1. State of Sustainability Initiatives: Sustainability of supply chains and fair schemes
Promoting Responsible Value Chains and Sustainable Sourcing Through
Fair Trade
22 June, 2016
Brussels

2. Who we are
The SSI is a partnership that was launched out of the joint IISD-UNCTAD Sustainable Commodity Initiative (2003) which sought to mainstream sustainable commodity production and trade by leveraging the different and growing number of voluntary sustainability standards on the market and by promoting core fair trade principles.
Launched in 2008 the SSI is a collaborative effort funded by the State Secretariat for Economic Affairs (SECO) and led by the International Institute for Sustainable Development (IISD), the International Institute for Environment and Development (IIED) and the Finance Alliance for Sustainable Trade (FAST).
To facilitate efficient decision making for sustainability by providing timely, accurate and pertinent information on the performance of voluntary sustainability initiatives on international markets.
A voluntary sustainability initiative, or VSI, is any non-obligatory initiative explicitly designed to promote the objectives of sustainable development, including ecolabels, certification initiatives, standards, CSR programs, business to business initiatives, roundtables and other collaborative or multi-stakeholder initiatives.
One of the core principles motivating the SCI, was a recognition that, there were limits to what the market could do in this regard and therefore the need to gain a better understanding on why and where VSS’s were working to promote sustainable trade and where they needed to be complemented by public policy.

3. SSI Review
The SSI Review is an independent evidence-based report on the characteristics, performance and market trends related to sustainability initiatives.

4. Content
2. Sustainable market statistics and data
3. Social, Environmental & Economic criteria of VSS
4. Opportunities through Fairtrade certification
5. Overall challenges
6. Conclusion

5. Sustainable market statistics and data

6. 10 key commodity sectors in agriculture and forestry
Fair Trade { {
Commodities coverage
Bananas
Coffee
Cotton
Cocoa
10 key commodity sectors in agriculture and forestry
Tea
Sugar
Soy
Palm oil
Forestry
Biofuel

7. Standards coverage
16 standards operating in agriculture and forestry sectors
Founded in 1997, Fairtrade International is a member-based
initiative operating within the food and agriculture sector across
120 countries. The initiative coordinates Fairtrade labelling at the
international level. Fairtrade sets minimum pricing and premium
levels as part of its commitment to poverty reduction for developing
country producers.
The initiative operates business to consumer. A separate
certification company, FLO-CERT, inspects producers and traders to
ensure they comply with Fairtrade standards. Full re-assessment
for Fairtrade’s certificates is conducted every three years. Within
this three-year period, yearly surveillance audits and random field
checks are performed. All audits are conducted by third-party
auditors. The three supply chain traceability models of identity
preservation, segregation and mass balance models are applied to
all Fairtrade products to ensure accountability of compliance claims
in the marketplace. The initiative’s primary source of revenue is
from membership fees and grants.

8. Growth in sustainability market
Compliant production as percent of global production, 2008 & 2013/14
Source: SSI Review 2014
The average annual growth rate of standard-compliant production across all sectors reviewed was a stunning 41%, significantly outpacing the annual average growth of 2% in the corresponding conventional commodity markets.
Development of VSS compliant area worldwide, (Minimum)
Source: SSI Review 2014

9. Production vs. Sales
A definite lag between supply and demand exists across all of the sectors reviewed. In fact more than half of most standard-compliant product is NOT actually sold as standard compliant. The gap between demand and supply may lead to reduced incentives to make the transition to sustainable production over time.
Sustainable markets: Standard-compliant production vs. standard-compliant sales for 2012
Source: SSI Review 2014

10. Single vs. multisector standards
Single sector initiatives lead in production volume
Source: SSI Review 2014

11. Sustainable Markets Production Growth Rates 2008-2014
Cocoa
Coffee
Cotton

12. Geographic distribution
Concentration in More Developed Economies
Production for sustainable markets is concentrated in more advanced, export-oriented economies raising concerns about the effect of sustainability requirements on market access for less developed producers.

13. Board representation
Source: SSI Review 2014

14. Social, Environmental & Economic criteria of the VSS

15. Environmental criteria: Indicator and indices coverage
Page 77
Overall, economic criteria display the lowest degree of coverage
across the three pillars of sustainability. Virtually all initiatives would
say that this is not a reflection of a lack of concern for the economic
sustainability of producers, but rather is due to a widely held belief
that economic sustainability is fundamentally founded on free
market interaction. For those holding this view, the absence of
economic criteria might be considered an indicator of an initiative’s
commitment to promoting long-term economic sustainability.
Fairtrade is the only initiative with criteria covering all aspects
related to contractual transparency between buyers and sellers.
Although RSPO reports high coverage, the remaining initiatives
have no criteria covered by the SSI’s “written contracts between
buyers and sellers” index.
• Price premiums illustrate the second-lowest average
coverage across all 16 voluntary sustainability initiatives,
with only Fairtrade and UTZ covering this index, although the
requirements specified vary considerably. The minimum pricing
specified by Fairtrade is based on product type and location,
while UTZ allows for negotiation of the final premium between
buyer and seller. Although not considered a premium per se,
CmiA presents the producer with the potential of eventually
receiving a dividend, but only after a certain level of sales has
been achieved (International Finance Corporation, 2013).
Average coverage of SSI environmental indices by VSS
Source: SSI Review 2014

16. Social criteria: Indicator and indices coverage
Average coverage of SSI social Indices by VSS
Source: SSI Review 2014

17. Economic criteria: Indicator and indices coverage
Page 77
Overall, economic criteria display the lowest degree of coverage
across the three pillars of sustainability. Virtually all initiatives would
say that this is not a reflection of a lack of concern for the economic
sustainability of producers, but rather is due to a widely held belief
that economic sustainability is fundamentally founded on free
market interaction. For those holding this view, the absence of
economic criteria might be considered an indicator of an initiative’s
commitment to promoting long-term economic sustainability.
Fairtrade is the only initiative with criteria covering all aspects
related to contractual transparency between buyers and sellers.
Although RSPO reports high coverage, the remaining initiatives
have no criteria covered by the SSI’s “written contracts between
buyers and sellers” index.
• Price premiums illustrate the second-lowest average
coverage across all 16 voluntary sustainability initiatives,
with only Fairtrade and UTZ covering this index, although the
requirements specified vary considerably. The minimum pricing
specified by Fairtrade is based on product type and location,
while UTZ allows for negotiation of the final premium between
buyer and seller. Although not considered a premium per se,
CmiA presents the producer with the potential of eventually
receiving a dividend, but only after a certain level of sales has
been achieved (International Finance Corporation, 2013).
Average coverage of SSI economic Indices by VSS
Source: SSI Review 2014

18. Opportunities and challenges
One of the core principles motivating the SCI, was a recognition that, there were limits to what the market could do in this regard and therefore the need to gain a better understanding on why and where VSS’s were working to promote sustainable trade and where they needed to be complemented by public policy.

19. Opportunities Concentration on developing countries Governance
Fairtrade certification is only available for products sourced from developing countries.
Governance
Fairtrade is a leader in enabling equitable governance among developing country smallholders.
Smallholders
Additional exceptions for smallholder producers which further accommodates for smallholders by extending the certificate period from three years to six years for “small licensees”.
Contractual transparency
Fairtrade is the only initiative with criteria covering all aspects related to contractual transparency between buyers and sellers.
Price premiums
Price premiums illustrate the second-lowest average coverage across all 16 voluntary sustainability initiatives, with only Fairtrade and UTZ covering this index.

20. Challenges Mainstream Markets Building the market Facilitating access
Voluntary initiatives, whether Fairtrade or not, cannot be expected to overcome market imperfections—they can help the market in being more attentive to such imperfections but ultimately it will take government intervention and support to do so in a way which is in accordance with the objectives of sustainable development.
Building the market
Continuing need to build the market—and, especially allow for the existence of premiums/compensation for the adoption of more stringent practice (preferential tariffs/taxes and public procurement policies).
Facilitating access
Need to facilitate market access and inclusiveness (technical assistance to unorganized smallholder organizations (SCAN) and facilitation of access to finance for smallholders (FAST)).
Key areas for complementary intervention include:
Promoting better price transparency (by requiring price reporting along the supply chain—and establishing HST codes for certified products)
Supporting access to finance (by offering guarantees on certified loans to certified production
Offering targeted technical assistance to allow smaller producers to become organized and to implement sustainable practices so they can become certified (with any of a variety of credible VSS)
Public procurement requirements for certified production
Preferential tariffs and taxes for certified products
Information transparency
Need to improve information transparency—info on markets (SSI) and impacts (COSA).

21. Conclusion
The general trend towards market growth BUT market concentration in more developed economies.
Fair Trade's focus on marginalized communities is entirely pertinent and appropriate.
The problem is that Fairtrade doesn't meet the needs of the entire market and therefore there is a need to help other initiatives also reach more marginalized markets. 
Fair trade has the right priorities, but offers a limited vehicle for their implementation, policy makers need to be open to exploring other opportunities for promoting the "principles of fair trade" by leveraging other instruments as well.

22. Contact us Thank you! Any questions? www.iisd.org/ssi
Lead Researcher, Jason Potts: