Business Model

Equal Exchange’s mission joins the principles of Fair Trade and co-operation. Our business model was designed to reflect that and the results have been astounding. Here are are five key components:

• Fair Trade (equitable trade, fair prices)
• Worker Ownership (and an economic democracy)
  
• Fixed Price Shares (no roller coaster rides here)
• Extreme Community (in this case, more is better)
  
• No Selling Out (we belong to our community)
  

Scroll down for details – it’s worth the read. I am particularly fond of the last, “No Selling Out.” How can we avoid going the way of Ben & Jerry’s or The Body Shop? Plus if you are in the analogy mood, check out the post on why we are a mountain bike, and don’t forget our awards; lots of people love our model.

1. Fair Trade
We pay our trading partners at least a guaranteed minimum price of $1.26 per pound of green coffee, and $1.41 for organic, no matter how low the world market may fall. This includes paying farmer co-ops a “Fair Trade premium” which is allocated by their members for development projects in their communities. In 2006, Equal Exchange also facilitated over $2 million in advance credit to farmer co-ops. Through our Interfaith Program, we allocated $130,000 to our faith-based project partners for additional programs in farming communities.

2. Worker Ownership
Equal Exchange is a worker-owned co-operative. This brings a one person, one vote economic democracy to our company. Every worker-owner has an equity stake in the co-op and shares in our profits and losses. That aligns real financial accountability with real representation. Because our members are closer to the mission than anyone, putting voting control in their hands keeps us on track.

3. Fixed Price Shares
We need outside capital to grow, but we don’t want capital growth to be our goal, so our shares are set at a fixed price. These shares earn dividends, targeted at 5%, which we’ve paid every year for the last 18 years. Shares can be sold back to the company when you want to cash out. No one is getting rich here, but $5 million in outside investment has allowed us to build the company, and helped us change the world. No single group is getting rich here but everyone is getting a decent return. Fair?

4. Extreme Community
Everyone talks a good line on community, but at Equal Exchange we like to crank it up and practice “Extreme Community,” staying in close touch with all of our different stakeholders at the same time.

With out farmer partners: every single Equal Exchange worker-owner spends a week overseas to meet, stay, and work with farmers.

With each other: to help us stay connected with one another, the salary range at our own worker co-operative is limited to 4 to 1, from highest to lowest paid, from box packer to president.

With other enterprises: We also allot 10% of profits to invest in our community, either through donation to non-profits or in seed capital for early stage, mission-driven companies.

5. No Selling Out
Many companies set out to do good, but then the founder retires or a major offer is too tempting and they end up selling to a larger more conventional corporation. So it was for Ben and Jerry’s, Tom’s of Maine, and The Body Shop. However, Equal Exchange’s bylaws require that if the co-operative is sold, all proceeds, after investors are paid back, are distributed to other Fair Trade organizations. Without the possibility of windfall riches there isn’t the motivation to sell out. The result? All of our energies focus on advancing our mission, and we attract employees, supporters, and investors with similar goals.

So please leave a comment, and tell us what you think?
What’s sounds great, what sounds a little dodgy?
What business models do you like?