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Are we fair enough?

It is clear that things need to change at the local level, that farmers have to earn a higher price for their green leaves and that tea growing as a dignified profession is slowly disappearing. You come to this conclusion very quickly, but bringing about change is not so fast.

Back in comfortable Europe, while enjoying our delicious East African tea sipping, it's surprisingly easy to forget the hundreds of different shades of green and the morning mist over the mountaintops. The only thing I can't forget are the genuine smiles of the people we met on our tea trip.

It is very easy to get sucked into the large series of small tasks that you have to get as a start-up… One of the main challenges that not only Frank about tea, but most companies, have to face when they try to be socially responsible way to do business is:

How can you be sure that working miles away is ethically responsible, without being able to personally monitor the well-being of those involved (i.e. our tea farmers) every day?

A 'solution' for this that is used by many is to add a quality mark by, for example, working with cooperatives of farmers who are Fair Trade certified and can only be purchased from them. By putting a Fair Trade label on products, companies hope to make your purchase seem a little more 'fair', as certified farmers should receive a price premium on top of the world market price.

To illustrate this with numbers, I will Tony's Chocolonely use as an example*. Don't get me wrong, I like Tony (especially their sea salt/caramel flavored chocolate), but this is a great example of putting fair trade into perspective. In addition to using its Fair Trade certifications, the company allegedly invests in farming communities through the Chocolonely Foundation; this receives 10% of Tony's Chocolonely's annual net profit, but that's not the point right now.

In Ghana, Tony pays a price premium of 25%, of which approximately 12.5% is a Fair Trade premium, which amounts to ~€0.15 on top of the market price of ~€1.20 in West Africa.

“In order to obtain a certificate, both the (cooperative of) farmers and the companies pay an annual contribution to the Fair Trade organisation. In return, the farmer receives the price premium, and the trademark is allowed to put the Fair Trade label on their packaging.”

The premium is paid into a cooperative's savings account, and in theory all members should decide democratically how the premium is invested, for example in the construction of a new school in the community. In reality, the cooperative's senior management often makes decisions unilaterally without informing their members, and farmers are often unaware that they are indirectly paying to be Fair Trade certified.

The license fee that has to be paid to the Fair Trade organization, by both the farmers' cooperative and Tony's, is where the shoe pinches the most. 2% of Tony's production costs per chocolate bar goes to the license fee (versus only 1% of the costs that go to the Fair Trade premium).

For example, in 2012, Tony had to pay a total of EUR 82,971 to the Dutch Fair Trade organisation Max Havelaar (which is part of Fairtrade International), which was twice the price premium that went to the farmers' cooperatives. You then naturally ask yourself whether that money could not have been spent differently… And this case study does not even contain the figures about the contribution that the farmers' cooperative had to pay to Max Havelaar, on top of the license costs that Tony's already paid for selling chocolate with the Fair Trade label.

Although Fair Trade can be seen as a 'good start', as Tony's Chocolonely puts it, the real impact of the certification at the local level remains quite limited. In reality, Fair Trade involves terrible amounts of paperwork, high administrative costs and expensive controls. The Fair Trade certification, among many other certifications (such as Utz, Rainforest Alliance), is often presented as a sustainable way to improve the living conditions of farmers, but with a high price tag for both the farmer and the buyer. Interestingly, many factories in Rwanda are already Fair Trade certified. If we wanted a Fair Trade quality mark on Frank about tea, we could, provided the farmers and Frank about tea would pay for it.

We are happy to pay a price premium for the benefit of the farmers. Paying a much higher license fee to a certification body in the west… we don't think that's cool. In addition, the price premium paid by the buyers often goes into the high administrative and overhead costs of the farmer's cooperative, without ever reaching the individual members of the cooperative.

For these and other reasons, we have decided not to use a seal of approval. Without going into too much detail about my idealistic views, I will say that a Fair Trade label on our tea will not solve the problems we have observed on the ground. Not very frank, so..

But then what?

We don't have the golden solution, but it does start with adding value at a local level, and through direct trade (no auction), keeping the chain as short as possible. All intermediaries want to earn something, and that goes up. Investing directly into the community, such as 2% of our proceeds (whether we make a profit or not) going into farmer training.

We're not there yet, but we're on our way. This is without a doubt a lengthy process. A process that starts with the realization that being honest has little to do with placing a Fair Trade quality mark on your tea packaging.

Keep it frank!


Founder Frank about tea

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