs and
whether they were successful in establishing true partnerships with them.
122
Linton: 607
Linton: 605
124
Linton: 604
125
Linton: 604
123
31
3) Starbucks – NGO collaboration for sustainable coffee
Starbuck’s corporate commitment to ethical sourcing
As Starbucks states in its company CSR Report: “Starbucks is committed to
purchasing our coffee in an ethical and sustainable manner, regardless of labels and
certifications.”126 The goal is to ensure the livelihood of the growers who supply the green
coffee to Starbucks. In 2001, the company paid on average $1.20/lb for green coffee
(compared to $0.48/lb at market price) to ensure that it was purchasing the best quality coffee.
But this price did fluctuate somewhat with the market. Between 2001- 2002, Starbucks made
the decision to dramatically increase the amount of coffee it bought at fixed prices. Whereas
in 2001, almost 90% of its coffee was purchased at variable price tied to the prevailing
wholesale market price, in 2002, the company bought 74% of its coffee at a fixed price, and
31% of its purchases were made through long-term contracts.127 The company also increased
direct purchases from small and medium size farms or co-ops from 9% to 59% from 2001 to
2002. One could argue that this shift took place in conjunction with the success and renewal
of Starbucks’ partnership with the environmental NGO, Conservation International (CI).
CI - Starbucks Partnership and the Chiapas Conservation Coffee Program
Conservation International, an NGO founded in 1987, works to conserve the Earth’s
natural heritage and protect biodiversity, in ways that prove harmony is possible between
human societies and nature. It has identified 25 “biodiversity hotspots” around the world
where the most concentrated and threatened number of animal and plant species are located.
The organization has collaborated with a range of different actors on its projects, including
companies, conservation groups, multilateral institutions, governments, and private
foundations.128 In an effort to encourage businesses to endorse the environmental agenda, CI
established the Center for Environmental Leadership in Business (CELB0 in 2000. Its mission
was to “engage the private sector worldwide in creating solutions to critical global
environmental problems in which industry played a defining role.”129 Thus CI is an
organization perceived as willing to collaborate with the private sector rather than fight it.
During the mid-1990s, CI came to realize that coffee production was severely
affecting biodiversity and hindering conservation efforts, as 25 million acres of rainforest had
been converted to coffee plantations worldwide.130 This was due to the abandonment of
traditional growing methods, which used shade trees to protect plantations, for more highyielding but lower quality varieties that could be cultivated in direct sunlight while using
pesticides to protect them. These new growing methods were heavily promoted by various
international aid agencies but they caused shade-covered plantations to be displaced and
resulted in habitat destruction.131
126
Starbucks CSR Report 2005 http://www.starbucks.com/aboutus/csrannualreport.asp: p11
James E Austin, and Cate Reavis. “Starbucks and Conservation International.” HBS No. 9-303-055. Boston:
Harvard Business School Publishing, 2002: 6
128
Austin and Reavis: 6
129
Austin and Reavis: 7
130
Austin and Reavis: 7
131
Austin and Reavis: 7
127
32
CI began its Conservation Coffee Program in 1996 through a pilot program working in
the three coffee cooperatives that were located at the edge of the El Triunfo Biosphere
Reserve in Chiapas Mexico. El Triunfo is home to over 100 species of mammals and 1000
species of flora, and provides a habitat for several endangered and rare species of birds and
mammals. The forest also has an important role in regulating regional climate, and as one of
the country’s highest rainfall areas, it provides water to wells and hydroelectric plants nearby.
Farmers in the surrounding areas at the base of the reserve traditionally have grown coffee
over the last century. Approximately 14,000 farms are situated in this “buffer zone”
surrounding the reserve. CI believed that conservation efforts in the reserve, which were
strained by a limited governmental budget, could be helped by promoting and preserving
shade-grown coffee in the buffer zone, thus limiting deforestation in areas surrounding El
Triunfo.
An interview with the head of CI’s Coffee Initiative, Matthew Quinlan, revealed that
growers needed to be convinced of the economic viability of the Coffee Initiative Project.
“Farmers are great economists: ‘a day doing what I know, I feed my family. A day trying a
new way, I might not.’ So we knew from Day One that we had to offer clear benefits to
accelerate adoption of conservation practices.”132 Technical assistance was provided to them
to improve growing methods but also the quality of the coffee. As an economic incentive for
farmers to sign on to the project, CI also helped the cooperatives to better market their coffee
and put them in direct contact with a specialty coffee buyer. On its website, CI states its belief
that “the world’s major coffee roasters can become a positive force for biodiversity
conservation by integrating environmental and social considerations into their purchasing
decisions.”133 The company that was originally supposed to work with CI pulled out of the
project when the main person interested in a partnership left the company, illustrating how
individuals are instrumental in establishing successful partnerships.
CI then tried to find other buyers and focused its attention on Starbucks. CI’s CEO
Peter Seligmann had met the Chairman of Starbucks in 1997 and found the company’s
dedication to social responsibility to be very encouraging. CI wanted to work with Starbucks
on the Chiapas project but the company had to fulfill certain requirements for partnership that
entailed further research and talks with senior executives within the company. Specifically, CI
wanted to have a “sponsor” of sorts, preferably a senior executive, who shared the same
concerns as CI, and could commit to championing the project with Starbucks. In initial
meetings between Glenn Prickett, CELB’s executive director, and Starbucks Senior Vice
President, Dave Olsen, Starbucks was at first reticent to sign on to the project because of
concerns about the quality of the coffee. They did not want to commit to buying a fixed
amount without some guarantee of quality. At the same time the company was already under
pressure from customers and interest groups asking what the company was doing to protect
the rainforest. Instead of giving in to pressures, Starbucks decided to try to establish a
partnership that would exploit both CI’s expertise in conservation and Starbucks’ expertise in
quality coffee.
132
Austin and Reavis: 8
Conservation International Website – Starbucks Partnership Profile
http://www.conservation.org/xp/CIWEB/partners/corporate/starbucks.xml
133
33
Because Starbucks had previously partnered with another environmental nonprofit, it
was more experienced, and more confident about engaging into a partnership with an NGO.
Sue Mecklenburg, the director of environment and community affairs of Starbucks at the
time, explained that their first partnership took longer to establish because there was a fear
that the NGO would expose the company since no confidentiality agreement was signed. But,
in establishing a partnership between a corporation and a non-profit, it is necessary for the
NGO to retain its independence: it was understood that Starbucks was not hiring the NGO in a
consultative role, but partnering with it in a way that the NGO could still be trusted to make
independent judgments about the company’s performance.134 Within four months, CI and
Starbucks jointly crafted a memorandum of understanding (MOU) that incorporated the
interests of both partners and outlined goals, responsibilities, and a timeline to which both
could realistically commit. It was signed in 1998 by Orin Smith, President and CEO of
Starbucks, and Prickett. Smith stated: “This was [a partnership] that I got comfortable with
really early. They were pragmatic, and getting it done was what mattered most. The synergies
between what they were trying to do environmentally and what we could do potentially with
the coffee were attractive.”135 Initially, Starbucks agreed to commit $150,000 to the project
over three years, but signed no agreement committing to buy the coffee produced.
The signing of the MOU was followed by a visit by Starbucks representatives to
Chiapas to meet face to face with the farmers, and to hike up to the top of the El Triunfo
Reserve. This was an opportunity for both CI and Starbucks staff to get to know each other
and build a trusting relationship. The interviews conducted with participants on the trip
indicated they found they had more in common than it would appear. Starbucks director of
environmental affairs, Ben Packard stated: “the trip enabled us to see each other’s dirty
laundry.”136 On the other hand, CELB’s senior director of business, Amy Skoczla, explained
that there was the realization that “both [partners] share the same sense of integrity with our
marketing messages, and we are both dedicated to talking about results, not intentions.”137
The meetings with the growers gave Starbucks a chance to communicate to them what was
necessary in order to increase the quality of their coffee.
Concretely, the project was managed mostly by CI whose staff on the ground who had
previous contact with the farmers, and who facilitated the relationship between them and
Starbucks, as a purchasing company setting quality standards for the coffee. Producers were
evaluated on how well they integrated conservation growing methods based on individual
targets set by CI and each farmer, which were tailored to the climatic and physical
characteristics of the farms. When they reached Starbucks quality standards, growers were
allowed to sell an increasing percentage of their crop to Starbucks at a premium price. Not
only were environmental criteria important (such as preserving and planting trees for shade
and using organic fertilizers such as the pulp from coffee cherries), but farmers also had to
agree to pay fair wages to their workers and to shelter them. CI monitored progress and results
by visiting every farm. If they met the proper criteria, farmers could become certified as
134
Austin and Reavis: 9
Austin and Reavis: 9
136
Austin and Reavis: 9
137
Austin and Reavis: 9
135
34
organic producers by independent certification organizations that in part used data collected
by CI staff for their evaluations.
Training the farmers in new methods, and educating them about quality was one of the
most important aspects of CI and Starbucks’ work on site. CI provided courses in villages to
growers, managers of co-ops, and technicians which taught them about farming methods, tree
planting, pulping methods to produce organic fertilizers, and quality control. Co-op leaders
had access to classes on management and planning. In terms of quality control, Starbucks saw
itself as having a responsibility to educate producers. Mecklenburg explained that given the
growers’ distance to the final product that is sold, “even if they were to taste it, they don’t
have any idea what we’d be looking for on this end. So they lack the information about what
the market’s expecting. We are in the process of communicating to farmers what we expect,
what beans should look like etc.”138 CI played the relay role between Starbucks and individual
farmers. Starbucks’ business practices manager, Dennis Macray, explained that “Starbucks
does not generally deal directly with individual farmers. We could not do this without CI.”139
Unlike a big corporation, CI had the ability to communicate at a very local level. The staff not
only sampled and graded every lot of coffee delivered by farmers, but they also ensured that
cooperative members had access to these evaluations so that they could receive feedback on
their performance, as well as suggestions for improvements. CI also operated a training
center, jointly financed by Starbucks, Green Mountain Coffee, National Arboretum, and
CONCAFE (the Mexican governmental agency overseeing the coffee industry). Farmers
could purchase organic fertilizers from the training center at a third of the price of equivalent
chemical ones. A Starbucks consultant also contributed to designing a dry mill for the purpose
of demonstration.
As we have seen previously in Lewis, with ethically traded commodities it is
important for an NGO to diversify the number of buyers, and to not depend on a sole source
of financing for the project. Quinlan observed the difficulty of protecting farmers without
insulating them from market realities: “Bringing them into the global marketplace is like
putting goldfish in with the sharks. But you do no favors pretending that the market is not
what it is. We need to prepare them to meet the demands of the marketplace.”140 From the
beginning of the project, CI had in mind a non-exclusive relationship with Starbucks. Prickett
stresses that “both sides saw the partnership […] more as a leadership initiative which [they]
hoped to extend throughout the industry.”141 Since Starbucks did not commit to buying any
fixed amount of coffee, CI ensured that cooperatives were able to sell to other specialty
companies such as Green Mountain Coffee Roasters, Frontier Organic Coffee, and
Sustainable Harvest Coffee Company. This was very important since in the first year of the
project, Starbucks purchased only 76,000 pounds of shade-grown coffee through this
partnership, representing a total of 2 containers. Starbucks itself sees this diversification as a
positive aspect of the work it is doing with CI. In the company 2005 CSR report, Starbucks
states:
138
Austin and Reavis: 11
Austin and Reavis: 11
140
Austin and Reavis: 11
141
Austin and Reavis: 9
139
35
“CI reports that farmers participating in the program increasingly
recognize the environmental value of incorporating Conservation Coffee
Best Pratices, and that through local partnerships they are able to sell
coffee to other buyers beyond Starbucks. This is especially important
when Starbucks is unable to purchase all of the coffee produced through
this program.”142
In 1998, when Starbucks announced its decision to introduce Mexican shade-grown
coffee into its stores, the small amount purchased that year reflected poorly on their
commitment to their partnership with CI. Mecklenburg recalled approaching Orin Smith with
concerns about negative publicity. She explains: “I can’t defend 76,000 pounds of coffee in a
company that’s dealing with hundreds of thousands of pounds, so either we need to get
serious about this, or we need to discontinue it.”143 Starbucks decided to renew its
commitment to the partnership in a more credible way: by 2002, the company increased its
purchases to 1.5 million pounds of conservation coffee. It chose to buy coffee grown on
plantations considered to be “in transition” but that were not yet certified as organic, if the
coffee met its quality standards. In addition, in 2001 CI set up the Conservation Enterprise
Fund to allow farmers to take out loans at low interest and to sustain them during pre and post
harvest periods, thus liberating them from their harmful dependency on loans from coyotes.
Funding for the loans was provided through several sources, including the World Bank’s
Global Environmental Facility. A $150,000 co-investment was made by EcoLogic Enterprise
Ventures and guaranteed by Starbucks for this project. Despite Starbucks’ original
reservations, the loan program was very successful: all loans had a 100% repayment record
and credit was extended to 2001-2002. Between 2000 and 2003, Starbucks provided a
guarantee to support $1.4 million in micro-loans made by CI and EcoLogic Enterprise
Ventures to Chiapas farmers.144
Overall, the Chiapas project has been successful. The amount of land incorporated into
the project between 1998 and 2004 increased by 220%.145 Cooperative sales increased
steadily, as well as the price received by farmers compared to the local price of coffee.
% Increase in Sales
(lbs of green coffee)
1999-2000
125
2000-2001
50
2001-2002
110
(Source: Conservation International)146
% Increase in Price over
Local Price
40
61
87
The success of the Chiapas Conservation Coffee project has led Starbucks and CI not
only to extend their partnership on the Chiapas project, but also to further it in other areas. In
an effort to bring both closer together, Orin Smith joined CI’s board of directors in 2001. He
142
Starbucks CSR report: 25
Austin and Reavis: 12
144
CELB website: “Partners: Starbucks Coffee Company,”
http://www.celb.org/xp/CELB/partners/com/starbucks.xml
145
Austin and Reavis: 12
146
Austin and Reavis: 23
143
36
personally believes that “preserving environmental diversity was a high-priority issue facing
the world and that CI’s approach of blending the environmental with the economic was
particularly effective.”147 For CI, this represents the security of having the CEO and President
of a major coffee retailer championing their partnership together. In 2003, Starbucks
committed to contributing $1.5 million over 3 years to CI’s Conservation Coffee program to
support its expansion in Central America, Peru and Colombia.148 Conservation Colombia
Coffee, which originates from farming communities located next to Tatama National Park and
the proposed Serrania de los Paraguas nature reserve in Colombia, was launched in Starbucks
stores in March 2003.149 In addition, Conservation Peru Coffee is currently available in select
international markets as well.150 Furthermore, Starbucks started working closely with Verde
Venturas, a $7 million investment fund managed by CI. In 2003, it provided $2.5 million in
loans to “provide small-scale coffee producers with direct access to affordable credit”151
during 2004-2005, representing the largest commitment of its kind by a specialty coffee
company. Verde Ventures stresses the leadership role that Starbucks has taken in addressing
the financial difficulties facing small-scale farmers.
Perhaps the most successful and impressive aspect of the evolving partnership
between CI and Starbucks is their decision in 2001 to jointly develop coffee purchasing
guidelines that would support Starbucks’ dedication to sourcing coffee in a socially and
environmentally responsible way. The guidelines were developed and formalized in several
stages and were based on CI 1999-2000 “Conservation Principles for Coffee Production,”
created by CELB in association with multiple stakeholders from the coffee industry. For
Starbucks, in the company’s effort to further its social and environmental responsibility
practices, this collaboration was a way of benefiting from CI’s expertise and experience in
conservation methods as well as the NGO’s knowledge of how these would impact local
small-scale producers.
In 2001, Starbucks and CI created the Starbucks Preferred Supplier Program based on
a set of quality, social, environmental, and economic guidelines. They planned for a two year
pilot program in 2002 and 2003, during which they solicited feedback from producers and
improved the specificities of the guidelines. In 2004, these improved guidelines were renamed
the Coffee And Farmer Equity (C.A.F.E.) Practices.152 This formalization into purchasing
guidelines was the result of weekly conference calls between Starbucks and CI staff who
remained in close communication throughout the process.153 Suppliers of any size or location
could earn up to 100 points for their performance in three areas of sustainability: 50 points for
environmental impact, 30 points for social conditions, and 20 points for economic issues.
Every 10 points awarded producers a $0.01 premium over Starbucks’ regular price, and a
producer that reached 100 points would become a preferred supplier for Starbucks. Quality
prerequisites were also incorporated into C.A.F.E standards independently of the point
system. Scoring in each area was to be carried out by independent third party verifiers. Since
147
Austin and Reavis: 13
Starbucks Website: http://www.starbucks.com/aboutus/conscoffee.asp?cookie%5Ftest=1
149
CI Website – Starbucks Partnership Profile
150
CELB Website - Starbucks Coffee Company
151
Verde Ventures: http://www.conservation.org/xp/verdeventures/about/supporters.xml
152
Starbucks CSR report: 19
153
Austin and Reavis: 14
148
37
the C.A.F.E. practices have been in place, Starbucks has been committed to improving and
expanding them to include and encourage other small-growers to apply.
What is interesting about the C.A.F.E. guidelines is that they truly represent an
example of a cooperative effort between a corporation and an NGO that has had a meaningful
impact on both that company’s business strategy and the NGO’s program. In 2005, Starbucks
purchased 76.8 million pounds of C.A.F.E. certified coffee, which represents 24.6% of their
total coffee purchases (increasing from 14.5% in 2004).154 The company plans to increase
their purchases to 150 million pounds in 2006 while simultaneously working on extending
guidelines to more growers worldwide, especially small-scale producers. In addition, there is
a sense that this collaboration has an impact on a much larger scale than the work done with
specific programs such as the ones described above. Mecklenburg is quoted as saying: “While
the Chiapas project is totally amazing and beyond what any of us could have imagined, it
pales in comparison to what we’ve done with the sourcing guidelines. What we want to do
with these is really define what sustainable coffee production is.”155 The company also sought
to influence the specialty coffee industry as a whole. It “hoped to create a network of industry
leaders who will join [Starbucks] in finding a way to create positive change within the global
coffee community.”156 Prickett noted that engaging other companies was necessary in order to
globally solve problems surrounding coffee production, since the actions of Starbucks alone
were naturally insufficient to achieve this goal.157 Starbucks’ hope is that the C.A.F.E
practices will become equal to other types of certifications, such as fair trade or organic
certification, which the company appreciates as important in the promotion of a sustainable
coffee industry.158
As stated in the company mission statement, Starbucks has continued to source its
coffee from other types of sustainable coffee certifications established independently of the
company. This is the case, for example, of “Fair Trade” certified coffee which Starbucks
purchases through TransFair USA. Yet these types of collaboration, and the ensuing attempts
at partnerships following from them, have overall been less successful than the partnership
established with CI.
Starbucks and Fair Trade coffee initiatives
Starbucks’ initial involvement with Fair Trade Certified coffee was a completely
different experience than that with Conservation Coffee. One major difference was that it
came out of an antagonistic relationship with an NGO rather than through collaboration. The
example illustrates how a company would want to partner with NGOs (and other actors) to
reduce its vulnerability to negative publicity, but it is also shows how this approach can lead
to a less stable and successful association than the one Starbucks established with CI.
154
Starbucks CSR Report 2005: 4
Austin and Reavis: 14
156
Austin and Reavis: 13
157
Austin and Reavis: 14
158
Starbucks CSR Report 2005: 20
155
38
In the article “Collaborating with Activists: How Starbucks Works with NGOs,” Paul
Argenti describes the beginning of Starbucks’ involvement with Fair Trade certified coffee. In
1999, when the company was approached by the NGO Global Exchange about the idea of
selling fair trade coffee in Starbucks stores, it hesitated to do so. Peaceful protests were
organized outside Starbucks stores in Seattle, so that the company gave in and announced in
1999 a one time purchase of 75,000 lbs of Fair Trade Coffee. But Global Exchange was not
satisfied with this result and several months later, fair trade campaigners appealed to
Starbucks stockholders at their annual meeting in April 2000. That year, market price for
coffee had plummeted to just over $0.64/lb, but Starbucks was paying $1.20/lb as it focused
supply only on premium quality beans. Although the company was already paying prices high
above normal market prices, and in its mission was committed to the livelihood of its
suppliers, none of them were certified as Fair Trade growers. But Starbucks’ reaction had
made Global Exchange decide to target the company and launch an awareness campaign for
fairly traded coffee, in order to put pressure on Starbucks to start buying from these sources.
Because it was already paying a higher price for quality coffee, Starbucks was
perceived as being more likely to cave under pressure to pay a slightly higher price for
certified coffee. Indeed, Starbucks’ resistance to the idea of incorporating Fair Trade coffee
came not from higher prices - since it represented only a 6 cent increase per pound - but from
the fact that these certified suppliers did not have to meet any criteria of quality for their
beans.159 The company’s reputation and competitive edge were built not only on its position
as a socially responsible company, but also as a provider of quality products. “If Starbucks
were forced out of the high quality niche, its competitive position would erode, opening it up
to competitive threats from smaller players […] which were small enough to escape Global
Exchange’s notice.”160 At the same time, company executives feared the effect of a boycott by
Global Exchange. They wanted to avoid protests taking place in front of their retail stores all
over the country and felt the need to quickly respond to the immediate publicity threat.
In essence, Starbucks had to prioritize between its mission to be socially responsible
and its desire to sell quality coffee.161 The company had to take into account the impact of
such a decision, not only on its customers, but also on its other suppliers. There was a concern
that farmers who had supplied high quality beans to Starbucks for 20 years would react
negatively when hearing that certified Fair Trade producers were receiving the same price for
lesser quality beans.162 In terms of customers, Starbucks didn’t know whether there was a
market for Fair Trade certified coffee, but the company did not have time to research the
matter because of pressure of an imminent boycott by Global Exchange. Starbucks executives
decided to commit to selling some certified coffee from TransFair USA in domestic stores for
a one year period, at the end of which they would reevaluate their decision based on the
performance of Fair Trade coffee. Argenti explains this as a sort of middle ground solution
that was intended to buy time in order to assess consumer demand for the product.
159
Argenti: 101
Argenti: 102
161
Argenti: 104
162
Argenti: 103
160
39
On April 12th 2000, Starbucks announced an agreement with TransFair USA and
agreed to create materials to educate its consumers and employees about the condition of
coffee producers. Linton notes, that this hardly constituted a real partnership: “for NGOs such
as TransFair […], a business partner may simply be a company that buys coffee that the group
has labeled or certified, but when businesses publicize their partnerships with NGOs they are
talking about a relationship that includes joint, long-range goals and a commitment of
financial support on the part of the company.”163 According to Mecklenburg, Starbucks tried
to collaborate more closely with Global Exchange and TransFair on the fair trade agenda to
promote quality guarantees, but both NGOs refused. Global Exchange saw itself in a strictly
independent role toward Starbucks, because it abided by the principle of not collaborating
with business. TransFair was content remaining in a position of simply selling coffee to
Starbucks without further engagements reasoning that as a certification agency it could not
accept funding from an industry leading corporation.
According to Argenti, this first decision pushed Starbucks to further its efforts in
ensuring the livelihood of coffee farmers and pushed fair trade up onto the company’s agenda.
After its initial assessment of Fair Trade Coffee, Starbucks, in a proactive attempt to diversify
its suppliers, decided develop a two year pilot program in partnership with Oxfam America,
the Ford Foundation, and the Oaxacan State Coffee Producers Network (CEPCO). These
represented a diverse group of organizations to be working together, going beyond a simple
corporate-NGO partnership. Oxfam America, a branch of Oxfam International, is an NGO
that deals with alleviating problems of poverty and hunger in developing countries; CEPCO is
the largest association of small-scale coffee producers in the state of Oaxaca – one of the
poorest in Mexico – whose members include 44 cooperatives and 16,000 farmers; and the
Ford Foundation is a non-profit organization (as opposed to an NGO per se) that awards
charitable donations to fund the activities of other groups dedicated to pursuing goals of
poverty reduction and international cooperation. Starbucks and the Ford Foundation each
committed $125,000 per year over two years to funding the project. The goal of the project
was to:164
•
•
•
•
increase the supply of high quality Certified Fair Trade coffee to the US specialty
coffee market from small farmer cooperatives,
improve the skills of small-scale coffee farmers by providing resources and
training to implement and standardize post-harvest improvement,
provide information and support to enable farmers to earn premium prices for their
coffee by producing high quality product,
enable the farmers to disseminate their learnings to other coffee cooperatives.
All parties to the partnership had converging agendas for the project, even if these
stemmed from different perspectives. Oxfam stated that it had been working for the past 30
years with small coffee growers and believed that “quality – cup quality, the rewards in
pricing for quality, and the perception of quality – is one of the major challenges to increasing
163
Linton: 605
Oxfam America Website: “Starbucks, Ford Foundation, Oxfam America and CEPCO Announce Innovative
Collaboration to Increase the Supply of High Quality Fair Trade Coffee.” Press Release 29 July 2002.
http://www.oxfamamerica.org/newsandpublications/press_releases/archive2002/art3007.html/print.html
164
40
the amount of coffee sold at fair trade prices.”165 Since their work in the coffee industry was
geared toward “finding new and innovative ways to secure a greater market share for smallscale coffee farmers” they were excited not only to find a source of funding to implement a
project in Oaxaca, but also to be working in collaboration with a specialty retailer like
Starbucks that could participate in the training process and eventually purchase the coffee
produced at a premium price. CEPCO farmers were interested in learning new growing
techniques that would enable them to produce higher-quality products consistently, thereby
making them less vulnerable to fluctuating market prices. Jaime Hernández, CEPCO’s general
manager declared at the beginning of the partnership: “We are aiming to produce coffee
consistency so we can offer the same high quality coffee. We’ll be able to ask for the right
price for our good work too – improving our business.”166
Simultaneously, Argenti explains that each partner came in with their own set of
concerns about entering into a partnership.167 The Ford Foundation was worried about being
perceived as providing financial support to a corporation, a practice that is forbidden by its
bylaws. They were very careful to make sure donations were allocated to Oxfam for the
purpose of the project. Oxfam, on the other hand, had never partnered with a corporation
before. They feared a negative reaction from the NGO community and did not want to be seen
as “selling out” by working with Starbucks. They had to face attacks from groups such as the
Organic Consumer Association that disapproved of Oxfam’s association with a larger
company. Starbucks was equally nervous about the logistics of partnering with many different
organizations, which is more complicated to carry out efficiently than a bilateral partnership
with a single organization.
Nonetheless, through careful and steady negotiations and efforts, the partnership was
established. In July 2002, Starbucks, the Ford Foundation, Oxfam America and CEPCO
officially announced their collaboration. Starbucks representatives were sent to Oaxaca in
February 2003 to see conditions on the ground. Following this initial contact, the leaders of
CEPCO were invited to go to Seattle to tour Starbucks’ roasting plants, where they learned
more about roasting techniques and different quality coffees through organized tasting
sessions. Starbucks’ support of this project also went further than simple funding. It provided
technical support to CEPCO that included building and equipping cupping labs, and
contributing to the purchase of an electronic sorter that helped growers separate high quality
beans and enhance the quality of their supply.168 The idea was to train farmers to teach these
same techniques to other farmers in the cooperatives.
Between 2001 and 2005, Starbucks increased the amount of Fair Trade Coffee it
purchased from 653,000 pounds to 11.5 million pounds and is planning to increase that
number to 12 million pounds in 2006. This represents about 10% of Fair Trade Certified
coffee imported worldwide.169 However, despite this increase there have been some problems
with sourcing Fair Trade Coffee. First, customer demand in the US is very low. In general,
165
Oxfam Website
Oxfam Website
167
Argenti: 109
168
Argenti: 110
169
Starbucks Fact Sheet http://www.starbucks.com/aboutus/StarbucksAndFairTrade.pdf
166
41
trends show a large imbalance between supply and demand of fair trade coffee. TransFair
USA stated that only 32 million pounds out of 235 million pounds produced in 2002 were
actually sold as Fair Trade Coffee.170 Second, Starbucks has found that many suppliers are not
consistent in the quantity and quality they can provide because certified co-ops tend to be very
small scale. The large suppliers that Starbucks has ties with, cannot be certified as Fair Trade
because of their size, even though the company still pays a premium price for their coffee.
According to Argenti, “the current Fair Trade system neither provides Starbucks with
sufficient economic transparency nor does it have well-defined environmental criteria or
relevant social standards to help ensure the sustainability of Starbucks suppliers.”171
This can be seen as a stark contrast to the success of C.A.F.E practices. One
explanation is that Starbucks had an active role in creating the C.A.F.E. standards. These were
the product of real cooperation with the non-profit sector and they fuse business concerns of
quality with social and environmental concerns in a way that Fair Trade does not.
Mecklenburg suggested as much by saying: “The Fair Trade movement is very focused on
solidarity among small farmers and paying good prices, which we as a company tend to do,
but we have other things to be concerned about which aren’t necessarily being met in the Fair
Trade Model.”172 Thus, the success of C.A.F.E practices in comparison to Fair Trade
demonstrates the value of collaboration and partnerships versus confrontation in achieving
sustainable development goals.
4)
Conclusions: Starbucks – NGO collaboration for sustainable coffee
As a result of these activities “not only did Starbucks actively pursue and evaluate the
Fair Trade model, but the company also continued to expand its social responsibility
programs and explored several alternatives to Fair Trade in an effort to reach the same goal:
improved livelihoods for the small farmer.”173 Specifically, it tried to find ways of
cooperating with NGOs and certification organizations over a longer period of time, instead
of reacting to an immediate threat as it had done with Global Exchange and TransFair USA.
As it states in its company CSR report:
“Starbucks is committed to purchasing our coffee in an ethical and sustainable manner,
regardless of labels and certifications. The Fair Trade system only certifies cooperatives of
small-holder, family-owned farms, a system that currently produces about two percent of the
world’s coffee supply. The majority of the high-quality coffee Starbucks purchases is grown
by farmers outside this system, many of whom are small-holders. Fair Trade Certified™
174
coffee is one source of supply for our global coffee purchases.”
Several observations can be made in this case study that may be generally applicable
for any potential corporate-NGO engagement. Argenti argues that, contrary to rational
expectations, “truly socially responsible companies are actually more likely to be attacked by
170
Argenti: 105
Argenti: 105
172
Austin and Reavis: 15
173
Argenti: 105
174
Starbucks CSR Report 2005
171
42
activist NGOs than those that are not.”175 This is because these companies usually advertise
their social policies and bank part of their reputation on this fact. They are also perceived as
more willing to enact change in their policies if they are truly dedicated to carrying out their
social goals. Companies that are willing to collaborate should therefore be more proactive
about identifying the issues that make them vulnerable. Argenti notes that too often,
companies wait for a crisis to erupt before trying to address problematic issues, as was the
case with Starbucks and Global Exchange. They could more actively seek out NGOs that are
willing to collaborate with them to help address these vulnerabilities. Not only does this give
companies the ability to “set the agenda before they are put on the defensive and before and
adversarial relationship develops”, but it also allows companies to “focus on the issues rather
than the ‘fight.”176
With regard to Global Exchange and TransFair, both NGOs illustrated a form of
thinking that is hostile to partnerships between the for-profit and non-profit sectors. They
perceived their role as being completely independent from business and did not wish to
compromise their practices by entering into collaboration with Starbucks. While this is a view
that is shared by others in the NGO community, one might wonder if they may not have
achieved their goal by trying to work with Starbucks’ quality requirements. In 2006,
Starbucks plans to purchase 150 million pounds of C.A.F.E certified coffee and only 12
million pounds of Fair Trade certified coffee. Perhaps, if Starbucks and Global Exchange had
worked together on a project that satisfied both parties, Starbucks would have had a more
positive incentive to advertise Fair Trade Coffee and educate its consumers to create a more
important demand for the product.
This example also shows that in order to establish true collaboration, it is important to
build relationships between partners carefully over time. This is essential in facilitating
mutual understanding and trust, which are the key to long-lasting and productive partnerships.
Starbucks’ reaction to Global Exchange’s campaign was rapid, and only addressed the
problem in the short-term. A more lengthy relationship also gives time for both parties to
learn to be flexible and to adapt to each other’s work methods and management style.
Although this may seem more time consuming initially, “rather than spending five years
under constant attack from an adversary, companies can dedicate one to two years working
with the same organization on a plan that may actually achieve mutually beneficial results and
potentially lead to a stronger reputation in the long-run.”177 This is exactly what Starbucks
attempted to do by collaborating with Oxfam America, the Ford Foundation and CEPCO and
in furthering its involvement with CI.
175
Argenti: 110
Argenti: 111
177
Argenti: 113
176
43
CONCLUSION: Assessing the success of corporate-NGO partnerships
Measuring the success of corporate-NGO partnerships in general is very difficult. As
mentioned previously, there are many different forms of partnerships that take place at
various levels ranging from small and medium businesses working with local community
organizations, to large TNCs working with foreign localized non-profits or big international
NGOs. Research carried out for this paper has revealed that there has not yet been much
published on the topic. This is a relatively new trend that has only recently been receiving
attention in the North because of increased concern with CSR, and the search for ways to
rethink traditional development aid strategies within the framework of a more diversified and
globalized political economy. Many of the authors writing on the topic conclude that more
research needs to be carried out before concluding whether these partnerships can
significantly contribute to sustainable development.
Furthermore, it is also difficult to assess the success of specific individual projects. For
every partnership established publicly, there could be a multitude of failed attempts. Some are
announced to the press when an agreement is reached, but no subsequent information is
provided on the concrete impact of the project, or on whether it was even carried out to
implementation. This is the case, for example, of Starbucks’ partnership with Oxfam, the Ford
Foundation, and CEPCO. At the time it was announced, Starbucks desired media attention in
order to shake its negative image in regards to Fair Trade Certified Coffee. But in the
company’s 2005 CSR report, its website, even on the Oxfam website, there is relatively no
follow up on the outcome of this particular partnership, making it difficult to say whether or
not it was successful. One could argue that it was not, because partners would have advertised
their success had this been the case, much in the same way that Starbucks publicizes its
partnerships in Conservation Coffee projects.
Additionally, it is very hard to obtain an objective analysis of partnership projects,
especially ones that involve large corporations that have a widespread brand image to uphold.
These companies spend a lot of money on marketing themselves in a positive light, and
therefore control the content of their CSR reports to reflect their achievements without
mentioning their failures. For instance, Starbucks’ report frames the Fair Trade initiative as
being successful but merely constituting one aspect of what the company is doing to promote
sustainable coffee. But the C.A.F.E. guidelines are explained in great detail, including how
they were developed over several years in conjunction with CI and the company’s desire to
continue expanding their scope. Most of the specific details of partnerships are confidential,
and the information accessible to the general public is usually controlled by corporate
partners. Thus it is difficult to find independent case studies assessing the efficiency of a
partnership.
The studies used in this paper to analyze how Starbucks works with NGOs contained
specific information on the projects because the authors were able to obtain interviews with
high-ranking and responsible representatives of both the company and the NGO, who allowed
this information to be published. However when I tried contacting Starbucks and CI to talk to
someone about these partnerships, they both refused to grant me an interview. The Starbucks
44
representative with whom I spoke told me that there were confidentiality issues involved, and
redirected me to the company website for more information. This is not to say that the case
studies necessarily present a skewed view of the partnerships, but it does illustrate the lack of
reliable detailed information on the outcome of partnerships.
In addition, there is little to no public data available that measures development
progress for the stakeholders impacted by development projects. Public corporations are
required to put annual financial reports containing analyzable figures necessary to
stockholders and investors. Governments and international institutions collect data and
publish economic and development indicators at regional, national, and subnational levels.
But companies and NGOs alike are not required to measure the progress and efficiency of
their projects in terms of development (although they may do so internally to assess their
viability) and they do not make this information readily available. These various factors help
explain why partnerships are so difficult to evaluate without performing original research
onsite, as well as the relatively low number of academic articles written on the subject.
The other challenges to evaluating the success of partnerships are that most are too
recent and too small in size to allow researchers to reach clear conclusions about whether they
are sustainable, and whether they can significantly contribute to development in the longterm. For a company like Starbucks, certified sustainable sources still represent only less than
30% of total coffee purchases. It is questionable whether Starbucks can one day achieve 100%
sourcing from certified growers, and whether this is (or even should be) a desirable goal for
the company. Although the ethical or fair trade model is technically easier to carry over to
other types of industries than other very localized forms of corporate-NGO partnerships, there
are difficulties implementing it within the overall coffee industry itself. Because Starbucks is
a specialty retailer focusing on a high quality product, it is already committed to paying
premium prices for its coffee. Thus the financial burden of buying through sustainable sources
is minimized. It is unclear whether retailers that are not concerned with cup quality, for
example fast-food chains, would have the motivation to pursue these same goals. Ethical trade
demands the dedication of a certain type of company that caters to a certain kind of consumer,
usually a more educated and richer consumer, who has the resources and the desire to pay
more for a higher quality product. It is also questionable whether this model is replicable for
industries involving other types of tradable primary goods. For example, fair trade tea and
sugar have enjoyed less success than cocoa and coffee because they do not present retailers
with the same advantages of marketability through quality.
As we have seen, one of the reasons corporate-NGO partnerships can be successful is
because they are more focused, and target development on a much smaller scale than larger
aid-driven projects. They have the capacity to impact fewer people but to do so in a more
significant way. NGOs collaborating with Starbucks work with relatively small numbers of
farmers, and while CI is expanding its efforts to different countries, there is a sense that
ethical trade is limited in how much it can actually influence the coffee industry as a whole.
CI is able to work with Latin American growers and facilitate contact between producers and
buyers in this region, but it is much harder to imagine doing this for growers in Africa or Asia
for practicality purposes. If the goal of development in these projects is to help lift producers
out of poverty, it is questionable whether ethical trade standards may ever reach this goal
45
across the industry as a whole. Current efforts are successful because they are localized,
small, and focus considerable resources on small projects facilitated by many different NGOs.
Paradoxically, these qualities also constitute limitations because trying to upscale activities
risks removing the very aspects of partnerships that make them successful, which are not
sustainable on a more macroeconomic scale.
These concerns raise broader questions about how partnerships projects tie into
development as a whole. Beyond the risks of dependency on aid being “reassigned” to the
private sector, the fact that impact and success are not easily measurable poses significant
problems in terms of accountability. If these projects fail, who is responsible? Furthermore,
should NGOs and businesses even be held to certain standards of accountability in these
projects in the same way we would consider governments, or international institutions should
be accountable? If the trend of NGOs working closely with business continues, it may be
necessary to have some kind of overseeing body or agency capable of imposing measures of
transparency. So far this has not been the case because NGOs are considered trustworthy. But
as they move more and more toward working in collaboration with business, it is conceivable
that the sector as a whole could lose credibility (especially with the existence of
confidentiality agreements with companies) which is why some NGOs seek to retain a strict
separation between the non-profit and the private sector.
Nonetheless, despite these problems, we can conclude from this research that
corporate-NGO partnerships are a step in the right direction in terms of influencing corporate
culture as well as the non-profit sector in many ways. Although partnerships may not lead to
large scale improvements in sustainable development and poverty reduction, they do have the
ability to significantly improve the livelihood of the individuals they specifically target. More
time, and further analysis is needed to see how these trends will evolve, and the importance
they will take on in the future.
46
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