The consumer is king

Dear Sam In response to your Limeblast 'What Now?' (March edition), it does indeed appear that the success of the developed world's drive towards a global trading system based around the principle of free trade is having the undesirable side-effect of making many of its own manufacturers victims of its own success. Many are now struggling to compete with cheaper, yet ever better produced imports from developing countries and many are now looking to the system to protect their livelihoods. I do, nevertheless, believe we must accept that this is one inevitable result of the true globalisation of our business and there is no point in dwelling on the past. Ultimately, in today's world the consumer is king and, quite simply, those organisations that can produce the quality of goods and service that consumers want at the most competitive prices are most likely to succeed, while those which cannot will most likely fall by the way. This is pure market economics. Of course the key point, as you identify, is that this is all very well in a world where companies compete solely on the quality of their products or service or their prices. However, in reality this is not the case and the social and environmental constraints on manufacturers in the developed world are often much more stringent - and costly - to comply with than those elsewhere, giving an unfair cost advantage to producers in developing countries. The problem is that while there is an uneven playing field in terms of social and environmental conditions in different countries around the world, there will always be grounds for those who are likely to suffer most from this imbalance to argue for protectionist measures such as tariffs or quotas. So the most important challenge appears to be how do we 'level the playing field' without reverting to crude, retaliatory protectionism and, thereby, allow companies to compete fairly against each other? In my opinion, the best way to try and achieve a level playing field would be to introduce an industry-led Certification Initiative which would aim to encourage companies worldwide to comply with certain minimum standards of both social and environmental standards. The Environmental Forum concept (as detailed in the article 'Sharing Knowledge', Leather International, March, page 19) being developed by the BLC in conjunction with key industry players is a good step in the right direction for a standardised environmental audit. However, I believe that a social audit system should also be developed to ensure that employees are treated fairly and all organisations meet certain minimum standards of conditions on working hours, remuneration, child labour, forced labour, health and safety, freedom of association and rights to collective bargaining, discrimination and disciplinary practices. It should also try to ensure that management systems are in place to maintain these conditions over the long term. A comprehensive audit system could be built up to eventually cover all stages of the leather business, from raw hide production at the abattoir through to finished leather and leather goods production. It would require the establishment of an independent, global auditing body and such a body would need to be able to draw on the experience and knowledge of industry trade organisations, such as COTANCE, ICT, ICHSLTA etc as well as private companies within the industry and governments and NGOs in order to establish and enforce the standards. Any company willing to achieve certified status would be able to apply to start the process of certification and a time frame would be set for full compliance. The application would be reviewed periodically to ensure progress was being made towards achieving the targets, and companies continually failing to meet their obligations under the process would have their status removed. Companies that fulfill the requirements of the certification process would be awarded certified status. Of course, for such a system to work effectively there must be incentives for companies to want to apply for certified status as they need to justify the costs involved in undertaking the process. One idea would be for the industry to promote the certification standard as a 'mark' of fair, ethical and environmentally-sensitive produced leather, in a similar way, for example, to the way the Fairtrade mark has been successfully developed for fairly traded agricultural produce. Consumers, today, are becoming much more conscientious about where and how the products they buy are made, and a well-promoted industry-wide certification standard could be used as a significant unique marketing factor, and one that could even result in better prices being paid by consumers. Another idea would be to encourage companies to deal with other certified producers through a series of 'positive' financial incentives. Countries or economic areas, such as the EU, could impose flat rates of duties on imports of all leather and leather goods and then offer exemption on goods from producers who are either certified or are undergoing the certification process. At the same time, producers within those countries or areas could be taxed at the same rate as the duty if they are not certified or applying for certification If the consumer markets of the developed world adopted such measures, they would firstly offer a considerable incentive to producers in developing countries to clean up their act, while at the same time offering protection to those western companies from 'unfair' competition. They would not, however, protect inefficient manufacturers in the developed world from 'fair' competition or from companies who simply have a competitive advantage. For companies whose competitive advantage is based on unjust or exploitative working conditions, there would be extra costs involved in bringing their organisations into line with these industry standards in order to be able to access lucrative consumer markets. However, for those that already meet the required standards, the costs involved would be considerably less, and the time taken to achieve certified status would be much shorter. If an industry-led social and environmental certification system existed, I believe there would be strong grounds for such 'positive' protectionist tariffs and taxes. As the BLC-led environmental auditing initiative identifies, the big brands today are ever more conscious of the need for good environmental reporting and I believe it will be a logical step forward to also include a social aspect in this auditing process in future. This is just the kernel of an idea but I do believe we in the leather industry should take heart from the success of other initiatives, such as the Ethical Tea Partnership in the tea industry, or the Forest Stewardship Council in the timber industry, which have been successfully introduced from within their respective industries. They have realised significant social and environmental benefits, as well as changing the way their industries work for the better. We should not be looking to stifle the growth and development of competitive businesses in developing countries by restricting access to lucrative Western markets. But we should be trying to ensure that the competition they bring is on a fair basis. Perhaps it is time for the leather industry to follow suit and try to establish its own such initiative? After all, would it not be in the interests of its members, particularly in the developed world, to have a fairer playing field in which to compete in the long term? Name supplied