3) Description of your products or services: One of the world’s first labor monitoring programs, RUGMARK is at the forefront of the movement to end child slavery in South Asia’s handmade rug industry. RUGMARK’s innovative system includes certifying and labeling rugs as child labor free; offering educational opportunities to children at risk of and rescued from exploitation; and building a market for child labor free products in the U.S.

In the last century, thousands of government and nonprofit agencies have attempted to make change through policy reform. While these efforts help, RUGMARK has learned that laws don’t work without a marketplace that respects them. In the end, it’s money that talks. After years of rescuing children from factories only to see them replaced by others, Indian activist Kailash Satyarthi concluded that the consumers who dictate the terms of the market must ultimately lead a systemic change. Thus, the plan to create a label for handmade rugs produced without illegal child labor was born: the RUGMARK.

As host to the largest market for handmade rugs, RUGMARK USA works to expand consumer awareness to stimulate demand and create financial incentive for manufacturers to stop exploiting children. The revenue from the sale of child labor free rugs has already had a huge social impact; every year, thousands of former “carpet children” attend schools and receive vocational training while countless more have been protected from exploitation through preventative measures.

4) Description of the operational model: RUGMARK USA is a nonprofit organization that operates as a partner with six RUGMARK offices under a franchise-type structure. RUGMARK is a voluntary program in which carpet exporters are licensed through affiliates in India, Nepal or Pakistan. They must agree to random inspections of all production sites to ensure no child is exploited during the manufacturing process. Importers become licensees by signing with RUGMARK in the market country and agreeing to work only with Rugmark-approved manufacturers. There are currently 27 importers selling RUGMARK-labeled rugs through 350 independent showrooms and some large department stores, representing 1% of rug sales in the U.S. market.

Fees from participating industry licensees go back to the impoverished weaving communities in the origin country and fund a comprehensive array of educational and social programs. RUGMARK currently sponsors 11 schools and rehabilitation centers in addition to offering everything from daycare to job placement to health services. In 2004, the 80,000 square meters of rugs sold in the U.S. translated into $57,000 to send children to school and receive vocational training, which, combined with funds generated in Europe and donor grants, provided direct services to over 3,500 children.

5) Description of the financial model: U.S. importers who use the RUGMARK label pay RUGMARK USA 1.75% of the export value of shipments. Fifty-seven percent of these fees fund social programs in South Asia; the balance supports RUGMARK USA’s consumer awareness efforts. In 2004, 26% of RUGMARK USA’s budget or $100,000 was from licensing fees. Licensing payments are projected to comprise 73% of revenues by 2012.

RUGMARK’s Retail Marketing Partnership also attracts industry funding. In exchange for promotional benefits, retailers pay an annual fee of $2,000. In 2004, the program had 13 retailers contributing $26,000. Using the focused time of a newly hired business development director, the program is projected to generate $55,000 by 2007 and $121,000 by 2012.

Although marginal now, with greater industry participation, fee revenue from importers and retailers will cover more expenses as RUGMARK works consciously toward sustainability. Future RUGMARK USA funding is anticipated from government and foundation grants, individual donations, industry revenue, and in-kind contributions. After 2007, industry revenue will surpass grants as the primary source of funding, as detailed in RUGMARK 10-year growth plan.

      Client fees represent this approximate percentage of operational budget: 26%

6) Key operational partnership: What sets RUGMARK apart is its ability to link the nonprofit and for-profit sectors by involving various stakeholders and creating a broad sense of investment. RUGMARK cooperates with consumer advocacy, labor and faith- based organizations that represent 10 million people. RUGMARK relies on partners like Co-op America to mobilize consumers to demand and purchase RUGMARK rugs. Partners from the investment community, including the Calvert Fund, apply shareholder pressure and lobby corporate retailers to eliminate child exploitation. They believe the company's stock-value is tied to supply chain issues, such as child labor.

RUGMARK also counts on its 27 U.S. importers and network of retailers to provide financing, help raise money, host educational events, and build RUGMARK brand recognition. RUGMARK’s industry partners include the leading home décor companies.

There are challenges to building partnerships. RUGMARK must alter the perception of many non-member importers who are unwilling to pay for a problem they don’t recognize. However, as consumer demand rises, there will be incentive to join and accept RUGMARK as a vehicle to communicate humanitarian corporate values.

7) Current outreach:

What is the order of magnitude of the potential demand for your products or services? Which
    other low-income groups, countries or regions could benefit from it? Try to quantify (number
    of clients, market size in currency):
According to the ILO, there are nearly 250 million child workers in the world today. RUGMARK’s primary goal is to wipe out child labor in the industry and geographic region where it is most egregious. Once successful in addressing the issue in the South Asian carpet industry, RUGMARK is prepared to expand its efforts to other areas where child exploitation is prevalent such as Turkey, Afghanistan and Morocco.

By succeeding with its one-industry approach, RUGMARK can facilitate sister programs. RUGMARK has already helped Pró Criança address child labor in Brazil’s footwear industry and other monitoring efforts, including Cocoa Industry Protocol, have been modeled after RUGMARK.

RUGMARK USA is part of a growing movement changing the way consumers think and act. As RUGMARK educates its target market, more consumers will consider who made the products and under what conditions.

A RUGMARK inspector visiting a carpet production facility to ensure there is no illegal child labor.   (Photo by Robin Romano)

8) Scale-up strategy: