CraftNetwork: Making fair-trade sustainable

Yesterday I got a chance to chat with Chris Benz, founder of fair-trade exporter of artisan-made goods CraftNetwork. (Benz got in touch from Indonesia, where he’s based, after we wrote about CraftNetwork a few weeks ago.)

Seven years ago Benz started the business exporting handicrafts made by local artisans in Indonesian villages. Before then, the craftmakers were generally competing against one another and their market was limited to tourists passing through. By coordinating over 1,200 artisans to make products to similar specifications, CraftNetwork lets them compete for wholesale buyers in the global market. So instead of buying factory-made goods, customers could get the same volume and uniformity from CraftNetwork’s artisan suppliers working independently in their own homes or workshops.

The real innovative thing I think CraftNetwork is doing is trying to build a brand beyond just a fair-trade company that people patronize for feel-good reasons. He wants the operation to respond to trends and demands in the market and be competitive with non-fair-trade businesses. The idea is that you make fair-trade sustainable the same way you make any business sustainable: by winning in the marketplace. The social aspect may be added value for some buyers, but it isn’t driving the buying decision.

Is this working? Benz told me he’s filling a contract for 50,000 books weaved of banana leaves for Carnival Cruise Lines — an order he expects to be repeated. Carnival is a publicly traded company, which means it doesn’t make “feel-good” purchases, it makes decisions based on increasing shareholder value. If Carnival could get the same items cheaper from a factory in China, it would.

So now dollars from Carnival and other large buyers are flowing to 1,200 artisan entrepreneurs in Indonesian villages. “I have a whole village employed, a whole village that’s bringing in $70,000 a month -– based on one order,” Benz says.

CraftNetwork is also supporting them with some basic business training and resources — like saving 10 percent of their profits for unexpected expenses (like paying for health care), showing them how to plan to increase capacity, and how to use computers. The company is also building a pool of money that artisans can borrow from to finance their operations while waiting for payments, which can take months to come in from large buyers.

CraftNetwork has attracted backing from the International Finance Corporation, an arm of the World Bank. Benz says the model can be repeated. He has a staff of about 35 people, and expects sales of $500,000 in 2008.

This is small so far — 1,200 artisans in a country of 237 million. But globalization and the technology that enables the connections that make CraftNetwork possible are still relatively new. There’s plenty of room — and need — for new models that make free trade work better for more people. This seems like one worth watching.

Before it's here, it's on the Bloomberg Terminal.