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WA5. Fair Trade: Coffee and Consumers

Statement

Please read the reading materials from Chapter 8 of the Corporate Social Responsibility textbook. Based on what you have learned in this unit, answer the following questions:

  1. After studying this chapter, are you more likely or less likely to buy fair trade coffee? Why or why not?
  2. Is there another way of achieving the objectives of improving the lives of developing-country farmers and producers than the Fair Trade approach? Describe at least one option.
  3. Why do consumers buy Fair Trade products? List a few reasons and analyze each of them.

Answer

Fair Trade is a concept that ensures a minimum price for goods developed in the third world and imported to the first or developed world where prices are much higher in comparison to the original countries (Jimenez, 2016). Coffee is special in this matter as it was the first product that pushed the movement and started the initiative; later, it was extended to other products like clothing and other agricultural products.

Coffee is the second most traded commodity in the world after petroleum (Jimenez, 2016) and it mostly grows in third-world countries from South America, Africa, and Asia; thus, changes in this industry affect millions and millions of people who work in the first stages of the coffee chain such as the coffee prices collapse in 1989 which affects a lot of people and led to the creation of the first Fair Trade organizations such as Max Havelaar in the Netherlands (Jimenez, 2016).

After studying this chapter, I am more likely to buy fair-trade coffee, as the chapter shows that the Fair Trade approach has little effect on the price of the coffee for end consumers, but it has a significant impact on the prices that coffee farmers sell for. This means that the increase in prices for the farmers is paid mostly from the corporations and other middlemen in the chain, and the consumer prices are not affected much. This is a win-win situation for both coffee farmers and consumers, but it is not as good for other corporations in the chain, which may explain why it is not adopted by all coffee companies.

There are other ways of achieving the objectives of improving the lives of developing-country farmers and producers than the Fair Trade approach; some of these ways and certification schemes are disused by Waxler (2022), such as the Rainforest Alliance (and Utz), Direct Trade, and Organic certification. I will explain the Direct trade and Farmers’ Unions as two examples of these ways.

Direct Trade involves no middlemen, that is, the coffee company buys directly from the farmers, with long-term relationships that ensure the farmers a fair price and the company a constant supply of high-quality coffee, and also addresses the logistic and regulatory issues of importing and delivering the raw coffee. This is a more effective way, but it also requires more effort from the coffee company, in organizing the logistics and finding farmers large enough to supply the company’s needs, which leads us to the second option.

The Farmers’ Unions method involves small farmers uniting to form a larger entity that handles the process of contracting, selling, and delivering the coffee to the companies. This is effective because most coffee is produced by farmers in their small lands, and it gives those farmers more power in the negotiations and reduces the overhead on the coffee companies to contract with so many small farmers, and these unions are run by the farmers themselves.

Customers buy Fair Trade products for several reasons; some of these reasons are listed below and analyzed:

  • Ethical and social reasons: Fair Trade marketed itself as a way to help poor farmers get more money for their coffee, which may appeal to customers as they may think of the small increase in prices as a little donation to help those farmers.
  • Environmental reasons: Fair Trade products were also associated with environmental-friendly practices as their certification schemes take that into account (Wexler, 2022). This may appeal to customers who care about the environment.
  • Quality and taste: Fair Trade usually pays more to the farmers, logically, this may be reflected in the farmers taking more care of their coffee as they are less stressed about the future and have more money to invest in better production methods and tools. This may appeal to customers looking for high-quality coffee.

To conclude, Fair Trade is a good initiative that has a significant impact on the lives of millions of people, and it is a win-win situation for both the farmers and the consumers, but also has some critics as it is not that significant, corruption in their certification schemes, and it is only a marketing slogan (Jimenez, 2016). There are alternatives as technology advances where farmers can directly seek foreign markets and sell their products, but we should not discredit the impact that Fair Trade has had on millions of farmers around the world.

References