Wisconsin Public Television University Place Entrepreneurship in Society  Paul Rice A Market-Based Approach to Solving World Problems  February 1, 2012 UP679   cc >> Jeanan Yasiri: This is Entrepreneurship in Society. It is a course that's offered through the University of Wisconsin School of Human Ecology. I'm Jeanan Yasiri. As we begin today, I'd like to extend thanks to our partners in supporting this course, the UW Office of Corporate Relations, the UW College of Engineering for their technical support, and financial support that is provided through the Ewing Marion Kauffman Foundation which is committed to advancing academic education in entrepreneurship. Additionally, we'd like to thank our media partners, Wisconsin Public Television and their University Place crew for taping today's lecture. I'm very pleased to introduce a special guest to our class today, Paul Rice, president and CEO of Fair Trade USA, the leading certifier of Fair Trade products in the United States. Since launching their label in 1998, Fair Trade USA has established fair trade as one of the fastest growing segments of the US food industry, and to date, they have developed business partnerships with over 800 US companies. Since 1999, low income family farmers and partners in the movement have earned over $250 million in additional income selling in the US fair trade market. Prior to launching the organization, Paul worked for 11 years as a rural development specialist in the mountains of Nicaragua. That experience has led to 30 years of award winning service in the fair trade movement, earning him accolades from Ashoka, the Skoll Foundation, and the World Economic Forum Award for Social Entrepreneurship. 

He holds degrees from Yale University as well as from UC Berkeley. We are delighted to have him join us from the San Francisco Bay area today. Please join me in welcoming Paul Rice. [APPLAUSE]  >> Paul Rice: Can you hear me now? So how you all doing? >> Good. >> No, how are you really doing? >> Great. >> Tired. >> Great. Tired. Who here drinks coffee? Especially the tired people. Who here drinks coffee? Alright. 

Raise your hands, who eats chocolate? Of course, all the girls raise their hands. [LAUGHTER] Who eats bananas? Okay. Now, who here has visited either a coffee or a cocoa or a banana farm? Keep those hands up. I'm surprised. Congratulations. So most of us haven't, right? I think most of us when we're drinking that morning cup of Joe, trying to wake up, or enjoying that chocolate bar, we're probably not thinking about the farmer or where it was grown or what the impact on the environment or what the life of that family was like. So, I want to take you on that journey today. I want to take you back to the farm where all of that stuff begins and help you get some insights into where this stuff that we eat comes from and what life is like for folks on those farms and how hard things are, in many cases, for the people who grow the things that we eat every day and take for granted. The title of this presentation is Market Approaches to Changing the World, and what I tried to do with that title is really kind of evoke the intersection that I see happening today between movements for social change, people who are trying to save the world, make the planet better, help people, save the environment on the one hand and the business community on the other and how those two are increasingly intersecting in finding a space where anyone who's interested in entrepreneurship can find a place. So, let's go on a journey. 

Most of the world's coffee or cocoa beans from chocolate or bananas comes from small communities like this one way up in the mountains somewhere. Farmers often only have one or two or three acres of land. Often they don't have electricity so they don't have Internet connection. They don't really know about world market prices. They're really isolated from markets. Often, in fact, they don't have vehicles, and so the way they get their coffee to market or their products to market is on mule back over footbridges like this one. So very remote. Very poor. Typically, they deliver their harvest in raw form to the nearest middle man who dictates price, and you kind of take the price that you can get. So, as you might imagine, that leads to a situation in which a lot of farmers are locked into poverty. 

They struggle to put food on the table. They struggle to just keep their kids in school. High school in the developing world is a luxury. Stuff that we take for granted. Clean water in the developing world is a luxury. And so, for me, that reality in my second semester of freshman year in college became a very heavy burden. And so my own personal journey was one of awakening to this reality and deciding I had to do something about it. And so I want to share a little bit of that journey because it relates to the fair trade story and the story about markets and social change. So I got interested in agriculture, I got interested in this reality of hardship and decided to study economics and international development, and by the time I graduated I knew I wanted to go work with farmers. And so a month after graduation, in the summer of 1983, I bought a one-way ticket to Nicaragua, and I went off to join the revolution. 

My goal was to work with farmers, and I started organizing co-ops and helping really small farmers get together and try and improve their production. And I thought, okay, this is pretty cool. I'll stay for a year, maybe two, and then go back and do something sensible. I stayed for 11 years. I was 22 when I went overseas. I was 33 when I came home. And it was an amazing journey. It was an incredible journey. And for many years I worked on one development project after another which is kind of the classic model that we have and that we've had since World War II for alleviating Third World poverty. So it's well-intentioned people sitting in these very well-intentioned organizations in Washington and London and around the world, developing projects and sending lots of money off, also very well-intentioned, to solve poverty. 

And that top down agriculture aid model, in my experience, doesn't work. I would say that the projects that I worked on, more often than not, simply recreated dependency on aid. And farmers don't want our aid. They just want a decent price for all their hard work. So I had a chance to shift gears toward the end of my time in Nicaragua and, kind of by chance, heard about these crazy people in Europe that called themselves fair traders. And their whole thing was they were willing to pay us a dramatically higher price for coffee, I was working with coffee farmers at the time, for coffee if we could just get organized and sell direct. And so in the summer of 1990 we started organizing. I pulled together some old friends that had also worked in the communities, and we went out and we started telling people about how we could get so much more money, not by trying to produce more, but just by selling smarter. And you know what? No one believed it. No one believed that they could be more than a coffee farmer, that they could also wear the hat of trucker and miller and exporter. 

No one imagined it possible, I'm talking about one-acre farmers, really small growers, no imagined that they, too, could own an export company and go toe to toe with transnational companies and really claim their own right in the global market. Save 24 brave souls who stepped up that year and delivered 10 sacks of coffee each, 150-pound sacks of coffee, on consignment because we had no cash. So they just delivered the coffee and we filled the container. We shipped it to a buyer in Holland, and three months later they paid for the coffee. And so in a schoolhouse in Santo Domingo, very much like that community that you saw in the previous slide, we got everyone together to give them their money. And so the farmers came, husbands and wives, the kids came, everyone brought their dogs, everyone had a machete on their belt because they wanted to know what Paulito had done with their coffee, and so I got up on the chalkboard and went through the numbers. Here's what we got, and the fair trade buyers at the time were paying $1.20 per pound for our coffee. The local market price at that time was 10 cents a pound. So I walked them through the numbers. We got $1.20 a pound, and here's how much the transportation cost and the milling and the sacks and export license, this and that, and that priced a dollar. 

So after all the costs, we had a dollar a pound to give to families. So just to put this in context, these guys were growing like 2,000 pounds a year. So, at 10 cents a pound, they would have received 200 bucks. Instead, we had roughly $2,000. And I had a tackle box full of cash and a clipboard, and I invited every family to come up one by one and sign their name and get their cash. Two grand each. These people had never seen that much money at one time ever. And it was like a spark that lit a prairie fire. Over night, I became "Pablo un dolar." [LAUGHTER] Because we were getting one dollar per pound, and we went from 24 families to 3,000 families over the next three years, who all came together to process their coffee as a group, to truck it, to export it, and a lot of that went to the fair trade market at this dramatically higher price. So with that money, what did farmers do? They paved the floors of dirt floor homes. 

They bought mules, in many cases, to bring their coffee down from the mountainside on mule back rather than on their own backs. They kept their kids in school. Many communities formed high school scholarship funds. High school cost, roughly, 200 bucks a year. Uniform money, book money, bus money. But $200 a year for many rural families in the developing world is like a wall locking a whole generation out of a better future. So they set up scholarship funds to give kids 200 bucks a year to go to high school. We dug wells and brought clean drinking water into villages for the first time. Instead of waiting for government to come and solve our problem for us, which wasn't going to happen, we did it ourselves. Farmers got trained. 

They invested in quality. They went organic. In short, this whole process of investment and improvement in living standards and in social services and in production and none of it thanks to anybody's charity. None of it was a gift. It was all made possible thanks to the money that was generated through this direct sale. It was all made possible thanks to people's hard work. And so the invisible dividend around this whole journey, what you couldn't see but you could feel every time you talked to a farmer, was hope and pride and dignity. Because that clean drinking well, that well providing clean drinking water didn't come from some agency. It came from the money that I made growing and selling coffee. It was an incredible journey. 

It totally transformed that region, totally transformed me. I think at the start of that journey I was very skeptical of markets and business. I thought business was really, frankly, more the problem than the solution. But out of this experience I came to see that markets and partnership with business and connections to consumers was, perhaps, the most powerful way to lift the poor out of poverty that we could hope to have. So I came back. Me and the farmer. So this is Yolanda Rivera, a classic coffee kid. So her dad, Santiago, the guy looking stiff as a board next to her... [LAUGHTER] He's a fourth generation coffee farmer. He has two acres of land. 

And he was able to study through second grade, and then his parents had to put him in the fields because they couldn't afford to keep him in school. So he's like the coffee every man. He represents the people who grow our daily cup of Joe. But he joined a co-op in the '90s that got fair trade certified. Then he started this journey and started getting more for his harvest. And as a result, Yolanda was able to continue on through high school with a scholarship that was created by fair trade premiums. She went on to college. First girl in the entire village to go to high school. First kid to go to high school. First kid to graduate from college, and now she's back in the health clinic in that same community serving her people. 

For me, there's no better way to describe the fair trade journey than to tell Santiago and Yolanda's stories because that's really what it's all about. It's us through our daily purchasing decisions through the cup of coffee that we choose being able to allow a kid half way across the world to realize her dreams. So, wrong slide. Okay, so that was my entry into the fair trade world, and I decided, okay, if it's big in Europe and there's not really a whole lot going on in the US, then I've got to see if I can help. So I moved back, took a detour through business school, got an MBA, got some tools, and launched Fair Trade USA in 1998. So we've been around for 13.5 years. And so our role in the fair trade world is not to buy and sell product. We're a nonprofit. We don't buy or sell coffee or any other product. Rather, we're the matchmaker. 

We help the growers connect with the market. We help those farmers find buyers that will buy direct and pay a better price. And we also perform a really important function which is auditing and certifying those products. So we have a label, a fair trade certified label, and when you see that on a package of coffee, a bunch of bananas, a bar of chocolate, you know that the farmer got a better price and that there was an independent third party body that actually audited that to make sure. So you don't have to take the word of the company for it. You know that there's an independent verification. We also have farmer training programs and we have consumer engagement programs to get consumers on board to help educate people about fair trade. So, here are a few numbers for you. In 14 years, we've signed up more than 800 companies here in the US, from small mom and pop companies to big corporate giants, like Starbucks and Dunkin' Donuts, Costco, Sam's Club, Whole Foods, Green Mountain Coffee Roasters, Ben & Jerry's Ice Cream. So, the fair trade movement, in that sense, spans the entire range of possible companies that you can imagine. 

Those companies last year sold over $1.5 billion worth of fair trade products in the US alone, and we're part of a $6 billion global fair trade market. So increasingly fair trade is mainstreaming. It's available in mainstream grocery stores. People are waking up to it, and all of that is driven a pretty significant impact. Last year we crossed the $250 million threshold in cumulative premiums back to fair trade farmers. So what that means is the amount of money over and above what farmers would have got selling locally, we call that the fair trade premium, that's really our return on investment. When we think about why do we do fair trade? It's for that extra money that farmers are getting as a result of participating in fair trade. So $250 million, again not in money that was given to farmers but rather money that farmers earned and captured through that direct transaction. And so that means not one but hundreds of thousands of kids that are going to high school and college as a result of this. Wells, schools, health clinics, so much is happening now in over 70 countries in Africa, Asia, and Latin America as a result of fair trade. 

Now, on the consumer side, we haven't done as well. Consume awareness of fair trade in Europe where fair trade has been around a lot longer is 80%. So roughly 80% of Europeans, if you asked them what does fair trade mean or show them a fair trade label, they can give you a reasonable description of what that means. Here in the US, we're at 34%. So, 34% of 200 million adults, so roughly 70 million adults in the US today can tell you what fair trade means. And that's pretty good but it's not good enough. What we discovered through the research is that when consumers learn about fair trade and become aware of what it is and what it's all about and when it's available in their local store, then they want it. We want it. Who doesn't want to be a part of something like that. So that kind of speaks to the big challenge that we face today which is how can we raise awareness, how can we grow the model, or more generally speaking, how can we take a model that has worked well for roughly 10 million farmers and their family members around the world and take it to scale? And so if you are thinking about entrepreneurship, this is kind of the classic question that all entrepreneurs at one point or another, if they stay in business, are forced to grapple with. 

How do I take my business from small and successful to bigger and successful? How do I take it to scale? And I can tell you, as someone who started and runs a $10 million, $11 million nonprofit, trying to impact the purchasing behavior of 200 million Americans is not easy. In particular venture, the challenges of consumer awareness, the challenges of raising capital as a nonprofit are huge. And the challenges of engaging the business community, and what we found is that fair trade will only work for Santiago and Yolanda if it also works for the business community. It has to be a partnership. We can't expect businesses to be socially responsible or environmentally responsible if that comes at the expense of profits. I think that was the old way of thinking, that the business community thought that profitability and sustainability were kind of at odds with each other, and that if you wanted to be sustainable, you had to take lower profits. And if you wanted to be profitable, then you couldn't afford to care about the environment or Third World workers. That's old school thinking. The leading thinkers in the business community actually understand that you can do both together. You can be profitable and sustainable, and, in fact, sustainability can be a driver of reputational differentiation, of growth, of profitability, and of success, in business terms. 

And so that was my comment before about the intersection now that we're seeing of social movements and the business community where it's no longer two separate cultures or two separate phenomenon. The two are coming together. There's definitely a convergence going on. So, I just want to make a couple more remarks about where we are in our venture and in fair trade in American, and then I want to open it up and hear what you want to know. So we have just launched, by the way, there's a great book, and of course now I can't remember the title. It's something like What Got You Here Won't Get You There, which is about how the formulas that people implement when they're starting something aren't necessarily the right formulas at a different stage of that venture and how if you want to take something to scale, you have to find new ways. That's where the fair trade movement finds itself today. So we're thinking about if there are two billion people in the world that live on two bucks a day and we're working with 10 million, how can we take this model and make it more relevant in the pail of global poverty? How can we have a bigger impact? So we have just launched an initiative called Fair Trade For All, which seeks to do just that. It seeks to take fair trade to scale in order to have a dramatically higher impact on farmers around the world. In fact, specifically, our first milestone is we want to double our impact in terms of communities reached, in terms of dollars back to those communities, we want to double our impact by 2015. 

And we're seeking to do that through three core strategies. The first one is focused on strengthening communities. And that kind of has a couple of different expressions. The first one is strengthening the community enterprise because we're an enterprise model where we're helping farmers form viable co-ops. That's a business. So how do we strengthen co-ops? Well, access to capital, helping them get access to bank credit so that they can produce and produce high quality products, training, technical assistance, entrepreneurial support, market linkage. Supporting those co-ops, helping them be really good partners to the likes of Whole Foods or Starbucks or Just Coffee or whoever, that's critical for their success. But then the flip side of that is once they have fair trade premiums and they want to do a water project or an education project, are there great organizations out there that can partner with them to help them do that effectively. So we've just entered into a partnership with Kiva.org, with Heifer International, with Lutheran World Relief, with a bunch of different NGOs that are all taking similar entrepreneurial approaches to sustainable development and who are great partners for us in this strategy of going deeper with fair trade, strengthening the community. So that's strategy one. 

Strategy two is all about inclusion. It's about expanding fair trade in order to include more people. Right now, fair trade really focuses on small farmer co-ops in most of our product categories. In a few other categories we also work with big farms, and the standard there is about the farm worker. Three-dollar a day, four-dollar a day farm worker who works in terrible working conditions with lousy wages and no respect. So we also want to reach out to the farm worker community as well as the small independent farmer. We want to serve both communities. And often it's the same family. So, by expanding the scope, if you will, of fair trade certification we're going to reach more people, but we're also going to make fair trade more attractive to the business community because guess what? Great coffee comes from small farms and large. So if I'm a coffee company and I'm, first and foremost, looking for high quality coffee, I want to have the freedom to buy from farms of any size and to be able to do that within the fair trade halo, if you will. 

So that's what we're onto right now. And it's a controversial move in my world, but outside of the fair trade world people kind of treat it like a no-brainer. So, the third and final strategy within the fair trade for all vision is about us. Through my time in Nicaragua working with farmers, I really kind of thought about fair trade two dimensionally as a model for empowering farmers. End of story. That's it. It's about, and only about, empowering farmers. And since I moved back to the states, I've kind of developed a different perspective. Actually, I'd love to hear your thoughts on this in a minute. I think people in this country are not indifferent to the plight of the poor. 

I don't think there's a person in this room that would enjoy eating a chocolate bar if you thought that there might be child slavery in the cocoa production of the cocoa. I don't think there's a person in this room that would want to eat a banana if you thought that the person that was picking the banana was crop dusted with toxic pesticides. We all have basic values, basic human values, and I think the problem isn't that we're indifferent as a nation but that we don't know how to get involved. Who knows how to help a cocoa farmer or banana farmer living half way around the world? Most people have no idea. And, furthermore, we're all caught up in our own lives and our own struggles, and so who has time to even educate ourselves about the issues, much less then figure out, oh my god, a solution to world poverty? It's almost paralyzing just thinking about it. I think that's the problem. And if you look at levels of civic action in this nation, they've gone down. If you look at how many people vote in this nation, only half the nation votes. So, for me, this whole thing about using markets to change the world, a lot of it is the psychology of us. How do we make it easy for us to be a part of something positive and powerful that really changes things? Well, guess what? We may not all vote but we all eat. 

And we all wear clothes, except for some of my neighbors in Berkeley. [LAUGHTER] So if you can turn the act of consumption, if you can turn the act of eating and clothing yourself into a way to vote for a better world, then your onto something, because everyone's going to do it. Everyone's, potentially, going to do it. And I think that's why fair trade, like so many other things, like buy local and organics and all these things, I think that's why it has been successful to the extent that it has. Because with a cup of fair trade coffee you can feel like, with that simple, easy, every day habit, you can actually reach half way across the world and help Yolanda go to school. That's pretty cool. And then you think about all the stuff that we buy and the implications and the possibilities are limitless. So, that's what igniting consumer involvement is all about. It's about raising awareness and giving people an easy way to get involved. Giving us all the realization and the opportunity to vote with our purchasing decisions for a better world because every purchase matters. 

So, in my mind that kind of takes two levels or two dimensions. The first one is buy the stuff. So, this is a picture of a woman buying fair trade sugar, and if you go into Whole Foods, you'll find a big ol' fair trade sign over the fair trade bananas. So, at the very least, go out and buy fair trade products if you can. And if it's not in your store or in your cafe, I was really happy to see that the cafe out here where I just bought a cup of Joe has Johnson Brothers fair trade coffee, yes. [LAUGHTER] But if it's not there, ask for it. People don't get pissed off if you ask for it. Do you all have fair trade? Oh, you don't have it? Well, wow, I'd love it if you could get it. Guess how many times it takes of someone asking that for the store owner to actually do it? Not very many. Businesses are set up to listen to their customers and respond. 

So buy it when you can. Ask for it when it's not there. That's really easy stuff. We can all do that. And for those who want to go above and beyond, there are other ways to get involved. So, we have a growing movement in America called the Fair Trade Towns Movement, and kind of alongside that is the Fair Trade Universities Movement, and the two are kind of in competition to see how many universities and towns they can capture. Madison, guess what, is a fair trade town. Cool. And the university isn't yet a fair trade university but we'll get there, right? So, the whole idea of the fair trade towns and the fair trade universities campaigns is, for those who want to get involved, for those who want to go out and talk about fair trade and spread the word and find the connections with other issues like buy local, there's a framework there for getting involved, for promoting it, for educating others, for getting products onto shelves and so on. I'll just tell one last story, and then we can open it up. 

So fair trade products, coffee and tea mostly, are available now on about 600 college campuses nationwide. And I didn't do any of that. Y'all did that. The only reason why there's fair trade coffee right out here is because at some point some group of students and/or professors and staff said to whoever manages that facility, hey, can we get fair trade in here? And they responded. So that's happened in hundreds of campuses nationwide. When we first got started, a lot of the big companies did not want to get involved in fair trade. They didn't think that consumers cared. They thought it was going to cost them more money. They didn't want to have the audit. Lots of reasons why companies were like, oh, fair trade, not so sure. 

I'm talking about in the early years. Now it's much more common. One of the biggest coffee companies at that time was a company called Sara Lee. We've all probably enjoyed Sara Lee pies. They also served coffee, and they used to be big on college campuses. And UCLA, University of California in Los Angeles, is a huge campus. It's probably as big as this one, probably 40,000 kids too. So they drink a lot of coffee on UCLA campus, and it was served by Sara Lee. And so students on campus got hip to fair trade. They put together a little committee. 

They kind of went out to see if other kids were interested in it. They got a petition, just a bunch of signatures on a piece of paper. So they went into dining hall administration and said, you know what, we really want fair trade coffee in our dining halls. And dining hall went to Sara Lee, and Sara Lee was skeptical but they went back and forth, back and forth, and finally Sara Lee did it. And they converted that account. And so several containers a year of coffee converted to fair trade which meant the farmers that produced that got a much better deal. But what's much more important about this story than that is that the business community sees y'all as trend setters. You are their current and future customers. What you want they think will be the norm in the future. And so Sara Lee, which is kind of this crusty, conservative company, decided, whoa, we better get on this fair trade thing. 

And so they didn't just convert the UCLA account, they auto shipped free fair trade samples to all of their university accounts and actively encouraged accounts to try it to see if they wanted to get involved kind of at the beginning of this new phenomenon called fair trade. And furthermore, they put it out there in all their food service channels. So basically a handful of kids on one campus ended up changing the behavior of a corporate giant. That's power. That's consumer power. And that's what Fair Trade Universities is all about. It's like using that voice of consumers, leveraging that voice not just to change the products that are sold here on campus but to have a much bigger impact on those companies. So, that's my story. Thank for inviting me. [APPLAUSE]  So I want to hear questions, that would be cool, but I also want to hear other points of view. 

If anyone's skeptical or if anyone wants to share a story. Those of you who raised your hands who've actually visited farms, whatever you want to talk about I'm up for it. Who wants to go first? >> I'm just looking for a hand to go up and I'll hand the mic off. >> My name is Matthew Rust. I'm a consumer affairs major. Thank you for being here, Mr. Rice. To go along with advertising and consumer awareness, I was hoping maybe you could talk a little bit about what was successful in the European market with fair trade, and maybe, I know with being a nonprofit advertising is difficult. I didn't know about fair trade until I got here to the university, personally. I don't know if it was being in Madison or being at the university that educated me to it but talking about colleges starting it, I think, is a really good point. European markets. 

Thanks. >> So, why is Europe so far ahead? Good question. There's a long tradition in Europe dating back to, like, the 1950s of international development organizations like Oxfam getting involved in trading and seeing trade as an alternative to aid. And so that evolved into something called the world shops. How many of you all know of a local company called Serve? Oh, man. >> They're down on Monroe Street. >> It's down on Monroe Street. Go check it out. So it's 100% fair trade shop, and Serve is a real pioneer here in the US market, but actually that's telling because if we had been Rotterdam or Berlin or Oxford today and I had asked the same question, how many have heard of Oxfam's little store down the street, everyone would have raised their hand. There's this tradition of shops that sell fair trade products across Europe and have helped raise awareness over decades. 

And here in the US we also have organizations but the profile has been lower and awareness has not been as high. So that's one reason. I think another reason, you know what, this may be crazy but I've heard it from several European friends. They believe that their colonial history and the fact that they all study history in school has led to what many call just a collective colonial guilt in Europe. Feeling like Europe was developed through the exploitation of Africa and Latin America. So there's a feeling that it's right to give something back. I don't know whether that's true or not. We obviously have a different history. We obviously have different consumers. I think US consumers maybe are not as aware often of the history of Latin America and our involvement in it or poverty around the world. 

So those are different thoughts about why. The bottom line is fair trade is a mainstream phenomenon throughout Europe Also, the market structure is different in Europe. If you go to Switzerland, so Switzerland, the whole country is the size of Wisconsin, and they have two retail chains, two grocer chains there that control 90% of all retail. So if you're in both retail chains, and fair trade products are, basically everyone's buying. So, in smaller markets where there's concentration of retail distribution, I think it's going to be logical that once fair trade gets in there, everyone's going to learn about it. So, the US is culturally different. We have a different history. We're much more dispersed. It's a bigger challenge here in the US. It's as far from San Francisco to New York as it is from Manchester to Moscow. 

So we've got a huge task before us. But it's doable. And it's doable, I think, at its base because I really believe that the core values of our nation, this is going to sound cliche, we love to root for the underdog, we believe in honest pay for a hard day's work. We believe in fairness. We all learned the fair, what, in kindergarten. It's a core value. Be fair. Play fair. So I just really believe, and I'm not just talking about fair trade now, but corporate social responsibility and values based business and products I think resonate with Americans in a very deep way. So, for me, the challenge isn't how do I change American's values. 

No. Our values, in that regard, fundamentally are right. It's how do we raise awareness so that people know that, wow, with a cup of coffee I can keep a kid in school? That's cool. Who knows? Who knew? I probably didn't answer a damn thing you asked, did I? [LAUGHTER] You get me on a roll, man, and I'm just like, whew! Sorry. >> Paul, before I hand the mic off to one of our other students, I'm just curious how many of you felt you were familiar with fair trade before reviewing materials in advance of Paul's talk and coming to class today? Okay. So just a fair number but not necessarily the whole group. >> Hi. My name's Alex Diamond. >> Hey. >> And thank you again for being here today. 

>> Sure. >> My question refers to the video stream on our UW, which is your coworker, Rob Behnke, and his work with the apparel industry and where that's going. >> Who is this? >> He's a gentleman who's cofounder of Fair Indigo. >> Oh, right. Of course. Thank you. >> Fair Indigo. Are you guys working together with moving the fair trade market towards retail production and where is that going and that kind of stuff? >> So, Fair Indigo is a company that I know of. I actually haven't met Rob, so that is why I did the double take. Fair trade, historically, has been more about food than anything else. 

And that's really where I've focused all these years of work is really on helping farmers, but the model and the theory of change that lies at the heart of fair trade certainly, at least theoretically, should be applicable to other industries, including manufacturing. The theory of change being that you can align the interest of producers, businesses, and consumers such that we all win and that consumers will step up and buy the product and buy into that if you give them a chance. So, a few years ago, we started looking at the plight of cotton farmers. And it's tough. If you're a one-acre, two-acre cotton farmer in Mali or Burkina Faso in west Africa or in India or in Peru, price is like this. You have no stability and no market access, so you're selling to local middle men and you lose your shirt three years in a row and you might make a little bit back the fourth year and then you're back on that roller coaster. So we were thinking about, okay, how can we take fair trade to cotton farmers? And what we realized was if we were to bring fair trade cotton to America and put fair trade cotton in garments without any knowledge of the factory situation, so the hypothetical of fair trade cotton made in a sweatshop, made into a garment in a sweatshop? That's doesn't work. So you've got to deal with the whole supply chain. It's not like coffee where it just comes off a farm and gets shipped to your local roaster. Cotton, made into clothes, goes through a factory, and, in fact, the activist community for 30 years has been scrutinizing the issue of the sweatshops. 

And those apparel workers that live and work in difficult conditions and make really low wages. So we decide to hold off on cotton until we could develop a standard for factory labor. So we developed a standard. We consulted with the industry. We consulted with the factory owners. We consulted with the workers. We developed a pilot standard, and last year, a year and a half ago, we launched Certified Apparel made with fair trade certified cotton in factories paying significantly higher wages and providing better working conditions to workers, and the product coming out of that is certified as well. It's an experiment. I don't know if it will work or not. Like Levi's, Gap, none of the big brands have signed up yet. 

So we've got Fair Indigo and we've got a couple of dozen small, mission-driven, really cool brands that are doing it because they believe in it, but we're waiting and hoping that we can take it from there to the next level. And I can't tell you how many times I've been to Minneapolis to visit with Target to talk about fair trade apparel. They want to do it but they really don't believe that you will pay a dollar more for a t-shirt that has the fair trade label on it. They want to sell that t-shirt for nine bucks and they'd like to add the fair trade label on it for nine bucks. And guess what? Because of the way the apparel supply change is structured, we can't do it for nine bucks. It's got to be 10. That's the only that the workers can get their benefit, the cotton farmers can get their benefit, and Target can make the same margin. Now, if Target wanted to take a dollar hit on it, then they could sell it for nine bucks. But I don't want that either. I don't want fair trade to be something that erodes companies' profits. 

I want them to want to do it out of enlightened self-interest. Do you know what I'm saying? Besides, they're not going to take the dollar hit. So, therein lies the rub. How do I convince a big company to make the leap or even just to experiment? And that's, frankly, where the conversation is today. Can we run a test in Targets, y'all have Targets out here, right? >> Sure. >> Okay. So, how can we run a test in Target, sell $10 fair trade t-shirts and see how they sell? And if they don't sell, I'll go home. But I think they'll sell. Tell me the truth, now that you know what fair trade is, would you pay an extra buck for a fair trade t-shirt? >> You talking to me? >> Hell yeah, I'm talking to you. [LAUGHTER] It was your question, right? >> I knew what fair trade was, but yeah. 

>> You better say yeah. [LAUGHTER] [INAUDIBLE] >> No, I don't mean to put you on the spot. I'm just playing around. But that is, look, no one knows if this is going to work in their industry. They've seen it work in coffee, they've seen it work in other product categories, but everyone says my industry's different. So, this is all step by step, it's an iterative process but I'm hopefully, actually I'm confident that fair trade can be relevant, not just for the agricultural sector, but for manufacturing as well. >> We've got a question back here, and then I'll come down to the young lady there. >> Yes, sir. >> Hi, my name is David, and basically I'm wondering how you go about researching and reaching out to new producers and farmers in developing countries. So how do you go about finding them? >> So, in most cases, the farmers come to us because they have heard about fair trade in their countries, maybe the community down the road has gotten involved in fair trade, and so they see that difference. 

In Nicaragua, you recall in my story, we signed up 24 farmers the first year. After that first year, after word got out that Pablo un dolar was paying a dollar a pound for coffee when the price was 10 cents with the middle men, people came to us. Everyone wanted to join the co-op. So it grew like that. And so that's kind of a similar path. I don't have a team that goes out looking for farmers to certify. It's really word of mouth. Fair trade is big in a lot of these countries. In every coffee producing country in Latin American, fair trade is on the industry's radar screen, people are signing up, people are getting trained, and I think the challenge has been, in the case of some of these products like coffee and cocoa and sugar, that we haven't been willing to work with everyone. We've only worked with you if you're in a co-op. 

That's been the requirement in some of our product categories. So that's why we've launched the fair trade for all initiative to kind of open the fair trade certification up to any and every producer that feels like they want to produce responsibly and sustainably and give them a chance to participate as well. And we're communicating that broadly. We go to all the trade shows and we spread the word among the industry, and the industry in turn tells their suppliers, hey, fair trade is expanding the model, you should apply. And applying means they're going to get inspected, they're going to get audited. So there is an on-site audit of every farmer once they say, okay, I want in. They can't just get in without being inspected. And it's 200-point checklist of different social, labor, and environmental criteria that farmers have to meet. It's very rigorous. The audit is very detailed. 

It takes many days and it costs. The average co-op pays $6,000 a year, sometimes more for bigger co-ops, in order to get certified. But, of course, once they get certified, that unlocks this whole market and this significant premium price that gets paid back to them. >> Hi, I'm Ellie Feldman, and I just have a question. You were saying in other countries the fair trade is bigger because there's just a few grocery stores and they all have fair trade. I'm wondering, in the US it seems like there's Starbucks on every corner so have you guys tried to leverage with Starbucks to create more awareness? It seems like that would be a pretty big way of getting a lot of knowledge in the US about fair trade. >> I'm working on it. [LAUGHTER] Swear to god, I'm working on it. So, Starbucks launched a fair trade coffee early on, like 2000-2001. So Starbucks has been a partner for, like, 10 years. 

But most years they've only had one or maybe two different fair trade coffees out there, and if you go into Starbucks you might not even notice that they have it. Unless you know the fair trade label and are really looking for it, you might not know. It's served as coffee of the day on a fairly regular basis. So sometimes if you go into a Starbucks and say, hey, I want a cup of coffee, you're getting fair trade coffee even though you don't know it. But even with that kind of modest level of involvement, Starbucks has become one of the largest importers of fair trade coffee in the world, and it's impacted the lives of hundreds of thousands of families. So it's a good thing. But to your point, what if we could leverage the whole company behind fair trade? What if they painted the walls? Obviously, that's where we want to go. So I think if you look at the fair trade market and think about it as all markets that evolve from kind of a pioneer stage to a mainstreaming stage to a maturation stage, I think we're just now kind of at a point in mainstreaming where companies are starting to think about fair trade not just as a flavor. I've got my Italian roast, my decaf, and my fair trade. You know what I mean? Companies are starting to think about fair trade as their brand halo. 

As what they stand for. And I say companies are starting to. Actually, Just Coffee, right here in town, and a lot of pioneers, have been doing fair trade and only fair trade since day one. So in honor and tribute to the pioneers who believe in the cause with all their heart and soul, I'll say that for them fair trade has been all they've every done from the very beginning. But for a big company that came late to the game, they want to dip their toe in the water, they want to see if it will sell, and they got to a certain level, and then for a lot of companies they just kind of left it at that. Now we're seeing those companies take it up. So point in case, Ben & Jerry's. I've been working with Ben & Jerry's for seven years. A couple of their ice cream flavors were fair trade. Last year they announced they're going 100% fair trade on all their ice creams. 

In the next two years, you'll see my label on every Ben & Jerry's sold in the land. That's pretty cool. So that's going from the flavor approach, which is a differentiation approach, to a here's what we're all about. This is our approach to business. Ben & Jerry's, Honest Tea, y'all know Honest Tea? Of course, everyone knows Honest Tea. So Honest Tea converted all their tea last year to fair trade, 100%. So it's not just on one bottle, it's on all the bottles, that have tea in them anyway. Green & Black Chocolate. So a bunch of mainstream companies are now saying this is who we are. We're going to go all the way, and guess what? When you go all the way, you tell everyone. 

So Ben & Jerry's has been doing so much advertising and cool stuff. Did y'all see Ben & Jerry's on Jimmy Fallon? Someone's got to nod. Please, someone nod. [LAUGHTER] So, Jimmy Fallon? Y'all don't watch TV? [LAUGHTER] So, Jimmy Fallon has now a Ben & Jerry's flavor called Late Night Snack. It's ice cream with little potato chips in it. It's pretty good. Yeah, I know, sounds gnarly but it's actually pretty good. It's fair trade so they've got Jimmy Fallon now talking on his show about fair trade. So that's the kind of stuff, once a company says, okay, I'm moving from the dabble to this is who I am, then they have a strong interest in advertising and promoting and awakening consumers with far more dollars than I'll ever have because I run a small nonprofit. So the way I awaken consumers is by leveraging partnerships and getting them to raise awareness. 

So, the way you can help, the way all y'all can help is whether it's Starbucks or Dunkin' Donuts or Subway or whoever it is, wherever you shop, just ask. Do y'all have fair trade? Oh, you don't? Okay, well maybe you'll have it next time I come in. Not like in your face, I don't like you. No. Okay, well next time I come in maybe you'll have it then because guess what? If enough people do that, they'll do it. >> We've got a question here and a final one down front. >> Okay. >> Hi. My name is Becky Hall, and I know that you talked earlier about how you had to change your company as you guys grew because you can't stick with the same things you started out with. As your company has grown, you started working with other farmers. 

What have you done to stay cost effective and make sure that everything is still fair trade? How do you oversee all of that? >> Run that by me again. >> As you guys grow, how do you stay cost effective and make sure everything is still fair trade, that all of the farmers that you're working with in Nicaragua, how do you oversee all of that as you're working with so many more people? >> I'll answer what I think you're after, but if I don't hit the mark, ask again. In terms of the farmer inspections and farmer certification, we have a network of inspectors all over the world that are, essentially there to inspect and verify that farmers are complying with the standard. And every year more farmers come in, so that work load grows every year. So every year we have to hire to that work load. Fair trade has been growing kind of slow and steady for the last 10-15 years. Last year we grew by 25%, so that was pretty good coming out of the recession. But suffice it to say, with Fair Trade For All, there is going to be a significant expansion of the work load at the farm inspection level. And so we've just engaged with a certification agency called Scientific Certification Systems, SCS, California-based, global, and they do an amazing job. They know their stuff. 

They've been certifying sustainable forestry and organics against other standards for 25 years. So we're really confident that as Fair Trade For All really expands the movement and expands the availability of fair trade to new farming communities, that we'll have the inspector infrastructure, if you will, to accommodate that. Is that what you were getting at or was it something else? >> Yeah. >> Thanks. >> Hi. My name is Darian. So, I'm going to go back to kind of where you started. So how did you choose Nicaragua of all the places to go, and once you were there, how did you find these communities when they're up a hill, across a bridge, and what obstacles did you have during your travels and was it safe because you went by yourself? That's my question. [LAUGHTER] So, Nicaragua, communities, obstacles, and safety. >> So, it definitely wasn't safe, and that's why I went to Nicaragua. 

I'm kidding. Nicaragua, at the time, was somewhat unique in that it was going through pretty dramatic political and social change, and the cooperative movement, farming cooperatives were just exploding. Everyone was organizing farming co-ops, and that was, in school, what I had studied, thinking about helping farmers by helping them come together into co-ops. And we have a tradition of co-op, farming co-ops, here in this country too. Like Sunkist Oranges, Ocean Spray Cranberries, those are farmer owned co-ops. So, I was really interested in that, theoretically. I wanted to go see it, and Nicaragua was doing it. It was like this live experiment. So I thought, okay, cool, I'll go there. But once I got there, I realized that I was, to your question about safety, I was in the middle of a war zone. 

There was a lot going down in the '80s in Nicaragua, and it wasn't safe. But I stayed because I just felt really drawn to it and compelled by the struggle of people to organize and to strive for a better life. And it helped that I met this gorgeous Nicaraguan woman and got married. [LAUGHTER] So, yeah, I kind of went native. I ate rice and beans every day and rode a horse to work most days and that was my life. I had no intention of coming home at some point. But, really, it was kind of random how I got there. What was the other point? >> How did you find communities that you went to? >> Oh, yeah. Well, so I worked on these different projects. So I worked with Oxfam for a while, and I worked with another agency called Christian Aid, and the government of France had a project that I worked on for over a year. 

So I connected with these different development agencies who were on the ground and signed on to their projects and then got sent to this community or that community and ended up meeting, literally, thousands of farmers in hundreds of little tiny villages throughout the northern part of Nicaragua which was my base for that whole time. And so after doing that for seven years, then I kind of got out of that model, and I started the coffee co-op, but I still had all those relationships. So that's where I went. I went back to all the coffee communities where I had already worked, and I looked up Santiago and I'm like, Santiago, come on, we've got to do this. And he's like, no way, dude, it's not going to happen. He didn't sign up the first year. He signed up the third year because he didn't believe, you got to see Santiago with his cowboy hat on. He's a little cowboy. He doesn't see himself as an exporter. Now he does but at the time he was like, exporter? That's a big company. 

We can't export. So I worked for months going back through all those communities where I had already worked to try and find people who would step up. Of course, once we proved it the first year then it took off. There is a, for those of you who are interested in thinking about working overseas after you graduate, there's, of course, Peace Corps, but there's also a great book and you can Google it and buy it. An organization called Food First puts it out, and it's called Alternatives to the Peace Corps. And it's about really cool NGOs all over the world that are doing sustainable development and food security and cool projects. Because we get calls and emails all the time by kids who want to go work abroad for a year, and there are lots of great organizations doing great work that you can connect with. So I highly recommend it, even if you don't stay for 11 years. [LAUGHTER] >> I want to thank the students for an excellent round of questions, and I know that they all join me in thanking you for an inspired presentation. Thanks, Paul Rice. 

>> They did good, thank you. [APPLAUSE]