What is Fair Trade?
What exactly makes up a fair trade can be quite tricky. For some, it simply pertains to trading commodities directly from the suppliers like farmers and artisans. The products usually include handcrafted woodwork, fruits, coffee beans, and other goods farmed in rural areas. However, it gained a definition that can be traced back to its roots over the years. In the early ‘50s, Western traders noticed that local artisans and farmers from the developing countries they visited had trouble making a profit with their produce.
These traders would sometimes buy the local products and sell them at a higher price in large commercial cities, then take the profits back to the farmers and artisans. Simply put, fair trade is the commercial model that targets the export of products of developing countries and takes it to a larger market to improve their economic condition.
How does fair trade work?
The most noticeable difference between fair trade from mass-produced goods in large markets is that the products are generally more expensive. However, the price isn’t a good measure of why people should consider buying products from fair trades.
Most companies that offer fair trade products go through a rigorous process of certification that often includes regular third-party auditing. They want to make sure that the supply chains and the products being sold, are up to the environmental, social, and economic standards.
As mentioned before, since most fair trade products involve food and other essential products, the certification process is similar to organic certifications that the government’s agricultural department usually spearheads. Likewise, fair trade products made by artisans like clothing and furniture go through a certification process that inspects the textile materials. Certifiers of fair trade operate independently, although owned by Fairtrade International.
Cooperatives make up a large majority of all existing fair trade companies, which only makes sense since it stays true to the purpose of fair trades for the empowerment of the workers that make up the company. In other words, every individual member of the cooperative is an owner of the company. This way, the small-scale farmers and artisans can reap their benefits as long as the cooperative businesses are being sustained until they grow in value.
The pricing of fair trade products is usually higher because it includes the coverage of cost in case globally uncontrollable conditions such as typhoons, drastic changes in climate, and other natural disasters happen. This cost coverage protects the business from fluctuating market prices.
Benefits of fair trade
- Setting a minimum price/income sustainability – Due to the change in climate and other factors, setting up minimum prices on products is necessary to sustain the farms and minimize the losses.
- Encourage growers and farmers to work together – Exchange of knowledge within the cooperative is encouraged since one of the core concepts of fair trade is for the producers to work together.
- Extra income from fair trade can be invested in training for more efficient farming techniques, resulting in more quality products – Research and product development have been an essential part of fair trade. Over the years, efficient farming has been dramatically improved by new technologies such as maximizing crop yield while reducing costs. One example is the increased production of mango due to the research of Filipino scientist Ramon Cabanos Barba, who introduced the use of ethrel and potassium nitrate to induce more flowers in the mango trees.
- Provides access to overseas loans to help producers invest – Producers that need more funding can cooperate with foreign companies to cover their costs. Since fair trade initiatives support the export of products from developing countries, it’s no surprise that foreign investments are common to elevate the former’s economy further.
- Global partnership for sustainable development – Global partnerships assure producers that the products will be sold as long as the market demands them.
- Creates safety nets for producers – Good quality seeds are being distributed among the members of cooperatives. The distribution ensures that product quality constantly improves without affecting external factors that influence pricing.
- Regulations and standards to protect the environment – It remains to be one of the main advantages of fair trades. Since organic products are being produced in a more natural environment with minimal to no environmental waste, certifications are needed to guarantee that standard. Aside from limiting greenhouse emissions to prevent global warming, regulations also serve as guidelines to conserve wildlife.
- Encourages farmers to undertake training to better understand the environmental impact of various agricultural practices – Education in agriculture is an essential part of fair trading since it creates awareness that farming can be just as profitable as other industries. However, the primary purpose of applying academic research and development is to create a sustainable structure of agriculture that doesn’t disrupt the environment.
- Continuous monitoring of the environmental impacts and implementing ways to reduce them – Constant monitoring of environmental impacts helps keep the fair trade communities on track for its mission to provide sustainable development in production methods.
- It helps combat climate change and its impacts – The fair trade promotion of using biodegradable materials instead of plastic is one of the most significant contributors to combating climate change.
- Costa Rica invested in ovens fueled by discarded coffee husks of the beans they’re roasting, reducing the number of trees cut down for firewood.
- Fairtrade communities heavily criticize large palm oil companies because they destroy orangutans’ natural habitats.
- Promotes equality – Equality extends way more than as a topic for social issues in the media. In traditional companies, unfair cultures often favor those with prestigious backgrounds. However, fair trades continue to combat that culture by looking more at the professional experience of a worker.
- Farmers have more control over their crops and work in a suitable environment. – Often, workers of all industries have a huge problem in the state of their working environment. Even office workers are subject to working spaces not ergonomically optimized to suit their needs. In fair trade, especially within cooperatives, workers themselves get to decide what type of environment they want to work in so that they are comfortable.
- Not subjected to discrimination and prejudice (e.g., gender, age, race) – Wage gaps in gender are a hot issue that has been discussed widely in politics and media. The level of total inequality can be accurately seen in charts that present data on wage gaps. Fairtrade imposes regulations to avoid discrimination and promote diversity within the workforce.
- Includes initiatives involving housing, healthcare education – Cooperatives, especially with the workers in rural areas, include projects that improve their conditions by erecting facilities like schools and clinics. In addition, housing is provided for the workers so that the factories/farms they work in are within proximity.
- It helps improve and enhance the quality of life in many farming communities – Farming communities in the modern world are often underappreciated, considering that there are jobs in the city that are alluring to many. However, with fair trade and its certification process and third-party auditing, farmers’ quality of life can drastically improve because it provides stability in income and expenses.
- Bans child labor – Child labor is a problem that is most prevalent in developing countries. With fair trade, banning child labor means limiting corporate workforce exploitation. In addition, with higher living standards, families won’t be forced to send their kids to work just to afford basic necessities.
- Women empowerment – Gender discrimination – Standards of fair trade are focused on eliminating bias. Use of pregnancy tests upon recruitment, for instance, is prohibited.
- Sexual harassment – The occurrence of sexual harassment within the workforce, in general, has been documented to be still a significant problem. However, with fair trade supporting the prevention of such injustice, it’s becoming possible to create a working environment where women feel safe.
- Gender-based violence – Conflict of interest is often the cause of violence within the workforce, but gender-motivated ones are also recognized as part of the problem. Imposing protocols on this type of incident is among the standards placed in fair trade.
- Promotes entitlement for parental leave, pregnant, and breastfeeding women – Workers are the priority of fair trade, so it’s only suitable to consider that women have specific needs regarding motherhood. Spending time with their families is one of the core concepts that improve workers’ social lives.
- Gender leadership schools – Leadership training is encouraged within the fair trade communities, especially in places where women make up most of the workforce. Financial skills, decision-making, and negotiations are among the skills offered by said schools.
- Builds effective, accountable, and inclusive institutions – When there is extra funding that the cooperative manages to acquire upon selling their products, some are used to fund initiatives like building hospitals, investing in new technologies, etc.
- Improve food security – Fair trades promote food security for ordinary people. Furthermore, since the goal is to create a zero-waste production method, food security also increases because of reduced land degradation. This way, the resources can be reused efficiently.
- Allows shoppers to live and shop according to their principles and take action to support farmers and their families – In most cases, what people only consider when buying things from the supermarket are price, taste, and quality. However, there are more to our decisions when choosing which products to buy. Fair trade aims to promote ethical, guilt-free consumption.
- Provides consumers with the opportunity to connect with the people who grow the produce – It’s essential for consumers that their products come from people who passionately grow the produce themselves.
The fair trade certification process
This part of the article will describe the step-by-step process to be fair trade certified.
The first step businesses have to do to be fair trade certified is to ensure that the business model follows fair trade standards.
Business assessment also requires the business owner to name a few things that the fair trade certification can help with.
- Sign up – Signing up is where the business submits a form to FLOCERT, the fair trade certification body that acts autonomously. Once the assessment is done and the business products are determined to be within the scope of fair trade certification, FLOCERT will send back a questionnaire that includes the requirements it takes to be certified.
- Initial audit – It happens right after the business submits the form with complete information. Then, one of the FLOCERT inspectors will schedule an appointment for an on-site inspection. The inspector will check the business facilities and gather information from employees and members.
- Analyzing audit – After the initial audit, the result will be released and analyzed. This part of the process decides whether or not the business can proceed to the next certification steps. If nonconformities are found, the analyst will guide the applicant on fixing these problems to proceed to the certification. Once cleared, the certificate is granted with a 3-year cycle. During these three years, regular audits are being conducted to ensure that things are running well and ready for certificate renewal.
When the business is officially recognized as a fair trade partner, they may use the official fair trade seal that certifies their company to have undergone the rigorous examinations of the organization.
Applying for each product
The total cost of certification depends on the business’s products. The type of products that the business offers should be stated right from the application form.
Now that the fair trade seal is available to use, the business can leverage this advantage by incorporating the certificate in the marketing efforts. Some suggestions that the fair trade website highlights are the importance of fair trade landing pages and blog posts. In the blog post, the business can share stories about their commitment to the principles and values of fair trade, such as creating a more humane environment for the workers and consumers.
Fair trade companies
This company started with humble beginnings, only having about a budget of $12,000 when it first opened in 1978. The first branch was erected in a renovated gas station in Burlington, Vermont.
The company’s values are centered around upholding human rights; social & economic justice; and environmental protection, restoration, & regeneration.
The main ingredient they use with fair trade is the milk that comes directly from farmers who sell their produce to the company.
Aside from being fair trade certified, Rishi Tea has also had USDA organic certification since 2002. Rishi Tea boasts its commitment to providing quality traditional tea. Direct trading of commodities enables them to handpick herbs whenever they want a new flavor profile while also ensuring that a higher price is guaranteed to be given to the farmers.
In Yunnan, the mountainous region of China, they partner with the farmer tribes who grow the ancient tea trees. Rishi Tea’s certification ensures that the business supports the efforts to conserve the culture of the tribes in those areas, which are the natural protectors of the ancient tea trees.
This collaborative project between Origin Wine, Du Toitskloof Winery, and the worker community gets its resources from the participating farms in South Africa that focus on building facilities to help the community.
Fairhills Wine offers a range of different products, including chardonnay and sauvignon.
This company is one of the largest fair trade certified coffee traders. The beans are carefully selected to fit the sustainable standard.
The resources came directly from small-time farmers in the Lake Toba and Aceh area in Sumatra. Upon partnering with the farmers, the company discovered that the aging coffee tree produced fewer yields over time. So what they did was that they educated people on proper management of the trees to keep their beans at the highest quality.
Theo Chocolate found a way to make a sustainable cocoa supply through the farmers in the Democratic Republic of the Congo.
The main difference that Theo Chocolate uses to demonstrate their commitment to fair trade standards is that they avoid using sunflower lecithin and soy during their process of creating chocolate. They instead use cocoa to its full potential by substituting those ingredients for cocoa butter to achieve consistency in flavor.
Skincare companies aren’t exactly known for their ethical practices. However, Blends For Life is one of the few companies that share its commitment to protecting human rights through humane practices of developing recipes for their products.
The simple approach is highlighted in their organic shea butter blends, keeping their supply coming directly from producers who are mostly women at fair trade prices. As a result, it doubles the producer’s income compared to the regular market price.
Combating poverty has always been the goal of People Tree, a clothing brand with a fair trade certification.
Without the use of options provided by fair trade standards, most cotton farmers rely on pesticides to maximize their crop yield. These pesticides, however, are highly toxic to humans, thus contributing to the degradation of land and, subsequently, the working environment.
People tree promotes fair trade standards by introducing more sustainable disposal and banning extremely harmful chemicals.
Training the farmers on developing healthier soil to properly manage pests without using heavy pesticides is one of the critical efforts that People Tree is working on with its producers.
Recycling materials and using renewable energy to process them are the highlights of Rapanui Clothing and Teemill.
Unlike large corporations who produce their clothes in bulk, this company offers a different way of production. They make the clothes in real time after an order is confirmed. It means that they make them one at a time, so they don’t have to waste so many materials by flooding the market with supplies.
Teemill is part of Rapanui Clothing. It’s a creative platform that is free to use for people who want to design their clothing brands.
Vintage-style clothing might be the highlight of Annie Greenabelle; the method they were produced serves as the backbone of the business.
Annie Greenabelle is constantly looking for new ways to improve its fair trade certified cotton and bamboo as clothing materials. The company is also invested in the use of recycled plastic.
Nomads Clothing is one of the oldest companies to bear fair trade certification. They use natural and organic fibers using traditional artisan techniques.
Based in the UK, Nomads Clothing has been promoting ethical practices in producing clothes using the traditional methods of the artisans who have worked to create high-quality products for more than 30 years.
Are people willing to pay for fair trade products?
Key findings in this experiment said that consumers value the ethical label of products upon choosing. The researchers also found a difference in sales when a product has a fair trade seal.
As part of the research, two products were involved. FR Regular and CB Coffee had about 10% more sales when the products carried the fair trade label than the generic label.
In a study conducted by the University of Bonn, the researchers found that consumers are willing to pay 30% more on products with fair trade labels.
The study also showed increased activity in the brain’s reward system when the test subjects were presented with fair trade products.
In a second experiment that is connected to the previous research of the University of Bonn mentioned above, test subjects were given two separate chocolates in a taste test and told that one chocolate is a fair trade product, while the other one is conventionally produced.
The majority of the test subjects felt more inclined to say that the fair trade chocolate was superior in taste than the conventionally produced one. But in reality, there is no difference between the two because they’re the same chocolates.
Researchers David Bürgin and Robert Wilken found a way to promote the sales of fair trade products despite their higher pricing compared to mass-produced alternatives.
Researchers found that consumers need to be aware of the benefits of buying these products to consider them.