UNDERSTANDING THE IMPACT OF FAIRTRADE

IDS Business and Development seminar13 November 2012

Sally Smith, Independent Research Consultant

sallyesmith@yahoo.com

What is Fairtrade?

“Fairtrade is an alternative approach to conventional trade and is based on a partnership between producers and consumers. Fairtrade offers producers a better deal and improved terms of trade. This allows them the opportunity to improve their lives and plan for their future. Fairtrade offers consumers a powerful way to reduce poverty through their every day shopping.”

Fairtrade International website

How does Fairtrade work?

Set of standards which establish the ‘rules’ for fair trading practices and engagement in Fairtrade, and 3rd party verification of compliance Standards for supply chain businesses trading in

Fairtrade-labelled products (incl. min. price & Premium) Standards for Small Producer Organisations and

Employers and Workers (e.g. democratic organisation, accountability, respect for labour rights & environment)

Strategies which enable engagement in Fairtrade Building markets Technical and financial support for producers/workers Networks and alliances Facilitating civil society action around trade justice

Why is it important to measure impact in Fairtrade?

to producers &workers to consumers to businesses which

invest to funders

Internally in Fairtrade: Are aims & objectives being

achieved? In what situations do

positive/negative impacts occur?

How can Fairtrade be improved?

Externally with the development community How to maximise the impact

of sustainability standards and trade-for-aid in development?

Accountability Learning & Improvement

Source: Fairtrade International Monitoring Report 2011

What are the challenges of measuring impact?

Scale & diversity of Fairtrade producers

905 certified producer organisations

> 1.1 million farmers and workers

63 countries 17 product

categories

What are the challenges of measuring impact?

Capturing the range of impacts

Regional/ National

development

Communities

Producer / Worker

Organisations

Producers/ Workers &

Households

Economic impacts, e.g. Income levels & stability Access to finance Asset ownership

Social impacts, e.g. Self-confidence, self-

esteem Health, education Gender equality

Environmental impacts, e.g. Biodiversity Natural resource capacity

What are the challenges of measuring impact?

Establishing the role of Fairtrade in bringing about change

Understanding how and why change has occurred

Ensuring reliable and credible findings, at reasonable cost

Source: http://impact.zewo.ch/en/impact

Before – After comparison with control group

What are the challenges of measuring impact?

Maximising utility for producers and workers Committing to transparency and improvement

Formulate policies & strategies

Implement

Measure performan

ce

Analyse & share

findings

Internal & external

communication

Learning cycle

Example of challenges in practice

Center for Evaluation (CEval), Saarland University, commissioned to assess the impact of Fairtrade in rigorous way

As baseline data were not available and a longitudinal study was not possible, CEval used a quasi-experimental design: comparing Treatment Groups (TGs) with matched Control Groups (CGs) at a single point in time (i.e. differences attributed to Fairtrade)

TGs = 6 FT producer organisations, covering 6 sectors and 4 countries

Was not possible to find CGs which matched TGs on all criteria (e.g. same type of organisation, levels of support, markets); access to non-Fairtrade producers challenging, especially plantations

Matching needs to be done at level of villages (e.g. type of infrastructure) and individuals (e.g. amount of land) as well as organisations – resource intensive

Data/results from different sectors/countries could not always be compared as contextual factors which determined results differed considerably – not possible to generalise findings beyond cases

Using the mass of evidence to understand Fairtrade impact

Meta-analyse

s

Sector studies

Gender review

Nelson, V. and Pound, B. (2008) Fairtrade impact assessment: A literature review. NRI, University of Greenwich: Chatham Meta-analysis of 38 studies

Vagneron, I. And Roquigny, S. (2010) What do we really know about the impact of Fairtrade? A Synthesis. PFCE: ParisMeta-analysis of 77 studies

Smith, S. (2010) Fairtrade bananas: A global assessment of impact. IDS: SussexSector study across 4 countries

Nelson, V. and Smith, S. (2011) Fairtrade cotton: Assessing impact in Mali, Senegal, Cameroon and India. NRI: ChathamSector study across 4 countries

Smith, S. (2011). Review of the literature on Gender and Fairtrade. Commissioned by Fairtrade International.Review of 21 studies

What do we know about Fairtrade impact for Small Producers?

Fairtrade can bring higher incomes and/or greater income security

Impact on income depends on: prevailing market prices vs. Fairtrade minimum price; scale of production and sales on Fairtrade markets; financial situation of producer organisation Farmers with low volumes, or who don’t sell much on

Fairtrade markets, unlikely to escape poverty through Fairtrade alone

Farmers with higher volumes/sales more able to save and invest – Fairtrade supports sustainable development

Fairtrade can improve productivity and quality through market requirements, price incentives and Premium investments

In Mali, Senegal and Cameroon, Fairtrade increased the prices farmers received for cotton by between 22% and 70% from 2004-2007. However, this effect was stalled in 2008-2009 when market growth did not keep up with supply.

Fairtrade can help strengthen Small Producer Organisations (SPOs) in various ways: Greater access to working and investment capital, & high

value markets Stronger, more resilient businesses – essential for impacts

to be scaled up and sustained More democratic, transparent and inclusive organisations –

essential for ensuring Fairtrade benefits reach producers (and empowerment)

Scale and scope of impact depends on context, including market structures and trading relationships

Support (organisational, technical, financial) from NGOs, buyers and/ or Fairtrade organisations is critical to outcomes

What do we know about Fairtrade impact for Small Producers?

“[Fairtrade buyer] Twin is very historical in the establishment of Gumutindo... Without Twin the conversion to Fairtrade and quality would have been difficult... When we made a loss and thought we would go out of business, Twin rescued us with a loan of $100,000.”

Nimrod Wambette, Chair of Gumutindo Coffee Cooperative, Uganda

Use of the Fairtrade Premium by Small Producer Organisations

• Average Fairtrade Premium earned by SPOs in 2009-10: €80,000 (€47 per farmer)

• Improving production & processing at farmer level: 30%

• Investments in developing SPO business: 24%

• Investments in education, health, community development: 14%

Source: Fairtrade International Monitoring Report 2011

What do we know about Fairtrade impact for workers?

Relatively few studies to date – cannot generalise

In cases studied, Fairtrade standards and auditing have improved working conditions Formalisation of employment and access to legislated entitlements New/improved employment policies and practices (e.g. sexual

harassment, health and safety, on-farm housing)

Income may increase through access to national minimum wages and wage-related benefits, but wages often below ‘living wage’ levels

Workers Committees to promote and defend workers’ interests – some achievements but limited by lack of knowledge, bargaining power and external linkages (to trade unions and other networks)

Use of the Fairtrade Premium by Workers

• Average Fairtrade Premium earned by Hired Labour settings in 2009-10: €80,000 (€100 per worker)

• Investments in education, health, community development: 61%

• Direct support to workers: 22%

• Premium greatly appreciated by workers but not always managed well; benefits may not be distributed evenly Source: Fairtrade International Monitoring

Report 2011

“I was a casual worker and my dream was to come and work here, because of the benefits workers receive, the different way of working, provision of working equipment, and compliance with the law.”

Fairtrade banana plantation worker, Ecuador

What do we know about Fairtrade gender impacts?

Fairtrade can bring economic opportunities for women

producers, increased involvement in SPOs, benefits from

Premium use material and strategic gains

Women workers often still in lower paid, less skilled

employment, but Fairtrade may formalise work and lead to

gender-sensitive employment practices

Typically Fairtrade raises awareness of gender issues and rights but limited impact on gender roles and responsibilities within households, organisations, communities – not challenging power structures and entrenched inequalities

Fairtrade gender impacts mediated via organisations – level of gender awareness in producer and worker organisations greatly affects outcomes

In Mali, Senegal and Cameroon, Fairtrade has enabled women to be paid directly for their cotton for the first time. For some women this has given them greater influence within their households, but others report that men still control all household income and take decisions unilaterally.

How and why does Fairtrade bring about change?

ESTABLISHING RULES

FOR FAIRTRADE

ENABLING ENGAGEME

NT IN FAIRTRADE

SETTING STANDARDS

• Business & Development

• Production

• Trade

PROVIDING

SUPPORT

FORMING NETWORK

S & ALLIANCE

S

ADVOCACY &

SUPPORT FOR CIVIL SOCIETY ACTION

BUILDING MARKETS

VERIFYING STANDARDS

MO

NIT

OR

ING

, EV

ALU

ATIO

N &

LEA

RN

ING

What is being done to better monitor and learn about Fairtrade impacts in future? Fairtrade International is developing a global impact

assessment system based around a theory of change agreed by stakeholders

Theory of change will help establish key areas of change that Fairtrade needs to track

System will involve a range of research activities at different scales to meet information needs in a cost-effective way (e.g. ongoing M&E at a global level; limited number of longitudinal studies started each year; occasional thematic research, etc.)

Key to success = effective systems for, and commitment to, learning

“Change is the end result of all true learning.”Leo Buscaglia