The Impact of Procurement on Poverty

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The Impact of Procurement on Poverty

• By Juan Andres Santelices
• 7th October 2008

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Responsible procurement

• Procurement practices that combine commercial
  considerations with social, labour and
  environmental performance.

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Corporate Social Responsibility (CSR)?

• A private sector policy where the company chooses
  to address its environmental social and economic
  impacts. (www.csr.gov.uk)?

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Sustainable Procurement

• A process whereby organisations meet their needs
  for goods, services, works and utilities in a way
  that achieves value for money on a whole-life
  basis in terms of generating benefits, not only
  to the organisation, but also to society and the
  economy, whilst minimising damage to the
  environment.

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Unfair World

• According to UNICEF 30,000 children die each day
  due to poverty, this means 10.9 million a year!
• 1 billion children in the world are in poverty.
• Nearly a billion people entered the 21st century
  unable to read a book or sign their name.
• Rural areas account for three in every four
  people living on less than US1 a day.

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Unfair World

• The total wealth of the top 8.3 million people
  around the world rose 8.2 percent to 30.8
  trillion in 2004, giving them control of nearly a
  quarter of the worlds financial assets.
• 51 percent of the worlds one hundred wealthiest
  bodies are corporations.
• In 2005, the wealthiest 20 of the world
  accounted for 76.6 of total private consumption.
  The poorest fifth just 1.5

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Unfair World
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Standards, Certifications

• In the UK and the rest of Europe around 70
  recognise the FAIRTRADE Mark. (one of the worlds
  leading ethical consumer labels).
• The Forest Stewardship Council (FSC) label,
  broadly speaking, exists to address
  sustainability by promoting environmentally
  appropriate, socially beneficial and economically
  viable management of the worlds forests.
• Marine Stewardship Council (MSC) fishery
  certification program and seafood eco-label
  recognise and reward sustainable fishing.
• Plan Vivo is a system for planning managing and
  monitoring the supply of verifiable emission
  reductions from community-based sustainable
  land-use projects in developing countries.

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Consumer Awareness
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Highlights

• Sales value of almost half a billion pounds for
  Fairtrade products in the UK in 2007.
• 22 consumer countries across the Fairtrade
  Labelling Organisation .
• Sales of Fairtrade products reached 2,381 million
  euros.
• A 47 increase on the year before.
• From 150 different products in 2003 to 3,500
  products in 2007.

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Highlights

• More than 100 million ha forest worldwide were
  certified to FSC standards in April 2008,
  distributed over 79 countries.
• FSC certified forests represent the equivalent of
  7 of the worlds productive forests.
• FSC is the fastest growing forest certification
  system in the world (UN FAO, 2007)
• With over 7'500 certificates, the number of
  companies along the forest product supply chain
  committing to FSC certification peaked at 40 in
  2007.
• Plan Vivo has sold more than 500,000 t CO2e, and
  is one of the earliest voluntary emission
  reduction systems (1997).

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Impact for the Producers and their families

• According to Gerado Camacho, a Coocafé member,
  The Fairtrade price allows us to survive as
  coffee farmers. It covers our costs of
  production, lets us send our kids to school, buy
  clothes and keep a roof over our heads.
• Arturo Gomez, member of the Costa Rican banana
  group Coopetrabasur noted Before I was someone
  that took a box and loaded it onto a train. That
  was my only responsibility. I was just a farmer,
  who was an intermediary. In this new system I
  have become an international business man.

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Impact for Producer Organisations

• The reputation of Ugandan coffee suffered
  following liberalisation of the coffee industry.
  The Gumutindo Co-operative, supported by
  Fairtrade and in particular its relationship with
  Cafédirect, has invested in agricultural
  training, organic conversion and improved
  processing methods to raise the quality of its
  coffee. Buyers are now knocking on the
  cooperatives door and farmers are queuing up to
  join the organisation.
• Farmers always note the increased access to
  knowledge and information, as well as credit, as
  among the key benefits.
• Very often producer groups have as a result been
  able to diversify successfully into growing other
  crops. Coocafe, for example, also grow macadamia
  nuts.

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Impact for Producer Organisations

• Farmers have become organised and then been able
  to move higher up the supply chain. In many
  cases, such as El Guabo in Ecuador, the
  smallholders organisation is now exporting
  directly.
• They are using the knowledge and finance to build
  their businesses and invest in diversification or
  adding value. For example, the Thien Hoang
  Organic Tea Club in Vietnam is planning to build
  a factory to process their tea.

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Examples of the Impact in poor communities
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Community forest in El Peten, Guatemala

• Community forest management is a strategy that
  leads to more integrated local development and
  helps to combat poverty.
• Forest management activities have produced
  additional sources of employment.
• In 2004 alone, these activities provided more
  than 22,000 days work and wages amounting to over
  US170,000.
• Working conditions are improving.
• At the collective level, the income has enabled
  the communities to increase their working
  capital.
• Community members are paid an average of US
  6.20, which is almost double the days wage paid
  to agricultural workers in the region.

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Fairtrade Bananas in the Windward Islands

• The impact of Fairtrade is demonstrated by the
  example of the Windward Islands. Four nation
  states whose economies were extremely dependent
  on selling bananas in the UK. Just a few years
  back, the farmers and nations looked disaster in
  the face. In the 1980s, there were 11,000 banana
  farmers in one island, Dominica. By the end of
  the 1990s, there were less than 700.
• Today, 3,600 farmers are in certified groups,
  representing 90 of all banana farmers in the
  Windwards Islands and nearly all their bananas
  are sold as Fairtrade.
• It does therefore give an interesting insight
  into the potential of Fairtrade, if scaled up to
  have a deeply significant impact on whole
  economies.

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Malawi and Mali

• In Malawi, the Kasinthula sugar cooperative, used
  their first Fairtrade premium to bring clean
  drinking water to a village for the first time.
  Previously villagers had had to walk some
  distance to take water from the river.
• Women cotton farmers in the Dougoroukoroni
  cooperative in Mali decided to spend their first
  Fairtrade premium payment on building a small
  two-room schoolhouse. But it was overflowing as
  children desperate for an education crowded into
  the tiny rooms. So the members, feeling empowered
  through their engagement in Fairtrade, negotiated
  with the local government to ensure that they too
  lived up to their responsibilities. The result
  the village now has a school large enough for
  approximately 160 pupils funded jointly by the
  local government and the cooperative.

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Bolivia, Brazil and Peru, the Brazil nut gathers

• Premium has been used for
• Members health insurance
• Pay fees to send kids to secondary schools and
  further education.
• Capacity training in business development.
• Co-financing the setting up of a business centre
  for the 6 cooperatives in the 3 countries
• Co-finance the setting up of Internet and
  communication centre for a village with more than
  2,000 families. Before they needed to travel over
  2 hours to get access to internet and telephony.

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Bolivia, Brazil and Peru, the Brazil nut gathers

• Business has generated income to
• Increase the daily wages of each member.
• Investment in own processing plants.
• Business capacity and market access knowledge.
• Visits to clients in Europe and United Stated.
• Create working capital in their organisations.
• Access to cheaper credits from ethical financial
  institutions.

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Impact on business

• Some significant commitments by major retailers
  to Fairtrade
• In 2003, in a groundbreaking move, the Co-op
  switched all its own-label coffee and block
  chocolate to Fairtrade. They have since switched
  all their own-label tea and sugar to Fairtrade.
• In March 2006, Marks Spencer switched all of
  its coffee and tea to Fairtrade, enabling over 30
  new producer organisations to enter into
  Fairtrade and making significant changes to
  volumes, values and positioning of Fairtrade.

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Impact on business

• More significant commitments by major retailers
  to Fairtrade
• Sainsburys announced in December 2006 its
  commitment to switch all of its bananas to
  Fairtrade. This move more than doubled the volume
  of Fairtrade bananas bought by Britains shoppers
  and generates an estimated 4m a year in
  Fairtrade premiums for the growers and their
  communities. Waitrose immediately followed suit
  also switching all their bananas to Fairtrade.
• Sainsburys has since switched all their
  own-label tea and sugar to Fairtrade.

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Impacts in business and governments

• Majority of companies are looking to their supply
  chains and seeking to improve standards.
• Impact in governments policies worldwide.
• Public have pressed governments to ensure world
  trade rules are reformed in such a way that
  tackling poverty and promoting sustainable
  development are their heart.

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Conclusions

• Buying from communities and small holders rather
  than from corporations, will provide a more equal
  distribution of wealth.
• The supply chains for buying ethically timber,
  food and carbon are available now.
• Supporting and getting to know our suppliers will
  have a great impact for buyers and producers.

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Conclusions

• Consumers can also support the development of new
  supply chains by demanding new products.
• Buyers should get more involved in developing
  fair supply chains

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Conclusions

• That 3.1 billion people still earn 2.5 dollars a
  day or less is a big scandal, and there are ways
  to solve it. Ethical and Fair Trade are one way
  to reduce poverty and injustice.

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Conclusions

• Also 67 of the consumers in the UK believe that
  Fairtrade is the best way to reduce poverty.
• This is the time to commit with better policies
  in public and private procurement.
• The poor cant wait any longer and it is time to
  change our attitude to purchase, and to be
  responsible for those billions that are waiting
  to improve their livelihoods and be part of fair
  world.
• Your decisions have a major impact, do not forget
  it!

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Finally

• I would like to thank
• Harriet Lamb (Fair Trade Foundation)?
• Duncan Mcqueen (IIED)?
• Willie McGhee (Plan Vivo Foundation)?
• John Forster.
• All of you.
• And a especial mention to all those producers,
  gathers and communities around the world that
  have contribute to my life all over the years.