ALTERNTIVES TO OVERCOME THE MAIN DIFFICULTIES IN THE
FAIRTRADE CERTIFICATION PROCESS: A MULTICASES STUDY OF
ORGANIZATIONS OF SMALL PRODUCERS IN BRAZIL.
Carla Cristina Martoni Pereira Gomes
Master of Science in Organization Management
School of Business and Economics of Ribeirao Preto - University of Sao Paulo Brazil
Researcher at Marketing & Strategic Projects and Research Center (MARKESTRAT)
Rua Maestro Ignacio Stabile, 520 - Ribeirão Preto – SP – Brazil
ZIP 14025-640
Phone/Fax + 55 (16) 3456 5555
E-mail: [email protected]
Marcos Fava Neves
Professor of Marketing and Strategy at University of Sao Paulo - Brazil
School of Business and Economics of Ribeirao Preto (FEA-RP/USP)
Research Coordinator at Marketing & Strategic Projects and Research Center
(MARKESTRAT)
Av. dos Bandeirantes, 3900. FEARP. Bloco C, sala 64.
CEP 14040-900. Ribeirao Preto – SP, Brazil.
Phone/Fax + 55 (16) 3456 5555
E-mail: [email protected]
Key Words: Fair trade; Small Producers, Certification.
Abstract
The valorization of environmental and social responsible products has resulted in an
increase of socio-environmental certification schemes over the years. In agriculture, this
reflects on a growing pressure towards an environmentally more balanced and socially
fairer production. In this context, fair trade certification comes as an alternative to these
pressures that come from consumers. This model of trade has emerged to associations
of small farmers in unfavorable economic conditions as an alternative for obtaining
better trading conditions for its products and thereby improving the living standards of
their communities. Such economic disadvantages include the vulnerability of small
producers, with no access to credit and no capital reserves, to fluctuations in the
international commodity markets. This lack of economic opportunities due to
difficulties in accessing capital, markets and information create barriers to small
producers, thus ensuring large producers easier access to the export markets. In this
context, fair trade becomes an excellent option. However, it is evident the difficulties of
these producers to get such certification. Therefore, a multicase study was carried out in
four organizations of small producers which already have the certification in order to
detect these difficulties in getting the certification and to propose a checklist of actions
that can help other organizations to fit into that market.
INTRODUCTION
The valorization of environmental and social responsible products has resulted in an
increase of socio-environmental certification schemes over the years. In agriculture, this
reflects on a growing pressure towards an environmentally more balanced and socially
fairer production.
In this context, fair trade certification comes as an alternative to these pressures that
come from consumers. This model of trade has emerged to associations of small
farmers in unfavorable economic conditions as an alternative for obtaining better
trading conditions for its products and thereby improving the living standards of their
communities.
Such economic disadvantages include the vulnerability of small producers, with no
access to credit and no capital reserves, to fluctuations in the international commodity
markets. This lack of economic opportunities due to difficulties in accessing capital,
markets and information create barriers to small producers, thus ensuring large
producers easier access to the export markets.
The fair trade is increasing at annual rates above 20% since 1997, according to the
Fair-trade Labelling Organizations International (FLO, 2008) and it has achieved this
last year, a global movement of something around US$ 4 billion. About 800 000
households in Africa, Latin America and Asia, were targeted and the total extra
payment ("Premium") resulted more than $ 38.8 million.
The main markets today are U.S., UK, Switzerland and France. The product range is
already quite varied, including, in addition to handicrafts, items certificates with
international label, such as coffee, tea, rice, cocoa, honey, sugar, fresh fruit and even
manufactured goods such as footballs, and items certified by national initiatives, among
them, dry fruits, nuts, flowers and others.
The two products of greater movement and visibility in the food products are
bananas and the symbol of the movement, the coffee. These products are sold in more
than three thousand Fairtrade stores, called "world shops" in 18 countries and between
70 000 to 90 000 outlets conventional (FLO, 2009).
According to FLO, Brazil has certified sales of orange juice, coffee, mango and
dried banana, but sells other products through fair trade, but without certification, such
as soybean oil, melon, shirts and crafts. The fruit and coffee are the main Brazilian
products demanded by the trade.
In this context, the international market developments and economic disadvantages
suffered by small producers, the question to which paper seeks to answer is this: How
can these producers enter the market fair trade?
Since there is a growing market for Fair Trade Certified products, and increase
consumer awareness on issues related to sustainability, from production to disposal, and
Fair trade addresses these issues, how small farmers can enter this market? What are the
difficulties in the certification process? As these difficulties were overcome by some
organizations of small producers?
OBJETIVES
This paper aims to understand what are the main barriers faced by organizations
of small producers in the Fairtrade certification process and how these barriers were
overcome by those organizations. The description of these processes, the steps and
procedures adopted by the organizations studied may be useful to other organizations of
small producers in various production chains. To achieve the main objective of the
paper, there are other specific goals that involve: (1) to study the functioning of the Fair
trade market in Brazil and abroad; (2) to describe how does the certification process
with the FLO (Fair Trade Labeling Organizations International), with the certification
criteria used by the FLO-Cert Certification; (3) to understand the barriers faced by
organizations of small producers in the process of certification Fair trade; Present
possible solutions for organizations of small farmers to overcome these barriers.
PROCEDURES
In the developing of this article, there was an initial exploratory study. At that
stage, there was a search on secondary sources, that is, a bibliographic survey through
books, specialized magazines and documents of Fair Trade certifiers.
A multicase study was carried out in four organizations of small producers
which already have the certification, in order to detect these difficulties in getting the
certification and to propose a checklist of actions that can help other organizations to fit
into that market.
This methodology was chosen because, according to Yin (2001), the case study,
in general, is the chosen strategy when questionings of “how” and “why” are put
forward, when the researcher has little control over events and when the focus is on
contemporary phenomena inserted somehow on real life.
The case study is a recommended method for situations where the theoretical is not yet
developed. Besides the theoretical Fair trade is not being advanced, are also few studies
related to the certification process of these organizations, this system of fair trade
(BONOMA, 1995).
Therefore, it was carried out, as mentioned before, four case studies: (1) the
certification process by a cooperative of small producers of mango in Petrolina,
localized in the São Franscisco Valley, Manga Brazil, (2) the process of certification of
a cooperative of orange growers in the municipality of Itapolis, state of São Paulo Coagrosol, (3) the certification process of a coffee cooperative in Minas Gerais Coopfam, (4) the certification process of another coffee cooperative in the interior of
Minas Gerais, the Specialty Coffee Cooperative of Boa Esperança
The choice of those organizations is due to the need for understanding the
problem in these specific scenarios, so that thereafter conclusions and approaches can
be defined.
LITERATURE REVIEW
Certification is a formal instrument that ensures that the product was prepared
according to quality specifications (standards) pre-established and is recognized as an
indispensable tool to give confidence to the products, services and companies. Due to
this particularity, it is a reducer of informational asymmetries and may be issued by the
company, as well as by independent organizations, private or public, national and
international, depending on the applied standard (MACHADO, 2000).
According to Spers and Zylbersztajn (1999), the quality certificates show
different characteristics of the product and help consumers to understand the
characteristics or attributes private gifts. They are supplied by a certifying body that
checks and controls the product certifies its value attributes and allow them visible to
the consumer for the presence of a logo or symbol. They are officially regulated the
participation of entities, both private and public, in implementing the system and its
control. It may be voluntary or compulsory.
As a certified agricultural focus of this paper, Oliveira (2008), notes that France
was the cradle of certifications in this category. The certification process was triggered
by the crises in the country wineries in the past century, these crises related to the lack
of legislation to protect the use of geographical names for food and agricultural
products. To resolve this issue, according to Brabet and Pallet (2005 apud Oliveira),
was established in 1935 in France to Appeal of Controlled Origin (AOC), primarily for
wines and spirits. In 1990, a law extended the AOC dairy products and agrifood
products.
According to Pinto and Prada (2000 apud PEDINI et al., 2009) the certification
process in agriculture stems from the growing trend of environmental movements and
awareness of urban populations who perceived the (negative) impacts that conventional
farming has on the natural resources, quality of life of farmers and rural workers and on
their urban communities. This causes pressure to force changes the paradigm of
agricultural production, providing production systems more environmentally friendly
and socially fair.
Nassar (2003) defines the certifications in agribusiness in two main objectives:
defining attributes of a product, process or service and ensuring that they fit into predefined rules:
• On the supply side is a tool that provides basic permitting procedures and
standards for participating companies manage the quality of their products and ensure a
set of attributes. In this case, the certification creates an instrument of exclusion and
selection of firms and products.
• On the demand side, the certification that hopes to inform consumers that a
product has certain attributes sought for him, serving thus as a mechanism of
informational asymmetries, increasing market efficiency. Examples are certified organic
products, certificates of origin is known, the direct products of the farm and others.
When buying a certified product, the consumer knows in advance several of its features.
The Fair trade certification, subject of this paper, emerges as one of the most social
and environmental certifications is growing internationally. It is a product
certification system designed to enable identification by consumers of products that
meet certain environmental criteria, work and pre-established, to encourage small
farmers and hired workers in developing countries. The national non-governmental
FLO International sets the standards as a certification body FLO-CERT notes
following the standards established by the producers, through independent audit
(VIEIRA AND AGUIAR, 2009).
The same authors also mention that an important aspect of this certification is a
guaranteed minimum price for products sold, which must be paid to producers.
Another aspect that drives the marketing strength of the seal is the existence of a
Fair Trade premium. Whose value additional predetermined amount of product sold
by the organization comes certified and should be invested in development projects
in the producing communities, according to the decision of the certificate.
The system of certification Fair trade can certify various products, especially
agricultural products.
FAIR TRADE CERTIFICATION
The Concept of Fair trade is based on the fact that the global market practices
affect underdevelopment and inequitable distribution of income among nations (Levi
and Linton, 2003).
The European Commission (1999, cited in Jones, 2003) emphasizes that the
main objective of the Fair-trade is to ensure that producers receive a price that reflects a
total adequate to cover its expenses of production and work. Furthermore, should
contribute to a better social and environmental development in developing countries.
Already the European Fair Trade Association, sets the objective of fair trade work with
marginalized producers and workers in order to help them move from a position of
vulnerability to a position of safety and economic self-sufficiency and greater equity in
international trade.
According to the organization's international Fair-trade movement, FLO (2009),
fair trade represents an alternative to conventional trade and is based on cooperation
between producers and consumers. Offering fairer trading conditions for producers,
thereby improving their living conditions. For consumers, fair trade is an effective way
to reduce poverty through their purchases.
Murray et al (2003), emphasizes that Fair Trade seeks to challenge the existing
relations in the global economy by using consumer-producer alliances to create a system
of alternative prices that are based both in the concerns of social justice and economic
factors; eliminate intermediaries transform practices of multinational companies that
operate heavily in agrifood chains.
Regarding to the fair trade certification, there are some requirements: social,
economic and environmental factors that must be met by producers' organizations.
The requirements can be classified as general, minimal and progress. The
general who are all producer organizations must meet from the moment they join the
Fairtrade. The minimum must be met before the initial certification, and progress,
organizations must demonstrate compliance over time and through continuous
improvement. For some progress requirements, the degree of progress required of every
organization depends on the producer level of economic benefits or other benefits he
receives from Fairtrade and its specific context. As this work is not just the rules for an
organization to ensure fair trade, only the general requirements and standards are being
described and then analyzed.
From the set of 106 requirements that are part of the General Criteria for Small
Farmers, 40 are considered minimum requirements. Social Development under the
requirements totaling 17, of which 9 are considered minimal. The Economic
Development are grouped under 10, of which only two of them are minimal. In
Environmental Development, the total requirement is 50, six of which are minimal. And
for each product to be certified, there may be additional criteria in the areas already
addressed by the General Criteria of FLO. Still, for each product, FLO develops
commercial criteria that must be obeyed by both sellers and by buyers. .
The following table summarizes these requirements for certification, according
to the type of development that is related to social, economic and environmental.
Social
Fair Trade contributes to Development
Members are small producers
Democracy, Participation and Transparency
Nondiscrimination
Working Conditions
Freedom of Labour
Freedom of Association and Collective Bargaining
Conditions of Employment and Wages
Health and Safety at Work
Economic Development
Fairtrade Premium
Economic Strengthening of the Organization
Environmental Development
Impact Assessment, Planning and Monitoring
Agrochemicals
Waste
Soil and Water
Fire
Genetically Modified Organisms
Source: Elaborated by authors from FLO data (2009)
Table 1: Requirements social, economic and environmental objectives to be met for
certification.
RESULTS
Aiming to meet the goals of this paper on what were the main difficulties that
organizations of small producers found in the certification process and how these
organizations are prepared to fulfill each of the certification requirements.
The interviews sought to focus on the barriers found by the Brazilian
organizations of small farmers to ensure fair trade. They gave a more general overview
of the process and its barriers, since they do not participate directly in day-to-day
organizational and difficulties for certification, but followed the evolution of this
process. Since the interviews with the organizations had the purpose not only present
the main difficulties encountered in the certification process, but how organizations
fulfill each requirement.
The table 2 summarizes the main difficulties faced by small producers
organization in the ambits, social, economic and environmental. Also it is showed how
they overcome those difficulties:
Certification
Difficulties
Requirements
Fair Trade contributes to • Low managerial capacity
Development
of small producers
• Lack of financial
resources
• Lack of specialized staff
Members are small
producers
• Lack of resources to hire
an agricultural technician,
he would be responsible
for visiting the farms and
monitor the issue of hiring
employees
Actions
• Agreement with
Universities and facilitating
agents
• Developing a Work Plan
in the social and economic.
• A summary of all actions
that were discussed in
detail for compliance with
each requirement
separately.
• Membership rules clearly
outlined in the Bylaws of
the
Organization;
• Letter of Intent for
membership;
• Signing the letter of intent
already aware of the rules
on
small
farmer;
• Registry data on the
Democracy, Participation • Lack of organizational
and Transparency
structure;
• Lack of knowledge by
of
their
members
responsibilities
and
obligations
to
the
organization;
• Lack of knowledge of
policy functions in an
organization;
•
Transparency
in
management;
• Participation of members
in decision making.
Freedom of labor
• Awareness of producers
in relation to child labor;
• Reaction of the auditor
the information received
during interviews and
observations made during
visits
to
farms
and
organizations.
Healthy and Safe Labor
• High cost of equipment
(either individually or
protective equipment that
promotes the welfare and
safety of workers);
• Time available for
courses;
• Technical safety;
• Professional nursing for
the first aid course;
• Awareness of which are
required equipment;
• Temporary workers
during harvest.
Fairtrade Premium
candidate
profile
and
ownership;
• Election Board in a
Committee of producers to
visit the property of the
candidate;
• Data are confirmed by the
Commission
and
the
organization Agronomist;
• Technical Appraisal of
the property in possession
of the Cooperative.
• Awareness of the Statute;
• Talk to joint development
of
the
Bylaws;
• Frequent meetings with
members;
• All meetings must be
recorded
by
minutes;
• The minutes shall be
signed by all participants;
• Members must participate
in the vote taken in direct
or delegated to a council,
for example.
• Rules clearly defined in
the
Statute
of
the
organization;
• Awareness of the
producer in relation to the
rule
regarding
the
interview that will be
submitted
• Agreements with State
agencies, federal who can
help with the training
courses;
•
Agreements
with
universities in the region
(exchange ideas).
• More than one task to be • to appoint a professional
Impact Assessment,
Planning and
Environmental Monitoring
administered
by
the
organization;
• The accounts must be
separate accounting of the
organization (separate bank
accounts);
• Producers are not
educated on how to make
such
records;
• The organization must
submit a Plan Award even
if no sale has not
contracted for Fair Trade;
• Values in real and not in
percentages.
Awareness of the producer
in relation to
environmental legislation;
Low capacity for preparing
the plan;
The use of agrochemicals.
responsible for drafting the
Plan
of
Award;
• Plan is developed based
on needs assessment of the
producers
for
the
improvement of production
costs (and quality) and
meeting the requirements;
• Plan is approved by the
Assembly;
• The Audit Committee
monitors the resource
usage
and
presents
annually the accountability
in the Assembly.
•
Hiring
agricultural
technician;
•
Partnerships
with
universities and other staff
as facilitators SEBRAE
EMATER, certify MINES;
•
Training
courses;
• Survey of the major needs
of the properties in relation
to environmental aspects;
•
Proposals
for
improvement with maturity
and
responsibility
for
actions;
• Constant visits to the
properties of agricultural
technician.
Source: Elaborated by the authors, based on the interviews
CONCLUSION
By the multicase study it was possible to identify the various barriers faced by
organizations of small producers against the complex requirements of a certification as
to Fair-trade. It is worth recalling the main difficulties encountered: producers’ low
scholarity level, certification system complexity, the need by the producers to become a
manager of their cooperatives as well as a manager of their farms; the absence of
professionals working for FLO to give directions to producers in a certification process.
Moreover, these organizations deal with constraints on the lack of financial
resources and the difficulty of being organized to access funds, problems regarding
physical infrastructure and lack of a strong organizational structure, some of whom do
not know the responsibilities and obligations being part of that organization. Also not
aware of the policy functions, they do not know the responsibilities of a president, a tax
auditor.
That certification is intended for the small farmer or family farm, also faces the
barrier of awareness of workers in relation to child labor. Some producers do not
understand that although they depend on a family farm, their children outside school
hours can not do all kinds of farm work. And finally, the difficulties of raising
awareness regarding the use of agrochemicals.
Despite all the difficulties raised, these organizations, through partnerships with
universities and state agencies to provide services, and resource utilization of the award
for training courses and hiring more qualified personnel, can overcome the barriers
listed above.
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