Fair Trade vs. Direct Trade

What’s the difference, anyway?

 
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Fair Trade vs. Direct Trade

 

If you’re someone who’s interested in shopping ethically (and I’m betting you are, unless you somehow ended up here as a result of random clicking around the internet) you’ve probably seen the terms “Fair Trade” and “Direct Trade” thrown about quite a bit.

But what do they actually mean? And are they the same thing? Some people talk about them interchangeably, but the reality is a bit more nuanced.

A quick search yields confusing, sometimes contradictory results. You may quickly become overwhelmed in the sea of tangentially-relevant-but-not-really-answering-my-question results. 

Why can’t something be straightforward for once?

Fear not, all of your questions will be answered by the end of this post!

Let’s delve into some definitions.

Fair Trade Definition

Fair trade is probably the term that you’re more familiar with. It’s used on everything from coffee to chocolate to clothing, and beyond.

The World Fair Trade Organization defines fair trade as: “a trading partnership, based on dialogue, transparency and respect, that seeks greater equity in international trade. It contributes to sustainable development by offering better trading conditions to, and securing the rights of, marginalized producers and workers…”

Basically, fair trade is a commitment not to exploit workers in developing nations, even when it’s easy to do so, and many other companies in your industry do.

Fair trade companies are committed to justice and fair treatment for all of the workers that make their product possible, by supplying safe working conditions and a living wage to workers in developing nations. Their main aim is to level the playing field between producers in developing nations and producers in developed nations.

Who Determines What Is and Isn’t Fair Trade?

There are several organizations committed to fair trade business practices that offer third-party certification. These include the World Fair Trade Organization, Fair for Life, The Fairtrade System, Naturland Fair, Fair Trade USA, Fairtrade International, and others. 

These organizations may differ on the specific practices they’re looking for and their method for ensuring they're held to, but they all have the same goal in mind- to ensure that workers everywhere are treated fairly. 

There are some concerns that these certifications have on the whole replaced transparency, which isn’t great. It’s nice to have a trusted organization do the research and vetting process for you, but it’s also nice to be able to check up on a certain company yourself if you ever want to.

Direct Trade Definition

Direct Trade, so far, is a concept that’s largely limited to coffee roasters and chocolate makers. 

At its best, Direct Trade is designed to pick up where fair trade left off, to go above and beyond in ensuring the quality of not only the product but also the treatment of workers in every step of production.

In some ways, direct trade is an attempt to get around the red tape of fair trade while still following its principals. Kind of following the spirit of the law without necessarily following the letter of the law.

Direct trade businesses want to ensure that everyone in their production process is treated fairly, but they also recognize that the more people involved in production, the harder that is to ensure. So, instead of compromising on their values, they instead limit the number of middlemen like importers, exporters, and oversight organizations to make things a bit simpler.

Direct trade companies work with producers and distributors, well...directly.

This direct exchange allows both parties an opportunity to negotiate for prices and terms that are fair for them. As a result, producers and distributors get paid what they want, and direct trade companies usually get a higher-quality product, since they’re able to give more input on the production process.

As the model catches on in the coffee and chocolate industry, we may soon see it spread to other industries, as was the case with the fair trade model.

For this to work, and for customers to be assured that the company is as ethical as it claims, there needs to be a high level of transparency.

Who Determines What Is and Isn’t Direct Trade?

At the moment, it’s mostly down to consumers themselves.

Since there are currently no third-party certifications or overseeing organizations to make sure companies that bill themselves as direct trade are really playing by the rules, customers need to be prepared to do their own digging and determine whether a company’s business practices meet your personal standards.

Of course, an informed consumer could always rely on DoneGood to do the digging for them!

Direct trade is still a fairly new term, so there may soon be third-party organizations popping up to oversee companies using the term direct trade, just as we saw happen with the term fair trade.

On the other hand, if direct trade is a subtle rejection of the bureaucracy of fair trade, any oversight organizations that do spring up may not be able to gain much traction in the industry.

Practical Differences

In a lot of ways, fair trade is the old timer on the block, familiar and comfortably worn-in, while direct trade is the newcomer that has a lot of heart, but makes no promises.

Fair trade has been around long enough to become highly standardized and regulated, but it’s that very process of verification that some people feel has sucked the soul out of the idea.

Direct trade is a fresh idea, with bright-eyed businesspeople eagerly pursuing it, but it’s largely uncharted territory in terms of, you know, rules.

Which route a company takes largely depends on ideals and preferred business practices, but for a consumer, it’s a lot less black and white.

A lot of the most well-known and respected ethical brands are likely to be fair trade certified, but if you only shop with them, you may miss out on some great new, up-and-coming direct trade brands. 

So, Which Is Better?

Well, it depends.

Not what you wanted to hear, I know.

But like everything, there’s a right way and a wrong way to go about this. Whether fair trade or direct trade is better largely depends on the way that the specific company you’re looking at is carrying it out.

There can be ethical brands doing everything they can to ensure fair treatment at every step of the supply chain who have never become Fair Trade Certified.

On the other hand, there could be less ethical companies claiming to follow direct trade practices when they’re really doing the bare minimum (or less, since direct trade is not a protected term and there aren’t any third-party certifications for it yet.)

The great news is, as a consumer, you don’t have to choose just one. You can continue to shop your favorite, fully-vetter fair trade brands and try out a new direct trade company with transparent, ethical practices. 

The specific company you choose to buy from will make a much bigger difference than just choosing fair trade or direct trade and sticking to it. There are better and worse fair trade companies just like there are better and worse direct trade companies. 

The trick is to shop with the better companies while avoiding the worse ones, regardless of which business model they’re using.


 
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Kayla Robbins
DoneGood Contributor

A freelance writer working with bighearted businesses who want to better our world.

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Kayla Robbins