Mainstreaming Versus Fairwashing in Fair Trade Operations

This study explores the effects of competition on fair trade operations. Specifically, as a benchmark, we first consider a model with a single fair trade organization (FTO), that is, a monopoly FTO. We then extend the analysis to a setting with two competing FTOs, that is, duopoly FTOs. Although both FTOs share the common goal of alleviating farmers’ poverty, they adopt contrasting strategies: One FTO seeks to lower the barriers to fair trade, aiming to mainstream it, while the other maintains stricter standards to prevent fairwashing (or greenwashing ). Following industry practices, we implement two modes of competition and compare them with the monopoly benchmark. We find that, while competition between FTOs increases the aggregate demand for fair trade certified products ( mainstreaming ), it results in less aggregate premium ( fairwashing ). Furthermore, we consider the potential application of blockchain technology in fair trade operations and demonstrate that it offers a promising solution to mitigate the fairwashing effects from competition between FTOs.