‘Fair trade’ describes trade systems (ie supply chain systems) which aim to be more just and equitable than typical trade systems. For instance, a supply chain that adheres to fair trade principles will ensure that the farmers and workers who create goods in developing countries receive fair payment for their labour and products. The interactions (ie sales) which occur in this supply chain must be conducted in a way that helps workers to achieve dignified and safe working conditions. Parties may also adhere to other social and environmental standards.
Fair trade is a way of doing business which promotes fairness and equity for all involved in product supply chains. Businesses can make and use fair trade products to support workers in developing economies whilst making their own businesses stronger.
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What is fair trade?
What does fair trade want to achieve?
Fair trade is important simply because it promotes dignity and fairness for all, for example by helping workers and farmers to obtain better living standards. But the concept has economic benefits too.
When fair trade systems are used by many, both developing and global economies are likely to become stronger. If businesses and workers at all stages of a supply chain (eg workers, farmers, importers and retailers) are paid fairly for their products, they will be better able to prepare for and bounce back from any challenges they face. For example, if a farmer is paid well enough that they have money available to put back into their business, they may use this to reinforce their crops against environmental threats (eg drought). Similarly, workers who are paid better wages can afford to better care for their own health, therefore creating a more resilient workforce.
Fair trade also has implications for climate change and environmental sustainability. Agriculture takes a giant toll on the Earth and transitioning to more environmentally sustainable farming practices is essential for averting climate change. When farmers are paid more for their products, they have more money available after essential expenses to invest in making their businesses more environmentally sustainable. This in turn contributes to making global supply chains more resilient.
The term ‘fair trade’ encompasses, in a broad sense, a way of doing business. Some businesses use certification systems operated by another organisation to demonstrate their compliance with a defined set of fair trade standards.
One of the best-known certification systems is called ‘Fairtrade’ or ‘Fairtrade International’. The UK branch of Fairtrade is the ‘Fairtrade Foundation’. The Fairtrade system sets social, economic and environmental standards that businesses involved in a supply chain should meet.
How does a Fairtrade certified supply chain work?
Farmers (or other producers) can become Fairtrade certified. Certification is usually obtained collectively, for example by an association or a co-operative of farmers. Producers can become certified by meeting a set of social, economic and environmental Fairtrade standards aimed at improving incomes and working conditions for their workers.
Businesses that buy from producers must support these standards by paying farmers (eg via co-operatives) fairly. This involves paying:
The Fairtrade minimum price. This is the lowest price that certified Fairtrade farmers can be paid for their products. This price is only paid if the market price falls below the Fairtrade minimum price, otherwise, the higher market price should be paid. Essentially, it is a safeguard for farmers against poor market conditions.
The Fairtrade premium. This is an additional payment at set rates that buyers must pay certified suppliers in addition to the Fairtrade minimum price. Money from the premium is collected and co-operatives (suppliers) then decide democratically how they will use it to invest in development projects which make both their communities and businesses more resilient.
How can I become Fairtrade certified?
The steps that must be followed to become a certified part of a Fairtrade supply chain differ depending on your business’ size and activities. For instance:
For producers, importers and other large businesses
Producers (including small-scale producers and larger co-operatives or associations of small businesses and workers), importers and other large businesses can become Fairtrade certified. To do so, they must meet the Fairtrade standards for their particular industry and business type. Once certified, producers are added to the Fairtrade product register where other like-minded businesses can find them to initiate a trade relationship.
The certification process involves:
filling in various application forms
an audit (ie inspection) of your site and processes by FLOCERT
an analysis of your application, audit, and responses to any issues identified during the audit
Businesses can also apply to simply licence one of their products so that they can use the Fairtrade Mark on its packaging or labelling. This may be appropriate if your business produces a product (eg chocolate bars) using a Fairtrade certified product (eg cocoa). The licensing process involves contacting the Fairtrade team to discuss your product and to submit information. For more information on the licensing process, read the Fairtrade FAQs on Becoming a Licensee.
For smaller businesses
Smaller businesses can also use the licensing system. For more information, read the section titled ‘How can small businesses get involved with the fair trade movement’ below.
How does Fairtrade licensing work?
If a product is made using goods (eg coffee or cotton) sourced through the Fairtrade certification supply chain process, businesses can work with the Fairtrade Foundation to form a Licence Agreement. This agreement will allow them to use the Fairtrade Mark on the product’s packaging or labelling.
There are different versions of the Fairtrade Mark, including:
The Core Fairtrade Mark, which signifies that all the ingredients or components in a product which can be fair trade are fair trade.
The Fairtrade Sourced Ingredients (FSI) Mark, which signifies that a certain ingredient in the product is sourced using a fair trade system (eg cocoa).
What other certification systems are there?
Other organisations committed to fair trade run similar initiatives to Fairtrade. These include:
The World Fair Trade Organisation
The World Fair Trade Organisation (WFTO) is a global community of social enterprises. The WFTO runs the WFTO Guarantee System which uses a logo in a similar manner to the Fairtrade certification system. The WFTO system takes into account businesses’ practices as a whole, in addition to the supply chains used for a particular product. The BAFTS Fair Trade Network UK lists shops and suppliers in the UK which follow the WFTO fair trade system.
Businesses that are B-corporations (or ‘B-corps’) aren’t fair trade certified organisations. However, B-corp certification is another well-known certification system which requires businesses to consider the impact of their supply chains on people and the planet. For more information, read Becoming a B-corporation.
Why should businesses use fair trade?
Fair trade products can be used simply to support more fair, safe and resilient working and living conditions for other people. The more businesses and individuals purchase fair trade products and supplies (eg ingredients for their own products), the more money the fair trade system has to grow and achieve its aims.
Using or selling fair trade products can also make your products more valuable or your business more attractive to potential customers. Around 93% of shoppers in the UK recognise the Fairtrade Mark and most trust it as a symbol of an ethical product. Consumers may be willing to pay more for products which are fair trade (ie ethical). Seeing that you use or sell fair trade products may also cause consumers to see your business in a more positive way. With the current large consumer trend toward buying ethically, demonstrating their commitment to fair trade is a good way for businesses to strengthen their offering.
How can small businesses get involved with the fair trade movement?
Fair trade is all about supply chain relationships, so at first glance, fair trade systems may seem most relevant to large businesses (eg importers or multinationals) who work directly with farmers. However, small and medium sized businesses (SMEs) can be part of fair trade too.
Creating Fairtrade certified products
Making certified Fairtrade products is achievable for small businesses. Hundreds of businesses work with Fairtrade and the organisation is on hand to help with the product certification process. Moreover, the Fairtrade sourced ingredients (FSI) Mark means that businesses can help the Fairtrade movement with just one ingredient in their product being sourced through a qualifying supply chain.
Using Fairtrade products
Even if creating Fairtrade certified products is inappropriate for your business model, you can commit to using fair trade products in your business.
For example, if you run a business selling food you could use certified fair trade cocoa, sugar, fruit and other food products. You could use Fairtrade certified hygiene products in your bathrooms, display fair trade flowers in your dining space, and make merchandise using fair trade clothing and linen.
Even though in these situations your business doesn’t have its own product that bears a Fairtrade Mark, you’re still demonstrating your business’ values to customers whilst supporting fair prices and conditions for the producers who made your products.
For more information on Fairtrade products available in the UK, read the National Fairtrade Purchasing Guide.
You could also include a commitment to, when possible, using fair trade and other ethical products in your business’ Articles of association.
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