Outsourcing Governance: Fairtrade’s Message for C21 Global Governance

Purpose – This paper seeks to bring together ethical governance theory and empirical findings to examine the shifting nature of governance in global value chains, and the implications of this shift for mainstream companies. In particular, it aims to examine one of the more mature models of ethical value chain governance, Fairtrade, and how this is being used by business. Design/methodology/approach – Information is derived from a longitudinal study of multi-stakeholder co-governance in Kenya and the UK, and an analysis of the literature on similar co-governance models. Findings – The paper shows that mainstream companies are looking to multi-stakeholder models not only to protect their reputation, but as a way of governing ethical dimensions of their value chains. However, rather than a form of co-governance, it has become a way of outsourcing governance, enabling companies to strengthen their public credibility, while simultaneously transferring an especially difficult element of modern value chain governance to organizations enjoying high consumer trust. Yet, primary data suggest that these governance systems are not delivering the benefits promised, at least at the producer level. Practical implications – By outsourcing governance to initiatives with dubious credibility in this way, companies may seem at risk. However, the mismatch between the promise and delivery of Fairtrade does not seem to be affecting consumer confidence and, until it does, companies may continue to benefit from the halo effect of being a Fairtrade ally. But there are also opportunities for companies to use Fairtrade's weaknesses to make the value chain a better avenue for delivering ethical governance, with implications for similar co-governance models. Originality/value – The study draws on one of the very few pieces of longitudinal field research on the impacts of Fairtrade. It approaches Fairtrade from a governance rather than reputations perspective, and emphasizes the implications for mainstream business rather than the co-governance movement.