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Fresh Food Industry.

Using Three Ethical Principles of the Global Business Standards Codex (GBSC),
Evaluate the Fairtrade Practices of the Fresh Food Industry.

Codex was established by two United Nation’s Organization, FAO (Food and Agriculture
Organization) and the World Health Organization (WHO) in the year 1963. Codex is the
organization that establishes the international standards for food. Codex provides the guidelines
that promote and implement the fair trade practices in the food trade. The principles of Global
Business Standards Codex govern the entire fair trade practices in all business universally. This
paper evaluates the fair-trade practices in the fresh food industry especially in the context of the
value chains that enhance the supermarket business operations. Supermarkets provide useful and
informative materials on fair and ethical trade practices that complement the basic concepts
quality as applied in the convention theory. (Gereffi 1994)

Fairness Principle
Fairness principle stems from fair trade which refers to a trading partnership that’s based on
transparency, dialogue, respect and equity in the international trade. The association of fair trade
major objective is to facilitate fairness even to the small traders or producers in the international

Evaluate the Fairtrade Practices of the Fresh Food Industry. 2
market by providing guarantees and fair trading terms and prices, access to credit, stable supply
relationships and other fair conditions for their produce in the international market. (Smith &
Barrientos 2005) Large multinational organizations have been known to frustrate the growth of
smaller companies in the emerging markets in the hope of minimizing any threats to their
business operations and profitability. (Vorley 2004)

Fairtrade is principally concerned with business terms and prices between the producers and
buyers, the ethical trade main concern is the working environment of the workers. The conditions
like favorable working environment, good ventilation and adequate sunlight or visibility. Ethical
trade ensures that the employers provide safe and comfortable working environment for all the
employees. (Lee & Billington 1992) For many years, workers in the supermarkets were
overworked and their counterparts in the factories worked under very poor working conditions
like in the agricultural, garment and foot-ware industries. (Dolan & Humphrey 2004)
The impersonal capitalist markets and the characteristics of the unfair trading practices that
dominated the international market in the early 1960’s that marginalized most producers were
greatly challenged by the introduction of the fair-trading practices. (Murray & Raynolds 2000)

Reliability Principle
Reliability principle is hard to address when the buyers exert pressure on the suppliers to deliver
goods on time with such instruments as insecure supply contracts, shortening lead times, falling
prices and irregular orders of goods. These suppliers offset their costs by passing on the loses to
the poor workers who have to work through short term contracts, increased workloads, low
wages and impromptu long periods of work with unpredictable rates of overtime compensation.
These practices are in direct violation of the codes that buyers and suppliers are supposed to

Evaluate the Fairtrade Practices of the Fresh Food Industry. 3
promote and which the buyers insist that the suppliers must adopt and implement positively. The
labor laws that the suppliers are supposed to honor are difficult to implement because of the
harsh trading terms that the buyers insists on the suppliers to adopt. (Halbenwang 2004)

For many years, the South African Grocery market favored large and well established suppliers
whose reliability can’t be matched with the small suppliers hence the ineffectiveness in the
application of the equity principle. (Louw, Vermeulen, Kirsten & Madevu 2007) To guarantee
the small supplier’s consistency on food quality, safety and volumes is very difficult due to
competition from the large producers hence the apparent discrimination. (D’Haese &
Huylenbroeck 2005)

However, the brands that are popular and available are not necessarily the best in terms of quality as most
consumers rely heavily on the information available from the media through advertisement and other
sources of information. Smith & Barrientos (2005) contends that the information available to the public
is mostly limited and the imbalance that exists between the consumers and the retailers is associated with
the search costs that may be prohibitive and unaffordable hence the customers may not be in a position to
discover and also compare the food prices and services at all levels of each individual value chain. The
brand loyalty ones created can attract more customers by virtue of the market power that the brand name
has on the consumers.
The vertical market power that exists in big chains and brand names makes the fair trade play second
fiddle as they can use their economies of scale to influence the prices that are payable by final consumer
and also they can minimize or influence the prizes negatively that are receivable by the raw material
suppliers. The Australian market has positive attributes but double marginalization arises where two
companies that are vertically adjacent can seek or scheme to maximize their profits. (Cotterill 2006)

Evaluate the Fairtrade Practices of the Fresh Food Industry. 4
These activities may raise the prices of the retail markets, lower the supply profit or limit the final output.
These inadequacies can be addressed by applying the vertical integration where a particular chain cannot
be allowed to buy all the suppliers or allow a supermarket to dominate and monopolized the sales of a
supplier. The private label companies can be utilized to minimize double marginalization.

Dignity Principle

The principles of human rights have to be adhered to in an organization. The rights of the employees to
have a safe and secure working environment that is well ventilated and well lit is mandatory. The dignity
of the workers have to respected by offering competitive compensation and also treating all the
employees fairly without any discrimination based on gender, color, race, disability or nationality.
According to the fair trade practices, all the employees should be compensated adequately and their
working environment and conditions must be acceptable and standardized. The workers are entitled to a
safe working environment that is well lit and ventilated. (Young 2003) Fair trade ensures that the
employers provide safe and comfortable working environment for all the employees. For many
years, workers in the retail outlets and supermarkets were overworked, underpaid while others in
the factories worked under very poor working conditions like in the shoe factories, agricultural
sector and the shoe industries. All the employees have a right to a dignified treatment under the
fair trade agreements.
For the consumers, the fair trade allows the consumers to have an opportunity to choose branded
products from the international markets. The small scale producers and suppliers are given equal
opportunities to participate in the market and trade openly with other big players in the market.
The multi-actor approaches as illustrated by Louw et al (2007) confirms the importance of the

Evaluate the Fairtrade Practices of the Fresh Food Industry. 5
fair trade practices that aim at reducing the bottlenecks that are in the supply chain and which
promote the collective actions that facilitate equity and competitiveness.

Murray D, Raynolds L., 2000, Alternative trade in bananas: obstacles and opportunities for
progressive social change in the global economy. Agriculture and Human Values 17: 65–74.
Gereffi G., 1994, Capitalism, development and global commodity chains. In Capitalism and
Development, Sklair L (ed.).Routledge: London; 211–231.
Vorley, B., 2004, Food Inc. Corporate Concentration from Farm to Consumer. UK Food Group:
Young, G., 2003, Fair Trade’s Influential Past and the Challenges of its Future. King Baudouin
Foundation: Belgium.
Dolan C, Humphrey J., 2004, Changing governance patterns in the trade in fresh vegetables
between Africa and the United Kingdom. Environment and Planning 36(3): 491–509.
D’Haese, M & Van Huylenbroeck, G., 2005, The rise of supermarkets and changing expenditure
patterns of poor rural households: a case study in the Transkei area, South Africa. Food Policy,
30: 97–113.

Evaluate the Fairtrade Practices of the Fresh Food Industry. 6
Louw, A., Vermeulen, H., Kirsten, J. and Madevu, H., 2007, Securing Small Farmer
Participation in Supermarket Supply Chains in South Africa, Development of Southern Africa,
24:4, 539 – 551.
Smith, S., & Barrientos, S., 2005, Fair Trade and Ethical Trade: Are There Moves Towards
Convergence, Sustainable Development, Sust, Dev. 13, 190 – 198. Wiley InterScience, online
publication, www.interscience.wiley.com . Doi: 10.1002/sd.277
Halbenwang, B.B (Ed.) 2004, Urbanisation trends in South Africa. Social Environment, Vol. 9,
April. Institute for Futures Research, University of Stellenbosch.
Lee, H.L. & Billington, C., 1992, Managing supply chain inventory: pitfalls and opportunities.
MIT Sloan Management Review, 33(3): 65.

Cotterill, R.W. (2006). Antitrust analysis of supermarkets: global concerns playing out in local
markets, The Australian Journal of Agricultural and Resource Economics 50, 17–32.

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