Major Report Says Ethical Consumer Labels Are Ineffective

They prioritize corporate interests, rather than those of workers.

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Bio bananas for sale in Germany

Thomas Lohnes / Getty Images 

Regular readers will know me to be a staunch defender of the Fairtrade certification system. Admittedly, I have a personal attachment to it, having visited the workshops of Fairtrade artisans in Agra, India, many years ago, and having worked as a volunteer at several Ten Thousand Villages stores in Canada, which sell all-Fairtrade items. But I sincerely believe the system does valuable work, based on years of reading and research about Fairtrade International and other such "multi-stakeholder initiatives" (MSIs).

Fairtrade's reputation has been on a rollercoaster in recent years. It was criticized in a 2014 study by the University of London's School of Oriental and African Studies as not benefiting poor agricultural workers as much as it should. Several companies have unsubscribed recently from its certification schemes, some going off to create their own. Other studies have said children can still be found laboring on certain West African cocoa farms. On the other hand, Fairtrade was praised as the most effective ethical consumer label in a comparative study last year and is widely considered a leader in sustainability and ethical standards.

So it wasn't surprising to see yet another study analyzing Fairtrade's effectiveness, although this one was a pretty clear condemnation. Titled "Not Fit-for-Purpose: The Grand Experiment of Multi-Stakeholder Initiatives in Corporate Accountability, Human Rights and Global Governance," it was published in July 2020 by a group called MSI Integrity that has spent the past decade investigating "whether, when and how multi-stakeholder initiatives protect and promote human rights." This 235-page report is the culmination of that research.

The report examined 40 multi-stakeholder initiatives (MSI) in total, including Rainforest Alliance, Forest Stewardship Council, Better Cotton Initiative, Roundtable on Sustainable Palm Oil, Alliance for Water Stewardship, UN Global Compact, Global Sustainable Tourism Council, Fairtrade International, and many more. These MSIs operate in 170 countries and engage over 50 governments and 10,000 companies. 

Ethical consumer labels
Some of these ethical consumer labels were investigated in the report. Cristina Arias / Getty Images

Most of the MSIs we know today started in the 1990s as a response to growing public concerns about human rights abuses. Civil society organizations joined forces with corporations to write new codes of conduct that quickly became a "gold standard of voluntary business and human rights initiatives." They were viewed as a solution to the problem of human rights abuses, with "minimal critical examination into its effectiveness or wider impacts." But has it worked? The report authors say no (emphasis my own):

"After reflecting on a decade of research and analysis, our assessment is that this grand experiment has failed. MSIs are not effective tools for holding corporations accountable for abuses, protecting rights holders against human rights violations, or providing survivors and victims with access to remedy. While MSIs can be important and necessary venues for learning, dialogue, and trust-building between corporations and other stakeholders — which can sometimes lead to positive rights outcomes — they should not be relied upon for the protection of human rights."

There are two main reasons for this. First, MSIs tend to prioritize the wellbeing of corporations over that of the victimized workers. They have a top-down approach to handling human rights abuses, and the voices of workers are rarely heard by the people making decisions. From the Guardian, "Only 13% of the initiatives analyzed include affected populations in their governing bodies and not a single one has a majority of rights holders on its board." Nearly one-third of initiatives do not have clear-cut grievance mechanisms for workers who need to communicate about problems.

Second, MSIs do not restrict corporate power or address the fundamental imbalances that cause human rights abuses in the first place. Companies have been able to preserve their interests by playing such an integral role in the creation of MSI guidelines. The authors write, "The mechanisms most central to rights protection, such as systems for detecting or remediating abuses, have been structurally weak." Relatedly, the third-party auditors that are hired to review companies' adherence are paid by those same companies, which creates a serious conflict of interest. 

Governments have been complacent, failing to address certain human rights abuses because they assume the MSIs are taking care of it. Amelia Evans, executive director of MSI Integrity, told the Guardian, that the opposite must happen: "Governments must recognize that because there’s an initiative in place, then underlying human rights abuses are occurring and they are obligated to take action." Therefore, an MSI's very presence should be a red flag that serious problems exist within the local supply chain. MSIs should fuel action, not justify inaction. 

I think it is unfortunate, however, that MSIs are blamed for governments' misinterpretation of their work, since it was never the intention of MSIs to replace government policies. One Fairtrade spokesperson said, "We agree that no initiatives should ever be seen as the replacement for the rule of law which is why we believe in and call for regulation aimed at preventing human rights abuses."

As a Fairtrade supporter, this report is tough news to swallow. While I can see and understand that corporate interests are too strong, and that worker-run programs could be far more beneficial, I'd argue in defense of MSIs that they are one of the few ways in which consumers can feel like they're taking action and doing a small bit of good in a world rife with abuse. After all, how else does one communicate to the higher-ups that fair wages, safe working conditions, and children in school matter deeply and that we're willing to pay more for it? Policy change starts with concerned citizens.

These MSIs, at the very least, create awareness about issues that would otherwise be unknown to many Western consumers, just as they were before the 90s brought them to the forefront of public discussion. But this report does indicate that it's time for them to rethink their structure and messaging if they want to remain relevant and useful and not allow all credibility to erode.

The report offers a few suggestions for how MSIs can change. These include recognizing that MSIs are tools for corporate engagement, not human rights protectors; accompanying MSIs with robust public regulation to make them far more effective; and involving the workers in decision-making and giving them a central role. 

Read the full report here.