Several British supermarkets are in talks with the Fairtrade Foundation about combining forces to buy ethically sourced bananas, coffee and cocoa from farmers in developing countries under long-term contracts in what would be the first “buying coalition” of its type.
The retailers, which include a handful of major supermarkets, are in discussions after the competition watchdog recently indicated that it would not fine them for violating anti-competition laws. A pilot scheme is now under way.
The Competition and Markets Authority’s guidance was a “game changer”, Fairtrade said, because “taking collective industry action” to pay farmers had been stymied for fear of contravening antitrust law.
Bananas, coffee and cocoa purchased under the scheme, known as the Shared Impact Initiative, could be on the shelves of British supermarkets within months, the British non-governmental organisation added. The initiative would increase the volume of Fairtrade produce available to consumers, it said.
The Co-op is taking part in a cocoa-only pilot for now but coffee and bananas would be next. Sainsbury’s and Tesco, the UK’s two largest supermarkets, are in talks about the scheme, according to people familiar with the matter.
Emily Pearce, the Co-op’s senior sustainable sourcing and international development manager, said the pilot aimed “to find solutions to deepen the impact, cooperatively for the millions of small-scale farmers and workers who are disproportionately affected by the effects of climate change and fluctuating commodity prices”.
Anna Mann, associate director for responsible business at Fairtrade, said: “We don’t think we’ll achieve environmental sustainability — or any sustainability — in supply chains without businesses working together more.”
Last November, the CMA issued an “informal guidance” to Fairtrade, the first of its kind under a new open-door policy relating to environmental initiatives, saying it “does not expect to take enforcement action” as a result of the scheme.
The informal ruling by the CMA would give supermarkets greater clout to solve big sustainability issues — such as child labour, living wages and deforestation — more cost effectively, she said.
However, one supermarket cautioned that it still feared the ire of the CMA if it worked with competitors, so it had been engaging only tentatively with the scheme.
The CMA said the initiative was unlikely to increase prices for consumers and would have neutral or even “positive effects” on competition by giving shoppers a greater choice of Fairtrade products.
UK supermarkets already sell considerable amounts of bananas, coffee and cocoa that are certified Fairtrade or under the Rainforest Alliance designation, but a coalition would provide more visibility across supply chains and make contracts less fragmented.
The idea is to provide farmers in countries such as Ivory Coast, Ghana, Kenya and Colombia the security of three-to-five year contracts so that they can invest in practices to combat the impact of climate change, Fairtrade and the CMA said.
Mann said the initiative would enable supermarkets to club together to pay farmers a minimum price and a premium, allowing them to invest in sustainable practices such as pruning, agroforestry and use of organic fertilisers. Until now, contracts with farmers had often been short term, dependent on a single buyer and subject to sudden change, she said.
For supermarkets, forming a “buying coalition” would help them meet difficult targets such as eradicating child labour on west African cocoa farms, or paying a living wage to banana producers by 2027, she added.
Ruben Njuki, a coffee farmer with one acre of land in Kirinyaga county in central Kenya, said fluctuating prices prevented him from planning properly and that the current income he received “was not sufficient” to build a permanent house or send his children to college.
Kenyan farmers have been devastated by floods this year, the impact of which could have been mitigated if farmers had invested in mitigation, Fairtrade said.
Njuki sells his coffee to the Mutira Farmers’ Cooperative Society, which could export coffee to the UK under the new initiative.
In its guidance, the CMA said that the proposed pilot scheme was unlikely to infringe competition policy given its scale, but if it were ramped up significantly it would need to look again.
Fairtrade said that, once proof of principle had been established in the UK, it hoped to expand it to other markets in Europe, including Belgium and the Netherlands, and eventually to the US.
The UK is the seventh largest importer of bananas, with imports of £592mn in 2023, according to the International Trade Centre. In the same year, it imported £1.1bn of coffee and £2.9bn of cocoa and cocoa preparations.