There is an extensive literature on the impact of Fair Trade. While much of the evidence is positive, there are also studies that find negligible, neutral or even negative effects. In this article, I propose that a paradigm shift towards systematic and regular outcome and impact reporting by Fair Trade organisations is both possible and urgently needed. This shift will align financial and non-financial reporting and help to ensure that Fair Trade is delivering on its core objectives, which include better prices for smallholder producers, improved working conditions and local sustainability. I provide evidence that at least some of the mainstream agribusiness sector is moving towards outcome reporting in some dimensions of their operations. Fairtrade and other certifiers for responsible sourcing only do marginally better than agribusiness in their current reporting in terms of outcome and impact reporting. A new paradigm in systematic and real-time outcome reporting is possible. To achieve this, data production must be bottom-up, rather than top-down. Smallholders and producers have to become owners of the positive outcomes they are seeking to achieve.
The annual reports of the Fairtrade Foundation (UK) and snapshots like the one provided on their website provide an overview: http://www.fairtrade.org.uk/What-is-Fairtrade/Facts-and-Figures [accessed on 28th May 2019]
Pérez Ruiz and García de los Salmones (2018).
Doherty, Davies and Tranchell (2013).
http://www.fairtrade.org.uk/What-is-Fairtrade [accessed on 28th May 2019]
Doherty et al. (2013).
A meta-review of more than 2,600 papers in the peer-review literature on Fair Trade found that ‘certification is associated on average with positive outcomes for 34% of response variables, no significant difference for 58% of variables, and negative outcomes for 8% of variables’ (DeFries, Fanzo, Mondal, Remans & Wood, 2017). A report commissioned by the Fairtrade Foundation found positive and ‘very positive’ effects across a range of variables including income, economic stability, access to credit, transition to organic production, and income diversification among others (Nelson & Pound, 2009). Papers have found positive effects on sustaining co-operatives (Milford, 2004); on conservation and biodiversity (Aerts, Mudappa & Shankar Raman, 2010); health and education-related consequences (Arnould, 2009); positive economic effects for banana growers that may be due in large part to increased productivity, not the price premium (Fort & Ruerd, 2009); although direct effects in terms of net income remain fairly modest, important benefits are found to include capitalising farmers and strengthening their organisations (Ruben, Fort & Zúñiga-Arias, 2009). Other papers have found negative effects on farmers unable to sell through Fair Trade (Carimentrand & Ballet, 2010); while Fair Trade has promoted premiums for social development for participating producers and strengthened the institutional capacities of the co-operatives involved, its ability to significantly enhance the working conditions of hired coffee labourers remains limited (Valkila & Nygren, 2010); neither co-operative organisations nor Fair Trade certification is associated with perceived trust among community members (Elder, Zerriffi & Le Billon, 2012); and there is no evidence that certification is associated with more sales and no evidence that many workers, including unskilled seasonal coffee pickers, benefit from certification (Dragusanu & Nunn, 2014 in a draft paper).
See, for example, Logic Model Development Guide, WG Kellogg Foundation, Michigan, 2004.
https://www.fairtrade.net/impact-research.html [accessed on 15th June 2019].
Pedersen, Neergaard, Thusgaard Pedersen and Gwozdz (2013) conducted a study of non-financial reporting by Danish public companies that has some similarities to the method used in this paper. In their analysis of 142 company annual reports as required by the new Danish regulation regarding CSR reporting, they found that 69% reported policies and 60% reported actions, with only 37% of companies reporting results (p. 362).
See Thompson (2019a).
For example see Stecker (2016), Vollero, Palazzo, Siano and Elving (2016), and Zanasi, Rota, Trerè and Falciatori (2017).
Fair Trade USA and Utz/Rainforest Alliance are among the leaders in such alliances with major producers and brands. Fairtrade International continues to privilege smallholder co-operatives.
The Road Ahead: The KPGM Survey of Corporate Responsibility Reporting 2017 (https://home.kpmg/xx/en/home/insights/2017/10/the-kpmg-survey-of-corporate-responsibility-reporting-2017.html).
2018 Deloitte Millennial Survey: Millennials disappointed in business, unprepared for industry 4.0 (https://www2.deloitte.com/content/dam/Deloitte/global/Documents/About-Deloitte/gx-2018-millennial-survey-report.pdf).
The full analysis has been published on https://www.truefootprint.com/ [accessed on 27th May 2019] as the Business Purpose Scorecard. For the purposes of this essay, the analysis is limited to agribusiness and responsible-sourcing certifiers; it does not include the food and beverage industry.
See https://www.angloamerican.com [accessed on 17th June 2019].
Fairtrade has a helpful definition: A living wage is a salary paid by an employer to a worker that covers a basic standard of living. A living income is the same idea, but applies to people - like smallholder cocoa farmers - who don't earn a salary from an employer' (Living Income: Campaigner Briefing, Fairtrade Foundation, London, 2019).
The question of who audits self-reporting on emissions is important. For public companies this is usually done under the norms established by organisations like the CDP and final results are often audited by third parties. As with financial reporting, however, this does not preclude the possibility of inaccurate or fraudulent reporting.
Doherty et al. (2013).
CocoaAction Report 2016, https://www.worldcocoafoundation.org/about-wcf/cocoaaction/. If the goal is reached, this would represent 15% of the cocoa growing population of the two countries.
World Cocoa Barometer 2018.
Fair Trade USA, which is not part of Fairtrade International, reports the same input and output indicators and does not publish systematic, regular outcome or impact reporting either.
See Smith (2010) and Doherty et al. (2013) for a discussion of some of these challenges.