Human Trustees

Can businesses do good in the world? Can multinational corporations with a public track record of chasing short-term profits while harming people, their communities and the natural environment change course over time and adopt new business models that lift poor farmers and factory workers from poverty and actually regenerate their environments? In his book out this year, Paul Rice tells such a story of hope (Every Purchase Matters: How Fair Trade Farmers, Companies, and Consumers are Changing the World).

Before getting to that, though, Paul Rice as a man grew on me as I read his book. It was not so much his Ivy League education (A Yale BA in political science and economics, and an MBA from the University of California, Berkeley) and his more recent global recognition (Ethical Corporation’s 2019 Business Leader of the Year, named four times Social Capitalist of the Year by Fast Company magazine, the World Economic Forum Social Entrepreneur of the Year, to name a few). It’s more about how he got there.

A university graduate who was passionate about social justice, Paul Rice went to Nicaragua in 1983, a nation in the throes of the Reagan-fueled Contra war against the leftist Sandinista regime. An idealist youth out to battle the injustices of neoliberal capitalism and the evils of Globalization, he was on a mission. [I too railed against these things in my 2010 book, Earth, Empire, and Sacred Text].

During his first seven years, he worked in mountain villages in the north of the country, involved in a number of projects aiming to eradicate rural poverty and promoting more efficient agricultural techniques. This work benefited from the Sandinista revolution’s redistribution of land to the poor and its urging farmers to form into cooperatives, “so they could start to benefit from the economies of scale that came from pooling their resources” (19).

This was an incredibly formative and exciting time for Rice. Living in these remote mountain villages, he “fell in love with the farmers who lived there.” He ate with them, met their families, learned to identify migratory birds traveling through their forests, and he “learned the ins and outs of small-scale coffee farming.” He loved their foods, “grew a mustache and learned to danse salsa,” and even married a local woman, having two kids with her. He did his best to assimilate. He became Pablo.

It was also a dangerous time. The US-backed Contras aimed to topple this leftist regime and, in the process, derail its rural policies. Over time, he grieved the loss of several friends and he was even “picked up by a band of heavily armed Contras in 1985 and interrogated at gunpoint for six hours before being released” (19-20).

After a few years, however, he started to wonder how effective these projects were. The millions of dollars poured into aid were not producing “sustainable economic growth.” Farmers were not actually empowered by all this infrastructure hard to repair and replace. That’s when he received a letter from Michael Shimkin, a wealthy executive in the publishing industry and just as passionate for social justice as he was. Shimkin was also a trustee of Oxfam America, which financed several literacy campaigns in Latin America. This work exposed him to some of the early Fair Trade organizations like Global Exchange, Equal Exchange, and Pueblo to People. Some of them sourced handicrafts and resold them at more equitable prices, while others bought coffee directly from small-farmer co-ops in Mexico and Costa Rica, reselling them “to conscious consumers who were willing to pay a premium for a more ethically sourced product” (22).

In that letter, Shimkin urged Rice to look into Fair Trade and see if he couldn’t use his contacts in the highlands of Nicaragua to have them directly sell their coffee as cooperatives to buyers in the north, who in turn could pay them a good price while adding a social premium, which they could then use to pay for community projects that would benefit everyone. This made immediate sense to Rice: trade, not aid!

Next, Shimkin introduced him to Jonathan Rosenthal, co-founder and executive director of Equal Exchange. “They are looking for someone with your kind of experience,” Rosenthal told Rice. In central America, instead of the 10 to 20 cents per pound farmers typically got for their coffee beans, Equal Exchange could offer farmers organized in cooperatives $1.40 a pound, with a handsome premium on top of that. Add two more benefits to this Fair Trade model: first, this price was guaranteed, regardless of market fluctuations, which can often be dramatic. And second, it’s also the “minimum” paid. That is, if coffee prices go up, the company will pay more for it.

Now came the hard part: get farmers to organize themselves. He started by founding the export co-op PRODECOOP (Cooperative Development Program), and because of the many people he knew and who now trusted him, he was able to recruit 24 families that first year. This was no small feat! It would be months before these farmers would receive payment for that coffee (new ventures cannot get a line of credit): “The beans had to be collected, milled, sorted, bagged, and then transported by Maersk, a Danish ocean-shipping line, to Equal Exchange in Boston, Massachussetts” (23). All that time, they would receive no money for their work. Amazingly, they trusted “Pablito” to fulfill his promise. And significantly, they understood that this was a game changer for them: they had given birth “to a farmer-owned coffee export business that took market power away from exploitive middlemen and put it in the hands of the farmers themselves.”

Yet would the quality be up to par? Five months later, Jonathan called Paul. “The coffee’s excellent. We’ll wire you the money today.” It was $50,000. The farmers were ecstatic! Each farmer’s share was $2,000 in cash—"more money than any of them had ever seen in their lives” (24). This success proved contagious. Within several years, the number of cooperatives multiplied, and they outgrew Equal Exchange’s capacity to sell their coffee and so began selling to other buyers, mostly in Europe, “the epicenter of the Fair Trade movement” (26).

Expanding Fair Trade’s vision

Paul Rice is a visionary leader. After coming back from Nicaragua in the 1990s, just in the second year of his MBA, he founded Fair Trade USA under the umbrella of what was then the global Fair Trade certifying body FLO (Fair Trade Organizations, now called Fairtrade International). For a product to carry the Fair Trade label, it has to be inspected regularly by a “Fair Trade” certifying body to make sure that all their production is compliant with that label’s standards.

Fair Trade coffee at that time (and it’s still the case for Fairtrade International) was only dealing with small farmers working in cooperatives. Rice was starting to question that narrow, exclusive definition. After all, it was far from serving all the small farmers who represented only 20 percent of the coffee labor market. The majority worked on large coffee plantations. That is a problem, because even today only about 1 percent of the coffee market is Fair Trade.

In 2008, Rice was on the verge of a contract with Starbucks’ CEO Howard Schultz. That could have caused Fair Trade USA’s market share to skyrocket, but in the end, Starbucks balked: by far, most of their sourcing came from either large farms or the smaller ones without a cooperative membership. This confirmed to Rice that Fair Trade standards needed to be expanded to leverage the power of the business community and multiply the number of coffee growers—especially those on larger farms and those on big plantations—who would benefit from the Fair Trade model.

By then, however, Paul Rice had already made some progress on the consumer side of the Fair Trade equation. in 2001, Ben Stiller, the founder of Green Mountain Coffee Roasters (GMCR), was known as a pioneer of “the fledgling corporate social responsibility movement.” His business was now entering its third decade when Paul Rice contacted him. GMCR had been selling organic coffee from the start (the first sustainability label) and intentionally cared for all its farmers. When Stiller heard Rice’s case for Fair Trade coffee, he listened with interest, but as CEO accountable to a board and to his shareholders, he asked, “will this make business sense?” By then GMCR was a sizeable, publicly traded company.

Yet Stiller had always been a risk-taking, innovative entrepreneur. He finally said to Rice, “Let’s try out a new line of Fair Trade coffee and see if consumers come along.” It was a bet on “enlightened self-interest” on the consumer’s part: if you care for the producers and the health of the land on which they grow their coffee, you’ll pay a bit more for that coffee. So, they agreed “on an organically certified roast sourced from small family farms in Mexico.”

Fair Trade was still relatively unknown in the early 2000s. The key, then, was to find a great story line they could pitch to their coffee store owners and managers. CMCR’s vice president of marketing and sales, T.J. Whalen, worked with his sales team and came up with the memorable tag line: “Better Coffee for a Better World.” Rice explains, “They gave multimedia pitches, showing the social impact Fair Trade coffee had for farmers. They offered in-store advertisements extolling the virtues of Fair Trade and organics to consumers. Soon they landed their first big partner: Newman’s Own Organics” (51). In turn, that partnership opened other doors: Wild Oats, Hannaford, Safeway, Kroger and even McDonalds.

Yet none of the coffee roasting companies that were warming up to the Fair Trade label were devoting much attention to it. Of all of them by far, GMCR had the highest proportion of Fair Trade coffee: 12 percent. Starbucks has never gone above one percent. This is exactly why Paul Rice finally broke with the Fairtrade International standards: they only certified small farms and cooperatives. Indeed, these Fair Trade pioneers “saw Fair Trade as a means for redistributing wealth from ‘First World’ consumers to ‘Third World’ farmers.’” In essence, it “was an alliance between two key stakeholders: the farmers who grew their coffee and conscious consumers who wanted to do good with their purchases” (57). But to them the business aspect of it—the companies in the middle—was almost a necessary evil. But in fact, the Fair Trade equation always included three stakeholders: producers, consumers and the retailers. A fourth stakeholder, moreover, was included in Fair Trade almost from the start: the planet.

As a result, Paul Rice came to view Fair Trade differently: instead of redistributing wealth, it is “a way of transforming capitalism—creating a new way of doing business that benefited everyone involved: farmers, consumers, businesses, and the environment.” Business can and should be an engine producing good in the world. And when it does that, it can also become more profitable.

That’s the story Rice tells in the rest of his book—the topic of this post’s second part, and it goes from coffee, tea, sugar, vanilla, and spices to include produce, furniture, the apparel industry and much more.

[Have a look at the Fair Trade USA website, “Fair Trade Certified”. Also, some readers will know that I have written about Fair Trade before, the last post in 2024 being on the history of the Fair Trade towns movement—in 2006 our town of Media, PA, became America’s First Fair Trade Town (sixty plus others now), and I’ve been on its committee most of the time since then. We are now part of a triangle: the first FT town in the UK and the first one in Africa, New Koforidua, Ghana, site of the cocoa cooperative owned by its farmers and the major source for Divine Chocolate in Europe. We are thereby trying to display a positive, redemptive model in contrast to the heinous Transatlantic slave trade].