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Smallholder farmers are the mainstay of agricultural production in the developing world. It is estimated that over 2 billion people in the developing world depend on smallholder farms for their livelhoods.

However, smallholders face several barriers and challenges both for domestic production and production for export. Access to credit is just one of these and has long been a key barrier to production for smallholders, undermining smallholders’ abilities to invest in their farms and production, often leading to declining levels of productivity. In cocoa and coffee production – an important source of foreign exchange and income for many developing country governments and farmers –  a lack of access to credit (or at considerable expense) has meant that farmers have been unable to invest in new trees and have relied on older trees which have declining yields and, therefore, diminishing returns.

The UN has argued that access to credit and financial services is ever more important in the context of the financial crisis and declining levels of remittances, which serve as an important safety net for much of the world’s poor.

In April this year, the first ever meeting of G8 Agricultural Ministers took place. Kanayo Nwanze President of the International Fund for Agricultural Development (IFAD) said at the meeting that:

“Protecting and increasing the access of poor rural people to financial services is even more vital now…the well-being of 2 billion poor people who depend on smallholder farms in developing countries hinges on it…that is why we are encouraging ministers to return home and make sure that in all countries, rich and poor, we work together to keep agriculture at the top of their national agendas”.

IFAD argues that private sector involvement in agriculture is more important than ever, particularly with regard to the provision of services such as finance and marketing. 

For many large businesses who source from smallholders in the developing world, sustainability concerns (related in particular to climate change) are driving projects to ensure that smallholder production is economically, socially and environmentally sustainable. An example of this growing trend is the shift of two major confectionery brands – Mars and Cadbury’s – to using certification (in these cases, Rainforest Alliance and Fairtrade) as a means to bring about sustainable production. As part of these transformations, support services are also provided to the smallholders involved, a gap that developing world governments have often been unable to fill. For example Cadbury’s is implementing farmer education programmes that explore best cocoa management practices leading to improved quality cocoa and increased yields and offering enterprise loans to start up farming or small businesses. Several examples  have shown that investing in services for smallholders can be a win-win for businesses.

Let’s hope these trends continue and the recession provides ample evidence of the importance of private sector investment in agriculture.

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Whilst the ‘Dairy Milk goes Fairtrade’ story has been around since early this year, it has now become a reality, despite a wider context of financial crises and a stagnation and decline in sales of some certified produce such as Organic.

On Monday the Bournville factory in the West Midlands, churned out its first line of Fairtrade Dairy Milk bars. A first in the world of ‘mainstream’ chocolate. Fairtrade has existed on the ‘fringes’ of most commodity sales (1-20% of all commodity sales in Europe and the US, Fairtrade’s biggest markets), albeit with growing sales, with most Fairtrade cocoa traditionally associated with niche or gourmet chocolate. It has now been propelled firmly into the mainstream. 

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The Fairtrade certification of Dairy Milk is expected to increase UK Fairtrade sales by 25%, after they reached £712.6m last year. Cadbury’s adoption of Fairtrade for its largest brand, Dairy Milk, is the sign of a big commitment. Cadbury’s claims that other varieties such as Fruit & Nut and Wholenut will follow once Fairtrade sources for ingredients such as hazelnuts and raisins are established (The Guardian).

And despite now being a time of financial difficulties for many companies, for Dairy Milk the transition to Fairtrade in the midst of a recession, should not be too finanically taxing. Cocoa is currently trading at $2,000 on the open market — well above the  minimum floor price of $1,750 a tonne for cocoa set by Fairtrade. This will mean no impact on purchase prices in the short term. However, the Fairtrade commitment does means the company is now locked in to paying higher prices than that on the open market if prices fall. Cadbury’s biggest driver for certification is thought to be that of securing supply and guaranteeing the sustainability of supply. This they regard as a necessary investment, rather than a cost.  

Cadbury’s may well be on to something here, as prices for cocoa rise due to shortages in supply, and as they have the added benefit of reduced reputational risk and increased shareholder value. This can only be a positive thing as the recession has severely undermined our faith in big businesses. Undoubtedly the commitment of a brand like Cadbury’s will only encourage others to follow suit and this trend is already emerging. Mars has pledged to buy 100% of its cocoa from sustainable sources by 2020,  working with the Rainforest Alliance. Nestlé, meanwhile, is working with the International and World Cocoa foundations.

Debate has raged over the ability of luxury fashion to contribute to sustainable development and of the industry’s potential to be a trailblazer in setting an example of how business can contribute to wider ethical, social and environmental good. The recession has brought this debate into even sharper focus.

A report by WWF entitled Deeper Luxury argues that: “Luxury companies must do more to justify their value in an increasingly resource-constrained and unequal world. Despite strong commercial drivers for greater sustainability, luxury brands have been slow to recognise their responsibilities and opportunities. We call upon the luxury industry to bring to life a new definition of luxury, with deeper values expressed through social and environmental excellence.” It rates ten luxury brands on their environmental and social performance and none score highly.

Others argue that despite their reputation for being less than ethical that ‘change is in the air’ for luxury brands. The guardian argues that “Major players [in the luxury fashion industry]….appeared to be tripping over themselves to reduce energy consumption, announce water projects or phase out excess waste (in an industry where faulty or end-of-line products are incinerated to “protect” the brand) at a recent sustainable-luxury conference in Delhi. Meanwhile LVMH, returned to the FTSE4Good Index Series, has just become a shareholder in Edun, the socially conscious clothing company set up by Ali Hewson and her husband Bono.”

Luxury fashion has not been necessarily immune from the financial crisis, but it has certainly been faring better than its less luxurious counterparts. Some luxury brands have bucked all recession trends with Hermes and Mulberry reporting strong profits for the first quarter of 2009, particularly with the sale of accessories, such as handbags, which satisfy consumers’ shopping itch and are longer-lasting and more versatile than a season-only dress. Hermes and Mulberry have effectively targeted consumers move away from conspicuous consumption: ‘Mulberry with its authentic and understated designs is striking a chord, not just in the UK, but also worldwide, because over-the-top extravagant consumption just isn’t in favour right now.”

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Does luxury fashion therefore have an even more important role to play in upholding high social and environmental standards in the context of a struggling global economy where other sectors struggle to survive and perceive their immediate priority to be their bottom line, let alone a second or third bottom line?

Sustainable slump argues that the recession is an ideal opportunity for luxury brands to forge a new image for themselves based on real, reportable and transparent efforts towards environmental and social sustainability. This will provide an important source of competitive advantage and consolidate market share, even whilst the recession rages, adding value for consumers – not just through the quality and presitge of their brand, but through their potential for superior environmental and social perfomance – and setting a precedent for how businesses can work with producers (and all the players in the value chain) and the environment to deliver long-lasting, meaningful change at scale.

Who would have thought that the humble egg would have anything to do with the recession? Yet, eggs have come to epitomise the unexpected impacts of the recession on consumption. Egg sales have risen significantly since the start of the year, offering a cheap form of protein and as an important ingredient for home-made food. As a result of ‘trading down’ consumers have seen their kitchens become a hive of activity again, as we move away from restaurant and pre-cooked meals, to home-made food to save our precious pennies.

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Other impacts of the recession include increasing shopper promiscuity as we feel less loyalty to retailers and chose to shop around to find the best deal. A survey by Experian, a retail consultant, shows that ‘more than a quarter of shoppers say they have been more likely to look around for the best deal over the past six months, and 80% say they have become more aware of the price of goods and services.’ Larger supermarkets have been able to count on 80% of their consumers coming back week after week. But recently, they’ve found shoppers getting much smarter and sharper, searching out value. The public has also become less trusting of big businesses – undoubtedly as a result of watching the banking sector crumble, bringing the entire financial system down with it.

Sales of ‘local’ produce from supermarkets have also risen. Asda claims its sales of local produce is up 55% compared to last year. Asda argues that consumers are doing this because of environmental concerns over ‘food miles’ and also as a bid to support local businesses in time of increased job and financial insecurity. However, sales of organic produce have thought to have declined – showing an often contradictory message in terms of environmental concerns – this may, however, be due to the relatively high cost of organic produce. Retailers, possibly as a strategy to regain consumer trust but also to make money from this growing trend, have also turned their focus towards sourcing locally. At the recently held Scottish Parliament Asda stated it was increasing in sourcing from Scottish producers, up from £16m last year towards a target of £25m this year.

What do these trends mean for sustainable development? What does the trend towards local mean for the livelihoods of small farmers in parts of the developing world and what does the fall in demand for organic produce mean for the environment? It might be too early to answer these questions, but monitoring these trends will be vital for understanding how sustainable development can make ensure the net impact of the recession is not a negative one, particularly for producers in the developing world. Dispelling misconceptions about food miles might be one example of ensuring that our growing preference towards local produce does not have unwanted and unforeseen effects.

The clothing and textile sector in the UK alone, produces around 3.1m tonnes of carbon dioxide, 2m tonnes of waste and 70m tonnes of waste water a year (Department for Environment, Food and Rural Affairs). Approximately 1.5 million tonnes of clothing end up in landfill every year. If the recession curbs our endless appetite for fashion, this might have positive impacts for the environment.

However, the recession is likely to have mixed effects on the fashion industry. Anecdotal trends demonstrate a move away from quick ‘fast-fix’ shopping habits, like buying a cutting-edge ‘this season-only’ dress from Topshop only for it to collect dust and provide food for moths in the back of wardrobe once the season has drawn to a close. It is predicted that overall clothing sales will fall and this is reflected in the windows of every high-street retailer as they battle for customers with pre-christmas sales, mid-season sales and other price cuts and offers. Industry experts have also predicted a preference for ‘classic’, ‘timeless’ pieces that are well-made, offer longevity and can be used every season. They have also predicted a fall in conspicuous consumption as those who have cash to splash spend their money more discreetly. Obvious labelling of clothing and the impression of excessive luxury is not seen as appropriate within the context of rising unemployment and rising food prices.

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Other trends show that accessories are faring well in the credit crunch as a means of satisfying the shopping itch, whilst also having the versatility of being able to wear with every outfit. Thus, for every pound spent an accessory can provide far more ‘bang for its buck’ in terms of frequency of use. Other trends reveal a move towards thrift – sewing and home-made clothing has soared in popularity as demonstrated by John Lewis’ 14% increase in haberdashery sales, as early on as late 2008.

However, other trends show rising popularity of stores like Primark, that epitomise the cheap, quick-fix side of the fashion industry. Primark sales have increased by 5% in the 6 months running up to February 2009. Most worrying, in 2005, Primark was named as the least ethical clothes shop in Britain. However, it has made some progress it recent years, working to ensure that none of its suppliers involve child labour and the launch of its Better Lives Foundation to provide financial assistance to organisations devoted to improving the lives of young people.

Not only is the environment directly affected by the fashion industry, but millions, if not billions of people rely on cotton, textiles and clothing manufacturing, particularly in the developing world, for their livelihoods. How will changing consumer patterns impact these people? As Primark sales soar, how are costs squeezed for producers and manufacturers further down the global value chain and what are the environmental externalities to produce clothes at such ‘bottom end’ prices?

The credit crunch may provide an opportunity for shoppers to reflect on what they really need in terms of clothing and despite Primark’s success, shoppers may be re-considering just what ‘value for money’ really means. The recession is also an apt time for retailers to take stock and plan a business strategy that differentiates them from the competition – using sustainability and ethics as a unique selling point – and allowing them to emerge stronger after the downturn.

A new action plan to make fashion more sustainable and less environmentally damaging was launched at the start of London Fashion Week in February of this year, by Defra Minister Lord Hunt. This may provide an apt means for businesses to achieve the competitive advantage mentioned above.

The Sustainable Clothing Roadmap has brought together over 300 organisations, from high street retailers, to designers and textile manufacturers to battle the environmental impacts of ‘throw away fashion’: ‘Companies and some of the biggest names in fashion have signed up to take actions to make a significant difference to the environmental footprint and social inequalities which blight some of the production and retail processes of consumer fashion.’ For example:

  • Marks and Spencer, Tesco and Sainsbury – all of these have signed up to a range of actions on increasing their ranges of Fair Trade and Organic, increasing take back and recovery of unwanted clothing and supporting fibres/fabrics that enable clothing recycling.
  • In addition M&S and Tesco are supporting green clothing factories, improving animal welfare across their supply chain and increasing consumer awareness on washing at 30 degrees centigrade.
  • Tesco – are extending their traceability programme across cotton supply chains to ban cotton from countries known to use child labour as well as carbon labelling of Tesco laundry detergents.

As this big businesses move towards sustainable practices and labels, sustainability becomes ‘mainstreamed’ and places significant pressure on the Primarks of the world to recognise their contribution to the environmental and social impacts of throw away fashion. This can only be a good thing.

Several of Sustainableslump’s posts have discussed the impacts of the recession on buying habits and society’s value towards consumption. Whilst on the surface this might not seem like an issue that directly affects the developing world, our purchasing practices can profoundly shape the livelihoods of others that dominate the production of the goods that fuel our seemingly endless appetite for shopping.

Consumption and the recession provides the perfect example of just how complex and correlated all the factors involved in the complicated interplay between sustainable development and the recession really are.  

For example, whilst some experts believe that the recession could boost responsible retailing and decrease some of the environmental damage associated with radical economic growth, growth in sales for ‘lower end’ retailers such as Lidl, Aldi and Primark and falling sales in Organic produce suggest that for a proportion of the market ‘sustainability’ and ‘quality’ just aren’t relevant decision-making factors.

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Some trends suggest that consumers are beginning to return to ‘older’ values of quality over quantity and in regards to fashion in particular, of classic and high quality over cutting-edge and ‘quick’ fashion pieces churned out by the Primarks of the world.

In both these circumstances, however, it may be that the developing world loses out – if shoppers in the west are buying less (albeit of a better quality), factories will have to close and unemployment will inevitably rise. If cheaper retailers come to reign supreme downward price pressures on the market as a whole could occur as retailers compete in ‘a race to the bottom’, putting pressure on labour costs, production costs, margins and ultimately the value accrued by producers in the developing world.

In so many ways the recession brings up more questions about the relationship between economic growth and sustainable development than it could ever answer.  Let’s hope that effective measurement and research will make some interesting conclusions once the market recovers…..

Contradiction exists over just how the recession is affecting how and what Western consumers buy. Whilst one study shows that 66% of consumers are still buying ‘green’ despite the recession, others show a fall in sales of organic produce, which has led to some organic farmers in the UK leaving the Organic certification scheme and which will inevitably have negative knock-on effects for small farmers in the developing world who benefit from the low-input, high premiums, organic production and sales can entail.

YouGov surveyed 2,000 UK adults in February 2009 on behalf of the Carbon Trust Standard and found that 66% say ‘it’s important to buy from environmentally responsible companies‘. Just over a quarter argued that environmental concerns affect them even more than a year ago.  In theory this can only be good for certification schemes that are perceived as more environmentally sustainable, such as Organic and Rainforest Alliance certified, but is what people say and do, two very different things?

The latest figures from TNS, market retail analysts, as quoted by the Guardian, show that there has been a 19% fall in sales of Organic produce in the 12 week period leading up to March 2009, when compared to the previous year. Are shoppers showing caution towards spending on more expensive food products?

As consumers, we have significant power in determining the fates of people and environments outside our own.

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For many small farmers in the developing world, participation in Fairtrade certification schemes, with its associated minimum market price and social premiums act as important safety nets when commodity prices fall and recognises the added costs for producers in participating in this certification scheme. Schemes like Fairtrade will become increasingly important in the economic downturn and should not necessarily be dismissed as unnecessary ‘luxuries’.

Reports about trends in ethical consumerism since the advent of the economic crisis are contradictory, to say the least.

Market research carried out by retail analyst TNS demonstrated that after a tenfold increase in sales over the past decade (peaking at £100 million in February 2008) sales are now falling – most notably in eggs, but also in chicken, dairy, fresh fruit and vegetables. However, research by Organic Monitor shows that consumer demand for fair-trade products continues to strengthen despite the recession, and with the mainstreaming of Faitrade – such as Cadbury’s recent revelation that all Dairy Milk will become Fairtrade certified – this strong growth may be set to continue.

ethical-consumerism-report-2007Experts have warned that consumers under economic pressure tend to concentrate on self-preservation and less about others. However, the Co-operative Bank’s Ethical Consumerism Report 2008 argues that ‘despite the first tremors of the downturn being felt towards the end of last year, the overall ethical market in the UK was worth £35.5 billion in 2007, up 15 per cent from £31 billion in the previous 12 months.’ The Co-operative attributes the growth in ethical consumerism to the impact of Government green legislation and ‘choice editing’. These factors are likely to continue past growth trends.

The exact impact of the recession on ethical consumerism will not be fully evident until the recession subsides, but if fairtrade, organic and other ethically certified food can ride the economic storm, the potential devestating impacts of the recession on small farmers and labourers in the developing world, and indeed the environment, may be somewhat attenuated.