Challenges in Implementing Fair Trade and Conscious Capitalism

FAIR TRADE AND CONSCIOUS CAPITALISM 1

Fair Trade and Conscious Capitalism

How does fair trade support the philosophy and practices of conscious capitalism?

Conscious capitalism is a business philosophy founded by the co-CEO of Whole Foods Market Inc., John Mackey, which calls for balancing between virtue and profits in conducting business (North Eastern University, 2021). The philosophy of conscious capitalism is that businesses should pursue profits in an ethical manner that protects social and environmental values, and serves the interests of all stakeholders (North Eastern University, 2021). Conscious capitalism thus emphasizes the notion of doing well by doing good, and recognizing the interests of all primary stakeholders, including those that cannot speak for themselves. Fair trade, on the other hand, is a global trading partnership that pursues equity in international trade by protecting the rights and interests of marginalized workers and producers, particularly in less developed economies (North Eastern University, 2021).

The fair trade movement supports the philosophy of conscious capitalism by giving certifications to businesses that create benefit for the land on which they are grown and the producers who make them. By pushing for the protection of the environment and the rights of marginalized stakeholders through, for instance, minimum supplier prices; fair trade demonstrates the core guiding principles of the conscious capitalism framework:

a. Higher purpose – fair trade certification supports the idea that businesses have a greater purpose in the society than just making profit. They have an obligation to represent environmental and social concerns at both local and global levels (North Eastern University, 2021).

b. Stakeholder orientation – both fair trade and conscious recognize that there are other stakeholders besides shareholders and customers, and it is important that businesses take into consideration the entire ecosystem of stakeholders, including the environment, in their decision-making (North Eastern University, 2021). One of the most significant ways by which fair trade protects the very marginalized suppliers, for instance, is by imposing the minimum price a certified organization can pay for commodities supplied (Hira & Ferrie, 2006)

c. Conscious leadership – conscious capitalism requires leaders to drop the ‘me’ mentality of capitalism and adopt the ‘we’ mentality that protects the interests of all primary stakeholders and perpetuates a culture of consciousness in business decision-making (North Eastern University, 2021). Fair trade perpetuates conscious leadership by recognizing and rewarding business leaders whose operations and supply chains maximize value for marginalized stakeholders who would otherwise be forgotten.

What are the challenges in the implementation of fair trade in the developing world?

One of the fundamental challenges in the implementation of fair trade in developing countries is the lack of a standard operational definition of what fair trade really means and how it is certified (Hira & Ferrie, 2006). The lack of a consistently-applied definition and well-tested certification criteria causes confusion among businesses as it is not clear what actions amount to fair trade and what does not (Hira & Ferrie, 2006). The second challenge is that there is uneven awareness about fair trade in developing countries, which limits the concept’s application (Hira & Ferrie, 2006). Due to uneven awareness, the few fair trade organizations that exist are forced to engage and trade with non-certified, and at times, unethical organizations, in which case they negate their purpose of ethically protecting all stakeholders. The third challenge is that it is not clear how fair trade contributes to economic development in developing countries given that certification limits itself to commodity goods only and the number of fair trade organizations or workers impacted by the same is fairly small (Hira & Ferrie, 2006).