Recently, a fair-trade business owner visited one of the cooperatives Anou serves looking to purchase several “fair trade” rugs. The artisans told the fair-trade business owner that their prices were the same in their workshop as they are on their Anou online store. The fair-trade owner complained that the prices listed online were too expensive and that they expected that prices would be cheaper at the workshop. However, all prices on Anou are set by the artisans that made the products. The difference between purchasing from an artisan workshop in person or via their store page on TheAnou.com is essentially zero minus the shipping costs.
Undeterred, the owner began to increase the pressure, refusing to buy anything if the prices were not reduced to a level the owner deemed acceptable. Since it was only two days before the biggest holiday of the year in Morocco, and a holiday for which everyone saves their money to buy food and gifts (Eid Kabir), the women of the cooperative panicked and gave the owner a 10% discount on their rugs, amounting to about $5 USD discount per rug.
We contacted the owner directly about sourcing products through Anou in the past, but they said, “the prices listed on Anou are too expensive and I have business costs to meet.” One month later, the $45 rug was listed on their website for $366. A description of the rug stated, “with the purchase of this rug, you directly support [artisan’s name] so she can better support her family.” This begs the question, was discounting the artisans by $5 really necessary? And does an 813% retail mark-up really follow the fair-trade business owners claim that their fabrics are “fair and honest”?
A Lack of Transparency
The challenge of finding an answer to the question of whether a $5 discount was necessary points to the significant and troubling lack of transparency within the fair-trade industry.
Unfortunately, there is no incentive or even a remote expectation for fair-trade businesses to be completely transparent about their costs. Customers must simply trust that a business is fair and practices what it markets. This holds true for established fair-trade organizations as well. Their slick websites display dazzling statistics about their operations, such as impossibly low overhead costs so artisans can get the “fairest” price. But dig a little deeper and you often find that fair-trade marketing focuses far more on evocative photos than on substance.
To glimpse beneath the surface, track down an organization’s 990 report (you can do that on www.guidestar.org). 990 reports are where tax exempt organizations in the US are legally required to publicly list their expenses and revenue. While 990 forms don’t provide that much clarity on an organization’s budget, they’re clear enough to see some pretty big red flags. For example, the two founders of one artisan focused organization collectively earn over $200,000 in salary annually. These two salaries account for nearly 50% of their entire annual budget and is likely greater than the value of all products purchased and sold in the same year. To cover these “overhead” costs, the organization raises funds through charity. Do their donors understand how much of their donation is going towards initiatives that may or may not benefit artisans or follow “fair trade” principles? Do their donors know how much artisans really make working with this organization? Without full transparency we are left to simply trust the information they market.
This lack of transparency always leaves artisans in Morocco with the short end of the stick. Artisans are regularly coerced into giving much more than $5 discounts because of someone else’s business’ costs, fair-trade or not. The worst part? The end customer never even knows. As long as this continues, artisans will remain disenfranchised and poor, which only provides the fuel for the endless parade of organizations trying to save them.
Opening Up Anou’s Expenses
Anou is breaking this monotonous cycle by empowering the community of artisans in Morocco to drive their own growth and development. Naturally, financial transparency has become the backbone of ensuring this community is capable of establishing equal access to the free market on their terms.
This is why, starting today, Anou is making its real time data for expenses publically accessible. Next, we will begin building the tools to publicly display the revenue of our community in real time. This way when purchasing from artisans in the Anou community, customers will know exactly where their money is going. No need to take our word for it or believe that “all money goes to the artisan!”, you can simply see it for yourself. This document is what we use internally to record and track our costs, so you see what we see in realtime.
While this decision uncomfortably challenges the status quo, we believe it is absolutely necessary for us to do. We cannot create the trust needed for the artisan community to coalesce if only a select few can view Anou’s expenses — it is the artisan’s money after all. Nor can we create the expectation for artisans within the community to become more transparent if we do not set the example ourselves. Lastly, if we do not do anything, there is no incentive for anyone else in the fair-trade industry to ever change.
At first glance, full transparency might be perceived as naive, idealistic, and/or unrealistic. But is it really? One business in the US, Bufferapp, recently made all of their salaries and sales data open to the public in real time. The move was heralded as ground breaking, signaling a new era in how businesses are run in the 21st century. This company isn’t a social enterprise, nor does it have a traditional altruistic mission. Bufferapp simply develops a software application that enables people to easily manage multiple social media accounts. If a private for-profit company with no direct purpose in helping marginalized populations can execute transparency better than everyone in the fair-trade industry, it is naive and unrealistic to believe that fair-trade should remain the same.
As we continue our push to full transparency, we ask that you join and support Anou to realize a marketplace that works for both artisans and their customers. You can show this support by spreading the word about Anou’s work, purchasing through Anou, or doing something as simple as asking a question about our budget in the comments below so that we can make our budget more understandable. With your help, artisans will no longer settle for $5 discounts and customers around the world can buy with the knowledge that their money is going where it is meant to go.
View Anou’s Real-Time Expenses:
Note: We’ll be exploring our budget more in depth in forthcoming blog posts. In the mean time, ask us any questions you have below!