Volume 21, Issue 1, January 2011
Douglas A. Schuler, Petra Christmann
The Effectiveness of Market-Based Social Governance Schemes
The Case of Fair Trade Coffee
Market-based social governance schemes that establish standards of conduct for producers and traders in international supply chains aim to reduce the negative socioenvironmental effects of globalization. While studies have examined how characteristics of social governance schemes promote socially responsible producer behavior, it has not yet been examined how these same characteristics affect consumer behavior. This is a crucial omission, because without consumer demand for socially produced products, the reach of the social benefits is likely to be limited. We develop a comprehensive model that links two
characteristics of market-based social governance schemes—(1) stringency and enforcement of requirements, and (2) promotion—to two conditions required for governance schemes to generate significant social benefits: (1) socially responsible behavior of participating firms; and (2) consumer demand for socially produced products which, in turn, expands products produced according to social governance schemes, and thus, the quantity of social benefits. We discuss market-based social governance schemes in the context of fair trade coffee.
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