Supply chains in COVID times
By Erinch Sahan, WFTO Chief Executive
18 August 2020
The pandemic is hitting businesses everywhere, with disruptions in retail, supply chains and production causing upheaval. The accompanying economic crisis is creating heightened risk and business uncertainty. The situation is particularly precarious for factories, workers and businesses who have become dependent on global brands. In response to the crisis, brands and retailers across the mainstream economy have delayed, put on hold, or straight up cancelled their orders. Sensing their leverage and the weakened position of their suppliers, some brands are even demanding further discounts from their suppliers on finished goods. In fashion, the Clean Clothes Campaign and others are raising these concerns and putting pressure on brands to #PayUp so the workers who make their products can survive.
Meanwhile through this crisis, we are witnessing practices and behavior from Fair Trade Enterprises that is a stark contrast. At WFTO, we have monitored practices by social enterprises who fully practice Fair Trade (WFTO members) and we found a different reality. At a time of widespread cancellation of orders and increasing layoffs across global supply chains, WFTO research found that for Fair Trade Enterprises through the crisis:
- 91 per cent provided suppliers with additional flexibility;
- 71 per cent retained all staff; and
- 86 per cent kept all orders.
In some ways, this is not surprising. The 366 Fair Trade Enterprises that make up the WFTO are structured as mission-led enterprises, who exist to benefit their workers, farmers and artisans, reinvesting the majority of their profits to this end. They do not have shareholders demanding increased returns but instead are social enterprises with a comprehensive commitment to Fair Trade. They are commercially viable, earning their income through trade. Yet commercial viability is a vastly different paradigm to the extraction of maximum profits for shareholders. This shows in their behavior during COVID-19.
While the term ‘corporate purpose’ has become a buzz word, it is often in a crisis that we can determine what is really the priority for companies. For most mainstream brands, sadly the pursuit of maximum profits remains the ultimate goal. The lack of concern for suppliers during the crisis clearly demonstrates this. In sharp contrast, Fair Trade Enterprises are showing that putting people and planet first is in fact a viable choice.
In the wake of the crisis, policy-makers, investors, consumers and citizens can help truly transform the business world, by supporting business models that are designed for mission-primacy, rather than profit-primacy. This may be critical to get through this crisis and prepare for the next.