In early May, Fair Trade USA (FTUSA) and Chobani LLC announced the launch of a Fair Trade dairy certification program. The program is an outgrowth of a previous pilot program involving the two organizations, conducted in New York and Idaho, to determine if Fair Trade’s Agricultural Production Standard (APS) could be applied to the dairy industry.
The Fair Trade model connects producers and businesses in the supply chain to support sustainable livelihoods and practices, especially as they relate to farm labor and working conditions.
Products they produce are certified and are eligible to carry the Fair Trade seal, making it easy for consumers to make purchase decisions, including paying a premium, for those that align with their own social, economic and environmental values.
In turn, the program provides financial premiums to producers and processors meeting those certified for meeting those standards.
Progressive Dairy reached out to Molly Renaldo, partnerships manager with Fair Trade USA, to dive deeper into the program and its adaptation into the U.S. dairy industry.
Molly Renaldo, partnerships manager, Fair Trade USA, talks about the launch of the Fair Trade dairy certification program. Courtesy photo.Is the Fair Trade Certified Dairy program limited to dairy producers selling milk to Chobani?
RENALDO: This is an industry-wide initiative, meaning all U.S. dairy producers are eligible to apply for Fair Trade Certification and that all brands wishing to buy and sell Fair Trade Certified Dairy are eligible to join the program. Our goal is to create true transformation at scale for dairy producers and workers by ensuring the benefits of the Fair Trade program are available to all.
Fair Trade USA takes a market-based approach to certification, which means we do not certify producers without a confirmed buyer willing to purchase on Fair Trade terms. We do this to ensure that after the work of coming into compliance with the standard and passing their annual audits, the producer group can have the full benefits of the standard requirements and the premium funds.
How do dairy producers selling milk to other cooperatives or processors get involved?
RENALDO: If a dairy producer is interested in the program, I would encourage them to reach out to Fair Trade USA to learn more about the program (email Molly Renaldo). Although we want to ensure a Fair Trade buyer is committed, those conversations can start from any point along the supply chain. Many times, it is a producer, cooperative or manufacturer that starts the conversation with the potential Fair Trade buyer – stating their interest in the program can expedite the process greatly.
How does a large dairy co-op, potentially with thousands of producer members, participate in a program like this?
RENALDO: They can participate in our dairy program because we can certify a subset of a cooperative's membership. Given the cooperative structure of dairy in the U.S. and the perishability of the product, it proved necessary to permit “mass balance” in these supply chains. With the use of mass balance, we work with the buying partner to identify the volume of raw milk required for the product(s) they are choosing to certify. We then collaborate with the cooperative to identify which farms would be able to provide the required volumes and be good candidates for the program. Finally, we meet with identified farms to present the program and offer their inclusion.
Within the directives of mass balance, diligent tracking is required of the cooperative for all sales/purchases of milk from Fair Trade Certified farms and to Fair Trade buyers. They are required to report these quarterly to Fair Trade USA. Additionally, all entities along the supply chain that take physical or financial ownership must report all sales and purchases to FTUSA to be vetted by our certification team. This ensures the amount of milk produced and sold on Fair Trade terms is the amount sold to consumers in the final product with our seal, likewise the amount sold to consumers correlates to the proper amount of premiums received by each Fair Trade Certified farm.
Most co-ops/processors commingle milk from multiple farms to make their products. Will a co-op or processor need to commit to the Fair Trade APS across all of its individual milk suppliers to be eligible to use certification labels? Or must the co-op or other processor segregate its milk supply to use certification labels on select products/product lines?
RENALDO: Typically, a Fair Trade Certified product must be physically segregated from other products throughout its supply chain journey. Some products (like cocoa) are allowed to use a mass balance system, which allows mixing of Fair Trade Certified and non-Fair Trade Certified product or ingredients at any stage in the supply chain, provided the overall quantities of the Fair Trade-certified product are controlled. This allows for the sale of Fair Trade Certified ingredients and products in supply chains where maintaining physical product traceability is unfeasible due to the nature of product processing systems.
Given the operational complexities of milk production, transport and the pooling of milk by cooperatives, mass balance was necessary to provide the benefits of certification to as many producers and farm workers as possible. The amount purchased from Fair Trade Certified farms is the exact amount used to produce the products that bear the Fair Trade Certified seal, or use the exact amount that is then sold as Fair Trade Certified (in the case of an intermediary selling Fair Trade Certified goods further down the supply chain).
Outline the step-by-step activities a dairy producer must take to participate. Are there any initial costs?
RENALDO: Once a cooperative agrees to become Fair Trade Certified, they work with the Fair Trade USA team to identify farms participants. Fair Trade USA presents the program to farms and offers their inclusion in the program. Once farm applicants agree to join Fair Trade USA's voluntary program, the producer services team works with the farm to understand the U.S. Amendment to the Agricultural Production Standard and the gaps they currently face between current status and compliance. The producer services team then helps the farm create a plan to come into compliance and prepare for their first audit.
To be granted authorization to trade on Fair Trade terms, the farms under a specific cooperative's certificate undergo a third-party audit against the Fair Trade standard. After closing any non-compliances found during the audit, the cooperative and farms are granted authorization to trade on Fair Trade terms and thus are permitted to sell Fair Trade Certified milk to any licensed Fair Trade entities.
The initial costs of certification for the farms include any initial compliance investments and the cost of the audit is the responsibility of the cooperative and/or farms (based on their own cost-sharing decisions).
A portion of the premium funds that workers earn from the sale of Fair Trade Certified dairy will also be available to support investments required to come into full compliance with the Fair Trade standard, as well as community projects.
What’s involved in a farm audit?
RENALDO: All audits are conducted by independent auditing bodies. These auditors undergo extensive training on interpreting the standard and identifying complex and often sensitive, less pronounced social welfare issues, prior to conducting a review of a farm for Fair Trade Certification.
In supply chains utilizing a cooperative structure, the cooperative is the certificate holder and farms are then audited under that certificate. Each audit is a three-pronged approach, which includes document review, on-site observations and worker interviews. These are conducted annually and typically take two to five days to complete per certificate.
Fair Trade USA works with third-party auditing bodies to conduct these audits of certified producers, since it writes and revises these standards internally.
Is there any cost to the dairy producer?
RENALDO: The dairy producer group is typically responsible for the cost of their audit. This can fall to the farm or cooperative depending on their own determined cost-sharing.
Are audit results confidential?
RENALDO: Audit results are confidential and only shared with Fair Trade USA and certified entities (cooperatives/farms). Supply chain partners are informed of changes in certification status, but anything more specific is left to be shared by the certified cooperative (if they so choose).
Is certification subject to regular renewal and if so, how frequent?
RENALDO: Yes, all certificate holders are audited annually against Fair Trade standards.
It reads like the initial launch of the dairy program is directed at human labor conditions, while standards involving environmental areas are being developed. Is that accurate?
RENALDO: Correct. The Agricultural Production Standard, the standard already used in crop production around the world, does include an environmental module that approaches environmental protections through a social impact lens (pesticide use, wastewater management, etc.). During the early exploration phase of this pilot, it was determined that since environmental was such an integral issue to the dairy context we wanted to give it the due diligence it deserved. We opted to first approach the social welfare challenges, given our experience and expertise in this field, and then specifically focus on how to adapt our environmental approach to address dairy's unique challenges.
Additionally, the environmental requirements included in the original APS were developed for food crop production. Given the impact and production differences between crops and dairies, as well as the advanced technical nature of the U.S. dairy industry, the environmental module of the APS needed to be more substantially overhauled to be applicable in the dairy context.
Finally, there are many other certifications and groups tackling these challenges in dairy currently that we would like to engage with to inform our own standards or potentially partner with in the future. Rather than reinvent the wheel, we want to lean on experts in this field to understand how Fair Trade Certification can best support these environmental sustainability goals.
We will continue to explore ways to build and develop dairy-appropriate environmental requirements into the standard as the program develops.
Many dairy producers are currently required to be certified under the National Milk Producers Federation’s FARM Program, which includes modules for animal care, environmental stewardship, antibiotic stewardship and workforce development. Is there any correlation between Fair Trade and FARM standards? Will dairy producers be required to have multiple audits covering the same things?
RENALDO: The FARM Program has done incredible work within dairy to not only implement standards of care across these different impact areas but also create a program that has been so widely implemented across the industry. When revising our Agricultural Production Standard to apply to the dairy context, we quickly learned of FARM's animal care program at work in over 98% of the industry. Given this fact and that our experience and mission was focused on human welfare, we felt confident staying focused on social impact and trusting the FARM Program to provide for animal care.
Currently we do not provide recognition for any other social impact standards. However, we hope to work together with the National Milk Producers Federation and other standard-setting bodies to provide a robust approach to impact in dairy. We have engaged with the National Milk Producers Federation throughout our pilot program for input and feedback and are excited to see what the future may hold for partnerships and the evolution of U.S. dairy.
Given the structure of the U.S. dairy industry, I’m having trouble following the money trail. Does Fair Trade license use of labels to eligible dairy product manufacturers (co-ops and private), charging a fee, and then pay premiums out of that fund to individual producers/processors?
RENALDO: This can be a confusing part of Fair Trade Certification, which is why we actually keep these two investments of the program completely separate.
Premium payments:
At no point in the process does Fair Trade USA handle the premium funds; we do however verify all transactions and the payment and use of funds are reviewed in the annual audit.
When a buyer purchases Fair Trade Certified ingredients, the premium cost is specified on the invoice and included as a clear line item part of the purchase. This money is received by the cooperative and disbursed directly to the Fair Trade Certified farms in direct correlation to the amount of milk they sold into the cooperative on Fair Trade terms.
This money is then split into the 15 cents per hundredweight to the Compliance Support Fund (a unique addition to the Fair Trade program for dairy) to assist in the cost of compliance with Fair Trade standards, and the remaining 30 cents per hundredweight into the Community Development Fund for workers to democratically decide how they choose to invest it back to address their community's greatest needs.
Certification and licensing fees:
This is a cost to the brandholder and is not to be borne by producers in any way. This cost covers the licensing of our seal, all supply chain verification activities and other brand support services.
If individual producers meeting standards are eligible for financial premiums, how are those premiums determined and distributed?
RENALDO: Premiums are set for both organic and conventional milk at 45 cents per hundredweight. This is to be paid on a monthly basis (unless otherwise agreed to in writing, per our trade standard) to the cooperative and disbursed proportionately to the farms (on timelines mirroring the 30-day agreement or as agreed to in writing). The workers on the respective farms will then democratically decide how they want to reinvest those funds into community projects.
If individual co-ops/processors meeting standards are eligible for financial premiums, how are those benefits determined and distributed?
RENALDO: The premium is disbursed to the certificate holders (cooperatives) and is passed on to the farms. The standards (the Agricultural Production Standard and Trade Standard) define this process and who/how participants are included and benefit from these premiums. Additionally, the standards lay out the structure for the premium participants’ evaluation of community investment opportunities, planning for investment and execution of projects.
