Cocoa companies aiming to improve the sustainability of their supply chains must change their business model to provide higher incomes to farmers in order to become truly sustainable, according to a new report.
In the biennial Cocoa Barometer report released last month, researchers at the nonprofit watchdog group Voice Network said several factors are amplifying the environmental and human rights problems the cocoa industry faces, and producers are failing to tackle the most severe impacts of cocoa production, chief among them: child labor, lack of a living wage for farmers and deforestation.
Current economic conditions, researchers said in the report, are complicating the ability of cocoa farmers to make necessary improvements to their operations. Systemic change, as opposed to just improved farming strategies, is needed to ensure the industry can meet its intended goals.
About 1.5 million children in the Ivory Coast and Ghana — the West African countries that produce most of the global cocoa supply — currently are working in jobs that only adults should hold, the report said.
“Investments and ambitions — of both companies and governments — must be increased by several magnitudes if targets on child labour are ever going to be more than greenwashing and empty words,” the report said. “These increased ambitions must be coupled with mandatory regulations.”
Companies in the cocoa sector have focused too heavily on increasing the yields of cocoa produced in order to tackle the problem of low farmer income. Cocoa producers saw this as a beneficial way to elevating farmer incomes by increasing the amount of cocoa grown and sold. This situation, researchers wrote, only has exacerbated sustainability problems in the sector, and has “not necessarily” led to an increase in net income for farmers. Instead, the Voice Network suggested that producers should raise the wages of its farmers, which the nonprofit said could decrease both deforestation and reliance on child labor.
Voice Network said a time-bound commitment to establish a living income for cocoa farmers must be enacted by all CPGs in the space. Also, stakeholder groups must hold companies accountable for setting a living income to make it a priority in the industry.
The report said one positive development happened in July 2022 when leading cocoa providers signed a pact with the governments of the Ivory Coast and Ghana to transition farmers to a living income.
“The two branches of the cocoa problem tree — environmental protection and human rights — both stand on a tree trunk of farmer poverty,” the report said. “This poverty is exacerbated by the current cost-of-living crisis.”
Companies set goals to change course
In response to criticism from environmental groups and organizations advocating for cocoa farmers, CPGs in the cocoa space have ramped up efforts behind their sustainability plans in recent years. These primarily focus on improving the livelihoods of farmers and lowering the ecological footprint of the sector.
Nestlé announced in early 2022 its intention to triple its cocoa sustainability funding to $1.4 billion by 2030. The Swiss company stated that it would use some of the money to provide financial incentives to African families who work to prevent child labor and lower their carbon footprint.
Snack giant Mondelēz International said this fall it will spend an additional $600 million on its cocoa sustainability program, which would bring its commitments in the space to $1 billion.
But Voice Network said in its report that changes are not being made quickly enough. The recent report indicates the significant work remaining to improve the lives of workers and curb the environmental impact of the industry.
However, in recently released cocoa sustainability reports, CPGs offered details about how they believe they are making necessary progress.
Barry Callebaut said in its 2021-2022 sustainability report that 80.6% of the farmer groups in its supply chain have programs in place to prevent child labor, up from 61.4% the year prior. The cocoa producer said it is working with Nestlé to incentivize school enrollment for children and is prioritizing diversifying the streams of income for its farmers.
OFI, the ingredients giant, has set a goal to provide a living income for 150,000 of its cocoa farmers by 2030. The largest cocoa producer in the space also aims to eliminate child labor from its cocoa supply chain.
Candy giant Mars Wrigley said in its most recent cocoa sustainability report that it launched two programs that aim to supply a living income to 14,000 farmers in its supply chain by 2030.
Cocoa production accounts for roughly 70% of deforestation in the Ivory Coast, according to the World Wildlife Fund. Traceability from CPGs is needed to equip farmers with a higher income and combat deforestation.
According to Voice Network, most of the leading cocoa producers trace less than half of their cocoa to farms. OFI, the largest producer in the space, traces 38% of its cocoa to farms. Barry Callebaut traces 30%, while Cargill traces 49%.
Several cocoa CPGs said a government-mandated traceability program is needed to achieve full traceability in the sector.
Barry Callebaut said in its report that it is willing to work with the governments of the Ivory Coast and Ghana to exchange industry-gathered farmer data.
OFI said it plans to create an increase in tree carbon stocks, which it said could reverse some of the impact of deforestation.
Mars Wrigley said it has traced 61% of its cocoa thus far and hopes to achieve 100% by 2025. The company also plans to achieve 100% deforestation free by that year.
Investor groups could spur CPGs to take more significant steps by using their economic heft to enact change, which is happening in other sectors. For example, groups of shareholders worth trillions in assets are pressuring meat and dairy producers to target deforestation in the companies’ supply chains, which the groups detailed at the United Nations’ COP15 summit last month.