Fairtrade Labelling Organizations International (FLO)

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1 Fairtrade Labelling Organizations International (FLO) Introduction Why Fairtrade labelling? Millions of landless labourers and small farmers don t have what should be their right: enough to feed the whole family, send their children to school and that little extra to invest in sustainable development. Clearly, the advantages of international trade are not visible to all people in the world. For small farmers, access to market or price information is difficult and as a result, many small farmers become more and more dependent on middlemen. In bad times, many loose their only property: their land, and thus, their livelihoods. Similarly, many plantation workers do not see the benefits of increasing world trade. They endure low pays, an unsafe working environment and poor living conditions. Too often they lack the freedom to join a union to defend their rights and the opportunity to participate in decisions that affect their lives on the plantation. Creating a viable trade alternative FLO-International exists to improve the position of the poor and marginalized producers in the developing world, by setting the Fairtrade standards and by creating the framework that enables trade to take place at conditions favourable to them. The National Labelling Organizations, members of FLO International, encourage industry and consumers to support fairer trade and to purchase the products. Products that carry one of the independent consumer guarantees a Fairtrade Label ensure that producers in the developing world get a better deal. We don't need any charity, we are not beggars. If we are paid a reasonable price for our coffee, then we can do without charity - Isaías Martínez, UCIRI, Mexico FLO is a young organization, it was founded only in 1997, as a service-organization for the various national Fairtrade labelling organizations all over the world. FLO s main tasks are: 1) Guaranteeing the standards: FLO gives credibility to the Fairtrade Labels by providing an independent, transparent and competent certification of social and economic development. The four main tasks for certification are: a) assessing the conformity of producers to the Fairtrade standards, b) assuring that Fairtrade benefits are used for social and economic development, c) auditing FLO registered traders in order to make sure that the Fairtrade price reaches the producers and d) assuring that the Labels are only used on products coming from Fairtrade certified producers. To ensure that producers comply with Fairtrade standards, FLO works with a network of independent inspectors that regularly visit all producer organizations. To monitor traders and retailers compliance with Fairtrade conditions, a specially developed trade auditing system checks that every Fairtrade-labelled product sold to a consumer has indeed been produced by a certified producer organisation which has been paid the Fairtrade price

2 2) Business facilitation: Incorporating Southern producers in the Fairtrade-labelling system only makes sense when there are markets for their products. FLO's Product Managers specialise in analysing markets and market trends for goods produced in the South, in analysing the structures and mechanisms of Southern production and international trade, and in working with producers to make better use of evolutions in market demands, market niches and perspectives for new products. Product Managers share their insights with their colleagues in National Initiatives, with producers, traders and retailers, with the aim of developing joint strategies to enhance fairtrade s impact in commercial markets. 3) Promoting producer support: FLO's third core task is to support the small farmers and workers who participate in Fairtrade to strengthen their organization and production, for example to respond faster to market developments or to continue to improve their compliance with the Fairtrade standards. FLO helps producers to clarify their needs and plans and connects them to the organizations with the resources and expertise to respond to those needs. Credible, universal, enabling development FLO Certification is run by an autonomous Unit within FLO International. This Certification Unit co-ordinates all tasks and processes all information related to inspection of producers, trade auditing and certification. Operating independently from any other Fairtrade interests, it follows the ISO Standards for Certification Bodies (ISO 65). FLO is one of the biggest international certification bodies. It regularly inspects and certifies about 300 producer organisations in 32 countries in Africa, Asia and Latin America, embracing around families of farmers and workers. The point of reference for FLO Certification are the International Fairtrade Standards. These Standards are developed and regularly reviewed by FLO, in close co-operation with all relevant stakeholders, who are represented on FLO s Board, the Certification and Appeals Committees and in the Standards and Policy Working Group. In contrast to Codes of Conduct and other social labels, Fairtrade Standards are not simply a set of minimum standards for socially responsible production and trade. Fairtrade Standards go further: besides minimum requirements producers must meet, FLO guarantees them a fair price, and, through process requirements, expects them to invest part of it in their economic and social development. Besides FLO, many other organizations and companies try to promote socially and ecologically sustainable production and trade with disadvantaged producers. FLO highly values its cooperation with Alternative Trade Organisations, World Shops and their umbrella structures (EFTA, IFAT and NEWS) and with social and organic labelling structures such as Naturland, IFOAM, SAI, FSC and CAN.

3 The Impact of Fairtrade I have been able to fix the roof of my house, there is more money for food and I can buy new shoes if I want to. We have lots of services that didn t exist before, but that make life easier: transport, health care, credit possibilities and shops with affordable basic necessities. But the most important contribution of the Fairtrade Labelling system is in my eyes that our dignity as a human being is recovered. We are no longer a plaything of the anonymous economic power that keeps us down. (Isaías Martínez, UCIRI Mexico). For consumers the Fairtrade labelling system means a real choice in their daily shopping habits. At the moment different food product ranges are available with a Fairtrade label, progressively non-food products as well. Fairtrade checked and certified (p 6) FLO standards that need to be met by producers, traders, processors, wholesalers and retailers for a product to qualify for the label: There are two sets of generic producer standards, one for small farmers and one for workers on plantations and in factories. The first set applies to smallholders organized in cooperatives or other organizations with a democratic, participative structure. The second set applies to organized workers, whose employers pay decent wages, guarantee the right to join trade unions and provide good housing where relevant. On plantations and in factories, minimum health and safety as well as environmental standards must be complied with, and no child or forced labour can occur. As Fairtrade is also about development, the generic standards distinguish between minimum requirements, which producers must meet to be certified Fairtrade, and process requirements that encourage producer organisations to continuously improve working conditions and product quality, to increase the environmental sustainability of their activities and to invest in the development of the organisations and their producers/workers; Trading standards stipulate that traders have to: pay a price to producers that covers the costs of sustainable production and living; pay a premium that producers can invest in development; partially pay in advance, when producers ask for it; sign contracts that allow for long-term planning and sustainable production practices. Finally, there are a few product-specific Fairtrade standards for each product that determine such things as minimum quality, price, and processing requirements that have to be complied with. This standards structure may seem more complicated than it really is. In essence, its nucleus is that Fairtrade should benefit small farmers and workers who are collectively and democratically organized; that trading relations between these producers and importers in the North promote that producers live decently and produce sustainably; and that the Fairtrade-labelled products satisfy consumers' desire for quality.

4 How does FLO work? Fairtrade labelling aims to support marginalised producers on the road towards sustainable development. The label identifies the Fairtrade product so consumers buy it, thereby enabling Fairtrade producers to access international markets on fair terms. The diagram shows how the system works for all Fairtrade labelled products presently coffee, cocoa, honey, bananas, mangoes, tea, rice, fruit juices and sugar. The Fairtrade Labelling Partners Producers (1) are the no.1 partners in Fairtrade labelling. FLO certifies producers who meet Fairtrade criteria and administrates them in a regularly updated register, distributed to Fairtrade importers. Fairtrade importers are traders (2) authorised to participate in the Fairtrade scheme. Some are alternative trading organisations (ATOs) who have been investing in an alternative and fairer trading system for up to 40 years. Others are commercial traders, interested in the goals of Fairtrade, and selling quality products to a growing body of interested consumers. FLO licensees (3) are traders too those selling the final product to consumers. Only FLO licensees are authorised to use the Fairtrade label. For this, licensees pay the National Initiatives (NIs) a license fee. They must buy the product that they label from FLO-authorised traders (sometimes the importer and the licensee are one and the same). FLO aims to use labelling to enable producers to access the market and reap the benefits of Fairtrade. For this, the Fairtrade label must be an independent guarantee to consumers (4) that producers and traders have abided by all Fairtrade conditions. Consumers need a guarantee that: Fairtrade benefits such as a higher price, stable income, fairer trading relations and decent production conditions do go to producers, and it is indeed marginalised producers who are benefiting from Fairtrade (see for all Fairtrade Standards).

5 The FLO Passport What is FLO? FLO is a non-profit making Association of Members based in Germany which was founded in April Who are the Members of FLO? The National Initiatives (NIs) are FLO s Members (Max Havelaar, TransFair etc.). There are presently 17 NIs, each in a different country. Twice a year the Meeting of Members decides FLO policy. What do the Members of FLO do? National Initiatives (NIs) are all non-profit making organisations who own (or part own) a label. They promote Fairtrade in their national market. They lobby governments for support, negotiate with importers and retailers, advertise Fairtrade and run education campaigns. Some NIs also research new Fairtrade products and support producers directly. What does FLO do? Setting Fairtrade standards. All Standards start with a generic part, equal for all, and then continue with specific product Standards, because of differences in the production and trade. Certifying Fairtrade producers: FLO inspects producers regularly against the Fairtrade Standards. Ensuring that the quantity of Fairtrade goods sold by producers under Fairtrade conditions, matches the total amount sold to consumers with the Fairtrade label. Guaranteeing: consumers that Fairtrade criteria are met, all the way along the trade chain (see diagram). The new FLO structure FLO is the only certification system in the world where producers do not pay for their certification. How can that work? - Finally the consumer pays for the Fairtrade system. Traders pass on to consumers the higher Fairtrade price and premium that they pay producers. The financial flows, represented in the diagram by a $ sign, go all the way back from the consumer who buys the product, to the producer. The National Initiative charges the Licensee a fee for using the Fairtrade label. This pays for all of FLO s certification and inspection costs and for the National Initiatives marketing expenses. So the cost of the system is included in the retail price, making Fairtrade Labelling sustainable. enlarging the ownership of the system to producers and traders. Having been established only in 1997, FLO is still a young organisation both in its composition, formed by national labelling organisations from 17 different countries in three continents, and in its certification and support work with producer organisations. FLO has learned a lot from its first four years and realises now what changes are necessary for the future. That is why early in 2000 FLO started a process of restructuration, of which the most important objectives are the following: To ensure a high quality and independent certification process: consumers need to be guaranteed that products from Fairtrade producer groups are traded in a fair way. To harmonise Fairtrade criteria, including contracts and monitoring reports of all the Fairtrade labelled products, in order to assure more transparency and improve efficiency for all stakeholders. To improve the marketing of labelled Fair Trade: producers and traders need to be better and more involved in marketing activities.

6 To structurally integrate producer and trade participation in all levels of FLO by inviting external representatives to participate in FLO bodies, such as the Board, the Certification and Appeals Commitees, the Standards and Policy Working Group, in regional and marketing meetings and the FLO Fairtrade Forum. To improve performance and efficiency by establishing a Database with producer profiles, information on inspections, markets and sales and educational and advocacy material accessible through the internet. To improve communication and cooperation with all other organisations and companies trying to promote socially and ecologically sustainable production and trade with disadvantaged producers in the South. One of the most important changes in the FLO structure is the creation of an autonomous Certification Unit. This Unit is responsible for the inspection and certification of all producer groups inscribed in the FLO registers. It was necessary to separate this unit from the rest of FLO in order to enhance our credibility as a certification organisation and to differentiate it from our the support and trade facilitation tasks. This is one of the prerequisits for FLO to become accredited as a certification body, and to be officially recognised as a certification organisation for Fairtrade. FLO S NEW STRUCTURE: FLO Meeting of Members September 11th, 2001 Regional Producer Meetings FLO Board 1/3 Appeal cie Markets & marketing meetings 1/3 Certif. cie Executive board Director FLO/NI staff stakeholders Fin. & Adm. Info system Inspection regional/local Certification Unit Standards + policy working group Prod. Support Facilitator. Product Managers Trade Auditing Producer Liaison Officers Next to its certification task, FLO is also setting up a separate structure for producer support and for trade facilitation. These two complementary tasks are executed by various product managers and the producer support network coordinator. The main objectives of these tasks are to support producer organisations where needed in their contacts with the market, to ensure a stable information flow between producer organisations and market players, and to detect organisational or other problems among producer groups, for which external support is mobilised when needed.