Does Fairtrade Really Work?

The Fairtrade certification system was created to support and empower marginalised small-scale producers and workers in low-income regions of the world. But to what degree does it work in practice? And how does Fairtrade overcome the limitations of its system for greater impact?

Fairtrade enables farmers and workers to tackle poverty and improve their financial sustainability, by creating a trade model with fairer prices and working conditions.

Within the Fairtrade model, certified buyers and traders must pay the Fairtrade price on any goods they purchase from Fairtrade cooperatives (a group of small-scale producers). The Fairtrade price will be either the ‘minimum price’ or market price, whichever is higher, plus a ‘Fairtrade premium’. To support small-scale farmers who often struggle with poverty, the minimum price acts as a safety net for farmers against volatile market prices that could result in losses, and the premiums are additional funds for cooperatives and workers to reinvest into their communities (like building roads, funding education, etc.).

Learn more about how the Fairtrade system works.

Do Producers Really Benefit From Fairtrade?

Image courtesy of Fairtrade Foundation / Kate Fishpool

It’s important to point out that benefits for Fairtrade producers will vary depending on product and region. Various studies, which focus on coffee producers, have demonstrated that Fairtrade’s system improves the lives of producers and their surrounding community. They have higher bargaining power in trade negotiations, they receive higher shares of revenue because of the minimum price model, and the Fairtrade premium has significantly impacted the social welfare of the community as a whole.^1,²

However, other studies have raised questions about the long-term impacts of the Fairtrade model. Here are four ways in which the Fairtrade system may be limited in its benefits for small-scale producers:

1. Not enough Fairtrade sales

Producers only receive the Fairtrade price if Fairtrade-certified buyers purchase their products. If farmers can’t find a Fairtrade buyer, they will have to sell their crop under normal terms, which means no minimum price and no Fairtrade premium, and can lead to lower revenue. So even if the producers abide by Fairtrade standards, there is no guarantee that they will always sell at Fairtrade prices.

Some products sell better under the Fairtrade label, while others may not. For example, according to a review by The State of Sustainable Initiatives, only 6% of Fairtrade-produced tea was sold to Fairtrade buyers in 2014.³ On the other hand, two-thirds of Fairtrade-produced bananas were sold to Fairtrade buyers in 2018. But what’s worth remembering here is that the number of Fairtrade sales is growing – Fairtrade tea sales had more than doubled after UK retailers (Sainsbury’s and Co-op) switched all their tea brands to Fairtrade, and Fairtrade banana sales have grown by 114% in the last ten years.³^,⁴ So, the more retailers switch to Fairtrade products and consumer demand increases, the more producers receive the Fairtrade price.

Another point to remember is that while it may not seem like much to us, farmers can at least rely on a portion of their products selling at a Fairtrade price – a stable income that farmers under conventional trade standards may not always get to enjoy. They also benefit from other non-monetary aspects of Fairtrade standards, like the protection of workers' rights in large plantations.

2. Auditing and licensing fees

Some critics have raised concerns that Fairtrade’s auditing and licensing fees may detract from producers’ benefits.⁵ To be clear, while cooperatives are responsible for auditing fees, licensing fees are paid by companies near the end of the Fairtrade chain who want to show that their product is certified with a label. Like all certification systems, these fees are necessary for operation costs. As Fairtrade certification is built on ethical standards, auditing is integral to maintaining the integrity of the certification. The auditing fees are necessary to ensure Fairtrade producers and traders progress towards better, fairer standards.

In my interview with FLOCERT, the third-party auditing body for Fairtrade, they explained how auditing fees are determined: “The fee depends on the size and setup of the cooperative or company (for example, is it a cooperative with 20 members, or one with 2,000? Or is it a chocolate trader in Europe?) and of the number of products it wants to certify.” For Fairtrade cooperatives or organisations that cannot afford to pay their fees due to circumstances, FLOCERT applies fee adjustments. For example, “in the face of the global COVID-19 pandemic, FLOCERT has offered its customers who got into financial troubles to pay their fees in instalments or defer payments.”

3. Long-term financial sustainability?

While Fairtrade focuses on the long-term financial sustainability of its producers and workers, one potential issue lies in its fundamental philosophy of an open-door system: Fairtrade always welcomes producers who want to join the Fairtrade chain. But what happens when you have a growing number of farmers focused on producing one specific crop? You potentially end up with an oversupply, as the supply exceeds demand. This ultimately impacts the number of products that end up being sold under Fairtrade terms, meaning farmers may need to sell their products under conventional trade.

Nicolas Lambert, CEO of Fairtrade Belgium, shares the difficulty in balancing this challenge with their philosophy: “What we've done last year is we've put temporary rules to limit the entry of new producer organisations in the system so that we can keep our promises, and so people are not disappointed from becoming Fairtrade certified but end up not selling anything under Fairtrade terms. So many people are joining the system, but while the [Fairtrade] demand is growing, it’s not as fast.” Another aspect Lambert mentions is the impact of this growth on the limited number of Fairtrade staff, who have become stretched thin and cannot provide the usual quality guidance and support to farmer cooperatives. Lambert is still hopeful that this limited entry rule will be released in accordance with Fairtrade’s open-door policy.

4. Environmental challenges

Growing clusters of monocultures also present an issue from an environmental perspective. And this represents another problem: long-term financial sustainability cannot be achieved without considering environmental sustainability. Fairtrade International says it themselves on their website: “Farmers are on the front line of climate change,” facing higher temperatures, droughts, floods, extreme weather, crop failure and more.⁶

Fairtrade is now exploring the concept of climate risk insurance for its small-scale producers,⁷ and is working with smallholder farms to increasingly diversify their land. However, while Fairtrade standards encourage sustainable agricultural practices (like responsible water use and waste management, and enhancing biodiversity and soil fertility), it is not mandatory.¹¹ Sustainable agricultural practices like organic farming can also have higher costs. But the benefit of being part of the Fairtrade system is that producers can earn more and reinvest some of their higher revenue into sustainable practices.

Read How Guatemalan Farmers Are Tackling Climate Change

Are Farm Workers Really Protected From Exploitation?

Perhaps one of the biggest critiques the Fairtrade system faces is its unapparent impact on farmworkers. It’s important to distinguish here that farmworkers are usually found on larger Fairtrade-certified farms, plantations or estates - not as much on small-scale farms, as they are typically family-owned and worked by family members.⁹

Here are two ways in which the Fairtrade system may be limited in its benefits for workers:

1. Limited Wages For Workers

One study in the Costa Rican coffee sector showed that Fairtrade certification successfully increased the income for coffee millers and had benefited their local community overall, but pointed out that unskilled workers (like coffee pickers and farm labourers) saw no increase in their wages.² Under Fairtrade, all labourers are guaranteed the legal minimum wage of their region. However, there is often a gap between minimum wage and living wage - the costs of having a decent home, decent food, medical care, etc. How does paying a minimum wage align with Fairtrade’s aims to empower the most vulnerable actors of the trade chain?

Nicolas Lambert from Fairtrade BE sheds light on the complexity of the situation: “It's very delicate from an ethical standpoint because the farmer himself is already poor. With a big plantation, it's easy to go to the big boss and say, ‘Hey, you have to pay a decent wage to your workers.’ When you have these very small farms, where maybe for a few weeks a year, they will hire someone to help them, and who are already poor, it's difficult to go and tell them, ‘You have to pay them a wage that you yourself are not receiving.’ First, you have to make sure that a small farmer is getting enough pay so that he can then afford to pay his workers correctly. Otherwise, you’ll chase the farmer into poverty. But it's a very difficult issue, and that's something we are trying to regulate and check.”

So, what has been done to improve conditions for workers? On Fairtrade-certified plantations and estates, Fairtrade premiums are 100% reserved for labourers. The workers manage a joint committee that receives the premiums, and there, they can collectively agree to use part of the money as supplemental wages (additional to their minimum wage). However, other times, as Lambert shares, they have decided to use premiums on buying coats, distributing milk to families, or paying for tuition fees for their kids. The most important aspect of the Fairtrade system is that it leaves the decision solely up to the workers, not plantation or estate owners - allowing them to invest these additional funds in what they feel best fits their needs.

First, you have to make sure that a small farmer is getting enough pay, so that he can then afford to pay his workers a decent wage. Otherwise, you’ll chase the farmer into poverty

2. Cases of Child Labour

Fairtrade’s auditing system has also come under fire as child labour was allegedly found on a Fairtrade cocoa plantation in the Ivory Coast by an investigative journalist team from Danwatch in 2020.¹⁰ It’s unclear whether the lack of auditing is due to travel restrictions under COVID-19 or systematic flaws. But whenever you hear one case, it makes you wonder: how many more cases like this exist? Especially considering many other non-Fairtrade cocoa farms in West Africa have been discovered to have widespread use of child labour.⁸ How does Fairtrade ensure that its producers are not using illegal forms of labour? Fairtrade audits are usually announced in advance, as auditing often takes time to prepare - for example, cooperatives prepare paperwork for review, and they also have to arrange time with farmers so the auditor can visit their fields or organise meetings for interviews. But by announcing their audit schedule, how can they ensure there are no opportunities for cover-ups? Fairtrade has criteria to identify high-risk situations, and in areas with a higher risk of illegal labour, certifiers conduct unannounced audits.

“The general spirit of auditing is one of trust,” explains Lambert. “ Sometimes the Western point of view is to say, ‘We are going to check these guys because they are the bad guys.’ But they're not necessarily the bad guys - they’re just people like you and me.” That’s why Lambert stresses that auditing is only a part of the certification process, that it’s only “a means to an end.” Auditing can help improve situations and prevent malpractice from happening, but it doesn’t solve the root issue.

“Take the painful example of child labour,” Lambert continues, “you can say child labour is forbidden - that's it, that's the rule, and I'm going to check it. But at the same time, if you don't do anything to make sure that these people are paid better prices, you're not going to tackle the root cause of child labour. Because you know, these people don't want their children to work on farms; they would rather send them to school, but they often can't afford it.” Lambert explains that sometimes farmers feel compelled to have their children work on their farms because they can’t afford to hire someone for a few weeks to help them harvest their crops. That’s why it doesn’t work just to create rules and ensure they are followed. “It helps to have rules because at least things are clear and it creates a little bit of pressure, but if you’re not working on the cause of the issue, then you’re not going to solve anything” he concludes.

Fairtrade’s approach is one of balance between strictness and encouraging development. Of course, if major certification requirements have been breached, then certifiers will suspend or decertify a producer organisation or trader. But Fairtrade’s overall focus is to give their producers the opportunity to address problems and improve over time.

But, what do Fairtrade producers and workers think?

It’s clear that Fairtrade is not a perfect system, but it’s a good start. Fairtrade now counts 1.7 million farmers and workers in 72 different countries and territories, as well as 35,000 certified products. It might seem like a lot, but Fairtrade producers account for less than 1% of the 570 million smallholder farms worldwide.⁹ This means that more than 99% of smallholder farms do not work under a trade model that can guarantee fair prices or respect for basic working rights. However, the number of Fairtrade producers is enough to put criticisms in perspective. While the studies we referred to were conducted to assess the real impact of Fairtrade’s model, they’re also inevitably limited in their scope and voice. While they study specific product chains and specific cooperatives, they cannot represent the voice and felt impact of all the people in the Fairtrade system. That’s why it’s important to hear directly from farmers and workers when asking: did Fairtrade work for you?