NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Guest blogger Muhan Cheng graduated from National?Taiwan University?with?a B.S. in Chemical Engineering and received her Masters Degree?in Environmental Management from the Nicholas School of the Environment, at Duke University, in 2008. She?currently?works as an?intern with the Ecosystem Services Review Program?at the?World Resources Institute.

An interview by Muhan Cheng

In many developed countries, fair-trade is usually associated with products like coffee, cocoa and handicrafts from Latin America and Africa, but not usually to crafts coming from countries like China. According to the Fairtrade Foundation, at the end of 2007, there were 632 fair-trade certified producer organizations in 58 producing countries, representing 1.5 million farmers and workers.

Beijing Fair Field Co. Ltd. is one of the first social enterprises that promote the idea of fair-trade in China. The company employs women in rural areas, helps them make handicrafts that preserve the local features and sells the products to urban areas. This income-generating activity strengthens women’s business skills, as well as their position in the family. Thus, Fair Field’s social enterprise model serves the objectives of women empowerment and poverty alleviation in rural areas; it runs on a not for profit self-sustaining business model.I had the pleasure of interviewing Jan Wang, who works for the Microfinance department of China Foundation for Poverty Alleviation (CFPA) and currently serves as a vice president for Fair Field Co. Following is a?summary of our conversation:

Muhan Cheng: Could you briefly describe how Fair Field got started?

Jan Wang: Fair Field was established in 2005 and it is a program derived from the Microfinance program under the China Foundation for Poverty Alleviation. The foundation is one of the largest NGOs in China and it has provided both financial and non-financial services to farmers since 1996. It primarily provides microcredits — loans less than RMB 10,000 (about USD1,500) to the farmers, and also non-financial services like training workshops, introduction to agricultural technologies and improving access to market information in the countryside. By doing this, we hope that the farmers will improve their business skills and become more knowledgeable about global trends. To date, we have worked with farmers in 26 counties in China.

CFPA’s Microfinance program has received many international donations to sponsor its training workshops and provide financial services to farmers in rural China. In 2005, Shell Foundation recognized that women in rural areas usually stay home taking care of the family after they get married and seldom engage in income-generating activities. Thus, they tend to have lower social and family status. For this reason, it endowed China Foundation for Poverty Alleviation to establish Fair Field Co. Ltd.

Fair Field started working with villages in Shanxi and Hebei, where the microfinance program was already in operation, and assisted artisans with re-design of the handicrafts into more functional products such as handbags, environmentally-friendly utensil packs, CD pockets and coasters. Through a proprietary channel, Fair Field is able to distribute modern products that preserve traditional patterns and local features in urban markets.

Fair Field generates revenue from the sales of these products, but the profits return to the organization to sustain this business model and subsidize non-financial services like the ones mentioned before.????????????????

Muhan Cheng: Who are the clients and what are the distribution channels?

Jan: Fair Field started organizing women in the villages two years ago but did not start producing until last year. Currently we sell primarily to large corporations. For corporations, responsible procurement is a way to implement social corporate responsibility and purchasing our products is a direct way to help the disadvantaged producers in rural areas. This also allows Fair Field to run in a self-sustainable as opposed to relying on grants and donations and avoid ceasing due to lack of funding sources.

This summer we partnered with a caf? shop in Beijing’s embassy area where our products are now displayed. We also provided training to the caf? staff on how to introduce our products and expect this new channel will bring more individuals to become aware of our products.

Our partners, clients, media partners, and company CSR representatives were all invited on the opening day. We received feedbacks from many people expressing their interest in this social benefit-generating consumption, which we call “pro-poor action”.??

Muhan Cheng: Do you know other organizations in China that have a similar mission to that of Fair Field?

Jan: As far as I know, there is none. Oxfam, an international group has a long history working on fair-trade, contacted us when trying to engage in China. Knowing that China is a very different region from the places they are operating, they were surprised when they found that we were applying the fair-trade concept in our organization. They tried to explore the potential partnership with us.

Muhan Cheng: When you established Fair Field, did you learn from other organization and their operations models?

Jan: Yes. I wanted to establish a model that fits best in China. To achieve that, I looked into the websites like Oxfam and Fairtrade Labeling Organizations International (FLO) and consulted Oxfam Hong Kong, hoping to learn from their experiences and method of promoting fair-trade. Moreover, Ye Weijia from WRI’s New Ventures Program gave me very helpful and valuable consultations on our business model.

Muhan Cheng: In China, a place coined “the world’s factory” with its cheap labor and mass production capabilities, how do you differentiate your products and other made-in-china products? What would be the challenges of entering the overseas market in the future?

Jan: China is in a unique position. First of all, many people do not connect China with poverty. The development in China is so rapid that people almost forget or ignore there are places under-developed and poor. The impression of China for many people is the prosperity in the east-coastal area, instead of the poor inland. People in rural areas live in isolation and find it challenging to move out from their villages, due to the gap of imbalanced development and the lack of economic opportunity.

We identified this problem and are trying to work on the solution. Secondly, unlike Latin America or Africa, China has the competition of low-price products everywhere. For this reason, we position our products as delicately hand-made, in contrast to the massive machine production of the country. Every item is uniquely made and demonstrates local features and traditional patterns. We target the consumer group who appreciates the uniqueness and social-value of our products.

Muhan Cheng: Other than handicrafts, Fair Field also produces tea products. Why and how did you begin the tea production??

Jan: In fair-trade, agricultural products is another major category other than handicrafts. Acknowledging the fact that the handicraft business only helped women and solved merely part of the problems in the countryside, we knew that we had to get to the bottom of the agriculture issues. We identified that agriculture technology in many rural areas was inefficient and behind the times, and thus started to work with tea farms to improve their production.

We first worked in two of the largest tea production areas in Fujian Province —Fuan and Xiapu— arranging technical workshops for yield and quality improvements. In addition, we designed the package for the tea leafs and had those packages handmade by our partners in the village. We created the brand “Fair-leaf” for our tea products, which just launched this spring. Other than tea products, we also partnered with farmers in Liaoning, Northeast China, to sell ginseng and dried fruits.?

Muhan Cheng: What can the government and corporations do to promote social enterprises?

Jan: First, corporate foundations can sponsor social enterprises, like Shell Foundation funds Fair Field. Second, corporations can offer their professional talents to assist our activities, such as having their employees work with us as volunteers. For example, Syngenta provided training personnel to our workshops, teaching the farmers about the safe use of pesticide. In addition, Microsoft donated the computers and offered the training on information technology in the villages. The professionals and their expertise are very valuable to us. Third, corporations can support us by purchasing our products; we also hope to partner with more retailers to display our products.

We believe that through this value chain, everyone can help rural development. The local government supports our work and helps arrange the venue for our activities. Our work draws the government’s attention on many rural issues, the safe use of pesticides being a good example.??????

Muhan Cheng: Can you describe the current development of Fair Field and what the plan is for the coming three years?

Jan: After we evaluated the international experiences of the fair-trade movement, we decided to develop our own way in China for two reasons: first, it takes a long time to pass IFO certification and we did not have time to wait; second, we may not reach their standard for our products. Therefore we created the “pro-poor action”, which incorporates characteristics of fair-trade, such as poverty alleviation, assuring farmers’ income and environmental protection.

Our program is still in development and we definitely hope to increase our production in the next two years. We plan to add one more location to produce handicrafts next year in addition to the existing three locations. At this time, with our first tea production this spring, we are focusing on marketing the tea products and plan to enter the overseas market.

Productivity is not the only goal we have. The relationship we have with the women in rural areas is very important. We are like friends, not employers. We have been introducing activities that increase their understanding of the global world and build up their business skills. We believe that social enterprise can influent and change the conditions of China’s rural areas.??

Conclusion:

Setting up an alternative supply chain, like Fair Field has done, is an innovative way to lessen the gap between rural and urban development in China. This way, the villagers can have a secured income without giving up their agricultural lifestyle and culture. Once the village benefits from this model, their livelihood is improved. The interaction between city and countryside increases in a positive way and helps develop a harmonious society.

The future success of social enterprises like Fair Field will be worth watching throughout the China’s development efforts, especially with the current government’s goal of promoting a harmonious society. It takes several components to have a successful social enterprise: the sincere heart of entrepreneurship, the problem-solving capability towards social issues, an innovative business model and of course, society’s support (which is the demand side of the market.)

When society progresses towards sustainability, a socially-conscious consumer behavior will be valued and promoted, thus catalyzing social enterprises to grow and be successful.