Annual report 2014 Fairtrade Max Havelaar (Switzerland)

FAIRTRADE – BUILDING BRIDGES

Annual Report and Impact Report 2014 Max Havelaar Foundation (Switzerland)

contents FAIRTRADE IS A LONG-TERM PROCESS

3

A CHALLENGING CONTEXT

4

INVESTMENT IN THE FUTURE

5

FAIRTRADE’S IMPACT

6

OUR “THEORY OF CHANGE”

8

A LEARNING SYSTEM

9

COCOA – ONE PERSON’S INDULGENCE, ANOTHER’S LIVELIHOOD

10

EXPECTATIONS AND REALITIES

12

THE POWER OF THE CONSUMER

13

MORE FAIRTRADE ON THE SWISS MARKET

14

COMMODITY & MARKET DEVELOPMENT 2014

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ANNUAL ACCOUNTS AND FINANCIAL STATEMENT 2014

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On an equal footing

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1.5 million

farmers 9 OUT OF 10 and workers

in 74

countries

PEOPLE IN SWITZERLAND

RECOGNISE THE

FAIRTRADE

MAX HAVELAAR MARK

More than the only 2,200 different sustainability label where

Fairtrade

have equal rights

are available

producers

in the decision process 2

products

in Switzerland

FAIRTRADE IS A LONG-TERM PROCESS 2014 WAS A GOOD YEAR FOR FAIRTRADE MAX HAVELAAR – BUT IT WAS ALSO A YEAR OF CHALLENGES. The year began with the new Fairtrade Programs for three commodities: cocoa, cotton and sugar – a real milestone, as the programs enable the producers to sell higher volumes under Fairtrade’s favourable terms. Trading partners who are committed to the cause also benefit, as there is now greater scope for them to include Fairtrade ingredients in their products. What this means for consumers is that there is an ever-widening range of Fairtrade products to choose from, thus making it easier for them to actively participate in improving living conditions for people in Africa, Latin America and Asia simply through making certain day-to-day shopping and consumer choices. In this way, Fairtrade connects the consumers with the producers and sustainability with indulgence.

Sales in the first year of the Program Mark are encouraging, but there is still a great deal of potential!

Another major advance was made in autumn, when we launched Fairtrade gold on the Swiss market. With this move, we are sending a clear signal that alternatives are possible, even if these are still on a fairly small scale as yet. It is a significant step for our country, which is, after all, the hub of the international gold trade. Around the world there are over 100 million people who are dependent on artisanal mining. These miners work under dangerous conditions, and often receive only modest prices for their labours. There is therefore an urgent need for safe working conditions, fair market access and environmental protection. With the introduction of the Fairtrade Gold Mark, we are setting an important example of greater transparency in the precious metals trade.

Alongside the “golden” days, however, 2014 was also a year in which Fairtrade was discussed in a critical light on several occasions.

Fairtrade is a system which is constantly learning and developing, and constructive criticism from outside is stimulating continuous improvement. It is also worth reflecting on the expectations in respect of Fairtrade. Fairtrade is no panacea, but, rather, operates in a complex setting – one which is often steeped in poverty. Fairtrade is thus a long-term process, with the ultimate goal of empowering farming families and workers to improve their own living conditions on a sustainable basis.

We also show in this report how Fairtrade operates and how it is developing. What are the findings that have emerged from various impact studies? What have we achieved so far? And where do we see contradictions and challenges? We look forward to our dialogue with you.

Nadja Lang CEO of Max Havelaar Foundation (Switzerland)

Miges Baumann Bread for all, Chairman of Max Havelaar Foundation (Switzerland)

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A CHALLENGING CONTEXT FROM RICE FARMERS IN INDIA TO WORKERS ON KENYAN FLOWER FARMS AND SMALL-SCALE BANANA AND MANGO FARMERS IN ECUADOR: FAIRTRADE MAKES A DIFFERENCE TO ALL OF THESE. YET FAIRTRADE CERTIFICATION DOES NOT SOLVE ALL OF THE ECONOMIC, SOCIAL AND POLITICAL PROBLEMS IN THESE OFTEN DIFFICULT SETTINGS. SUSTAINABLE CHANGE TAKES TIME. Many small-scale farmers and workers in developing countries and emerging economies are living constantly on the poverty line, or, indeed, below it. They neither have promising prospects within agriculture, nor any realistic alternatives. Small-scale farmers suffer the effects of fluctuating commodity prices as well as, not infrequently, the effects of trade structures that shunt price pressures and risk onto the first and weakest link in the value chain. Increasing cost of living and climate change are also key issues, along with yield losses and structural problems such as the small cultivation areas and low levels of development in rural areas. This is the complex and often poverty-stricken context in which Fairtrade operates – with the aim of empowering producers on a long-term, sustainable basis through interventions based on organisational structure and trading standards.

HAVING AN IMPACT IS NOT A STATIC STATE, BUT AN ONGOING PROCESS AT A NUMBER OF LEVELS:

• Empowerment Strong producer organisations are the key to self-determined development. Fairtrade helps to nurture this through democratically organised cooperatives and workers’ organisations.

Joining forces with each other encourages the producers to share their knowledge internally whilst giving them a stronger presence externally.

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• Fair trading relationships Fairtrade provides access to markets on favourable terms and helps to establish long-term, partnership-oriented trade relationships. The Minimum Prices offer a safety net, while the supplementary Fairtrade Premium enables important investments to be made (see next page).

• Sustainable livelihoods and natural resources Fairtrade leads to improvements in production in terms of quality as well as productivity, and often also to greater value creation in the producer countries. The protection of natural resources, along with obtaining fairer working conditions and better health care are some of Fairtrade’s key areas of impact.

CHALLENGES ALONG THE ROAD TO DEVELOPMENT

In spite of its positive impact, Fairtrade cannot solve every problem, as economic pressures on the producer organisations do not simply melt away in the face of Fairtrade. Increases in efficiency and professionalism are required, and equality of opportunity remains an issue in many countries, in spite of demo­ cratic structures within the cooperatives. Moreover, climate change is presenting farmers with immense challenges. In order to be able to overcome these deeply rooted problems, political and economic measures must also be implemented.

INVESTMENT IN THE FUTURE THE FAIRTRADE PREMIUM IS A KEY INSTRUMENT WHICH ENABLES INVESTMENT TO TAKE PLACE AT A LOCAL LEVEL. DECISIONS ON WHICH AREAS TO INVEST IN ARE TAKEN AUTONOMOUSLY AND DEMOCRATICALLY BY THE PRODUCER ORGANISATIONS THEMSELVES. In addition to the selling price for their commodities and products, the producer organisations also receive a Fairtrade Premium.

This money goes towards projects which benefit the whole community. Small-scale farmers and workers make their own decisions, through a democratic process, on what projects should be implemented with the funds from the Premiums. This ownership is one of the primary success factors for the sustainability of such projects.

2012/2013 altogether 125 million US dollars were paid out to small-scale producer organisations and plantations around the world, over a period of twelve months. In Switzerland, sales of Fairtrade products generated some 7 million US dollars in Fairtrade Premiums, representing an 8.3 % increase over the previous year. The graphs below show that producer cooperatives invest the money primarily in the development of their businesses, while plantations often invest in education projects.

ALLOCATION OF PREMIUMS BY PRODUCER ORGANISATIONS (TOTAL: 106 MILLION US DOLLARS) Investment in producer organisations (48 % ) 24 % Human resources and administration

Services for farmers (41 % )

23 % Infrastructure of producer organisations

17 % Payments to farmers

1 % Training for staff and representatives of producer organisations

7 % Agricultural equipment and resources 5 % Various services to benefit farmers

Community services (9 % )

4 % Training in agricultural and business practices

2 % Schools and education

4 % Credit and financing

2 % Health care

2 % Implementation of good agricultural practices

2 % Social projects (e.g. disaster aid, recreational activities)

1 % Education and training for farmers and their families 1 % Health care for farmers and their families

1 % Environment 1 % Community infrastructure 1 % Various services to benefit the community Other (2 % )

ALLOCATION OF PREMIUMS IN PLANTATIONS* (TOTAL: 19 MILLION US DOLLARS) Training and empowerment (13 % ) 9 % Support of worker organisations (e.g. Premium Allocation Committee) 4 % Training for workers and their representatives

Services for workers and their families (65 % ) 17 % Investment in accommodation and housing 15 % Scholarships and educational projects

Community services (20 % )

13 % Various services to benefit workers and their families

9 % Schools and education

12 % Credit and financing

4 % Social projects (e.g. disaster aid, recreational activities)

7 % Health care

4 % Health care 2 % Community infrastructure

1 % Payments to workers Other (2 % )

1 % Various services to benefit the community

“FAIRTRADE IS AN IMPORTANT STEP. BUT IT IS CRUCIAL THAT THE AUTHORITIES, NGOS AND THE PRIVATE SECTOR ALL COMMIT TO THE FAIRTRADE ­CONCEPT. TOGETHER, WE CAN ACHIEVE A GREAT DEAL.” * In plantations, the Premium is managed by the workers.

THIERRY BUCHS Head of Section, Private Sector Development, SECO

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FAIRTRADE’S IMPACT IN RECENT YEARS, A NUMBER OF DIFFERENT STUDIES HAVE EXAMINED THE IMPACT OF FAIRTRADE. THESE HAVE SERVED TO UNDERLINE THE VARIOUS POSITIVE EFFECTS OF FAIRTRADE, AS WELL AS HIGHLIGHTING ASPECTS WHERE THERE IS SCOPE FOR IMPROVEMENT. The full studies can be found online at: www.maxhavelaar.ch/studien

MARKET ACCESS AND WORKING CONDITIONS La Corporación para el Desarrollo Empresarial Rural (CODER) carried out a study on small-scale banana farmers and workers on banana plantations in Columbia (2014). The study indicates that participation in a Fairtrade programme raises household income and reduces production costs. Working conditions improved, as did the quality of housing. At the same time, the study showed that low market prices put farmers and workers at risk, and that Fairtrade needs to do more to improve market access for them.

Study

EMPOWERMENT OF WORKERS A study commissioned by the Max Havelaar Foundation (Switzerland) and Fairtrade International examined the empowerment of workers on flower farms in Ecuador (2014). The workers emphasise the importance of having, among other things, a secure job. From a longer-term perspective, however, most of those who took part in the study aspire to a greater level of independence through some kind of self-employed enterprise activity. Being employed in a Fairtrade-certified operation is an attractive means of working towards this, with stable and appropriate wages on the one hand, and an increased level of confidence on the other, thanks to training opportunities and active participation in workers’ organisations.

Study

NO EVIDENCE OF POSITIVE IMPACTS ON WORKERS IN THE SMALL-SCALE FARMING CONTEXT The School of Oriental and African Studies at the University of London carried out research into the employment conditions of workers in Ethiopia (flowers and coffee) and Uganda (coffee and tea) (2014). Their findings also identified weaknesses in the Fairtrade system. In particular, it was found that casual labourers working for small-scale farmers, who are often themselves struggling on or below the poverty line, are sometimes worse off than workers on larger, non-Fairtrade-certified plantations.

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HIGHER INCOMES Researchers at Harvard University reviewed a number of independent studies on the economic impacts of Fairtrade (2014). They concluded that Fairtrade-certified producers obtain better prices and achieve higher yields and, thus, higher incomes, and are also better off in terms of financial stability. The research also examined whether Fairtrade tends to certify farmers who are already in a better position. As it turns out, the opposite is likely the case: it is primarily the poorer, more marginalised producers who benefit from Fairtrade.

The impact of Fairtrade may, therefore, be underestimated, rather than overestimated.

Study

MINIMUM PRICE BRINGS STABILITY The Max Havelaar Foundation (Switzerland) and its sister organisation Max Havelaar Netherlands together commissioned an evaluation of Fairtrade-certified orange juice producers in Brazil (2014).

The study highlights the central role of the Fairtrade Minimum Price and the importance of good working relationships between producers and processing plants during the financial crisis. It also concludes that Fairtrade makes an important contribution to ensuring environmentally responsible production. The authors nevertheless acknowledge that workers employed by the farmers do not benefit from Fairtrade to the same extent.

Study

POVERTY REDUCTION A group of scientists at the University of Göttingen carried out a study into certification systems in Uganda (2013), focussing on small-scale coffee farmers. According to their findings, Fairtrade certification raised producers’ living standards by 30 % whilst at the same time reducing the level and extent of poverty. Fairtrade showed significantly better results in comparison with the various other certification systems. The researchers attributed this to improved market access, the Fairtrade Minimum Price and the Premium, as well as the possibility of keeping the further processing of the coffee within the cooperative.

Study

GREATER EQUALITY Twin Trading studied the experiences of women in supply chains in the Dominican Republic, Uganda, Ecuador, Ghana and Peru (2012). The study highlighted the crucial but often unnoticed and unpaid role of these women. In many countries, most of the land is in the hands of men, and it is the men’s work which is vis­ ible to the outside world: for example, when they are selling their crops. This also holds true for Fairtrade-certified organisations, although the study indicates that women in Fairtrade organisations have more opportunities than their counterparts in less-organised, nonFairtrade-certified cooperatives.

Study

“FAIRTRADE ASSISTS FARMER ORGAN­ ISATIONS IN FINDING SOLUTIONS TO NEW CHALLENGES, AND ENCOURAGES DIALOGUE WITH LABOUR UNIONS.” JULIA MALQUIN Fairtrade Advisor on Workers’ Rights in Latin America

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OUR “THEORY OF CHANGE” FAIRTRADE STANDS UP FOR FAIR TRADING CONDITIONS AND IMPROVED LIVING CONDITIONS FOR PRODUCERS. HOW THIS CHANGE SHOULD TAKE PLACE IS SET OUT IN OUR “THEORY OF CHANGE”.

OUR VISION

MAKE TRADE FAIR

SMALL PRODUCER COOPERATIVES AND PLANTATIONS

WHAT WE DO

WHO WE WORK WITH

OUR GOALS

A WORLD IN WHICH ALL SMALL PRODUCERS AND WORKERS CAN ENJOY SECURE AND SUSTAINABLE LIVELIHOODS, FULFIL THEIR POTENTIAL AND DECIDE ON THEIR FUTURE.

FOSTER SUSTAINABLE LIVELIHOODS

SUSTAINABLE SUPPLY CHAINS AND COMMITTED PARTNERS

ESTABLISH REGULATIONS GOVERNING ORGANISATION, CULTIVATION AND TRADE

CIVIL SOCIETY ACTION

ENABLE ACCESS TO THE FAIRTRADE SYSTEM

The development of the Fairtrade Standards is our most fundamental and outwardly visible tool for the development of farming families and workers. These standards include the Fairtrade Premium and the Minimum Price set for many commodities. In addition to its standards and certification, however, Fairtrade provides other direct and indirect support for producers and their organisations. It works with civil society organisations to create more sustainable supply chains, and stimulates consumer demand as well as the engagement of the public with Fairtrade issues.

OBJECTIVES IN A VARIETY OF AREAS

Our “Theory of Change”, Fairtrade’s impact model, defines various impact pathways within the spheres of economy, ecology and society in which Fairtrade aims to bring about change.

These include improved income, resilience to climate change, and sustainable food security. However, the outlined areas of activity are not restricted to the conditions for small producers and workers in the producer countries. There are also goals

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EMPOWER SMALL PRODUCERS AND WORKERS

CONSUMER BEHAVIOUR

AWARD THE LABEL, PROVIDE INFORMATION AND RAISE AWARENESS

which focus on creating change with respect to consumer behaviour, more sustainable business practices in trading and processing, and improvements in the regulatory framework.

MONITORING, EVALUATING AND LEARNING

In order to assess whether Fairtrade is, indeed, bringing about change, regular monitoring and evaluation is carried out through data collection and analysis, thus providing a verifiable record of outcomes. In the context of the current strategic development of Fairtrade International, the findings of a wide range of internal and external impact studies on Fairtrade were systematically evaluated, and reflected against the “Theory of Change”. Based on this analysis, in its annual planning activities worldwide, the resources of Fairtrade can be targeted at the specific impact goals. In order to achieve this, it is crucial that the various instruments, such as support for producers, opening up of markets, standard setting and certification, go hand in hand with projects and partnerships, public relations work and advocacy.

A LEARNING SYSTEM FAIRTRADE IS A SYSTEM THAT IS CONTINUALLY DEVELOPING. ALTHOUGH A GREAT DEAL HAS BEEN ACHIEVED OVER THE PAST TWO DECADES, THERE IS STILL MUCH WORK TO BE DONE. WE ARE SETTING OURSELVES NEW CHALLENGES, AND RESPONDING ACTIVELY TO CHANGE. Fairtrade makes smart use of impact studies to continually improve its activities on the basis of the findings and recommendations. The regular evaluations of key issues are actively employed in the improvement process, along with feedback from practitioners in the field. New insights into the needs of producer and workers’ organisations and the challenges they face have led to a rethink and gradual expansion of the local-level support given to producers. The strengthening and development of business skills plays a central role here. Structured management and a knowledge of how to market and process their produce more effectively should help producer cooperatives to improve their professionalism and thus achieve a stronger market presence. As far as plantations are concerned, it is important that workers know their rights, and also that workers’ organisations invest their Fairtrade Premiums as efficiently and effectively as possible. In other areas, such as good cultivation practices, organic conversion or quality improvement training, Fairtrade is capitalising to a greater extent on existing strategic partnerships as well as looking to develop new collaborations.

Fairtrade International is a member of the ISEAL Alliance, the umbrella organisation for sustainability schemes, which establishes various quality criteria that the members must adhere to. For instance, ISEAL sets out the process by which standards must be developed. Another requirement is that sustainability initiatives have to evaluate their impact, and devise their strategies in line with research findings and learning processes. ISEAL also stipulates that every organisation should develop a so-called “Theory of Change”.

This is an impact model which describes what an initiative such as Fairtrade does, and the ways in which this should lead to positive changes in the short, medium and long term. Fairtrade has developed such an impact model, and operates its Monitoring, Evaluation & Learning system in accordance with the ISEAL quality criteria.

FINDINGS INFORM STANDARDS

The findings of numerous studies also have an influence on the Fairtrade Standards, which are regularly revised. Thus, for instance, the results from studies on working conditions on plantations have been collated and used for the purposes of a recent revision of plantation standards. In this way, Fairtrade ensures that research findings result in learning processes which, in turn, bring about change and continued development.

Another project is concerned with the challenges facing workers on small-scale farms. The main focus here is on documenting existing examples of best practice involving workers on small farms and then using these to encourage peer learning processes among the various producers themselves.

“We don’t shy away from challenges, but meet them head-on. We learn and develop ourselves, and in this way, step by step, we are doing our part for global fairness.”

LARRY ATTIPOE Development Director of Fairtrade International

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COCOA – ONE PERSON’S INDULGENCE, ANOTHER’S LIVELIHOOD “MOST COCOA GROWERS HAVE NEVER TASTED A PIECE OF CHOCOLATE”, SAYS FORTIN BLEY (CENTRE IMAGE ABOVE), A COCOA FARMER IN CÔTE D’IVOIRE. TO HIM, AND AROUND 5 MILLION OTHERS WITH SMALL FAMILY-OWNED FARMS, COCOA PRIMARILY MEANS ONE THING: LIVELIHOOD. An average of around 12 kilos of chocolate are consumed per person every year in Switzerland – a lucrative business, one would think, for those who cultivate the primary product. This is often not the case, however. For hundreds of thousands of cocoa farmers, most of them in West Africa, this tough work is hardly worth their while. There is often a lack of information on how they can improve the quality and yield of their cocoa plants; added to which are ageing tree stocks and losses of fertile soils. Alongside the Minimum Price, the Fairtrade Premium is an important instrument in our efforts to counteract these trends. The CANN cooperative in Côte d’Ivoire, for instance, has invested a portion of its Fairtrade Premium in training in good farming practices.

COLLECTIVELY STRENGTHENING THE BARGAINING POSITION

The strategy of small-scale farmers joining cooperatives, as prescribed in the Fairtrade Standards, gives farmers greater market power through a collective market presence. This approach also encourages knowledge sharing, and producer organisations are thus able to improve their professionalism. Cocoa farmer and

176‚600 cocoa farmers

in 20 countries 10

Secretary General of the CANN cooperative Fortin Bley says: “Fairtrade promotes good planning and structured working. That has led to a positive change in the farmers’ attitudes towards their work. It has also meant that the cooperative members exchange notes far more – and that strengthens us as an organisation.”

ONE FAIRTRADE, TWO WAYS OF GETTING INVOLVED

Small producers in West Africa are only able to sell less than half of their cocoa on Fairtrade terms. Volumes are critical for these farmers, however, regardless of what happens to their commodity afterwards – whether it is used in a bar of chocolate, a yoghurt or the chocolate dusting on a cappuccino. The farmers produce cocoa, not chocolate.

In order to maximise farmers’ sales whilst, at the same time, offering companies additional sourcing options, an additional Fairtrade Mark for chocolate products was introduced in 2014.

2.6 hectares – average area under cultivation

46 % of the Fairtrade Premium

SPENT ON IMPROVING PRODUCTIVITY & QUALITY

PROGRAM MARK

PRODUCT MARK

The Fairtrade Sourcing Programs are focussed not on certification of an end product, but on individual commodities, thus allowing companies to make a commitment to Fairtrade for specific ingredients in their products. The Fairtrade Program Mark does not relate to the whole product, but to the particular focus ingredient, such as cocoa. With the Cocoa Program Mark, a confectionary company can use Swiss sugar in its chocolate.

This means that the chocolate industry can still retain its Swissness whilst allowing cocoa producers to sell greater volumes on Fairtrade terms.

The Fairtrade Product Mark is for mono products such as bananas, as well as for composite products in which all of the ingredients that are available as Fairtrade-certified commodities are, in fact, Fairtrade. In other words, “All that can be Fairtrade, must be Fairtrade.” In addition, in the case of composite products, the proportion of Fairtrade ingredients must be at least 20 % of the whole product. In a bar of chocolate bearing the Fairtrade Product Mark, all the ingredients that can be sourced as Fairtrade must come from a Fairtrade-certified producer, from cocoa to sugar, and from vanilla to almonds.

With these two approaches (the Product Mark and the Program Mark), Fairtrade is pursuing the same end goal: namely, the empowerment of small farming families. The same Fairtrade Standards apply to the producers, irrespective of the label.

• Global Fairtrade sales of cocoa saw an increase of 20 % in 2014, thanks to the Fairtrade Cocoa Program.

• This led to an additional 1.8 million US dollars’ worth of Fairtrade Premiums being generated.

“Fairtrade certification allows the investments to be made that are urgently needed for increasing productivity levels.”

MAMADOU SAVANE Sustainability Manager in the ECOOKIM cooperative in Côte d’Ivoire

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EXPECTATIONS AND REALITIES FAIRTRADE OPERATES IN A CONTEXT THAT IS FILLED WITH CHALLENGES AND CHARACTERISED BY AREAS OF TENSION, THE OVERARCHING ONE BEING THE OFTEN IDEALISED EXPECTATIONS ABOUT THE POWER OF FAIRTRADE ON THE ONE HAND, AND THE REALITIES AND IMPERATIVES OF DEVELOPING COUNTRIES ON THE OTHER. CONSUMER NEEDS VS PRODUCER NEEDS

Consumers in the northern hemisphere expect products bearing the Fairtrade Mark to be 100 % Fairtrade. All that matters to the producers in developing countries, however, is that they are able to sell a greater proportion of their production on Fairtrade terms.

Larger volumes are required for Fairtrade to have an impact. One of the ways in which producers’ needs were taken account of was the launch of the new Program Marks in 2014. Consumer requirements are catered for by ensuring that information is transparent – making it clear what is in a Fairtrade product.

MAINSTREAM VS NICHE

Numerous other Fair Trade Organisations exist alongside Fairtrade Max Havelaar. All of them have the same goal of making trade fairer, although the paths chosen to achieve this are not all the same. The aim of Max Havelaar is to bring fairly traded products to the mass market in order to benefit as many producers as possible in developing countries. This requires working together with value chain actors right across the board – from small specialist retailers to large corporations. Alternative trade organisations, on the other hand, prefer to obtain their products as directly as possible from the producer organisations. Mainstream and niche are not mutually exclusive, however, but complement each other and are, to a large extent, based on the same standards.

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TRACEABILITY VS ADDITIONAL COSTS

For over 80 % of Fairtrade sales in Switzerland, the product is traceable right back to its origin. However, in the case of cocoa, sugar, fruit juice and tea, this is not always possible. Why is that?

To take orange juice as an example, the production process is a complex one that takes place in large processing plants. If separate facilities had to be built for Fairtrade, this would incur huge additional costs which would make Fairtrade producers unable to compete, and they would be pushed out of the market. For “mixed” products the system of “mass balance” is applied, and these products are identified as such when they are sold. Of course, the amount of Fairtrade orange juice sold must equal the amount of Fairtrade oranges bought, and the produ­ cers still receive the same benefits.

RETAIL PRICE VS PRODUCER BENEFITS

As is the case with conventional goods, the retail price of a Fairtrade product is set by the market partners, and Max Havelaar has no influence over this. Similarly, the majority of value creation (processing, trade, marketing, etc.) takes place in the developed world. This means that only a few pence from a bar of chocolate might go to the cocoa growers. But it is also essential to see this from the producers’ perspective: small producer cooperatives normally receive between 15 and 65 % extra for their Fairtrade commodities.

THE POWER OF THE CONSUMER CONSCIOUS CONSUMER CHOICES IN THE DEVELOPED WORLD PLAY AN IMPORTANT PART IN IMPROVING LIVING CONDITIONS IN A PRODUCT'S COUNTRY OF ORIGIN, WHILST SETTING AN EXAMPLE FOR GREATER SUSTAINABILITY. Fairtrade means connecting the producers in Africa, Latin America and Asia with the consumers in Switzerland and other markets. Alongside facilitating market access, one of the primary tasks of the Max Havelaar Foundation is to raise awareness among the Swiss public of the importance of Fairtrade, and to encourage people to make considered consumer choices.

Consumers will thereby be sending an all-important signal to say that fairly traded products are a basic requirement, and sustainable sourcing will thereby gradually become a matter of course.

To this end, Fairtrade Max Havelaar launched the campaign “The Power of You”. This included messages on posters and shopping-mall screens, as well as various online activities.

FAIRTRADE CULINARY DELIGHTS – EATING OUT AND AT HOME

To reach as wide an audience as possible, restaurants, cafés and staff catering were included in the campaign. “Fair breaks” at work were introduced, and “Fair cooking” recipes with Fairtrade ingredients were promoted. A voucher booklet was also produced, which allowed consumers to benefit from special offers with a number of partners. And at home, tasty dishes can be prepared using Fairtrade products. Fairtrade ambassadors and celebrity chefs Rebecca Clopath and Philippe Ligron inspire home cooks with their exciting creations.

See more at www.maxhavelaar.ch/kochen.

MORE FAIRTRADE IN TOWNS

As a member of the umbrella organisation Swiss Fair Trade, Max Havelaar is supporting the “Fair Trade Town” campaign, launched in June 2014. The aim of this initiative is to encourage the population to engage with Fairtrade. Proprietors, politicians and members of the public who actively support their communities are encouraged to raise awareness of Fairtrade through various activities.

EXTREMELY HIGH CREDIBILITY

The fact that the awareness-raising activities of the Max Havelaar Foundation have borne fruit is evidenced in the latest market research figures: according to the 2015 GlobeScan consumer study, Fairtrade Max Havelaar enjoys 88 % recognition among the Swiss public, along with 85 % consumer trust – which is reflected in the high customer retention rate of 82 %.

“THE COMBINATION OF REGIONAL AND FAIR NOT ONLY RESULTS IN SUPERB TASTE, BUT ALSO HAS A POSITIVE EFFECT FOR PEOPLE AND THE ENVIRONMENT.” REBECCA CLOPATH Chef and ambassador for the Max Havelaar Foundation

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MORE FAIRTRADE ON THE SWISS MARKET FROM COFFEE AND EXOTIC FRUITS THROUGH RICE AND SPICES TO COTTON PRODUCTS AND EVEN GOLD: FAIRTRADE PRODUCTS ARE INCREASINGLY GAINING IN IMPORTANCE – IN BOTH THE RETAIL AS WELL AS THE OUT-OF-HOME SECTOR. Fairtrade producers are selling ever-increasing volumes of their products on the Swiss market. Particularly in the cases of cocoa and cotton, small-scale farmers have been benefiting significantly from the new Fairtrade Program, which enabled them to sell a total of 30 % more Fairtrade cocoa and 33 %* more Fairtrade cotton in Switzerland. Furthermore since the end of 2014, artisanal miners in certified operations have also been able to sell their gold here.

PRODUCERS NEED ALTERNATIVE SELLING OPPORTUNITIES

As far as the classic products such as bananas, flowers, coffee and cocoa are concerned, certified organisations are selling increasing amounts of their products on the Swiss market. How­ ever, there is still a large surplus of numerous Fairtrade commodities, as well as many producers looking for additional opportunities to sell their products.

FAIRTRADE IN RETAIL AND GASTRONOMY

Retail and gastronomy are increasingly investing in sustainable supply chains, in purchasing Fairtrade commodities, and in extending their ranges of Fairtrade products. In 2014, 220 licensees, 850 partners in the catering trade and 25 goldsmiths were

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already committed to Fairtrade. The retail and out-of-home sector saw increases in sales of Fairtrade products of 7.5 % and 33 %*.

Important commodities such as bananas and coffee enjoyed distribution gains of 4 % each. Thus, in 2014, Swiss trade has again made a major contribution to improving living standards for farmers and workers in the producing countries.

SWISS CONSUMERS BUY FAIR

In spite of the generally stagnant market conditions, Swiss consumers spent 467 million Swiss francs on Fairtrade products in 2014, which equates to 57 francs per head – up 7.5 % on the previous year. For the first time ever, in 2014, consumers were able to buy jewellery made from Fairtrade gold, various Fairtrade convenience foods such as artichokes and palm hearts, and exotic fruits like papaya. Moreover, Fairtrade products are becoming increasingly affordable for Swiss consumers, as retailers have begun to switch entire product lines in the mid-price bracket to Fairtrade.

* Excluding Fairtrade cotton towels In/Out campaign in 2013

COMMODITY & MARKET DEVELOPMENT 2014 PRODUCER ORGANISATIONS NORMALLY RECEIVE BETWEEN 15 AND 65 % EXTRA WHEN THEY GROW AND SELL THEIR PRODUCTS UNDER FAIRTRADE TERMS, REGARDLESS OF THE RETAIL PRICE OF A PRODUCT. THE FOCUS SHOULD THEREFORE NOT BE SOLELY ON FAIRTRADE SALES IN SWITZERLAND, BUT ALSO ON THE VOLUMES SOLD BY THE PRODUCERS IN THEIR OWN COUNTRIES. FROM THE PRODUCERS' PERSPECTIVE

BANANAS 31‚484 tonnes +4 % on prev. year

FLOWERS 78‚590‚235 stems +1 % on prev. year

RAW COFFEE 3‚045 tonnes +2 % on prev. year

FROM THE CONSUMER PERSPECTIVE Product Bananas

COCOA 1‚732 tonnes +30 % on prev. year

Sales (CHF)

Change comp. to 2013

100‚183‚000

4.0 %

Market share **

Bananas

76‚091‚000

-4.0 % 34.0 %

Fruit juices

49‚448‚000

2.0 %

Raw coffee

48‚825‚000

4.0 %

Cocoa

42‚024‚000

31.8 %

Other exotic fruits *

13‚815‚000

31.1 %

Convenience fruits

13‚724‚000

-0.8 %

Rice/quinoa

13‚375‚000

17.9 %

Cotton products

12‚685‚000

-42.2 %

Cotton Tea

9‚825‚000

17.8 %

Spices

5‚560‚000

184.9 %

17 %

Fruit juice

11 %

Honey

10 %

Coffee

10 %

Tea

6 %

4 %

Cocoa/chocolate 0

10

20

30

40

50

60

70

80

90 100

Organic percentage *** 79 % 73 %

Bananas

56 %

Sugar

4‚314‚000

-8.3 %

Pineapple

4‚849‚000

-0.9 %

Sugar

3‚867‚000

32.1 %

Tea

3‚447‚000

56.3 %

763‚000

-9.1 %

Honey

Plants

90‚000

-50.4 %

Fruit juice

Gold

40‚000

new

Total

467‚202‚000

7.5 %

incl. mangos, avocados, passion fruit, oranges, limes, coconuts, physalis, papayas estimated retail market share, based on sales volumes. Source: AC Nielsen *** organic percentage based on sales volumes

19 %

Rice/quinoa

Honey

**

35 %

Sugar

64‚277‚000

Dried fruits/nuts

53 %

Pineapple

Composite products

*

COTTON 184 tonnes +33 % on prev. year

FROM THE MARKET PARTNER PERSPECTIVE

Flowers

Sports balls

SUGAR 1‚230 tonnes +88 % on prev. year

47 %

Coffee

43 %

Rice/quinoa

38 %

Cocoa

21 %

Pineapple

18 % 3 % 0 % 0

10

20

30

40

50

60

70

80

90 100

“SUSTAINABILITY CONCERNS THE ENTIRE SUPPLY CHAIN, AND IS BECOMING MORE IMPORTANT FOR CONSUMERS WHEN THEY ARE SHOPPING, TOO.” ANTON VON WEISSENFLUH Director of Chocolats Halba

15

ANNUAL ACCOUNTS AND FINANCIAL STATEMENT 2014 FOR THE 2014 FINANCIAL YEAR, MAX HAVELAAR IS PUBLISHING ITS ANNUAL ACCOUNTS IN ACCORDANCE WITH SWISS GAAP FER GUIDELINES IN ORDER TO FURTHER INCREASE TRANSPARENCY. The Max Havelaar Foundation achieved a gratifying result for the 2014 financial year, with end-of-year profits standing at 769,112 Swiss francs. This was due to the positive developments in sales of products bearing the Fairtrade Mark, and the associated license fees. Bananas and flowers continue to be the most important products. In accordance with the fund regulations, the profits were transferred to the organisational capital.

Management costs saw an increase on the 2013 level, as the amalgamation of the two offices into a single headquarters in March 2015 resulted in one-off accruals in connection with existing rental contracts. The marketing and communications expenditure also rose on the previous year. This was partly due to investments in the poster campaign “The Power of You”.

The financial reporting for the Max Havelaar Foundation has been carried out in line with the professional recommendations for accounting standards (Swiss GAAP FER 21), applying these for the first time to the year ending 31 December 2014 (including comparative figures for the 2013 financial year). They give a true and fair view of the assets, financial position and profit situation.

Max Havelaar has been submitting the accounts voluntarily for an ordinary audit since 2012.

These annual accounts were comprehensively reviewed in an ordinary audit by PricewaterhouseCoopers (Basel) and found correct.* Max Havelaar has, at all times, complied with the legal requirements in respect of its internal control system.

2014 EXPENDITURE BY AREA 36 % International cooperation Includes i.a. Standard Setting, producer support, Monitoring & Evaluation, Policy Setting and Global Product Management.

23 % Business Development

18 % Administration and Infrastructure

6 %

Quality and Supply Chain Management

* “The audited annual report to the Board of Trustees contains no restrictions nor any indications of violations of the law.”

16

17 % Communication and Marketing

BALANCE SHEET Assets CHF

Note *

31.12.14

31.12.13

Liabilities CHF

Note *

31.12.14

31.12.13

5‚843‚572

4‚688‚437

Short-term loan capital

Liquid assets

4.1

4‚206‚230

3‚031‚517

Trade/services payables

5.1

518‚363

259‚600

Trade/services receivables

4.2

1‚492‚038

1‚573‚898

Other payables

5.2

190‚864

205‚093

90‚801

26‚069

Provisions

5.3

219‚181

246‚220

54‚503

56‚954

Deferred income

5.4

515‚219

432‚341

94‚910

179‚917

Earmarked funds

26‚389

25‚746

94‚910

179‚917

Donation funds

26‚389

25‚746

Current assets

Other receivables from third parties Accrued income

4.3

Fixed assets Property

4.4

1‚443‚627 1‚143,254

Organisational capital

4‚468‚465 3‚699‚354

Paid-up foundation capital

6

Acquired free capital Annual result Total assets

5‚938‚482

4‚868‚354

Total liabilities

190‚002

190‚002

3‚509‚351

3‚091‚511

769‚112

417‚840

5‚938‚482 4‚868‚354

PROFIT AND LOSS ACOUNT Note *

31.12.14

31.12.13**

Note * Financial income

31.12.14

31.12.13 **

19‚130

7‚522

(26‚186)

(6‚350)

(7‚056)

1‚172

License income from third parties

7‚160‚332

7‚088‚514

Financial expenditure

Income from trade/services

7‚160‚332

7‚088‚514

Financial result

Income from earmarked donations

643

333

Deposits in funds under loan capital

(643)

(333)

Income from donations

643

333

Fund result of earmarked funds

(643)

(333)

Other operating income

90‚484

60‚721

769‚112

918‚187

Losses from receivables

78‚938

(6‚587)

Total operating income

7‚330‚397

7‚142‚981

–

(500‚347)

Extraordinary result

–

(500‚347)

YEAR-END RESULT

769‚112

417‚840

Personnel costs

(728‚828)

International cooperation

Operating expenditure Operating result

Extraordinary expenditure

8

(569‚327)

(1‚771‚737) (1‚844‚321)

Marketing and communication costs

Other operating costs

Ordinary result

(3‚165‚918) (3‚141‚092)

Administration costs

Depreciation of property

7

4.4

(759‚485)

(570‚280)

(121‚055)

(100‚613)

(6‚563)

–

(6‚553‚586) (6‚225‚632) 776‚811

917‚349

* The full auditors’ report and the annual accounts together with the performance report and all notes can be found at www.maxhavelaar.ch/jahresbericht. ** As from 1 January 2014, all activities of the carpet label STEP were transferred to new ownership, with no further expenditure or income from this. In order to ensure that comparisons between 2013 and 2014 are possible, the STEP-related items from 2013 are shown in the figure under “extraordinary result”.

17

On an equal footing FAIRTRADE IS AN INTERNATIONAL NETWORK IN WHICH ALL PRODUCERS HAVE EQUAL RIGHTS TO PARTICIPATE IN THE DECISION-MAKING PROCESS. With a 50 % voting weight in all the important decision-making forums and international committees, the producer networks play an active role in helping to shape the Fairtrade movement. Fairtrade International is now taking the additional step of gradually transferring the responsibility for local support of the producers to the three producer networks, thus extending their role.

THE MAIN PILLARS OF THE FAIRTRADE SYSTEM

18

The international umbrella organisation Fairtrade International • is responsible for the strategic direction of Fairtrade and for the development of the Fairtrade Standards.

• is driven by the producer networks and the national Fairtrade Mark organisations.

The certification body FLO-CERT GmbH • is an ISO-65-accredited certification organisation.

• independently certifies and monitors the producers and traders in respect of their compliance with Fairtrade Standards.

www.fairtrade.net

www.flo-cert.net

The three Fairtrade producer networks • represent the interests of the producers in Africa, Asia and Latin America.

• support the producers at grassroots level through local advisors.

Around 20 national Fairtrade organisations • license the Fairtrade Certification Mark worldwide. The Max Havelaar Foundation (Switzerland) is one of these organisations.

www.fairtrade.net/producer-networks.html

www.info.fairtrade.net

THE MAX HAVELAAR FOUNDATION (SWITZERLAND)

Founded in 1992 by six Swiss charities, Max Havelaar Foundation is a non-profit organisation that licenses the Fairtrade Mark for sustainably grown and fairly traded products in Switzerland. As a member of Fairtrade International, Max Havelaar works through the Fairtrade principles to improve living conditions for small-scale farmers and plantation workers in developing countries and emerging economies, but does not take part in trading activities itself. Max Havelaar Foundation is primarily engaged in creating market access for Fairtrade products, and providing information and raising awareness of Fairtrade in Switzerland.

MANAGEMENT (AS AT 31.12.2014)

Nadja Lang, CEO Elie Peter, Director of Communication and Marketing, Deputy CEO Karin Altherr, Commercial Director Fabian Waldmeier, Director of International Cooperation Patric Fuhrimann, Director of Finance and Services

FOUNDATION BOARD (AS AT 31.12.2014)

Miges Baumann, Bread for all (Chairman) Melchior Lengsfeld, Helvetas Swiss Intercooperation (Vice-Chairman) Geert van Dok, Caritas Schweiz Jürg Rückert, C.M.C. Consulting-Management-Coaching AG Esther Oettli, HEKS Matthias Dörnenburg, Fastenopfer Monika Uhlmann, Swissaid

FOUNDATION ORGANISATIONS

“We producers not only have a say in our organisations, but we are also joint owners and shapers of the Fairtrade System.”

CHIEF ADAM TEMPURI Chairman of the Executive Board of Fairtrade Africa

19

Max Havelaar Foundation (Switzerland) Limmatstrasse 107 8005 Zürich T +41 44 278 99 00 F +41 44 567 89 59 info@maxhavelaar.ch www.maxhavelaar.ch

PUBLISHED BY Max Havelaar Foundation (Switzerland) — EDITOR Katrin Dorfschmid — IMAGES p. 1: Éric St-Pierre / p. 3: Patrick Gutenberg / p. 4: Yisheng Organic Photographer / p. 10/11: Éric St-Pierre, Merli Jürisoo / p. 12: Frédéric Raevens / p.13: Saloon, Marc-André Marmillod / p. 14: iStock / p. 18: Santiago Engelhardt / p. 19: Kyle Freund TRANSLATION Zieltext AG, Zollikon — LAYOUT Saloon Creatives GmbH, Zürich — PRINTING Offset Holend AG, Zürich (100 % recycled paper, FSC-certified, Nordic Swan, CO2 neutral)