Many initiatives on sustainable production and trade target producers or workers and tend to ignore the quality of trading relationships in the supply chain. For the Fairtrade Foundation and Fairtrade Deutschland, Aidenvironment and IIED evaluated the impacts of the Fairtrade system on trading relationships. A striking finding was the extent to which trading relationships directly influence producer capacity to invest in sustainability.
The study looked at the impact of Fairtrade’s supply chain interventions (e.g. Trader Standard and Fairtrade Minimum Price) on trading relationships throughout the cocoa, tea, banana and cut flower supply chains. While Fairtrade has succeeded in enhancing the capacity of producers to invest in sustainability and has introduced safeguards against unfair trading practices for upstream businesses, this impact is not felt everywhere. Fairtrade’s influence on downstream companies is limited. The research also revealed that trading relationships throughout the value chain can influence the capacity of producers to invest in sustainability. For example, cocoa cooperatives that have more stable and remunerable trading relationships are able to provide better services to their members, who can then become more reliable trading partners. Another example was found in the banana sector, where more stable demand throughout the year (fewer unjustified quality claims and contract cancellations) provide banana plantations with more incentives to offer their workers annual rather than temporary employment.
The study also revealed some challenges. As all sectors were subject to increasing pressure on prices and margins throughout the value chain, the key challenge is to ensure that there is sufficient total value for a fair share at each stage of the value chain. However, Fairtrade has insufficient leverage on its own to change trading relationships because market dynamics and public policy exert a powerful influence. To deepen its impact on trading relationships, we advise Fairtrade to engage with all supply chain actors, conduct stricter auditing of its Trader Standard, and in its advocacy and campaigning work to pay more attention to fairness in trade through the entire supply chain.
The study ends with recommendations to the public sector and civil society on how they can promote fairness in trade. We discuss the elements of a business case for investing in fairness in trade, which includes arguments of supply security, transparency, reputation, and business stability. Fairness in trade is also about doing the right thing and taking responsibility for the sustainability of the whole supply chain. And that means honesty, building goodwill, and building stronger relationships that are beneficial to all concerned.
The research was conducted by Aidenvironment and IIED, with Sally Smith, WvB Consulting and Andre Fearne.
For more information, please contact Jan Willem Molenaar