Design a label

To help customers in the high street tussle between 'organic', 'Fairtrade' and 'food miles', Karen Ellis & Michael Warner propose a new 'Good For Development' label.

Everyone knows that trade is crucial for economic growth and reducing poverty, and that it can have a widespread positive effect on development. However, so far,we don't know much about the potential effect that consumer choice has on developing country exports - though the contribution they make to development at present is very limited. The Fairtrade labelling scheme, for example, is a relatively narrow definition of what is good for development, and seems to imply that other trade is ‘unfair'. At the same time, new labels on products which have been air-freighted may unfairly jeopardise export opportunities for more than a million poor farmers in the developing world. So, this seems a good time to investigate how consumers can be better informed about the broad development effects of what they buy. In response to the growing trend for ‘ethical' consumerism, manufacturers and retailers are increasingly labelling products to authenticate their production processes or origin - Fairtrade, or Organic, for example.

designa labelThe growing support for Fairtrade labelled products suggests growing consumer concern about the effect their purchases have on producers. But being Fairtrade is not synonymous with being ‘development friendly'. More than a million people in Africa rely on agricultural exports to the UK for their livelihoods.Without these export opportunities they would have a much lower income - yet only a small proportion are part of a Fairtrade supply chain.

Fairtrade has had a significantly positive effect on the livelihoods of producers and the communities in which they live.The key problem, however, is one of scale. Only a limited number of products are covered by the Fairtrade mark. Despite significant growth in recent years., the volume of Fairtrade sales relative to total merchandise trade is less than onehundredth of one per cent.

Even within their product categories, Fairtrade labeled products generally account for only around 0.5 - 5% of sales. Some of this is due to the requirements placed on Fairtrade purchasers, for example to pay a price that is often above market prices, or to make credit available.The market for Fairtrade produce is ultimately limited by the willingness of consumers to pay the higher prices that come with it.

In response to consumer concerns about food miles, some retailers are planning to introduce labels saying which products have been air-freighted - labels designed to make consumers aware of the potential carbon cost of the goods they are buying. But these labels could be misleading, since they don't tell us the overall environmental cost of production.The recent proposal by the Soil Association to remove organic certification from most air-freighted products is a case in point - denying consumers information on many genuinely ‘organic' developing country products.

A recent study shows that the emissions produced by growing flowers in Kenya - which is naturally warm and sunny - and flying them to the UK can be less than a fifth of those produced by flowers grown in heated and lighted greenhouses in Holland. Some retailers have acknowledged this and are developing more comprehensive approaches to assessing the environmental impact of production.

The environmental effects of trade are clearly a legitimate concern for consumers. However, there is a risk that those effects are being overstated by some interest groups - intent on showing that buying locally grown produce is more attractive. Compared to other sources of carbon emissions, the contribution from trade is small. In the UK, international freight is responsible for only 5% of emissions from air transport whereas passenger flights account for 90%. Ninety- five per cent of the UK's trade in goods is transported by ship, which is significantly less polluting than air or road transport. UK emissions from shipping constitute less than 2% of the country's total greenhouse gas output.The environmental impacts of car-based shopping vastly outweigh those from transport within the food distribution network.

This kind of selective information has the potential to cause considerable damage to developing country producers. More than a million people in rural Africa earn vital income by exporting fresh fruit and vegetables to the UK.And, if we refuse to buy fresh produce air-freighted from Africa, this would only reduce UK emissions by less than 0.1%. But at the moment there is very little information available to consumers about the positive effect their purchases could have on developing world communities. As a result they aren't able to make properly informed choices.

This is why the time is ripe to look at the possibility of introducing a new Good For Development label. This would:

  • Encompass a much wider range of products from developing countries than Fairtrade currently does.
  • Recognise the broader development benefits of trade (including those from market-priced, non-Fairtrade, products).
  • Ensure the environmental impacts of production can be assessed properly.

Such a scheme could encourage a step-change in how people buy products from developing countries, and expand export opportunities.

One simple model would be to grant the label to all agricultural exports from developing countries that meet a required minimum standard of development benefits.This would be technically the least challenging option, but it may not give enough information for ethicallyminded consumers.

A second option might be to enable developing country exporters to ‘score' additional points over and above the ‘basic' level Good For Development label, where products can be seen to be particualry beneficial, say in environmental or community terms.

A Good For Development label could generate additional sales for exporters who can demonstrate that they bring development, and perhaps environmental, benefits to the country of production. These might be:

  • Improvements in the investment climate.
  • Industrial diversification.
  • Employment opportunities.
  • Emproved land security.
  • Skills and local enterprise development.
  • More efficient water and soil conservation methods.
  • Improved access for poor producers to markets.
  • Innovation in production.
  • Affordable access to infrastructure.
  • Use of environmentally sound production techniques.
  • Increased payments of taxes to the state.

With corporate and consumer consciousness of development issues at an all time high, the merits of a broader Good For Development label which addresses these challenging questions deserve serious consideration. If we can get the initial thinking right, the dividends for international development and reducing poverty could be substantial. If we don't take this seriously, the trend towards new ethical trade barriers could, perversely, actually restrict development in some of the poorest countries in the world.

Karen Ellis is a Research Fellow in the International Economic Development Group (IEDG) at the Overseas Development Institute (ODI). Michael Warner is Director of the IEDG Programme on Business and Development Performance at ODI.

A longer version of this article first appeared as an ODI Opinion Paper www.odi.org.uk

DFID's Shopping for Development campaign presentation: here.

Read other peoples' comments

Phil Kingston, Penarth, Wales
I am saddened that the article proposes ways forward for development which are all within the free trade model. It is precisely because of the unfairness of that model that fair trade has developed. Without a clear statement of the vital importance of Trade Justice, the injustices of the Free Trade Model will continue. So, yes let's explore the ideas of these authors for a range of development labels, but clearly acknowledge that unless there is a prior movement towards Trade Justice, we will again be tinkering with small reforms which the overall Free Trade Model will constantly attempt to turn to the advantage of the richest.
Claire, Yorkshire
My heart sank when I first saw the 'By air' stickers in the supermarket. It only gives consumers a small piece of the bigger picture and doesn't highlight the importance for farmers in developing countries to sell their produce. I think the 'Good for Development' label is a great idea and will help consumers understand the effects of what they do or don't buy.
Georgina Barnett, London
This sounds like a really intelligent, yet simple way of letting consumers know which products to buy in order to help developing countries. I would certainly pay attention to a 'good for development label' and buy accordingly. I'm sure many others would too.

This could encourage a step-change in how people buy products from developing countries.