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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.

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