Dr Sanjay Lanka is a Lecturer in Financial Management. His research is centred on social and environmental accounting. Dr Lanka’s work includes Agroecology Accounting: Biodiversity and Sustainable Livelihoods from The Margins and The Effectiveness of the Fairtrade Minimum Price as A Valuation Device. This podcast discusses issues raised in both of these papers.
Recently, companies that had supported the Fairtrade label through retail partnerships have decided to step away from this engagement. Cadbury one of the main supporters of the Fairtrade label has launched its own label “Cocoa Life”, although Fairtrade claims to be supporting this initiative. Similarly, Sainsbury the world’s biggest retailer of Fairtrade certified products has decided to replace the Fairtrade label for its tea’s with its own “Fairly Traded” label. Sainsbury promises to improve the Fairtrade practice of providing a minimum price guarantee and a social premium with additional benefits such as long term commercial relationships which it acknowledges are missing from the Fairtrade system. Sainsbury in presenting its rationale for making this change brings out the problem with the Fairtrade system.
Despite having been around since 1992, the Fairtrade label has not translated into sustainable livelihoods for smallholder farmers despite having made some progress in improving livelihoods. This is due to the fact that Fairtrade has focused its attention on its retail partners, who have benefited the most from their relationship with Fairtrade, which has also received a significant portion of its resources from the Fairtrade premium charged on retail products bearing its label. The Fairtrade system has enabled retailers to develop a profitable market niche that has bolstered their corporate social responsibility story but retailers have noted that consumers are not as enamoured by the Fairtrade label.
However, research at the smallholder end of the commodity value chains which are supposed to be the beneficiaries of the Fairtrade system show that the benefits of Fairtrade have not accrued at the smallholder level. The retailers shift away from Fairtrade portends an acknowledgement of this failure. It is also an indicator of retailer’s new business strategy to develop their own certification initiatives to garner a new market niche that would not be associated with the Fairtrade label that is starting to lose its glimmer. In this podcast, I present some of the issues related to this lack of accountability to the smallholder coffee farmers in the Fairtrade system and discuss the potential for alternatives to improve smallholder farmer’s livelihoods.