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What are Fair Trade Cooperatives?

By J.M. Densing
Updated May 16, 2024
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Fair trade cooperatives are groups of people who agree to work together to sell a product by following fair trade principles in a way that benefits all of the group's members. The cooperative members share resources and profits, and they agree to charge the same price for their product rather than compete against one another. In setting prices, they follow fair trade principles — essentially increasing the amount of money paid to laborers and producers such as farmers and craftsmen — and charge a price that allows members to earn a living wage for their efforts. In addition, in the process of producing their product they use environmentally responsible practices. Profits are shared among members, and often a portion is used to benefit the community.

Fair trade cooperatives produce many types of products. Some examples of fair trade products are coffee, chocolate, tea, fruit, sugar, clothing, crafts and artwork. Members of the cooperative each own a share in the business and have an equal vote in decisions. They also receive an equal share in profits. They strive to provide safe, humane working conditions and comply with human rights and labor laws.

In many areas of the world, fair trade cooperatives are extremely important to their members. Fair trade cooperatives allow their members to live more comfortably and to be able to provide the basic necessities for their families. Workers, farmers, artists and craftspeople in many places often receive extremely low pay for the goods and services they provide, and they find themselves unable to pay for basic needs such as food and medical care.

By working together in fair trade cooperatives, members are able to share resources and lower the costs to produce their products, which raises their profits. Fair trade cooperatives also set prices in a way that benefits members. Rather than minimum prices that benefit consumers, they set prices that try to cover the costs of production and allow their members to earn a wage that covers necessities such as food, clothing, shelter and medical care. Frequently, portions of profits are used to help the communities in which the members live, funding projects such as schools, clinics and housing. All members of the cooperative vote to decide which projects to fund.

In producing their goods and services, members of fair trade cooperatives are supposed to use environmentally responsible practices. This includes the use of renewable resources and materials for products such as crafts and clothing. Many food products, such as coffee and chocolate, are organic. Fertilizer and pesticide use is discouraged, and certain chemicals are banned. Farmers also are supposed to follow practices that encourage the conservation of land and water; examples of this include crop rotation and the targeting of irrigation directly toward plant roots.

There are several organizations that can certify or label fair trade cooperatives and their products. Products often are certified by the international Fair Trade Labeling Organization. Cooperatives can be members of the Fair Trade Federation or the World Fair Trade Organization, among others. Certification or labeling helps consumers know that a product was produced following fair trade principles.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
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