Can Ethical Trade Certification Contribute to the Attainment of the Millennium Development Goals? A Review of Organic and Fair-Trade Certification

The growth of ethical consumerism in developed countries has led to increased imports of environmentally and socially certified products produced by the poor in developing countries, which could potentially contribute towards the achievement of the Millennium Development Goals (MDGs). Among these, organic products and fair-trade products are among the rapidly growing “ethical trade” products. This market development trend utilizes certification systems that ensure the impartiality of assessing products produced in developing countries. This paper assesses how the conditions under organic certification and fair-trade certification directly and indirectly contribute to the achievement of the MDG targets. The study finds that organic certification substantially contributes to MDG1 (poverty and hunger) and MDG7 (environmental sustainability). Farmers who follow certification requirements stand to be rewarded with substantial improvements in farming systems, premium prices, and better market access. In addition, by eliminating the risk of exposure to toxic agrochemicals, it directly contributes to health-related MDGs. Moreover, as organic agriculture contributes to mitigating climate change, certified organic farmers with established farm-monitoring systems are in better positions to receive compensation for soil carbon sequestration, when the methodology is approved. However, organic certification doesn’t clearly address social aspects, which fair-trade certification directly deals with. Fairtrade certification directly targets smallholders in marginal areas, resulting in broader impacts on other non-income MDGs. In addition, financial benefits for fair-trade certification are immediate, as organic certification often requires a transition period before full certification is granted. Thus, in achieving the MDG targets, a combination of organic and fair-trade certification is recommended. This paper concludes that for this market-based development scheme to broaden its poverty impacts, public sector support in harmonizing standards, building up the capacity of certifiers, developing infrastructure development, and innovating alternative certification systems will be required. JEL Classification: Q56, F18, I39 ADBI Discussion Paper 115