Outsourcing governance: Fairtrade’s message for C21 global governance

Globalisation and global challenges demand new governance models. The perceived success of the value chain as a governance mechanism for delivering better social and environmental outcomes has led a growing number of mainstream companies to incorporate brands associated with initiatives such as Fairtrade, the Forest Stewardship Council, and Rainforest Alliance into their procurement and marketing strategies. By buying from ethically certified producers and selling ethically labelled products, retailers and manufacturers are effectively outsourcing a significant part of their supply chain governance to third parties considered to have greater moral credibility than the companies themselves. This paper explores the implications of such outsourcing for the companies concerned, and in particular the dangers to both corporate reputation, and to the wider credibility of alternative governance models. Drawing on empirical data from a longitudinal study of Kenyan communities producing for Fairtrade, and situating this within debates about voluntary self-regulation, value chain governance, and international development, the paper details how Fairtrade initiatives have been adopted as part of a governance outsourcing strategy, and the extent to which they are able to helps companies meet their societal responsibilities. The paper concludes with a discussion of the lessons for corporate strategy and the management of governance issues. The paper brings together ethical governance theory and empirical findings to examine the shifting nature of governance in global value chains, and the implications of this shift for mainstream companies. In particular, it examines one of the more mature models of ethical value chain governance, Fairtrade, and how this is being used by business.