The Economic Advisor

Fair Trade Certification is Good For Business

The term “Fairtrade” indicates a movement that promotes a just price to developing-world producers of agricultural products, such as bananas, cocoa, coffee, cotton, flowers, fresh fruit, rice, herbs and spices, sugar, tea and wine.

From its foundation in the 1980s, Fairtrade has become an organized and trusted labeling system recognized by ethical, and increasingly mainstream, consumers.

Despite the global recession, FLO reported a 23% rise in worldwide sales of Fairtrade labeled products, with annual sales of over $4 billion (USD) for 2008.

Fair Trade consumers are concentrated in the US and Canada, Europe, Australia and New Zealand, and East Asia – most prominently Japan, where sales rose by a staggering 44% in 2008.

Other growing markets are located in South Africa and Mexico. The FAIRTRADE Mark is the property of the Fair Trade Labeling Organizations International (FLO), based in Germany. FLO members sub-license the use of the FAIRTRADE Mark in their territories, while FLO International licenses the FAIRTRADE Mark to companies where there are no national labeling initiatives.

Prior to the early 2000s, Fair Trade products were a small niche in the market, often sold by single unit, ethical and new age stores. This has now dramatically changed and the FAIRTRADE Mark has become essential for selling in many markets – bananas and coffee retailing and serving in North America and Europe in particular.

It may soon become a necessity for selling all food, flowers and cotton goods from the developing nations into the higher end of their own markets also.

There are currently over 6000 Fair Trade certified products from 60 countries available to buyers.

Recognizing market and reputation value, more and more global companies are introducing Fair Trade into their procurement policies. Brands such as Starbucks, Ben and Jerry’s, Candico Sugar and Cadbury’s chocolate have started including Fair Trade certified ingredients into their mainstream products, and increasing their use. Leading retailers such as Tesco (UK) now have their own range of Fair Trade products which are highly successful.

There are currently 19 Fairtrade Labeling Initiatives in 23 countries around the world and a variety of product-specific standards are set by FLO. There are however, only two Fairtrade labels, one for North America and another for the rest of the world. Both involve third party certification by a registered member of FLO. The Fairtrade certified Mark is in use in the US and Canada but will gradually be replaced by the International FAIRTRADE Certification Mark over the next few years.

Rather than competing, these labels are recognized by consumers in their respective markets.

In order to display either branded mark on products, retailers and producers must ensure the source of production has undergone a certification process involving a third party audit of the production facilities and distribution and supply chains.

All observers agree that Fair Trade produce will continue to grow at substantial rates compared to the market overall and that the price differential between Fair Trade and non-Fair Trade produce will continue to narrow. This will further enhance the market potential of the brand in both developing and developed world markets.

Dylan Tanner is an eco-entrepreneur and writer who founded the newsletters Asia and China Environmental Reviews and has been writing about environmental and social trends within a business context for fifteen years. His latest venture is a B2B directory of responsible and sustainable suppliers.