Monthly Archives: December 2010

Insights from a Producer and Brandholders on “Fair for Life Social & Fairtrade Certified” and “Fair Trade Certified”

-

On December 16, FTRN produced the fourth of a 4-part webinar series on “Clarifying Fair Trade Certifications.” Webinar 104, about comparing “Fair for Life Social & Fairtrade Certified” (FFL) and “Fair Trade Certified” (FTC), featured Director of Canaan Fair Trade & Founder of Palestinian Fair Trade Association, Nasser Abufarha; CEO of Theo Chocolate, Joe Whinney; and Fair Trade Organic Coffee Buyer of Green Mountain Coffee Roasters, Ed Canty . You can download the 1.5-hr Webinar 104 recording, or register for upcoming webinars, at FTRN Webinars.

Below are some key points about the FFL and FTC systems according to the attributed person, from the webinar:

Nasser:

FFL strengths:

Highly credible as organic certifier, so allows more emphasis on environmental sustainability.

Producers interact with 1 control body for both organic and Fair Trade, so cost to producers is less.

Flexible and adaptable to local context, as system emphasizes Fair Trade values over international systems. As an example, FFL certifies 15 products, while FLO cert only certifies 2 products (because standards don’t exist within FLO for other products).

No label fee at marketing end in consumer countries, just an audit fee, so more affordable.

IMO seeks full social accountability by brandholder, so brandholder becomes part of movement, not just a company that does a little Fair Trade with mostly unexamined practices.

FFL weaknesses:

Not as widely recognized in Fair Trade markets.

FTC strengths:

Well-recognized label.

Union of 21 international labeling initiatives, so enhances broad marketing.

FTC weaknesses:

Obsessed with standardized system, not with the goals of Fair Trade.

More attention is given to bigger buyers, so small organizations get lost.

Licensing fee based on volume leads the labeling initiatives to prefer big organizations over small.

System is only concerned with FTC products, not with the social accountability of other practices of the brandholder. Seems like a double-standard, as producers get a lot more scrutiny than brandholders.

Joe:

FTC strengths:

Established the concept of Fair Trade within a small consumer niche.

Requires that the premium paid above the conventional price to cocoa farmer coops be used for the social benefits of its farmer-members.

FTC weaknesses:

Farmers are not guaranteed that they will earn more money for their crop.

Transfair markets and promotes its label as a trade association might do while also being the exclusive label for the certifier, FLO. This presents a conflict of interest.

Only coops are allowed to be certified by FLO which excludes a majority of farmers.

Only a small portion of a supply chain is certified (the farmer coops, not the finished product manufacturer)

Operates as though there is one global, applicable, sustainable price for a product.

Licensing fee paid to Transfair by Theo would range between $500 – $1,400 per ton of cocoa while farmer coops are only guaranteed $200 per ton of cocoa. Transfair licensing fee is not paid to farmer groups.

FFL strengths:

Recognizes the complex nature of trade by reviewing each trading relationship and contract on a case by case basis.

Recognizes that there is not one global, applicable sustainable price for a product.

Certifies suppliers as well as manufacturers.

Recognizes a diversity of supplier organization schemes.

Provides a progressive certification which requires improvement each year to maintain certification.

Charges a flat annual certification fee plus inspection costs. (Similar to organics)

Is collaborative and engaged with stakeholders in improving standards.

Conducts on-site inspections annually for buyers, brand holders and producers.

Allows Theo to invest real $’s directly back into origin projects for more meaningful impact on farmers.

FFL weaknesses:

Reviews trading contracts retroactively.

Not yet a widely recognized seal.

Improvements for Fair Trade movement:

Achieve reciprocity and respect between various Fair Trade certification programs.

Establish industry recognized trade association separate from certification agencies.

Tie certification to living wages for all farmers and employees of Fair Trade certified companies.

Ed:

FTC Strengths:

Single Focus, that money gets back to producer level.

Set Minimum Price

Aids Business Transparency

Producer Organization’s Involvement – producers vote substantially on issues, like setting standards.

Access to Market

Scalable – systems builds producer organizations to grow effectively.

Producers vote on their Fair Trade premium

FTC weaknesses:

Division among stakeholders.

Market Conditions and Competition at Origin

Financial Literacy – producers need more capacity.

More uniform Trade Standards

It is not enough! – system must do more to improve livelihood and food security

Ed:

GMCR looks to grow Fair Trade stepwise, not too rapidly, to get quality and step with producers to sustainable, manageable levels.

Fair Trade most impactful over the long term, as sudden growth can affect qualify, supply chain relationships, and financing.

FTC producers are quite involved, especially in starting the process for increasing prices.

Joe:

Wants to see stronger producer/farmer voice, and greater assurances for producers benefitting more.

Nasser:

Standards reviews bring in some views of producers, as FLO has responded more in recent years, like with the Quick Entry Price Review.

Joe:

Reciprocity is fair, even when FFL recognizes FLO but doesn’t pay FLO, just like in organics. Reciprocity allows greater access for producers.

Nasser:

Multiple labels and certifications become confusing, so the more unification the better, for brandholders and producers.

Joe:

In organics of the early 1990s, different certifiers developed harmonized standards to allow the industry to grow. I like to think industry (rather than government) could do such harmonization in Fair Trade.

Ed:

It is refreshing to see IMO piggy backing, not recreating same wheel, in accepting FLO certification.

Joe, Nasser:

FLO and FTUSA more focused on marketing than certifying, while IMO is similar to FLO CERT as mainly doing certifying.

Nasser:

FFL and organic certifications cost 12,000 euros in past year for producers and exporters.

FTC certification only cost 8000 euros for producers and exporters – that doesn’t include licensing fee paid by brandholder, equal to 1-2.5% of wholesale sales.

Cost has become prohibitive for small producer groups, unless they are partnered with a brandholder that pays a lot of the expenses.

Ed:

I’m glad that some of the licensing fee goes to producer development.

Joe:

Licensing fee should be optional, above a required audit fee.

Nasser:

Label use for multi-ingredient products does present a problem in cosmetics, where as little as 2-4% of a product can be Fair Trade to use the FTC label. FFL system is OK, as it requires 50% of ingredients to be Fair Trade to use FFL label. Both systems are OK with respect to food products, requiring 50% of ingredients to be Fair Trade to use label.

Ed:

Finance is the biggest issue this year for producers. How do we figure out fair prices in a volatile coffee market moving prices by 10% per day.

Joe:

If the cost of production is not covered by the Fair Trade or conventional price, this must be recognized by all participants and consumers. I’d like to see more effort to establish minimum Fair Trade prices based on cost of production.

Nasser:

Price is important, but terms of trade need more emphasis to clarify, and to set fairly. Advance payment to producer groups is important, like when olive oil is delivered 10 months after the harvest.

FFL requires a premium price above the local market price. This is important to farmers as part of the value of Fair Trade.

Joe:

All of FFL purchases from a certified producer group must be at Fair Trade prices and terms. FTC allows some purchases as Fair Trade, others at conventional prices and terms.

Ed:

GMCR consumers are willing to pay more for Fair Trade, but also because they appreciate the higher quality.

Joe:

Theo doesn’t think our society has a choice to pay lower prices, as the investments to producers and to employees are necessary.

Nasser:
Fair Trade offers a connection from consumers to the human story of producers, but quality needs to stand on its own to justify the consumer price.

I’d like to see unified standards between certification schemes.

Joe:

I call for a collaborative effort to ensure Fair Trade’s integrity, and a unified effort on behalf of producers.

Ed:

I welcome people to send me questions to forward to GMCR’s producers about Fair Trade.

More at Webinar 104 recording.

Insights Into Label Use, Governance, and Producer Benefits of “Fair for Life” and “Fair Trade Certified”

-

In December, FTRN produced the third of a 4-part webinar series on “Clarifying Fair Trade Certifications.” Webinar 103, about how “Fair for Life Social & Fairtrade Certified” (FFL) and “Fair Trade Certified” (FTC) manage label use, system governance, and benefits to producers, featured Deputy Manager IMO Social & Fairtrade Certification, Florentine Meinshausen, Fair Trade USA VP of Certification, Chisara Ehiemere, and Fair Trade USA Board Chair, Michael Conroy. You can download the 1.5-hr Webinar 103 recording, or register for upcoming webinars, at FTRN Webinars.

Below are some key points about the FFL system according to IMO, and about the FTC system according to FTUSA, from the webinar:

Label Use

FFL-

2 labels are used: unqualified “Fair for Life Social and Fair Trade Certified” label, and “Made with FFL Certified ingredient ” label

Label use requirements are consistent across all consumer countries.

Products must be kept physically separate and traceable from producers to final vendor.

Brandholder labelling the final product must undergo Fair for Life certification, including confirmation of fair employment conditions.

For agricultural products:

To use unqualified label, a mono-ingredient product must be 100% Fair Trade; for multi-ingredient product, at least 80% of all ingredients must be Fair Trade, or 50% plus the intent to reach 80% within 3 years if ingredients are not yet available as Fair Trade.

To use “made with” label, at least 20% of all ingredients must be Fair Trade. If cocoa were Fair Trade, label would say “Chocolate made with Fair Trade cocoa”

For cosmetic or body care products:

To use unqualified label, at least 50% of all ingredients (excl. water) must be non-aqueaous, non-fruit juice Fair Trade ingredients.

To use “made with” label, at least 15% of all ingredients (excl. water) must be Fair Trade.

FTC-

2 labels are used: unqualified “Fair Trade Certified”, and composite label.

To use unqualified label, 100% of ingredients must be Fair Trade.

Governance

FFL-

Privately owned by nonprofit Bio-Foundation of Switzerland

Looking to start a Fair for Life governing board in 2011

Does do limited formals stakeholder consultation as well as informal consultation with stakeholders.

Is transparent by publishing all criteria, control points and guidance for compliance, so publishes more than just standards.

Also publishes all handler and producer profiles of performance evaluations, and scores in categories.

Also publishes how the premium is used.

Individual producers in a producer group are not expected to understand full standards, just simple internal standards written by the producer group (e.g. the manager of the producer group is expected to understand the full standards).

Applying labor standards to their own casual workers is not easily accepted by many small- or medium- scale producers.

Only IMO can certify IMO standards, but that could change in the future.

FTC-

2800 licensed partners (companies), 830 producer groups, 19 labelling initiatives (plus 3 associate or seeking associate initiatives in Brazil, Mexico, South Africa), 3 producer networks (Africa, Asia, Latin America), involving 1.5 million producer families

FLO International, or FLO ev, sets standards, offers business support for producers, and helps producers seize market opportunities.

System is jointly owned by producer networks and labeling initiatives, unlike other certification systems claiming to identify Fair Trade.

Board consists of producer networks (4 seats), labeling initiatives, traders, and independent experts.

FLO cert is only ISO65 accredited social certification body.

FTUSA is in the process of separating its certification operations from its other operations to avoid conflicts of interest.

Benefits for Producers

FFL:

Producers benefit from a higher farmgate price, social and environmental community projects that can be funded by a Fair Trade premium, and fair contracts and good working conditions.

Premium can go to improving producer business operations if operations are a coop, but not if a private company contracts with workers or individual producers.

IMO does not do training or project development, as this is organized directly by the certified organizations (often in combination with Fair Trade buyers).

IMO does not market its brand, and doesn’t charge licensing fees.

FTC:

Producers are guaranteed Fair Trade premium for community development used for new homes, schools, and clinics.

FTC is only social certification in which producers are guaranteed a minimum international floor price to promote stability.

Producers gain empowerment and independence, in part through joint ownership and management of FLO.

Provide agricultural and business capacity training to producers.

More at Webinar 103 recording.

Some Insights Into IMO’s “Fair for Life” System

-

In November, FTRN produced the second of a 4-part webinar series on “Clarifying Fair Trade Certifications.” The latest webinar, about how “Fair for Life” (FFL) works along the supply chain, featured Deputy Manager IMO Social & Fairtrade Certification, Florentine Meinshausen, and IMO “Fair for Life” U.S. Director, Kerry Hughes. You can download the 1.5-hr Webinar 102 recording, or register for upcoming webinars, at FTRN Webinars.

Points about the FFL system according to IMO include:

FFL has 100 projects certified, with 30 more in application process.

FFL can certify smallholder producer groups, hired labor, and others along supply chain.

Certification can apply to many types of production operations (smallholder farms, plantations) for many kinds of products, from agriculture and aquaculture to textiles, mining and handicrafts, etc. For textiles, tailoring/manufacturing stage must undergo FFL certification since it’s the most labor-intense stage.

Starting in 2011, new standards will apply to artisan groups who don’t use their own raw materials in handicraft production. To date, no handicraft producers have been certified.

IMO also does on-site audits of the consumer country buyer/importer and brandholder, and registers any intermediate manufacturers.

FFL requires full physical traceability.

FFL checks relationship of handlers to producers, and to its own workers in consumer/North countries.

Example certification of 2 palm oil projects in Sri Lanka: 300 farmers and 90 mill workers had auditors on site for 4.25 days for FFL, and another 4 days for organic certification. FFL certification costed $4000. No licensing fees.

Content requirement for FFL label use mandates that 95% of a product’s ingredients must be FFL certified (changing to 80% in 2011 as consumer country production can be certified FFL).

FFL has always accepted comparable certifications as equivalent, such as Soil Association Ethical Trade program, EcoCert on individual product basis, FLO, etc., to reduce burden on producers of getting multiple certifications.

After certification, a summary of the evaluation and performance rating are posting on FFL website.

For each project certified, IMO publishes the amount of FT premium received and how it was used.

Buyers can be members of the Committee that decides how to use the premium.

IMO doesn’t have formal multi-stakeholder governance, but sometimes consults stakeholders.

FFL currently verifies that a fair price and premium are negotiated between producer group and each of their buyers, in part requiring that the fair price is above market prices.  Starting in 2011, FFL will require a minimum price set by each producer group that would be paid by all buyers from that producer group.

Committee that decides how to use the premium can consist of producers, workers, local NGOs, and buyers.

FFL allows buyers to hold the FFL certificate, in cases where producers prefer that to reduce their risk and guarantee a buyer for their products. FFL verifies that buyers holding certificates don’t exploit producers.

FFL currently requires that workers have a right to organize, not the existence of an active worker organization. Starting in 2011, the standards will be stricter with regard to freedom of associations with more focus on an active workers organization, and well-working internal grievance processes to raise workers concerns .

More at Webinar 102 recording.

Some Insights Into “Fair Trade Certified” System

-

In October, FTRN produced the first of a 4-part webinar series on “Clarifying Fair Trade Certifications.” This first webinar, about how Fair Trade Certified (FTC) works along the supply chain, featured Michael Conroy, Board Chair of Fair Trade USA, and Board member of Fairtrade Labelling Organizations International (FLO). You can download the 1.5-hr webinar recording ($5 before Dec 1, free afterwards), or register for upcoming webinars, at FTRN Webinars.

Points about the FTC system according to Michael Conroy include:

1 set of FTC standards for small farmers, organized in democratic coops. Other set for larger farms with hired labor; focus on representation of workers, organization at farm level for receiving and distributing social premium, respecting antidiscrimination, protection of ILO freedom of association. These standards do not require unionization in advance, but protection on attempts to unionize (would be decertified if worker fired for attempt to unionize).

3 costs pay for FTC system operation:

cost of compliance for producers, which varies widely, but are easiest for those with best practices already in place;

cost of producer certification varies by size of operation (size varies from 50-100 members to 80,000 members in Ethiopia coffee coop. This cost is around few dollars per worker/farmer per year; up to 50% can be subsidized by FLO fund paid by licensees;

Cost of trade certification around $1000/yr in the US, higher in Europe, paid by licensee.

Up until 2003, most of certification costs were paid by brandholders in consumer countries. Producers wanted more control over costs, and more participation in the FTC system. They offered to pay a larger share of certification costs. 100% of the costs of trade certification is paid by licensees. About 50% of costs of producer certification is paid by FLO, from licensing fees, so that around 50% of producer certification costs are paid by producers themselves.

FTUSA does plan to partner with existing labor auditing organizations in apparel certification, so won’t just do own auditing. For FTC apparel, all of cotton must be FTC. Thread, buttons and other materials don’t exists as FTC, so are not required to be. Also, the assembly process (whether in 1 factor or several), must meet labor standards for FTC apparel. Covers cotton sewing, but not crochet or knitted garments.

FLO-CERT does do some unannounced audits, beyond once per year, in higher risk or problematic situations for both producers and traders. Certainly is more difficult in hired-labor audits.

Physical traceability of commodities is very difficult and very expensive. So, FTC system employs a volume-invoice system to keep equivalence between the amount of retail products marked as Fair Trade Certified, and the amount of Fair Trade Certified raw materials produced.

To get started, a producer group who wants to become FTC should visit FLO-CERT (also Spanish version) website, to download a initial application consisting of a few pages, for a preliminary assessment by FLO-CERT. If viable, FLO-CERT would take around 1 month to ask for further paperwork. After such paperwork is submitted, first on-site audit visit would happen within 3 months. Entire process usually takes less than 1 year.

FTUSA, when concerned about practices or reputation of potential licensees (e.g. Wal-Mart or Whole Foods), checks with producers. Producers usually say that licensing such companies to sell FTC can be valuable to seeking further improvements in those companies practices. All licensees have to check with FTUSA for off-product license use, so FTUSA can check for fairwashing.

More at Webinar 101 recording.