strategic fairtrade funding programme phase ii: 2010-2013

8/14/2019 Strategic Fairtrade Funding Programme Phase II: 2010-2013

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STRATEGIC FAIRTRADE FUNDING PROGRAMME

Phase II: 2010-2013

Revised draft, November 10th 2009

Programme

applicant:

Fairtrade Labelling Organizations International (FLO) e.V.

Bonner Talweg 177, 53129 Bonn, GermanyRepresented by its Chief Executive Officer Mr. Rob Cameron

Programmepartners / co-implementers:

FLOs member Labelling Initiatives (LIs) and Producer Networks (PNs)

Programmeperiod:

2 programme periods:Phase I: 2008 2009Phase II: 2010 2013

Programmebudget:

22.2 million

Programmetarget group /beneficiaries:

Small-scale producers and workers in hired labour settings in developingcountries who are able to access the benefits of Fairtrade certification, alongwith their dependents and communities


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Strategic Fairtrade Funding Programme: Phase II (2010-2013)

Table of Contents

Executive summary__________________________________________________________ i

1. Development Context: Fairtrade and the Millennium Development Goals ____________1

1.1 Fairtrades direct impact on the Millennium Development Goals _______________11.1.1 MDG 1: Eradication of Extreme Poverty and Hunger ______________________11.1.2 MDG 2: Achieve Universal Primary Education ___________________________1

1.1.3 MDG 7: Ensure Environmental Sustainability ____________________________21.1.4 MDG 8: Develop a Global Partnership for Development____________________2

1.2 Fairtrades additional impacts on the Millennium Development Goals ___________3

2. The Evolution of Fairtrade Towards a Global Movement for Change________________4

3. Fairtrades Strategic Intent ________________________________________________5

4. Implementing Fairtrades Strategy: Goal, Purpose and Outputs____________________7

4.1 Strategic Objective 1: The global Fairtrade system is STRENGTHENED (streamlined,efficient, maximizing direct impact and leveraging wider changes) ___________________7

4.1.1 Revised Governance Model for Fairtrade _______________________________74.1.2 Revised Financial Model ____________________________________________84.1.3 Strategy & Policy__________________________________________________9

4.1.4 Enhanced brand communication_____________________________________104.1.5 Quality management ______________________________________________104.1.6 Information management system ____________________________________104.1.7 Monitoring, evaluation, impact assessment ____________________________11

4.2 Strategic Objective 2: The scope of Fairtrade is BROADENED (number of producers,products & countries) _____________________________________________________11

4.2.1 Global Product Management (GPM)__________________________________124.2.2 International Account Management (IAM)______________________________124.2.3 Brand management (international licensing, certification mark management) __13

4.3 Strategic Objective 3: The impact of Fairtrade is DEEPENED (increased value for eachproducer from their involvement in Fairtrade) ___________________________________14

4.3.1 Flexibility in standards setting (simpler, faster & more responsive)___________14

4.3.2 Producer Services and Relations: working with different types of producers (supportingthose who most need Fairtrade) ___________________________________________154.3.3 Certification _____________________________________________________154.3.4 Partnerships (e.g. technical assistance, access to finance, market information) 154.3.5 Stronger positioning of Fairtrade vis--vis international trade & development(communication, networks) _______________________________________________16

5. Fairtrades Strategic Funding: A Co-ordinated Approach ________________________17

6. Constraints and risks____________________________________________________19

7. Budget_______________________________________________________________19

8. Management of the Fairtrade Strategic Funding Programme_____________________22

Annexes _________________________________________________________________22


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Executive summary

Phase I of the Strategic Fairtrade Funding Programme enabled Fairtrade to make significantprogress, both in operational and strategic terms. Operationally, we have expanded the supply sideby increasing the range of Fairtrade products and the number of producers able to access thebenefits of Fairtrade; and we have grown the demand side by building the market for Fairtradeproducts in traditional markets and taking first steps in the development of new markets, includingin the South. Strategically, we have completed a comprehensive Strategic Review process, the

result of which is a unanimously adopted revised Strategic Model for Fairtrade globally. Phase II ofthe Strategic Fairtrade Funding Programme, set out in this proposal, embodies our core strategicobjectives: Strengthening the global Fairtrade system; Broadening the scope of Fairtrade; andDeepeningthe impact of Fairtrade.

These objectives are designed to enable Fairtrade to scale up and meet the key developmentchallenges that we face today. By doing so, Fairtrades contribution to achieving the MillenniumDevelopment Goals (MDGs) can be significantly strengthened, in particular our contributiontowards Developing a Global Partnership for Development (MDG 8). This proposal covers theperiod up to the end of 2013 only two years before the target date for achievement of the MDGs.We have used the MDG target date as the target for achieving our ambitions for Fairtrade, and weare committed and confident that Fairtrade can make a significant and lasting contribution in theglobal push for sustainable development.

By 2015 we aim to achieve a five-fold increase in the number of individual producers accessing thebenefits of Fairtrade, and a ten-fold increase in the global retail sales value of Fairtrade-certifiedproducts.

The direct linkage between our revised strategy and the MDGs gives us a unique opportunity toimprove the lives of millions of producers who have been disadvantaged by a global trading systemthat is widely recognized as being imbalanced against the interests of developing countries. Thisimbalance has severely constrained the ability of developing countries to achieve theirdevelopment objectives1.

Our strategic objectives will also enable us to have a greater impact in areas in which the need forFairtrade is particularly acute. Our focus on low income countries, conflict-affected regions, genderequality and climate change reflects our strategic intent to deepen Fairtrades development impact.

Of course, the environment in which we operate is also one that has been, and will continue to be,affected by the global economic downturn. Thus far, Fairtrade sales have held up well in the midstof the economic turmoil. We believe that demand for Fairtrade reflects disillusion with the type ofbusiness practice that has, at least in part, taken the global economy into crisis. Although notdesigned with the current financial crisis in mind, our strategic objectives provide the idealresponse in the prevailing economic climate, as can be seen in the three activity areas in which weseek to generate change:

1. Managing change globally;2. Enabling change in markets; and

3. Enabling change for producers.

Each activity area contains both new and existing functions with which we seek to achieve ourstrategic objectives listed above and transform Fairtrade into a truly global movement for change(MDG 8).

To do so we must enhance our communication capabilities so that the Fairtrade message reachesmore people across the globe, encouraging them to adopt a Fairtrade lifestyle made possible by

1E.g. Zedillo et al (2005) Trade for Development: Achieving the Millennium Development Goals


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the increased availability of a wider product range. We must extend the link between producersand consumers that is at the heart of our mission to enable Fairtrade to become a globalcommunity with which people identify. Generation of this global grassroots support is the key totaking Fairtrade to the scale needed to make meaningful and significant change in the way inwhich international trade is conducted.

Achieving our ambitions will require significant up-front investment. As the level of investment fromof the beginning of Phase II is unclear we have prepared three funding scenarios, outlined in

Section 7 below. The low case scenario represents the minimum achievements we expect by2013 and is represented by the milestones and targets in Annex 2 of this proposal. Based on ourlow case funding scenario, by 2013 we aim to:

- Double the number of individual producers benefiting from Fairtrade- Substantially reduce the costs producers face for engaging with Fairtrade- Achieve a more than three-fold increase in the value of the Fairtrade Premium received by

producers- Build the capacities of Producer Networks so that all producers have a louder voice- Extend Fairtrade to more producers in priority areas including low income countries and

conflict-affected regions- Open up new products and market sectors to Fairtrade-certification- Open up new markets in developed and developing countries for Fairtrade-certified

products- Facilitate access to appropriate and affordable financial services for producers- Improve recognition in and trust of the Fairtrade Mark- Achieve a more than three-fold increase in the value of global Fairtrade retail sales to 9.8

billion

The high case scenario matches the level of ambition we presented at the 6thDonor CoordinationMeeting in September 2009. These targets remain those to which we aspire.

One of the strongest messages to emerge from out Strategic Review was the fact that we cannotachieve our targets in isolation. Our work necessitates the development and strengthening ofpartnerships. This focus comes out strongly in many of the Annexes, for example strengtheningour producer support structure (Annex 4), broadening the scope of Fairtrade to include newproducts and new markets (Annexes 8 and 9) and deepening the impact of Fairtrade in low incomecountries (Annex 15), but is also part of our ongoing work in many other areas. We will prioritizepartnerships in strengthening and extending existing functions and in developing new functionsthat came out of the Strategic Review.

Although our timeline for achieving our ambitions for Fairtrade coincide with the MDG target date of2015, the targets listed in Annex 2 illustrate the minimum progress we aim to make by 2013 basedon the low case funding scenario which is detailed in Section 7. The requested donor investmentin this scenario is 22.2 million over four years. This level of investment is the minimum weanticipate for Phase II. However, even an investment of this size will constitute a substantialcontribution to achieving the MDGs and we are confident that Fairtrade can live up to, and evenexceed, donor expectations in this regard. Coordinated donor support for such a high profile

development initiative is consistent with the principles of both the Paris Declaration on AidEffectiveness and the Accra Agenda for Action (AAA). Additionally, the consumer aspects ofFairtrade make it one of the most visible approaches to development, and one with whichconsumers across the world can easily identify. This proposal, therefore, presents a uniqueopportunity to unite a streamlined global Fairtrade system; a coordinated multi-donor commitment;and an emerging civic consciousness in both developed and developing countries to create theglobal movement for changethat we strive to become.


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1. Development Context: Fairtrade and the Millennium Development Goals

The United Nations Millennium Declaration that was adopted in 2000 commits its signatories toforging a new global partnership to reduce extreme poverty. The time-bound targets for achievingthis the Millennium Development Goals (MDGs) aim to stimulate development by improvingsocial and economic conditions in the world's poorest countries. The UNs 2008 interim MDGprogress report notes some significant areas of progress, especially against health- and education-related indicators. Yet the report also highlights several areas in which a strengthened

commitment is needed in order to advance more rapidly towards achieving the targets. Key areasof concern include poverty rates in sub-Saharan Africa, access to improved water and sanitation,childrens health and, in order to maximize the chances of the MDGs being achieved, the risk ofdeveloped countries not living up to their commitments on official development assistance2.

The Fairtrade Minimum Price guarantees the cost of sustainable production, while the FairtradePremium is used by producers and their communities to fund projects for social, business andenvironmental development. With its focus on development through empowerment, Fairtrade has acrucial role to play in both maintaining and accelerating progress towards achievement of theMDGs. Studies have confirmed the impact that Fairtrade can have in the reduction of poverty,including providing a key stimulus for the behavioural change necessary to escape from the cycleof poverty3.

Our work has significant impacts on all eight MDGs. Our focus on empowerment places decision-making on development with the producers themselves. In such cases, for example when aproducer group uses its Fairtrade Premium to build a school or a clinic, Fairtrade can have anindirect impact in the achievement of the MDGs. These impacts are discussed in Section 1.2.

Yet Fairtrade also has significant direct impacts in achieving the MDGs, in particular MDG 1; MDG2; MDG 7; and MDG 8 Developing a Global Partnership for Development. The latter is aparticular focus of our revised Strategic Model and builds on what the UNs 2008 progress reportindentified as the single most important success to date a global collective effort that isunsurpassed in 50 years of development experience.

1.1 Fairtrades direct impact on the Millennium Development Goals1.1.1 MDG 1: Eradication of Extreme Poverty and Hunger

According to the World Bank most poverty reduction strategies identify rural development as apriority sector4. With its focus on small scale producers and agricultural commodities, Fairtradehas an important role to play in the fight against rural poverty, and slowing the rural-urbanmigration that places tremendous strains on social, economic and environmental systems. TheFairtrade Minimum Price guarantees that the costs of sustainable production are met; the FairtradePremium enables investments in social, environmental or business-development projects; and,perhaps most importantly, the creation of sustainable trading relationships that enable producers inrural communities to access export markets and provide the predictability producers need to growtheir businesses sustainably. Fairtrade prioritizes the producer-focused partnerships to ensure theavailability of the services producers need (for example financial or technical services) to developsustainable businesses. Through its Business and Development standards the Fairtrade systemalso facilitates local ownership of the development agenda something that has often been

missing from previous rural poverty reduction strategies.

1.1.2 MDG 2: Achieve Universal Primary EducationFairtrade standards state that no child labour is allowed on Fairtrade farms and plantations, andemphasize the importance of ensuring that childrens household tasks do not interfere with their

2The Millennium Development Goals Report 2008, United Nations (http://www.un.org/millenniumgoals)

3Rueben, R (2008) The Impact of Fairtrade

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http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTPOVERTY/EXTPRS/0,,contentMDK:20177529~pagePK:148956~piPK:216618~theSitePK:384201,00.html


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education. Additional income received through the Fairtrade Minimum Price can be used tosupport the costs of childrens schooling. Moreover, many Fairtrade-certified producerorganizations identify education as one of the key priorities in which they want to invest theirFairtrade Premium income. These investments complement public services and benefit entirecommunities, not just producers themselves.

1.1.3 MDG 7: Ensure Environmental SustainabilityFairtrade standards require producers to implement integrated crop management; recycle or

dispose of waste in an environmentally-friendly manner; protect soil from erosion; use energy-saving production methods; install drip irrigation wherever possible; and they may not usegenetically modified organisms (GMOs) or certain more harmful pesticides. Beyond this,producers are encouraged to work towards organic certification for which producers also receive aFairtrade Organic Differential (in addition to the Fairtrade Premium) for investment in furtherdevelopment. An evaluation of certification schemes carried out by the German Federal Ministryfor Economic Co-operation and Development (BMZ) found that certification has led toconsiderable savings in the field of water and energy consumption5, issues highlighted by UNDPas being of critical importance in its 2006 Human Development Report6. Case studies of Fairtrade-labelled coffee (of which around 85% is also certified organic) found that Fair Trade has improvedthe natural environment in participating communities. It has improved soil conservation and watermanagement practices as well as increased consciousness about the importance of conservationin general.7

1.1.4 MDG 8: Develop a Global Partnership for DevelopmentFairtrades multi-stakeholder approach relies on partnerships and co-operation with otherdevelopment actors in order to achieve its development objectives. It is the Development of aGlobal Partnership for Development, most explicitly between producers in developing countriesand consumers, but also between other key development partners ranging from technical andfinancial service providers to transnational companies, that enables more people in more places toaccess more of the benefits of Fairtrade.

In addition to requiring producers and workers to be organized in order to gain certification andrealize the benefits of Fairtrade, our revised Strategic Model emphasizes the importance ofpartnerships at all levels in order to achieve our development objectives.

With its aim of substantially scaling up Fairtrade to enable more producers to access its benefits,our revised Strategic Model recognizes that this can only be achieved by working together withother development actors both from the non-profit and the commercial sectors to developpartnerships and identify best-practice. Since our Strategic Review was completed we havestepped up our commitment to creating and facilitating the partnerships that producers need,including access to technical assistance or finance, export readiness, market information, large-scale commercial contracts, and advocacy. In some cases Fairtrade has acted to facilitate linkagesbetween relevant actors, for instance building collaborative networks in Malawi to explore differentways of facilitating technical, financial and business support for producers by linking the neededsupport to producers into identified Fairtrade market opportunities.

For producers, the requirements of Fairtrade certification enable them to form social and

professional networks through which they can deal more confidently with local and nationalgovernments, business partners, banks, development agencies or technical service providers. Weare prioritising partnerships in all areas of our work, developing the relationships needed to dealmore effectively with the major development challenges like climate change and gender equality,and bring our work to those most in need of Fairtrade like producers in low income countries andconflict-affected regions. But the most important partnership is that which is at the heart of ourMission: a partnership between producers, traders and consumers, brought together by the

5BMZ, Introduction of Voluntary Social and Ecological Standards in Developing Countries, 2008

6UNDP, Human Development Report 2006, Beyond scarcity: Power, poverty and the global water crisis

7Murray, D. et al.: One Cup at a Time. Poverty Alleviation and Fair Trade Coffee in Latin America, 2003


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2. The Evolution of Fairtrade Towards a Global Movement for Change

The origins of the Fairtrade system lie in the grassroots initiatives which were started in severalcountries in the 1960s and worked for greater justice in North-South trade relations. Theseinitiatives sold products from small-scale producers in the South at prices that would allow them adecent living. Subsequently, these developed into world shops and Fair Trade shops, specialistretail outlets offering consumers a fair alternative. Fairtrade began as an attempt to expand FairTrade out of its alternative niche into the professional mainstream retail market. Following the Max

Havelaar label, launched in the Netherlands in 1989, similar non-profit organizations underdifferent names were established in other countries in Europe and North America.

In the beginning there was little cooperation or coordination between the national labellingorganizations. Each one had its own label and its own contacts with Southern producers, whichwere supported and monitored by individual national initiatives (NIs). In view of their commonvision and goals and to better coordinate and streamline their work in the South, a process ofinformation exchange and cooperation began, which culminated in 1997 with the creation ofFairtrade Labelling Organizations (FLO) International as the worldwide association of all NIs.Subsequently, three regional Fairtrade Producer Networks (Asia, Latin America and Africa) wereintroduced to the Fairtrade system, and in 2008 were formally incorporated into the FLOGovernance structure.

FLO International was established to coordinate the work of the NIs and to ensure that the threecore ideas of the label concept, i.e. global Fairtrade standards, producer certification and product-related trading rules (fixed minimum prices, regulations on advance payments, etc.) wereharmonized, and that compliance was inspected and certified all along the supply chain. In 2003,FLO International created a professional and independently managed company, FLO-CERTGmbH, to manage all aspects of the certification of producer organizations and the supply chain.FLO-CERT is ISO 65 accredited for Generic Standards for Small Producers Organizations, theGeneric Standards for Hired Labour Situations and FLO-CERTs Trade Certification Policies andfollows the ISO 65 norm in all certification operations.

After a review of its governance structure and adoption of a new constitution in November 2006, atwo year Strategic Review process was begun in recognition of the need for Fairtrade tounderstand where and how it can make the deepest development impact in constantly changingmarket conditions, and how the Fairtrade system needs to be adapted in order to make thatimpact. The process to arrive at a common, shared strategy and agreed Strategic Model throughwhich it could be delivered involved extensive consultations with all participants in the Fairtradesystem, and with as many external stakeholders as possible. This process culminated inDecember 2008 with the unanimous adoption of the revised Strategic Model for Fairtrade.

The headline of the Strategic Model was the need for us to scale up with integrity. To achieve,we need to strengthen our partnership with the donor community in Phase II of the StrategicFairtrade Funding Programme.


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3. Fairtrades Strategic Intent

The Strategic Review served to revalidate Fairtrades vision, mission and values, which guide us inpursuit of our goals. Fairtrades vision is of

a world in which all producers can enjoy secure and sustainablelivelihoods, fulfil their potential and decide on their future.

We believe that trade can be a fundamental driver of poverty reduction and greater sustainabledevelopment, but only if it is managed for that purpose, with greater equity and transparency thanis currently the norm. We believe that people can overcome disadvantage and marginalization ifthey are empowered to take more control over their work and their lives, if they are betterorganized, resourced and supported, and can secure access to mainstream markets under fairtrading conditions.

We also believe that people and institutions in the developed world are supportive of trading in thisway when they understand the needs of producers and the opportunities that Fairtrade offers tochange and improve their situation. Our work is driven by informed consumer choices, whichprovides crucial support for wider campaigning to reform international trade rules and create afairer economic system.

Our mission therefore is

to connect disadvantaged producers and consumers, promote fairertrading conditions and empower producers to combat poverty,strengthen their position and take more control over their lives.

Our vision and mission are reflected in the values by which we work as a movement so that weourselves set an example for the changes we seek in others. Therefore we will work collaborativelyand seek to empower those who wish to be partners in our mission. Trust is a crucial factor in ourwork and we will be mindful of our responsibilities to those who place their trust in us, embracingtransparency and stakeholder participation as important ways of being accountable for our work.

Fairtrades strategic intent is now clear, as are the ways in which Fairtrade can meet its strategicgoals, which are detailed in the next section. In short, we will do this by:

- Creating an efficient and effective environment to connect producers & consumers, withina streamlined global system that is part of the civil societies in which it operates andvalues and respects the diversity of its stakeholders;

- Designing and implementing an operating model that prioritizes Fairtrades role ofenabling development via producer empowerment;

- Scaling-up our business and our principles to achieve mainstream market penetration andstrengthen Fairtrades capacity to support marginalized producers and their communities;and

- Transforming Fairtrade into a global social enterprise with grass-roots social support inwhich consumers and producers are social as well as economic players. We aspire to be

a global movement for change, deriving our authority from our ownership andgovernance structures.

The adoption of the revised Strategic Model for Fairtrade demonstrated the level of commitment byall FLO members to developing the streamlined global system needed for Fairtrade to go to scaleand increase its impact on producers. Throughout the Fairtrade system we share common goals ofdevelopment through producer empowerment a principle that is reflected in greater producerownership of both their own development agendas, and also the development of the Fairtrademovement.


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This focus is demonstrated in our Empowerment Model, a revised approach to producer-facingactivities, including strategy and policy, standard setting, producer services and certification. Stillunder development, this approach emphasizes the interdependencies in producer-facing activitiesand the need for internal coherence and coordination linking clearly to our revised StrategicModel.

We have already achieved considerable progress in mainstream market penetration, both throughrecognition of the Fairtrade Mark and through commitments gained from major market players,

including transnational companies. The resulting sales volumes have obvious impacts onproducers, but also in the crucial area of consumer support for Fairtrade. It is this support thatprovides the link between producers and consumers that is explicitly recognized in our Mission,and that will enable Fairtrade to achieve its aim of goal of becoming a global movement for changein which both producers and consumers set an example of how trade that is based on mutualrespect and dignity can be conducted for the benefit of all.

Our immediate-term priorities are

- Revise our standards and certification systems to ensure they are aligned with theempowerment and development goals of Fairtrade, and can adapt to the needs ofindividual producers rather than imposing a model on them.

- Make producer support a more integral part of the Fairtrade system and devolve

operations to the South so that they are more responsive to the needs of producers andmore accountable to them.

- Support the Producer Networks to ensure they have a clearer role and take on greaterresponsibility within the Fairtrade system.

- Re-organize our market-facing operations so that we operate more as a single globalsystem and can better leverage fundamental change in business commitment andadoption of Fairtrade principles.

- Develop Fairtrades capacity to support marginalized producers and their communities byfurther increasing consumer demand for Fairtrade in mainstream consumer markets.

- Extend the scope of Fairtrade to new product areas in a carefully-managed way thatensures we are not growing one part of the market at the expense of another and thatconsiders development impact, reputational risk and the best use of resources.

- Manage and deliver change from the centre by reorganizing and strengthening our coreactivities and working more strategically within product categories and in producercountries and regions.

Our Strategic Model Implementation Plan sets out how we will achieve this.

- A clear policy framework for Fairtrade- A new Fairtrade Standard framework- A Producer Self-Assessment system- Increased capacity of Producer Networks- Developing new markets for Fairtrade products- A Global Product Management facility- A Global Account Management facility-

Enhanced brand communication- A new Information Management System for Fairtrade- A robust monitoring and impact assessment structure- Revised Governance and Financial Models for Fairtrade

Our strategic intent is outlined in more detail in Annex 19 Making the Difference: a short Summaryof Fairtrade Labellings Strategic Review (2007/2008). The implementation of our revised StrategicModel is discussed in detail in the next section.


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4. Implementing Fairtrades Strategy: Goal, Purpose and Outputs

The Strategic Review did not fundamentally alter how or with whom Fairtrade works. It did,however, identify the need for us to be simpler to engage with for those in most need of Fairtrade,more responsive to the needs of individual producers and to develop partnerships and work moreclosely with other stakeholders to achieve more value for our target group disadvantagedproducers.

With this proposal we are seeking strategic funding to work towards the goal that links directly toour vision:

Fairtrade is a global movement for change (MDG8) thatcontributes to making trade fair, enabling producers to

enjoy sustainable livelihoods

Fairtrade has a crucial role to play in discussions and debates on international trade anddevelopment. Through the strengthened institutional capacities and partnerships that the StrategicFairtrade Funding Programme will facilitate, we aim to mainstream the principles and practices ofFairtrade into international trade and development discourses. Alongside this we aim to build onthe existing grassroots support to stimulate the demand for both Fairtrade products and fairertrading practices.

The purpose of Fairtrades Strategic Funding Programme, which links directly to our mission, is toensure that:

Disadvantaged producers have a strengthened connection toconsumers, improved market access and are empowered to

combat poverty (MDG1)

In recent years Fairtrade has experienced consistent growth in both volumes and impact. In itsmore developed markets, for instance in the United Kingdom, where recognition of the FairtradeCertification Mark has reached 70%8, Fairtrade products now form part of the consumermainstream. The commitment of transnational companies to working with Fairtrade not onlybenefits the producers with whom they work but also enhances the profile of Fairtrade in consumermarkets (both in the Global North and South). Donor support has played a crucial role in enablingFairtrade to move as far and as fast as it has done. With this level of support from producers,traders, consumers and donors; our developing partnerships to assists us; and our revised strategyto guide us; Fairtrade can become a global movement with which people identify themselves atmultiple levels.

The purpose will be achieved through three strategic objectives, to each of which are attachedstrategic areas of activity.

4.1 Strategic Objective 1: The global Fairtrade system is STRENGTHENED (streamlined,efficient, maximizing direct impact and leveraging wider changes)

Strategic Activity Area: Managing change globally

4.1.1 Revised Governance Model for FairtradeBy revising our Governance Model we aim to develop governance structures and processes thatare fit for future purpose in line with Fairtrades strategic vision of a streamlined global systemand a world-wide social movement for change. The Governance Model needs to be legitimate(ensuring representation of stakeholders in governance and accountability for those responsible formaking decisions) and effective (enabling good decisions to be made in a timely manner). The

8OC&C Survey for Fairtrade Foundation


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Governance Committee of the FLO e.V. Board has recently been reconstituted to lead this processand has been augmented by the addition of two independent members with proven experience ofgovernance issues.

We are currently developing the review process that will produce this model. It will be important toinvolve all stakeholders (including those not currently represented in the existing model) inagreeing objectives and analyzing differing options that could be pursued. We expect someheadline choices and quick wins to emerge by the end of 2009, with a clear process for

subsequent stages agreed for 2010. By the end of 2010 the new model will be fully defined withimplementation underway. It is vital that the pace of the process is appropriate for all keystakeholders, and that progress is secure with changes fully understood and well-supported.

4.1.2 Revised Financial ModelLooked at in terms of financial flows, the primary purpose of Fairtrade is to facilitate the flow offinance from the consumer to the Fairtrade-certified producer. To enable this to happen, the actorsin Fairtrade each play a role in enabling, verifying, promoting and supporting that basic financialflow. However, those actors necessarily incur costs in carrying out this work, which need to befinanced, and have various financial transactions between themselves as they support each otherswork.

Fairtrade has developed a revenue model whereby licensees organizations which put the

Fairtrade certification mark on the end product pay a licence fee to cover the relevant costs of theFairtrade system. This fee is collected by the appropriate licensing organization, currently inalmost all cases a national Labelling Initiative (LI); most of the licence fee is retained by the LI tocover their own (consumer- and business-facing) costs. However, a proportion is paid to FLO eVto cover its core costs and to finance the Producer Certification Fund, which FLO eV administers toenable financially weaker producer organizations to meet the costs of certification; LIs also pay asmall proportion of the license fee to FLO-CERT to help cover some of the non-recoverable costsof certification activities. Licence fee income comprised 63% of the total income to the Fairtradesystem in 2008.

Historically Fairtrade has not generated sufficient licence fee income to fully fund its activities,particularly in the start-up and development phases of new activities. It has therefore workedhand-in-hand with donors who have recognized the benefits to producers of co-financingFairtrades investments in new markets, new products, new geographical territories, new producersand new areas of strategy and policy development. Donor income made up 27% of the totalincome into the Fairtrade system in 2008. Certification fees to producers and traders make up thebulk of the remaining revenues of the Fairtrade system.

An outcome of the Strategic Review process was a Fairtrade-wide consensus that, while thecurrent financial model has considerable strengths:

- It is not sufficiently affordable, simple and efficient to deliver the ambitious growth in scalethat Fairtrade wishes to achieve

- It does not allocate financial resources in a way that maximizes return on investment tothe Fairtrade system

-

It does not easily allow full transparency of financial flows

- It does not appear to distribute the benefits of Fairtrade business in an equitable way.

We have therefore embarked on a collaborative Fairtrade-wide process to design a revisedfinancial model for the Fairtrade system which makes significant gains in:

- Credibility: a model that is transparent and accountable, delivering optimum benefit toproducer organizations

- Affordability: a model works in the most cost effective way possible


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- Simplicity: a model with the optimum number of financial flows between the actors in thesystem

- Efficiency: a model that enables the effective and efficient operation of a system- Scalability: a model that can deliver Fairtrades mission with ambition

The resulting model must of course achieve the buy-in of all parts of the Fairtrade system andexternal actors such as consumers and donors who contribute to the financing of that system. Itneeds to set the right financial incentives for all actors in the Fairtrade system, must incorporate

strategies (for example a donor fundraising strategy) relating to the coordinated development of allincome streams, and must be fit for purpose for at least the medium-term planning horizon.

Our initial work on the model has been to understand the often complex financial dynamics of thecurrent system, and to begin to explore possible alternative models. We will finalize the design ofthe revised model during 2010, for implementation in 2011. Major changes to the financial modelwill be inextricably linked to changes to the governance structure, so the processes to revise thesemodels are extremely closely linked.

4.1.3 Strategy & PolicyA Strategy and Policy Unit was established at FLO in 2008, even before the outcomes of theStrategic Review were finalized. The unit helps to create an environment in which agreedstrategies can be implemented, provides the FLO Board with analysis and research with which it

can take informed decisions, and maintains a structure through which Fairtrades progress can bemonitored. The Strategy and Policy Unit provides leadership for the global Fairtrade movement indeveloping the strategic framework through which we can achieve our development objectives.The initial priorities for the unit are:

- Working with different kind of producers and producer organizations: currently Fairtradeworks with cooperatives and workers in hired labour situations, along with nascent workwith producers engaged in contract production. Other forms of producer organizationcould benefit from engaging with Fairtrade;

- Workers rights: strengthening our hired labour model by developing stronger partnershipswith independent trade unions and others aiming to ensure workers rights, both atexisting points of intervention and further along the supply chain.

- Achieving fairer competition within the Fairtrade system: working to make market accessfairer, engaging with different supply chains and avoiding discrimination between differentproducer set-ups and certain traders / types of traders;

- Extending product scope: broadening the product range in response to market demand,thereby providing new opportunities to producers through the development of acomprehensive policy framework for new product development.

- Developing a new approach to economic criteria: to explore the possibilities of other formsof financial return rather than only minimum price and premium, also considering thatdifferent producer set ups may have different needs.

- Understanding the impact of climate change on Fairtrades work (and our work on climatechange): how are Fairtrade communities affected and how can Fairtrade assist withadaptive measures? What is the impact of Fairtrade on climate change and whatpossibilities exist to mitigate that impact?

These priorities show clearly how important the unit is to Fairtrade. For instance, some of thedevelopment work on new products and product areas is being led by Fairtrade LabellingInitiatives, but the Strategy and Policy Unit enables this to be done in a coherent manner. Thestrategic work of the unit thus informs the standard and price setting processes, rather than thestandard processes informing strategy development as was the case in the past.

Advocacy is another key function of the Strategy and Policy Unit. The unit represents FLO at theFair Trade Advocacy Office in Brussels where it works in close co-operation with other importantplayers in Fair Trade, including the European Commission and the World Fair Trade Organization.


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In this way the work of the unit extends its impacts beyond the strategies of Fairtrade to the work ofother partners in ethical trade. Cooperating and linking up with other organizations to amplify thevoice of small producers in the North is important, as well as seeking contact with criticalconsumers and grass roots groups on whose support the growth of Fairtrade depends. ProducerNetworks also play an important advocacy role in their respective regions, a function that willincrease during the period covered by the proposal.

4.1.4 Enhanced brand communication

Public support and commitment has been the driving force behind the growth of Fairtrade. Thiscommitment is built on the connection between consumer and producer a connection developedthrough many campaigns and communications activities across the Fairtrade market countriesover the past 15 years. Awareness of Fairtrade is coupled with an understanding of the partindividuals can play in achieving development objectives. This cornerstone of Fairtrades successto date is central to the plans to now take Fairtrade to scale to maximize its development impact.The importance of building public awareness and loyalty across existing and new Fairtrademarkets is critical to grow consumer demand and build the opportunities for producers to tradeunder Fairtrade terms and connect more directly with consumers. As the range of Fairtrade-certified products increases, effective communication plays a crucial role in the development of aFairtrade identity, through which producers, consumers and grassroots movements unite todevelop a dynamic global movement for change.

The introduction of a strong global brand for Fairtrade will improve our ability to communicateacross all the countries in which we operate. New clear positioning and visual identity will not onlystrengthen global awareness of Fairtrade, it will maximize the use of resources as communicationtools. Websites, campaign themes and materials can be developed and shared centrally, helpingto avoid duplication. The priorities for collaboration across the Fairtrade movement over the nextfive years are:

- The implementation of the first global brand for Fairtrade across all communications incurrent markets

- Consensus and clarity on messaging on Fairtrade- Central production and coordination of campaign themes and materials- Coordination on projects that communicate the impact of Fairtrade for farmers and

workers

-The development and implementation of a global media risk management strategy

4.1.5 Quality managementAlongside scaling up its work to enable more producers to benefit from engaging with Fairtrade, wehave recognized the need to address the quality of our work, both internally and externally.Fairtrade has had quality management capacities in place since early 2008, the focus of which are:

- Quality of the organization (policies, strategies, structures, location, management, staff)- Quality of the processes (information, networking, communication, documentation,

resources)- Quality of the services (recognising that our services can only be good if the other quality

levels are also good).

Additionally, FLO and the World Fair Trade Organization (WFTO) are implementing a joint projectthat aims to improve access of low-income, disadvantaged producers to Fair Trade marketsthrough the development of a Quality Management system for Fair Trade.

4.1.6 Information management systemThe collection, aggregation and interpretation of Fairtrade system-wide data has historically beencomplex, reflecting the evolution of the Fairtrade system. The provision of global access to areliable and consistent set of information is an essential step in the evolution towards a singleglobal system for Fairtrade. A coordinated Information Management System (IMS) will provide


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access to reliable, high quality system-wide data, enabling Fairtrade stakeholders to consistentlymonitor and improve its efficiency, performance and impact.

The project began in late 2008. An initial phase of agreeing high level data and systemrequirements has been followed by the design of a harmonized data model and set of datadefinitions, and an agreed data governance methodology. This will enable new and existing data tobe shared for global integration and distribution.

During the remainder of 2009 we will begin the employment of system-wide data governance andglobal definitions, whilst making improvements to the quality of existing data sources. In parallel wewill research and design the possible technological solutions for the Fairtrade IMS, with a phasedimplementation during 2010. Over the following two years we will be reviewing the business impactof the Fairtrade IMS and adding additional functionality where there is a clear business case. Wehave a vision of all Fairtrade actors and stakeholders from the producer to the consumer havingaccess to easy-to-use, relevant and reliable data on Fairtrade and its impact.

4.1.7 Monitoring, evaluation, impact assessmentAs Fairtrade seeks to assist producers who are disadvantaged by conventional trade to combatpoverty, strengthen their position and take more control over their lives, it is vital that we are able tounderstand to what extent this is being achieved. A robust impact assessment framework enableslearning to be used to improve the quality of our work and results to be communicated to producers

as well as consumers, the media and other stakeholders who are increasingly requesting thisinformation.

To address this need, we have adopted a three-pronged approach for an Impact Assessmentsystem:

1. A Monitoring & Evaluation (M&E) system of basic data on all certified producers. The M&Eprogramme is results-oriented and will concentrate on the assessment of short- andmedium- term outcomes.

2. Concentrated work on case studies using a common methodology. This will be done inclose co-operation with national Fairtrade Labelling Initiatives and other stakeholders inorder to meet specific needs identified by these groups.

3. Elaboration of a self-assessment system. This will enable producers to measure their ownprogress and to inform, producer services, strategy and policy, and standard-setting inparticular the Business and Development Standards.

Together with ISEAL partners FLO is developing the Code of Good Practice for Assessing theImpacts of Social and Environmental Standards Systems, which will add not only credibility to theFairtrade standard, but also provides insight in areas for improvement.

The development of the IMS described in Section 4.1.6 above will facilitate the collection,aggregation and integration of Fairtrade impact data.

4.2 Strategic Objective 2: The scope of Fairtrade is BROADENED (number of producers,

products & countries)

Strategic Activity Area: Enabling change in markets

Fairtrades Strategic Review highlighted ways in which our market-facing activities can bestrengthened. As Fairtrade has evolved, market-facing activities have historically been managedsolely by the national Labelling Initiatives. Clearly, this does not meet the needs of a global systemwhich engages with transnational companies. Thus, two new core activities were introduced thatwill operate across national boundaries Global Product Management and Global AccountManagement. Additionally, a model for international licensing and development of new markets for


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Fairtrade products complements the improvements in our market-facing activities. This will ensurethat we can operate more strategically, scale up our work in key markets (existing and newmarkets) and product categories, and leverage more change from industry by working as a singleglobal system. These new activities will improve the benefits we create for producers by workingwith productsand through business relationships.

4.2.1 Global Product Management (GPM)As well as being a centralized point of product information and expertise for Fairtrades Labelling

Initiatives and Fairtrade producers and traders, Global Product Management also representsFairtrades product expertise at a global level. Initially, GPM will focus on the products where wecan maximize short-term impact: coffee, cocoa, cotton, tea, bananas and sugar. An evaluation ofthe success of these strategies will inform the inclusion of more product areas in the future.

Global Product Management analyses and advises on product supply and demand, helping satisfypotential for growth and minimising the risk of bottlenecks. GPM also analyses and compares theconventional trade versus the Fairtrade market. These functions require a holistic understanding ofsupply chains and risk analysis both at production and market level. Combined, these activities willlead the development and implementation of global product strategies aiming to maximize marketgrowth and producer impact.

To be effective, GPM needs to maintain Fairtrade-external and Fairtrade-internal relationships.

Externally, the development of GPM strategies necessitates bringing together experts from variousfields, including producers, traders, and market experts. Internally, GPM works closely withFairtrade Labelling Initiatives on product sales strategy, the Producer Services and Relations Unitat FLO to ensure two-way communication with producer groups, the FLO Standards Unit to provideproduct expertise in the standards setting process, and with FLO-CERT to ensure supply chaincertification.

4.2.2 Global Account Management (GAM)To ensure Fairtrade seizes the major cross-border opportunities, and to achieve more productiveand valuable relationships with companies operating in multiple markets, it is recognized that botha collective steering approach and improved coordination of business-facing activities acrossFairtrade are needed. The new function of Global Account Management aims to fulfil this need.

Global Account Management (GAM) will ensure a co-ordinated approach in the market to businesspartners who are critical to realising our strategic objectives for the development of Fairtrade. Inparticular, IAM will be a vital tool in developing the long-term trading relationships producers needin order to build sustainable businesses.

The key aim of GAM is to leverage greater industry commitment through supporting businesspartners. Previously, our engagement with businesses that work with many products or whichoperate in several national markets has been fragmented, which limits the service we can offer andour ability to leverage change. International Account Management enables businesses to have asingle point of contact within Fairtrade.

Operationally, GAM will set strategies for approaching market players (based on overall Fairtrade

product/category strategies). To do this it will be necessary to create deep understanding of theneeds of key market players by building close and sustainable relationships with them. Closerrelationships will enable Fairtrade to customize its services for key market partners and, in return,act as a motivation for them to step up their commitment to the Fairtrade mission.

In 2009 we are piloting the GAM design and approach with eight large international licensees. As2009 continues we will implement the recommendations from the pilot findings to create thecomplete GAM function through 2010. In particular we will build on lessons learnt from the pilot tocreate the proven and agreed solution.


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Recognising the importance of the pioneering actors that so often continue to innovate in drivingchange we are also focusing effort on ensuring sound relations with 100% Fairtrade businesses bypromoting and strengthening committed partnerships, best practice, and inter-connections acrossFairtrade. The new GAM functions will be lead by FLO.

4.2.3 Brand management (international licensing, certification mark management)In recent years, the demand for Fairtrade-certified products has experienced consistent growth.

Even with the onset of the global economic crisis, Fairtrade still achieved 22% growth in the valueof global retail sales in 2008. Nevertheless, to reach our ambitions we need to build further on thesuccess of Fairtrade in traditional markets while simultaneously creating new markets which areaccessible to an increased number of producers. The previous activities in this section (4.2.1 -4.2.2) make vital contributions both to growth in traditional markets for Fairtrade-certified goods,and the establishment of new markets. They allow us to support producers businesses in theirdomestic markets and facilitate trade between developing countries rather than just South toNorth trade.

Labelling Initiatives and the coalition of civil society organizations that are behind them have beeninstrumental in generating the support that exists for Fairtrade in many countries. The new market-facing activities will positively impact on the role of the Fairtrade Labelling Initiatives as we becomea more streamlined global system with less duplication. Labelling Initiatives will be able to offer

more efficient services to licensees and there will be clearer guidance on the use of theCertification Mark. At the same time, there remains a key role for grassroots initiatives within thisglobal system, including the many who are interested in bringing Fairtrade to new markets.Indeed, there is strong recognition within Fairtrade of the importance of facilitating the developmentof new Fairtrade markets through the licensing of the Certification Mark and supporting civil societygroups which seek to raise public awareness and support for Fairtrade (see Annex 9). Thisrecognition extends to both new Northern markets, for example Eastern Europe, and for Southernmarkets like India, Brazil and Kenya. In order to meet the needs of emerging Fairtrade markets weare adopting a three-fold approach:

1. International Licensing: FLOs International Business Unit will license companies for theuse of the Fairtrade Mark in markets beyond the territories currently allocated to LabellingInitiatives. Trade auditing will be conducted by FLO-CERT.

2. "Engagement with local organizations on a project basis": We have begun to engage withNGOs and/or civil society organizations in new markets by collaborating on selectedFairtrade projects, for example development of new Fairtrade products and/or prices,participation in trade fairs or conferences promoting Fairtrade and the exchange ofinformation on Fairtrade. Through these activities we are developing a workingrelationship between Fairtrade and civil society organizations in new markets.

3. Fairtrade Marketing Partnerships: Fairtrade Labelling South Africa signed the firstMarketing Partnership Agreement with FLO in April 2009. We expect this to be a usefulprecedent in strengthening relationships between Fairtrade and organizations wishing tomarket Fairtrade products in new markets. Marketing Partners will be responsible fordeveloping business and consumer awareness of Fairtrade and building links with civilsocieties in their countries.

Strategies for use of the Fairtrade Mark, arguably Fairtrades most valuable asset, complementthose of developing new markets:

1. Brand Positioning Strategy: Determining the positioning of Fairtrade based on its vision,mission and core values. This includes the use of the Fairtrade Mark as a corporateidentity and helps to define its various uses throughout the system.

2. Mark Use Strategy: Identifying the role of the Fairtrade Mark as a certification andrelationship tool, in particular identifying the guiding principles for its use as a certification


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mark on products and as a promotional tool (campaigner, business-to-business, business-to-consumer).

3. Trademark Protection: Monitoring of Fairtrade Mark use and protection through itsregistration as a trademark in relevant countries. In addition, we are developing a strategyto test our ability to register the term "Fairtrade" as a trademark. If successful, thisprotection will provide more value to our stakeholders via a unique trade name, as well asproviding a stronger case for defending the use of the term by other parties.

4.3 Strategic Objective 3: The impact of Fairtrade is DEEPENED (increased value for eachproducer from their involvement in Fairtrade)

Strategic Activity Area: Enabling change for producers

4.3.1 Flexibility in standards setting (simpler, faster & more responsive)While the underlying principles of Fairtrade standards need to be applied universally in a consistentmanner, a one size fits all approach is not responsive enough for a system as diverse asFairtrade. In addition to our Production Standards and Trade Standards, the Strategic Reviewintroduced the concept of Business and Development Standards as a way in which producers canown their development agendas. This will provide a basis for producers to set their own goals anddevelopment objectives (such as converting to organic production, diversifying their income orbroadening their export and marketing channels), including the milestones and indicators needed

to monitor progress. Business and Development Standards is a move away from a simple policingactivity to one which focuses on enabling development through empowerment.

Our revised certification system will, therefore, be based on:

- Production Standardsthat specify how the principles of sustainable production should beincorporated through continual improvement in employment and working conditions,health and safety, and environmental management systems.

- Trade Standards that underpin the promise that every purchase supports the efforts ofproducers to work towards a socially and environmentally sustainable livelihood.

- Business & Development Standards that provide a framework for producers to set theirown goals and development objectives. These may cover their production and business(such as converting to organic production, diversifying their income and broadening theirexport and marketing channels) as well as the capacity of their organizations and theirsocial role within their communities.

One important tool for simplifying standards is benchmarking standards for producers and traderswith the aim to find common ground with other standard systems. Benchmarking may lead toeasier compliance as producers are already complying with similar standards for other certificationschemes. This will enable us to streamline existing standards and the processes to set thestandards, as well as more easily adding components. This will lead to opportunities for joint auditsand joint recognition of certificates, thereby reducing costs for producers. Benchmarking will alsoenable us to focus on the unique aspects of Fairtrade Standards which will speed up the standardsetting and standard review processes.

We will engage with Producer Networks (and their sub-networks and other members of theFairtrade system) for proposing new standards and explore the use of interactive technology forconsultations and data processing to speed up the processes and improve quality.

Pricing processes can also be simplified and accelerated by:

- Including easy price extensions from existing prices in pricing methodologies (forexample, how to extend a conventional product price to an organic product price);

- Including macro-economic data that inform pricing processes in the pricingmethodologies;


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- Exploring different ways in which generic Fairtrade Premium setting rules can bedeveloped;

- Assisting producers in the provision of data that will speed up pricing setting processes.

Our Monitoring and Evaluation functions complement certification processes by collectinginformation gained from our operations and by producers themselves to measure individualprogress and overall impact. More importantly, we can incorporate this learning into continualimprovement of our work at all levels.

This certification system is not a guarantee of perfection in ethical issues but a promise that everypurchase supports the efforts of producers to work towards a socially and environmentallysustainable livelihood.

4.3.2 Producer Services and RelationsBuilding on experience of various partnerships, Fairtrades producer services and relations will beexpanded and equipped with the capacity to develop and manage local partnerships and shareknowledge and expertise across the Fairtrade system. It will also work more strategically,formulating country and regional strategies that are aligned with both producer needs and ourforecasts of market trends. The linkages between producer services and relations and market-facing activities, particularly Global Product Management, will be strengthened.

Our Strategic Review strengthened our commitment to working with different types of producer set-ups. Doing so will enable us to reach more of those who most need the benefits of Fairtrade. Inparticular, engaging with other producer set-ups will enable Fairtrade to expand its work in low-income countries, many of which do not have substantial numbers of producers organized into co-operatives or working in hired labour situations.

While doing so we will need to understand the different context in which groups experiencehardship and ensure that we are providing the right sort of support to each and not supporting onegroup at the expense of another. We need to ensure that we complement and support the work ofother organizations seeking to improve labour rights, in particular the work of independent tradeunions.

4.3.3 CertificationIndependent third party certification against Fairtrade Standards has been crucial in ensuring thecredibility of the Fairtrade system. We recognize the importance of independent certification, andthis will be maintained in our revised Strategic Model alongside a commitment to simplify thecertification processes to enable producers to get more benefits from their engagement withFairtrade. Any reduction in the compliance criteria or simplification of certification processes needsto be balanced against potential increase in risks associated with the perceived dilution of ourcredibility. At the same time we recognise the need to reduce the burdens that producers face ingaining and maintaining their certified status.

We are already working with other certification schemes, for example Starbucks CAFE Practicesand Forest Stewardship Council, to establish commonalities and ways in which duplications can beavoided. These partnerships may lead to mutual recognition of some standards components or

dual certification. Both options have considerable benefits for producers.

The future role of FLO-CERT will be evaluated in the context of our revised Strategic Model,considering options of expanding its scope to cover other certification schemes.

4.3.4 Partnerships (e.g. technical assistance, access to finance, market information)One of the key messages emerging from the Strategic Review was the need to strengthen existingand develop new partnerships in order to meet the needs of a consistently expanding Fairtrademovement. Stronger partnerships are required on the producer side, for example in facilitatingaccess to financial services or technical assistance (see Annexes 13 and 14), and on the market


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side, for example in providing market information (see Global Product Management above) orproduct development.

On the producer side, our partnerships will be directed at addressing some of the main issuesfacing producers, in particular reducing costs associated with certification (for example throughdual certification) and accessing the financial services and technical assistance required to buildsustainable businesses. We will expand our work with trade unions to ensure workers on Fairtrade-certified facilities and conventional production facilities have better access to their rights. On the

market side, partnerships will focus on creating demand in existing and new markets, andsupplying accurate information along the supply chain. We will continue our ongoing partnershipswith other stakeholders in the development of new products and product areas.

We will also develop partnerships to address some of the cross-cutting development issues thathave so far not been tackled by Fairtrade like gender equality and climate change (see Annexes 17and 18), to extend the benefits of Fairtrade to those who need them most, like producers in lowincome countries and conflict-affected areas (see Annexes 15 and 16), and to ensure thatproducers are able to realize more benefit from their engagement with Fairtrade by improving thecost-benefit ratio of Fairtrade, or by accessing affordable finance or technical assistance (seeAnnexes 13 and 14). Our work on impact assessment will also require partnering with otherorganizations and academic institutes (see Annex 6).

While developing our partnerships approach we are conscious of the need for strong links betweenthe development of strategic partnerships and their operational implementation. Two new postshave been created within FLO to ensure that both aspects of partnerships are managed efficiently.The Head of Strategic Relations and Partnerships will enable us to have a coherent structure andapproach to partnerships to match the ever increasing demands in this regard, ensuring clarity andconsistency of our work with strategic partners. The Partnerships Manager will be based in theProducer Services and Relations Unit, ensuring the efficient on-the-ground implementation ofpartnerships. The fact that these two positions are based in FLO does not imply that FLO will bethe lead implementing agency for all partnerships, rather is to ensure a coordinated approachacross the Fairtrade movement. As the capacity of Producer Networks increases they will take onmore operational responsibility for partnerships.

4.3.5 Stronger positioning of Fairtrade vis--vis international trade & development(communication, networks)

Alongside the development of strategic partnerships we recognize the need for Fairtrade to featuremore prominently in debates and discourses on international trade and development. Thestrengthening of our Producer Networks is a critical factor in ensuring that producers voices areheard in these debates. A stronger and more influential position in this regard is vital for Fairtradeto become a global movement for change which contributes significantly to the global partnershipfor development (MDG 8). To achieve this we adopt several approaches: development andpublication of position papers on major issues concerning sustainable trade and development;development of strategy papers on our relationships with other certification and labelling schemes;development of a global advocacy strategy; and, developing and managing relationships with otherorganizations.

With these approaches we will provide more clear and coherent leadership within the fair andethical trade movement while simultaneously being able to make a more significant and influentialcontribution to international debates and policy formulation on sustainable trade and development.


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5. Fairtrades Strategic Funding: A Co-ordinated ApproachWith its programmatic approach and prioritization of partnerships to harmonize procedures,monitor progress and review strategies, Fairtrades Strategic Funding Programme provides anopportunity for donors to support a high profile development activity that is consistent with theprinciples of both the Paris Declaration on Aid Effectiveness and the Accra Agenda for Action(AAA). Multi-donor support for Fairtrades Strategic Funding Programme will make a significantcontribution filling the identified gaps in delivering on MDG8, in particular to accelerate progressfor aid alignment, harmonization, management for results and mutual accountability.9

The Accra Agenda for Action begins: We are committed to eradicating poverty and promotingpeace and prosperity by building stronger, more effective partnerships that enable developingcountries to realize their development goals. We believe that Fairtrade, with its growing anddeepening network of partnerships, has a vital role to play in helping donors to meet thiscommitment. Fairtrades contribution to the MDGs, described briefly in section 1 above,demonstrates a shared commitment with the AAA which states that democracy, economic growth,social progress, and care for the environment are the prime engines of development in allcountries. With its emphasis on development through empowerment, decision-making throughdemocratic processes (e.g. the joint bodies), building sustainable trading relationships, communitydevelopment (e.g. social projects funded through the Fairtrade Premium) and environmentalprotection (enshrined in Fairtrade Standards), Fairtrade clearly demonstrates wide-reachingdevelopment potential that is consistent with donor strategies.

The AAA identifies three major challenges to accelerate progress on aid effectiveness:

- Country ownership: The need for local ownership of the development agenda, ashighlighted in the AAA, has also been explicitly recognized in Fairtrades revised StrategicModel. In addition to Fairtrades overall emphasis on development through empowerment,the new Business and Development Standards will provide a direct link between the basisof the Fairtrade system (standards) and the development agendas of Fairtrade-certifiedproducers.

- Building more effective and inclusive partnerships: Fairtrade prioritizes both enteringinto and facilitating partnerships. Our approach to partnerships aims to bring the more ofFairtrades benefits to more producers of more products in more locations. Ourpartnerships cover several areas including:

- With other certification schemes to reduce costs for producers or develop new productareas

- With financial service providers to increase producer access to credit- With trade organizations and technical service providers to increase producers export

readiness- With field-based agencies to improve the quality of producer support- With related movements and advocacy groups to make the case for trade justice- With trade unions to improve workers access to rights- With product groups to unblock supply chain bottlenecks- With academic institutions to assess the impact of Fairtrade-

With development agencies to address key issues like climate change and Fairtrade inconflict-affected regions

- Supporting Fairtrades Strategic Funding Programme can, thus, make a major contributionto AAA commitments to reduce the costly fragmentation of aid by minimisingduplications; increase aids value for moneyby facilitating corporate social responsibility;work with all development actorsby engaging in and facilitating strategic partnerships;

9Implementation gaps in relation to commitments for strengthening global partnerships for development and required policy responses,

http://www.un.org/millenniumgoals/


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and deepen the engagement with civil society organizations by our work with relatedmovements and advocacy bodies.

- Achieving development results: Deepening the impact of Fairtrade is at the heart of ourrevised Strategic Model. As a first step, our revised Strategic Model is designed to makethe Fairtrade system more efficient and streamlined, thereby enabling us to deliver morecost-effective results to producers.

A more efficient system brings with it renewed responsibilities. Our accountability stems from ourmulti-stakeholder approach which necessitates participation and transparency. Implementing ourStrategic Model will be challenging: obtaining consensus amongst our stakeholders on theinnovative approaches we are undertaking is not a task we take lightly. Yet we also do notunderestimate the progress which was made during our Strategic Review a two-year process ofconsultation and negotiation which culminated in the unanimous adoption of a robust andcomprehensive Strategic Model and collective ambition. Our task now is to take this wide-reachingcommitment to the next level, enabling Fairtrade to live up to its strategic intent and truly make thedifferencefor producers.

We also have a commitment to responsiveness and learning. Our certification processes arecomplemented by monitoring and evaluation systems, and ongoing assessment of impact. Withthis approach we incorporate the learning gained into continual improvement of our work at all

levels.


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6. Constraints and risks

Although we enter the implementation of our revised Strategic Model with the confidence gainedfrom a comprehensive and consultative Strategic Review process; a strengthened team committedto leading the pursuit of our development objectives; major commitments from global brands; andever more producers wanting to engage with Fairtrade, we are also aware of many of the factorsthat could constrain our work and the external risks that we may have to face. Continuing toachieve the levels of collaboration within Fairtrade; cooperation across the fair and ethical trade

sector; maintaining consumer and corporate support; the potential for limitations on our operationsdue to regulation; and the uncertain impacts of the global economic crisis are some of the majorconstraints and risks we have identified.

The multi-stakeholder environment in which we operate provides many challenges in gainingconsensus for the development of Fairtrade. Clearly, this can place constraints on progress, but wedo not underestimate the level of achievement in getting unanimous adoption of our StrategicModel. This collaborative approach during which we sought consensus at every stage provides anideal precedent for the ways in which we can work together in the future. Similarly, implementationof complex projects involving various parts of the Fairtrade movement has given us valuableexperience and understanding. Without the level of trust and understanding that we have gained inthe movement we would not have been able to present a proposal as far-reaching as this one. Theneed for consensus also acts as a built-in safeguard against overextending Fairtrade.

While external risks may be more difficult to mitigate, the unprecedented levels of collaboration andwide-ranging expertise in the Fairtrade movement enable us to better anticipate major risks andmanage them effectively. For example, a movement-wide consultation on the global economiccrisis was held in early 2009 enabling us to pool expertise. Our developing strategy and policycapabilities will further enhance our ability to anticipate and manage major external threats.Evidence of the value of Fairtrade can be seen in our developing relationships with corporateenterprises and major licensing agreements that we have secured in the midst of the globaleconomic crisis. Our challenge is to build on this momentum.

At the same time we must ensure that consumer support matches the growth in Fairtrade. Werecognize the risk that growth could lead Fairtrade to be perceived differently and for this to impacton consumer support. Our Mission of connecting producers with consumers through the FairtradeMark is our most important mitigation strategy for this risk. We must ensure that ourcommunications can effectively translate greater producer ownership of the development agendaso that consumers can be assured that every Fairtrade purchase does indeed make a difference.

A comprehensive risk management framework is annexed at Annex 3 of this proposal.

7. Budget

The programme budget is set out at Annex 1 of the proposal. We have presented the budget inthree funding scenarios, reflecting the range of possible options between a business as usualincremental growth scenario (low case) to a step change high case scenario around which weare framing our ambitions. At the Donor Coordination Meeting held at Interlaken in September

2009 it was established that sufficient funding for the low case scenario would be available from2010 onwards. Donors also committed to assisting Fairtrade in identifying and approaching newdonors who can help us to achieve the funding needed for our more ambitious targets as Phase IIprogresses.

There are some important principles underlying the preparation of the budget:

- The budget is based on the current financial model of the Fairtrade system. Significantchanges to the model arising from the work described in section 4.1 above may impact


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the revenue flows, even if the fundamental principle of generating revenue through alicence fee does not change.

- Whilst they are described in the budget as Fairtrade international leadership &coordination (FLO eV), the activities accounted for in the expenditure section of thebudget may be delivered by any actor in the Fairtrade system, and in many cases via anexternal partner under appropriate management control. Where activities are deliveredmay well change over time, as the ongoing work to define the roles of the various actors inthe Fairtrade system and the overall governance of the system reaches its conclusions.

Hence some Producer-facing activities, or some advocacy work currently withinStrategy & policy, may eventually be delivered by Producer Networks (in addition to thecapacity-building budget line, which we have explicitly shown within the summarybudget). However, as the coordinating body for the Fairtrade system, FLO eV wouldretain the accountability for the funds entrusted to it for those activities. This principle isparticularly pertinent to the first half of the programme, particularly in the event that mid orhigh case funding is available: we recognize that it is neither practical nor desirable forFLO eV to double in size in one year. We will make optimum use of capacities alreadywithin Fairtrade for example the policy teams within some of the larger LIs to help usdeliver the programme activities and outputs described elsewhere in the proposal andannexes. This collaboration will contribute to the goal of the Strategic Model to create asingle global system.

- By way of an exception, we have explicitly shown the Strategic Fairtrade Funding

Programme contribution to LI market-facing activities (described below) as amemorandum item, as this forms only a part of the total funding for such activities, and weare not yet in a position to produce a consolidated four-year Fairtrade system budget.

- We have structured the programme budget as flexibly as possible. In particular, to theextent possible, we have avoided creating additional fixed costs, such as salaries,preferring instead to allow a flexible response to available funds and priorities. We willthus be able to respond to variable funding scenarios, adding additional units of activityas and when funds become available. Additional funding can therefore be equated to, forexample: additional low income countries or conflict-affected areas in which we are able towork; the development of a greater number and variety of new products; a greater depthand breadth to strategy, policy, research and partnership-building in areas such as ourresponse to climate change; or the opening up of more new markets for Fairtrade-certifiedproducts.

This following section explains the key figures and the main assumptions embedded in the threebudget scenarios, alongside the headline outputs they will deliver.

Low case- Total programme funding requirement (0.1): 22.2m. This figure includes both the FLO

eV funding requirement, and the funding for specific market-facing activities which isexplained further below. This envisages some increases in support from those alreadycommitted to the programme, and the attraction of a small number of new donors to jointhe consortium.

- Income membership fees (1.1.1): 40.5m over the 4-year period, representing 60% ofFLO eVs income requirements. The proportion of Fairtrade generated (ie non-donor)

income over the funding period rises from 50% in 2010 to just over 79% by 2013, in linewith a strategy to decrease reliance on donor income over time. With this level ofinvestment, global Fairtrade retail sales figures will not grow as significantly as in the midand high cases, and we have also made relatively pessimistic assumptions about theimpact of the global economic downturn. Membership fees are calculated in line with theprojections of global Fairtrade retail sales f igures, captured in our indicators, incorporatingassumptions on the evolution of licence fees over time and on the proportion of LI licenceincome which is paid to FLO eV as membership fees.

- Income from donors (1.1.3): 23.9m, of which 19.0m is the Strategic Fairtrade FundingProgramme contribution to FLO eV. We have assumed in all scenarios that all new


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donors to FLO eV join the Strategic Fairtrade Funding Programme. The Other fundingbudget line (1.1.3.2) represents all amounts currently already committed by donors for2010-13 or which are highly probable.

- LI market-facing activities (1.2): 3.3m. We have assumed in this scenario that no othernational donors will choose to follow the route currently being explored between DFID,FLO eV and the Fairtrade Foundation whereby part of the donor contribution to theStrategic Fairtrade Funding Programme is earmarked for activities to build the market forFairtrade-certified products, either in the donor country, or potentially in new markets in

line with the Fairtrade market development strategy. The 3.3m in the low case scenarioassumes no additional donors other than the arrangement committed to by DFID.

- Expenditure (2): 63.9m over the four-year funding period. This assumes some growth inyear one and only modest growth thereafter.

- Contribution to FLO eV reserves: 3.1m, paid for by membership contributions. FLO eVcurrently has a very low level of reserves; the contributions aim in all three scenarios tocreate free reserves of: low case 2 months expenditure, mid case 2.5 monthsexpenditure, and high case 3 months expenditure.

- The outputs from a low case scenario represent a scaling back of what can be achievedin the other cases, since the total investment (FLO eV expenditure and market-facingactivities) of the four-year period is 65% of the high case investment. In particular weenvisage:- A doubling in the number of individual producers accessing the benefits of Fairtrade

(2.2m)- A trebling in the global retail sales value of Fairtrade-certified products (9.8bn)- A more than three-fold increase in the total value of Fairtrade Premium (110 million)

Mid case- Total programme funding requirement (0.1): 32.8m. This still envisages a significant

increase in support from those already committed to the programme, with the attraction ofa moderate number of new donors to join the consortium.

- Income membership fees (1.1.1): 47.8m over the 4-year period, representing 57% ofFLO eVs income requirements. The proportion of Fairtrade generated (ie non-donor)income over the funding rises from 41% in 2010 to 82% by 2013, as per the strategydescribed above. With an increased level of investment over the low case, globalFairtrade retail sales figures will grow more rapidly. We have held steady our assumptionsabout the evolution of licence fees and the proportion of LI licence income paid to FLO eVas membership fees. This means that the ratio of membership fee and donor income i

strategic fairtrade funding programme phase ii: 2010-2013

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