Fair trade 2.0

For over 40 years we have been involved in fair trade. However, we announced recently that we are no longer labelling our products ‘fair’.

This is because ‘fair’ suggests satisfactory conditions, whereas the actual situation is often different. With our trade, we want to have more of an impact in the countries of origin. Hence, we will drive forward our commitment to social and ecological sustainability in a more focussed way.

Fair trade and its impact

Creating a positive impact in the countries of origin through trade is not easy. Let’s take the issue of price, for example: If we were to pay farming families double, we would no longer be able to sell our products to the wholesale market. This is because for wholesale, in addition to certificates, the price is the only thing that counts. And even if our loyal mail-order customers were still willing to buy the more expensive cashew nuts, the sales volume would shrink to a tenth of its current size. Consequently we would only buy from a handful of farming families, rather than from the approximately 2700 of today. We would also have to close our factory with the loss of 580 jobs. Though things would be better for a smaller number of farming families, the workforce, on the other hand, would be unemployed. So what should we do?

1. A holistic approach

Individual elements such as higher prices for farming families, for example, are not sufficient to have any kind of sustainable impact. Farming families, the local economy and the environment must be given equal consideration – this is the basis of our sustainable approach. We do this through ...

• establishing independent companies on site. These companies take care of added value and local jobs, transfer know-how and pay taxes. To date we have set up five companies in Brazil, Tunisia, Burkina Faso, Togo and Benin, providing more than 900 jobs.
• Direct contact with farming families This is how we ensure that they also actually benefit from price increases. Though direct contact, organic cultivation – cultivation is much more important as regards the carbon footprint of foodstuffs than transportation or packaging – or issues such as child labour can also be discussed. Creating agricultural prospects together enables farmers to invest in their future.
• Ecologically sensible supply chains Here we depend on the cooperation of our customers: They pre-order seasonal products from small-scale farmers and receive them delivered by post in the original bulk packaging. That may be unusual but it is also actually the most sustainable way to shop. To make our supply chains more ecological, we focus on scientific knowledge – and not on convenience.

2. Long-term approach

In our opinion, the most important component for greater impact is long-term collaboration. Cooperatives, companies and sustainable farming are not achieved overnight and take decades rather than years. We stick with our partner companies through thick and thin, with investment where necessary. In twenty years, we have never given up on a partner. This perseverance in very difficult countries and regions comes at a price: To date, we have had to write down more than 1.2 million CHF on investments. But that's something we take in our stride.

3. Sharing

In order to make the supply chain fairer for all those involved, we are changing the rules of trade by ...

• turning our price calculation on its head. Normally in fair trade, in addition to the raw materials’ prices, a fair trade premium and – for organic cultivation – an organic premium is paid. The sales price is then projected across many levels of trade and exceeds the original raw materials’ price many times over, especially if the product is processed in Europe. We will now pay out 10% of the sales price from the mail order purchase to farming families – in addition to the raw materials’ price and the premiums. And we also share this money among all farming families who deliver to gebana, not just to those selling mail order to gebana. So, although each individual farming family receives less, the situation of an entire region improves on a permanent basis. This price allocation is being implemented on a product by product and country by country basis – and has already begun in Burkina Faso.
• Sharing our profit If we generate a profit in Switzerland, we share this equally with our staff worldwide, with the investors and also – via price reductions and projects – with you, our customers.

In fair trade we are often led to believe in a heaven on earth and consumers love to believe it: farmers who earn a fair livelihood on a small number of hectares, wages like those in Europe, gender equality, working trade unions. The reality looks very different and improvements cannot be brought about from one day to the next, but have to occur gradually. But occur they must! We measure this in sustainability figures that we communicate. Above all we are committed to projecting a realistic picture of what we do and telling the true stories behind our products. This is because we rely on the fact that you trust us. In turn, you are also relying on us telling you the truth.

Adrian Wiedmer, Managing Director

Price calculation turned on its head

By paying 10% of the sales price to farming families, we are turning the way we calculate prices on its head.

Why? So that it is fairer. Here is an example: If we paid 10% more to farming families for their raw nuts, this would correspond to a price of approximately CHF 0.35 per kilo. However, if they receive 10% of the sales price, then this corresponds to 3.60 CHF per kilo on average. Now instead of paying the farming families supplying for mail order double, we divide the premium between all the cashew farmers we work with. This generates an improvement in income for 2700 farming families and helps the development of an entire region.

How do we finance it? Specifically we share the increase with our customers: They pay slightly more for the products and we forego some of our margin. This approach is starting with mangoes and cashews in Burkina Faso: With the mangoes, there is a slight increase in price. With the cashew nuts the prices are staying the same because here the price of the raw materials is currently falling.