Highlight 32/2022 – Delivering the SDGs through Fair Trade

Olha Krylova, 18 May 2022

Trade is the main driver for economic growth. That is why trade is a key element of the Sustainable Development Goals (SDGs) – the new approach to global poverty reduction and world sustainability. Yet, at the same time unfair trading practices cause a significant threat to development. Poverty, hunger, poor working conditions, environmental threats are the aftermath of the unfair trade.

In response to the afore-mentioned challenges, a fair trade concept was created in the 1950s. Fair trade is a system of certification that aims to ensure that a set of standards are met during the process of production and supply of a product or ingredient. For farmers and workers, fair trade means   protection of workers’ rights, safer working conditions and fairer pay. For consumers, it means high quality, ethically produced products.

How does fair trade deliver the SDGs? Fair trade is about doing trade differently. It empowers farmers and workers to take control of their lives, businesses and communities through trade. Fair trade also enables businesses – and through them, consumers – to understand the whole supply chain from producer to buyer. Fair trade works through labelling and certification of goods. It delivers information to the consumers who can be aware of the conditions under which goods are produced. It can be eco-labelling, high-standard certification, etc. More specifically, fair trade organizations use five tools  to contribute to sustainable development:

• Price premiums: fair trade products are usually priced higher than the conventional ones.

• Certification and labelling: fair trade certificates certify that the product for sale complies with the norms and standards in force regarding product quality, working conditions, environmental sustainability, business development. If the company possesses the fair trade certificate, it means that during the production of a particular good, child labour was not practised, there were no CO2 emission or it was within the limits, the workers received fair salaries, etc. Fair trade certificates and labelling of the goods also raise awareness among the consumers.

• Microcredit : it helps small-scale producers get started on fair trade projects.

• Technical support : it includes advice on business development and on achieving quality standards, training in new techniques as well as trade information.

• Advocacy is an important element in fair trade marketing : it includes branding and fair trade messages. For instance, supermarkets find the fair trade label useful for attracting sustainability-conscious consumers who are willing to pay extra for products that guarantee producers a fair price.

The fair trade movement comprises over 2.5 million producers and workers from 70 countries, over 500 specialized importers, 4,000 world shops. These figures are growing. Yet, the market share of fair trade remains small. Concerning the above mentioned 2.5 million producers, only the 1-2 % of their trade activities falls under the category of fair trade.

Additionally, the geography of fair trade is fragmented. The good practice of fair trade relates more to the European region than to others. Europe represents over 60-70% of the fair trade market.

To understand how fair trade could essentially contribute to the achievement of SDGs, it is necessary to consider a real example, for instance the market of cobalt. Cobalt is an essential raw material used by large tech companies for rechargeable lithium-ion batteries, electronic devices, and electric cars. 70% of the world’s cobalt mining takes place in the DRC.  20 %  of cobalt in the DRC is produced by artisanal miners. The extraction of this mineral in the DRC is linked to child labour, safety risks, environmental abuses, and corruption. 3-year-olds are working as artisanal miners, are using mercury, which undermines their health.  If the DRC fails to adopt and enforce stricter regulations to protect small-scale miners, these trends will increase alongside the technology-driven surge in cobalt demand, projected to grow by 60% by 2025.

Globally, it means that every second device, which we use, was produced by a child, caused harm to the environment or was linked to child labour or corruption. Fair trade could be a solution for the DRC and other states to reduce poverty, to increase human rights standards and to reach the SDGs. The government and world advocacy campaign could oblige the mining companies to impose labelling obligations and fair trade certification on cobalt. Yet, in practice this is a very complicated process, as the final prices on goods will be increased and not all the producers will want to lose profits. By contrast, many consumers value goods produced in a socially and environmentally responsible manner.

Fair trade is a mutually beneficial mechanism, as it provides consumers with information about the production process, raising their awareness. Fair trade shapes a new economy, delivers the SDGs and creates new ways of production. Yet, fair trade should be perceived and achieved in a very long-term perspective, as it requires time and a global cooperation.

Olha Krylova, Highlight 32/2022 – Delivering the SDGs through Fair Trade, 18 may 2022, available at www.meig.ch

The views expressed in the MEIG Highlights are personal to the author and neither reflect the positions of the MEIG Programme nor those of the University of Geneva.