Headline developments
It is pleasing that we have managed to grow the value of our purchases from fair trade suppliers despite a small decline in overall sales. The three year rolling average shows a slight fall, largely owing to a “bumper” year in 2006, but the opening up of more licensing partnerships offers good prospects for the future.
Exciting innovation in areas such as fair trade rubber gloves and charcoal and adding more value in country shows Traidcraft’s pioneering role is continuing.
Steady improvement in meeting our commitments to our producer suppliers and improving the quality of our support to them. We are receiving increasingly open and valuable feedback from our producers.
Fair Trader sales and overall numbers have declined, partly as a result of the recession but also because of increased commercial competition. Finding ways of revitalizing growth in this important part of our activity will be critical, and initial work to promote fair trade in schools is an encouraging dimension of this.
We have had a series of very positive external evaluations of recently completed projects, which underline the effectiveness of our development model and project implementation. A record level of new grants from major donors provides strong professional recognition of the growing impact of Traidcraft’s overseas development programmes.
The strategic programmes to focus on cotton, tea, and crafts producers and on business service provision to poor businesses have continued to gather momentum. Traidcraft Exchange’s four regional offices are each building significant programmes of activity.
Advocacy and policy work to promote responsible purchasing practices and to address issues arising from supermarket trading practices have proved effective during the year.
Challenges ahead
As we reflect on the data in these accounts, we have recognised a number of areas which will require particular focus:
Ensuring that we continue to grow developing world purchases in difficult market conditions, created both by recession and by increasing competition in Fairtrade products, by sustaining and growing the plc’s sales and profitability.
Supporting the encouraging growth of Traidcraft Exchange programmes and policy activity by finding further sources of unrestricted donations.
Further adapting Traidcraft plc activity and Traidcraft Exchange programme development to recognize the challenges of climate change for our producers and ourselves, and improving our direct and indirect environment impacts.
Recognizing differences in the nature of the plc’s relationships and desired impacts with different types of producer, identifying those groups on which we may particularly want to focus our efforts and impact, and recognising that for other producers our role, though welcome, may be less critical to their future.
Sustaining the scale of the Fair Trader channel in the face of greater mainstream availability of Fairtrade-marked products. Encouraging existing Fair Traders to continue to recognize the importance of their role within the wider mission of Traidcraft beyond the selling of products, and engaging churches and schools more actively.
Continuing to improve our internal communication and team-working, so that staff are well-motivated and able to deliver Traidcraft’s mission.
Putting more focus on identifying new areas of innovation, especially those that may open up new markets for fair trade products, as we have achieved this year with rubber gloves and charcoal.
Increasing the scale and scope of our constructive engagement with commercial businesses, both through Traidcraft plc’s licensing arrangements and through interaction with Traidcraft Exchange’s policy and consulting teams.
Encouraging complementary approaches within the fair trade movement and advocating a continuing clarity of focus on promoting poverty reduction and development.
During 2010 we will be begin a major strategic review, that will include re-evaluating our priorities in a changing environment, and assessing how Traidcraft can have the greatest future impact in fighting poverty through trade.
There are also a number of areas which we believe could improve the way in which our social accounts are presented.
The accounts are becoming lengthy, and would benefit from a more succinct approach, possibly with greater use of appendices or external links to which interested readers/browsers can refer on subjects which really interest them.
We will consider whether structuring the accounts around desired outcomes might be a more useful approach than describing areas of activity.
We could seek to focus on a smaller number of key indicators, and where available (and truly comparable) should aim to identify external benchmark data which allows a fuller assessment of our relative impact/performance. Providing more context to allow the reader to judge the importance of what we do would also be beneficial in some areas of the accounts.
The measuring of Developing World Purchases, whilst remaining useful, is a crude approach to assessing impact, and should be reviewed in line with our work to identify more clearly a range of producer categories and our differing goals in respect of each category.
The feasibility of implementing these changes will be considered as part of a review of the structure of our Social Accounts to be used in future years.
Traidcraft’s Foundation Principles
Traidcraft is guided by five Foundation Principles.
- Traidcraft is a Christian response to poverty.
- Our mission is fighting poverty through trade.
- We respect all people and the environment.
- We abide by and promote fair business practices.
- We strive to be transparent and accountable
The remainder of this summary report pulls together some of the key findings and data from our Social Accounts under the headings of these principles, to give a clear indication of how far we are achieving our mission within the framework of our principles.
1. Traidcraft is a Christian response to poverty
Traidcraft was established as a Christian response to poverty and that continues to be important to us. We set out our understanding of how our Christian identity affects our approach to our work and mission in the introductory section of our Social Accounts.
As reported in previous years, the overwhelming majority of our supporter base is drawn from active churchgoers, and we believe our Christian identity is important to them.
Mobilising the support of churches and individual churchgoers is a key aspect of our Christian identity, and has been critical to our growth and development. Activities in the year have included:
Networks: There are now more than 5000 churches registered as Fairtrade churches. We have continued to work closely with the Fairtrade Foundation on the Fairtrade Churches scheme. , the Christians Aware network, Christian Concern for One World, and with the Joint Public Issues team of the Baptist, Methodist and United Reformed churches, and have sought to forge closer links with development and social justice advocates in churches and Christian agencies.
Activities: We have participated in a number of conferences of church leaders, the 2008 Greenbelt festival and helped to organise the Back to Church Sunday initiative nationally, as well as supporting further Big Brew campaigns in a number of Anglican dioceses. We have had many meetings with individual church leaders, and Traidcraft Speakers have presented our work to numerous church audiences.
Resources: Coverage of Traidcraft in church media increased by 24.5% on the previous year. We added substantially to the print and on-line resources available for our church-based audience, including Harvest, Advent and Lent materials. The church resources section is one of the most popular on our website and we have been encouraged by the increasing use made of our web-based resources with total downloads of 4,000.
2. Our mission is fighting poverty through trade
Traidcraft fights poverty through three types of inter-linked activity; Trade, Support and Influence. We believe we need to engage in all three if we want to achieve transformational change in the way trade works to the benefit of poor people.
A. Trade – we bring direct benefits to producer communities.
Sales
Sales of Traidcraft branded goods, including licensed products, declined in the year by 2.6% to £21.7 million. Licensed sales grew by 5.6% but this was not sufficient to outweigh the drop in direct sales of 5.3%.
Fair trade sales (which account for 91% of the total) followed a pattern similar to total sales and declined by 3%, although fair trade non-food sales grew by 3%.
Whilst not surprising in the current economic climate, we believe the decline also reflects in part the increased competition from continued growth in the number of Fairtrade-marked products from commercial companies. This growth is evidenced by an increase in the number of Fairtrade products in the UK from 3,500 to 4,500 and an increase in total Fairtrade sales from some £500 million to £700 million.
Purchases from the Developing World
Traidcraft’s purchases from developing world producers increased by 3.4% to £4.1m, despite the decline in sales volumes.
The three-year rolling average of purchases declined from £4.1 million in 2008 to £3.95 million in 2009. (A rolling average is used to smooth affect of timing of major orders). The average has dropped due to the falling out of the 2006 figures from this year’s figures, when there were significant purchases in 2006 of T-shirts, coffee, sugar, rice and cashew nuts. With less strong sales than budgeted for since 2006, we have been unable to reorder these goods at the same levels.
34% of all our cost of sales (three year rolling average) was spent in the developing world (2008: 35%). On average 22% of the price paid by consumers is going back to producer countries (2008: 22%).
Producer Support activity
Sourcing: We bought directly from 51 different producer groups. products from the others are sourced mainly through other UK and European fair trade organisations committed to long term relationships with their own suppliers.
Crafts and clothing producers: We set individual target order levels for 34 core suppliers. Of these we met the target in 28 cases (82%), in one case the supplier declined to offer sufficient products to enable us to meet the target. This is excellent progress from the previous year where we met 75% of targets.
Food producers: Most of our suppliers are part of the wider Fairtrade certification system, or they are sourced through other Fair Trade Organisations. Therefore the volume and value of our orders are less critical than for non-food suppliers since our orders are merely one part of their overall Fair Trade business. Our new instant coffee from India is processed and packaged in that country, thus adding much more value in the South than most fair trade coffees. We have developed new suppliers of ingredients to key products, including a second honey supplier. Two additional raisin suppliers, in Chile and India, are in the process of being added to the existing supplier in South Africa. Unfortunately purchases from Africa declined due to a poor raisin harvest in South Africa and a reduction in the purchase of other dried fruit from South Africa as sales of a new product line did not meet forecast.
Advances: The value of advance payments made to producers increased by 11%, helping them to deal with the challenges of the credit crunch.
Business and environmental tools: We have been developing a tool to monitor the commercial sustainability of our fair trade suppliers better. A draft tool has been developed and will be used during 2009/10. The environmental monitoring section of our Partnership Reviews have been enhanced to monitor an organisation’s awareness of environmental legislation, and its responsible management of resources and waste.
Communication: Last year stakeholders fed back they required improved communication of information regarding Traidcraft’s sales. In response to this we have implemented a post season feedback system to inform crafts of Traidcraft’s sales performance in general and sales of their specific products.
Fair Traders
Number of Fair Traders: Fair Traders, who sell our products in their churches, schools and businesses, remain our most significant supporter group both through their sales and by explaining our mission to their customers. Their sales account for just under 50% of Traidcraft’s direct sales. Fair Trader sales have experienced increased pressures over the course of the last few years due to the increased availability of Fairtrade products from other suppliers. The number of active Fair Traders declined slightly to 6,641 (2008: 6,787). About 700 Fair Traders ceased to be active in the year, and these were not fully replenished by about 550 recruits (13% fewer recruits than in 2008).
Recruitment: Our approach has been to communicate to the additional benefits of buying a Traidcraft product from a Fair Trader. Focus for recruitment is towards three main areas; churches, schools and offices.
- Churches: A 2008 survey of Fair Traders showed that 94% of our supporters attend a church/place of worship. Traidcraft supported Back to Church Sunday and the Big Brew during the year. Over 4,000 churches took part in the two events which help raise the profile of fair trade within the church community.
- Schools: The launch of the Fairtrade Schools Scheme has encouraged large numbers of schools to get involved with Fair Trade. Our presence on the Fairtrade Schools steering group has helped cement our involvement with schools that wished to take part and we have developed a strategy to help school become Fairtrade Schools.
- Offices: Offices are keen to purchase fair trade beverages and snack to message values to customers and staff. During the year over 120 new office accounts were set up.
- Resources: We have focused our communication strategy on providing resources to increase recruitment and to explain the added value of buying Traidcraft products. Resources have included worship materials, lesson plans for all Key Stages and offices encouraging business to purchase Traidcraft refreshments.
Licensing activity
Licensing contributes to growing the value of Traidcraft’s fair trade purchases by providing volume sales opportunities for our core producer groups.Licensed sales grew by 5.6% to £5.8m.
Licensing also allows us to pioneer new product categories, where our branding provides consumer confidence in the absence of a Fairtrade mark. Two major areas of innovation were launched with new licence partners in the year:
- Fair trade rubber gloves through BM Polyco were launched in January 2009, and are listed in Tesco.
- Fair trade charcoal through Rectella has been launched in March 2009 in a product co-branded with the Co-op.
Customer service levels
Order turnaround times: Turnaround times for orders have been very strong throughout the year averaging 99.9% of orders despatched within 48 to 72 hours.
Stock availability: Food stock availability has averaged 98%. Non food availability was in line with previous years however due to efforts to reduce Christmas card stock holding we took a deliberate decision not to re-order some Christmas cards during the latter part of the Autumn season and therefore encourage the selling of older stock. This decision, whilst being a very successful one from the perspective of reducing Christmas card stock and freeing up working capital did result in higher than normal out of stocks during this period.
Financial performance
Return on Capital Employed (ROCE): Traidcraft plc produced a small profit for the year and a ROCE of 1.2%. Cumulative ROCE since the last public share issue in 2003 is 5.4% (target 6.5%).
Dividend Payment: In 2008 we declared a dividend of 2 pence per share. This year, reduced profitability has meant we have been unable to declare a dividend for 2009.
B. Support – we help people develop the skills needed to run their own business or to train others to do so.
Project Spending
Total expenditure of our charity arm, Traidcraft Exchange, increased by 10% to 3.5 million. Project expenditure grew by 10% to £2.8 million reflecting an increased scale of activity whilst administration costs fell marginally from 17% to 16% of total expenditure reflecting a slight improvement in efficiency.
Strategic programmes
Overview: Traidcraft Exchange currently focuses on developing projects within strategic programmes aimed at supporting tea, cotton and craft producers and workers, and also runs a number of projects supporting honey and non timber forest products. Many of our projects utilise our expertise in helping the formation of producer organisations among small scale farmers and crafts producers, in developing pro-poor business development services and in establishing fair trade supply chains. We estimate that our current projects are touching the lives of some 25million people in the developing world.
Project implementation: The full social accounts provide detailed information on the progress made in implementing our development projects within these programmes, and reports on some of the detailed evaluation work on recently completed projects. During 2008/9 we worked on implementing a total of 31 projects in East and Southern Africa, India, Bangladesh, Cambodia and Vietnam.
Tea Producers - We received a very positive evaluation of our work with small tea growers in South India. The evaluation stated that ‘’the project has contributed in a very substantial way to improving the overall conditions of the small tea grower sector’’.
Cotton Producers - Two new cotton projects have commenced, one each in India and Kenyawith the aim to improve the lives of small-scale cotton farmers. In India, already, 50 farmers have been organised into self -help groups as planned and local street theatre is being used to create awareness on organic cultivation practices.
Crafts Producers In Cambodia the Sustainable Trade for Social Enterprises project worked with 40 craft producers to build their capacity. An external evaluation concluded that the project had strengthened many of the Social Enterprises, making them more market orientated and increased jobs for disabled people and other marginalised groups.
Business Development Services - Two projects in India aimed at building up networks of business service providers to work alongside poor producers were completed with many targets exceeded. An external assessment pointed to a high level of success in enhancing the skills of participating organisations and of increasing the quality and effectiveness of the local development support available to small enterprises.
Traidcraft’s Market Access Centre (MAC): The MAC provides training and consultancy expertise in many of Traidcraft Exchange’s own projects, but also undertook supply chain evaluations for two private sector organisations that led to the launch of fair trade rubber gloves and charcoal (both under licensing agreements with Traidcraft plc). It also developed a responsible purchasing programme for a major retailer, and implemented training aspects of a producer training programme in Rwanda led by Shared Interest.
Fundraising
Traidcraft Exchange is not funded from the profits of Traidcraft plc, as these are re-invested back into the company in order to grow its business and benefit further fair trade producers. The charity is therefore highly dependent on the support and generosity of individuals, trusts, foundations and other grant-making bodies.
Major grants: Our restricted grant income is raised from government institutions, charities, charitable trusts, companies and major individual donors. We achieved an unprecedented number of major grants from funders during 2008-09, raising more than five times as much as the previous year, and greatly exceeding our target. We secured a total of £4.36 million of funding, against a target of £1.5 million and achieved a return on investment of 25:1 against a target of 7.21. This success is welcome endorsement by these funders of the effectiveness of our approach and is a great opportunity to touch the lives of even more poor people in Africa and Asia.
General donations: Public fundraising raised £1,475,000 in the year against a target of £1,750,000 and the 2008 total of £1,606,000. Legacy income declined from £181,000 to £ 50,000. In total, donations of unrestricted income were therefore down some 15%. However, if we exclude the distorting factor of legacies and the impact of a one-off windfall Gift Aid benefit in 2008, the underlying decline in general donations was 5%. The ROI on public fundraising activities was 4.0:1, better than our target of 3.7:1, but lower than the previous year’s exceptional 4.9:1. Another way of looking at this is that it cost us about 25p to raise £1 of public income (20p in 2008).
Number of donors: During 2008-2009, 22,091 individuals gave donations to our work. This compares with 21,978 in 2007-08, representing an increase of 1%, which is less than we had planned, but encouraging given the economic downturn and strong competition for donations. However, the average size of donation reduced from £80 to £64, suggesting that our supporters may be responding to the recession by reducing the amount they give.
C. Influence – we work to change the rules that govern trade, challenging injustice and encouraging changes in public and political attitudes. Being a successful model of business ourselves is a key part of this.
Policy Work
Traidcraft’s policy work aims to improve the impact that trade rules have on poverty and to change the practice of companies so that poor people in developing countries are able to benefit from what they produce.
Purchasing practices: We have continued our work to raise awareness of the impacts purchasers have in developing countries. We have produced an online self assessment game (The Buying Game) for purchasers which has been used over 3,900 times since July 2008.
- Three guidance documents have been produced, targeted at professional purchasing managers. These have included studies of the garments and cocoa supply chains.
- The recommendations from these reports have been promoted at conferences, and through the Chartered Institute of Purchasing and Supply. A large retailer has approached Traidcraft to train its purchasers on responsible purchasing practices.
Supermarket practices: The focus of this work has been engaging with the Competition Commission’s investigation into the groceries trade. We have campaigned with the general public and politicians for a tougher code of practice to govern supermarkets’ relationships with their suppliers and for the establishment of an Ombudsman to enforce the rules. We were pleased with the Commission’s findings, but still need to campaign for their proper implementation by the government and supermarkets.
Trade rules: Building on our work on Economic Partnership Agreements (EPAs), we have expanded our focus to look at other European Union (EU) free trade deals. During the last year we have had a specific focus on the EU-India Free Trade Agreement (FTA) currently under negotiation, producing a number of reports and working closely with Indian ciivl society.
The Fair Trade Movement
Traidcraft has an important role in promoting the development of fair trade awareness and good practice. Traidcraft staff have continued to hold a variety of posts across various fair trade associations.
Traidcraft’s Market Access Centre has carried out research on how fair trade crafts labeling could be introduced effectively in the UK market, and whether it would benefit producers. Publication of results is expected during the summer of 2009.
The PROFIT project has successfully developed draft standards for a fair trade label within India (“Shop for Change”). The project is achieving its stated objectives, and we are facilitating planning for the next stages of development.
The Fair Trade Plus project, a 3-year project working to increase the impact of fair trade on poverty in India, continues to be implemented successfully and on schedule.
Media and Brand Awareness
Traidcraft’s success depends in part on an awareness of our work and the positive impact that we have on the poor in the developing world. Awareness is the first step towards attracting supporters and gaining access to influencers and decision-makers responsible for trade policies.
Media coverage: As measured by Advertising Value Equivalent (AVE) coverage of Traidcraft was £3.2m, in line with last year’s figure. Excluding internet coverage total mentions of Traidcraft across all media channels increased by 8%.
Speakers: Traidcraft’s Speaker Network is an important resource, raising awareness and understanding of fair trade and Traidcraft’s work. In addition, talks help to raise money for Traidcraft Exchange and increase sales of Traidcraft products. We have 539 speakers (this compares with 536 speakers in 2007-2008). Total talks reported were 505 (515 in 2007/8), but we think this is an underestimate as the number of invitations processed through our offices was up by 17%. The most popular sections of the speaker area on our website are the community area (discussion boards in particular) and the resources for talks (of which the producer stories are the most popular). Visits to the community area are up 26% on last year and producer stories are up 115% on last year. Visits to the news area are up from38in 2007/8 to423 in 2008/9.
3. Traidcraft respects all people and the environment
Our work to promote the interests of poor producers in the developing world and many of our connections with our customers and supporters in the UK are covered in the comments above, but additionally we report here on our impact on Staff and the Environment.
Staff
Overview: Staff turnover has been low at 5.2%, and we have been pleased to see sickness levels (already below local and national norms) reducing further. We have not had to make any staff member redundant, but a pay freeze was announced for the 2009/10 financial year and there was a reduction in the amount of time and money we could afford to spend on staff training.
Staff survey: Overall findings from this year’s staff survey were positive. The rating of Traidcraft as an employer overall (8.5 out of 10) is significantly higher than last year’s score of 6.9. The response rate of 67% was similar to last year (66%). 16 of the 21 comparable statements had a higher mean score than last year. The other 5 scores stayed the same. The survey showed that the majority of staff are happy and proud to work at Traidcraft and feel that the benefits they receive are fair. However it indicated that a number of areas raised in the previous year’s survey, and that Traidcraft’s management had sought to addressed during the year working with the Staff Association, still needed further work.
- Pay policy: A complete review of the pay and reward policy is underway. Staff have been consulted and it is hoped the revised policy will be in place before next year’s pay review.
- Team meetings: To improve consultation and communication, training was carried out on how to conduct effective team meetings for all managers and supervisors.Tthe minutes of senior management meetings now highlight key information which line managers need to feed back to their teams.
- Staff development: To improve how staff feel valued the annual performance appraisal system was reviewed, forms were revised and training for all staff was held to improve the appraisal experience.
Environment
Carbon footprint: As in previous years we have chosen to “draw the boundary” of our activities as surrounding our direct UK operations and our importing activities. On this basis Traidcraft’s carbon footprint is in the order of 1,150 to 1,250 tonnes CO2, and is estimated to have reduced by about 6% in the year, largely owing to a reduced volume of imports.
Carbon offsetting: We have taken the decision to continue to use offsetting monies to support environmental projects of our producers.
Sea and air freight: The majority of imports are shipped by sea with only 2.6% of goods by mass imported by air in 2008-2009. No food products were imported by air. Products from Nepal were air freighted as there is no easy access to a port. Also orders for two major UK wholesale customers were air freighted due to tight delivery deadline.
Power: Both Gateshead sites were supplied with 100% renewable electricity.
Paper: Traidcraft’s most significant print matter is the catalogue that Traidcraft plc issues twice a year. Catalogues are printed on paper made from a blend of fibres coming from recycled household paper (up to 40%). Both the paper mill and the catalogue printer operate an environmental management system certified to ISO14001. We continue to trial different ways of engaging with mail order customers, through the use of flyers and emails. This resulted in a reduction in the number of catalogues mailed by about one third between 2007 and 2008. In 2008 we were able to continue the work with our UKsupplier to ensure that all the envelopes and cards in our 2008 Christmas card range were printed on FSC material with only vegetable inks used. Traidcraft continues to use office paper that is made from 100% waste paper and in a process that uses only 27% of the water consumption used in virgin grades and is certified ISO 9001.
Packaging: Traidcraft sends out many parcels each year, the majority of parcels are packed in cardboard boxes with newsprint reel off cuts for supporting packaging. Traidcraft does not use plastics e.g. polystyrene balls to pack products for delivery. Traidcraft has continued to work with its food manufactures’ to review the amount and material of food packaging, and is exploring with its manufacturer’s the scope to use more biodegradebale packaging.
The local community
Traidcraft as an organisation, and many of its staff have continued to engage actively with local authorities, schools, churches, businesses and other organisations in order to contribute to the life of the local community.
4. Traidcraft abides by and promotes fair business practices
Being a Fair Trade business: Traidcraft plc seeks to model how businesses can operate on a fair trade basis. We report in more detail on this in the section on Trade activities above.
Encouraging better business practices: Our work to encourage more responsible business practices and to improve the way supermarkets treat many of their suppliers has been covered in the section on Influencing activity above.
Treating UK Suppliers well: One of the most important factors in the treatment of suppliers is to ensure we pay our suppliers in line with agreed payment terms. During the year payments have been made within agreed payment terms (typically 30 days).
Board governance: We continue voluntarily to comply with the Combined Code on corporate governance, and seek to apply the highest standards of governance in our Board activities.
5. Traidcraft strives to be transparent and accountable
Social accounts data: We see our social accounts as the most important form of accountability to our stakeholders. This year we have also provided much fuller reporting of social accounts data within the published financial accounts of Traidcraft plc and Traidcraft Exchange. Traidcraft’s 2008 Social Accounts once again won a special commendation for SME reporting from the ACCA UK Awards for Sustainability Reporting.
Producer feedback: We have continued our new practice of seeking detailed and structured feedback from our producers, and this is summarised in the Trade section of the Social Accounts.
Surveys of other stakeholders: Financial constraints have meant that we were unable to carry out other stakeholder surveys in 2008/9. However, in 2010 we are planning to survey; staff, retail customers, speakers and Traidcraft Exchange beneficiaries and partners in South Asia. In addition our Supplier Support team continues to survey producers as part of their rolling three-year cycle of visits.
Customer complaints: The volume of complaints from customers, measured as a percentage of orders, remained stable at 4%.
