NATURAL RESOURCES INSTITUTE

Fairtrade Cotton: Assessing Impact in Mali, Senegal, Cameroon and India A Summary Report

May 2011 Valerie Nelson and Sally Smith

www.nri.orgi Fairtrade Cotton: Assessing Impact in Mali, Senegal, Cameroon and India

A Summary Report

May 2011

Valerie Nelson1 and Sally Smith2

Drawing on research by:

Mali and Senegal: Laure Brun, Malick Ndiaye and Mamadou Amadou Sow (ENDA Pronat, Senegal) and Blane Harvey (Institute of Development Studies, University of Sussex)

India: Lalitha Narayanan with Ila Mehta and Rutwik Gandhe (Gujarat Institute of Development Research) and Czech Conroy (Natural Resources Institute, University of Greenwich)

Cameroon: Marthe Wandou (freelance consultant) and Cathy Mackenzie (freelance consultant and NRI associate)

Global cotton markets: Gerald d’Estur, Independent Consultant, France

1 Natural Resources Institute (NRI), University of Greenwich (UoG). 2 Institute of Development Studies (IDS), University of Sussex. Contents Summary 3

1. Methodology 3

2. Global cotton context 3

3. Regional contexts and trends 5

4. Fairtrade in cotton 5

5. Fairtrade impact on social difference and inequality 6

6. Fairtrade impacts on income 6

7. Fairtrade impacts on household standard of living and quality of life 7

8. Fairtrade impacts on strengthening of producer organisations 7

9. Fairtrade impact on local and national development 9

10. Fairtrade impact on natural resources management and environmental impact 10

11. Fairtrade cotton market and value chain analysis 11

12. Fairtrade avenues of impact 12

13. Key recommendations 15

14. Impact methodology recommendations 16

1 Summary of in-depth interviews with Fairtrade traders were undertaken and an independent cotton This study assesses the impact of Fairtrade expert was commissioned to help unpack on cotton producers and their organisations how global economic and cotton sector in Mali, Senegal, Cameroon and India. One trends, and Fairtrade market and value Producer Organisation (PO) from each chain dynamics, affect producers and their country participated in the study, selected families. by Max Havelaar France and the Fairtrade Foundation, UK (who jointly commissioned The three West and Central African POs the research). The impact analysis forms included in the study are all certified against the basis for a series of recommendations the Fairtrade Standard for Small Producer aimed at improving the Fairtrade system Organisations (SPO). The (nascent) Indian in favour of cotton producers, on-farm PO participates alongside a Promoting Body workers, and their organisations and (a company working with cotton farmers communities. to provide services and buy their cotton) under the Fairtrade Standard for Contract 1. Methodology Production Systems (CPS). The draft country study reports and the draft synthesis Fairtrade International’s methodological report were all shared firstly with the POs guidelines for impact assessment were and then with a wider range of Fairtrade used as the basis for the study design. stakeholders to gather their comments, They identify four main mechanisms through cross-check the accuracy of data, and to which Fairtrade has the potential to create identify any gaps. Where producers or other impacts (positive and negative): producer stakeholders disagreed with a particular standards; trade standards; organisational finding, their views were incorporated into support; and networks. The possible areas the final report, highlighting any discrepancy of impact studied were social differentiation with other sources of information. and inequality; the socio-economic status of participants; the organisation of smallholders 2. Global cotton context and workers; local, regional and national development; and, finally, the management Cotton is grown in more than 100 countries of natural resources. on about 2.5% of global arable land. Processing of cotton has shifted from The research team explored with farmers, developed to developing countries over the their households, PO management and last decade. Both world cotton production staff, community leaders, Fairtrade bodies, and consumption are trending higher, value chain actors and other relevant key reaching a record in 2008–09 before the informants whether and how Fairtrade is global economic crisis affected consumer having an impact. Fieldwork was carried demand. The largest producers are China, out by in-country research partners India, the USA and Pakistan, and yield accompanied by NRI and IDS staff and increases have led to an overall growth associates. Primary level farmer groups in global production although yields vary were selected according to criteria such from place to place. The largest consumers as geographical location and the length (importing cotton for processing) are of time participating in Fairtrade. FLO- China, India, Pakistan and Turkey. Over Cert inspection reports were analysed 150 countries are involved in the export or and relevant available data gathered from import of cotton, but as many of the top Fairtrade International (FLO). A small number producers are also large consumers, overall

3 trading is on average less than one-third of in different countries, although in some world output and represents only 0.1% of cases there is a high degree of vertical total world product exports. The expanding integration in which a single company or textile industry in Asia has led to it becoming parts of a corporate group perform several the leading importing region. The US has chain functions, especially in the stages been the world’s largest cotton exporter between spinning and manufacturing. since 1834. Companies in the chain may also be linked via shareholdings, holding companies and Over 500 firms are involved in global cotton joint ventures. Trade is also affected by and textiles trade, but 13 of these handle a range of distorting practices, including around a quarter of world production. subsidies, quotas, smuggling, exploitative International merchants buy from ginners labour conditions, currency manipulation, when they want to sell and sell when fake origin labelling and counterfeiting. spinners want to buy, which rarely happens simultaneously, hedging their physical The price of seed cotton comprises a position with ‘futures’. Direct trades relatively small share of the total retail between ginners and spinners are rare as cost of textile products, as value is added they can only work with long-term trading from processing, manufacturing and relationships and averaging of prices. distribution services as the cotton moves through the marketing channel. The impact Cotton is traded in US dollars and prices of seed cotton and lint prices on retail are volatile and have been trending lower, values depend on the quantity of cotton although at the time of the research they contained in the finished product and on the were on an upswing. Trade-distorting processing needed. However, the cost of subsidies put pressure on prices (10 out of raw cotton as a share of the retail value is the 11 largest cotton producing countries estimated to not exceed 10%. As a result, provide governmental protection measures a 10% increase in the seed cotton price to cotton producers). However, even if may translate into an increase in the retail these were eliminated and production price of only 1% or less, although there may declined in countries that subsidise cotton, be some compounding of costs through it may rapidly expand in other lower cost the value chain. The retail segment often producing countries in response to higher receives over half of the final retail value of prices. Technology-driven productivity the various cotton finished products. gains, competition with polyester and increased competition at the retail level add Organic and Fairtrade cottons are more to the downward price pressure along the expensive than conventional cotton, but this value chain, ultimately affecting the prices does not necessarily translate into a much received by farmers of seed cotton. higher cost of the end-product because the retail value of a clothing item is typically Cotton textile value chains are very complex. about 25 to 30 times the value of the Cotton fibres are firstly separated from cotton contained in it. A mark-up of around the seed in ginning to form lint and are 30–50% on the price of organic or Fairtrade then spun into yarn. The yarn is used cotton lint would in theory translate into to manufacture textile goods, involving a 1–2% mark-up on the final product and activities such as weaving, knitting, dyeing, consumers will normally not care about such printing and, finally, sewing into garments, a price difference. However, in practice, accessories and homeware products. The retail mark-ups on organic or Fairtrade different stages of the value chain can occur cotton items are much higher, generally

4 about 20–40%, but occasionally up to India is the major competitor of African 100%. The higher sales price is usually organic and Fairtrade cottons. In recent explained by the additional costs involved in times Indian lint has been cheaper than niche markets. W&CA lint, largely because of currency fluctuations (although other factors also Conventional cotton production relies heavily contribute to the difference). on the use of agro-chemicals with serious implications for human and ecosystem Cotton production is of critical importance health; water and soil use is also a key to the economies of all four case study challenge to sustainable production. Organic countries, particularly in terms of rural certification of cotton has expanded rapidly employment. In all of the study regions there in recent years, but still only accounts for are hundreds of thousands of smallholder 1% of world output. The use of genetically farming families relying on the cash income modified varieties may have increased from cotton to secure their livelihoods. yields but poses risks for human health and However, many are suffering as prices have biodiversity which are not fully understood. fallen while costs of production have risen. Preventing cross-contamination is an increasing challenge for organic farmers. 4. Fairtrade in cotton 3. Regional contexts and Launched in 2004, Fairtrade cotton began in four W&CA countries (Mali, trends Senegal, Cameroon and Burkina Faso) The cotton-ginning companies in the West with smallholder organisations being given and Central Africa (W&CA) case study support from Max Havelaar France (as well countries are all ex-state cotton boards as Geocoton, national cotton companies which have been (partially) liberalised. They and donor funding), and soon after in India buy seed cotton directly from producers with support from Max Havelaar Switzerland. and provide them with farm inputs and The aim was to provide support to small credit. Pan-territorial/pan-seasonal price cotton producers suffering from a long-term guarantee mechanisms pass high levels of decline in prices, to manage environmental financial risk to cotton companies. There and health risks from cotton production, and is a crisis in W&CA cotton, with all cotton respond to the crisis in the African cotton companies operating at a loss since 2004– sector. As yet, there is no separate FLO 05. In contrast, in India most seed cotton standard to cover other vulnerable groups in is purchased from growers at marketing textile value chains, such as factory workers yards by middlemen who sell it to ginners in garment manufacture, but FLO’s Trade or are paid a commission by ginners. Those Standards require all operators in Fairtrade traders often supply inputs (for cash or on cotton value chains to submit evidence credit) to farmers. of their efforts to comply with key ILO conventions on labour rights. Quality is of increasing importance in the cotton trade and handpicked cottons from In early 2011, after nearly six years in India and Africa trade at a discount to existence, Fairtrade cotton is being machine-picked cottons for contamination- produced in seven countries (four in W&CA, related reasons. Indian cotton has the as well as India, Kyrgyzstan and Egypt) and reputation of being the most contaminated, involves an estimated 55,000 producers. with African cotton taking second place. Fairtrade cotton products are primarily sold in Europe – the UK, France, and Switzerland and to a lesser extent in Germany, Denmark

5 and Finland –with additional markets ● Enhanced community solidarity and emerging all the time. Sales volumes have social cohesion in Mali and Senegal was benefited greatly from the involvement of found, but some anecdotal evidence large brands and retailers, motivated as suggested labour exchange traditions much by corporate social responsibility may have been undermined by Fairtrade considerations as by expressed consumer production requirements. More research demand. Sales grew rapidly in the first is needed to verify this phenomenon and years, but slowed down in 2009–10, with its scale. the key UK market experiencing a 33% drop in unit sales from 2009 to 2010 due ● Inconclusive findings on the impact of to challenging retail conditions on the high Fairtrade on child labour, but at minimum street. there has been sensitisation of producer group leaders and male farmers. Fairtrade can have a diverse range of impacts on individual producers, 6. Fairtrade impacts on their households, organisations and income communities, and more broadly on local and national development and the natural ● Fairtrade producers in W&CA received environment. The main impacts identified substantially higher prices under for the case study producers are outlined Fairtrade between 2004 and 2007: in the sections that follow. between 22% and 40% higher for conventional cotton and up to 70% 5. Fairtrade impact on higher for organic cotton. However, case social difference and study PO sales on Fairtrade markets dropped off in 2007–08 and reduced inequality to zero in 2008–09, mainly because supply exceeded demand and cotton ● Positive impacts on women’s economic empowerment have been achieved in companies were holding a back stock of W&CA, including more cotton produced Fairtrade cotton from previous years. by women farmers and greater control ● There has been less direct impact on by women of their cotton income, producer income in the Indian case although the effect is not consistent study PO due to market prices generally across all women. being above the Fairtrade minimum price. ● Improvements in women’s representation and participation in ● The potential price uplift for average Producer Organisations were found in production in W&CA was estimated to be all four case studies, although there only between USD 40 and USD 133/year is concern that women may still feel for the 2008–9 harvest, if all production obliged to vote as their spouse does had been sold on Fairtrade markets. and board representation is sometimes A lack of reliable cost of production only symbolic. data limited the analysis that could be done on net profits from Fairtrade ● Gendered social norms and the gender production. There is some evidence division of labour still limit women’s that Fairtrade has increased the cost of participation and ability to benefit from inputs and labour, but quality and yield Fairtrade. improvements may counterbalance this.

6 ● Fairtrade price incentives and technical ● The recent lack of sales has undermined assistance (linked to Fairtrade status) the positive income effects in W&CA. In have brought improvements in quality. In India the impact on household income India a new seed variety is promoted by for case study producers was minimal the Promoting Body to meet the quality anyway. requirements of Fairtrade buyers (and because it is higher yielding), but it is ● Use of hired labour is relatively common less drought-tolerant and so represents in India, while in W&CA most producers a risk in drought-prone areas and for rely on family labour and unpaid farmers without irrigation (who may be labour exchange with neighbours. the poorest). There is anecdotal evidence of some improvements in working conditions as 7. Fairtrade impacts on a result of Fairtrade, but more research is needed to verify this. household standard of living and quality of life 8. Fairtrade impacts

● Cotton is the most important income on strengthening of source for Fairtrade farming households producer organisations in the study groups, although in Cameroon cotton production has been ● Smallholders were already organised de-prioritised by farmers in recent into large, multi-level farmer years due to a lack of sales on Fairtrade organisations in W&CA. Fairtrade has markets, low prices on conventional strengthened these organisations (e.g. markets and higher costs of production. skills development, improved regularity of meetings, greater transparency of ● The precise impact of improved prices financial transactions). In the Indian case on household standard of living is Fairtrade has supported the emergence hard to measure because households of a new farmer organisation, with the pursue a range of livelihood strategies support of the Promoting Body (PB). simultaneously (and because payments from cotton companies are staggered). ● The number of FLO-certified producers Case study producers reported that grew rapidly in W&CA but has cotton income is used to help cover basic fallen back with the slump in sales. household expenses, including health Membership of the PO in India has care and children’s education. W&CA increased year on year. case study households said they are ● Indian farmers were positive about more able to cover these costs when their organisation and said it should Fairtrade prices are available. continue even if Fairtrade did not ● Some Fairtrade farmers in all countries persist because of its worth. Farmers reported using surplus income from felt the exchange of information from cotton for small investments in income- attending more regular meetings was generating activities, farm equipment, a particular benefit. In all three W&CA savings and/or land, but this evidence of case studies Fairtrade farmers observed sustainable development was less often improvements in the transparency and found for farmers with small areas of management of their organisations, cotton and/or low yields. but some said there was more to do to achieve good governance at all levels.

7 ● Over-dependence on other organisations ● The Fairtrade Premium decision- is an issue in both W&CA and India. In making process was viewed positively W&CA the case study POs are still heavily by producers in all four cases, with reliant on the national cotton companies, some changes instituted by FLO largely for structural reasons but also (in India) leading to improvements. due to weaknesses in internal capacity. However, in W&CA, members’ In India the nascent PO is still entirely confidence in their POs has been dependent upon the PB. Although the PB affected by the slump in sales, which has provided support for organisational has made it difficult for the POs to development – a process which cover certification costs, reduced takes time and requires considerable available Fairtrade Premiums and capacity building – the PB lacks a clear undermined their ability to make timely incentive to build up the organisation to Premium payments. At the time of the independence. research Cameroonian farmers were missing out on both SODECOTON and ● All case study POs still lack the networks Fairtrade Premium funds for community and capacity to market independently, investments. Their producer groups with market access only through were also unable to commit sufficient the national cotton companies/PB. funds to the community contribution Although improvements in organisational when this role was decentralised democracy and management capacity to them, preventing more effective in all four cases could in the longer term investments and coherent projects. help farmer organisations have greater Some Indian producers questioned autonomy, their ability to absorb the the sharing of the Premium across all risks involved in cotton marketing is communities, especially when there questionable. are not many members in a particular community. ● Producers’ access to high-value export markets has improved as a result of ● In all four cases individual Fairtrade quality improvements brought about farmers have only limited knowledge directly or indirectly by Fairtrade. In the of the principles and (sometimes) the Mali and India cases farmers already basic mechanisms of Fairtrade and accessed organic-certified markets, but there is sometimes confusion with Fairtrade Premium investments support organic certification. More knowledge farmers to continue to meet the organic was, unsurprisingly, found at higher market requirements and to achieve more levels in producer organisations, but sustainable production methods. few farmers understand where the cotton is sold, and the actors and ● The Fairtrade Premium has been used for margins involved, partly because of a range of purposes including: paying for their lack of involvement in ginning, health officers and buildings; construction input supplies and exportation. This of schools, scholarships and uniforms; lack of understanding worsens the water supply; rural electrification; confusion and loss of confidence agricultural infrastructure and sustainable created by the drop-off in sales. agriculture investments; and producer organisation offices. There were many positive observations of these outcomes.

8 9. Fairtrade impact on competition between Fairtrade suppliers and lack of willingness of buyers to local and national commit to buying Fairtrade over longer development periods.

● In the early years when sales expanded ● There is little evidence of increased rapidly, Fairtrade was helping to advocacy activities or any change in revitalise the nationally important West the political influence of the W&CA and Central African cotton sectors in case study producer groups as a result the study countries, offering a potential of their participation in Fairtrade. The strategy for greater financial viability PO in Mali has made most progress and sustainability at both producer and in developing support partnerships cotton company levels. Unfortunately, and engaging in lobbying, with crucial the stalling of sales is undermining capacity-building support being this impact. More generally, there provided by NGOs. More networking are structural issues such as limited is recommended at the local level in land holdings, high levels of illiteracy, Cameroon; the PO has received donor lack of textile industry infrastructure, support, but this has not increased currency fluctuations, climatic and its political influence significantly. In natural resource endowments which Senegal some support partnerships limit the impact that Fairtrade has and have been created, but with limited which may be beyond the scope of the impact to date. The Indian PO has only Fairtrade system to address. However, just been established, and it is too Fairtrade could increase its analysis of early to expect much progress in terms these factors and its development of of political influence; in the meantime suitable strategies to help tackle them, the PB is representing it in Fairtrade such as through international advocacy. networks and other forums. The question is over what timescale should ● At a national or state level there has greater PO independence be expected been minimal impact in India, given to happen, and how can FLO and the size of the cotton sector and the Fairtrade actors address the fact that relatively small proportion that Fairtrade the incentives may not be sufficient for production represents. PBs to support producer organisations to independence? ● The complexity of cotton value chains and the power of some intermediaries and retailers to determine value chain outcomes (such as who is included and excluded) also represent key challenges for FLO and Fairtrade actors in meeting their objective of sustainable development for small producers. This is exemplified by the fluctuations in sales in W&CA, but the case study PB in India also says it is struggling to sustain a longer-term trading relationship with the PO given the costs of certification, fluctuations in market demand,

9 10. Fairtrade impact on negative side-effects (e.g. more snakes in fields), higher costs and perceived natural resources ineffectiveness of the Fairtrade- management and approved alternatives, although the environmental impact W&CA national cotton companies argue that the pesticides work differently and ● The Fairtrade Premium is an incentive are slow acting, rather than being less which enables farmers to invest in effective. changing their agricultural practices, and the Fairtrade standards can ● Some socio-environmental concerns provide a framework for improvements. were also raised about whether However, external support has been of farmers are still re-using pesticide critical importance in delivering positive containers for food and water storage impacts on sustainable agricultural (Cameroon); as well as the risks of practices (e.g. a donor-supported GMO contamination (India); increased project for Fairtrade producers in work burdens involved in organic and Cameroon, donor support for the PO sustainable agriculture methods (India); in Mali). the riskiness of the switch to a higher quality but less drought-tolerant seed ● Organic certification in Mali and India variety in India to meet Fairtrade quality predates Fairtrade, and it is not easy requirements; and about salinity ingress to assess the relative impacts of into groundwater (India). each certification, in particular where external capacity-building support is ● Farmers in Mali and India reported being provided as well. However, good increasingly irregular and late rains synergies were found to be occurring (which have knock-on effects worsening between Fairtrade and organic the impact of pests), and salinisation standards in achieving sustainable is a problem in India that is likely to agriculture – while sales are happening be exacerbated by climate change. – because of investment of the Fairtrade Support for sustainable agricultural Premium in low-input agriculture. production as well as better terms of trade are likely to be important elements ● Switching to less toxic pesticides is an in building up the resilience of Fairtrade important achievement in both organic farmers to increasing climate variability and non-organic Fairtrade situations. at least in the short-term, but attention It is not possible to separate out needs to be paid to the issue of drought whether these impacts are the result of tolerance in India. Fairtrade or Organic certification, but it is likely that both certification systems ● Organic Fairtrade producers in Mali contribute through their requirements, report lower input costs compared training and financial mechanisms. In to conventional Fairtrade producers, Mali positive human health impacts who are suffering as input prices rise, were observed by farmers as a result of but they also have substantially lower the decrease in toxic pesticide use. But yields. the consistency/persistence of switching is not always clear. Some farmers in W&CA are resistant because of

10 11. Fairtrade Cotton market is shipped to India for further processing, incurring additional costs of transport, and value chain analysis storage, insurance, logistics and import ● Global cotton sales grew rapidly in the duties. Indian spinners are more familiar early years but slowed down in 2009 with Indian lint, and other value chain and were predicted to drop off in 2010, operators have preferences for sourcing mainly due to a 33% reduction in UK locally (due to high levels of vertical sales (the biggest market for Fairtrade integration in the Indian textile sector). All cotton). This was due to the challenging of this disadvantages African producers. retail environment prompted by the onset Some retailers specifically want cotton of recession in 2008–09 combined with from Africa, but they are in the minority price sensitivity of the types of products and most focus on keeping costs down. sold as Fairtrade. ● Fairtrade can add cost to final products in ● Production of Fairtrade seed cotton the following ways: grew almost exponentially from 2004 to ● Cost of FLO certification/registration and 2009, as more POs gained certification licence fee; (doubling between 2008 and 2009) and membership of existing POs expanded ● Processing costs associated with running fast. POs, especially those in W&CA, small volumes on separate production were unable to sell hardly any Fairtrade lines and not being able to blend cotton cotton from the 2007–09 seasons as the of different qualities; over supply from previous years needed – lack of Fairtrade market for waste; to be cleared. Backlogs have apparently now cleared, but production in W&CA – costs of monitoring, reporting and for 2009–11 was much lower, suggesting marketing; ongoing problems with supply and – value chain operators may charge demand fluctuations. higher margins for Fairtrade cotton, maybe because their margins are ● FLO has responded by establishing a unsustainably low in conventional Cotton Working Group with oversight by cotton (although evidence for this is a Global Product Manager which aims anecdotal). Importantly, margins are to improve intelligence gathering, as well generally calculated on the basis of as communication and co-ordination processing costs, not including raw between Fairtrade organisations, materials, which means that the higher businesses involved in Fairtrade cotton cost of Fairtrade lint should not be and producers. compounded along the value chain.

● Most Fairtrade cotton was sourced ● According to key informants, there may from W&CA until 2007–08 when there be no substantial differences between was increased availability and hence the trading relationships in Fairtrade value competition from Indian Fairtrade cotton. chains and those in conventional cotton. W&CA prices for Fairtrade cotton lint Many of the same actors are involved were reportedly up to 25% higher than and commercial decisions are based on Indian prices until 2009, mainly due to the similar factors. Fairtrade has not been strong euro/weak dollar. The FOB price able to guarantee long-term trading difference has now reduced as the dollar relationships over the past two years as has strengthened, but most W&CA cotton measured by stable sales; this is largely

11 to do with the length and complexity of for engaging with a Promoting Body Fairtrade cotton value chains, the types to support the emergence of a farmer of products being sold as Fairtrade, organisation, complemented by the audit and the timing of transactions along the process which has supported ongoing chain. improvements.

● However, more efforts are being ● The Producer Standards, along with the made by FLO and Labelling Initiatives financial incentives related to Fairtrade, to work with traders and retailers to have stimulated greater participation of develop more sustainable Fairtrade women as members and representatives value chains; there is some evidence of POs, particularly in W&CA, where they that Fairtrade can create opportunities account for up to 40% of PO members. for collaboration and partnerships in This is less true for the Indian case study developing innovative models which PO, where women are disadvantaged address some of the difficulties that by the membership requirement to hold have been faced to date. It will be a land title, although women are able important to monitor the effect of these to attend meetings in place of their efforts in the coming years. husbands and are represented at board level in the PO. Other potentially excluded 12. Fairtrade avenues of groups in India have also benefited from impact the non-discrimination requirements of Fairtrade, such as Harijans, although In order to improve the impact of Fairtrade, more needs to be done to tackle it is important to explore how Fairtrade entrenched inequalities, including those has had an impact upon cotton producers based on gender. As for other aspects of and their organisations by analysing the organisational strengthening, the support operation of the main avenues of Fairtrade of external agencies has been critical for impact, as follows. achieving impact in this area.

FLO Producer Standards ● Relatively limited awareness of Fairtrade principles, processes and markets among ● Fairtrade (FLO) Producer Standards and producers, particularly at the lower levels the auditing system have contributed of the organisations, has made it all the to increased organisational democracy more difficult for them to understand the and transparency of the case study POs stalling of sales. in W&CA through establishing required standards for certification. Capacity ● There is anecdotal evidence of building from cotton companies and/or improvements in hired labour conditions external agencies has been important in India, Mali and Cameroon (although in bringing about this organisational there is little hired labour use in W&CA); change (see below). it is not clear if the reported changes are widespread and if they are a result ● An element of pre-selection has of the Producer Standards and auditing, occurred with more organised local- increases in farmgate prices, or other level groups within the umbrella bodies effects (e.g. PO-level initiatives). participating in Fairtrade first.

● The Fairtrade standards, along with ● In India the Contract Production support from external agencies, have Standard has provided a framework increased awareness of child labour

12 issues among case study PO leaders reducing the relative attractiveness of and male farmers, but there is conflicting Fairtrade, although a further change evidence as to whether it exists on in Fairtrade and non-Fairtrade market Fairtrade farms and under what conditions. dynamics could reverse this (e.g. if more secure and longer-term guarantees for ● The Producer Standards have led sales can be established). to significant environmental benefits (sometimes in combination with organic ● Fairtrade Premium certification) in the reduction of the use According to producers, the Premium of harmful pesticides, better disposal of has brought positive benefits in all four chemical containers, and introduction and case study countries from investments strengthening of sustainable agriculture in education, health, water, agricultural farming methods. There are costs incurred infrastructure and support for organic as well, however (e.g. more expensive production. Some problems have been pesticides, not being able to use containers experienced with late payment of the for storage, higher labour costs) and the Premium due to the drop-off in sales and measures have not all been universally an inability to sustain the benefits. Specific popular. difficulties have arisen in Cameroon, with producers not being reinstated as FLO Trade Standards recipients of cotton company community ● The Fairtrade Minimum Price (FTMP) project investment after Fairtrade sales, The FTMP had a positive impact on and therefore Premium funds, dried up in producer income in all three of the W&CA 2008. Some POs have used some of the case studies until the stalling of sales in Fairtrade Premium to cover operational 2007–08 onwards, which undermined the costs, with the aim of making them less impact achieved. In India the FTMP has dependent on external support, but this had no discernible impact as it has been means volatility in sales has a negative lower than local market prices and since effect on their financial stability. 2008 when the government intoduced ● a guaranteed base price. FTMP is set in Terms of trading euros for all countries now, but until 2008 An increase in registered operators it was set in dollars for India. A weak euro means that Fairtrade value chains are from 2004 to 2008 made W&CA cotton not significantly different to conventional expensive relative to Indian cotton, which ones in terms of the businesses involved. exacerbated the tendency for sourcing to There are examples of Fairtrade helping move from Africa to Asia. to build collaborative value chains with innovative models for getting Fairtrade Cotton companies in W&CA also products to market, but equally there benefitted from higher FOB prices (until are examples of retailers and other sales stalled), enabling them to cover the value chain actors dominating sourcing costs of buying seed cotton, whereas decisions and not giving guarantees of conventionally traded cotton is often sold purchases in advance. There is significant at a loss. As such, Fairtrade appeared to price competition between Fairtrade offer a (partial) solution to the long-term suppliers, and in a context of oversupply crisis in cotton sectors of the region. this undermines compliance with the key However, confidence has been knocked Fairtrade principle of long-term trading by the sales slump. A rise in non-Fairtrade relationships. In this competition SPO cotton prices in 2010 is also further producers in W&CA (and perhaps also

13 SPOs in India) are likely to lose out to UK. Max Havelaar France played a critical Indian producers operating under contract role in establishing Fairtrade cotton in W&CA, production systems, given established securing funding and bringing together key sourcing preferences of conventional players (e.g. national cotton companies, cotton operators. However, even the case COPACO) to develop management study PB is struggling with the costs of systems and build up supply. Max Havelaar certification and competition with cheaper Switzerland was similarly involved in cotton coming from other Indian states, developing cotton supply from India. as well as the lack of secure, consistent The Fairtrade Foundation has worked on Fairtrade markets to sustain the long-term developing UK markets and trying to reduce relationship with farmers. As a result of costs in Fairtrade cotton value chains, these problems, FLO and its partners as well as providing access to funds for are focusing on developing markets for capacity building. In India, the FLO Liaison products that involve less fluctuation in Officer helped in the formation of the PO and demand and allow for the development of has supported more democratic decision longer-term trading relationships. making and representation.

Organisational strengthening and Fairtrade market requirements for quality business development cotton, as well as the financial incentives associated with Fairtrade, have combined External support has been critical in building with technical advice and training from the capacity of the case study POs in all support organisations to achieve quality four countries. This support has come improvements in all four country case from different sources: an NGO in Mali, the studies. In India the new cotton variety national cotton companies in Cameroon promoted by the case study PB has led to and Senegal and the PB in India. All of this quality improvements, but also creates some support is indirectly linked to Fairtrade as it risks for farmers in drought conditions. helps producers to meet Fairtrade standards and the requirements of Fairtrade buyers. Networking External support also covers operational costs in some cases (with help from the Fairtrade has had little impact in terms of Fairtrade Premium), and has encouraged supporting producer networking (e.g. for more democratic decision making and the business development or advocacy) in the participation of women. But the W&CA POs, case study POs. The PB is representing especially in Senegal and Cameroon, remain the Indian PO in the Fairtrade Network of very dependent on the cotton companies Asian Producers, but producers are not yet (for inputs, transport, ginning and technical themselves involved. In W&CA networking advice) and some individual producers are has also been limited and there is no confused between the identity of the cotton apparent impact from Fairtrade, although company and the PO. In Mali financial and in Mali the PO has developed some new operational dependence on NGOs is also an partnerships and representatives participate issue, but greater progress has been made in in national and regional meetings as a result encouraging independence. of support from an NGO, and there may be some indirect links with Fairtrade (based on Support for organisational strengthening Fairtrade’s contribution to sustaining the PO). and business development has also been It was noted that there is no clear platform carried out, or financed, directly by Fairtrade for networking of local-level Fairtrade groups organisations, especially the Labelling to find their voice in the larger organisation in Initiatives (LIs) in France, Switzerland and the Cameroon.

14 13. Key recommendations collection of gender-disaggregated data; develop guidance and strategies to tackle ● Reduce the volatility of Fairtrade gender inequality and support positive markets: take steps to achieve greater changes in household gender relations balance between supply and demand in and women’s active participation in POs. Fairtrade cotton; ensure understanding of and commitment to Fairtrade principles ● Strengthen actions on hired labour among all businesses involved in Fairtrade and child labour: raise awareness of cotton value chains; identify and support Fairtrade requirements for hired labour the development of value chains and and assist POs to develop strategies products which best fit with Fairtrade to meet standards, especially in India; principles and objectives; introduce a commission a dedicated study on child mechanism which protects producers from labour using appropriate methods. currency fluctuations. ● Support sustainable production and ● Improve awareness and understanding environmental stewardship: seek throughout value chain: support POs partnerships with other organisations/ to improve training and communication private companies to develop on Fairtrade principles, processes and programmes supporting climate change markets with farmers; improve data adaptation and sustainable production; gathering and transparency on costs and gather more data on costs of Fairtrade margins in Fairtrade value chains; learn production and ensure adequate from innovative value chains models which consideration of costs/risks of different seek to maximise the benefits to producers types of production/seed varieties. while minimising retail prices; build ● consumer awareness. Improve payment and use of Fairtrade Premium: ensure timely payment of ● Increase returns and promote income the Premium and greater transparency diversification: ensure continued capacity and communication with producers; building support to improve productivity, encourage strategic use of the Premium, reduce costs, increase quality and produce through building the capacity of POs more sustainably; promote linkages and linking with other agencies, local with organic production; support POs authorities, etc; support learning about to engage in other functions in the value good practice. chain (e.g. input supply, transportation, ● processing) and promote/facilitate product Support organisational development diversification to reduce dependence on and networking: develop strategies of cotton; develop a strategy to help African organisational support which facilitate producers compete; conduct further progress towards PO independence, analysis of producer empowerment in including linking to government or contract production systems. development agencies for capacity building, agricultural extension ● Tackle gender inequality and services and access to credit; support empowerment of women: give a innovative approaches which help PO higher priority to gender within Fairtrade representatives to network and lobby International and FLO-Cert, including within national and Fairtrade policy provision of training to all staff and circles.

15 14. Impact methodology ● Seek to publish findings to inform debates on the impact of Fairtrade and recommendations raising the bar in terms of transparency to ● Extend FLO methodology which was encourage other certification systems to originally established as a guide and do the same. Try to educate others about requires fleshing out (e.g. review pros why these studies are complex (because and cons, and potential trade-offs, of contextual changes, lack of consistent of different approaches to impact data, confounding factors) and why it is assessment; clarify hypothetical and not always so easy to attribute impact actual causal impact chains; elaborate on solely to Fairtrade. contextual conditions affecting impacts; provide guidance for researchers on operationalising methodology).

● Ensure expectations, timescales and budgets for impact studies are realistic. Prioritise themes for in-depth exploration to avoid budgetary constraints limiting the depth of findings (e.g. on the full range of issues affecting economic sustainability; on child labour; on the dynamics of Fairtrade impact in Contract Production Systems versus Small Producer Organisation situations, etc.).

● Reflect on the impact of impact studies themselves to maximise use and to ensure that the Fairtrade system responds to key findings. It is often the case that impact studies do not reveal new information to those inside a standard system, and that they are grappling with these issues on a day- to-day basis, but independent evidence gathered as part of a learning process can and should be a critical part of organisational reflection and decision making.

16 For more information, please contact:

University of Greenwich Natural Resources Institute Medway Campus Central Avenue Chatham Maritime Kent ME4 4TB

Tel: +44 (0)1634 880088 Fax: +44 (0)1634 883386 E-mail: [email protected] Website: www.nri.org

This document is available in other formats on request

University of Greenwich, a charity and company limited by guarantee, registered in England (reg. no. 986729). Registered office: Old Royal Naval College, Park Row, Greenwich, London SE10 9LS

Every effort has been made to ensure that this publication is as accurate as possible. However, the university reserves the right to alter or amend this publication without notice any other information printed here.

This publication is printed on 9 Lives 80 silk recycled material, comprising 80% recycled fibre.

D6595-12 E July 2012