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Profits with Purpose: Equal Exchange.

43 entrepreneurs who are changing the world
Social Capitalist 2008 Winner

Profits with Purpose: Equal Exchange

Rink Dickinson and Rob Everts, executive directors
West Bridgewater, Massachusetts & Hood River, Oregon
equalexchange.coop

Equal Exchange is an unusual company -- a worker-owned co-operative dedicated to Fair Trade -- that has made a success of tilting against the windmills of market forces for the purpose of demonstrating that the viability of economic democracy, and the way your food reaches your plate, needn't impoverish those who grew it.

When three young men -- Jonathan Rosenthal, Michael Rozyne, and Rink Dickinson founded the company in 1986 they decided their start-up would not only tackle the needs of their suppliers -- disadvantaged small-scale farmers and farmer co-operatives in developing countries. It would also try to improve upon the typical human relationships in other links of the chain from farm to table, including those of employer/employee, firm/investor, and farmer/consumer.

For example, Equal Exchange employees are also the owners, on a democratic one-worker/one-share/one-vote basis. They are the ones to nominate and elect the board, as well as fill two-thirds of the board seats. This helps safeguard Equal Exchange's workplace democracy, and ensures control resides with those closest to the mission. One tool in this role-reversal is the practice of selling non-voting preferred shares of a fixed value, with targeted 5% annual financial return plus a large, less tangible, social return.

Further, the three founders did not want people to simply buy their coffee or tea, but to also be knowing and willing participants in this alternative economic model. So whereas in the late '80's coffee was coffee was coffee, Equal Exchange was one of the first companies to begin to tell the stories and struggles of their farmer-partners and explain to consumers how their choices could have ripple effects in communities thousands of miles away.

The improbable company is alive and well. Equal Exchange has been profitable 18 of the last 19 years, has averaged 30% annual revenue growth, enjoys about $28 million in annual sales, and employs about 100 people in 6 states.

In 21 years Equal Exchange's impact amongst farmers has grown beyond coffee farmers in a few Central American nations. Today the company buys the coffee, tea, rooibos, cocoa, sugar, almonds and pecans from over 30 co-operatives in 19 countries on 4 continents. More than 90% of the crops are certified organic, and for coffee farmers alone the higher Fair Trade prices paid by Equal Exchange translated into $8 million in extra income between 2000 and 2006.

But regardless of that success the three founders knew from the beginning that their greatest impact would not be through their own imports or sales (which would never rival the scale of their conventional competitors), but rather by being a “mosquito” on the back of one or more multi-billion dollar industries, and by setting an example for others to emulate.

To do that has meant a two-track strategy. One track is to succeed on conventional terms, and demonstrate that their model could work. The other track has been to use Equal Exchange's "voice" to advocate for reforms. Sometimes this has been done quietly within trade circles, conferences and speaking to next-generation leaders at business schools -- and sometimes very publicly via marketing and advocacy campaigns.

In this way Equal Exchange has helped to jump-start the Fair Trade coffee and other food categories. Fair Trade Certified™ now accounts for over 3% of the U.S. coffee market and is quickly making in-roads into other categories including, tea, chocolate and bananas. There are now a number of small 100% fair Trade food companies, and some very large corporations buy at least a small amount of their ingredients via the Fair Trade system.

Lastly, Equal Exchange's official vision for the next 20 years -- approved last summer by the worker-owners -- is as improbable as was the first one in 1986. It is to create:

"A vibrant mutually cooperative community of two million committed participants trading fairly one billion dollars a year in a way that transforms the world."