Brussels Briefing 44: Aynur Mammadova, IISD Associate, SSI Team Member - Sustainability of supply chains and fair schemes favorable to farmers
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The Brussels Development Briefing no. 44 on “Promoting responsible and sustainable sourcing through Fair Trade” took place on 22 June 2016 from 9:00 to 13:00, at the ACP Secretariat in Brussels, Belgium. This Briefings was co-organised by CTA, the European Commission / DEVCO, the ACP Secretariat, CONCORD and the Fair Trade Advocacy Office.
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Brussels Briefing 44: Aynur Mammadova, IISD Associate, SSI Team Member - Sustainability of supply chains and fair schemes favorable to farmers
- 1. State of Sustainability Initiatives: Sustainability of supply chains and fair schemes Promoting Responsible Value Chains and Sustainable Sourcing Through Fair Trade 22 June, 2016 Brussels
- 2. • The SSI is a partnership that was launched out of the joint IISD-UNCTAD Sustainable Commodity Initiative (2003) which sought to mainstream sustainable commodity production and trade by leveraging the different and growing number of voluntary sustainability standards on the market and by promoting core fair trade principles. • Launched in 2008 the SSI is a collaborative effort funded by the State Secretariat for Economic Affairs (SECO) and led by the International Institute for Sustainable Development (IISD), the International Institute for Environment and Development (IIED) and the Finance Alliance for Sustainable Trade (FAST). To facilitate efficient decision making for sustainability by providing timely, accurate and pertinent information on the performance of voluntary sustainability initiatives on international markets. • A voluntary sustainability initiative, or VSI, is any non-obligatory initiative explicitly designed to promote the objectives of sustainable development, including ecolabels, certification initiatives, standards, CSR programs, business to business initiatives, roundtables and other collaborative or multi-stakeholder initiatives. Who we are
- 3. SSI Review The SSI Review is an independent evidence-based report on the characteristics, performance and market trends related to sustainability initiatives.
- 4. Content 2. Sustainable market statistics and data 3. Social, Environmental & Economic criteria of VSS 4. Opportunities through Fairtrade certification 5. Overall challenges 6. Conclusion
- 6. Fair Trade Commodities coverage Bananas Coffee Cotton Cocoa Tea Sugar Soy Palm oil Forestry Biofuel 10 key commodity sectors in agriculture and forestry
- 7. Standards coverage 16 standards operating in agriculture and forestry sectors
- 8. Growth in sustainability market Compliant production as percent of global production, 2008 & 2013/14 Source: SSI Review 2014 Development of VSS compliant area worldwide, 2008-2013 (Minimum) Source: SSI Review 2014
- 9. Production vs. Sales Sustainable markets: Standard-compliant production vs. standard-compliant sales for 2012 Source: SSI Review 2014
- 10. Single sector initiatives lead in production volume Source: SSI Review 2014 Single vs. multisector standards
- 11. Sustainable Markets Production Growth Rates 2008-2014 Cocoa Coffee Cotton 0 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 900,000 1,000,000 2008 2009 2010 2011 2012 2013 2014 PRODUCTION(MT) UTZ Rainforest Alliance Fairtrade Organic VSS 0 200000 400000 600000 800000 1000000 1200000 1400000 1600000 1800000 2008 2009 2010 2011 2012 2013 2014 PRODUCTION(MT) BCI CmiA Organic VSS Fairtrade 0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 2008 2009 2010 2011 2012 2013 2014 PRODUCTION(MT) 4C UTZ Fairtrade Rainforest Alliance Organic VSS
- 13. Board representation Source: SSI Review 2014
- 14. Social, Environmental & Economic criteria of the VSS
- 15. Environmental criteria: Indicator and indices coverage Average coverage of SSI environmental indices by VSS Source: SSI Review 2014
- 16. Social criteria: Indicator and indices coverage Average coverage of SSI social Indices by VSS Source: SSI Review 2014
- 17. Economic criteria: Indicator and indices coverage Average coverage of SSI economic Indices by VSS Source: SSI Review 2014
- 19. Smallholders Additional exceptions for smallholder producers which further accommodates for smallholders by extending the certificate period from three years to six years for “small licensees”. Opportunities Concentration on developing countries Fairtrade certification is only available for products sourced from developing countries. Contractual transparency Fairtrade is the only initiative with criteria covering all aspects related to contractual transparency between buyers and sellers. Price premiums Price premiums illustrate the second-lowest average coverage across all 16 voluntary sustainability initiatives, with only Fairtrade and UTZ covering this index. Governance Fairtrade is a leader in enabling equitable governance among developing country smallholders.
- 20. Challenges Mainstream Markets Voluntary initiatives, whether Fairtrade or not, cannot be expected to overcome market imperfections—they can help the market in being more attentive to such imperfections but ultimately it will take government intervention and support to do so in a way which is in accordance with the objectives of sustainable development. Building the market Continuing need to build the market—and, especially allow for the existence of premiums/compensation for the adoption of more stringent practice (preferential tariffs/taxes and public procurement policies). Facilitating access Need to facilitate market access and inclusiveness (technical assistance to unorganized smallholder organizations (SCAN) and facilitation of access to finance for smallholders (FAST)). Information transparency Need to improve information transparency—info on markets (SSI) and impacts (COSA).
- 21. Conclusion The general trend towards market growth BUT market concentration in more developed economies. Fair Trade's focus on marginalized communities is entirely pertinent and appropriate. The problem is that Fairtrade doesn't meet the needs of the entire market and therefore there is a need to help other initiatives also reach more marginalized markets. Fair trade has the right priorities, but offers a limited vehicle for their implementation, policy makers need to be open to exploring other opportunities for promoting the "principles of fair trade" by leveraging other instruments as well.
- 22. Contact us Thank you! Any questions? www.iisd.org/ssi info@ssianalytics.org Lead Researcher, Jason Potts: jpotts@iisd.ca
Hinweis der Redaktion
- One of the core principles motivating the SCI, was a recognition that, there were limits to what the market could do in this regard and therefore the need to gain a better understanding on why and where VSS’s were working to promote sustainable trade and where they needed to be complemented by public policy.
- Founded in 1997, Fairtrade International is a member-based initiative operating within the food and agriculture sector across 120 countries. The initiative coordinates Fairtrade labelling at the international level. Fairtrade sets minimum pricing and premium levels as part of its commitment to poverty reduction for developing country producers. The initiative operates business to consumer. A separate certification company, FLO-CERT, inspects producers and traders to ensure they comply with Fairtrade standards. Full re-assessment for Fairtrade’s certificates is conducted every three years. Within this three-year period, yearly surveillance audits and random field checks are performed. All audits are conducted by third-party auditors. The three supply chain traceability models of identity preservation, segregation and mass balance models are applied to all Fairtrade products to ensure accountability of compliance claims in the marketplace. The initiative’s primary source of revenue is from membership fees and grants.
- The average annual growth rate of standard-compliant production across all sectors reviewed was a stunning 41%, significantly outpacing the annual average growth of 2% in the corresponding conventional commodity markets.
- A definite lag between supply and demand exists across all of the sectors reviewed. In fact more than half of most standard-compliant product is NOT actually sold as standard compliant. The gap between demand and supply may lead to reduced incentives to make the transition to sustainable production over time.
- Concentration in More Developed Economies Production for sustainable markets is concentrated in more advanced, export-oriented economies raising concerns about the effect of sustainability requirements on market access for less developed producers.
- Page 77 Overall, economic criteria display the lowest degree of coverage across the three pillars of sustainability. Virtually all initiatives would say that this is not a reflection of a lack of concern for the economic sustainability of producers, but rather is due to a widely held belief that economic sustainability is fundamentally founded on free market interaction. For those holding this view, the absence of economic criteria might be considered an indicator of an initiative’s commitment to promoting long-term economic sustainability. Fairtrade is the only initiative with criteria covering all aspects related to contractual transparency between buyers and sellers. Although RSPO reports high coverage, the remaining initiatives have no criteria covered by the SSI’s “written contracts between buyers and sellers” index. • Price premiums illustrate the second-lowest average coverage across all 16 voluntary sustainability initiatives, with only Fairtrade and UTZ covering this index, although the requirements specified vary considerably. The minimum pricing specified by Fairtrade is based on product type and location, while UTZ allows for negotiation of the final premium between buyer and seller. Although not considered a premium per se, CmiA presents the producer with the potential of eventually receiving a dividend, but only after a certain level of sales has been achieved (International Finance Corporation, 2013).
- Page 77 Overall, economic criteria display the lowest degree of coverage across the three pillars of sustainability. Virtually all initiatives would say that this is not a reflection of a lack of concern for the economic sustainability of producers, but rather is due to a widely held belief that economic sustainability is fundamentally founded on free market interaction. For those holding this view, the absence of economic criteria might be considered an indicator of an initiative’s commitment to promoting long-term economic sustainability. Fairtrade is the only initiative with criteria covering all aspects related to contractual transparency between buyers and sellers. Although RSPO reports high coverage, the remaining initiatives have no criteria covered by the SSI’s “written contracts between buyers and sellers” index. • Price premiums illustrate the second-lowest average coverage across all 16 voluntary sustainability initiatives, with only Fairtrade and UTZ covering this index, although the requirements specified vary considerably. The minimum pricing specified by Fairtrade is based on product type and location, while UTZ allows for negotiation of the final premium between buyer and seller. Although not considered a premium per se, CmiA presents the producer with the potential of eventually receiving a dividend, but only after a certain level of sales has been achieved (International Finance Corporation, 2013).
- One of the core principles motivating the SCI, was a recognition that, there were limits to what the market could do in this regard and therefore the need to gain a better understanding on why and where VSS’s were working to promote sustainable trade and where they needed to be complemented by public policy.
- Key areas for complementary intervention include: Promoting better price transparency (by requiring price reporting along the supply chain—and establishing HST codes for certified products) Supporting access to finance (by offering guarantees on certified loans to certified production Offering targeted technical assistance to allow smaller producers to become organized and to implement sustainable practices so they can become certified (with any of a variety of credible VSS) Public procurement requirements for certified production Preferential tariffs and taxes for certified products