ALTERNTIVES TO OVERCOME THE MAIN DIFFICULTIES IN THE FAIRTRADE CERTIFICATION PROCESS: A MULTICASES STUDY OF ORGANIZATIONS OF SMALL PRODUCERS IN BRAZIL

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1 ALTERNTIVES TO OVERCOME THE MAIN DIFFICULTIES IN THE FAIRTRADE CERTIFICATION PROCESS: A MULTICASES STUDY OF ORGANIZATIONS OF SMALL PRODUCERS IN BRAZIL. Carla Cristina Martoni Pereira Gomes Master of Science in Organization Management School of Business and Economics of Ribeirao Preto - University of Sao Paulo Brazil Researcher at Marketing & Strategic Projects and Research Center (MARKESTRAT) Rua Maestro Ignacio Stabile, Ribeirão Preto SP Brazil ZIP Phone/Fax + 55 (16) carla@markestrat.org Marcos Fava Neves Professor of Marketing and Strategy at University of Sao Paulo - Brazil School of Business and Economics of Ribeirao Preto (FEA-RP/USP) Research Coordinator at Marketing & Strategic Projects and Research Center (MARKESTRAT) Av. dos Bandeirantes, FEARP. Bloco C, sala 64. CEP Ribeirao Preto SP, Brazil. Phone/Fax + 55 (16) mfaneves@usp.br Key Words: Fair trade; Small Producers, Certification. Abstract The valorization of environmental and social responsible products has resulted in an increase of socio-environmental certification schemes over the years. In agriculture, this reflects on a growing pressure towards an environmentally more balanced and socially fairer production. In this context, fair trade certification comes as an alternative to these pressures that come from consumers. This model of trade has emerged to associations of small farmers in unfavorable economic conditions as an alternative for obtaining better trading conditions for its products and thereby improving the living standards of their communities. Such economic disadvantages include the vulnerability of small producers, with no access to credit and no capital reserves, to fluctuations in the international commodity markets. This lack of economic opportunities due to difficulties in accessing capital, markets and information create barriers to small producers, thus ensuring large producers easier access to the export markets. In this context, fair trade becomes an excellent option. However, it is evident the difficulties of these producers to get such certification. Therefore, a multicase study was carried out in four organizations of small producers which already have the certification in order to detect these difficulties in getting the certification and to propose a checklist of actions that can help other organizations to fit into that market.

2 INTRODUCTION The valorization of environmental and social responsible products has resulted in an increase of socio-environmental certification schemes over the years. In agriculture, this reflects on a growing pressure towards an environmentally more balanced and socially fairer production. In this context, fair trade certification comes as an alternative to these pressures that come from consumers. This model of trade has emerged to associations of small farmers in unfavorable economic conditions as an alternative for obtaining better trading conditions for its products and thereby improving the living standards of their communities. Such economic disadvantages include the vulnerability of small producers, with no access to credit and no capital reserves, to fluctuations in the international commodity markets. This lack of economic opportunities due to difficulties in accessing capital, markets and information create barriers to small producers, thus ensuring large producers easier access to the export markets. The fair trade is increasing at annual rates above 20% since 1997, according to the Fair-trade Labelling Organizations International (FLO, 2008) and it has achieved this last year, a global movement of something around US$ 4 billion. About households in Africa, Latin America and Asia, were targeted and the total extra payment ("Premium") resulted more than $ 38.8 million. The main markets today are U.S., UK, Switzerland and France. The product range is already quite varied, including, in addition to handicrafts, items certificates with international label, such as coffee, tea, rice, cocoa, honey, sugar, fresh fruit and even manufactured goods such as footballs, and items certified by national initiatives, among them, dry fruits, nuts, flowers and others. The two products of greater movement and visibility in the food products are bananas and the symbol of the movement, the coffee. These products are sold in more than three thousand Fairtrade stores, called "world shops" in 18 countries and between to outlets conventional (FLO, 2009). According to FLO, Brazil has certified sales of orange juice, coffee, mango and dried banana, but sells other products through fair trade, but without certification, such

3 as soybean oil, melon, shirts and crafts. The fruit and coffee are the main Brazilian products demanded by the trade. In this context, the international market developments and economic disadvantages suffered by small producers, the question to which paper seeks to answer is this: How can these producers enter the market fair trade? Since there is a growing market for Fair Trade Certified products, and increase consumer awareness on issues related to sustainability, from production to disposal, and Fair trade addresses these issues, how small farmers can enter this market? What are the difficulties in the certification process? As these difficulties were overcome by some organizations of small producers? OBJETIVES This paper aims to understand what are the main barriers faced by organizations of small producers in the Fairtrade certification process and how these barriers were overcome by those organizations. The description of these processes, the steps and procedures adopted by the organizations studied may be useful to other organizations of small producers in various production chains. To achieve the main objective of the paper, there are other specific goals that involve: (1) to study the functioning of the Fair trade market in Brazil and abroad; (2) to describe how does the certification process with the FLO (Fair Trade Labeling Organizations International), with the certification criteria used by the FLO-Cert Certification; (3) to understand the barriers faced by organizations of small producers in the process of certification Fair trade; Present possible solutions for organizations of small farmers to overcome these barriers. PROCEDURES In the developing of this article, there was an initial exploratory study. At that stage, there was a search on secondary sources, that is, a bibliographic survey through books, specialized magazines and documents of Fair Trade certifiers. A multicase study was carried out in four organizations of small producers which already have the certification, in order to detect these difficulties in getting the certification and to propose a checklist of actions that can help other organizations to fit into that market.

4 This methodology was chosen because, according to Yin (2001), the case study, in general, is the chosen strategy when questionings of how and why are put forward, when the researcher has little control over events and when the focus is on contemporary phenomena inserted somehow on real life. The case study is a recommended method for situations where the theoretical is not yet developed. Besides the theoretical Fair trade is not being advanced, are also few studies related to the certification process of these organizations, this system of fair trade (BONOMA, 1995). Therefore, it was carried out, as mentioned before, four case studies: (1) the certification process by a cooperative of small producers of mango in Petrolina, localized in the São Franscisco Valley, Manga Brazil, (2) the process of certification of a cooperative of orange growers in the municipality of Itapolis, state of São Paulo - Coagrosol, (3) the certification process of a coffee cooperative in Minas Gerais - Coopfam, (4) the certification process of another coffee cooperative in the interior of Minas Gerais, the Specialty Coffee Cooperative of Boa Esperança The choice of those organizations is due to the need for understanding the problem in these specific scenarios, so that thereafter conclusions and approaches can be defined. LITERATURE REVIEW Certification is a formal instrument that ensures that the product was prepared according to quality specifications (standards) pre-established and is recognized as an indispensable tool to give confidence to the products, services and companies. Due to this particularity, it is a reducer of informational asymmetries and may be issued by the company, as well as by independent organizations, private or public, national and international, depending on the applied standard (MACHADO, 2000). According to Spers and Zylbersztajn (1999), the quality certificates show different characteristics of the product and help consumers to understand the characteristics or attributes private gifts. They are supplied by a certifying body that checks and controls the product certifies its value attributes and allow them visible to the consumer for the presence of a logo or symbol. They are officially regulated the participation of entities, both private and public, in implementing the system and its control. It may be voluntary or compulsory.

5 As a certified agricultural focus of this paper, Oliveira (2008), notes that France was the cradle of certifications in this category. The certification process was triggered by the crises in the country wineries in the past century, these crises related to the lack of legislation to protect the use of geographical names for food and agricultural products. To resolve this issue, according to Brabet and Pallet (2005 apud Oliveira), was established in 1935 in France to Appeal of Controlled Origin (AOC), primarily for wines and spirits. In 1990, a law extended the AOC dairy products and agrifood products. According to Pinto and Prada (2000 apud PEDINI et al., 2009) the certification process in agriculture stems from the growing trend of environmental movements and awareness of urban populations who perceived the (negative) impacts that conventional farming has on the natural resources, quality of life of farmers and rural workers and on their urban communities. This causes pressure to force changes the paradigm of agricultural production, providing production systems more environmentally friendly and socially fair. Nassar (2003) defines the certifications in agribusiness in two main objectives: defining attributes of a product, process or service and ensuring that they fit into predefined rules: On the supply side is a tool that provides basic permitting procedures and standards for participating companies manage the quality of their products and ensure a set of attributes. In this case, the certification creates an instrument of exclusion and selection of firms and products. On the demand side, the certification that hopes to inform consumers that a product has certain attributes sought for him, serving thus as a mechanism of informational asymmetries, increasing market efficiency. Examples are certified organic products, certificates of origin is known, the direct products of the farm and others. When buying a certified product, the consumer knows in advance several of its features. The Fair trade certification, subject of this paper, emerges as one of the most social and environmental certifications is growing internationally. It is a product certification system designed to enable identification by consumers of products that meet certain environmental criteria, work and pre-established, to encourage small farmers and hired workers in developing countries. The national non-governmental FLO International sets the standards as a certification body FLO-CERT notes

6 following the standards established by the producers, through independent audit (VIEIRA AND AGUIAR, 2009). The same authors also mention that an important aspect of this certification is a guaranteed minimum price for products sold, which must be paid to producers. Another aspect that drives the marketing strength of the seal is the existence of a Fair Trade premium. Whose value additional predetermined amount of product sold by the organization comes certified and should be invested in development projects in the producing communities, according to the decision of the certificate. The system of certification Fair trade can certify various products, especially agricultural products. FAIR TRADE CERTIFICATION The Concept of Fair trade is based on the fact that the global market practices affect underdevelopment and inequitable distribution of income among nations (Levi and Linton, 2003). The European Commission (1999, cited in Jones, 2003) emphasizes that the main objective of the Fair-trade is to ensure that producers receive a price that reflects a total adequate to cover its expenses of production and work. Furthermore, should contribute to a better social and environmental development in developing countries. Already the European Fair Trade Association, sets the objective of fair trade work with marginalized producers and workers in order to help them move from a position of vulnerability to a position of safety and economic self-sufficiency and greater equity in international trade. According to the organization's international Fair-trade movement, FLO (2009), fair trade represents an alternative to conventional trade and is based on cooperation between producers and consumers. Offering fairer trading conditions for producers, thereby improving their living conditions. For consumers, fair trade is an effective way to reduce poverty through their purchases. Murray et al (2003), emphasizes that Fair Trade seeks to challenge the existing relations in the global economy by using consumer-producer alliances to create a system of alternative prices that are based both in the concerns of social justice and economic factors; eliminate intermediaries transform practices of multinational companies that operate heavily in agrifood chains.

7 Regarding to the fair trade certification, there are some requirements: social, economic and environmental factors that must be met by producers' organizations. The requirements can be classified as general, minimal and progress. The general who are all producer organizations must meet from the moment they join the Fairtrade. The minimum must be met before the initial certification, and progress, organizations must demonstrate compliance over time and through continuous improvement. For some progress requirements, the degree of progress required of every organization depends on the producer level of economic benefits or other benefits he receives from Fairtrade and its specific context. As this work is not just the rules for an organization to ensure fair trade, only the general requirements and standards are being described and then analyzed. From the set of 106 requirements that are part of the General Criteria for Small Farmers, 40 are considered minimum requirements. Social Development under the requirements totaling 17, of which 9 are considered minimal. The Economic Development are grouped under 10, of which only two of them are minimal. In Environmental Development, the total requirement is 50, six of which are minimal. And for each product to be certified, there may be additional criteria in the areas already addressed by the General Criteria of FLO. Still, for each product, FLO develops commercial criteria that must be obeyed by both sellers and by buyers.. The following table summarizes these requirements for certification, according to the type of development that is related to social, economic and environmental. Social Fair Trade contributes to Development Members are small producers Democracy, Participation and Transparency Nondiscrimination Working Conditions Freedom of Labour Freedom of Association and Collective Bargaining Conditions of Employment and Wages Health and Safety at Work Economic Development Fairtrade Premium Economic Strengthening of the Organization Environmental Development Impact Assessment, Planning and Monitoring Agrochemicals Waste Soil and Water

8 Fire Genetically Modified Organisms Source: Elaborated by authors from FLO data (2009) Table 1: Requirements social, economic and environmental objectives to be met for certification. RESULTS Aiming to meet the goals of this paper on what were the main difficulties that organizations of small producers found in the certification process and how these organizations are prepared to fulfill each of the certification requirements. The interviews sought to focus on the barriers found by the Brazilian organizations of small farmers to ensure fair trade. They gave a more general overview of the process and its barriers, since they do not participate directly in day-to-day organizational and difficulties for certification, but followed the evolution of this process. Since the interviews with the organizations had the purpose not only present the main difficulties encountered in the certification process, but how organizations fulfill each requirement. The table 2 summarizes the main difficulties faced by small producers organization in the ambits, social, economic and environmental. Also it is showed how they overcome those difficulties: Certification Requirements Fair Trade contributes to Development Members are small producers Difficulties Low managerial capacity of small producers Lack of financial resources Lack of specialized staff Lack of resources to hire an agricultural technician, he would be responsible for visiting the farms and monitor the issue of hiring employees Actions Agreement with Universities and facilitating agents Developing a Work Plan in the social and economic. A summary of all actions that were discussed in detail for compliance with each requirement separately. Membership rules clearly outlined in the Bylaws of the Organization; Letter of Intent for membership; Signing the letter of intent already aware of the rules on small farmer; Registry data on the

9 Democracy, Participation and Transparency Freedom of labor Healthy and Safe Labor Lack of organizational structure; Lack of knowledge by members of their responsibilities and obligations to the organization; Lack of knowledge of policy functions in an organization; Transparency in management; Participation of members in decision making. Awareness of producers in relation to child labor; Reaction of the auditor the information received during interviews and observations made during visits to farms and organizations. High cost of equipment (either individually or protective equipment that promotes the welfare and safety of workers); Time available for courses; Technical safety; Professional nursing for the first aid course; Awareness of which are required equipment; Temporary workers during harvest. candidate profile and ownership; Election Board in a Committee of producers to visit the property of the candidate; Data are confirmed by the Commission and the organization Agronomist; Technical Appraisal of the property in possession of the Cooperative. Awareness of the Statute; Talk to joint development of the Bylaws; Frequent meetings with members; All meetings must be recorded by minutes; The minutes shall be signed by all participants; Members must participate in the vote taken in direct or delegated to a council, for example. Rules clearly defined in the Statute of the organization; Awareness of the producer in relation to the rule regarding the interview that will be submitted Agreements with State agencies, federal who can help with the training courses; Agreements with universities in the region (exchange ideas). Fairtrade Premium More than one task to be to appoint a professional

10 Impact Assessment, Planning and Environmental Monitoring administered by the organization; The accounts must be separate accounting of the organization (separate bank accounts); Producers are not educated on how to make such records; The organization must submit a Plan Award even if no sale has not contracted for Fair Trade; Values in real and not in percentages. Awareness of the producer in relation to environmental legislation; Low capacity for preparing the plan; The use of agrochemicals. Source: Elaborated by the authors, based on the interviews responsible for drafting the Plan of Award; Plan is developed based on needs assessment of the producers for the improvement of production costs (and quality) and meeting the requirements; Plan is approved by the Assembly; The Audit Committee monitors the resource usage and presents annually the accountability in the Assembly. Hiring agricultural technician; Partnerships with universities and other staff as facilitators SEBRAE EMATER, certify MINES; Training courses; Survey of the major needs of the properties in relation to environmental aspects; Proposals for improvement with maturity and responsibility for actions; Constant visits to the properties of agricultural technician. CONCLUSION By the multicase study it was possible to identify the various barriers faced by organizations of small producers against the complex requirements of a certification as to Fair-trade. It is worth recalling the main difficulties encountered: producers low scholarity level, certification system complexity, the need by the producers to become a manager of their cooperatives as well as a manager of their farms; the absence of professionals working for FLO to give directions to producers in a certification process.

11 Moreover, these organizations deal with constraints on the lack of financial resources and the difficulty of being organized to access funds, problems regarding physical infrastructure and lack of a strong organizational structure, some of whom do not know the responsibilities and obligations being part of that organization. Also not aware of the policy functions, they do not know the responsibilities of a president, a tax auditor. That certification is intended for the small farmer or family farm, also faces the barrier of awareness of workers in relation to child labor. Some producers do not understand that although they depend on a family farm, their children outside school hours can not do all kinds of farm work. And finally, the difficulties of raising awareness regarding the use of agrochemicals. Despite all the difficulties raised, these organizations, through partnerships with universities and state agencies to provide services, and resource utilization of the award for training courses and hiring more qualified personnel, can overcome the barriers listed above.

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14 Faculdade de Economia, Administração e Contabilidade, Universidade de São Paulo, São Paulo, MIRANDA, B. V. Diferenciação e geração de renda nos sistemas agroindustriais, 2009, 112 p. Dissertação de Mestrado. Faculdade de Economia, Administração e Contabilidade, Universidade de São Paulo, São Paulo, 2009 NASSAR, A. M. Certificação no Agribusiness. In Zylbersztajn, D; Scare, R.F (Org.) Gestão da Qualidade no Agribusiness: Estudos e Casos. São Paulo. Atlas, NEVES, M. F. Introdução ao Marketing, Networks e Agronegócios. In: ; CASTRO, L. T. (org.) Marketing e Estratégia em Agronegócios e Alimentos. São Paulo: Atlas, NEVES, M. F.; CHADDAD, F. R.; LAZZARINI, S. G. Alimentos: novos tempos e conceitos na gestão de negócios. São Paulo: Pioneira, NORMANN, R.; RAMIREZ, R. From Value Chain to Value Constellation, Designing Interactive Strategy. Wiley: Chichester, OLIVEIRA, F. I. Certificação de cafés sustentáveis: um comparativo das principais normas internacionais voluntárias, p. Monografia de Especialização - Centro de Desenvolvimento Sustentável da Universidade de Brasília, Brasília, PEDINI, S.; AMÂNCIO, R.; AMÂNCIO, C. O G. O mercado solidário certificado: ruptura ou continuidade do mercado convencional? In: CONGRESSO BRASILEIRO DE SOCIOLOGIA, 14, 2009, Rio de Janeiro. Disponível em Acesso em: 20 de maio RAYNOLDS, L. T.; MURRAAY, D. L.; WILKINSON, J. Fair trade: the challenges of transforming globalization. New York: Routledge, RICCI, M. S. F. et al. Cultivo do Café Orgânico. In: Sistemas Produtivos 2. Brasília: Embrapa Agrobiologia. 2006, versão eletrônica, disponível em: < acesso: 22 marco SAES, M. S. M. Diferenciação e Apropriação da Quase-Renda na Agricultura: a cafeicultura de pequena escala, p. Tese (Livre Docência) Faculdade de Economia Administração e Contabilidade, Universidade de São Paulo, São Paulo, SAES, M. S.M.; SPERS, E.E. Percepção do consumidor sobre os atributos de diferenciação no segmento rural: café no mercado interno. Organizações Rurais & Agroindustriais, Lavras, v. 8, n. 3, p , SANTILLI, J. As indicações geográficas e as territorialidades específicas das populações tradicionais, povos indígenas e quilombolas. In: Lages, Vinícius; Lagares, Léa; Braga, Christiano (Org.). Valorização de Produtos com Diferencial de Qualidade e Identidade: Indicações Geográficas e Certificações para Competitividade nos Negócios. Brasília: Sebrae, 2005.

15 SILVA, E. C; JR. CASTRO, L.G.; ANDRADE, F. T.; CHAGAS, I.S.P.; CONSENTINE, F. T Fair trade: um estudo exploratório de suas origens, características e relação entre seus principais agentes. In: Congresso da Sociedade Brasileira de Economia e Sociologia Rural - SOBER, 2009, Porto Alegre. XLVII Congresso da Sociedade Brasileira de Economia e Sociologia Rural. Ribeirão Preto, SP: Sociedade Brasileira de Economia e Sociologia Rural, 2009 SEIBEL, F. A diferença está na origem. Anuário Exame 2006 /2007. São Paulo: Editora Abril, SCHNEIDER, J. W. Pesquisa Mundial de Comércio Justo. Brasília: Sebrae, SELLTIZ, C. et al. Métodos de pesquisa das relações sociais. São Paulo: Herder, SILVA, C. A.; BATALHA, M. O. Competitividade em Sistemas Agroindustriais: metodologia e estudo de caso. In: III Workshop Brasileiro de Gestão de Sistemas Agroalimentares, PENSA/FEA/USP, Ribeirão Preto, VIEIRA, L.M; AGUIAR, L.K. An appraisal of the Fair trade system: evidence from small producers in emerging countries. In: Lindgreen, A; Hingley, M; Vanhamme J. The crisis of food brand: sustaining safe, innovative and competitive food supply. Surrey: Grower Publishing Limited, 2009 TAYLOR, L. P.; MURRAY L. D.; RAYNOLDS T.L: Keeping Trade Fair: Governance Challenges in the Fair trade Coffee Initiative, Sustainable Development 13, TEATHER, D. Big retailers help raise Fair trade sales.the Guardian, june, p YIN, R. K. Estudo de Caso: Planejamento e Métodos. 2. ed. Porto Alegre: Bookman, 2001.

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