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Ethical Procurement – How Fairphone Are Disrupting A $500bn Market

5 months ago

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Ethical Procurement – How Fairphone Are Disrupting A $500bn Market

For those of you that haven’t heard of them, allow me to introduce Fairphone. Founded in the Netherlands in 2013, Fairphone are a social enterprise in the smartphone market, aiming to create a phone that is both environmentally and socially responsible, or ‘fair’ (hence the name). Now on the second iteration of their product, Fairphone have been growing rapidly, and have amounted various awards and accreditations along the way. So, what exactly is it that makes them special, and can the larger market leaders take a leaf out of their book?

Fairphone Ethical Procurement | CSR Jason

Ethical Procurement:

Being a certified ‘B Corp’, the entire Fairphone company is built on social responsibility, but ethical procurement is arguably their main focus.

In the smartphone industry, and the consumer electronics industry in general, the vast majority of minerals that are used are mined in poor conditions by very low payed workers. In addition, it’s not unheard of for children as young as 7 to be involved in the mining process. When you consider that mining is hardly the safest job in the world, the entire industry becomes shrouded in controversy.

If that wasn’t bad enough, the vast majority of products on the market contain ‘conflict minerals’, which are minerals that are extracted and sold in order to fund international or domestic conflicts around the world. Whilst government regulation has started to clamp down on the use of conflict minerals, it is highly likely that thousands, if not millions, of products have helped fund violence and exploitation in several countries, with the Democratic Republic of the Congo being the most notable. As somebody who always wants the latest gadget, the thought that my consumption could have contributed to such an issue is pretty alarming.

This is where Fairphone have taken a clear stance. They’ve strived to ensure that all of the materials that go into their phones are conflict free, and are actively benefiting the communities that mine them.

As well as this, their entire approach revolves around building long lasting relationships with key suppliers, so they can better understand the problems that they’re facing and work together to eradicate them.

Overall, it’s a really refreshing approach to procurement and supply chain management, but the better news is that they’ve actually made it work commercially. It would be nothing short of naive to suggest that Fairphone have been able to do this without incurring any additional costs, but this is where ethics and conscious consumerism have combined wonderfully. Despite Fairphone entering a hugely competitive market, in which incumbent firms have an almost limitless stream of capital to invest in innovation, Fairphone have done remarkably well. This just goes to show how powerful responsibility can be when combined with engaged, socially-minded customers.

Conflict Minerals Smartphones | CSR Jason

The Catch:

Up until now, it may sound all far too good to be true. If Fairphone have created a great phone that’s also great for the planet and the people that live on it, why isn’t it the market leader? Well, although Fairphones achievements are pretty exceptional when you consider the competition, they’re still an unbelievable way off being a mainstream company, and this is potentially where the problem lies.

Unfortunately, their lack of capital for R&D/innovation has come at a severe cost when you look at the finished product. Don’t get me wrong, it’s far from bad, it just seems to be a few generations behind the current market trends and standards. The processing power wouldn’t have stood out in 2014, yet alone 2018. The phone also runs a more dated version of android, and the camera is noticably worse than competitors.

On top of that, because Fairphone have opted for a modular design (so you can repair it easily and not throw it away), it’s also quite a hefty unit. In a market dominated by super thin products with futuristic design concepts, it’s unlikely that Fairphone are going to make the sufficient waves needed to truly consider theirselves as competitors.

At this point, it may be tempting to conclude that Fairphone’s ethical procurement is the cause of this setback, but I really think that couldn’t be further from the truth.

The thing is, the problems that Fairphone have encountered have absolutely nothing to do with their ethics. In fact, without their ethics, they probably wouldn’t have even got this far. Realistically, the fact that their product lags behind rivals is simply because they’re a small startup with extremely limited capital (in comparison to market leaders).

This, in my opinion, is absolutely crucial, as it completely changes the take-home message of this post.

The thing is, the problems that Fairphone have encountered have absolutely nothing to do with their ethics. In fact, without their ethics, they probably wouldn’t have even got this far.

Verdict:

Whether we like it or not, we’re probably not going to see many new entrants into the smartphone market. Therefore, the fact that Fairphone have actually done so well is pretty astonishing. In my view, this perfectly shows just how powerful ethics can be, and for that they deserve enormous praise and recognition.

But what does this mean when it comes to genuinely changing things?

Well, being realistic, it’s unlikely that Fairphone will ever grow to the size required for long lasting change to occur, but maybe that’s not a bad thing. What Fairphone have done, and done extremely well, is make a clear statement. They’ve effectively proved that customers care about ethics and responsibility. In doing so, I like to think that mainstream companies will see the benefits of implementing ethical programmes and policies, which is pretty much the ideal scenario from a consumer perspective.

At a time where smartphone prices are rising rapidly, companies will no doubt start to struggle to justify the price tag. Yes, we like face scanners and curved glass and fast processors, but there is a limit to how much more we will pay for them. Perhaps going forward, and thanks to Fairphone, these companies will see ethics and CSR as a way of justifying that higher price tag, and I reckon the world might just be a better place for it.

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Hi! I’m an author and blogger within the fields of social impact and responsible business. I believe that businesses can be a force for good in the world, and this website contains my thoughts on how that can work.

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