Fairness in Trade Matters for Sustainability – An Impact Evaluation of Fairtrade’s supply chain intervention
Many initiatives targeting sustainable production and trade focus their interventions at the producer or worker level. They tend to ignore the extent to which the quality of trading relationships in the supply chain affects their work. At request of the Fairtrade Foundation and Fairtrade Deutschland, AidEnvironment and IIED evaluated the Fairtrade system on its impacts on trading relationships. A striking finding was the extent to which trading relationships directly influence producer capacity to invest in sustainability.
The research looked at the impact of Fairtrade’s supply chain interventions (e.g. Trader Standard and Fairtrade Minimum Price) on trading relationships through the supply chain in the cocoa, tea, bananas and flowers. Fairtrade has enhanced the capacity of producers to invest in sustainability and have brought some safeguards for upstream businesses against unfair trading practices. This impact is, however, not felt everywhere and Fairtrade’s influence on downstream companies is limited. The research also revealed that trading relationships throughout the value chain can influence producer’s capacity to invest in sustainability. For example, cocoa cooperatives with more stable and remunerable trading relationships are able to provide better services to their members, which allows them to become a more reliable trading partner. Another example was found in the banana sector, where more stable demand throughout the year (i.e. less unjustified quality claims or cancellations of contracts) provide banana plantations with more incentives to offer annual employment to workers rather than temporary.
The study also revealed some challenges. All sectors showed an increasing pressure on prices and margins throughout the value chain, so that the key challenge is to ensure that there is sufficient total value for a fair share at each stage of the value chain. Trading relationships are mainly determined by market dynamics and public policy. Fairtrade has insufficient leverage to influence these alone.
To deepen its impact on trading relationships, we advise Fairtrade to engage with all supply chain actors, conduct stricter auditing of its Trader Standard and in its advocacy and campaigning work to pay more attention to fairness in trade, through the entire supply chain. The research ends with recommendations to the public sector and civil society on how they can promote fairness in trade. We also discuss the elements of a business case for companies to invest in fairness in trade, including supply security, transparency, reputation and business stability. In addition, Fairness in trade is also about doing the right thing and taking responsibility for the sustainability of the whole supply chain. And that means honesty, building goodwill and building stronger relationships that are beneficial to all concerned.