Principles and business practise | Fair Trade Original

Principles and business practise

Trade that dev Fair Trade Original’s development trade concept offers its trading partners access to the export market and enables them to make use of opportunities beneficial to the ­success of their operations. This creates jobs, increases the producers’ income, enhances their position within the organization and improves their control of their living ­conditions.

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elops The achievement of Fair Trade Original’s objective of enhancing the trading partners’ position in international trade and improving the chances of producers and employees in developing countries is not selfexplanatory: it can be achieved only when the fair trade principles are adopted. Moreover, this is a lengthy process that requires efforts by everyone in the chain: producers, trading partners, wholesalers, stores and consumers. Every sector and every country of origin is confronted with specific problems and challenges – which makes development trade both complex and fascinating.

Our vision Poverty and the unequal distribution of wealth constitute major obstacles to the well-being of individuals and the communities in which they live, impede ­development and create a continual source of tension and contrasts between individuals and groups in society.

­ merica is intended to make a favourable contribution A to the struggle against poverty. We attach paramount importance to profitability, sustainable relations, autonomy and self-respect for the trading partners and producers.

Our mission Fair Trade Original’s development trade with trading partners and producers in Africa, Asia and Latin

Improving the chances of producers and employees in developing countries requires efforts by everyone in the chain Fair Trade Original enters into long-term trading relationships with trading partners who endorse the fair trade principles and are convinced of the development trade concept. The initial stage of the relationship is implemented in a very practical manner: we purchase a balanced product range which is appealing to the European market. In addition to offering a varied food range, Fair Trade Original also offers a modern, ethnical range in the interior, table and fashion segments.

These products are widely available from outlets including supermarkets and the Worldshops.

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Trading partne Fair Trade Original makes a distinction between trading partners and producers. The producers handle each 足individual article when, for example, plucking coffee beans, painting pottery or filling jars of tapenade. The trading partners are the exporters in the developing countries: 足 Fair Trade Original purchases their products either directly, or via an importer in the Netherlands or another European country.

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e rs and producers The trading partners are, in a nutshell, the producers’ link to the export market: they accept the orders, distribute them between the producers, assist them as necessary in the production process, collect the products, pay the producers and make the arrangements for the logistics and export. Good agreements and regular harmonisation are required to maintain a transparent equilibrium between the interests of the trading partners as export companies, the interests of the producers and the requirements imposed by the market. Consequently, development trade is also a continual endeavour to find a balance between ideals and recalcitrant commercial everyday practice.

Producers Coffee farmers with one hectare of land, who have joined together to form a cooperative. Tea pickers who work on a tea plantation which conducts a social policy. A woodworking shop that began as a one-man company and now has twenty employees. Bag weavers who work at home and deliver their orders once a week. Glass blowers who like working in a factory which offers them cooler, safer and more agreeable work. Women who have their own workshop, since Muslim cultures do not allow women to work together with men. The producers’ forms of cooperation are just as varied as the products they make. However, all producers share one thing in common: they live and work in a development country in Asia, Africa or Latin America, are in a disadvantaged position and have

organized themselves to improve their position.

As individuals they have virtually no access to the (international) markets for their products: cooperation increases their opportunities to sell their products.

Trading partners Fair Trade Original does not procure from individual producers, but from export organizations. These can be marketing organizations that purchase the goods from producers, cooperatives or factories. These trading partners are the essential link for Fair Trade Original in reaching the producers or employees.

The trading partners’ development efforts contribute to the sustainable enhancement of the market opportunities available to the producers who are affiliated within them and, in turn, the sustainable enhancement of their socio-economic development.

Trading partners play an extremely ­ active role in the assistance provided to producers The trading partners play, in general, an extremely active role in the assistance provided to producers.

The producers – irrespective of whether they work in a factory, workshop, plantation, plot of land far inland, at a small informal workplace or, on occasion, even at home – receive support in the chain based on the

trading partners’ efforts. This support, in addition to support in the more technical aspects of the procurement, sales and export logistics, can also adopt many other guises – product development, the procurement of raw materials, the provision of training courses designed to improve production, the supervision of good working conditions, the formation of a social emergency fund, the provision of grants for school­ children and the provision of information about HIV and AIDS: each situation requires a specific approach.

The local producers’ organization will often devote attention to the needs of individual producers, whilst larger groups of employees have an employees’ representative committee that takes part in the decisionmaking on priorities. Fair Trade Original finances, encourages and promotes these programmes, ­programmes that are an essential element of the producers’ socio-economic development.

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Fair Trade Original acts in ­accordance with the following fair trade principles:

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Offering opportunities to disadvantaged producers Fair trade suppliers are trading partners that procure their products from disadvantaged producers and companies which conduct an explicit social policy. The trading partners, as necessary with Fair Trade Original’s assistance, initiate development within their companies and at their producers and employees. Trading partners with Max Havelaar Fairtrade Seal of Approval certification, where relevant, are assigned priority.

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Transparency Accountability: All players in the trading chain are transparent and maintain clear administrative records. The parties inform each other about important developments in the market and within their organization.

Chain responsibility: all those involved in the chain bear the responsibility, on the basis of their position in the chain, for the origin of the raw materials, the quality of

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the products and production processes and compliance with the fair trade principles.

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Fair trade conditions Advance financing: Fair Trade Original offers its partners advance financing of a maximum of 60% of the amount of the order to bridge the period between the acceptance of the order and payment.

Long-term trading relationships: Fair Trade Original strives to maintain trading relationships with the organization’s trading partners for a period of at least 5 years, a period required to implement sustainable developments. The trading partners’ (export) expertise is developed gradually, a process which also needs to take account of the occasional relapse. The trading partners are also required to enter into a long-term relationship with their producers and employees.

Orders and payments: the purchase and sale agreements concluded within the chain must be understandable and realistic, and must include a explicit specification of the rights and obligations of the parties involved relating to the product (the specifications and

statutory requirements) the price and the delivery date. Deliveries must be paid on time.

Development premium: this ­premium is paid – on top of the purchase price, see below – for products with the Max Havelaar Fairtrade Seal of Approval and an increasing number of food products without the seal of approval. The payment of this premium is subject to the condition that the employer forms a democratic, joint body comprised of the employer and employees to decide on the allocation of the premium fund.

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A fair price Fair Trade Original pays the organization’s trading partners a price which is above the cost price.

This price must be sufficient to pay the employees an acceptable wage and cover the production and trading costs. This price is set in consultation with the trading partner, in part on the basis of a transparent cost-price calculation. The trading partner in turn negotiates with the producer. When the cost price of a product is structurally excessive then we work with the trading partner on the implementa-

Fair trade The Fairtrade Labelling Organizations International ­­ (FLO e-V)1 , World Fair Trade Organization (WFTO) and European Fair Trade Association (EFTA) have adopted worldwide fair trade principles that lay the foundations for the fair trade movement’s operations.

Each organization has a specific focus. The Max Havelaar Fairtrade Seal of Approval covers 15 (agricultural) products2. Products containing at least 50% raw materials with fair trade certification may bear this Seal of Approval.

tion of cost savings and efficiency improvements. Self-evidently, Fair Trade Original also works on the control of its own costs. The Max Havelaar Fairtrade Seal of Approval guarantees the payment of a fixed minimum price for the raw materials (coffee beans, oranges, grapes) for a number of foods to ensure than the cost of production is covered in a commercially, socially and environmentally-responsible manner. Fair Trade Original uses the EFTA fair trade assessment for all other products to verify that the employees and producers receive an acceptable wage and that the prices

are set on the basis of a transparent cost-price calculation.

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No child labour, no forced labour No child labour: fair trade products are made without child labour, i.e. children below the age of 16. When children help then this may never be to the detriment of their schooling, health, or time to play. The trading partners respect the rights of the child. They can demonstrate that they employ no children.

No forced labour: every form of violence, compulsion and slave labour is unacceptable. Should any

principles FLO Cert inspects the suppliers of these products to verify that they comply with the fair trade principles and that the development premium paid for these products is allocated in accordance with the rules.

No fair trade seal of approval is available (yet) for most processed and gifts & living products. Fair Trade Original arranges for the verification of these trading partners’ compliance with the fair trade principles using the EFTA fair trade assessment system.

form of forced labour be observed then the trading relationship will be terminated with immediate effect.

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Equal opportunities No discrimination: all producers and all male and female employees (carrying out equivalent work) are entitled to equal payment, equal treatment and equal job opportunities, irrespective of their race, class,

caste, skin colour, gender, beliefs, political convictions and social and/ or cultural background. Should any form of discrimination be observed then the trading partner will draw up a plan of improvement. The implementation of the plan within the agreed period is supervised.

Freedom of organization: the trading partner shall provide its producers and employees the freedom to orga-

1 FLO e-V is responsible for the specification of standards and the provision of support to national fair trade seal of approval organizations such as the Max Havelaar Nederland Foundation. See www.fairtrade.net. The audits are conducted by the independent FLO-Cert organization.

2 Coffee, bananas, fresh fruit, flowers, cocoa, tea, rice, honey, wine, footballs, herbs, fruit juices, cotton and composite products.

nize themselves in trade unions or elect employees’ representative committees. An elected employees’ representative committee is formed at workshops with more than 50 employees. This committee represents the employees in negotiations with the management on the terms and conditions of employment and the improvement of working conditions.

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Justifiable working conditions Fair terms of employment: terms and conditions of employment are agreed in factories and larger, more formal workplaces. These govern the working hours, overtime, holidays, sick leave and pensions and are at least in agreement with the national or international legislation. Moreover, additional efforts are made to improve the employees’ living and working conditions, such as arrangements for a canteen, crèche, loan fund and activities with the personnel. All employees at these workplaces have signed a contract of employment that contains an explicit specification of the terms and conditions of employment. The smaller, still informal workplaces have at least simple personnel

records with the signature of each employee.

Health and safety at the workplace: the work that is carried out must, within reasonable margins, be both safe and healthy. Should any unhealthy or unsafe work be observed then a plan of improvement will be implemented. (Local) experts can, as required, play a role in this plan of improvement.

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Capacity-building Trading partners are expected to achieve structural improvements in the capacity of their producers and members. Fair Trade Original has acquired a great deal of expertise in the capacity-building of trading partners and producers. The development programmes, often carried out with on-site experts, constitute an important instrument in development trade. The improvements in their production and trading performance enable our trading partners to develop into reliable suppliers. The expertise they acquire enables them to enter new markets. The objective of capacity-building is to achieve business and social improvements.

Business improvements relate to

issues such as the implementation of a quality-assurance system, efficiency improvements, product development, improvements to the logistics and packaging, enhanced market information and improved management. These improvements can be implemented at both trade partner and producer level. Social improvements relate to compliance with the fair trade principles such as by improving the working and living conditions, incomes, decisionmaking capacities and the organization, etc.

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Care for the environment All players in the trading chain endeavour to minimize the environmental impact of production and trade by the responsible use of natural resources and the responsible management of waste. These activities contribute to a sustainable living and working environment.

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Promotion of fair trade All players in the chain are familiar with the objectives and principles of fair trade, and inform their customers and suppliers accordingly.

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From new contact to intens When Fair Trade Original is seeking new products then the first step is to review whether existing trading ­partners in Africa, Asia or Latin America, where relevant after the provision of specific support, are in a position

When food product suppliers are sought then the determining factor is, in the first instance, the companies or cooperatives that have already received certification from FLO Cert, the international certification organization behind the Max Havelaar Fairtrade Seal of Approval. Fair Trade Original has a number of ­measurement instruments (developed in-house) for the assessment of potential new trading partners in terms of a long-term trading relationship and the best form of trading relationship.

to supply the relevant products. When this is not feasible then Fair Trade Original uses its networks, including the networks of the European colleague organizations, to seek a new trading partner.

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Collaboration agreement Potential trading partners complete a basic information form with questions about their organization.

This information is then used to assess whether the trading partner is compatible with Fair Trade Original’s operations: it also provides an insight into the ­capacity of the new trading partner in terms of their operations, exports and compliance with the fair trade principles. Fair Trade Original does not expect new trading partners to comply in full with these principles immediately. However, Fair Trade Original does wish to determine whether the trading partner possesses the potential and the involvement required to become a fair trade organization within the foreseeable future.

New trading partners also need to be able to supply goods to the export market, if not immediately then in any case within the near future. Following a favourable assessment the preparations can be made for the first order. The parties also sign a collaborative agree-

ive cooperation ment in which both state that they will comply with the fair trade principles.

Audit of compliance with the fair trade principles Fair Trade Original gives preference to the delegation of audits of compliance with the fair trade principles to independent certification organizations such as FLO Cert. New partners who supply products that are not covered by a Max Havelaar Seal of Approval (this Fairtrade seal of approval is applicable to a limited number of products, primarily foods) are assessed by Fair Trade Original for their compliance with the fair trade principles. This is carried out using the EFTA fair trade assessment system developed by European fair trade organizations. A colour is awarded for each fair trade principle: green for full fair trade, yellow for minor shortcomings, orange for shortcomings that require immediate improvement and red for improvements the management does not implement. The fair trade assessment is laid down in an audit report and a plan for improvement. When the trading partner fails to rectify serious shortcomings then Fair Trade ­Original will terminate the collaboration.

Sustainable capacity-building In addition to trade, capacity-building also plays a central role in Fair Trade Original’s collaboration with its trading partners. The wealth of experience the organization has acquired enables Fair Trade Original to submit a unique proposition to its trading partners.

When it transpires that the collaboration possesses potential and that additional support is required alongside trade to enable the trading partner to grow into a successful exporter then an analysis of the company is carried out to identify the trading partner’s strengths and weaknesses.

Fair Trade Original and the trading partner then use this analysis and the fair trade audit (either the ­FLO-Cert audit or the EFTA fair trade assessment, see also pages 10–11) to draw up a long-term plan, if necessary. The objective of this business development plan is to enable the trading partner to conquer a stronger position in both the fair trade and regular segments of the export market. The relevant improve-

In addition to trade, capacity-building also plays a central role in Fair Trade Original’s collaboration with its trading partners. ments in the operations and fair trade area are then planned and implemented at both the level of the trading partner and the producers and suppliers.

When possible, Fair Trade Original works on these programmes in cooperation with colleague organizations and with local organizations and consultants in the trading partner’s region. In some instances col-

league fair trade organizations guide the trading partners in their further development. Fair Trade Original is then kept informed about the progress.

Phase-out of the relationship The relationship does not necessarily come to an end after the successful completion of the development programme, or when the trading partner has no interest in a programme of this nature – quite the contrary: a successful trading partner who complies with all the requirements gives Fair Trade Original more scope for the guidance of new partners. However, the trading relationship is terminated should the required development prove to be unsustainable, and in the event of corruption or mismanagement. Trading relationships are also terminated when, in spite of both parties’ efforts, it proves impossible to continue to make products that are marketable. As necessary, an exit programme is drawn up to guide the trading partner to other customers or to product lines that can be marketed successfully elsewhere.

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Monitoring and adjustment Once the collaboration between Fair Trade Original and a trading partner has been given shape and a business development plan has been drawn up then the progress is evaluated once a year. The trading partner and Fair Trade Original use these evaluations to adjust the plan as necessary.

Fair Trade Original maintains regular personal contact with most trading partners: the organization’s staff make work visits, give advice and courses, or the trading partners visit Culemborg. All these contacts offer an opportunity to hold a formal or informal ­discussion about the progress. Fair Trade Original also has a comprehensive network of advisors in the various regions who report on the results from their work at the trading partners. Regular exchanges also take place with the European colleague organizations to discuss each other’s opinion of and approach to joint trading partners. A number of organizations are also responsible for independent, external audits: FLO Cert All trading partners that supply products with the Max Havelaar Fairtrade Seal of Approval are periodically audited by the independent FLO Cert organization3.

To this end FLO Cert, based in Germany, maintains a global network of auditors who are familiar with the local situation and speak the local language. All ­producers of these products must meet the general standards, as well as additional standards to be met by each product relating to requirements such as the price and the allocation of the development premium.

Fair Trade Original, as a licence holder of the Max Havelaar Fairtrade Seal of Approval, must also give account for the organization’s procurement and sales information.

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In conclusion EFTA Fair Trade Original and the European Fair Trade Association4 developed the EFTA fair trade assessment to assess the trading partners who cannot be certified

by FLO Cert. in terms of compliance with the fair trade principles. Most of Fair Trade Original’s trading partners have now been assessed by local consultants using this system. Re-assessments are now taking place. Fair Trade Original is a member of EFTA. National Association of Worldshops The Dutch National Association of Worldshops5 audits the importers the association has approved as Worldshop suppliers. These include Fair Trade Original.

The association also arranges random audits at the trading partners and producer organizations that work with these importers. Fair Trade Original is approved as a supplier of Oxfam-Worldshops in Belgium.

WFTO The World Fair Trade Organization6 (WFTO) developed a self-assessment method for its members. All WFTO members (including Fair Trade Original) are under the obligation to complete a detailed questionnaire about their working methods and development. These questionnaires must be completed at two-yearly intervals.

A random selection of these questionnaires is subjected to an external verification procedure. WFTO is currently developing a system for the regular audits of all members by independent auditors. This will ultimately need to result in a WFTO Seal of Approval at organizational level.

The consumer The customers for the products and the consumers serve, ultimately, as Fair Trade Original’s conscience.

They need to appreciate the products and have confidence in the method. Fair Trade Original gives account for the operations in the Annual Report. Media such as the website, the corporate F-Commerce magazine and newsletters provide information about the principles and the current situation.

Fair Trade Original’s aforementioned principles and methods are focused on structural developments at ­trading partners, farmers, crafts­men and employees in Africa, Asia and Latin America.

Trade, in enhancing their opportunities on the export market and achieving social improvements, makes a real contribution to combating poverty.

The increasing volume of trade ensures that continually more people benefit from this approach. Everyone wishing to make a contribution is welcome.

3 www.flo-cert.net 4 www.european-fair-trade-association.org 5 www.wereldwinkels.nl 6 www.wfto.com

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Fair Trade Original The Netherlands Beesdseweg 5 • 4104 AW • Culemborg • The Netherlands PO Box 115 • 4100 AC Culemborg • The Netherlands www.fairtrade.nl Belgium Hoogstraat 35E • 3360 Bierbeek • Belgium www.fairtrade.be