Fairtrade not fit-for-purpose?

Multistakeholder initiatives (MSIs) are not fit to protect human rights, declared MSI Integrity, a highly-regarded NGO, in its extensive report on 15 July.

Published in HRDD Newsletter/August 2020 issue

Blog by Tytti Nahi, Lead of Fairtrade’s HRDD Centre of Excellence

I did first go on defensive, when reading about MSI Integrity’s latest report. For instance their website reads:

“[The report entitled] Not Fit-For-Purpose reflects on a decade of research and analysis into international standard-setting MSIs. It concludes that this grand experiment has failed in its goal of providing effective protection against abuse.

While MSIs can play important roles in building trust and generating dialogue, they are not fit-for-purpose to reliably detect abuses, hold corporations to account for harm, or provide access to remedy.”

Image: MSI Integrity: Not-Fit-For-Purpose -report

So yet again, I thought, some bunch of flippant, publicity-seeking people have lumped all MSIs together and “found out” we have not fixed all human rights problems in all the world’s supply chains?

But reading on, I realized that in many crucial issues, MSI Integrity’s observations are actually spot on. Further, the report is a good exposé of what our civil society partners expect of Fairtrade, in light of the UN Guiding Principles on Business and Human Rights (UNGP, 2011) that put forward the HRDD perspective.

Addressing the power balance is crucial

For me, there are two important things MSI Integrity is getting just right.

First, I agree that to advance human rights, it’s crucial to empower marginalized people and limit corporate power – but many MSIs fail or choose not to recognize this. See page 5 of MSI Integrity’s summary report for their assertion that it is their failure to empower people and limit corporate power that has fundamentally limited MSI capacities to protect human rights.

This is, in fact, pretty much how Fairtrade also views the world. Our constitution asserts that marginalized people can and must gain power and take more control in their supply chains and societies. We only certify farmers and workers who are organized and act collectively to strengthen their voice – and we seek to support their organizations through democratic rules and Premium funding.

Yet many other MSIs do take a narrow, technical view of what causes poverty and human rights violations and how to reduce them. Just like MSI Integrity blames, these MSIs focus on productivity, product quality, efficiency or traceability – as if these were enough to ensure that more value trickles to the producers.

Binding regulation is needed

Second, I agree that voluntary initiatives cannot substitute binding laws. Like MSI Integrity writes: “This is not to say that MSIs cannot play a role in the promotion of human rights, or that they have not had successes. … [But] It is time to … recognize that MSIs must be supplemented with public regulation.”

Ambitious voluntary initiatives have some great strengths: They can foster healthy race-to-the-top among some companies, ignite societal discussions, forge partnerships between sustainability-seeking actors etcetera.

But voluntary initiatives cannot raise the bar for all. MSIs rarely even get to speak to companies that do not seek to brand themselves as sustainable and responsible. Public regulation is needed to set just rules of the game for everybody. Fairtrade is also working to strengthen our advocacy work, to encourage and bring our learning to government policies.

Key take aways for Fairtrade

So MSI Integrity’s high-level conclusions are fine. But what are the key take-aways the report offers for Fairtrade? What does the report tell of NGO expectations towards Fairtrade? Here’s my top five:

  1. We are expected to develop an internal HRDD process. MSI Integrity reminds that “complaints have been brought against multiple MSIs in OECD National Contact Points” (full report, p. 45 and 141-142). That National Contact Points have considered the complaints, tells that MSIs are expected to abide by the OECD Guidelines for Multinational Enterprises – and do HRDD.
  2. We are expected to be open about the social and environmental challenges in Fairtrade certified supply chains. MSI Integrity blames that “Many MSIs adopt weak or narrow standards which risk creating a misperception that abuses are being effectively addressed” and many MSIs “conflate scale with impact” (summary p. 9 and 15). If we mislead consumers or companies to believe that many supply chains are just a small step away from sustainable, we are part of the problem, not solution.
  3. Our focus on imbalances of power in supply chains is a USP (unique selling point) among MSIs. We are expected to recognize and highlight this! Further, we are expected to continuously search for ways to strengthen rightsholders’ (farmers’ and workers’) role at Fairtrade and Fairtrade certified producer organizations. MSI Integrity deplores that “Many MSIs have set standards that assign responsibility to less-resourced actors—mainly producers and entities in the Global South—while ignoring more powerful actors in the Global North” and “more accountable private mechanisms, such as the Worker-driven Social Responsibility [WSR] model, are displacing MSIs as the ‘gold standard’” (summary p. 12; report p. 6, 30, 46-47 and 220). The WSR model is said to centre rightsholders in the monitoring and implementation of standards.
  4. We are expected to have a human rights-based grievance mechanism. We do not have one – and that is a major shortcoming in the era of HRDD. MSIIntegrity devotes one sixth of its report to grievance mechanisms. So without one, we cannot claim that Fairtrade is aligned with the HRDD approach.
  5. Advocacy for public regulation raises Fairtrade’s legitimacy. MSI Integrity suggests that “the influence of MSIs is eroding. In its place is a resurgence in advocacy for public regulation and more accountable private mechanisms, such as the Worker-driven Social Responsibility initiatives” (summary p. 12). So our advocacy for public regulation shows that MSI Integrity is misguided in lumping all MSIs together and labelling MSIs the old way. But to make this point effectively, we still need to invigorate our advocacy work, so it becomes visible, credible and effective.

The Six Key Insights of MSI Integrity

Image: MSI Integrity: Not-Fit-For-Purpose -report

Here are MSI Integrity’s six “key insights” and some of the related main arguments, so you can see what you think:

Insight 1/Influence: MSIs have been influential as human rights tools, but that influence, along with their credibility, is waning.

  • A number of CSOs have withdrawn from individual MSIs over concerns about inaction, ineffectiveness, and the resources they consume.
  • There are now well-documented instances in which MSIs have failed to detect or remedy human rights abuses. Complaints have been brought against multiple MSIs in OECD National Contact Points.
  • The term “MSIs” has become increasingly connotative of a corporate-oriented model. “Worker-driven” models have emerged and may displace MSIs in the medium to long term.

Insight 2/Stakeholder Participation: MSIs entrench corporate power by failing to include rights holders and by preventing civil society from acting as an agent of change.

  • MSIs have largely excluded rights holders from their governing bodies and implementation.
  • Decision-making on pro-human rights reform issues in MSIs is often slow, incremental and resource-intensive.

Insight 3/Standards & Scope: Many MSIs adopt weak or narrow standards which risk creating a misperception that abuses are being effectively addressed or that overlook the root causes of abuse.

  • MSIs can draw attention away from the full extent of human rights abuses in an industry or create a misperception that they are being adequately addressed.
  • MSIs sometimes create standards that are too weak to ensure that the underlying issue is actually being addressed.
  • Many MSIs have set standards that assign responsibility to less-resourced actors—mainly producers and entities in the Global South—while ignoring more powerful actors in the Global North.

Insight 4/Monitoring & Compliance: MSIs employ inadequate methods to detect human rights abuses and uphold standards.

  • MSIs employ inadequate methods to detect human rights abuses.
  • MSIs have weak measures for upholding or enforcing compliance.
  • Many MSIs are not transparent about the extent of member compliance with standards.

Insight 5/Remedy: MSIs are not designed to provide rights holders with access to effective remedy.

  • Almost a third of MSIs do not have a grievance mechanism, and therefore, do not provide individuals or communities with the ability to seek remedy for rights violations.
  • Of those MSIs with grievance mechanisms, nearly all of their complaints procedures fail to meet internationally recognized criteria for effective access to remedy.
  • MSI grievance mechanisms are not rights holder-centric

Insight 6/Impact: There is little evidence that MSIs are meaningfully protecting rights holders or closing governance gaps

  • MSIs make unsubstantiated claims or offer very limited evidence of their impact on rights holders.
  • Many MSIs conflate scale with impact.