Amid growing concerns over environmental degradation in commodity production, state and nonprofit organizations have introduced sustainability standards such as eco-labelling to enable consumers to identify environmentally friendly products. This allows consumers to shop with a clear conscience, despite paying a slightly higher price, knowing their expenditure supports ethically and environmentally responsible products.

One of the earliest and most recognized labels is Fairtrade International, which, like many other labels, was initiated to ensure ethical practices among commodity producers. Over time, it expanded its focus to include environmental standards. Today, the Fairtrade label is visible on a variety of products in grocery stores across North America and Europe.

From the production perspective, the primary attraction for sellers and producers to join an eco-label program is the economic incentive: the possibility of a higher product price. Although producers can also benefit from additional resources such as training and networking, the main motivation remains the opportunity to sell their product at a premium if they meet the certification requirements.

Stories from the field

During a study on the capacity of eco-labels to enhance biodiversity and climate adaptation in Arabica coffee cultivation, we examined local perspectives on the economic incentives for farmers to participate in labelling schemes, such as Fairtrade, on the island of Flores, Indonesia. Flores is globally celebrated for its coffee, yet the island’s coffee farmers face significant challenges with eco-labels.

We conducted interviews with Pak Damagus Agas, a secretariat of the local cooperative ASNIKOM, in Manggarai, Flores, and with Pak Rikardus Nuga, the director of LAPMAS, an NGO collaborating with local farmers and cooperatives in Bajawa, Flores. These interviews shed light on experiences with Fairtrade where a buyer named Indokom proposed certification by Fairtrade. Indokom would then act as their official seller. Both groups underwent the certification process at a cost.

For ASNIKOM in Manggarai, the agreement entailed supplying three containers of beans to be sold at an elevated price with Fairtrade certification. Ultimately, only one container was purchased at the increased price, and the remaining two were sold at the cooperative’s standard rate. When the cooperative sought an explanation, they were informed that the beans did not meet Fairtrade standards. Requests to inspect the beans were denied. Consequently, the cooperative concluded that the certification and its associated costs were not economically justified.

In the Bajawa district, the cooperative supplied their beans to Indokom for sale under the Fairtrade label but did not receive the premium price. Upon inquiring with Indokom, they were told that the beans were not selling. Similar to ASNIKOM, when they requested to see the beans for sale, access was denied. Given the financial loss from the certification process without any return, the cooperative decided not to renew its contract with Fairtrade or Indokom.

In both instances, a middleman introduced the label to the groups, offering a seemingly advantageous deal with a label guaranteeing a higher selling price and a buyer committed to paying that price. Unfortunately, these deals proved to be too good to be true. The farmer groups reported that they were not provided direct contact with Fairtrade and had to rely on the buyer for information about the process.

Fairtrade’s response

We reached out to Monika Firl, Senior Advisor, Coffee Program at Fairtrade International, who provided insight into these issues. She acknowledged the imperfections of the system, noting that, unfortunately, traders and middlemen with dishonest intentions can exploit it.

She further clarified that if a producer organization is unaware of the mechanisms available to address these issues, they find themselves without recourse. If a trader enrolls a producer organization and is responsible for their certification, Fairtrade may not be aware whether the organization is familiar with the procedures designed to protect or assist cooperatives.

Lessons from sustainability trades

Despite these challenges, the objectives of Fairtrade remain significant and valuable in safeguarding vulnerable groups within supply chains. Over the years, it has achieved considerable success, and in various regions of the world, it has been immensely beneficial for farmers. However, as these systems expand and become more complex, involving more steps and participants, gaps emerge, leading to diminished transparency and accountability.

Negotiations concerning sustainability standards, product costs and access often favour companies over local farmers. Global approaches to sustainability may not always align with the specific needs and systems of different locales. In the same areas as these case studies, other labelling schemes and initiatives led by government and non-government organizations have successfully connected smallholder coffee farmers with domestic and international markets. These initiatives have not only persisted longer in the region but also included a broader range of farmers.

For instance, according to Pak Rikardus Nuga from LAPMAS, an organization collaborating with the ministry has assisted in registering farmers and ensuring compliance with requirements. A geographical indication label issued by the Indonesian Ministry of Law and Human Rights from the Directorate General of Intellectual Property has registered over 1,080 farmers in the Ngada Regency, including the Bajawa district, since 2012.

This is not to imply that global market sustainability standards fail to benefit any farmers. However, certain aspects of the process require greater transparency, accountability and accessibility. Farmers need a more significant voice in decisions affecting their products.