Fair Trade Label - Literature review Example

Critical Review of: Grankvist, G., Lekedal, H., Marmendal, M. (2007). Values and eco and fair trade-labelled products. British Food Journal 109 (2):169-181. Summary of the report The food market is inundated with a variety of options for specific products and one way to distinguish between alternatives is the products’s labelling; eco-labelling and fair trade-labelling are just two broad categories for such product labelling. A product with an eco label is said to be environmentally friendly, or that the production process for that particular product has satisfied a particular standard or a host of standards related to environmental considerations; this includes products that are organically produced. Fair trade label, on the other hand, refers to products certified to have been produced under a trading partnership that promoted equality in international trade favouring especially the welfare of poor and marginalized farmers. Several studies have been conducted on the market response to eco- and fair trade-labelled products. The study conducted by G. Grankvist, H. Lekedal, and M. Marmendal published in 2007 and entitled Values and eco- and fair-trade labelled products specifically focused on the effects of eco-labelling and fair trade-labelling to the taste preferences of the respondents. The question that begged to be answered was whether the market would deem eco-labelled and fair trade-labelled products better tasting or not. Additionally, the study attempted to correlate taste preference for eco-labelled and fair trade-labelled products with the importance attached to certain values; that is, how do the values that are important to the respondents affect their preference for labelled products? The first hypothesis on the effects of labelling on taste preference was premised on the observation of Johansson et al (1999) and Kihlberg et al (2005) as cited by Grankvist (2007) that organically produced products were more preferred by consumers even if the information was false; the label “organic” gave the labelled products attributes that contributed to their desirability. The second hypothesis was premised on the fact that inherent values that shaped an individuals’ attitudes would translate to that person’s behaviour and this would manifest in their actions and preferences. Taste preference – whether it decreased or increased – would then be a result of the values the individual deemed important and this would affect their choices. In carrying out the study, 64 Swedish students distributed in 3 groups – one control and two experimental – were surveyed. They were given the same orange juice although one experimental group was falsely informed that the juice was eco-labelled while the other experimental group was falsely informed that the juice they were to taste-test was fair trade-labelled; a short description of what eco-label and fair trade label preceded the survey-taking. The respondents ranked the taste of the orange juice and they were also asked which values from among a list were important to them. The results showed that taste preference for fair trade-labelled products were slightly higher than for un-labelled products while taste preference for eco-labelled products were slightly increased compared to fair trade-labelled products; the increases, however, were not that significant. The more favourable rating for both eco-labelled and fair trade-labelled products were correlated to attach more importance for the value “warm relationship with others”; the value “security” was also associated with the increased preference for fair trade-labelled products. Those who value “warm relationship” are friendly people and mostly women who also are generally well-liked and have strong support groups; meanwhile, those who value “security” usually come from the low-income group who feel more keenly the lack of security due to lack of income stability. From the results of the study by Grankvist et al (2007), consumers who valued “warm relationship” were more aware of the need for ethical considerations in choosing a product; thus their preference for eco-labelled and fair trade-labelled products. Further, those who valued “security” the most were able to relate to the poor and marginalized farmers and were more sensitive to their need of income security and thereby an equal chance at the international market; therefore, these consumers has increased preference for fair trade-labelled products. Critique of the report A consumer will have several considerations when buying a particular product and those considerations will also influence how they will weigh the options that would make them decide whether to choose a labelled product or not. Taste could be one factor that will decide it for them but, as the study has shown, the increase in preference with regards taste is only marginal; in the overall consideration, it may not contribute much to tip the scale. Choosing a particular label as the better alternative over another product with a different or with no label is maybe more clearly defined if the basis where the values that a person attach some importance to. For example, a dedicated environmentalist would probably prefer the organically produced product while a person who feels strongly for social issues would prefer the fair trade-labelled products. These individual’s marked preference would be predictable because of the values that are decidedly important to them which, in the example, were rather obvious. Moreover, these individuals may be assumed to be more environmentally- and socially-aware, respectively, which accounts for their choice. But even with that, there is no 100% guarantee that they will buy the said products – and buying, or the willingness to pay is still the bottom line for labelling the products (Stroud, 2009). It would be more difficult to relate other values to product preference given a range of values, economic factors, and product attributes which the consumer is subjected to. In the case of the consumer who chose “security” as the most important value (probably because they themselves were economically insecure), the choice was positively correlated with the preference for fair trade-labelled products; the analysis was that the choice was made because the respondent is sensitive to the disadvantaged position of the poor farmer and is maybe hoping to elevate that position by patronizing their product. But in a way, this could be contradictory when we view the consumer based on his income level; a fair trade-labelled product is a more expensive alternative and even if the consumer is aware of the plight of the farmers who produce it and would feel the need to patronize the product, he will be checked by his capacity to pay for the product. In the end, it would be weighing the pros and cons of the alternatives and this would be influenced by a host of other factors inherent to the consumer. As mentioned above, the bottom line to labelling is still the marketability of the product – or the willingness of the customer to buy it. Several studies have actually been conducted on such topic. One survey conducted by the global marketing company, Havas Media, which involved 20,000 respondents in 10 markets showed that more than half were willing to pay 10% more for environmentally and socially responsible products and services and this despite the economic downturn (Stroud 2009). The values that correlate to the consumer choices were not explicitly isolated but it can be inferred that the choices made have been influenced by growing environmental and social awareness, generally speaking. This observation can be conjectured from the fact that mass media in recent years have been inundated with references to environmental and social responsibility. Environmental issues such as global warming, climate change, carbon emission, solid waste generation, etc. have been taking certain stage and more and more people know that there is an imminent threat of global ecological collapse because of rampant environmental degradation; moreover, people are also learning the ways an individual can cut down on their contribution to such environmental degradation. Knowledge and awareness is shaping in us a new value – concern for the environment is being appealed to by concern for our own lives and the lives of future generations – and this is influencing our behaviour and our actions. This new awareness and the challenge to reverse our pollutive ways and lifestyle are in large part responsible for the proliferation of eco-labelled products. Eco-labels are telling us that this is one way we can lessen our negative impact on the environment. Apparently, that is enough to convince a significant number of consumers to spend extra on perceived environmentally-friendly products. In the case of fair trade, emotional response is also being evoked. There have been several features over the years that highlighted the poor working conditions in the South. On one extreme end, we have seen multi-national companies of first-world countries exploit the low labour costs of third world countries; some of the more notorious have been known as sweat shops and even children have not been spared. That image is already well-known across the globe and it has opened the eyes of the general populace to the uglier side of global market and trade: the pitiable working conditions, the vicious cycle of abject destitution, and the injustice. For the ordinary citizen of developed countries, it is almost unimaginable thereby making the realities of unfair trade even more stark. This may have very well been underpinned in the concern for the welfare of the disadvantaged sectors of society and such feeling may be influential in choosing products we know are giving those marginalized people a more equal opportunity in the market. Apparent in the above discussion is the importance of awareness and knowledge. That is, people who know more about the conditions that brought about eco-labelling and fair trade labelling are more supportive if it. This is understandable in light of the general observation that a person’s specific action is in accordance with his intentions which, in turn, are influenced by attitudes that are embedded in him (Ajzen, 2001). This concept of embedded attitudes involves the depth at which that attitude lies in cognition (Prislin & Ouelette, 1996) – that is, a person’s attitudes (and therefore his behaviour and subsequent actions) are highly correlated with his understanding of the context upon which relevant issues were premised and developed. Prislin and Ouelette (1996) specifically observed increased environmental concern due to increased environmental education; the attitudes embedded by education were influential in encouraging environmental preservation in their study group. By inference, the same could be said for awareness in social issues and how it may encourage socially-benefitting actions. One last issue that I would like to highlight is the proliferation of eco and fair trade labels which has led to the weakening of the entire field (Stroud, 2009). This is a more recent observation in the market place which is not benefitting eco-labelled and fair trade-labelled products. It may be assumed that, for the most part and in its initial implementation stages, the concept of eco-labelling and fair trade-labelling had noble intentions. People recognized that and responded positively towards it; this can be gleaned from their patronization of products that were stamped with the more recognizable and thus more credible labels – the USDA organic certification, Germany’s Blue Angel label, Dolphin-friendly labels, etc (Smith & Stancu, 2006). But such responses to eco and fair trade-labels have been increasingly exploited and this is obvious in how such labelling is becoming more and more a marketing strategy rather than an environmentally- and socially-responsible cause; so much so that labels are losing their credibility (Stroud, 2009). There is also the issue that a label, in several instances, is a reflection of a particular certification for the product’s adherence to a single standard (Gadonniex, 2009). As well as that, there is vagueness in who or what benefits from the standards and how the impacts are measured (Gadonniex, 2009). The number of eco-labels and fair trade labels are breeding confusion among the consumers and this can negatively affect how they perceive eco-labelling and fair trade-labelling in general. As can be seen from the above discussion, there have been so many considerations in choosing to support a particular label, or even whether to go for that alternative or not. Cost could be prohibitive but there have been several cases wherein the customer bought the more expensive eco-labelled or fair trade-labelled products. A recent data has shown that the price premium of organic products in Europe stood at 14 to 25% and is even as high as 274% for organic eggs in Germany (Smith & Stancu, 2006). This has begged the question of what exactly makes eco-labelling or fair trade-labelling an effective marketing strategy. Grankvist et al (2007) attempted to answer the question – although not explicitly relating the labelling to marketing effectiveness – by showing how labels affect taste preference and the important values attached to such preference. The effects have been limited. It does not follow, however, that the result of the study was insignificant or irrelevant; on the contrary, the narrow focus has underscored two aspects that would influence consumers’ choices and that knowledge contributes significantly to the knowledge regarding the effects of eco-labelling and fair trade-labelling. I would have to critique, however, that the limitedness of the result could have been influenced by the relative homogeneity of the study group as all were students and an appreciable percentage were female. Also, the survey was done through questionnaires; in List and Gallet’s (2001) metaanalysis of valuation studies, willingness-to-pay (WTP) in a hypothetical market overstates WTP when real payment is required by a factor of 3. That is, consumers who claim that they prefer eco-labelled or fair trade labelled may be more than those who are actually willing to pay for it; in light of the almost insignificant effect of labelling on taste preference, WTP may not be conclusively correlated for this particular group. This is a methodological bias that has turned some studies away from using questionnaires and designed their studies in such as way that preference translates to actually buying of the product (Mahe & Muller, 2007; Rousu & Corrigan, 2008). Also, the studied group is composed of university students; it is generally assumed that students are not an income-earning group and their preference may be biased by the fact that their choice is not as prohibited by the same socio-economic considerations that dictate the actions of the income-earning group. As well as that, university students make up a lesser proportion of the spending populace and may be a poor representative for such studies. Furthermore, as I have pointed out the importance of cognition to attitude and how it affects consumer choices, level of awareness should also have been part of the analysis; from the report which said that only a short description of what eco-labelling and fair trade-labelling means was provided to respondents, one gets the impression that independent knowledge regarding these concepts were largely taken for granted when in fact, this could be one of the more influential factors to decision-making process. The issues raised in this critique would thus serve as guide to the recommendations for future studies that aim to correlate the factors that influence the marketability of eco-labelled and fair trade-labelled products. REFERENCE CITED: Ajzen, I. (2001). Nature and operation of attitudes. Annual Reviews in Psychology, 52: 27-58. Gadonniex, H. (2009). The next generation of eco labels? Sustainable Industries. [Online] Available from: http://www.scscertified.com/press_releases/SI_Ecolabel_Aug09.pdf [Accessed 15 March 2010] List, J. and Gallet, C. (2001). What Ex­perimental Protocol Influence Disparities between Actual and Hypothetical Stated Values? Envi­ronmental and Resource Economics 20, 241-54. Mahe, T. And Muller, M. (2007). Social preferences and experimental auctions for ethical and eco-labelled food. Conference of the French Economic Association. [Online] Available from http://www.gate.cnrs.fr/afse-jee/Papiers/229.pdf] [Acessed 15 March 2010] Prislin, R. And Ouellete, J. (1996). When it is embedded, it is potent: effects of general attitude embeddedness on formation of specific attitudes and behavioural intentions. Personality and social psychology bulleting, 22 (8): 845-861. Rousu, M.C. and Corrigan, J.R. (2nd Quarter 2008). Consumer preferences for fair trade foods: Implication for trade policy. Choices 23 (2): 53-55. Smith, A., and Stancu, C. (2006). Eco-labels: a short guide for New Zealand producers. Business & Sustainability Series Briefing Paper 2 ISSN 1177-3731. [Online] Available from: http://www.landcareresearch.co.nz/research/sustainablesoc/business/trade/documents/eco_labels.pdf [Accessed 15 March 2010]. Stroud, S. (2009). The great eco-label shakedown. Sustainable Industries. [Online] Available from: http://www.scscertified.com/press_releases/SI_Ecolabel_Aug09.pdf [Accessed 15 March 2010]. Read More