New Fairtrade Labels Attract criticism

On 27 January 2014, Fairtrade International launched its Fairtrade Sourcing Programmes for cocoa, sugar and cotton. The official objective is to boost smallholder producers' sales.
Meanwhile, criticism of these new labels is on the rise too and Fairtrade

Everything is based on one finding: sales of many fair products are not taking off. Currently, only 1.2% of cocoa is traded under Fairtrade conditions around the world and Fairtrade cocoa and sugar producers only sell one-third of their production under fair trade conditions even though it is completely certified.

The well-known Fairtrade label 

To date, businesses that wanted to show the main Fairtrade label on their product had to certify all ingredients for which there are standards. These ingredients had to represent at least 20% of the total weight of the product. Therefore, to be labelled, a crunchy nut chocolate-milk bar had to contain 100% certified cocoa, nuts and sugar (there are no Fairtrade standards for milk).

New ingredient labels

The well-known label and its conditions are maintained, but at the same time, new labels have appeared for cocoa, sugar and cotton, under which only one ingredient needs to be certified. Companies can only label a product under these labels if 100% of their supply of sugar, cocoa or cotton for that product is Fairtrade certified. Otherwise, they can still opt for institutional communication (CSR reports and other B2B or B2C communication tools). A T-shirt with only 10% cotton can consequently be labelled as long as all the cotton used is Fairtrade certified.

However, Fairtrade Belgium's main objective is not to "award the label to end products; this new programme aims to encourage businesses to include fair trade in their supply chain (for at least 10% of the supply of a certain ingredient)." Furthermore, it adds, "The Fairtrade model is a recognised model for development, but this model can be effective only if significant volumes are sold under Fairtrade conditions. Only at that stage can we guarantee to have an impact on cocoa or cotton producers.  After 25 years of action, we have found that we have succeeded in achieving such an impact for banana and coffee producers by creating a major northern market for these products. On the other hand, for products such as cocoa, sugar and cotton, the demand in Europe has remained weak. In other words, innovation is needed to meet these challenges which the producers have confronted us with."

More opportunities for cocoa farmers...

Multinationals immediately reacted positively to this new initiative. Candy giant Mars(1), as well as other major brands and Swiss, Japanese and German retailers such as Rewe and Lidl were among the first to commit to the new Fairtrade Sourcing Programme(2). This alone will result in a six-fold increase in fair trade cocoa sales in Germany in 2014. Sales of Fairtrade cocoa producers increased by 14%, which should generate an additional 1.2 million dollars in terms of development premium for cocoa producers.

“This is the breakthrough we have been looking for. The farmers I represent in Africa have been looking to sell more cocoa as Fairtrade for a long time,” said Fortin Bley, President of the Fairtrade Africa Cocoa Network, cocoa farmer and secretary general of the CANN co-operative in the Ivory Coast.

“This new programme means we can already increase our Fairtrade sales. This means more Fairtrade Premium money to invest in training to increase the productivity of our members' farms, thereby increasing their incomes. It means more Premium money invested in social programmes like drinking water, construction of schools and more impact for our communities.” 

… but producers of sugar and other ingredients of chocolate bars worry

A chocolate bar can have the "Fairtrade cocoa programme" label while sugar or other ingredients such as nuts or vanilla, are not fair trade. According to the CTA(3), "70% of sugar consumed in Europe is in the form of food products containing sugar"(4), and is not pure sugar. This means "the biggest potential for long-term growth of Fairtrade sugar on the EU market is in manufactured products. Yet the new Fairtrade sourcing rules could serve to reduce or, at minimum, hold back the increased use of Fairtrade-certified sugar in manufactured products. This can be seen as coming at a very unfortunate time, with ACP sugar suppliers (who provide around 90% of Fairtrade-certified sugar) scheduled to face increased competition on EU sugar markets after the abolition of EU sugar and isoglucose production quotas".(5)
When Ekitinfo asked Eric Garnier, Value Chain and Public Relations director of Alter Eco, he confirmed the risk for sugar producers: "Our organic Fairtrade certified sugar cane costs us three times more than on the New York commodity exchange. For cocoa the difference is only 15 to 20%... Obviously, no multinational will want to pay 300% more for sugar (…). Considering that big players such as Nestlé or Cadbury make most of their turnover on milk chocolate (a lot of sugar and only 35% cocoa), this means that two-thirds of their raw materials, their supply logic, choices of value chains and ingredients are absolutely not affected by this new system".(6) We therefore have to ask ourselves "Are we still changing global trade rules?"(7)

Fairtrade Belgium is aware of the problem: "Fairtrade International also wants sugar producers to benefit from the impact of this programme. This is a major concern for us and we are currently working on an internal project to achieve this".

The drop in demand may also affect the producers of certified nuts and vanilla since major chocolate brands no longer have to buy these ingredients under fair trade conditions to use a Fairtrade label.

The idea of relocating and using Europe's beet sugar could be interesting, but it should then also be applied to products such as wine that can be Fairtrade certified. Fairtrade standards should also be developed for producers in the North, which is something Fairtrade Belgium is not ready to commit to.(8)

The race for certification

Today, the cocoa market is still not stable because demand is on the rise boosted by a growing global consumption of chocolate, driven in particular by China. The challenges that need to be met by the chocolate industry as a whole are huge. How can they increase production? In addition, how can they counter the drop of the number of cocoa growers, who, because of low prices over many years, have stopped producing and switched to more profitable crops?

In this context, certification is a good tool to achieve greater traceability and guarantee the supply of high-quality beans. Certification is also a good means to fight child labour, which is a real threat to the reputation of chocolatiers and relatively common on cocoa plantations in the Ivory Coast and Ghana, the two main producing countries.

Actually, almost all major chocolatiers have announced they would have their production Fairtrade, Utz Certified, or Rainforest Alliance certified by 2020. The latter two are more recent labels and have less demanding economic and social standards than the Fairtrade label. Neither offers producers a guaranteed minimum price, whereas the Fairtrade label guarantees a minimum price of 2,000 USD/tonne and a development premium of 200 USD. Utz Certified, for its part, trains farmers to negotiate better prices. The average premium paid by Utz in 2012 amounted to 112 euros/tonne (155 US dollars/tonne).

Therefore, it is understandable that certification systems such as Utz Certified are attractive to major corporations.
This means Fairtrade International is losing certification market share, which also partially explains the development of new Fairtrade Sourcing Programmes.

"Unfair" competition and confused consumers
The proponents of "everything that can be Fairtrade certified in a product must be" with all chocolate bars containing Fairtrade cocoa and sugar (or other products), will be confronted with the rather unfair competition of retail and agrofood giants with a large communication budget. Their products will use the "Fairtrade Max Havelaar Cocoa Programme" label because of the cocoa in the product despite the fact that the sugar or other ingredients are not certified.

The Oxfam organisations involved in fair trade have expressed their concern about the new programmes: "Even though Oxfam agrees that more must be done to help cocoa producers find outlets for their Fairtrade cocoa, we do not believe that lower standards for Fairtrade certification is the way to go. We strongly advise Fairtrade International to explore alternative strategies, such as more investment in marketing, in education or in raising the awareness of consumers." Consequently, Oxfam would not use the new ingredient labels. 

Because these new labels will result in fair trade at two speeds, the historic players are not using them. Artisans du Monde, the French network of world shops that has practiced fair trade for more than 40 years, even states that the Fairtrade Sourcing Programmes constitute a "new certification approach that does not meet the requirements of fair trade". The network will actually soon decide about its "further pursuit or not of (its) partnership with Fairtrade International". The same is heard at the BFTF, the Belgian Fair Trade Federation, which considers that "The FSP model obviously goes against fair trade values supported by the Belgian Fair Trade Federation and its members."

Right now, consumers are not very well informed about the new Fairtrade ingredient labels. These labels have not yet appeared on the Belgian market but it will not take much longer considering the open nature of the liberalised common market in Europe. How will consumers find their way? How will they distinguish between two rather similar logos? The ingredient labels will have the blue and green colours of the original label on a white background instead of a black one, and specify "cocoa programme", "cotton programme" or "sugar programme". Will they be able to decide whether one product is fairer than another?

There is a genuine risk that the new labels, which one could qualify as "light" in certain respects, will cause the demise or at least completely marginalise the traditional Fairtrade label for chocolate products, sugar or cotton. The confusion and risks are such that even Fairtrade Canada and Fairtrade America, who are actually members of Fairtrade International as is Max Havelaar in Belgium, might decide to not adopt these labels.

Inflated statistics

Christian Jacquiau, a French economist and critic of the Fairtrade label and who wrote a book called 'Behind the scenes of fair trade', thinks that the industry will be able to sell fair trade chocolate without any certified cocoa as long as the sugar is certified. Considering that the price difference between fair trade and the conventional market is higher for sugar than for cocoa (see information given by Eric Garnier below), this seems unlikely. However, Christian Jacquiau has a point when he talks about "inflated statistics". He explains his view in an interview in the magazine TerraEco: "When a chocolate bar is registered at the cashier's the whole retail sales price will be registered as fair trade, and not only the few grams of sugar for which it may display the Max Havelaar logo on its packaging. The turnover on such fake fair products in supermarkets will boom and ensure success... at least in the statistics. But how fair is this?(9)

To be continued...

In its document "Why you will not see the new Max Havelaar FSP label on Ethiquable products", French organisation Ethiquable goes into another debate at Fairtrade International in more detail. This time the development premium is audited. To date, producers' organisations or, in the case of plantations, a Joint Body with representatives of the workers, have decided about the appropriation of the premium. The premium also usually finances social programmes (education, access to drinking water and so on) or economic development programmes (improved quality, investments etc). "The current debate aims to channel part of the premium towards rehabilitating and improving cocoa plantations. One of the options suggested even consists of creating a country fund, which would be fed by part of the premium and finance programmes in support of cocoa production".(10) If this option is withheld, it would not be the producers who autonomously decide about the allocation of the development premium any longer. Rehabilitating cocoa plantations, even though it would be to the benefit of the producers, especially serves the interests of major cocoa stakeholders who now have a hard time finding high-quality cocoa beans (see box).

And after 2015 ?

According to CLAC(11), the Latin-American and Caribbean Co-ordination of Small Fair Trade Producers, until 2015, only coffee, cocoa, sugar and cotton from producer organisations – and consequently not from plantations – can be Fairtrade certified. And afterwards? Do the FSP labels open the door to the certification of products from plantations?

Small Producers' label

Ethiquable and Oxfam worldshops are increasingly focusing on the Small Producers' label. This label was launched in 2010 by the CLAC, the Latin-American and Caribbean Co-ordination of Small Fair Trade Producers. It was developed by and for small producers. The idea had been around for a while because it had become clear that Fairtrade International, by offering the Fairtrade label to plantations for products such as tea, bananas, grapes or flowers, was drifting away from its original mission, i.e. offering market access to smallholder farmers and changing international trade practices.

"As small producers we had to speak out in defence of initial fair trade values: co-operation, democratic governance, support to smallholder farming…," explains Jéronimo Pruijn, executive director of Fundeppo, the Foundation of organised small producers.(12)

The Belgian Fair Trade Federation (BFTF) says that "over the last few years, some historic fair trade players in Europe have somewhat distanced themselves from the Fairtrade label by withdrawing their products and now others are willing to follow suit."

A narrow vision on fair trade

Fairtrade International’s vision of fair trade is increasingly becoming tighter and tighter. The development model has changed and fair trade is losing its social transformer role. The growth in turnover has taken over fair trade's initial double objective, which was to both denounce abusive international trade practices and to show that trade can be conducted differently by developing an alternative social model of trade. 

Samuel Poos

The ideas expressed in this article are those of the author only. They do not necessarily reflect the official position of BTC, the Belgian development agency, or of the Belgian Development Co-operation.

Photo. Copyright Didier Gentilhomme. Guebre Albert, of the Agricultural Cooperative N'Zrama of N'Douci (CANN) - Ivory Coast.

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1. See the Novethic article: Mars veut 100% de cacao issu de sources certifiées d'ici 2020.
2. Switcher, a Swiss company, announced in January it would get involved in the cotton programme.
3. The Technical Centre for Agricultural and Rural Cooperation (CTA) is an international joint institution of the ACP (Africa, the Caribbean and the Pacific) Group of States and the European Union (EU).
4. CTA, Agritraide, Fairtrade certification for multiple-ingredient products to be modified, 20 January 2014.
5. CTA, Agritraide, Ibid.
6. Didier Pérou, Max Havelaar lance de nouveaux labels ! Évolution logique ou réel retour en arrière ?, Ekitinfo, 27 January 2014.
7. Didier Pérou, Ibid.
8. See for this topic: " Le commerce équitable, aussi pour les agriculteurs belges ? "
9. Le commerce équitable trouble davantage les esprits qu’il ne convainc", Interview of Christian Jacquiau, Terra Eco. 3 February 2014. http://www.terraeco.net/Le-commerce-equitable-trouble,53604.html
10. Ethiquable, Pourquoi vous ne verrez pas le nouveau label « FSP » de Max Havelaar sur les produits Ethiquable,http://www.ethiquable.coop/page-dactualites-mag/pourquoi-vous-ne-verrez-pas-nouveau-label-fsp-max-havelaar-sur-produits#.UwKIGxSDjqc.twitter
11. CLAC, the Latin-American fair trade Coordination, letter of 18 September 2013 addressed to Fairtrade International.
12. Philippe Chibani-Jacquot, La liste des labels équitables s'allonge, Novethic, March 2012.