Journal of Business Ethics (2009) 86:127149 DOI
10.1007/s10551-008-9761-9
Springer 2008
Assessing the Impact of Fair Trade Coffee: Towards an
Integrative Framework
Karla Utting
ABSTRACT. This article presents an impact assessment framework
that allows for the evaluation of positive and negative local-level
impacts that have resulted from responsible trade interventions
such as fair trade and ethical trade. The framework investigates
impact relating to (1) livelihood impacts on primary stakeholders;
(2) socio-economic impacts on communities; (3) organizational
impacts; (4) environmental impacts; (5) policies and institutional
impacts; and (6) future prospects. It identifies relevant
local-level stakeholders and facilitates the analysis of
conflicting interests. The framework was developed in the context
of, and is applied in this article to, the fair trade coffee
industry in northern Nicaragua. It was designed, however, so that
it can be applied across commodity sectors and responsible trade
initiatives. It is able to do this by accommodating for differences
in the social, environmental, political and institutional contexts
of different areas, and by taking into account the distinct nature
of an initiatives overall objectives, different levels of
intervention, and the full range of stakeholders involved. KEY
WORDS: impact assessment, responsible trade, ethical trade, fair
trade, livelihoods, conicts of interest, smallholders, coffee,
Nicaragua
n ABBREVIATIONS: ATC: Asociacio de Trabajadores del Campo
(Association of Rural Workers); CAFENICA: Asociacion de
Cooperativas de Pequenos Productores de Cafe en Nicaragua
(Association of Co-operatives of Small Coffee Producers of
Nicaragua); CECOCAFEN: Cooperativas Cafetaleras del Norte (Coffee
Co-operatives Central in the Northern Region); COSATIN: Cooperativa
de Servicios Agropecuarios Tierra Nueva (New Earth Farmers
Co-operative); DFID: Department for International Development; FAO:
Food and Agriculture Organization; FTO: Fairtrade Labelling
Organization International; PRODECOOP: Promotora de Desarollo
Cooperativo de Las Segovias (Promoters of Cooperative Development);
PROCOCER: La Cooperativa Multi sectorial de Productores de Cafe
Organico Certicado (Co-operative Producers of Certied Organic
Coffee); SL: sustainable livelihoods; SOPPEXCCA: Sociedad de
Pequenos Productores, Exportadores y Compradores de Cafe (Society
of Small Coffee Producers, Exporters and Buyers); SWOT: strengths,
weaknesses, opportunities, and threats analysis; TNC: transnational
corporation; UNDP: United Nations Development Programme; WB: World
Bank; WCED: World Commission on Environment and Development
IntroductionKarla Utting is a PhD candidate at the School of
Earth and Environment, University of Leeds, and a member of the
Sustainability Research Institute (SRI). Her thesis focusses on the
development of an impact assessment framework that aims to explore
livelihood and development impacts resulting from responsible trade
initiatives. Her research involves two case studies that examine
fair trade coffee production and the production of speciality
coffee veried by the CAFE practice programme of Starbucks, in
Northern Nicaragua. The empirical foundation consists of
information on a diverse range of local level impacts and draws on
the perspectives of multiple local-level stakeholders including
smallholders, community members, producer organizations, government
ofcials, NGOs and other key informants.
Alternative trade and responsible business initiatives have
become an important part of a sustainable globalization movement
that currently challenges the practices of conventional value
chains and the increasing power of global transnational
corporations (TNCs). Fair trade and ethical trade initiatives have
arisen in the context of economic globalization. In recent years,
they have acquired considerable prominence due to an increasing
public acknowledgement that international trade actors have moral
obligations to address issues of poverty, sustainable livelihoods,
environmental assets and sustainable
128
Karla Utting and positive local-level sustainability impacts of
responsible trade initiatives. The article also applies this
framework to a specic case in Nicaragua. The rest of the article is
divided into two main sections. The rst section elaborates the
assessment framework, including its stages, objectives,
characteristics, functions and components. The second section
applies the framework to a coffee-producing region in northern
Nicaragua and assesses the changes (or impacts) promoted by a fair
trade intervention. This includes: (1) an analysis of the context;
(2) assessing different areas of impact; (3) identifying conicts of
interest between the stakeholders and potential tradeoffs; and (4)
a discussion of the local-level changes. Impact assessment
framework The impact assessment framework that has been developed
aims to facilitate the gathering of comprehensive evidence on the
sustainability claims of the growing number of ethical and fair
trade initiatives. This section presents the design of the
framework (see Figure 1), which was initially developed by drawing
upon the secondary literature and other frameworks and
methodologies particularly the Sustainable Livelihoods Framework
and the Stakeholder Analysis methodology developed by the U.K.s
Department for International Development (DFID) (1999) and using
these to combine different component parts of previous research
studies on fair trade and ethical trade initiatives.2 The framework
was later rened after a testing period of eight months in coffee
producing areas of northern Nicaragua (Departments of Jinotega and
Matagalpa). The integrity of the framework is particularly
important given the growing number of researchers using formal
frameworks to support and manage their investigations (DFID, 2002).
Framework stages and components Stage one vulnerability
contextualization There are four main stages in the structure of
the impact assessment framework.3 The rst is an in situ
vulnerability contextualization that is derived from the
Sustainable Livelihood Framework, which initiates studies by
framing the external environment in which people exist (DFID, 1999,
Section 2.2). This enables one to understand why development
development in general. The increased visibility of these
responsible trade models for international trade is in part also
the result of a widespread recognition of the signicant
contribution they can have in the battle against some of the
harmful effects of economic globalization, particularly in
developing countries (Broad, 2002; Curtis, 2001).1 The
proliferation of supporters of responsible trade initiatives,
however, has been accompanied by the growth of a band of strong
critics and sceptics. The latter point to what they see as
potentially insurmountable challenges to fair trade and ethical
trade, such as their limited potential to expand market growth, to
ensure sustainability and to create longterm benets for Third World
producers and their communities. According to some researchers
(Moore, 2003; Raynolds, 2002; Tallontire, 2001), crucial
stakeholders, particularly consumers, are increasingly concerned
about the effectiveness of these initiatives. While some of these
concerns involve the inability of consumers to adequately
distinguish the increasing number of such initiatives, others
relate to a lack of empirical evidence concerning their
effectiveness and the resulting inability of stakeholders to
evaluate the ethical claims of responsible trade initiatives. Such
criticism has led to a growing and widespread credibility decit
surrounding these initiatives. At issue in the case of fair trade
is the extent to which companies are adhering to the standards that
are laid out in the guidelines and the degree to which the intended
beneciaries small producers are actually better off as a result of
the higher price charged to consumers for fair trade products. If
no concrete evidence is available to back up the claims of these
initiatives, critics can and will continue to denigrate them and
consumers and donor organizations will withhold their support. The
concerns mentioned in the literature highlight two important
issues. First, there is a need for greater ongoing empirical data
and analysis to address the widespread credibility concerns
surrounding responsible trade initiatives, particularly at the
local-level where the initiatives operate. Second, there is not an
adequate and consolidated framework to support critical
ground-level research of the impact of fair trade and ethical
trade. This article seeks to address the latter problem by
presenting a exible impact assessment framework that can be used by
researchers to carry out a systematic evaluation of both
negative
Assessing the Impact of Fair Trade Coffee
129
Figure 1. Impact assessment framework for responsible trade
initiatives.
initiatives such as fair trade have been adopted in those areas.
The frameworks vulnerability stage also incorporates a stakeholder
identication process, whereby the different stakeholders involved
are identied and their response to a crisis is documented. This rst
stage of the research framework encourages the researcher from the
beginning to identify and develop contacts and networks. Stage two
impact assessments This stage, drawing upon the sustainable
livelihoods and development literature, entails the
multidimensional assessment of impacts of responsible trade
interventions. These impacts can be categorized under three main
avenues. Impacts avenue I livelihood impact on primary
stakeholders. Given that the values espoused by ethical trade
initiatives are all elements of sustainability
(Carney, 1998, p. 107), this section aims to link livelihood
changes with sustainability by exploring the extent to which
compliance with ethical codes of conduct and fair trade standards
is leading to the achievement of sustainable livelihoods (SL)4 by
the intended beneciaries (the primary stakeholders). This section
uses the asset analysis (livelihood platform) of the SL framework
(Scoones, 1998) as a way to conceptualize rural peoples livelihoods
and incorporates the concept of sustainable livelihoods proposed by
Chambers and Conway (1992).5 The core of this framework is based on
ve assets or types of capital social, human, nancial, physical and
natural (see Table I) which can be employed in rural settings to
generate sustainable livelihoods (Scoones, 1998). Barney et al.
(2001) suggest that in order to achieve sustainable livelihoods
there must be access by all people to a balance of these capital
assets.6 Despite certain limitations (e.g. Carney, 1998),
particularly
130
Karla UttingTABLE I Description of capital making up
livelihoods
Capital Human Financial Physical Social Natural
Examples Represents skills, knowledge, ability, labour,
empowerment, and good health Denotes the nancial resources used to
support livelihood objectives objectives (e.g. wages, credit,
remittances, savings, etc.) Basic infrastructure and producer goods
(i.e. tools & equipment) Networks, participation and
decision-making, connectedness, membership in groups, social safety
nets Natural resource stocks from which ows and services are
delivered
the frameworks explicit focus on assets and little attention to
commercial factors, it is generally agreed that the existing
literature shows that the sustainable livelihoods framework has on
balance proven useful. Some have argued that it generates important
useful insights on trade matters by integrating social,
environmental, economic or productive factors into the analysis of
how people make a living (Mayoux, 2001a, b; Parrish et al., 2005;
Tallontire, 2001). Socio-economic conditions of community
stakeholders. This component examines the broad socio-economic
impacts of fair trade and ethical trade on communities and their
various local stakeholders. Its goals are to map the main positive
and negative changes (impacts) and to determine how, and the extent
to which, responsible trade initiatives have played a role in
generating these changes. Impacts avenue II impact on
organizations. The nature and success of fair trade and ethical
trade are largely determined by the organizations e.g. alternative
trade organizations 7 (ATOs) implementing the fair trade standard
or ethical trade principles/codes. Their organizational culture,
policies and structures largely determine their ability and
inclination to generate organizational success and balance this
with larger development and social goals (Ronchi, 2002a;
Tallontire, 2001; Mayoux, 2001a, b). Therefore, assessing
organizational capacity is crucial in determining the extent to
which organizations can positively support livelihoods of primary
stakeholders and go beyond standards and codes to encourage
sustainable development in local areas. Impact on environment. The
aim of this component is, rst, to identify the most relevant
environmental issues, and second, to establish whether
responsible
trade initiatives are having a direct impact on the protection
of environmental resources. Have the environmental standards of the
initiatives been conducive to environmentally sound production? Are
fair trade organizations implementing the initiative involved in
any other environmental projects? Impacts avenue III policy and
institutional impacts. The Sustainable Livelihood framework
developed by DFID, called The Transforming Structure and Processes
Component (DFID, 1999, Section 2.3), is adopted in this section to
answer two main questions. First, to what extent do policies, laws
and institutions in the area help to create an overall enabling
environment for sustainable livelihoods within the context of
responsible trade? Second, what impacts have fair trade and ethical
trade initiatives had on policies and institutions at the local
level over time? Future issues. This component seeks to identify
relevant future limitations and opportunities for fair trade and
ethical trade as initiatives for development and poverty
alleviation. What are the prospects of survival of these
initiatives? Can they continue to produce the same development
impacts and improvements in the local conditions and well-being of
communities and small producers or workers? Stage three conicting
interests and trade-offs This third impacts avenue explores
signicant locallevel conicts and tradeoffs among different local
stakeholders where the ethical and fair trade interventions operate
(Grimble, 1998). How do the different conicts of interest between
stakeholders at the local level contribute to or limit the impacts
on sustainable livelihoods and development? Assessing the
respective interests of key stakeholders gives
Assessing the Impact of Fair Trade CoffeeFocus Observation group
analysis
131
Secondary Published Close-ended Open-ended Structured Semi-
Unstructured Rapid sources summaries of surveys surveys interviews
structured rural organization appraisal
Stage four discussion of local level changes The nal stage of
the framework involves a discussion of the results of the collected
data in terms of the main local-level changes from the chosen
avenues of impacts. Moreover, it concludes the research by
identifying potential areas for innovation and practical
improvements to the initiatives to reduce stakeholder conict and to
better achieve their stated objectives. Objectives and
methodsResearch methods used during the testing period
p p
p p
p p
p p
Objectives The impact assessment framework for responsible trade
initiatives has three main objectives: rst, to explore changes in
livelihood systems, standards of living and sustainable
development; second, to identify conicts of interests and
trade-offs between different local stakeholders; and third, to
identify any potential for innovation and practical improvement of
responsible trade initiatives. For example, could the support given
by fair trade and ethical trade be directed to a wider range of
stakeholders and provide benets to a wider range of people within
the communities where these interventions operate? Research methods
During the testing period, various quantitative and qualitative
research methods were used by the researcher (see Table II) to
effectively generate information reecting livelihood and
development impacts of fair trade on a range of different
stakeholders. The framework does not seek to investigate everything
related to the impact of these initiatives at the local level;
rather it proposes crucial areas of inquiry that can show the most
important aspects of the changing situation in relation to
livelihoods, poverty and development. Functions of the framework
There are two main ways in which the framework can be applied for
the purpose of research. First, it
p
p p p
p
p p
TABLE II
p
p
p
Vulnerability context Impact assessment Livelihood impact
Socio-economic impact on communities Organizational impact Policy
and institutional impact Future impacts Conicts of interests &
tradeoffs
Stage
p
p
p
p
p p
p p
p
considerable value to any research study to prevent
non-co-operation and even opposition from different stakeholders,
who, directly or indirectly, would be affected by change (Grimble,
1998).
132
Karla Utting Characteristics of the framework The framework was
initially designed to enable it to be used to make comprehensive
impact assessments in different areas of research involving
responsible trade initiatives. Although distinctly different in
their objectives, responsible trade initiatives share a similar
rationale for managing the supply chain in a socially responsible
manner and, in some cases, in adopting similar approaches for
shaping behaviour within those chains (Bloweld, 2003). Still,
research has shown that, despite the characteristics shared between
different codes and standards, the experience of every initiative
will be different for each location. Therefore, the application of
a common framework will have to take into consideration
can help researchers explore livelihood and development changes
at the local level in areas where one responsible trade initiative
operates (see Figure 2). Second, it can be applied to investigate
local-level changes in two or more areas where responsible trade
initiatives have been implemented, in order to gain a balanced view
of the differences in impacts (see Figure 3). However, given the
distinct nature of the overall objectives of different initiatives,
the range of different levels of intervention, and the number of
different stakeholders involved (Mayoux, 2001a, b), the impact
assessment framework cannot be facilely used to compare different
initiatives and conclude that any one approach (e.g. fair trade
versus ethical trade) has a greater development impact (see Figure
3).
Livelihood and development changes
Framework
One case study research(e.g. alternative or mainstream
trade)
Conflicts & tradeoffs between different stakeholders
Innovation and improvement of initiatives
Figure 2. Framework application 1.
Figure 3. Framework application 2.
Assessing the Impact of Fair Trade Coffee the differences in the
social, environmental, political and institutional context of each
area in which it is applied, the distinct nature of the initiatives
objectives, and the number of different stakeholders involved
(Mayoux, 2001a, b). The framework has a number of characteristics
that would give it the potential to facilitate data collection and
be applied across different contexts. These include the following.
First, it is comprehensive and systematic, which enables it to
determine a range of impacts associated with the implementation of
formal standards guiding the environmental and social dimensions of
trade in relation to a number of key stakeholders (Barrientos,
2003; Nelson et al., 2002). Second, it is dynamic, which allows it
to examine change in impacts over time as a result of both external
uctuations and internal conicts and to contribute to ongoing
reforms of standards and implementation. Third, it is innovative
and adaptable so that it can apply a variety of qualitative,
quantitative and participatory research techniques to take account
of both: (a) intended changes as a result of implementation of the
initiative standards and codes of conduct, and ones that are
associated with the multi-dimensional impacts on primary
stakeholders (that is, the intended beneciaries); and (b)
unintended changes as a result of implementation of the initiative
standards and codes of conduct, and that are associated with the
multi-dimensional impacts on other stakeholders that do not
directly correspond to explicitly identied project objectives.
133
about real improvements and long-term stability in the social
well-being and livelihoods of small producers and other local
stakeholders. During the impact assessment, conicts of interest
between different stakeholders and actual potential tradeoffs were
also documented. Before any evaluation of impacts, it is important
to examine the vulnerability context to understand reasons why
these initiatives came into existence, the environment in which
they operate, and the different stakeholders or actors involved in
the setting.
Stage one: vulnerability context The Nicaraguan coffee crisis
The Nicaraguan coffee industry, despite a recent rise in coffee
prices, can be said to be in crisis. This most current crisis can
be dated back to a sharp drop in coffee prices in 19992000. The
background to this crisis, and to the rise of the fair trade coffee
industry in Nicaragua, goes back a bit earlier, however, to the
late 1980s and early 1990s. The increasing popularity of
neo-liberal trade and economic policies in the 1980s led to, among
other things, the 1989 disintegration of the international coffee
agreement. This move, along with a range of other factors including
increasing corporate consolidation (Ponte cited in Bacon, 2005a),
the establishment of a new coffee industry in Vietnam in the early
1990s8 and the expansion of coffee production in Brazil (Bendana
and Allgood, 2001; Ponte, 2002) would eventually lead to a major
drop in prices internationally by the end of the decade and, more
generally, to increasing price volatility (International Coffee
Organization, 2006) (see Figure 4). In Nicaragua, the coffee crisis
took the form of a 70% drop in the wholesale price for green
coffee9 over a four-year period, from USD $1.44 per lb. in 1999 to
less than $0.50 per lb. in 2002 (CEPAL, 2002). This was devastating
for the economy. The price drop resulted in an immediate loss of
employment and increased migration to urban areas for thousands of
Nicaraguan coffee producers and workers, as well as the threat of
property foreclosure for many coffee plantations and small farms
alike. To date, ve banks that had invested in the coffee sector
have folded.10 Other national banks, exporters and rural coffee
co-operatives and unions also incurred
Fair trade impact assessment In an impact assessment
methodology, impacts can be found at different levels depending on
the objectives of the study, research questions, or hypotheses. The
researcher must distinguish what are the priority impacts she
wishes to evaluate according to her chosen unit of analysis. The
following case study investigates fair trade impacts in the coffee
producing regions of Jinotega and Matagalpa, northern Nicaragua.
The framework elaborated above will now be employed to examine
three layers of impacts in the region, including: (1) livelihood
impacts; (2) organizational impacts; and (3) policy and
institutional impacts. These three impacts have been chosen in
order to explore the extent to which fair trade has brought
134
Karla Utting
Figure 4. International price of coffee. Source: Average yearly
prices for Arabica coffee beans (19842005): International Coffee
Organization (2006).
huge debts, much of which still remains to be repaid (Bacon,
2005a, b). The fall in prices also had immediate and severe
consequences for the social and economic conditions of coffee
workers and small producers and their families in Nicaragua
(Bendana and Allgood, 2001). Some coffee-growing countries,
however, weathered the storm better than Nicaragua. Why was
Nicaragua so severely affected? Events at the local and nation
level come into play. At the national level, a series of events and
situations has led to institutional instability in the coffee
industry. This includes political dictatorships (pre-1979),
revolutionary government and political-military interference by the
United States (1980s) and the transition to liberal democracy and
neo-liberalism (1990s) (Mendoza-Vidaurre, 2002). Moreover, the lack
of government investment in public infrastructure in coffee areas,
nancial corruption in the government of former president Arnoldo
Aleman (19952000) and a weak legal system that often excludes the
interests of the marginalized, all contributed signicantly to the
coffee crisis in Nicaragua. At the local level, factors that
affected coffee producers included: climatic changes and natural
disasters such as hurricane Mitch (1998); producers lack of
diversication; producers inability to afford expensive inputs for
coffee production, which meant that land was becoming more and more
degraded;
increasing debts; and the lack of access to stable markets at
the international level. These various factors may help to account
for the fact that the coffee crisis seems to have continued into
2005, even despite the fact that the price in international markets
rose to $1.25 per lb. According to the Association of Rural Workers
(ATC), a national organization that defends agricultural workers
rights, price instability and generally low prices over the years
have signicantly lowered the production capacity of coffee farms.
The bad harvest of 2005 and the fact that national exports have
dropped signicantly provide evidence that the crisis is still being
felt today, despite the recent rise in the prices. Stakeholders The
coffee industry in Nicaragua is composed of large, medium and small
producers, landless workers, producer co-operatives, unions and
associations of co-operatives, and coffee-exporting and processing
companies (benecios), as well as the technical organizations and
non-governmental agencies (NGOs) which support production. Amongst
all these groups, the 40,000 small producers and workers are the
most vulnerable (CEPAL, 2002). During a crisis, the livelihoods of
these two groups in particular are put at risk. During a price
crisis, small producers are forced to sell their coffee at prices
that do not cover
Assessing the Impact of Fair Trade Coffee production costs. 11
This practice may result in them pulling their children out of
school and not being able to afford farm inputs, basic medicines
and food supplies eliminating some essential elements of their
everyday diet (Utting-Chamorro, 2005). Landless farmworkers are
usually even worse off. Thousands of seasonal and permanent
farmworkers working on the countrys largest plantations are made
redundant as large farms seek to cut costs. In 2003, for example,
thousands of coffee workers (36,000 unemployed at the national
level) and their families were grouped together in what they called
plantones in the mountains north of Matagalpa (Utting-Chamorro,
2005). These people were living under black plastic covers in
miserable conditions along roadsides for months, demanding help and
solidarity from both the government and passers-by. Interviews held
with members of the plantones during a 2003 study recorded their
lack of adequate homes, land, jobs, and seeds for planting. They
could not send their children to school or buy medicines even
though they were suffering from all sorts of diseases caused by
malnutrition (ibid). In 2005, however, the government partially
complied with the 2000 Tuna Agreement that had promised all
landless coffee workers 1.4 hectares (two manzanas 12 of land in
return for payments for a period of 30 years. According to the ATC,
land was only given to 700 of the 2,000 families demanding help,
and the conict with government ofcials over compliance with what
was promised continues. Despite some advances, the coffee crisis is
still affecting the sector as many permanent workers have become
seasonal workers and many are still without jobs, in particular due
to the instability in world prices and political conicts at the
national level. Research results show two very different types of
responses to the coffee crisis on the part of the most marginalized
and vulnerable groups. Rural landless workers waited a number of
years for the government to comply with their promise to support
them by giving them land and seeds, waiting until it became a
serious national problem due to critical hunger levels. Small
producers with legal holdings, on the other hand, adopted more
effective coping strategies and mobilized themselves to seek new
market opportunities through alternative channels. Evidence shows
that since the beginning of the coffee crisis in 2000, an
increasing number of small producers have accessed new markets
through ATOs.
135
This link provides them with better prices and a social premium
to improve their local social conditions and also demonstrates to
them the importance of enhancing their social capital13 for
surviving times of crisis (Bacon, 2005b; Mendez, 2002). Emergence
of fair trade in Nicaragua The 1999 coffee crisis in Nicaragua
played a signicant role in the emergence of unions of co-operative
organizations accessing alternative markets in developed countries,
including the Society of Small Producers for Coffee Export
(SOPPEXCCA, in Jinotega), the Coffee Co-operatives Central in the
Northern Region (CECOCAFEN, Matagalpa), the Promoters of
Co-operative Development (PRODECOOP, Estel), New Earth Farmers
Co-operative (COSATIN R.L., Boaco), and Co-operative Producers of
Certied Organic Coffee (PROCOCER R.L., Nueva Segovia), as well as
ve others that form part of the umbrella organization called the
Association of Co-operatives of Small Coffee Producers of Nicaragua
(CAFENICA). These organizations have helped to reduce the
vulnerability of small coffee producers by providing access to
niche markets in the North which guarantee them higher and more
stable prices at the farm gate (Bacon, 2005a). The adoption of fair
trade in various regions of Nicaragua was particularly important in
the context of the coffee crisis and the level of poverty of
marginalized coffee producers and workers and their families, who
were unable to earn a livelihood through conventional trade. Since
1997, fair trade has been particularly attractive to co-operatives
in Jinotega, as it is a market-based intervention strategy that
helps smallholders to capture value previously appropriated by
traders and others in the marketing chain. Stage two: impact
assessments This section aims to investigate the livelihood changes
that have occurred for the intended beneciaries of fair trade.14
The intended beneciaries in this context are smallholders (one to
25 hectares of land) who constitute the primary stakeholders in the
fair trade movement, and who are afliates of the fair trade
co-operative organization Soppexcca, a second order co-operative (a
co-operative of co-operatives) with 650 member producers located in
Jinotega, northern Nicaragua and
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Karla Utting their own product before their involvement with the
fair trade system. This may be because they were not aware of the
information that cupping could provide, or how that information
could be valuable to them. Now, half of the interviewees claim to
have professionally tasted their nished product by having access to
Soppexccas cupping laboratory. Gender is a crucial aspect of
livelihood analysis, particularly changes in human capital that
relate to gender equity and the role of rural women in fair trade
activities. The extent to which fair trade promotes the empowerment
of women in rural areas is extremely important, as this is one of
the Fairtrade Labelling Organizations (FLO) objectives for fair
trade certication, and it is also increasingly recognized in the
new development discourse (Barrientos, 2005; Mayoux, 2003; Pearson,
2005). In Nicaragua, women occupy a subordinate position in rural
areas. Signicant changes were witnessed in this regard, with women
moving from a situation of not having any involvement in coffee
production to having more input in generating household income.
Also, an increase in mens role in domestic housework and a
signicant decrease in the number of cases of women being abused in
the community were reported by the majority of the interviewees.
Soppexccas organizational gender focus has also been successful in
allowing women to gain the necessary skills and knowledge to
produce an own brand mark for their coffee, and to enhance their
condence and skills to produce good quality coffee. Soppexccas Cafe
de las Mujeres (Womens Coffee) is now successfully commercialized
by a womens co-operative afliated to Soppexcca and sold as fair
trade organic coffee to the North American market. Social capital.
Changes in social capital in this study were explored by taking
into account criteria such as social recreation, levels of
migration, and participation and decision-making within the
co-operative and at the community level. Studies have shown that
coffee farm households use multiple relationships at the level of
the farm, family network, and co-operative organization to respond
to a crisis (Bacon, 2005a). This represents a process of
empowerment, whereby people or groups struggle to achieve their
dened goals by enhancing their social capital base through
mobilization of resources, becoming more connected to networks, or
increasing participation (Bacon, 2005b).
which sells directly to the fair trade markets in the North.
There are three main areas of impact. Livelihood impacts on small
producers There are ve livelihood impacts that will be analyzed.
These are addressed in turn. Human capital. Human capital in this
analysis is about capacity building and capabilities, that is,
enhancing the ability of small producers to sustain and improve
their livelihoods by equipping them with the understanding, skills
and access to information, knowledge and [technical] training that
enables them to perform effectively (Urban Capacity Building
Network, 2005). Human capital also involves education and good
health for the successful pursuit of different livelihood
strategies (Scoones, 1998). Fair trade is generally having a
positive impact on the human capital of small producers in
Jinotega. Capacity building of small producers is being achieved
with the technical support provided by their organization,
Soppexcca, which promotes quality improvement by encouraging
farmers to improve the environmental and physical conditions of
their farms, by leading them towards organic production, and by
showing them how to treat plant diseases. Also, there are signs
that better managerial skills are being developed as the majority
of producers are expanding their coffee farms and employing more
farm workers. Although only four agronomists were available to
assist the 650 members of Soppexcca, the majority of the
interviewees had received technical support either by participating
in workshops or through direct personal assistance. Soppexcca
frequently organizes workshops by grouping co-operatives according
to their year of establishment and encourages the participation of
all members. All interviewees considered technical support and
training as an opportunity for them to both adequately access the
fair trade market and obtain a better premium price, and to reduce
the penalty fee charged for the percentage of coffee delivered that
is classied as low or medium quality. Capacity building is also
shown by the increased interest of farmers in cupping their own
coffee.15 The initiative to make quality control an integral part
of farmers production systems is an important indicator that
demonstrates producers willingness to acquire the tools of trade
(Bacon, 2001). Many interviewees stated their lack of interest in
tasting
Assessing the Impact of Fair Trade Coffee This research found
evidence of small producers households moving social assets to cope
with the declining quality of life produced by the coffee crisis.
This is an empowering approach to reduce vulnerability promoted by
fair trades certication standards. The fact that small producers
experienced little, if no, ruralurban migration suggests that
producers were nding other coping mechanisms to survive the crisis,
rather than traditional means. If we take the recent conclusions
elaborated by Bacon (2005b) in his study of empowerment in fair
trade co-operatives, in which he states that different organizing
practices can have more inuence on livelihood outcomes than
farm-gate coffee prices or traditional coping mechanisms such as
migration and pulling children out of school, then participation
becomes crucial to the process and outcome of smallholders
empowerment. Soppexccas organizational objectives succeeded in
opening up spaces for the empowerment of their members, encouraging
producers to take part in events and making them feel part of a
system that is owned by them, and establishing closer relations
with the general manager of the organization as well as between
buyers and co-operative members. The participation of small
producers increased once they became part of a fair trade system,
not only in events organized by their co-operative, but also at the
community level; in interactions with development, health and peace
committees; in sports activities and parents committees at school;
and with national or international development NGOs operating in
their communities. The increased participation by women was
particularly signicant, suggesting progress is being made in terms
of womens empowerment or gender equity. Participation of women
before fair trade consisted solely of their sporadic attendance at
mass. At the co-operative level, nine of the 12 co-operative groups
studied experienced a substantial increase in the number of members
accessing the fair trade market. However, it was also found that
the remaining co-operatives experienced a drop in the number of
members. These three co-operatives had been established for over 20
years, and were associated with Soppexcca from its founding in
1997. This indicates a trend of older co-operatives taking the
initiative to divide their members into those who believe in the
fair trade system and those
137
sceptical of the benets provided by this market system and
unwilling to be part of it. Results also show increased involvement
in the co-operative, with half of the interviewees responding that
they had increased their participation in the decisionmaking
process of their co-operatives. This was attributed to the fact
that many members found that it was becoming easier to take part in
meetings, which was due in part to a learning process occurring in
the organization as members, opinions were being taken into
account. Participation of women increased in every single
co-operative group, suggesting that fair trade plays a signicant
role in encouraging women to take part in a male-dominated system.
Physical capital. This section examines the impact of fair trade on
the physical capital of small producers. The Sustainable
Livelihoods Framework describes physical capital as comprising the
basic infrastructure and producer goods needed to support
livelihoods (DFID, 1999). An analysis was carried out on the use of
the fair trade premium (USD $0.05 per lb.) by co-operative members
as income bonuses to enable producers and their families to either
improve the conditions of their home or their coffee farms, or
community members to improve community infrastructure or services
including water, electricity, roads and paths and transport links
and communications. Soppexcca aims to improve the standard of
living of their members and achieve sustainable development in
their communities. A number of producers claim to have improved the
conditions of their home. Improvement consisted mainly of expanding
the number of rooms in the house (from an average of 1.6 to 2.4
rooms) and of improving toilet facilities (going from having no
outside toilet or a shared one to making ones own). Little evidence
was found of improvements to the physical structure, including the
walls and roof of their homes, even though most interviewees
described the poor condition of their homes and their desire to
reinforce them with concrete walls and a more solid roof. Whether
producers can earn enough money to make adequate improvements to
their home has to do with how much of the premium given to producer
co-operatives is distributed to producers and
138
Karla Utting Natural capital. Natural capital is the natural
resource stock (soil, water, air, genetic resources, etc.) and
environmental services (hydrological cycle, pollution sinks, etc.)
from which resource ows and services useful for livelihoods are
derived (Scoones, 1998). A strong commitment to environmental
sustainability was demonstrated by the fair trade producers, as
they were aware of the importance of conserving their natural
resources and were beginning to think with a long-term vision.
Their co-operative union, Soppexcca, promotes the principles of
sustainable development through environmental workshops. It also
encourages producer members to move towards organic production by
applying organic farm inputs and promotes the participation of
young people in environmental activities within their communities.
Small producers associated with the fair trade system in Jinotega
saw various benets from environmental conservation. They associate
environmental protection with improved soil conditions, increased
yield and the conservation of a healthy water cycle and
precipitation levels, in part through the prevention of
deforestation, and so a decrease in the risk of drought and rivers
drying out. Maintaining the water supply is important to retain
soil moisture, and it is equally important to not exhaust and burn
soil and to work towards quality coffee production. According to
small producers, environmental protection also has health benets;
small farmers were interested in conservation to allow their
children to breathe cleaner air. Before being associated with fair
trade, small producers used the environment without much
consideration for its natural value. Since their association with
fair trade, environmental workshops carried out by Soppexcca show
them, for example, how to make use of coffee residues (the pulp
that is removed from the bean during processing) without
contaminating the soil and other environmental resources. The
majority of small producers interviewed claimed to have changed
from having no environmental awareness to becoming very
environmentally sound in their production practices. Financial
capital. This section outlines the nancial resources used to
support livelihood (Scoones, 1998), and examines how fair trade
producers nancial assets have changed through time. Extensive
groundlevel research with a number of stakeholders shows
how much of it is allocated to community work.16 Producers can
make use of the credit services provided by Soppexcca. However,
only producers who have been involved in fair trade for longer
periods (four or more years) can make use of the credit service to
make personal investments to repair their homes or improve the
conditions of their farms. The continuous running of fair trade
workshops by Soppexcca is benecial particularly to the new entrants
into the fair trade movement, as they act as catalysts for learning
how to improve living standards by improving the state of their
homes and dietary conditions, as well as helping them to identify
ways to diversify their economic activities. There were small
improvements in the state of the communitys basic services thanks
to investments by co-operatives. Co-operatives had allocated funds
in different areas, for example, to build a baseball eld and
provide baseball equipment for children and to improve the physical
conditions of schools. As Parrish et al. (2005) claim, however,
using funds for disjointed, ad hoc projects may not have optimized
the potential benet of such funds. The problem, as explained by
Soppexccas social project co-ordinator, is that funds provided by
the premium price are too small to consider larger community
development work such as improving road infrastructure and water
and electricity services. Government support to these marginalized
areas is at best very limited or non-existent according to all
small producers interviewed and Soppexccas agricultural assistants.
There are still a number of physical services, for example
communication and electricity, which are still not accessible for
most rural communities in Jinotega. Communication between
communities high in the mountains and Soppexcca, which is located
from 40 to 140 km away, depending on the community in question, is
either through the radio (on which Soppexcca announces meetings on
a sporadic basis) or through paper leaets sent by bus and delivered
to the communities. Nevertheless, it is important to note a
leverage role played by Soppexcca, which takes on the task of
helping rural communities acquire from international agencies or
buyer companies the funding they need as a way to complement the
fair trade premium and to achieve greater change within fair trade
communities.
Assessing the Impact of Fair Trade Coffee that fair trade has
the potential to contribute to sustainable livelihoods in the
coffee industry because of its unique access to a market that both
pays the highest prices at the global level and is not determined
by a boom and bust international commodity price system. In a
context where Nicaraguan-based exporters are competing for quality
coffee, the high price offered by fair trade buyers and the fact
that they offer smallholders a stable price system and access to
credit services for co-operative members becomes crucial for
sustainable livelihoods. However, unlike local exporters, fair
trade organizations do not offer immediate payment for each sack of
coffee delivered because buyers pay upon delivery of the supply of
coffee, which may take up to three to four months, and Soppexcca
does not have the nancial capability, like big coffee suppliers, to
offer immediate payment. This creates the risk that some producers
will not honour contracts, particularly when the international
price of coffee is similar to the fair trade price agreed upon when
the contract was signed. For example, in 2005 when international
coffee prices rose to $1.30 per lb., many small producers began to
sell their coffee to the local market or to export companies, which
offered them instant cash for their coffee, rather than to their
own co-operative. In 2005, 20% of the 650 small farmers afliated
with Soppexcca breached their contract, even though they were
penalized at a rate of $0.05 per lb. This practice jeopardizes the
co-operatives relationships with buyers in the international level.
It is important to note that fair trade farmers do not receive the
total market price (in 2005, $1.21 per lb.) plus a $0.05 per lb.
premium at the farm gate as suggested by the fair trade standard.
Deducted from the price paid by buyers in the North for their fair
trade coffee are many costs: export, transportation, processing,
taxes (1% municipal), and more recently, certication and storage,
as well as costs specic to Soppexcca (for example, debt repayment
or eco-
139
tourist investment). Table III shows how much fair trade
producers were paid compared to producers selling to the
conventional market.17 Results show that although almost half (in
2004) of the fair trade price was retained at the co-operative
level, fair trade can still have a signicant impact on the nancial
capital of small producers. Table IV shows that on average small
producers are now receiving 4.5 times more for their coffee than
they were before they joined the fair trade system. Reasons for
this have to do with the prolonged coffee crisis that signicantly
decreased prices paid to conventional coffee farmers. Money is
being spent mainly on food and education and also on their farms,
but there were no signicant visible results in improvement in the
physical condition of the home. According to an agronomist working
with small producers in Soppexcca,the change in living conditions
will not be immediately obvious to you for a number of reasons. For
example, apart from it being difcult for producers to manage the
liquidated money from their total production for a whole year,
producers do not have a savings culture, where you see producers
keeping their money for future investment.
The majority of the small producers interviewed claimed to have
accessed credit for investment for the rst time by getting it
through their co-operative. The longer they have been part of the
fair trade system, the more money they are likely to borrow for
improvement. Impact on organizations In Nicaragua, small coffee
producers accessing the fair trade market are usually organized
into primary-level production co-operatives composed of between 10
and 80 smallholders. These co-operatives then form secondary unions
of co-operatives (80 to 600 members), or tertiary associations
of
TABLE III Fair trade price compared to conventional price of
coffee Year Conventional (gold coffee) $47 $90 Fair trade (gold
coffee) $65 $109 Difference Fair trade organic (gold coffee) $85.50
$134.00 Difference
2004 2005
$18 $19
$37.50 $34.00
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Karla UttingTABLE IV Average annual income made from coffee,
other products and all products by a small producer
Product sold Coffee production Other productsa (not coffee) All
products
Income (2001) $5180.00 69.80 587.80
Income (2005) $2,480.00 109.20 2589.20
Difference $4.79 1.56 4.40
unions of co-operatives (600-plus members). The secondary and
tertiary associations help primarylevel co-operatives to sell their
coffee directly to buyers in developed countries, bypassing the
need for intermediaries in the value chain (see Figure 5).
CAFENICA, an umbrella organization for all fair trade unions and
associations of co-operatives, represents 6,300 smallholders
producing coffee for alternative trade markets. The ten
organizations comprising CAFENICA are spread throughout the
different coffee-producing departments of Nicaragua. The analysis
here examines the impacts of fair trade on Soppexcca, which
provides us with a best practice example of how the fair trade
standard is managed at the local-level. Soppexccas governance
structure consists of a general assembly and a board of directors
made up of producer members. Normally, the organizations plans are
debated in the general assembly, and nal decisions are made by the
board of directors. Generally, in meetings with assembly members,
community and organizational problems are put forward in the
presence of the oversight ofcers, which are positions within the
board of directors. When consensus is achieved on priority areas,
the oversight ofcers take the proposals for community projects and
organizational activities to the members of the
board of directors, including Soppexccas general manager. The
board members then look into the extent of the problem and what
sort of action is required. Funding is then found to nance projects
and solutions as required, from both external sources and from the
co-operatives afliated to Soppexcca. Arguably, the alternative
trade organization has more legitimacy when producers are placed at
the centre of decision-making, when all operations are transparent,
and when producers are given more responsibility to implement the
fair trade standard that best addresses their needs, ensuring that
the main beneciary is the producer. However, a weakness of this
organizational structure mentioned by the president of Soppexcca is
the high levels of illiteracy of the majority of the members, the
low education levels of the representatives on the board and the
lack of knowledge about how to manage legal, commercial,
organizational and fair trade requirements. Also, the problem of
the inefciency of many primary-level co-operatives is linked to the
low levels of nancial resources making producers unable to deal
with radical changes. The poor understanding of the nature of fair
trade, the lack of knowledge about the international coffee market
and the low capacity to interpret its trends are also due to a lack
of education. This reduces the positive
Figure 5. Fair trade value chain.
Assessing the Impact of Fair Trade Coffee impact that fair trade
aims to have on the families and communities of small producers.
Many of the benets acquired from fair trade certication in Jinotega
can be linked to Soppexccas management structure, its leadership
skills, and its style of working as a secondary union of
co-operatives. In Soppexcca, self sustainability is being achieved
by balancing nancial and human capacity (personnel, project
execution, skills, administrative work, etc.). The slow but
consistent growth planned by the organization is based on its
reluctance to accept new members into the fair trade system unless
these two aspects are well balanced and they have the capacity to
support new participants. Producer members trust and believe in the
organizations services and projects because of the respect it has
given them, placing them at the forefront of decision-making, and
also because they have a general manager as a leader who personally
attends to their interests and deals with the problems of each
individual member. Soppexccas organizational structure, however,
also has its weaknesses. These include, for example: inadequate
administration and accountancy due to a lack of computing
competency; a low capacity to generate new projects (that require
external funding); and an unbalanced distribution of
responsibilities, especially in the area of commercialization.
There is still a need to dene the responsibilities of each working
group and increase the number of agronomists to support the
increasing number of members. According to the organizations
members, fair trade has helped considerably to improve relations
between Soppexcca and other local development organizations and
governmental agencies, to increase its credibility at the
departmental and national levels, and to maintain good relations
with international partners and supporters. The increased
credibility has allowed Soppexcca to attract further funding from
key organizations such as Christian Aid, Lutheran World Relief, the
European Union, Global Exchange, ACRA/SOLIDARIDAD, and some
alternative commercial buyers like Heidelberger
Partnerschaftskaffee in Germany. Fair trade has created a culture
of high-quality coffee which has resulted in good commercial
relations with foreign buyers in the United States and Europe and,
at the local level, increased the organizations prestige. Fair
trade has helped to
141
establish relationships with buyers not only because of quality,
but also because Soppexcca has made fair trade an attractive
alternative initiative to support. In a context where there is a
risk of the fair trade market closing down or stagnating in the
medium term,18 Soppexcca has created a good platform for export and
commercialization and has the opportunity to offer large quantities
of high quality coffee to new markets. However, the highly
competitive nature of the quality coffee business makes it more and
more difcult for Soppexcca to establish itself in speciality
markets. Policy and institutional impact While Fair trade coffee is
just one of many development and livelihood options within the
Department of Jinotega, it is particularly important. Coffee is not
only the motor of Jinotegas local economy, but it is also important
at the national level, accounting for almost 60% of national
agricultural production.19 Thus support to this production sector
is crucial, considering the prolonged and devastating effects of
the coffee crisis and the lack of public investment in these
marginalized areas described earlier. The absence of government
support to coffee areas is considered a problem not only by
smallholders and large producers, but also by many local
organizations. The newly appointed mayor believes the problem to be
the result of a lack of organization and bad management of funds by
the previous local administration. Moreover, he suggests that the
problems of the coffee sector have always been considered at the
national level, with the responsibility for resolving these issues
falling on the central government. It is believed that the previous
conservative council was opposed to the work of many local
organizations, including Soppexcca, because of the political stance
of these organizations (which involved support for the Sandinista
movement).20 Rural development projects in coffee-producing areas
of Jinotega have been managed and supported primarily by
non-governmental organizations, which include local organizations
(such as FUNJIDEZ, La Culcumeca, Aldea Global and Soppexcca),
national organizations (such as ATC), and international
organizations (such as Christian Aid and Lutheran World Relief).
Although relationships between local institutions are ones of
mutual respect, co-ordination of development projects is weak.
142
Karla Utting comply with the new requirements and took away
their exibility. Concern was also expressed by small producers and
their organizational representatives around opening spaces for big
producers to work with co-operatives and allowing them to benet
from tax avoidance. It is feared that dilution of the fair trade
brand will occur if big producers are allowed to become part of
fair trade, as they have the ability to manipulate higher level
institutions, particularly regarding the environmental laws under
the jurisdiction of the Environment Agency in Nicaragua. Many in
Soppexcca describe how large and medium-sized coffee producers are
usually the most environmentally destructive because they do not
have any incentive to protect the environment and are renowned for
being able to avoid paying for breaches of environmental law. A
small producer is more conscious of protecting natural resources
partly because they are less able to avoid nes for negligence from
MARENA, Nicaraguas environment agency. Policy changes which impact
on the nature of co-operative organizations can have major
implications for fair trade. If, for example, the new requirements
of the co-operative law are not adapted to t the conditions of
these organizations, co-operative groups may be adversely affected
and fair trades impact will be diminished. Good institutional
relations are important in uniting local organizations and in
having greater inuence on the law-making process at the national
level.
Sometimes three or four similar projects are operating in the
same rural communities without any co-ordination. When two
organizations work in similar areas or towards the same goal (e.g.
poverty alleviation or sustainable development) but do not
co-ordinate with each other, then valuable resources can be wasted.
The project co-ordinator of a local NGO, la Culcumeca, argues that
there is more dialogue emerging between certain organizations and
the different components are being kept exible so that activities
can be more complementary. Thus, the social project mandate of fair
trade must itself be exible and must consider the work of other
organizations if it is to become a useful and respected initiative.
Good relations and dialogue between the different organizations at
the local level is crucial if development projects for poverty
alleviation and sustainable development are to be signicant for the
region as a whole. In many cases, Soppexcca has gone beyond its
organizational scope and assumed responsibility for development
issues ignored by the local administration in Jinotega (e.g. by
building schools, paying teachers, organizing adults, young people
and children, mobilizing communities by proposing various social
activities and inuencing legislation). Arguably, fair trade has
helped to create a competitive environment within the world of
development at the local level. Different local organizations are
now designing their development projects and component parts in a
way that demands greater efciency. We also see more focus on the
three core elements of sustainable development environmental,
social and economic rather than on specic issues such as
environmental management or economic diversication. Policy changes
can cause signicant impacts on the implementation of fair trade by
co-operatives in Nicaragua. For example, when the co-operative law
that provides the legal structure for all cooperatives in Nicaragua
was modied, beginning 2005, to improve the conditions and efciency
of co-operatives at the grass-roots level, it was done without
consultation of grass-roots organizations and co-operatives. Many
in Jinotega pointed out the difculties placed upon poorer
co-operatives in adjusting to the new law as it gave them little
time to
Stage three: conicting interest and tradeoffs Insofar as fair
trade was founded to help marginalized small producers, it is
almost natural to assume these small producers to be the primary
stakeholders. They are, however, not the only actors involved in
fair trade production. Small producers can (and do) hire landless
peasants to work for them. This group is not only directly involved
in fair trade, but is even more marginalized that the small
producers involved with fair trade. There are also other
stakeholders involved in fair trade at the local level. These would
include FLO representatives and other organizations that provide
support for fair trade production.
Assessing the Impact of Fair Trade Coffee In addition to those
actors already involved in fair trade, there are others who could
be involved. There are, for example, a large number of small
producers who have not yet been incorporated into fair trade
production. The formal criterion for them to become involved is to
be organized into co-operatives. More practical restrictions on
their involvement include levels of material and organizational
resources that they possess and the limited extent of the fair
trade market. Another group that could possibly become involved in
fair trade is comprised of medium and large coffee producers. Under
FLO rules they currently are not eligible, however, because in the
coffee sector only co-operatives comprised of small producers can
be certied. In other sectors, however, such as bananas, FLO does
certify plantation production (Bloweld and Gallat, 1998; Murray and
Raynolds, 2000). Many medium and large producers would like to see
this possibility in the coffee sector. These different groups have
different interests in how the fair trade market in Nicaragua
develops. This means that there will inevitably be trade-offs
between different strategies for developing the fair trade market.
At issue in these discussions are the strength of the claims of
different stakeholder groups and the nature of the risks involved
in pursuing different strategies. With regard to the issue of the
claims of different groups, there would seem to be a prima facie
reason to prioritize the interests of small producers. Insofar as
fair trade was established to support them (and consumers and
others support fair trade on this basis) and insofar as they are a
marginalized group, there would seem to be solid grounds for giving
preference to their claims. There are, however, two groups of small
producers, those that are already involved in fair trade and those
that are not. Those that are already involved can make claims on
the basis of the efforts that they have already undertaken to
organize themselves. Small producers not currently active in fair
trade would also seem to have some claims, however. As part of the
primary target group, they would seem to have some claims on FLO to
facilitate their participation in fair trade. Moreover, to the
extent that fair trade emphasizes the importance of bonds of
solidarity, it could be argued that they can also make some claims
on other small producers who have already had some success in fair
trade to reach out and support their participation.
143
Landless workers, especially those involved in fair trade, would
also appear to have a strong case for support. Not only are they
as, if not more, marginalized than small producers, but they also
play a role, albeit a smaller role, in the success of fair trade.
An important question is whether landless workers not involved in
fair trade have any specic claims on fair trade. Stated another
way, should fair trade seek to include greater numbers of landless
workers by certifying plantations, or is this an endeavor that is
best left to a separate organization? The group with the weakest
claims, it would seem, would be medium and large producers. They
were not a target group of fair trade. They have been certied in
some product markets, but not out of a specic interest in their
plight. They have been certied primarily as a way to help landless
workers (and to help grow fair trade). Any claims that they might
have to participate in fair trade would seem to be largely
derivative. With respect to risks (and trade-offs), two broad
concerns arise when it comes to expanding the participation in fair
trade by other local actors. The rst concern is that any expansion
of participation, especially a rapid one, might undermine the
success that fair trade has already had. The basic risk is that
incorporating a larger number of actors into a market that is not
growing at a proportionate rate will reduce the level of benets
that everyone receives. The level of benets that small producers
receive from fair trade must meet some minimum threshold if they
are going to be able to develop their productive capacity (both in
terms of sustainable livelihoods and organizational levels). The
failure to meet threshold levels could undermine the success of
fair trade. An additional risk relates specically to the inclusion
of medium and large producers in fair trade. There is the
possibility that these actors, if admitted, may be able to
outcompete small producers (and their organizations) and squeeze
them out of the market. This leads to a second major risk. The
inclusion of large and medium producers has the potential to
undermine the original mandate of fair trade, which was to support
small producers. Incorporating large and medium sized producers
might adversely affect the fair trade brand. One concern widely
raised in this regard was the behaviour of these actors (especially
their attempts to inuence policy and avoid regulations).21 More
144
Karla Utting ducers to join other certication standards, which
do admit plantation production, such as those of Utz Certied and
the Rain Forest Alliance. There are, however, also limitations to
this solution. From the producers perspective, these programmes are
less attractive insofar as they do not offer price premiums. They
may have some potential to address some of the concerns of
plantation workers, however, especially around issues of labour
standards. Another concern that exists is that these labels compete
with fair trade and may also function to reduce the demand for fair
trade coffee. One could, of course, challenge the premise that
small producers should have a priority over other stakeholders.
This is clearly not the view of the small producers themselves and
the local FLO representatives. One could pursue such a challenge on
moral grounds or on more classical utilitarian grounds. On moral
grounds, one would need to show that it is the responsibility of
FLO and existing small producers to change the nature of their
organization to give primacy to landless peasants. In terms of
pursing a utilitarian analysis, one would have to be able to show
that incorporating medium and large plantations would generate
benets to landless peasants that outweigh those that small
producers receive under the current system. Such an argument would
ultimately need to hang upon empirical studies. My empirical work,
meanwhile, grounded in the impact assessment framework developed
above, has shown that the fair trade system, as it currently works
in Jinotega, has provided important benets for small producers in
the form of more sustainable livelihoods (due to increases in the
ve capital assets), increased organizational capacity at the level
of rst and second order co-operatives, and increased capacity to
network with other organizations and to engage in public policy
debates.22 With respect to livelihoods, the assessment framework
was found to be useful because the distinction of different types
of assets particularly the nancial capital impact (including
improved prices and revenues), human capital (education and
training) and social capital (including empowerment and rights) was
key to showing more specically how fair trade contributes to the
promotion of pro-poor development.23 The distinction and analysis
of these different types of assets highlights the fact that
development is not just as a matter of income
generally, there is some concern that fair trade will lose
support from consumers if it incorporates plantation production. On
the other hand, incorporating these producers does hold some
potential for helping landless peasants. This would depend in large
part on the extent of the market.
Stage four: discussion of local-level changes If one starts from
the premise that small producers are the primary stakeholders of
fair trade, then the analysis of how to promote the growth of fair
trade in Nicaragua would seem to be relatively straightforward.
First, in order to maintain the benets of fair trade to small
producers, it would be important to manage the entry of new actors
into the market. The fair trade coffee market can only absorb so
much production, so new entrants must be admitted with an eye to
the growth of the market. The new entrants would, in the rst
instance, be new groups of small producers. Existing producers,
along with FLO, should provide support to emerging small producer
groups to facilitate their entry into the market, to the degree
this is feasible. On the demand side, they should also participate
in whatever ways they can to promote the demand for fair trade
coffee. Second, obligations are owed to landless workers engaged in
fair trade. What these are should be spelled out more clearly by
FLO and monitored more closely. For their part, small producer
organizations should also take a more active role in ensuring more
fair treatment of the landless workers that they employ. Third,
with respect to large and medium sided producers, there are two
strategies that might be followed. On the one hand, a longer-term
strategy could be developed to incorporate these actors as the fair
trade coffee market grows. Golding and Peattie (2005) highlight the
potential of social marketing techniques to increase fair trade
sales and maintain fair trades distinctive nature. Signicant
expansion of the fair trade market would be needed, however, if it
is to be an inclusive system. Even so, there would still be
concerns surrounding such a strategy, as noted above. These include
the possibility that they might squeeze small producers out of the
market and that they would change the mandate of fair trade and
diminish the worth of the brand. The second strategy would be to
encourage these pro-
Assessing the Impact of Fair Trade Coffee generation, but also
of the empowerment of local actors. The issue of empowerment of
small producers is directly related to the role of producer
organizations. The analysis of social capital revealed greater
participation by producers in their co-operatives, organizations
and communities from the outset of the initiative. On the other
hand, the analysis also revealed that strong leadership skills of
the general manager played a crucial role in the success of the
organization. Moreover, a strong correlation was found between the
move to the development of more sustainable livelihoods and the
transparency and management structure of the organization
implementing the fair trade initiative. Overall, the assessment
framework was helpful in demonstrating a clear symbiotic
relationship between development of the capital assets and
organizational capacity building. The assessment framework also
provided data that demonstrated the importance of institutional
relations at the local level. There is a signicant number and range
of development organizations in rural areas which do not always
co-ordinate their activities with each other. My analysis showed
that good relations and support between different organizations and
the local government is crucial in order to prevent resources from
being wasted, to have a greater inuence on legislation, and to
promote sustainable development for the region as a whole. Results
show that Soppexccas engagement in fair trade enabled it to
positively inuence other local development organizations and to
exert some inuence on the local administration as well as on other
institutions which had neglected coffee growing regions in
Nicaragua. Due to the benets that fair trade has been able to
provide, any changes to the current practice of fair trade must be
undertaken cautiously. While there are other stakeholders whose
interests must be addressed in order to more effectively promote
development, most notably landless peasants, it is not clear that
signicantly changing the practice of fair trade is the best way to
do so.
145
their claims that they can and do make a signicant difference in
the lives of small producers. In order to address this problem, in
the rst half of this article I developed an impact assessment
framework by drawing upon work in the area of sustainable
livelihoods and development theory more generally. The use of these
sources has allowed for the incorporation of a range of potential
impacts that fair trade might generate. I have highlighted six main
areas of impact: sustainable livelihoods (and ve different forms of
capital); socio-economic impact on communities; organizational
impacts; environmental impacts; policy and institutional impacts;
and future issues. Incorporating this variety of impacts is
important not only for demonstrating the results of fair trade and
related initiatives. It also allows us to see the interaction
between these different impacts and thereby to understand not only
what these initiatives do, but how they are able to achieve what
they do achieve. In the second part of the article, I employed this
impact assessment framework to analyze the production of fair trade
coffee in the Departments of Jinotega in northern Nicaragua. The
results showed that fair trade production, while not without some
difculties and set-backs, has indeed contributed to sustainable
livelihoods, the development of organizational capacity and the
generation of greater policy and institutional impacts. It was
demonstrated that these effects tended to be mutually reinforcing.
The results generated also allowed for the analysis of conicting
interests among different stakeholder groups and provided the basis
for developing policy proposals. The nature of the results of this
study indicate that it should be possible to employ the impact
assessment framework developed here in other contexts, both in
other countries and across different responsible trade initiatives.
It is extremely important to continue to document changes promoted
by responsible trade initiatives and to understand how these
changes occur. Only in this way can the credibility concerns about
the impact of responsible trade initiatives on poverty reduction
and development be effectively addressed. NotesIn this article,
responsible trade will be used as a generic term covering a variety
of distinct approaches that seek to make global trade whether
alternative1
Conclusion Fair trade and other responsible trade initiatives
suffer a credibility gap due to the fact that there is not sufcient
generation and dissemination of data to support
146
Karla Uttingproducts to various alternative markets, including
ecofriendly, bird-friendly, as well as the conventional fair trade
market. 8 In the early 1990s, the WB invested heavily in developing
a coffee industry for Vietnam so that it could have an export
cash-crop. Now Vietnam has become the second-highest producer of
coffee in the world (Greeneld, 2002). 9 The commodity of green
coffee is obtained after the raw fruit the cherry of the coffee
plant has gone through a conversion process. The cherry has the
fruit or pulp removed leaving the seed or bean which is then dried
(International Coffee Organization 2007a, b). 10 The banks that
collapsed during the coffee crisis included Interbank, Banco del
Cafe, Banco del Campo, Banco Mercantil, and Banic. This information
was provided by Carlos Javier Mejia, president of Esperanza Coffee
Group. 11 Varagis et al. (2003) suggests that Nicaraguas average
cost of production for a quintal (100 pounds) of conventional
coffee is USD $67.00. 12 Manzana is the Nicaraguan measurement of
land area equivalent to 0.7 hectares. 13 For literature on the
importance of social capital in surviving crisis conditions, see
Bebbington (2000), Mendez (2002), and Bacon (2005a, b). 14 Data was
collected using a quantitative survey involving a time dimension
that explored changes in the livelihood strategies of primary
producers both before and after their involvement with fair trade.
Unstructured qualitative questions were also used to understand how
fair trade interfered with the asset choices available to
smallholders. 15 Cupping refers to a process that identies in great
detail the defects in the coffee beans, including unripeness, poor
fermentation, etc. It also helps to produce a detailed description
of the coffee to enable it to be marketed better to roasters by
listing details such as acidity levels, body, avour, odour, etc. 16
According to Soppexccas management, fair trade co-operatives have
the right to decide what portion of the premium will be kept for
the cooperative and what portion will be allocated to each
producer. 17 Data obtained from the credit administrator of
Soppexcca, April 2005. 18 Taken from a SWOT (Strength, Weakness,
Opportunities and Threats) analysis produced by Soppexcca. 19
Personal communication with Eugenio Lopez Lopez, mayor of Jinotega,
May 2005. 20 Personal communication with Victor Gonzalez, ex
vice-president of Soppexcca, April 2005. 21 Personal communication
with Alquiles Castillo, Soppexcca oversight ofcer, 15 February
2005.
(e.g. fair trade) or mainstream (e.g. ethical trade) benecial
(or at least not harmful) to disadvantaged producers and workers by
managing the environmental, social, and nancial aspects of trade in
goods and services (Bloweld, 2003). 2 For example, Carney (1998),
Mayoux (2001a, b, 2003), Ronchi (2002a, b), Grimble (1998), Nelson
et al. (2002a, b), Hopkins (2000), Burns and Bloweld (2000),
Meinzen-Dick and Adato (2001), Bird (2002), DFID (2002), Barrientos
(2005). 3 Impact Assessment has been dened by Roche as the
systematic analysis of the lasting or signicant changes positive or
negative, intended or not in peoples lives brought about by a given
action or series of actions (1999, p. 21). 4 The term sustainable
livelihoods (SL) was rst acknowledged as a development concept in
the Food 2000 publication produced by an advisory panel of the
World Commission on Environment and Development (WCED) in 1987
(WCED, 1987). However, much of the literature emerging in the 1990s
adapts Chambers and Conways (1992) denition of Sustainable
Livelihoods (see endnote 4). New discourses on poverty,
livelihoods, sustainability, and diversity led to the formalization
of the concept into different SL approaches. These approaches were
used as a tool for rural development research and practice,
planning interventions, reviewing and evaluating projects, and
policy analysis. Some important approaches were developed by the
Department for International Development (DFID), the United Nations
Development Programme (UNDP), the United Nations Food and
Agriculture Organization (FAO), and the World Bank (WB). 5 Chambers
and Conways denition of SL includes the following: A livelihood
comprises the capabilities, assets (including both material and
social resources) and activities required for a means of living. A
livelihood is sustainable when it can cope with and recover from
stresses and shocks and maintain or enhance its capabilities and
assets both now and in the future, while not undermining the
natural resource base (Carney 1998, p. 4 summarizing Chambers and
Conway, 1992). 6 However, the framework is criticized by some who
argue that it restricts the scope of analysis by assuming that the
poor always make rational choices in the construction of
livelihoods set within the limits of ve capital choices (Odero,
2003, private conversation with M. Bloweld). The critical review of
the SL framework by DFID in 1999 was the result of the misuse or
abuse of the framework (see DFID, 1999). 7 I call them alternative
trade organizations (ATOs) rather than fair trade organizations
(FTOs) because they could be involved in commercializing
Assessing the Impact of Fair Trade Coffee22
147
This is not to say that there where not tensions involved.
Interviews held with the board of directors of Aldea Global, a
local producers organization in Jinotega, suggested that some small
producers are not happy with the role of the management of the
co-operatives involved in fair trade. They believe that there needs
to be more direct relations between the farm gate and the buyers in
the North. Others, however, have suggested that the process of
direct farm-gate-buyer links may ignore some essential market
functions and the importance of a commercialized organization. 23
There was of course a time lag in the generation of results. The
analysis showed an adaptation period of four to ve years before
producers began to see discernible benets and once factors such as
debts and legal and organizational management constraints were
overcome.
AcknowledgementI would like to thank the School of Earth and
Environment at the University of Leeds, U.K., for providing me with
the necessary funds to undertake this research project.
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