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207. Governance matters

2011-10-21 Comments Off on 207. Governance matters

Fair Trade USA recently decided to break with Fairtrade International and change the rules governing Fair Trade Certification. Fairtrade International, for its part, decided to increase the representation of producers in its governing body.  These decisions shine some light on a dimension of the coffee trade that often goes unnoticed and underappreciated — coffee chain governance.  As FTUSA moves forward with its Fair Trade for All initiative, how will it govern?  What might its governing style tell us about its values?  And what consequences will its governance have for producers and the movement more broadly?


The supply chains that connect smallholder farmers in coffee-growing countries with coffee drinkers in the United States involve many different types of actors.  There are the actors within the chain that everone recognizes — farmers, cooperatives, exporters, importers, roasters, cafes, etc.  And there are other actors beyond the chain who are often less visible but provide essential goods and services that make the chain more efficient — local coffee institutes, financial services providers, NGOs, certifiers, etc.

Supply chain governance refers to the rules of engagement for all of these actors: when and where decisions are made, by whom and how, how disputes get resolved, etc.

Governance is practical — a matter of seeking efficiency in moving coffee from origin to market.

But governance can also be a matter of ideology — an expression of values shared by different coffee chain stakeholders.

And governance isn’t abstract.  It can be a matter of real consequence — inclusive and transparent governance can reduce power asymmetries and increase equity; undemocratic governance can calcify or widen power asymmetries, perpetuating or increasing inequity.


Historically, governance has reflected the distribution of power along the chain: the actor(s) with the most power dictated the rules of the game and less powerful actors on the chain fell in line.  When Fair Trade came along, it represented a radical break with this tradition.

While “governance” doesn’t usually make the short list of Fair Trade talking points, Fair Trade’s participatory, inclusive practices — democratic chain governance — may have been the most revolutionary element of the Fair Trade model.  Fair Trade’s pioneers included actors all along the chain, who created governance structures collaboratively to achieve specific, shared commercial, economic, social and environmental objectives.  But Fair Trade didn’t just focus on outcomes.  It also valued process, ensuring a voice in the decision-making process for smallholder farmers who were structurally disadvantaged and consistently marginalized by traditional supply chains.


These democratic governance practices emerged in the context of specific Fair Trade value chains and varied from one chain to the next.

With the advent of Fair Trade Certification, common elements of these different chains were codified as standards, and inspection bodies were created to verify compliance with those standards.  In the process, a critical piece of the Fair Trade governance process was moved to actors outside the chain — FLO/FI and more than 20 National Initiatives in countries where FTC products are sold.  Chain actors still control decision about most of what really matters to smallholder farmers.  But some weighty decisions that affect the lives of smallholder farmers and their families are made by Fair Trade agedncies, as the recent Fair Trade USA and FI decisions illustrate.


Fairtrade International (FI), the Fair Trade standard-setting organization previously known as FLO, announced earlier this month a new governance structure that makes producers “half-owners of the global Fairtrade system.”

Previously, the FI General Assembly operated on a one organization, one vote principle — a formula that gave 21 of the body’s 24 votes to consuming countries, and the remaining three votes to regional producer organizations from Africa, Asia and Latin America.  Under the new rules, consuming country votes will be reduced from 21 to 12, with the remaining 12 votes allocated across the three regional producer organizations.

The timing of the announcement makes it hard to resist contrasting it to the controversial decisions FTUSA announced in September.


The announcement of the Fair Trade for All initiative, which will open the door of the U.S. market for FTC coffee to estates and other non-traditional actors, met with criticism from smallholder producer organizations, Fair Trade pioneers and others who have objected to both the potential impacts of the decision and the unilateral process by which it was made.  Here on this blog and elsewhere, advocates of smallholder farmers and democratic supply chain governance have called on FTUSA to open the review of certification standards for new entrants in the U.S. market for FTC coffee: estates with hired labor and unorganized farmers that will supply FTC coffee to U.S. buyers through non-traditional channels.  How FTUSA responds could be an indicator of how it will govern FTC in the Fair-Trade-for-All era.