A University of York academic has co-authored a major report which advocates creating business models that are focused on benefiting society and the planet. Based on a recent study of Fair Trade Enterprises, the report unveils pivotal governance, management and profit reinvestment models that are already working across the world.
The report from the World Fair Trade Organization (WFTO), Traidcraft Exchange, University of York and Cambridge University, challenges leaders gathering at Davos to foster business models that put people and planet first.
Key insights about Fair Trade Enterprises include:
- 92 percent reinvest all profits in their social mission;
- 52 percent are led by women;
- Four times less likely to go bankrupt;
- 85 percent report actively sacrificing financial goals to pursue social or environmental goals, while retaining commercial viability.
The report, titled “Creating the new economy: business models that put people and planet first,” challenges government, business and finance leaders to foster mission-primacy business models in order to kick-start the new economy.
The report gives specifics to the idea of stakeholder capitalism, which is the focus of leaders gathering in Davos this week.
Professor Bob Doherty, from the University of York, led the research team that investigated 360 unique business models.
The team also included Dr. Simon Croft in the Stockholm Environment Institute in the Environment Department and Dr. Helen Haugh from Judge Business School Cambridge.
Prof Doherty said: “Our research has investigated a global community of enterprises who provide a viable, inspiring alternative to ‘the maximizing profit for shareholders’ approach that has led to negative human and planetary consequences.
“These are hybrid enterprises who are members of the World Fair Trade Organization (WFTO) trade but with a social and environmental purpose, working with indigenous communities to develop innovative products.
“They reinvest their profits back into their social mission, display unique governance arrangements with artisans and farmers on their boards, plus over 50 percent of them are led by female entrepreneurs.”
The report concludes that these characteristics give Fair Trade Enterprises an ability to prioritize social and environmental goals in their investments, practices and impacts.
The report includes case studies where the ownership of an enterprise by workers, farmers or artisans results directly in them prioritizing the interests of these producers. These enterprises also pioneer ecological practices.
For example, Prokritee in Bangladesh has built a business model that upcycles waste fabrics into bags and baskets. Chile’s Green Glass collects discarded bottles and transforms them into drinking glasses, while Chako in Zanzibar turns waste glass into light fittings. Cambodia’s Village Works makes bags from various waste bags and produces reusable bamboo straws.