A fair-trade certification is a product certification within the market-based movement of fair trade. The most widely used fair-trade certification is FLO International's, the International Fairtrade Certification Mark, used in Europe, Africa, Asia, Australia and New Zealand. Fair Trade Certified Mark is the North American equivalent of the International Fairtrade Certification Mark. As of January 2011, there were more than 1,000 companies certified by FLO International's certification and a further 1,000 or so certified by other ethical and fairtrade certification schemes around the world.
The Fairtrade International certification system covers a wide range of products, including banana, coffee, cocoa, cotton, cane sugar, flowers and plants, honey, dried fruit, fruit juices, herbs, spices, tea, nuts and vegetables.
Fair trade is a strategy for poverty alleviation and sustainable development. It aims to create greater equity in the international trading system. It creates social and economic opportunities through trading partnerships with marginalised farmers and craftspeople in developing countries so that more customers are accessible to their products and they receive a favorable deal. In return, the producers must comply with the standards set by the certifying authority.
Packers in developed countries pay a fee to the Fairtrade organisation for the right to use the Fairtrade certification logo. Importers of Fairtrade-certified products must pay exporters a price higher than the market price for non-Fairtrade–certified products to cover additional costs borne by Fairtrade-certified firms in marketing and inspection. Any surplus after paying these costs must be used for local social, environmental, and economic projects.
Fairtrade develops private standards that aid the sustainable development of some smaller producers and agricultural workers in third world countries. In order to become certified Fairtrade producers, the cooperatives and their farmers have to comply with private standards set by Fairtrade International. FLOCERT inspects and certifies producer organizations in more than 70 countries in Europe, Asia, Africa, and Latin America.
The standards set for different stakeholders are as follows:
The majority of the members of the organization must be small-scale producers who do not highly depend on hired workers, but run their farms mainly by their own effort.
Profits earned must be equally distributed among the producers.
Every member in the organisation should have the right to vote in the decision-making process.
Workers have the right to join an independent union to collectively bargain their working conditions.
Forced labour and child labour are prohibited.
Working conditions have to be equitable for all workers. Salaries must be at least equal to or higher than the minimum wage in effect.
Safety and health measures must be implemented properly so as to avoid injuries at work.
Buyers pay a price no lower than the Fairtrade Minimum Price in order to cover the costs of sustainable production.
Buyers pay an additional amount of money that allows producers to invest in development (the Fairtrade Premium).
Buyers sign contracts that assist long-term planning and sustainable production practices.
The Fairtrade system consists of two types of pricing: the Minimum Price and the Premium. These are paid to the exporters according to the proportion of output companies are able to sell with the brand "Fairtrade Certified", typically ranging from 17% to 60% of their turnover.
The Fairtrade Minimum Price is the price that must be paid by buyers to Fairtrade-certified producers. It is a floor price that covers producers' average cost of production, protecting producers from selling their products underpriced.