Fair Trade Practices and Their Impact on Global Business

Fair trade practices place people first. In an age where many products are produced from commodities that may travel thousands of miles before reaching market, fair trade practices provide a way for everyone involved in production to benefit.

Beginning in Puerto Rico during World War II, an American businesswoman established a sewing group for women that helped generate income by selling their crafts for sale.

Fair Trade International

Fair trade is an international movement to rethink commerce. Based on the principle that producers who are most vulnerable should be treated with dignity and respect, Fair Trade acts as a partnership between consumers, companies and producers that put people and planet before profit.

Fair trade refers to an approach in which marginalized farmers and producers in developing countries receive better treatment when selling their goods to businesses that pay a premium above market price, then pass this extra money back directly to them as investment for improving farms or communities, or as child labor-free agriculture standards are enforced.

After World War II, religious groups and political activists created the fair trade movement through worldshops selling goods from poor countries of the northern hemisphere – such as textiles made of handloom cotton fabric or coffee and chocolate from small farms – which commercialized these items from these poorer regions for commercial sale in Northern hemisphere countries. By 1988 Max Havelaar label was developed in Netherlands to sell outside worldshops into mainstream sales channels thereby significantly increasing sales volume. Fairtrade Labeling Organizations International (FLO) provided standards whilst supporting, inspecting and certifying producers comprising these supply chains by inspecting them and supporting them with inspection of certification of producers along their supply chains to achieve fair trade certification standards and supported, inspecting and certifying them against these standards set by this international organization and supporting their producers through supply chains that existed throughout these supply chains.

Fair Trade Labels

Fair trade labels have become an effective brand identity; eight out of 10 consumers report that fair trade labels positively affect their perception of products or brands. Companies are responding by revising their sourcing models to include fair-trade ingredients.

Fair trade generally aims to give economically-disadvantaged producers more equitable positions in global markets than they can achieve through other methods of selling and purchasing goods. Fair trade can help create stable, sustainable trading partnerships while shielding suppliers from volatile market conditions.

Today, fair trade certification services are offered by several different organizations on various scales. Fairtrade International, for instance, works with business networks distributing their products across Europe, Asia and America under its Fairtrade Certified mark; other entities like Fair World Project, Global Goods Partners and Fairness USA specialize in smaller-scale certification of businesses or producer cooperatives rather than individual products.

Some organizations have made changes to long-standing policies in an attempt to expand what constitutes fair trade, leading to some controversy. Fair Trade USA for instance recently moved away from strict worker-owned coop certification and started to certify some large coffee plantations operators, along with companies who may have low cost and opaque supply chains that don’t align well with fair trade ideals.

Direct Trade

Fair trade began in 1946 when Edna Ruth Byler of America traveled to Puerto Rico and witnessed the talent of women sewing for Mennonite Central Committee sewing groups. Inspired by this experience, she brought back some lace back home for sale before donating the profits directly back into Mennonite sewing groups – this initiative later blossomed into Ten Thousand Villages becoming North America’s first fair trade retailer.

While fair trade organizations produce mostly coffee, other items include crafts, textiles, food and more. Some have even formed partnerships with large global corporations in order to introduce their products more broadly into mainstream society – for example in 2000 when Starbucks started offering fair trade coffee throughout their stores.

Fair trade supports sustainable agriculture and environmental preservation while simultaneously improving farmers’ livelihood. Employing fair trade practices requires companies to adopt an holistic approach when conducting business activities, taking into account how their actions impact people and places involved in their supply chains.

Direct trade, on the other hand, aims to reduce inequalities between producers and consumers through long-term partnerships between retailers and producers that are founded upon trust and mutual benefits. By creating these direct relationships, retailers are better able to monitor product quality while guaranteeing that farmers receive fair compensation for their goods.

Fair Trade Organizations

Fair Trade Organizations, supported by consumers, actively support producers and work for greater equity in international trade. Their approach represents an alternative to commodity practices which leave economically marginalized farmers and artisans without enough income for food, shelter and healthcare needs.

Fair Trade organizations operate differently from conventional business models that straddle profit and social responsibility; instead they prioritize economic sustainability of farmers and workers while still producing products to market. They work with smaller producers in developing nations who supply goods directly to large retailers, supermarkets or food services.

Fair Trade USA is one of four largest certifiers and works closely with partners to promote Fair Trade coffee, tea, chocolate, sugar, quinoa and herbs & spices – plus provide community engagement programs as well as support programs for their partners.

Fair Trade certification ensures that farmers and workers’ voices are heard. In addition, producers receive a premium that they can invest back into their communities or businesses. This stands in stark contrast with the undemocratic model of free trade which gives large corporations undue influence in shaping global policy decisions – Nobel laureate Joseph Stiglitz points out how this leads to unequal globalization with poor communities being left out.