21 September 2010

Fair Trade: The Board's Decision

Hi everyone,

I’m writing to expand a little on the post Dave made below about the Fair Trade Referendum and the steps the Board is taking to implement that Referendum.

As many of you might be aware, the issue was discussed at length at the USU’s Annual Policy Conference, and has been debated at the last two Board meetings. It’s really important to the Board that we act on this issue that’s obviously of huge concern to a number of our members, but it’s equally important that any progress on such a substantial commercial consideration be made with due consideration of all the legal and financial implications of a decision of this kind.

In light of that, the Board felt it was not in the best interests of the USU to accept the terms of the referendum exactly as they were expressed. I'll explain the steps we’re taking to make fair trade coffee available on campus, and then the issues the Board had with the referendum as it was put.

So first, what steps are we taking at the moment, or in the immediate future?

1. Following on from the clear interest in being able to buy fair trade products on campus that has been shown consistently, Parma cafe was required to supply Fair Trade coffee in the terms of their contractual arrangement with the USU. There was a short lapse in this supply when the outlet changed hands, but the USU has enforced the terms of the contract, and you're able to buy Fair Trade coffee at Parma again.

2. In line with the Referendum, we have established a Steering Commitee made up of Directors and Staff (more on this below) that will be working to adjust our selection criteria to take into account the Referendum result and make Fair Trade supply an important consideration in guiding tender selection when the current contract expires. We're doing research now to make sure that we'll receive high quality tenders and be able to make a smooth transition to Fair Trade.

In terms of what the Referendum required, all practical steps that the current Board had the ability to follow through on ARE being taken. Current directors will not have the opportunity to participate in the selection process for the next coffee contracts, and this Board does not have the ability to bind any future Board to any course of action or decision. While we could have made any number of token gestures, what's important to us is communicating with our membership about the financial and legal considerations that need to guide our decision making in line with our commitment to listening to our members. The more we can have a constructive dialogue with all of you about a compromise that will satisfy our social and ethical responsibilities in line with our commercial needs, the more likely we are to be able to reach a resolution that delivers the best results for all concerned.

That brings me to the components of the Referendum that the Board felt were a problem:

1. Fair Trade Certification with the Fair Trade Association of Australia and New Zealand (FTAANZ)

The biggest problem with certification is that USU doesn't have a monopoloy on coffee supply on campus - the University operates (and has recently outsourced) catering at the Darlington Centre, and we also have a number of tenants who supply coffee. One of these tenants - Parma - was required to supply Fair Trade coffee when that outlet went out to tender, but our other tenants have existing contractual arrangements with the USU that don't allow us to stipulate conditions on things like coffee supply.

Most of our tenants are small businesses, and the impact on them of making the switch to fair trade would be even greater than it would on the USU, which is a much larger business - this would be really unfair of us as land lords, and present significant legal issues. One option in terms of expanding the fair trade presence on campus is to negotiate Fair Trade supply with tenants renewing their leases, or in new spaces that become vacant for commercial use.

In addition to this, the Board was concerned about future compliance costs of certification which might not be apparent now. Changing standards for certification, and the risk involved with this, was something the Board was not prepared to commit future Boards to.

2. The Composition of the Fair Trade Steering Committee

Where the Referendum recommends the creation of a Steering Sub-Committee of the USU Social Justice Committee to oversee the implementation of the referendum, the Board passed an amended resolution that created a Steering Committee comprising the Board Executive, CEO, Operations Director and Finance Director.

Board Directors were concerned about the implications of including ordinary members on a specialist committee that dealt with highly sensitive financial and commerical information. The committee would necessarily deal with confidential information, and it would be highly unusual for any organisation like ours to include members not bound by the same standards as Directors on a committee like this. Not only would we be considering information that was sensitive from the USU's point of view, the committee would also deal with information about potential contractors that we have an obligation to protect.

Moreover, a series of changes to our committee structure were passed at the August Board meeting that mean the Social Outreach (/Justice) commitee will not be convened in 2011 - we'll be adding a blog post on these changes very soon.

3. The 100% Fair Trade Commitment

The final issue that concerned the Board was a commitment we were asked to make to exclude any suppliers that could not supply 100% Fair Trade coffee from our next tender process, by making 100% Fair Trade an essential criteria.

From our point of view, it would be quite unwise to limit competition in our tender process. In order for the Board to make the best possible decision for the USU when the coffee contract comes under review, we felt that it would not be appropriate to exclude competitive tenders from consideration. Coffee represents an important revenue stream for the USU to fund its student programs, and this Board felt that the risk that no Fair Trade tender would be able to adequately fulfil all of our other essential criteria was too high to limit our options in such a way - particularly given the difference between the fair trade and non-fair trade tenders in the last tender process.

That said, we are told that the Fair Trade market has grown and developed substantially since the last tender process. What this means is that in all likelihood, a 100% Fair Trade tender will be equally competitive in all essential criteria, and the adjustments that we are considering to our weightings in the 'desirable' category will mean that a Fair Trade tender will be more competitive in the terms of our tender than other options.

We'll be reporting back here, and on the USU website, on further developments on this issue.

(USU Vice President)

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