NPR's Morning Edition did a major piece this morning about how the structure of publicly held companies prevents them from doing good in the world. The premise was the directors and officers of these companies have a legal duty to maximize shareholder profit, and therefore could be sued if they did things that impacted the profit, even if done for social good. As an ex-Wall Street corporate lawyer, I can tell you that this is utter nonsense. It reflects a lack of imagination on the part of the directors and officers (and their legal advisors) and replaces their real legal duty with the profit-oriented economic theory that has gripped our country since the late 1980s.

The truth is, officers and directors are legally required to maximize shareholder VALUE, not shareholder profit. That is or can be a very different proposition. "Value" is what the company defines it as. Profit is only part of the value equation, but there is no legal, ethical or moral requirement that it is the only definition of value. So if the highest value of a company is to serve the common good and be profitable (which we at Dean's Beans, among others, have proven is possible for almost twenty years), then when shareholders invest in that company, they will know what they are getting into. There is no shortage of investors looking to put their money where their greater values are, as proven by the billions consciously placed in socially responsible investments in the last decade.

What is required is not a new form of corporation. Rather, social entrepreneurs creating their new businesses for the common good simply have to write their foundation documents (the Bylaws and Articles of Incorporation) to enshrine their social mission into the very bones of their new company. They need to state clearly what the values of the company are that they are seeking to maximize. Thus it is a lack of imagination on the part of the company's lawyers and advisors, not a lack of legal possibility, that prevents new public companies from being organized for the common good, as they define it.

I will be happy to give free advice on this subject to any social entrepreneur who wants to insure that their new company can pursue its social mission without the fear of being sued by shareholders for not putting profit above everything else.

I often hear comments by café owners or some of the less enlightened in the coffee business such as, “aren’t all coffees organic?” or “we only buy organic coffee --the broker told me that the farmers don’t use pesticides”. Unfortunately, neither of these comments is true, and I thought it was about time to state the case for certified organics right here.

First of all, it is important for folks to realize that coffee is the second most heavily pesticided crop in the world after cotton. Period. The top ten chemicals used on coffee are either banned for use in the USA or strictly limited and heavily regulated. Twenty years ago, many of us young (-er) eco-activists tried to stop the export to the developing world of chemicals that were not allowed to be used in the USA. The ethical reasoning was clear enough, if we aren’t allowed to put them on our workers and in our environment, why should we dump them in less tightly regulated environments? Also, since most of these chemicals were used on food that would be exported to us, shouldn’t we stop this exporting Circle of Poison? Good luck, we couldn’t overcome the agricultural lobby then or now on this one. Some of the chemicals used in coffee are DDT, malathion, parathion, dieldrin, endrin, roundup and paraquat. Does that leave a good taste in your mouth?

Add to the inherent dangers in these chemicals the problem that most farmers who use them can’t read the warning labels in English, German and Spanish and a real problem ensues. The majority of farmers in the world are indigenous peoples who may not read or write the languages on the warning labels. Even in Latin America I usually work with farmers who can’t read Spanish, and the warnings aren’t printed in Quiche, Mam, Tzutujil or other indigenous languages. I can’t tell you how many times I have seen children or adults throwing handfuls of white chemicals over plants without using any protective gear or applicators, or even knowing what the chemical was.

It is essential for consumers to understand that “certified organic” is more than just farmers not using pesticides. In order to become certified, farmers must undertake a three year chemical free period, complemented by training in erosion control water protection, mulching and composting of plant wastes and a lot more. A very stringent, transparent system of internal controls must be adopted and followed to monitor adherence to the organic program. Certified organic farms make a strong commitment to the earth and her inhabitants that is far beyond that of the ordinary farmer.

It is often difficult for consumers to read past the marketing hype of major companies and organizations that would like the commercial benefit of organics without paying the farmer more or making a real commitment. I am sorry to say that Rainforest Alliance and Fair Trade share this lack of commitment. Neither major label requires certified organic status from its growers, but both make all sorts of earth friendly claims about their products. Many people associate Fair Trade with organic, because historically most Fair Trade cooperatives were also certified organic.  However, as Fair trade has, ahem, broadened its reach to embrace large multinational players in the coffee, banana, and other markets, that equation can no longer be assumed. For example, Starbucks only Fair Trade coffee, “Estima”, is not certified organic (which also means Starbucks doesn’t have to pay the twenty cent organic premium to the farmers!). Interestingly, neither of the two (that’s it??) organic Starbucks coffee are Fair Trade (so they don’t pay the Fair Trade premium on these!)! I have heard that where once 85% of all Fair Trade certified coffees were also organic, the figure is now down to about 65%. That’s certainly better than Rainforest Alliance, which has a strong environmental program but has no requirement for organics either.

We are 100% certified organic because we believe in the value of organics to the earth, the farmers and their ecologies and to the consumers, as well. Coffee people who make claims that their products are organic but are not certified are either blowing smoke or are truly ignorant of what this issue is all about.

Most people think that Fair Trade is just about a minimum price guaranteed to the farmers. That is a critical piece of the system, but Fair Trade provides many powerful tools for social change – something that no other label or system offers. One of the most significant is the requirement that farmers organize into democratic and transparent cooperatives.

In order to understand what this is about, it is necessary to appreciate why Fair Trade was founded in the first place. In the coffee world, the vast majority of farmers are small scale and indigenous. That means they have little access to information about prices, how the market operates, the needs of northern buyers, access to credit and more. They may not even speak their own national language, but rather their indigenous language. Therefore, they need middlemen to either provide the services for them or buy their coffee outright as cherries picked earlier that day. Since most are physically far removed from the major population or processing centers, they also have to rely on middlemen to get their coffee out of the mountains and into the stream of commerce. As you can see, they are not effective participants in the world market (even though economic models assume that they are), and are at a terrible disadvantage in trying to get a good price for their products.

By organizing into cooperatives, the farmers have the joint buying power to get better prices for farm inputs, they have joint processing power and a greater ability to get information about current prices and market conditions. They get to vote and have a real say (often for the first time in their lives) on the things that impact their families’ health and well-being. The requirement of transparency means that for the first time in their lives they know what they are getting, how much goes into the coop’s coffers, how much everyone else is getting and they can see the impact of the cooperative on their personal and joint bottom lines. Further, the coops provide valuable and often nonexistent social services, such as loans and health care (or at least money to obtain care).

Fair trade coops often pool their premiums together to have a powerful joint impact on their communities. This may take the form of building wells and schools (and believe me, most farming communities are in desperate need of both!) such as we have seen and participated in in Nicaragua, Ethiopia, Peru and elsewhere. Often, it takes the form of purchasing and building upstream capacity – that’s biz talk for buying the plants that process, grade, package and export their beans, thereby keeping that entire income stream in the local community, not giving it away to layers of middlemen. In Ethiopia, our Oromia partners have even created a national bank that takes deposits from non-members, makes low cost loans to members and has creatively diversified the income of the coop.

These are the unique, important and largely unknown benefits of cooperation in the coffeelands, and tens of thousands of farming families have gained better lives as a result. These are the reasons why we have focused on cooperatives and will continue to do so.

Fair Trade is much more than just an economic formula guaranteeing the farmers more money than conventional coffee sales. One of the most exciting aspects of the movement to me is the impact Fair Trade has on women throughout the developing world. Within Fair Trade cooperatives, gender equity is required. That generally means that women have to be represented on the Board of Directors and on other governing bodies, and of course, they can vote and their votes are equal. I am not naïve, however, and I know that in many of the societies where coffee grows women’s empowerment is still a goal and is resisted subtly and sometimes overtly by the ruling men. At the same time, I have seen powerful indications of change. Five of the fourteen coops we work with around the world are managed by women. And those women use their power not only to improve the lives, social standing and self-esteem of women in their own coops, but each of them reaches out and mentors women in other coops. An awesome model for all of us.

We take voting for granted, and many of us don’t even bother to vote in primaries or in general elections. For women (and men) who have never had the opportunity to participate in decisions that effect and control their economic and political lives, voting is a powerful act. I have seen enormous changes in women over the years as they participate and have their voices heard in their communities and on the world stage. One example, Esperanza Castillo from Pangoa Cooperative in Peru. When we first met in 2003, she was a shy and quiet manager of a small coop (about two hundred families). Over the years, Esperanza has developed into an internationally recognized voice for women and Fair Trade. At one event she got a standing ovation when the next speaker (Hilary Clinton) got warm applause. In Ethiopia, Nekempte has gone from an “office girl” when we first met in 2000, to the number three in command of Oromia Cooperative, which has over 100,000 members! 

The point here is not that all of the problems of women’s empowerment have been solved by Fair Trade. Rather, the movement opens an oasis of opportunity to women in rural societies where there are not that many other institutional openings. That is the true evolution of change beneath the surface of a cup of Fair Trade coffee.