Markets working to support sustainable development

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Fairtrade

Fairtrade is a tool for development that ensures disadvantaged farmers and workers in developing countries get a better deal through the use of the international FAIRTRADE Mark. By complying with standards set by the Fairtrade Labelling Organisation (FLO) producers receive a guaranteed minimum price as well as the Fairtrade premium.

Producer Standards

  • Social Development
  • Socio-economic development
  • Environmental development
  • Labour conditions

Trade Standards - Companies trading Fairtrade products must:

  • Pay a price to producers that aims to cover the costs of sustainable production: the Fairtrade Minimum Price
  • Pay an additional sum that producers can invest in development: the Fairtrade Premium.
  • Partially pay in advance, when producers ask for it.
  • Sign contracts that allow for long-term planning and sustainable production practices

This premium is designed to be invested in social, environmental or economic development projects that are democratically decided on by producer organisations. The minimum prices and premium for all Fairtrade certified products are published separately. Consumers absorb some, if not all, of the costs of paying a premium to farmers and the minimum pricing. Global sales of Fairtrade products were estimated to be  €2.9 billion in 2008.

Market coverage: 

Figures from the 2012 Fairtrade Monitoring Report show that a total of 1.24 million farmers and farm workers are part of the Fairtrade system, 60% of whom are located in Africa or the Middle East. For 2011 total sales revenue of Fairtrade products for producers was 673 million Euro, of which 61.3 million Euros is a fairtrade premium for producers. Around 1.3 million hectares of production area is under Fairtrade certification.

Background information: 

Fairtrade was originally created under the name 'Max Havelaar' in 1988 by the Dutch development agency, Solidaridad and the first ‘Fairtrade’ coffee from Mexico was sold into Dutch supermarkets. The initiative was then replicated across European and North American markets, though with differing brandnames (and hence different identities). Examples include: Transfair (in Germany, Austria, Luxemburg, Italy, the United States, Canada and Japan), Fairtrade Mark in the UK and Ireland, Rättvisemärkt in Sweden, and Reilu Kauppa in Finland.

In 1997, Fairtrade Labelling Organizations International (FLO) was established in Bonn to bring together the various labelling initiatives. This was followed in 2002 by the creation of the International Fairtrade label. In 2004 FLO split into two seperate organsations - FLO International which sets Fairtrade standards and provides producer business support and FLO-CERT, which inspects and certifies producer organizations and audits traders.

Funding source: 

Spending in 2012 for the Fairtrade Foundation (UK based) was approximately £10.6 million.  

Each Fairtrade organisation has its own funding sources and is responsible for its own fundraising. For example the Fairtrade Foundation receives 85.6% of its funding from a licensee fee from Fairtrade certified products. The remainder comes from government grants (5.1%), other grants (5%), member agency grants (0.9%),

Notable information: 

New products are increasingly being added to the certification line, however coffee remains its number one product in terms of volumes of sales and producers.Licensing capability has recently expanded into Africa with the creation of Fairtrade South Africa in 2009. As a Marketing Organisation it is a national organisation designed to market and promote Fairtrade in country. FLO directly licenses companies to use the Fairtrade Certification Mark. 

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