Today, we are surrounded by numerous certifications on the products we buy at supermarkets. It is getting more and more confusing to figure out what exactly most of them stand for. Some labels are self-explanatory and some are not. Fair for Life Social and FairTrade certification belongs to the second category. Therefore, most of the consumers do not even realize that while they purchase Fair for Life or FairTrade certified products they contribute to the empowerment of poor around the world. The labeling initiative is aimed at improving the lives of disadvantaged farmers in the developing countries. For achieving this ambitious goal, many effective mechanisms have been developed:
1) Price floor. The key characteristic of FairTrade is the minimum price that Fair Trade buyer agrees to pay certified farmers when the market price is too low. In this case, producers can always cover the average costs of sustainable production, including their own work. The Floor Price is intended to reduce the risk faced by growers due to fluctuating market prices. However, when the market price is higher than the FairTrade minimum, the buyer must pay the market price
2) Fair Trade premium. Another important feature is a price premium, often referred as the community development or social premium. It is a sum of money paid in addition to the sales price for the investment in social, environmental or economic development projects. The premium should be fair to both sides and is paid into a separate fair trade fund. The details of how the premium is to be used have to be decided democratically by the farmers themselves.
3) Stability and access to credit. The FairTrade buyers should settle for long-term contracts and offer advance crop financing to producer groups (up to 60 per cent) if requested.
4) Working conditions. Workers must have freedom of association, safe working conditions, and wages at least equal to the legal minimum or regional averages. Most forms of child labour are prohibited.
5) Institutional structure. Farmers are fostered to organize as associations or cooperatives, where decisions are reached in a democratic manner and with a transparent administration that can facilitate sales and administer the premium paid.
6) Environmental protection. A variety of harmful chemicals is forbidden for FairTrade production. The criteria are meant to ensure that the members work towards sustainable environmental practices. Farmers must provide basic environmental reports showing their impacts on the environment. The production of genetically modified crops by farmers is prohibited.
Whether these mechanisms work and Fair Trade makes “economic sense” have been intensely debated in academic as well as policy circles. According to Journal of Economic Perspectives , “the existing empirical evidence, suggests that Fair Trade does achieve many of its intended goals. Fair Trade farmers do on average receive higher prices, have greater access to credit, perceive their economic environment as being more stable, and are more likely to engage in environmentally friendly farming practices.” For instance, a study of 845 coffee farmers from southern Mexico during the 2004–2005 season, suggests that farmers who were Fair Trade and Organic certified on average obtained 12 cents more per pound of coffee sold. These positive results can be explained by the willingness of many consumers to pay a premium for goods produced in a socially and environmentally responsible manner.
In July 2013, Exportsustent, our export company in Ecuador, was certified with Fair For Life Social and FairTrade. Other operational sites in Sierra Leone are preparing to undergo the certification process. For us, sustainability is a combination of organic and fair trade, which is achieved by ensuring fair and equal opportunities to all the farmers while working in harmony with the environment. The operations of Natural Habitats in Ecuador and Sierra Leone are settled in areas where no critically endangered species have been identified; furthermore, the group invests in several programs to enhance biodiversity, and to protect the environment while training and empowering small farm holders.