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Framework for Understanding

Fair Trade DisintermediationJONATHAN DOH AND KENNETH TAYLOR

ABSTRACT

Our research seeks to answer the question of how aconventional commodity supply chain can be trans-formed into a disintermediated commodity supply chainin the context of the fair trade (FT) movement. Wepresent a normative framework for conceptualizingthe disintermediation process, exploring the variables

bearing on this process using the case of FT coffee to

illustrate our insights. We highlight the motivationalsources driving FT, suggesting that it is increasingly tothe advantage of multinational enterprises to leveragetheir market power to circumvent intermediaries in thesupply chain and, in so doing, shift a greater share ofincome and wealth to producing communities. Aresearch agenda centered on building an FT supply-chain disintermediation index is proposed.

Jonathan Doh is a Professor of Management and Operations, Villanova University, Villanova,PA. He is the Herbert G. Rammrath Endowed Chair in International Business and a Directorat Center for Global Leadership, Villanova University, Villanova, PA. E-mail: [email protected]. Kenneth Taylor is an Assistant Professor of Economics, Villanova University,Villanova, PA. He is also an Associate Director at Center for Global Leadership, Villanova

University, Villanova, PA. E-mail: [email protected].

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Business and Society Review 117:4 443475

2012 Center for Business Ethics at Bentley University. Published by Blackwell Publishing,350 Main Street, Malden, MA 02148, USA, and 9600 Garsington Road, Oxford OX4 2DQ, UK.


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INTRODUCTION

In this article we seek to answer the basic question of how and

why a conventional commodity supply chain is transformedinto a disintermediated commodity supply chain. On the

surface, many scholars find the disintermediation process bothillogical and inefficient. Our investigation assumes that thedynamics of fair trade (FT) underlie this process as the primarymotivator. We begin by further assuming that any conventionalcommodity supply chain is a product of legacy participants,market power, and the economic calculus of cost minimization

and profit maximization. The answer to our basic question leadsus into a discussion of the constituent stakeholders, their roles,relative power, and ethical beliefs. We survey the various motiva-tions for participating in this process and the historical changesin the global economy that have created the context for FT.Drawing upon and extending research on critical managementstudies (CMSs), international business, stakeholder management,and customer social responsibility, we propose a framework for

understanding the disintermediation process in the context ofFT.FT has come to mean many things to different people. All agree

that FT seeks to rearrange the buyersupplier relationship usinga holistic partnership approach focused on promoting equalityand opportunity for the least-advantaged supply-chain partici-pants. The end result of this process is supply-chain disinterme-diation to various degrees. While multiple perspectives on FThave developed over the yearsfor instance, with FT labeling

standardsthe basic definition stated previously will constituteour definition for this article. We began this study with anexpanded set of three interrelated questions. These were

1. How does the conventional commodity supply chain becometransformed to an FT disintermediated commodity supplychain, as depicted in Figure 1?

2. What are the active variables bearing on this transformation

process?3. Why would participants go to the time, trouble and expense

of altering an existing, efficient supply chain to create a new,untested form?

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While a comprehensive theory of FT disintermediation may

never be formulated, a framework for understanding the processprovides a foundation for establishing a research agenda to definethe extent to which any given industry has become disintermedi-ated or the potential for this happening. In seeking answers, wefound it imperative to explore human motivations, ethics, multi-national enterprises (MNEs), and consumer research, as well asthe implications of the development of modern mass communica-tion mediums in the context of globalization. All of the factors to

be discussed have resulted in a transformation of the mindset ofmany agents engaged in global supply chains. We begin by intro-ducing our FT paradigm, using examples from the case study ofcoffee to elucidate some of our insights and hypotheses.

FIGURE 1 Conventional and Disintermediated (Fair Trade)Supply Chain for Coffee.

Plantation

Workers

Small-

Scale

Farmers

Inter-

mediaries

Coffee

Plantations

Brokers Importers Roasters Distributors Retailers Consumers

Farmers Cooperatives Processing

Mill

Coffee

Companies Consumers

Advocacy

NGOs

(e.g. Oxfam)

Certification

NGOs

(e.g. Transfair)

Conventional Commodity Supply Chain:

Coffee

Disintermediated Commodity Supply Chain:

Fair Trade Coffee

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FRAMEWORK FOR UNDERSTANDING SUPPLY-CHAINDISINTERMEDIATION

The most powerful agents in any global supply chain are theMNEs. Given their market power, they possess a unique ability toinfluence the terms of trade and stimulation of value-addingactivities. Along with MNEs, other agents involved in this story arenongovernmental organizations (NGOs), consumers, and variouslevels of government. We suggest that consumers and NGOs canpressure MNEs to use their market position as major purchasersof raw, semifinished, or finished goods produced in developingcountries that can, in turn, encourage greater value-adding activi-ties in those countries. This process can make a contribution tofairer income distribution by increasing economic opportunitiesand growing incomes in developing countries. In addition, thereare other benefits in terms of conservation of natural resources,establishing more predictable markets, and generating good

will. The role of government is more ambiguous and difficult tosummarize.

The disintermediation process can be characterized by the fol-lowing normative equation:

D M N C G = ( ) , , ,

D is the level of disintermediation present in the global supplychain for a particular commodity at a particular point in time; M

is multinational enterprises; N is relevant NGOs; C is a consumermarket variable depended on the stage of development of themovement; and G is the influence of government policy andprograms.

This equation is subject to the following constraints:

1. The presence and diffusion of global mass telecommunica-tions.

2. That the upstream portion of the global supply chain origi-

nates in the developing world.3. Social infrastructure in developing countries involved: objec-

tive rule of law, level of corruption, economic and politicalstability, presence of democratic institutions, efficacy of



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public institutions, regulatory framework, openness to trade,etc.

4. Third party verifications, corporate codes of conduct, existing

trade agreements, and related treaties and standards.

The role of MNEs in this equation can be negative or positive.MNEs are the most powerful agent in the disintermediationprocess yet they have historically tended to be reactive.

As an example from the FT coffee story, in the late 1980s, theDutch NGO Solidaridad approached the major coffee MNEs oper-ating in The Netherlands to source and sell FT coffee, but after

consideration, these MNEs decided that doing so would hurt theircompetitiveness and consumers.1 It would take the developmentof a significant consumer social movement during the 1990s tostir the major coffee MNEs into action. Given the growth ofsocially responsible consumption (SRC) around the world, theincreased application of corporate socially responsibility polices

within MNEs, and the revealed long-term advantages of integrat-ing social justice dimensions into their products and operations,

we hypothesize that MNEs will become a more consistently pro-active factor in the disintermediation processes in the future.NGOs have been a first mover in the disintermediation process.

They have a positive influence that increases with the number,size, and nature of NGOs involved, the activist policies employed(e.g., boycotts), and the types of social injustices they seek toameliorate. The story of FT coffee in fact begins with actions takenin 1988 by two Dutch NGOs having the goals of reducing povertyand addressing perceived social injustices in rural Mexico. They

contacted an FT coffee cooperative in Oaxaca, Mexico, with somenew ideas for bypassing the existing MNEs global supply chain,

but in a way that held promise for enhancing sales and support-ing a higher price for the cooperatives coffee. Further, we hypoth-esize that when MNEs chose to partner with NGOs, their impacton supply-chain disintermediation can be amplified.

Consumers are seen as the ultimate gatekeeper in the FT move-ment. We will further argue that given the biological roots of human

fairness and altruism, expressed through systems of virtue ethics,we have witnessed the rise of the socially responsible consumer.Critical to the strength of this variable is consumer awarenessreaching critical mass and passing into the tipping point to become

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a social and commercial movement. The tactic suggested by theDutch NGOs in the Oaxaca coffee cooperative case focused ondeveloping a socially conscious, consumer-centered promotion

campaign to be launched in Europe using the first FT labelinginitiative: Max Havelaar. In the story of coffee, this turned out to

be a critical element in triggering widespread consumer awareness.In general, once the tipping point is reached, the subsequentnetwork effects can generate profitable market niches that cannot

be ignored by MNEs. When these conditions are present, wewitness more pervasive and permanent changes appearing inglobal commodity supply chains.

Before the tipping point, the supply chain is characterized by asmall number of advocates, developing world producers, andNGOs circumventing the dominant supply chain to attain theirethical objectives (i.e., tangential disintermediation). For instance,the FT coffee cooperative in Oaxaca, Mexico, which goes bythe Spanish acronym UCIRI (Unin de Comunidades Indgenas dela Regin del Istmo), had already been selling FT coffee to alter-native trading organizations in The Netherlands and Germany

since 1985 within a slowly evolving, tangential disintermediatednetwork. This minor tangential disintermediation had roots in thecounterculture movement of the 1960s and 1970s that broughtinto existence a small core of socially conscious consumers. Afterthe tipping point is entered, the entire supply chain begins totransform, with disintermediation becoming more pervasive andembedded. Therefore, we hypothesize that the consumer variablehas a bifurcated effect on the disintermediation process with thedivision temporally defined by the tipping point of the associated

consumer social movement.The government variable likely needs to be disaggregated into

sub-variables: supranational, national, and local. While the supra-national and national levels are mostly responsible for creating anembedded liberal framework, the local level can have a muchgreater impact on the disintermediation process. Still, it is difficultto make any generalizations on the impact these lower levels willhave on the disintermediation process other than to say it may

matter significantly. The impact can range from extremely positive,to neutral, to extremely negative. The development of FT coffee is agood example of how national governments can have a positiveimpact on supply-chain disintermediation. The European Union



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(EU) embraced the United Nations (UN) Millennium DevelopmentGoals (MDGs), and in 2005, the European Commission specificallysingled out FT as a tool for poverty reduction and sustainable

development. In 2006, the European Parliament formally recog-nized the value of the FT movement and in a resolution calling forthe creation of an EU-wide policy to support FT through a coherentpolicy framework. The importance of this regional move within the27 EU nations is that it set standards and harmonizes policies withthe effect of creating stable, extensive markets for MNEs to respondto the production of FT products and in altering supply chains tocome into EU policy compliance (i.e., disintermediation). We can

generalize by saying that the ideal national government would beone that pursues policies of macroeconomic stability, a strong ruleof law, upholds democracy, and a pro-market stance. In other

words, supports a liberal framework in which freedom and justicecan be pursued by all.

We have one final hypothesis to propose: The more complex theglobal supply chain for a product, the more difficult it becomes tocreate a disintermediated supply chain. The disintermediation

process has manifest in commodity supply chains for two reasons.First, they are comparatively simple, and second, the disadvan-taged participants are relatively easy to identify. Given what evolu-tionary biologists have identified in human nature, to evoke analtruistic response based on a perceived lack of fairness demands aface or cause, no matter how abstract, on the receiving end of theconsumer response. This is easier to provide with simple supplychains than with complex ones. We would predict, therefore, thatthe outcomes we discuss in our case of FT coffee are unlikely to be

witnessed in the future for, say, automotive parts or computerchips. An in-depth discussion of the agents involved in the disin-termediation process and associated theory will help the reader tounderstand these hypotheses and the assumptions we make morethoroughly. We next present a brief review of the literature con-cerning the central agent in disintermediation.

GLOBALIZATION AND THE ROLE OF MNES IN

DEVELOPING COUNTRIES

MNEs are not typically viewed as contributors to poverty allevia-tion nor are they seen as agents of ethical or FT in developing

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countries. Criticism of the role of MNEs in developing countriesextends back more than four decades.2 One set of criticisms havefocused on the activities of MNEs such as Nike, Levi Strauss,

United Fruit, and others whose sourcing practices in developingcountries have been alleged to exploit low-wage workers, takeadvantage of lax environmental and workplace standards, andotherwise maximize import of cheap raw materials or semifinishedgoods, preserving the value-added activities for developed countryproduction.3 Many governments, international organizations, andlocal and international NGOs have criticized the low-cost, labor-seeking behavior of MNEs in developing countries, suggesting

such firms scan the globe for the cheapest, least regulated, andmost exploitive situations in which to source raw materials andsemifinished products.4

With the acceleration of economic globalization, a new group ofcritics has emerged. Indeed, globalization has been a frequenttopic of discussion in both the academic and popular press, withauthors exploring the costs, benefits, and challenges of thisimportant phenomenon. Partly in response, MNEs have been

called upon to make positive contributions to the social andenvironmental conditions of the countries in which they operate.In particular, NGOs have advocated that MNEs consider theirsourcing policies as an explicit mechanism to advance ethicaltrade, often enlisting consumer groups and wholesalers/retailersto support their efforts.5

The emergence of globalization over the past half century wasaccompanied and supported by a technological revolution intelecommunications. The development and dispersion of radio,

television, fax machines, computers, mobile phones, and theInternet assisted MNEs in the managing global operations andmarketing of their products and services. Outside of MNE opera-tions, telecommunication technology has had myriad and sig-nificant social, cultural, political, and economic impacts.Specifically, instantaneous and comprehensive access to newsand information to a growing number of people has broughtawareness of the myriad dimensions of these same MNE opera-

tions. Further, this same communications technology hasaided the organization and actions of advocacy groups andNGOs in response to the perceived deficiencies and abuses ofMNEs.6



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Management theory and MNEs have responded in numerousways to these developments. One response has been the gradualevolution and implementation of the stakeholder model of gover-

nance.7 Stakeholder theory explores those interests and actorswho affect, or in turn are affected by, the corporation.8 Accordingto a study by Mitchell et al., stakeholder management focused onidentification of key stakeholders, and their relative salience was

based on managerial assessments of stakeholders possession ofone or more of three relationship attributes: power, legitimacy,and urgency.9 Further, a party to a relationship has power to theextent it has or can gain access to coercive, utilitarian, or nor-

mative means, to impose its will in the relationship.10 Legitimacyis defined as a generalized perception or assumption that theactions of an entity are desirable, proper, or appropriate withinsome socially constructed system of norms, values, beliefs, anddefinitions, while urgency is reflective of the degree to whichstakeholder claims call for immediate attention.11

As employers, communities, and societies in developing coun-tries take on more of the stakeholder qualities, often as a result of

intervention of NGOs, other types of watchdogs and monitoringorganizations emerge. These organizations, often new NGOs, arefacilitated by electronic communications and other forms of mobi-lization. In the face of an expanding, external stakeholdernetwork, MNEs would be expected to, and justified from a com-petitive and shareholder perspective, consider shifting greatershares of value-added activities to their emerging economy facili-ties or subcontractors. T. M. Jones argues that honest, trusting,and ethical relationships result in positive reputation effects and

minimize opportunism, as contracting parties interact and growto depend on the reliable behavior of their business partners.12

Importantly, this voluntary but genuine trust-building furtherreinforces positive responses, and serves as a constraint to oppor-tunism. Jones also proposes that such behavior can have mea-surable impacts on competitive advantage, and because ethicalsolutions to commitment problems are more efficient than mecha-nisms designed to curb opportunism, it follows that firms con-

tracting, through their managers, with their stakeholders on thebasis of mutual trust and cooperation will have a competitiveadvantage over firms that do not.13 For example, in the face of anexpanding stakeholder network, Nestle, Sara Lee, Kraft, and

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Tchibo signed a Common Code for the Coffee Community in2004 to improve working and environmental conditions on thecoffee farms from which they sourced their beans. Among other

things, this Code requires producers to pay minimum wages tocoffee workers, cease using child labor, permit union member-ships, and abide by international environmental standards. Bythe mid-2000s, new rules and regulations began to be imposed bycoffee MNEs that altered the relationship between their extensivesupply-chain linkages feeding into both the American and Euro-pean markets.14

As applied to corporate social responsibility (CRS), Jones sug-

gests that certain types of corporate social performance aremanifestations of attempts to establish trusting, cooperative firm/stakeholder relationships and should be positively linked to acompany financial performance. Corporate social performance

would then be defined in terms of the contracting relationshiprather than particular behavior.15 This integration of agency andstakeholder perspectives, supported from the theoretical basis ofethical decision making and relationship building, provides a

powerful justification for MNEs to consider shifting more value-added, productive, and sustainable activities to the developingcountry markets in which they operate.

THE SOCIALLY CONSCIOUS CONSUMER

The previous section stated that corporations have come underincreasing pressure to account for the social and environmental

consequences of their actions.16 One avenue by which civil societyexpresses its preferences in relation to corporate conduct is viaconsumer sentiment.17 Such sentiment can take the form of pur-chase behavior, protests, boycotts, or other means.18 FT by defi-nition represents a marriage of ethics and global commerce.Ethics itself emerged as a social construct based on humanrelations. Human relations are an expression of innate humannature. Thus, to understand the socially conscious consumer, we

must briefly step back and summarize the consumer mindset.For the past several decades, evolutionary biologists have been

studying the strong prosocial tendencies of humans to beempathic and cooperative.19 These scholars argue that this has



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come about through a process of accumulated adaptation overmillions of years of human evolution. It is now well establishedthat humans care deeply about fairness and justice. Results from

the study of the ultimatum game by behavioral economistsconfirm the primacy of fairness in human exchange.20 A notedfact is that peoples actions often transcend even the logicalconstraints of reciprocal altruism. People give to charity, they

vote in elections knowing that they alone cannot influence theoutcome, they tip hotel staff that they will never see again, andthey buy FT goods although they will never meet the poor farmer

who grew the beans used to brew their morning coffee. To econo-

mists, this type of behavior appears to be nonutility maximizingbehavior but in fact represent behavior, which does increaseutility, but in a nonpecuniary, intangible fashion. It represents aform of psychic utility associated with our innate sense of fairnessand justice.21 Given these biological propensities, it is only logicalthat the emergence of civilization brought numerous new oppor-tunities for social interaction, cooperation, and personal advance-ment, and with them scholarly reflection leading to the discipline

of ethics.A cursory review of the philosophical context of ethics permitsa deeper understanding of the FT phenomenon and the variousanalytic approaches developed to better govern corporate behaviorand supply-chain management. The ideological basis of FT isphilosophically complex, being a mixture of consequential, deon-tological, and teleological thinking.22 Aristotle placed justice (i.e.,fairness) as the reigning virtue, echoing the conclusions ofmodern evolutionary biology. Further, he argued that if one used

means deemed unethical it would not justify an ethical outcome.Today this point of view is characterized as nonconsequential23

An example of the way in which this approach would be expressedby an FT advocate would be when an individual focuses on socialjustice, working for equality of the poor in developing nationsthrough either existing forums for resolving differences (e.g.,

World Trade Organization [WTO]) or in promoting alternativeapproaches compatible with the existing objectives of economic

participants (e.g., establishing stakeholder structures withinMNEs, FT labeling, etc.).

Consequential ethics, as the name suggests, focuses on ethicalends that are important to achieve with more relaxed rules over

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means. The phrase the ends justify the means is a common wayto encapsulate the essence of consequential ethics, although thereare many variations. In the early nineteenth century, John Stuart

Mill best articulated one form of consequentialism in his article onhedonistic utilitarianism.24 Essentially, this approach holds that

what matters in the end is aggregate happiness and that if aparticular persons happiness is reduced in the pursuit of anincrease in total happiness, this is ethically justifiable. It can besaid that utilitarianism, in its most generalized form, favors thegreatest good for the greatest number of people under a given setof constraints.25 This ethical approach could manifest in several

ways within the FT movement. An FT consumer might choose amore expensive FT product as she or he places the happiness ofthe developing world poor above greater personal happiness. Foran FT developed world advocate, this could be displayed by engag-ing in boycotts against the goods produced by offending MNE, oreven in acts of violence against MNEs. Developing world workersagitating for radical revolution against the established ordertoward the end of establishing a more just order would be

another example of how consequential ethics could be expressed.What is common to all these manifestations is action supportingequality of outcomes under the assumption that the end result

will be a net gain in aggregate happiness.Immanuel Kant is often attributed with developing the primary

structural framework for deontological ethics. Ethical behavior, heargued, must be based on a set of universally held principles

where the outcomes are less relevant than principles lived by. Theelements in the set of universally held principles were based on

what Kant termed the categorical imperative: an ethical prin-ciple that must be followed in all personal actions. The phraseequality of opportunity is Kantian in that the actual outcome isless important than the provision of opportunity for personaladvancement. A Kantian, deontological FT advocate will live his orher life strictly in accordance to the beliefs of social and economic

justice, sustainable business practices, and environmental integ-rity. Further, this person would believe that living by ones prin-

ciples, or categorical imperatives, is critical to personal integrity.While a more just world is desired, that is, outcome is lessimportant than doing the right thing. This person is willing tocarry a placard and walk for hours in protest in front of the



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corporate offices of an offending MNE, even though such action ishighly unlikely to result in the desired outcome.

We would be remiss if we did not present one other powerful

source of ethical principles: theology. Organized religion is essen-tially deontology, as well as teleological, and has been significantin the development of the FT movement. Religion, in particularChristianity, had a global footprint long before MNEs. Their strongmoral and ethical beliefs along with their work with the poor inthe developing world put them in a unique position as witnessesand advocates. It is hardly surprising that FT in the United States

was pioneered by the Mennonite Central Committee (i.e., Menno-

nite church). Ten Thousand Villages, founded in 1946, is a non-profit organization that sells native crafts, as well as FT coffee,obtained through Mennonite missionary activities.

Regardless of ones particular ethical beliefs, when expressedwithin the economy, they give rise to the phenomenon of thesocially conscious consumer. Such an individual is one who takesinto consideration some global impact of consumption, related totheir ethical values, in the purchasing decision. It is typically

assumed in the SRC literature that these consumers attempt toeffect positive social change through their actionsthe deonto-logical positionwhich may indeed be the dominant consumersentiment.26 The field of SRC has grown along with the FT move-ment, examples of which are often used in case analysis. To makean informed choice, the socially conscious consumer must haveaccurate, comprehensive information on a given product. Becauseconsumers cannot possibly know all the pertinent details con-cerning some global supply chain, they most often rely on infor-

mation provided by intermediary advocacy groups (i.e., NGOs), FTlabeling schemes, and the media.

One pertinent question is how do we go from the sociallyconscious consumer to an FT consumer movement? The FT phe-nomenon goes back to the late 1940s (i.e., Ten Thousand Vil-lages), although some push this date back earlier in the century.Regardless, the FT coffee phenomenon did not reach its tippingpoint with rapidly expanding FT network effects until the 1990s.

It was mentioned earlier that in 1988, the first FT certificationinitiative was created in The Netherlands under the name MaxHavelaar. This marked a significant step toward the tipping pointsince for the first time FT goods could move out of worldshops

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and into the mainstream of mass market retailing. Social psy-chologists define group intelligence as a process by which a

broad, disaggregate group of individuals concurrently come

together in common awareness on the same plane of knowledge.27

Within business studies, social psychological research has beenapplied in the subdisciplines of marketing and behavioral financetoward the end of forecasting consumer and investor behavior.Once convergence on a certain plane of knowledge occurs (e.g., ofFT products and why buying them matters) a large group can

bring about significant change in related socioeconomic con-structs (e.g., global supply chains). A related process, herd men-

tality, describes the manner in which individuals influence peersto follow trends and embrace new behaviors (e.g., purchase FTgoods). An applicable work by Malcolm Gladwell explores theprocess by which economic, social, and cultural factors join tocreate new trends in consumer behavior.28 He defines tippingpoints as being a short temporal interval of critical mass, inregard to some new social phenomenon, after which the momen-tum for change becomes unstoppable.

What began to alter the commercial landscape for the majorcoffee MNEs was the continued development of FT labeling, whichmoved distribution into mainstream retailing, as well as thegrowth of European inspired coffeehouses in the United States,most notably Starbucks. Small coffee NGOs success was based inpart on selling high quality beans, emphasizing country of origin.In 2000, Starbucks made the decision to serve FT coffee throughall of its cafes in the United States, with this decision eventually

being extended to its university foodservice outlet operations in 20

other countries. In the same year, the giant supermarket chainSafeway agreed to sell FT coffee in it stores. This growing andsuccessful niche market would not be ignored for long by the fivelarge coffee MNEs. Seeing commercial opportunity, by late 2003Procter & Gamble launched its own FT coffee under its Millstone

brand, being the first large MNE to do so in the North Americanmarket.29 Passage into a tipping point and formation of a socialmovement is not an instantaneous event but rather one that

unfolds over several years. For FT coffee, this passage took placeduring the decade of the 1990s, so that by the year 2000 themovement was firmly established in both Europe and the UnitedStates.



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Gladwell further argues in his discussion of agents of changethat this transformative process is often led by key individuals.

These individuals can be connectors, who link the associated

network together; mavens, who acquire, distill, and share intel-ligence; and salesmen, who persuasively and indefatigablypromote the cause. There are examples of each of these types ofindividuals in the FT literature, many of whom became leaders oractive members of FT related advocacy groups and NGOs. His

work is further relevant for an analogous process unfolds withincorporations and along global supply chains. Within corporations,the tipping-point process may be reactive, for instance in

response to a boycott, or proactive, as with many stakeholderinitiatives. Starbucks 2000 decision to sell FT coffee in all of itsU.S. cafes is a reactive example. At first, Starbucks resisted callsto sell FT coffee, arguing that there would be insufficient demand.

The San Francisco-based Global Exchange waged a year-longcampaign to change this decision, and when this NGO began toorganize a 29-city protest against Starbucks, the company backeddown, agreeing to sell FT beans. Since then, Starbucks has reor-

ganized its supply-chain structure to embrace principles forethical sourcing under the banner they call Coffee and FarmerEquity Practices.

It has now been established in several studies that consumersare willing to pay a premium when presented with the option ofFT products.30 Others have persuasively argued that SRC isstrongly linked to the concept of CRS.31 In a stakeholder sense,these scholars argue that CRS delineates a list of the majorresponsibilities of a corporation, one of which is responding to

evolving consumer sentiment and buying preferences. The SRCliterature has matured to the point of developing indices measur-ing the degree of corporate SRC sensitivity, as reflected through

various measurable internal behaviors.32 An SRC analysis study-ing buying behavior across nine countries revealed the overarch-ing rationale associated with the decision to buy or not to buy FTproducts is not bound to culture.33 While these conclusions aretentative due to small sample size, this finding would be expected

given the innate, universal propensities of humans to judge fair-ness. This research further reveals that ethical or unethicalconduct by business influences the behavior of consumers in areciprocal fashion. If these research findings hold up to further

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empirical testing, it will reinforce the perception that FT is aglobal rather than just a western, niche-market phenomenon. It

would further suggest that ethical MNE behavior reinforces rising

SRC. As the world becomes wealthier and more interconnected,FT would be forecast to become more prevalent throughout globalmarkets and in associated supply chains.

Increased media coverage of business, fed by the global diffu-sion of mass communications technology, has increased publicawareness of, and scrutiny of, all aspects of MNE activity. The

business ethics literature has grown immensely these past severaldecades, interpreting the morality of corporate behavior through

its effects on a broader set of people and outcomes. Companieshave responded, recognizing that proactive implementation ofethical policies through a stakeholder approach enhances corpo-rate culture, has marketing advantages, and strengthens sustain-ability of both global supply chains and the environments in

which they operate. The origin of increased media attention andnew business policies is found in public awareness campaignschampioned by NGOs. We now turn to a focused discussion of

their catalytic role in this disintermediation process.

THE ROLE OF NGOS

A major element in the FT operational calculus is the role of NGOsin pressuring corporations to adopt more socially responsiblepolicies, in this case, related to adoption of FT practices. Whenindividuals or groups within civil society work together to advance

a broad common set of interests, and these interests become asignificant force in shaping the direction of society, the outcomesof this process are often called social movements. Social move-ments can be thought of as broad societal initiatives organizedaround a particular issue, trend, or priority.34 The fair and ethicaltrade movement, especially in Europe, has taken on characteris-tics of a true social movement. When civil society groups cometogether to form more organized relationships, the entities that

emerge are often referred to as NGOs.NGOs come in many forms, with differing levels of operations,

orientation, and objectives. They can be international, national,urban, or community based. Further, their orientation can be



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toward empowering, participation, service, or charity. Any givenNGO often is found to have more than one of these orientationsand objectives or possesses multiple levels of operation. Estimates

of the number of NGO vary greatly, yet all analysts put thenumber in excess of 50,000 while agreeing that their presence hasincreased dramatically over the past three decades.35 Their growthhas coincided with that of mass media telecommunications andthe rise in awareness of perceived global injustices and increasedscrutiny of MNEs behavior and associated supply chains. Inaddition, they have been peopled by the various types of activistscharacterized by Gladwell. Feeding their growth is the perception

that many supranational organizations, such as the WTO, are toobiased toward the interest of developed world corporate interests.Also, the intractable nature of poverty in the developing worldalong with the perceived failure of national governments to deal

with injustices led many to action.Yaziji and Doh argue that there are three necessary and suffi-

cient conditions that collectively set the stage of the emergence ofNGOs and related social movements.36 First, there needs to be a

critical mass of dissatisfaction with either a social, economic,political, or technological facet of society. Second, this segment ofthe population must share a common awareness of a failure byexisting sociopolitical channels in addressing the issue of concern(i.e., have moved into the tipping point). Third, given the concern,there needs to be agreement that supporting an NGO is a viableand legitimate means for addressing their dissatisfaction. This setof conditions establishes the context in which NGOs are witnessedto emerge. Once established, NGOs efforts are directed in myriad

forms and directions.Corporate relations with NGOs have developed over time to be

complex and multidimensional. Research on these relations hasrevealed strategic adaptations, at times leading to new organiza-tional forms and/or strategies that are termed coevolutionary.37

This is often brought about through the efforts of NGOs and oftenarises from an initial conflictual campaign, such as the boycott ofNestle in the late 1970s. Eager to improve their corporate citizen-

ship credentials, MNEs often seek to partner with an NGO tomonitor and implement business practices. This may in turn leadto the rise of voluntary industry standards or the joint craftingof legislation leading to new legal standards governing those

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practices. There is no doubt that NGOs have become influentialorganizations within civil society and that they constitute animportant variable in the supply-chain disintermediation process.

OTHER AGENTS IN THEDISINTERMEDIATION PROCESS

Supranational, national, and local governments and their agen-cies can have a negative, neutral, or positive influence on thedisintermediation process. Supranational organizations do not

actively become involved in FT, yet create context and validate FTactivities. The UN 1948 Universal Declaration of Human Rights isoften cited by those in the FT movement to morally justify activi-ties. While not a treaty or a formal part of international law, theDeclaration has created a diplomatic instrument that has often

been used to pressure governments that are in violation of itsarticles. It further guides the UN in their activities and policies. In2001, 192 UN members and numerous international organiza-

tions agreed to the MDGs. These goals, to be achieved by 2015,are in harmony with the Declaration and cover a broad swath ofsocial objectives in the developing world from the reduction inpoverty and environmental sustainability to the development ofa global partnership for development. FT activists embrace ofMDGs for the promotion of FT is seen as a means to augmentefforts to attain nearly all stated goals. Agencies of the UN, suchas the UN Development Program, the UN Childrens Fund, the

World Health Organization, and the World Food Program, to name

a few, all have operations on the ground in developing countrieswhere they engage in a variety of social justice and human devel-opment activities. UN operations on the national and local leveloften complement those of fair traders and bring awareness todomestic producers and citizens of efforts on their behalf andrelated opportunities.

The World Bank works with and is related to the UN but wasformed as a separate organization through the Bretton Woods

Agreement signed in 1944. FT NGOs often criticize the policies ofthe World Bank and accuse it of being a tool of more developedcountries and their MNEs. However, having as its goals economicdevelopment and poverty reduction means that their activities in



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the developing world have an analogous impact to that of the UNin raising awareness and creating context. It can also be said thatthe research staff of the World Bank conducts considerable

research on the impact of FT initiatives as a means to attain bothpoverty reduction and development. In summary, the collectiveefforts of supranational organizations have served to create asupportive international framework for FT to develop aroundembedded liberal ideals.

Developed world governments, with their role at the downstreamportion of global supply chains, are in a unique position to influ-ence the disintermediation process. Some nations, such as the

United States, have taken a distinctive laissez faireapproach to FTproducts. Others, like the aforementioned 27 members of the EU,have taken deliberate steps to support FT initiatives with the goal ofpromoting developing world economic sustainability and povertyreduction. To this end, they enacted uniform policies and stan-dards, providing preferential access of FT products to Europeanmarkets. Complying with these policies and standards resulted inmany MNEs disintermediating portions of their supply chains.

The governments of developing nations vary in their response toFT. Some are openly supportive (e.g., Costa Rica) while others aretotally hostile (e.g., North Korea). The range of response is so

varied that we are unable to generalize about this level of govern-ment. When openly supportive of FT initiatives within their

borders, national governments direct support is often limited tofinancial assistance through enterprise development and financ-ing initiatives.38 These agencies can be helpful in providing advice,such as on accessing loans, business partners, and export oppor-

tunities. They can also offer business training, direct financing,and help in the development of business plans. Local governmentauthorities often have close links with provincial level economicdevelopment and financing units. Many of these individuals arelikely to have commercial interests, often agricultural, so local FTactivists approach them for help with ambivalence. The record ofsupport is mixed at this governmental level and depends uponsuch factors as the people involved, the strength of the legal

system, and the level of corruption present in the local politicalenvironment. Even when local government officials are support-ive, local FT cooperatives and activists complain that thegovernment-support programs for domestic enterprise develop-

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ment and financing agencies are often difficult to access, bureau-cratic, and limited in support service offerings. We can conclude

by saying that when available, national, provincial, and local

governments can act to improve needed infrastructure (e.g.,roads, irrigation systems, etc.), provide grants and credits tosupport FT activities, and assist in negotiations with MNEs andtheir supply-chain subsidiaries.

When national, provincial, and local governments lack eitherthe capacity or willingness to assist domestic producers and

workers in obtaining fairer treatment, NGOs often step in to fillthe void. Acting on behalf of indigenous people, such as in the

aforementioned case of the Dutch NGOs working with the coop-erative in Oaxaca, Mexico, NGOs essentially become host govern-ment surrogates, having a more direct say in the operationalrelationship between domestic cohorts and MNEs. Once represen-tative authority is obtained, NGOs gain bargaining power to assistin negotiations between indigenous groups (i.e., local NGOs),MNEs, and host governments.39 When successful, this surrogateprocess can effectively contribute to disintermediation.

SUPPLY-CHAIN DISINTERMEDIATION: THE CASEOF COFFEE CONCLUDED

In this section, we tie together the threads already introducedconcerning the story of FT coffee in order to highlight an industry-specific case illustrating our disintermediation framework. In rela-tion to this framework, we describe the mechanisms designed to

promote additional processing in developing countries, circum-vent price markups by intermediaries, establish premium brandrecognition for products produced using sustainable or organicmethods, avoid products fashioned under oppressive working con-ditions, and otherwise promote greater awareness and support fordeveloping country working conditions and income needs. Wefocus on a primary commodity because it is in such sectors thatglobalization of production has had particularly radical, and often

disruptive, impacts within developing countries. These types ofgoods have been problematic to the development process due torelative price volatility and low global income elasticity (i.e.,Engles Law).



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Coffee is the essential FT story for a host of reasons. First,according to UN Conference on Trade and Development, coffee isthe second most valuable primary commodity good exported from

the developing world. Tens of millions of developing countryfarmers and workers depend on coffee for their livelihoods. Itsglobal industry structure made it ideal for FT activism. The globalcoffee industry is oligopolistic with five MNEs, Kraft, Procter &Gamble, Nestle, Sara Lee, and Tchibo purchasing almost half ofthe global supply of green coffee beans.40 While 70 percent ofglobal production is grown on plantations of less than 25 hect-ares, within this number, we find small family farmers producing

nearly 50 percent on farms less than 5 hectares in size.41 Thisdichotomy in market structure between the downstream andupstream of the coffee commodity supply chain led to accusationsof MNE abuse of power by FT promoters. In their advocacy cam-paigns it was easy to replace the happy, robust figure of Juan

Valdez and his donkey, used for promotion by the NationalFederation of Coffee Growers of Colombia since 1960, with arealpolitik image of destitute developing world workers struggling

to survive in unsafe work and unsanitary living conditions.The traditional coffee supply chain is long and complicated (seeFigure 1). Coffee may pass through as many as 50 hands on its

way to each cup. Coffee beans are first grown on either smallfarms or large estates. Brokers (aka coyotes) buy beans fromfarmers and then sell them directly to exporters/importers

without ever actually possessing any coffee. The beans move on todeveloped world importers who then sell the beans to roasters

who in turn roast and package the coffee. The coffee is then sold

to retailers who sell the beans to consumers in one form oranother.42

While there were parallel stories of the development of FT coffeein the United States and Europe, the European story embodies ina more complete sense FT activism at its finest. In both regions,NGOs began the process of spreading awareness, moving con-sumer sentiment toward the tipping point and initiating the FTmovement. Many pieces of this story were shared earlier, begin-

ning with two Dutch NGOs approaching the FT coffee cooperativein Oaxaca, Mexico, in 1988. The initiating NGO, Solidaridad, isorganized as a foundation that collects donations from religiousgroups and then awards these funds as grants to cooperatives in

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the developing world. The Mexican cooperative UCIRI was knownto Solidaridad since it had been involved for some time in a slowlydeveloping tangential disintermediated network in Northern

Europe. The new labeling initiative, Max Havelaar, was seen as abranding strategy that would raise awareness and bring higherconsumption of FT coffee. The Dutch public is familiar with MaxHavelaar as a character in a famous novel who defended the basicrights of Indonesian coffee farmers during the period of Dutchcolonial rule. Thus using this name was a branding approach thatfits in nicely with the theory of socially conscious marketing.Solidaridad argued that the value added by certification would

entice importers and retailers to participate by stocking theirshelves with certified coffee produced by UCIRI, for which Soli-daridad would collect a fee.43 This approach was successful, andin the ensuing years, other NGOs began their own FT labels suchthat by the late 1990s there were 17 distinct FT labels throughoutEurope, North America, and Japan. During this time, FT coffee

was moving toward a tipping point of general awareness as NGOspromoted their labeling initiatives and their numbers multiplied.

The social psychology surrounding FT coffee rose toward thenecessary critical mass to move into the tipping point, creating asocial movement. All of this placed increasing pressure on thedominant MNEs to respond or miss out on a rapidly growing,potentially lucrative niche market.

In the United States, small independent importers, small-scaleroasters, and NGOs (aka alternative trade organizations) beganimporting FT coffee from farming cooperatives in Central Americaduring the 1980s. Thus, tangential disintermediation followed a

similar developmental path as that witnessed in Europe in theseearly years. The first real sign of an American FT coffee movementis typically associated with the formation of Equal Exchange in1986 by FT advocates and their decision that year to import coffeefrom poor farmers in Nicaragua. As with other FT goods, theircoffee was initially distributed though worldshops and other spe-cialty outlets. The Equal Exchange label was present from the

beginning yet their labeling standards developed over the next few

years, eventually harmonizing with those emerging in Europewhen Equal Exchange joined the European FT network.

As one would expect with tangential disintermediation, theimpact on the global supply chain was limited in these early years



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of FT coffee. European and American NGOs bought directly fromfarmer-owned cooperatives thereby displacing the middleman, orcoyote, shifting a small portion of value added to the cooperatives

while satisfying their loyal cohort of socially conscious consumers.This middleman link has often been deemed exploitive so removalwas viewed as increasing local social justice. Some Latin Ameri-can cooperatives also began milling operations that, in thesecases, further increased the shift in supply-chain value to coop-eratives and coffee farmers. It was noted earlier that during thelate 1980s, Solidaridad approached the major coffee MNEs oper-ating in The Netherlands soliciting their involvement in FT coffee,

but their appeal was rebuffed. From this, we can infer that thetipping point that would result in a social movement had not yet

been breached.The major MNEs began to face a shifting commercial landscape

as FT labeling became more widespread and accepted by theconsuming public. In the United States, the growth of Europeantype cafes helped to move the distribution of FT coffee into main-stream retailing. As the niche market for FT coffee grew, it slowly

dawned on the five major coffee MNEs that there was profitpotential in the growing movement. The 2000 Starbucks decisionoutlined earlier in this article was a catalytic event within the

American MNE market segment of the coffee industry, leadingthe social movement in this region to its tipping point. In Europe,the continued success of this specialty coffee market led to themajor coffee MNEs making fundamental changes to the globalsupply chain. In particular, the 2004 decision by Nestle, Sara Lee,Kraft, and Tchibo to jointly agree to a Common Code for the

Coffee Community to improve working and environmental condi-tions on their coffee-source farms indicated that disintermedia-tion was becoming pervasive. Nonetheless, none of thesecompanies would have made a move in these areas absent con-sumer and NGO pressure, reflecting the important role of thesocially responsible consumer and FT advocates in the process ofadoption of FT principles and products. By the opening years ofthe twenty-first century, the FT movement was entrenched on

both shores of the North Atlantic.It was noted earlier that by the late 1990s, there were over 17

different FT labeling schemes. These schemes addressed differingsocial and environmental factors in the developing world and

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were seen to be in conflict. Since 1997, most of the labelinginitiatives have been harmonized under the umbrella group Fair-trade Labeling Organizations International. Headquartered in

Bonn, Germany, this organization sets minimum standards to bemet under all FT labeling schemes. Uniformity brings confidenceto the socially responsible consumer, creates a more unifiedmovement, and strengthens the FT network while stabilizingmarket structure.44

FT has encouraged small farmers to stay small in an effort tocreate sustainable coffee production, although the beans fromthese farms are often pooled and roasted in cooperatives. Many

FT farmers integrate their coffee crops into an existing environ-ment in a process that is known as shade-growing. In fact, over80 percent of FT coffee sold in the United States is shade-grown,

with the intent of preserving natural habitats of many plants,insects, birds, and animals.45 Furthermore, 85 percent of FTcoffee is also certified organic indicating that it was farmed usingonly natural fertilizers and pest control. It is reported that farmersreceive an extra 15 cents above FT prices for certified organic.46

Even coffee grown by small farmers that is not certified organic isgenerally better for the environment as small farmers often cannotafford chemical fertilizers and pesticides.47 According to a 2002report from the World Bank, these practices benefit farmers andfarm workers who have less contact with the chemicals, and thegeneral public from less use of agrochemicals.

Recent research on the financial impact on participants due toFT disintermediation suggests that the process does indeed shift

value to developing world participants. A study of the before and

after effects of disintermediation on small coffee producers inNicaragua showed that retained value by those farmers increased274 percent per FT unit of coffee sold in the final market, whilethe value that used to be captured by domestic wholesalers (i.e.,coyotes) was transferred to the coffee growers cooperative.48 Thissupply-chain comparative example, depicted in Figure 2, is asso-ciated with the FT instant coffee operations of Nestl and Cafdi-rect in Nicaragua. It further illustrates that the processing and

retail side of FT instant coffee becomes more expensive, in partbecause of the small volumes traded. A final point to note is thatwhile the value retained by farmers and cooperatives does indeedincrease within FT disintermediation, the majority of the value



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FIGURE 2 Allocation of Supply-chain Value per Unit Pre- andPost-disintermediation (Fair Trade): The Case of

Coffee in Nicaragua. Source: Adaptation from datapresented by Mendoza and Bastiaensen.48

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continues to be retained by roasters and retailers. In fact, theabsolute value received per unit sold increases for roasters andretailers in the FT case.

This suggests that as volumes continue to grow, MNEs standto benefit from the fast-growing market for FT coffee. FT coffeeshipments reached 19,872 metric tons in 2003.49 FT coffee sales(by volume) grew by 71 percent from 2004 to 2005 in the UnitedStates, and by 34 percent in the United Kingdom.50 According to

Transfair, in 2005, 44 million pounds of green coffee imports wereFT certified in the United States, which amounted to about $500million in retail sales.51 This represents an average year-over-year

growth of nearly 90 percent since 1998. Despite this growth insales of FT coffee, they still make up only about 3 percent of thedeveloped world coffee market.52 Regardless, new mainstreamcoffee companies and retailers, such as Britains Marks andSpencer, are attracted by the growing markets and healthy profitsfor FT certified coffee. Finally, in terms of oversight and compli-ance of global commodity chains (GCCs) and standards, Taylor etal. report that Fair trades alternative governance arrangements

have made significant progress toward establishing and maintain-ing fairer social relations among its participants. . .53

USING MARKET POWER TO DISINTERMEDIATESUPPLY CHAINS

Research in the role and influence of various players in GCCsprovides an interesting heuristic for understanding the position

and potential of MNEs, producers, host governments, and NGOsto promote FT in global value chains.54 GCC examines the sourcesand influence of market power that allow firms to generatesurplus rents by arbitraging their production and distributionacross national boundaries.55 GCC provides a lens through whichto view and measure the degree to which MNEs can erect andsustain entry barriers in the face of pressures from competitors toerode market power and commoditize products and services. The

dynamics of GCC analysis show how the spatial structure of avalue chain and the power relations among the constituent actorscan result in market power derived from the construction andprotection of unique assets and capabilities.56



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As applied to commodities, GCC provides a theoretical rationalefor the current state of power asymmetry and uneven distributionof benefits from the production and distribution of commodities in

both their raw and finished form. Recent GCC research related toFT and similar initiatives has focused on the concept of embed-dedness.57 Taylor et al. argues that the organizational and gov-ernance processes of FT, the Forest Stewardship Council, andother related initiatives, are shaped by the embeddedness of theiroperations in conventional markets, practices and assump-tions.58 More broadly, CMSs have added an additional perspec-tive to research in global commodity chains by viewing MNEs as

exploitive actors that are able to dominate the terms of tradewithin developing countries. As Eden and Lenway have argued,MNEs, by definition, span national borders, but local firms andorganizations in developing countries may be more geographicallyrestricted. The resulting asymmetry in mobility means that theless mobile may pay more of the costs of globalization, incurgreater instability in earnings, and see their relative bargainingpower fall.59

As GCC and CMS have demonstrated, MNEs have significantmarket power to influence the terms of trade between developingand developed countries. As MNEs have become more active indeveloping countries, they are viewing emerging regions both asnew consumer markets as well as sources of inputs for finishedgoods produced in their home countries, demonstrating the inte-gration of rent- and market-seeking goals. The production byMNEs of FT products can be viewed as part of an internal supplychain in which MNEs manage the entire production and distri-

bution process, or, alternatively, as part of outsourcing strategiesin which MNEs source supply from subcontractors. By sourcingdirectly, MNEs may be in a position to contribute to more fair andequitable trade by shifting income and stimulating higher value-added activities to poorer regions. In so doing, MNEs may be ableto accelerate economic development and, in some cases, facilitatemore sustainable business practices and better working condi-tions in developing countries. In practice, these actions are often

initiated in response to real and anticipated pressure by NGOsand consumers of final products in developed country markets,although high growth in demand for FT products appeals toMNEs market-seeking tendencies. They may also be motivated by

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potential competitive benefits to the MNE resulting from access to,and ability to, influence quality and stability of supplies, as wellas product differentiation and brand identity. In addition, MNEs

and producers benefit by the role that MNEs play as a channelthrough which market intelligence is transmitted to producers,allowing them to learn more directly about market trends andpreferences in developed country markets.60

SOCIALLY RESPONSIBLE TRADE: IMPLICATIONAND FUTURE RESEARCH

The evolution of the global economy, and the role of MNEs withinit, has posed intense challenges for researchers, government offi-cials, international development institutions, and societies. In thisarticle, we have sought to contribute to an understanding of thesechallenges by redirecting discussions away from critical indict-ments of MNEs and instead offering a positive but realistic nor-mative perspective that incorporate new conceptualizations of the

role of MNEs. Importantly, this role requires prodding of MNEs byconsumers and NGOs in advancing fairer and more ethicallysound trading relationships. This proposed research perspectiveis not only important for developing countries, but also to MNEs.

Given the normative nature of the process outlined in thearticle, the proposed research agenda should be focused on cre-ating an FT supply-chain disintermediation index that could then

be used to substantiate the hypotheses shared in this article.Product, industry, or MNC rankings could then be complied in

regard to certain features, such as degree to which a supply chainis or could be disintermediated, the degree to which various MNCshave embraced the principles of the FT movement, etc. In ourdiscussion of the literature on SRC, it was mentioned that anindex had been developed to measure the degree of corporate SRCsensitivity.61 These scholars compiled a Socially Responsible Pur-chase and Disposal (SRPD) scale using a self-identified sociallyresponsible consumer behavior survey device incorporating a pool

of 147 responses. Building on recent developments that haveoccurred in theory and practice has resulted in the developmentof numerous such indices (e.g., Transparency International Cor-ruption Perception Index). Such an FT disintermediation scale, as



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with the SRPD scale, would be a multifaceted construct includingweighted survey results from a representative sample of the FTstakeholders presented in this article (surveys of producers,

vendors, employees, government officials, suppliers, NGOs, etc.).Along with the aforementioned rankings, the results of thisresearch agenda will permit other questions to be answered and aclearer picture of the nature and extent of disintermediation to bemore clearly revealed across global industries.

Much more needs to be done to develop and test this emergentframework of supply-chain disintermediation and the hypothesesproposed. In this article, we have argued that a richer, more

interconnected world will demand more FT goods and that MNEsare evolving to embrace a stakeholder model under the banner ofCRS. All of the evidence suggests that as the twenty-first centuryunfolds MNEs will become a more significant contributor to social

justice, economic development, and promotion of a sustainableglobal economic order.

NOTES

1. G. Fridell, Fair Trade Coffee: The Prospects and Pitfalls of Market-

Driven Social Justice (Toronto: University of Toronto Press, 2007), 54.

2. F. H. Cardoso and E. Faletto, Dependence and Development on

Latin America (Berkeley, CA: University of California Press, 1979); T.

Moran, Multinational Corporations and the Politics of Dependence: Copper

in Chile (Princeton, NJ: Princeton University Press, 1974); A. G. Frank,

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ference on Trade and Development (Geneva: United Nations, 1964).

3. A. Harrison and J. Scorse, Improving conditions of workers?

Minimum wage legislation and anti-sweatshop activism, California Man-

agement Review, 48, 2(2006): 144160.

4. P. Singer, One World: The Ethics of Globalization (New Haven, CT:

Yale University Press, 2002).

5. J. P. Doh and H. Teegan (Eds.), Globalization and NGOs: Trans-

forming Business, Government, and Society (Westport, KS: Praeger Pub-lishers, 2003).

6. M. Yaziji and J. P. Doh, NGOs and Corporations: Conflict and

Collaboration (Cambridge, UK: Cambridge University Press, 2009).

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7. J. L. Cummings and J. P. Doh, Identifying who matters: Mapping

key players in multiple environments, California Management Review, 42

(2000): 83104.

8. R. E. Freeman, Strategic Management: A Stakeholder Approach

(Boston, MA: Pittman, 1984).

9. R. K. Mitchell et al., Toward a theory of stakeholder identification

and salience: Defining the principle of who and what really counts,

Academy of Management Review, 22 (1997): 853886.

10. Ibid, 865.

11. Ibid, 867.

12. T. M. Jones, Instrumental stakeholder theory: A synthesis of

ethics and economics, Academy of Management Review, 20 (1995): 404437.

13. Ibid, 422.

14. L. T. Raynolds, Consumer/producer links in fair trade coffee

networks, Sociologia Ruralis 42 (2002): 404424.

15. Jones, Instrumental stakeholder theory, 435.

16. C. Smith, Corporate social responsibility: Whether or how? Cali-

fornia Management Review, 45, 4(2003): 5276; D. L. Spar and L. T. La

Mure, The power of activism: Assessing the impact of NGOs on globalbusiness, California Management Review, 45, 3(2003): 78101.

17. C. B. Bhattacharya and S. Sen, Doing better at doing good:

When, why, and how consumers respond to corporate social initiatives,

California Management Review, 47 (2004): 924; R. Harrison, Corporate

social responsibility and the consumer movement, Consumer Policy

Review, 13, 4(2003): 127131; S. Sen and C. B. Bhattacharya, Does

doing good always lead to doing better? Consumer reactions to corporate

social responsibility, Journal of Marketing Research, 38 (2001): 225243.

18. J. G. Klein et al., Why we boycott: Consumer motivations for

boycott participation, Journal of Marketing, 68, 3(2004): 92109.

19. F. De Waal, The Age of Empathy(New York: The Crown Publishing

Group, 2009). M. D. Hauser, Moral Minds (New York: HarperCollins,

2006). R. Dawkins, The Selfish Gene (Oxford: Oxford University Press,

1976).

20. W. Gth and M. Yaari, An evolutionary approach to explain

reciprocal behavior in a simple strategic game, in Explaining Process and

ChangeApproaches to Evolutionary Economics, ed. U. Witt (Ann Arbor,MI, University of Michigan Press, 1992), 2334; G. E. Bolton, A com-

parative model of bargaining: Theory and evidence, American Economic

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21. H. Gintis, Game Theory Evolving(Princeton, NJ: Princeton Univer-

sity Press, 2000).

22. F. Schuurman, Beyond the Impasse: New Directions in Develop-

ment (London: Zed, 1993).

23. C. Fisher and A. Lovell, Business Ethics and Values: Individual,

Corporate and International Perspectives, 3rd ed. (Upper Saddle River, NJ:

FT Press, Pearson Education, 2003).

24. J. S. Mill, Utilitarianism (Oxford: Oxford University Press, 1998).

25. W. Frankena, Ethics, 2nd ed. (Engelwood Cliffs, NJ: Prentice-Hall,

1973).

26. J. Roberts, Profiling levels of socially responsible consumer

behavior: A cluster analytic approach and its implications for marketing,Journal of Marketing Theory and Practice 3, 4(1995): 97114.

27. C. Sunstein, Infotopia: How Many Minds Produce Knowledge

(Oxford, Oxford University Press, 2006).

28. M. Gladwell, The Tipping Point: How Little Things Can Make a Big

Difference (Boston, MA: Little, Brown & Co., 2002).

29. C. Peale, Fair Trade Coffee has New Home at P&G, The Cincin-

nati Enquirer, 16 (September 2003), http://www.enquirer.com/editions/

2003/09/16/biz_wwwbiz1coffee.html.30. P. Auger et al. What will consumers pay for social product fea-

tures, Journal of Business Ethics 42 (2003): 281304.

31. L. Mohr et al. Do consumers expect companies to be socially

responsible? The impact of corporate social responsibility on buying

behavior, Journal of Consumer Affair 35, 1(2001): 4572.

32. D. Webb et al. A re-examination of socially responsible consump-

tion and its measurement, Journal of Business Research 61 (2008):

9198.

33. R. Belk et al. Consumer ethics across cultures, Consumption,

Markets, and Culture 8, 3(2005): 275289.

34. H. Teegen et al. The importance of nongovernmental organiza-

tions (NGOs) in global governance and value creation: An international

business research agenda, Journal of International Business Studies, 35

(2004): 463483.

35. Yaziji and Doh, NGOs and Corporations, 1516.

36. Ibid.

37. A. Y. Lewin and M. Koza, Empirical research in co-evolutionaryprocesses of strategic adaptation and change: The promise and the

challenge, Organization Studies 22, 6(2001): 512.

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38. For an example see South Africas small enterprise development

agency, http://www.seda.org.za

39. J. P. Doh and H. Teegan, eds. Globalization and NGOs: Transform-

ing Business, Government, and Society. (Westport: Praeger Publishers,

2003).

40. A. Hira and J. Ferrie, Fair trade: Three key challenges for reach-

ing the mainstream, Journal of Business Ethics 63 (2006): 107118.

41. A. Nicholls and C. Opal, Fair Trade: Market Driven Ethical Con-

sumption (London: Sage, 2005).

42. Oxfam International, Mugged: Poverty in Your Coffee Cup(Oxford:

Oxfam International, 2002).

43. Fridell, Prospects and Pitfalls, 5354.44. Raynolds, Consumer/producer links, 404424.

45. Transfair USA, Fair Trade Coffee Backgrounder, 2006, http://

www.transfairusa.org/pdfs/backgrounder_coffee.pdf

46. Transfair USA, Fair Trade Coffee Fast Facts, 2006, http://

www.transfairusa.org/pdfs/fastfacts_coffee.pdf

47. Transfair USA, Fair Trade Coffee Backgrounder.

48. R. Mendoza and J. Bastianensen, Fair trade and the coffee crisis

in Nicaraguan Segovias, Small Enterprise Development

14, 2(2003):3646.

49. Fair Trade Labeling Organization, Worldwide Fair Trade Sales

Rise by a Third in 2005, 2006, http://www.fairtrade.net/sites/news/

news.html

50. Fair Trade Labeling Organization, Why FLO Deals with Coffee,

2006, http://www.fairtrade.net/sites/products/coffee/why.html

51. Transfair USA, Fair Trade Coffee Fast Facts.

52. Fair Trade Labeling Organization, Worldwide Fair Trade.

53. P. L. Taylor, In the market but not of it: Fair trade coffee and

forest stewardship council certification as market-based social change,

World Development33 (2005): 129147; P. L. Taylor et al., Keeping trade

fair: Governance challenges in the fair trade coffee initiative, Sustain-

able Development 13 (2005): 199208; L. T. Raynolds, The globalization

of organic agro-food networks, World Development 32 (2004): 725

743.

54. G. Gereffi et al. The governance of global value chains, Review of

International Political Economy 12 (2005): 78104; G. Gereffi and M.Korzeniewicz, (eds.), Commodity Chains and Global Capitalism (Westport,

KS: Praeger, 1994).



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55. S. Ponte and P. Gibbon, Quality standards, conventions and the

governance of global value chains, Economy and Society 34, 1(2005):

131; Gereffi and Korzeniewicz, Commodity Chains.

56. J. Bair and G. Gereffi, Upgrading, uneven development, and jobs

in the North American apparel industry, Global Networks 3 (2003):

14369.

57. Taylor, Market-based social change, 129147; Taylor et al.,

Keeping trade fair, 199208; Raynolds, Agro-food networks, 725743.

58. Taylor et al., Keeping trade fair, 200.

59. L. Eden and S. Lenway, Multinationals: The Janus face of glo-

balization. Journal of International Business Studies 32, 3(2001): 388.

60. M. Fairbanks et al.,Plowing the Sea: Nurturing the Hidden Sourcesof Growth in the Developing World(Boston, MA: Harvard Business School

Press, 1997).

61. Webb et al., Socially responsible consumption, 9198.

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