documentary photography ethiopia

Marketing and Monitoring of Fairtrade

What does Fair­trade mean for pro­duc­ers in devel­op­ing coun­tries? How does the Fair­trade Model work? This paper is my final the­sis of busi­ness admin­is­tra­tion and explains the above ques­tions. The research paper also exam­ines the fair­trade approach with the New Insti­tu­tional Eco­nom­ics, relat­ing to trans­ac­tional costs and Williamsons Fail­ure Frame­work. It fur­ther points out the rel­e­vant com­pli­ca­tions for the actors along the sup­ply chain of agri­cul­tural prod­ucts and explains the infor­ma­tion dif­fer­ences between pro­ducer and con­sumer in our global trade and how an estab­lished & costly mon­i­tor­ing sys­tem tries to resolve the issue. In con­clu­sion the con­sumer has to be aware of his power of choice and how the gov­ern­men­tal insti­tu­tions can help in bal­anc­ing the infor­ma­tion lev­els through labelling obligations.

For all those, who´d like to get the short ver­sion in eng­lish rather than all the research work pub­lished in 2008, here I give a small expla­na­tion of how the ideal fair­trade sys­tem works.

FAIRTRADE_modell

The farm­ers get a cer­tifi­cate from the Fair­trade Labelling insti­tu­tion, which is agreed upon cer­tain stan­dards that are indi­vid­u­ally set by each organ­i­sa­tion on their own terms. The farmer have to pay a cer­tain amount of money for this process of as well being assessed and sequen­tially mon­i­tored. So they can sell their prod­uct to the mer­chants, which are allowed to label it “fair­trade” again accord­ing to the indi­vid­ual stan­dards of their cer­ti­fier. The cer­ti­fier receives pay­ment mostly increas­ing with increas­ing value of prod­ucts traded with his label. The mer­chant can sell their labelled prod­ucts to the cus­tomers, who can also review the infor­ma­tion pro­vided by the cer­ti­fier or labelling ini­tia­tive. (see graphic)

Cer­tain fric­tion points in this scheme are obvi­ous as labelling ini­tia­tives, mer­chants and farm­ers are also oper­at­ing under mar­ket rules and profit max­imi­sa­tion goals. The con­sumer in the end has no means to really know what is going on in the fields, there­fore he needs the extra amount of trust into a fair­trade label – trans­parency becomes a key value in build­ing this trust and is mostly achieved through proac­tive sto­ry­telling and rich media enhance­ments of the prod­ucts themselves.