A Fact Sheet on the Fairtrade Seal

What are the key features of the Fairtrade system?

• Minimum prices: For each product, a country- or product-specific minimum price is set, which is paid regardless of the world market price. If the world market price is higher than the minimum price, the higher world market price is paid. (Minimum price for coffee: $1.40 per pound + $0.30 if the producer is certified organic)
• Social premiums: $0.20 per pound of Arabica green coffee sold. At least $0.05 of this must be allocated to projects aimed at improving productivity or quality
• Pre-financing: Producers receive an advance payment of the purchase price of their products upon request
• Long-term trade relationships: Long-term contracts with buyers are sought to provide producers with planning security
• Focus on smallholder producer groups

What are the certification criteria for Fairtrade?

Depending on the type of producer organization, three standards apply simultaneously, each with a different focus:

1. one of the general standards (either for cooperatives, plantations, or contract farming)
2. the respective product standard
3. the trader standard

The general and product standards are usually divided into core and development requirements, with a time frame specified for meeting the respective requirements. The core requirements must be met in all cases for the first Fairtrade certification, whereas the development requirements must be fulfilled gradually within the specified timeframes. The trader standard also includes mandatory core requirements but no development requirements. Instead, additional “Voluntary Best Practices” are suggested, which actors in the value chain may—but are not required to—apply.

What are the costs involved?

• Distribution License: The distribution of Fairtrade products is subject to a license. Companies that wish to sell certified coffee bearing the Fairtrade logo, for example, pay €0.22 per kilogram sold.
• Certification costs: The cost of initial certification depends on the number of members in the producer association, the number of workers, and the number of processing facilities.

How transparent is Fairtrade regarding the use of social premiums?

• Information is buried in Fairtrade International’s Monitoring Report.
• An overview of how social premiums are used is documented only in broad terms by category.

What is the relationship between sellers and producers?

Fairtrade and FLO-Cert staff maintain contact with local producers throughout the certification process. Sellers of these products in Europe, on the other hand, generally have no contact with producers in the Global South.

What are the criticisms of the Fairtrade system?

• Minimum prices do not provide a (sufficient) incentive for quality improvement: While minimum prices protect producers from price crashes on the market and offer planning security, they do little to promote quality improvements in cultivation, harvesting, and processing.
• Transparency regarding the use of social premiums does not extend down to the project level
• Consumers support the system but have no influence over how Fairtrade funds are used or which projects are selected