FLO, Fair Trade USA, and Starbucks: A Critique

Written by on April 24, 2012 in cause marketing, Education, Green, poverty - No comments

Part 2 of a multi-series post 

The majority of consumers who consider themselves “ethical shoppers” are most likely to be familiar with the term, “fair trade.” An ethical consumer is also likely to know about the history of exploitation of small farmers behind the coffee, bananas, sugar and tea industries. The average, ethical consumer, however, is unlikely to know that fair trade labels are not created equal. Behind the labels are very different standards. Influential companies, like Starbucks, are joining the bandwagon and defining fair trade under their own terms. As Dean Cyon, owner of Deans Beans, a coffee roaster in Orange, Massachusetts puts it, “the powerful fair trade logo isn’t what it used to be.” Fair Trade International (FLO), formerly known as the Fair Trade Labeling Organization, certified by FLO-CERT and Fair Trade USA, formerly known as Transfair USA, certified by Scientific Certification Systems, are the leaders in the fair trade industry with their green and blue and black and white marks labeling a variety of both foods and materials in more than 70 countries (fairtrade.net). Twenty years later, the engaged, ethical consumer is as confused as ever. FLO, Transfair USA and others have created their own version of fair trade standards and practices which they believe to the best most beneficial for the producer and the consumer. However, the question for each organization is: will they be sustainable?

Birthed from alternative trading organizations (ATO’s) the fair trade movement began with small scale suppliers sending arts and crafts products to non profit organizations such as Oxfam. At the beginning, Fair Trade Organizations traded mostly with handcrafts producers, mainly because of their contacts with missionaries and often, crafts provide “supplementary income” to families; they were of crucial importance to households headed by women with limited employment opportunities (Kocken). In 1988, the fair trade industry was formalized by a Dutch development agency, Solidaridad, under the label “Max Havelaar” and the idea quickly caught on. The Max Havelaar label was replicated across Europe and North America and in 1997 in Bonn, Germany, FLO emerged.

FLO was created as an intiative to unite the variations of the European-based, Max Havelaar label. Its goals were quite different from the small scale ATO’s. FLO purposed to reach a more diverse customer base and to grow the fair trade market by using different distribution strategies [than the ATOs] (Benezcon, 62). From the beginning, FLO determined to formalize and to set the fair trade standards. This determination led FLO to terminate the use of the Max Havelaar and other certfication marks, such as Transfair, and to create their own; both as a way to unite their work and to set a new standard. In 2002, FLO launched the globally recognized, blue and green label. The goals of the launch were to improve the visibility of their label on supermarket shelves, facilitate cross border trade and simplify export procedures for both producers and exporters (fairtrade.net).

To bring more credibility and transparency to the FLO mark, FLO took two, large strides in the fair trade industry. In 2004, FLO split into two independently managed organizations: Fair Trade International (FLO) and FLO-CERT, which acts as the fair trade certifier and inspector of traders and products. Additionally, FLO became one of the founding members the ISEAL Alliance who develops guidance and helps strengthen the effectiveness and impact of voluntary environmental and social standards (isealalliance.org). FLO’s compliance with ISEAL’s Code of Good Practice ensures consumers that FLO’s standards have undergone rigorous peer review and self-assessment. Coincidentally, ISEAL maintains the integrity of FLO’s fair trade standards through the following criterion:

• the standard will not create unnecessary barriers to trade;
• the standard-setting process is transparent and open to interested stakeholders;
• the standard has clear objectives, and criterion which meet those objectives;
• there is meaningful participation by those stakeholders that are directly affected by the implementation of the standard; and
• there is a balance of input in the discussion and in the decision-making on the standard (fairtrade.net).

As required by ISEAL, FLO meets with stakeholders to discuss the standards and to look for ways to change and improve them. Through these consultations, in 2006 FLO chose to strengthen their compliance with ISEAL and improve their standard-setting policies. These “good practice” efforts include:
• increased participation of interested stakeholders and public in the consultation process;
• increased transparency of standard setting processes through posting relevant
• documents of all important steps in standard setting on FLO’s website;
• development of written standard setting procedures;
• development of a complaints mechanisms;
• introduction of a central contact point for stakeholders in standard matters, (fairtrade.net)

FLO’s globally recognized, fair trade “mark” represents three ‘common principles’ each with their own specific principles. Each principle applies to small scale producers and workers in their organization or cooperative and is expressed in the following charts: 

Additionally, FLO set standards on ingredients, measurement and content for all products and for each specific product. When available, a product must contain as many Fairtrade ingredients as available (fairtrade.net). For example, a chocolate bar will only receive a FLO label with fair trade certified sugar, vanilla and cocoa. This includes even miniscule amounts of ingredients, even if they constitute less than 1% of the total product. If they are available, they must be fair trade certified for the product to receive the FLO mark. Furthermore, at least 20% of a food composite product’s ingredients must be Fairtrade certified and the percentage of ingredients is calculated in their natural state, before ingredients have been processed (fairtrade.net). Through discussions with stakeholders about improving and strengthening the FLO standards, FLO created what it calls the NSF.  “The New Standards Framework supports producers in working toward a socially and environmentally sustainable livelihood,” says Andreas Kratz, Director of Fairtrade International Standards Unit. “Now, more than ever, more sales under Fairtrade terms provide more opportunity for producers to achieve their own development goals,” (tenthousandvillages.ca).

The NSF gives producers more autonomy. They are given the right to determine their own development, monitor their progress and find new ways in which to protect their local environments. With hopes to lessen the desk work and administrative costs, FLO requirements have been edited and compiled into one easy to read document where producers can find specific requirements for bananas or gold, for example. The NSF also plans to restructure the standards with hopes that they will facilitate benchmarking and make it easier to collaborate with other sustainability systems (fairtrade.net). The goal of NSF is to make the standards easier to understand and to free producers to choose where to invest their Fairtrade premiums. As stated by fair trade expert Anne Tallontire, “FLO is THE example of Fair Trade,” (Tallontire, CSR and Regulation, 77).

Next time in “FLO, Fair Trade USA, and Starbucks: A Critique:” The controversial decision of Fair Trade USA to leave FLO. For better or for worse?

Disclaimer: This series gives an overview of the history and the changes in the fair trade industry. Stay tuned for a final posting with the most up-to-date information. To obtain a copy of the citations, please contact Julie directly. 

Julie Fahnestock

Julie lives in Cambridge, MA and is currently pursuing her MBA in Managing for Sustainability at Marlboro Graduate School in Vermont. She has a background in international development and grassroots organizing and is passionate about equitable wages, labor rights and the global income disparity. Julie is also a new blogger for Just Means and Socialearth. If you can't find Julie in Cambridge, she's probably on the beaches somewhere in South Florida.

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