Fair trade food schemes battle to promote better standards

Early last month, a small team of auditors arrived unannounced at a melon farm in Choluteca, the fertile region of southern Honduras. The farm is a division of Fyffes, the Irish fruit company.

After interviewing workers, the auditors sent a report to Fair Trade USA, a non-profit organisation that certifies and labels products as “fair trade”. A few days later, it decertified the farm, claiming multiple infringements of its standards, including trade union rights.

This storm in a Central American farmyard goes to the heart of problems facing the international fair trade movement, as it struggles to respond to challenges posed by the global food industry and changing consumer habits.

The controversy came as an embarrassment to Fair Trade USA, since it had certified the farm only eight months previously. The organisation had split from Fairtrade International, an umbrella group, in pursuit of bigger and faster gains. Critics had said the move would lead to a dilution of fair trade standards, which generally guarantee better than market prices and safe working conditions for farmers and workers in the developing world.

Growing consumer demand for ethical food has encouraged more companies to certify their output, leading to the emergence of new fair trade schemes and putting pressure on established fair trade certifiers to expand their operations, despite limited resources.

“We have ended up with a proliferation of labels because there are some strong differences in how producers and people in the fair trade movement believe they can best respond,” says Anna Canning, campaigns manager for Fair World Project, a fair trade watchdog.

The trend threatens to undermine consumer confidence, while encouraging “fairwashing” — when a company applies for a fair trade label to gloss over its problems — Ms Canning says.

Some leading producers have recently pulled out of established fair trade schemes to set up their own ethical labels.

The decision in 2016 by Cadbury, the British confectionery maker owned by US food group Mondelez International, to pull out of the Fairtrade scheme in favour of its own sustainability programme, Cocoa Life, placed a question mark over the viability of established fair trade organisations. Green & Black’s, which pioneered organic Fairtrade chocolate and was bought by Cadbury in 2005, joined Cocoa Life the following year.

In 2017, UK retailer J Sainsbury announced it would also drop the Fairtrade label from its own-brand tea, launching its Fairly Traded label instead. Meanwhile, Nestlé is expanding its in-house Cocoa Plan sustainability programme.

Trishna Shah, senior analyst at market researcher Euromonitor International, says that “2009 was the year when the big global fair trade brands became important to companies, they began to seek them out — Cadbury, Mars and Nestlé went fair trade; 2017 is when they switched”.

While Fairtrade, UTZ and the Rainforest Alliance have been seen as the gold standard for fair trade certification in recent years, there is now “a ripple of change”, with leading manufacturers moving to self-certification, Ms Shah says.

“For some manufacturers with complex supply chains, established fair trade schemes don’t offer enough flexibility. That’s why they are looking to adapt to the current business climate,” she says.

In this sense, the best-known fair trade certification brands are victims of their own success.

“Fair trade has been one of the most important ways of getting more people to think about where the stuff they buy comes from, and the conditions under which it is produced. That’s a fantastic thing,” says Christopher Cramer, development economist and professor at Soas, University of London, and co-author of one of the few in-depth academic studies of the impact of fair trade schemes.

“There is a neoclassical view that it doesn’t work to intervene in markets — I disagree. You are more likely to reach poor people through larger producers who are in the public eye,” he says.

However, research four years ago, led by Prof Cramer, questioned the positive effect of fair trade on the people it is supposed to benefit: the producers.

“We found that fair trade made no positive difference to the poorest people in the supply chain. We had statistically significant evidence suggesting that we don’t know enough, and that what we know is that it doesn’t make much difference,” he says.

Fairtrade International says it has since worked closely with the researchers “to listen to their views and better understand some of their findings”. But the organisation is bullish about its prospects, claiming to represent almost 1.7m Fairtrade farmers and workers, and being a partner to 2,400 companies selling more than 30,000 products with the Fairtrade mark.

“The producers will tell you that Fairtrade provides more benefits for them,” says Dario Soto Abril, chief executive of Fairtrade International. “We set the bar high, we are the gold standard — we put the producers in the driving seat.”

Among consumers, the Fairtrade brand has the highest recognition, with nine out of 10 shoppers in the UK knowing about it, he says.

Mr Soto Abril sees the trend towards self-certification by large manufacturers as a vindication. “We are disruptive of the terms of trade. Part of being disruptive is that we force companies to catch up,” he says.

Rather than being bypassed by Mondelez, Fairtrade is now partnered with the company, monitoring closely what it does, Mr Soto Abril says.

Fairtrade is also responding to the changing business environment, he says. Next year it will launch Fairtrace, which uses blockchain technology to increase traceability and allow shoppers to know more about the origin of the products they are holding in their hands.

The move is a recognition that sustainability is a lot more nuanced, with consumers more demanding and inquisitive than before, making it harder for companies to win their trust. Ms Shah at Euromonitor says a wave of start-ups is trialling digital platforms such as blockchain and smart labelling to connect consumers with the ethical credentials of brands.

“One of the big buzzwords in 2018 has been traceability,” Ms Shah says.

Meanwhile, the Fyffes melon farm in Choluteca is left without the Fair Trade USA label.

Fyffes said it “remains committed to the highest ethical standards, robust certifications or ethical audit programmes that operate across our supply chain”.