Written by: Barney Jeffries

In February 2008, sugar giants Tate & Lyle announced that all their retail sugar will carry the Fairtrade label. It's the biggest switch yet, expanding the UK market for Fairtrade sugar by £80m.

Great news, obviously. Sugar cane farmers in Belize are set to benefit from a "social premium" of around £2m a year — a vital amount in a country recently ravaged by hurricane.

Yet it's hard not to feel a certain ambivalence when huge corporations switch to Fairtrade. The cynical might accuse them of cashing in on the growing demand for fairly-traded products and the positive publicity they bring, while doing little to change inequitable business practices overall.

It's hard to be convinced that Nestle's Fairtrade-certified Partners' Blend, which accounts for a fraction of a per cent of their total coffee sales, is anything more than a PR fig leaf.  In Tate & Lyle's case, there's been no switch to Fairtrade in its much larger, but less visible, industrial sugar supplies.

Going with the FLO

David Wainwright of Tropical Forest Products believes there are serious problems with the Fairtrade Labelling Organisation (FLO). David was importing honey directly from Zambian beekeepers according to fair trade principles long before the concept of "Fairtrade" came about. The company decided to apply for certification four years ago, at a time when supermarkets were just beginning to look around for Fairtrade suppliers.

"There were no issues at our end, but for the producers to get registered is complicated," says David. "For them to fit into the FLO model is pretty difficult, and I'm actually not sure if the effort is justified.

"People don't realise the system is very prescriptive. Inspectors come with clipboards and a list of standards, which they tick off as they see evidence that these are being complied with. It works for multinationals who are used to thinking in that way and can pay lip service to those standards, but it discriminates against the real producer organisations."

There are hundreds of regulations to conform to; nothing unusual to European businesses used to red tape, but often alien to small farmers in the Zambian forest. David cites as an example the requirement that producers should have a fax and phone line to facilitate communication. "In rural Zambia these hardly work — we usually communicate by text message," he says. "FLO wanted them to install a satellite phone at vast expense."

David also draws attention to the huge amount of money changing hands. "It costs us about £10,000 a year for our Fairtrade label, so vast amounts must come in from the likes of Nestle. Where it all goes, I don't know. Think how much difference that £10,000 could make if it went directly to the producers."

Currently, only one of Tropical Forest Products' honeys bears the Fairtrade label. This doesn't mean their other products have lower ethical standards — but there's a risk buyers might perceive this to be the case.

"There is a danger that the Fairtrade Foundation will come to monopolise the ethical high ground, and anything that doesn't have the mark is somehow seen as second class," David says.

An unfair advantage?

The increasing presence of the big players in the Fairtrade market creates a business challenge as well as an ethical one. Multinationals and supermarket brands, with their economies of scale and established distribution channels, have a huge advantage over small Fairtrade businesses. The latter can't compete on price, and when both bear the same Fairtrade mark, convincing customers of their higher ethical standards isn't easy.

Uday Thakar, managing director of social enterprise consultants Red Ochre, believes that Fairtrade products will follow a similar pattern to other ethical ventures, such as organic fruit and vegetables. "There is a recurring pattern with Fairtrade products," Uday suggests. "They start off as premium priced niche products and then move towards being mainstream."

Despite the growing size of the Fairtrade market, Uday advises against trying to scale up to compete with the big businesses. Instead, he suggests, small businesses must continue to stay one step ahead.

"They have to keep looking at new products and new ways of marketing," Uday says. "It's important to remain innovative. They should ask themselves what else they can do. There will always be a market for specialist ethical products, and people who're willing to pay a premium for them. Fairtrade products appeal to those who want to be seen to be doing good, and those people are probably less price sensitive."

If Fairtrade has the power to influence the decisions of multinationals, then that has to be a good thing. As long as unfair trade practices continue, however, there will be a market for fairly-traded alternatives. The sad truth is, there will be business opportunities for ethical importers for many years to come.

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