TUESDAY 9 FEBRUARY 1999

MR CHARLES BRIDGE, MS AILEEN LEONARD, MS ROSEMARY STEVENSON, and MS JUDY WALKER

150  Is there a benchmarking role for government in this?

  (Ms Walker) We are back to the question of the role here of government in setting standards and monitoring against those standards. From my own perspective, we have a number of techniques that we have been using over a number of years in poorer countries around the world of looking particularly at social impact assessment and we have used those widely in a whole range of different countries and we are at the moment in the process of introducing many of those techniques and instruments into some of the UN bodies for them to start using them as well. So we feel that we have a body of knowledge on how to deal with some of these areas. In terms then of monitoring companies to do this, I think we are at the beginning of a learning curve here. There are a number of agencies growing up; there are a number of companies developing their own expertise in doing this and it is not clear to me at the moment what the role of government would be in the future in helping to supply that. But we are actively engaging in dialogue with many companies and with civil society partners in looking for ways forward in all of these difficult areas.

151  And the Department of Trade and Industry?

  (Mr Bridge) I do not think we have been actively involved in benchmarking. That is the kind of thing which we would expect an organisation like ETI to be interested in developing and DfID, and we have not seen a niche for ourselves there.

152  Can I just ask question here. You mentioned a couple of times the Social Dimensions of Business Resource Centre. Can you tell us a wee bit about this because I am intrigued by it. I would have thought this would have been the responsibility of the socially aware Department of Trade and Industry, but perhaps you could tell us a wee bit about it and where the money is coming from.

  (Ms Walker) We are in a process of tendering for an outside body or consortium of organisations to actually run this on behalf of DfID at the moment, so I cannot give you details of who it is going to be.

153  I can appreciate that, but just the general concept.

  (Ms Walker) The general concept behind it is that in order to take this forward, there are a number of different types of organisations who need to be involved in the development of social responsibilities in poorer countries. I am focusing particularly on poorer countries here, not in Britain because it is not the remit of DfID to look at that, although many of these organisations which are in the consortia that are bidding for this resource centre are based in the UK. The bidding process is not far advanced and I cannot at the moment tell you who is going to be in this, but the type of activity it is going to do when it eventually gets up and running is to develop a lot of information about instruments and methods of going about benchmarking, as you call it, or social impact assessment, as I call it, and developing a whole series of people with the expertise to carry through this type of activity and also developing on-the-ground pilots about how you actually do this. So in some ways it replicates what the ETI is doing, but it takes a slightly different view of developing expertise particularly.

154  I wonder if I can ask about your views on ethical labelling and its usefulness because certainly in the DTI submission I think there are about five paragraphs on labelling and I was hard-pushed to actually find out what your opinion was about labelling from those five paragraphs.

  (Mr Bridge) Well, first, I think labelling can, in principle, be done and, second, it is one option with some risks and dangers and it is one which, I think I am right in having picked up in the course of the morning, the Ethical Trading Initiative people themselves are not too keen on, the labelling of products. That may partly come down to the point I made at the beginning, that we, in the DTI, are looking for an inclusive role rather than an exclusive approach and we do not want to imply that people who have not ticked the box are unethical. Perhaps the main difficulty from DTI's point of view or potential difficulty with some labels is that they could be used arguably in a discriminatory way, in a way which would get us into difficulties under WTO rules. If we are talking about labels which are entirely voluntary arising from a purely private sector initiative, then that should not normally be a problem, though even there the relevant WTO agreement does require that where there are internationally recognised standards in particular areas, they should be used rather than some other standards so that there should be no particular advantage given to one supplier over another in meeting the requirements of the labelling. So you need a fair, transparent and open system for operating a labelling scheme and this applies all the more strongly of course if it is a government-led scheme and more strongly again if it is a government-imposed requirement.

155  I notice you say in your submission that it is important to note that the opposite of fair trade is not unfair trade, but is conventional trade which may be completely ethical. Are the unfair trade people trying to say in some ways that they do not believe that the opposite of what they are doing is completely ethical because, for example, you say that with a fair trade scheme, the producer is likely to get more for his crop by selling it direct than he would through a chain of intermediaries, so surely the opposite applies and it is the intermediaries creaming off the cash and is that ethical?

  (Mr Bridge) Well, I think making a profit in business is ethical, yes.

156  Even —-

  (Mr Bridge) I believe I can firmly say that that is the Government's position, that it is all right to be in business. Perhaps I will leave it there.

157  But it is equally all right of course if you are making that money at the expense of poor producers in third world countries?

  (Ms Stevenson) It would be helpful perhaps if I come in here. The opposite of fair trade is conventional trade. I do not think we are necessarily saying that every single piece of non-fair trade is ethical, but the fact that something is not fair trade does not necessarily mean that it is not ethical. For example, fair trade works in particular with small producers and it may not always be possible to work with that group. In some countries the way the market is organised, the middle man is not necessarily a bad thing; in some cases the middle man is a necessary part of the system. Kenya is an example there. It will not always be possible for someone to meet the criteria of the fair trade mark, leaving aside at the moment that it is only in a limited number of commodities anyway, so it is still possible for business to act in an ethical way and obviously that is what we are trying to encourage even though it is not meeting these narrow criteria. Obviously we support fair trade as helping improve the lives of often the most marginalised and poorest producers, but they are not necessarily in opposition with each other. The Ethical Trading Initiative, for example, aims at helping to improve the ethical standards of that wider range of business and people who are not necessarily going to be involved in fair trade.

158  Clare Short got some publicity recently on the business of fair trade coffee. Can I ask if the DfID uses fair trade coffee?

  (Ms Stevenson) Firstly, DfID supports the concept of fair trade as it improves the lives of, as I said, often the most marginalised and this is one way of promoting responsible business. As to whether we actually do use fair trade coffee in the office, yes, we do, coffee and tea.

159  Are you saying you use it exclusively?

  (Ms Stevenson) When we have meetings, the tea and coffee provided is fair trade.

160  Following up what you said earlier, there presumably is coffee which is not fair trade coffee which is quite ethically produced, so are you not now discriminating against those producers?

  (Ms Stevenson) Fair trade helps often the very poorest. Our aim is to eliminate poverty. You can have lots of good things, but choose between them.

161  Can I ask what the DTI use for its coffee?

  (Mr Bridge) I do not think it is fair trade coffee.

162  So has the debate been held?

  (Mr Bridge) Yes, I believe it has. I believe that our outside catering suppliers are under their contract given a free rein about where they source such things. That is my understanding.

163  Provided they make a profit on it!

  (Mr Bridge) No, they are quite free to make a loss.

  Helen Southworth:Would that be ethical?

164  Can I move on to something else. I think there is a commitment to amend the Trade Descriptions Act so that it would be illegal to put misleading environmental claims on labels or advertising. Are there any proposals to equally do the same thing with misleading ethical claims and could those be handled under current legislation? If I advertise that my clothing or footballs are made using child-free labour and that was proved not to be the case, is that something that can be prosecuted at the moment?

  (Mr Bridge) I understand it is, yes. I understand that under the Trade Descriptions Act, it is simply an offence to make false or misleading claims, therefore, including the kinds of claim that you have suggested. I am not sure how easy it would be then to take it to court and I dare say it would be rather harder to do than it would be in the case of making a false claim that the football would remain inflated.

165  We have had references made already to social auditing and there is a review of company accounting in the Companies Act going on. Has the Trade Policy Directorate made any contribution to this review?

  (Ms Leonard) The exercise on the review at the minute, my understanding is that there has been a scoping exercise and there is an independent steering group which will be handling the review. We expect that group to issue a consultation document shortly, though I am not sure of the timing, and we will obviously feed into that and look at the issues even if someone comes along saying that the ideas we have heard this morning, there should be a requirement for reporting and then obviously there will be a trade policy dimension to that and we will feed into that process. My understanding is that the independent steering group have not got any preconceptions and want actually to hear these requests and requirements.

166  I do not quite get the impression that you are self-starting in this process. Does the Trade Policy Directorate have a view at the moment prior to scoping and committees being established and all the rest of it? If I were to table a question to the Minister today, saying, "What is the attitude of the Trade Policy Directorate of the DTI towards social auditing procedures?" would we just get a response along the lines you have just given us or would there be something else?

  (Mr Bridge) I think it would probably along the lines you have just heard.

167  So you have not really got a view on it at the moment? Is that it? I find this a wee bit surprising given that it is common currency amongst most of the witnesses we have had this morning that there is an institute of social auditing in place and there are a number of companies that are producing independent social audits and one would have thought that with pressure from companies like The Body Shop, for example, you may have been aware and had an inkling of an idea on this.

  (Mr Bridge) Well, we are aware of the fact that a lot of companies do a lot of work in the area of social auditing, yes. I do not think we have had it particularly pressed upon us that it would be terrifically important and a good idea from a trade policy point of view to make that a requirement in the Companies Act. I am not frankly even sure, just looking at it from a very narrow parochial point of view, whether it is really a trade policy matter, but be assured that the DTI of course will look at everything that is put to it in this area.

168  It may be that you will be required to look at this when we produce our report and seek a response from you. It is a bit unfortunate that we have to do that in order to get it, but I hope that message goes back to the people who have responsibility for it because I think that frankly it is rather disappointing, the testimony we have heard from you this morning, and we would have thought you would have been more frank and all we have had is lip-service paid to the Ethical Trading Initiative. We think the Ethical Trading Initiative itself is praiseworthy, but we are not sure that all the parts of government are giving it exactly the same degree of emphasis.

  (Mr Bridge) Well, I regret your characterisation, Chairman, but I will report it back because I am a good messenger!

  Chairman: Thank you and we are grateful for the messages you have given us this morning.