Prague 20 Oct 2006 Fiona Gooch, Traidcraft

Multinational Companies’ Impacts on Developing Countries Prague 20 Oct 2006 Fiona Gooch, Traidcraft

Overview • Traidcraft • Impacts Commercial Companies have on Vulnerable people • International Supply chains • Responsible Purchasing Initiative • European Coalition for Corporate Justice

Traidcraft Plc • Established 1979 • Values driven ‘Social Enterprise’ – Leading UK Fair Trade organisation

• 1000 Agricultural, textiles, & home interiors products • Buy from ~ 100 producer groups in Africa, Asia & South America • Turnover >£16m • 1993 Initiator of corporate social reporting

Traidcraft’s Social Accounts

www.traidcraft.co.uk

Two sides of Traidcraft A business with development objectives: Traidcraft plc

A development NGO specialising in business: Traidcraft Exchange

•Small enterprise development •Facilitate market access •Policy work to improve impact of trade on the poorest in developing countries

Question to YOU …

Are commercial companies - reducing poverty in developing countries? or - increasing poverty/vulnerability?

European Companies Impact on Poor People in Developing Countries • Sell products to poor people e.g. drugs, seeds, baby milk • Poor people are neighbours of EU companies e.g. Coca Cola in India, Shell in Nigeria • Employ poor people e.g. Unilever (factories), AngloAmerican (mining) • Poor people work/supply EU companies

Examples • Foreign Direct Investment in developing countries has increased 6-fold over 10 years. • 6 companies dominate ~ 70% world trade in agricultural commodities • 1 company, Cargill controls 80% global grain distribution . . . . . . Clearly private sector dominance has development implications

Companies’ Impact on Lives Economic cash flow, market dominance

Environmental resource use, waste, water, emissions

Social employees, communities, exclusion

Examples of negative impacts on poverty in international supply chains.

Vulnerable workers - Chile

Family Impacts of Forced overtime in Kenya

Distribution of £1 retail value of bananas in the supply chain

Vulnerable workers Morecambe Bay

Pushing Risks Down the Supply Chain Retailers & brands push for: - lower prices from producers - fast and flexible production - high technical & quality standards - better labour conditions but without a long-term commitment

Producers, as employers: - hire women & migrants - use short-term contracts & evade benefits - put workers under excessive pressure - undermine organising - hide labour rights violations

Precariously employed workers: - insecure on contracts with few benefits - exhausted by long hours & high targets - undermined in organising for their rights

EU Food Supply Chain Bottleneck The Supply Chain ‘Bottleneck’ in Europe Source: Grievink (2003) Consumers: 160,000,000 Customers: 89,000,000 Outlets: 170,000 Supermarket formats: 600 Buying desks: 110 POWER

Manufacturers: 8,600 Semi-manufacturers: 80,000 Suppliers: 160,000 Farmers/producers: 3,200,000

Concentration in Banana supply chain from Latin America & Caribbean to UK

Responsible Purchasing Project • • • •

CTM, Italy IDEAS, Spain Oxfam Wereldwinkels, Belgium Traidcraft, UK

EU funded project 2005 - now

Responsible Purchasing • 4 case study sectors • Business case • 1st steps for companies • Indicators to monitor Buying • Public policy options

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Our learning?

• Power Imbalance in supply chains • Limited safe-guards for most vulnerable • Lack of business accountability/responsibility for Impact – – – –

Gaps in norms set for business behaviour Existing norms (e.g. ILO) ignored Lack of transparency of business relations/impact Inability for impacted 3rd parties to hold companies to account

EU Public policy response is ‘voluntary Corporate Social Responsibility’ …. But insufficient

Why Government action needed?

• ‘Harmful companies’ – private companies (Top Shop), slow (Walmart, Lidl), sick companies • Trends - Better, Cheaper, Faster • Market dominance -> ‘Bully suppliers’ • CSR/‘Ethical trade’ commitments limited/harmful impact

Backfiring on social objectives ...

Collaboration is needed • Change needed at EU & national level • Any organisation’s actions ALONE are ignored

European Coalition for Corporate Justice (ECCJ) • civil society organisations from across Europe. • Our vision is of a sustainable world in which corporations’ drive for profit is balanced by the interest of society at large and respects human, social and environmental rights.

What ECCJ does: • -co-operation amongst NGOs • -Influence Corporate Justice policies of the EU and its member states. • -Inform the general public • -Present a joint civil society vision • -implementation of EU policies on Corporate Justice by the member states • -Build capacity

5 PRINCIPLES

• 1. References to international standards • 2. Stakeholders’ rights. Companies and their directors can be held accountable. • 3. Responsibility throughout the supply chain: • 4. Reporting of environmental, social impacts; & Lobbying. Backed up with Independent monitoring and verification • 5. A leading role for public authorities

Thanks • Any questions on presentation?

For more information • www.responsiblepurchasing.org • www.traidcraft.org – [email protected],

• www.corporatejustice.org – Contact: Virginie Giarmana, Coordinator [email protected]