With the festive season in full swing, the chocolate industry is once again being urged to play fair and ‘put its money where its mouth is,’ pay cocoa farmers a living income, and implement radical reforms to buying practices.
The VOICE Network paper, Good Purchasing Practices, points to harmful business behaviour as the root cause behind the cocoa industry's persistent social and environmental problems.
Large chocolate and cocoa companies are not paying prices that allow cocoa farmers to earn a living income. According to the paper, they will see their sales and profits gain a seasonal boost, as they do every year. However, evidence suggests that cocoa farmers in Cote d’Ivoire and Ghana will not benefit equally.
It points to research by Oxfam, which has shown that cocoa farmers in Ghana saw their net incomes decrease by over 16% between the 2019-2020 and 2021/2022 harvesting seasons. In that same period, the world’s four largest public chocolate corporations, Hershey, Lindt, Mondelēz, and Nestlé, have together made nearly $15 billion in profits from their confectionery divisions alone, up by an average of 16%.
Dr Julian Oram, Senior Director at Mighty Earth, said: “During a visit to Ghana in March, I spoke to cocoa farmers who expressed hope that cocoa prices would rise in 2023 compared to last year. But even if this happened, they believed it would likely not be enough to cover their costs of production. This dilemma entrenches poverty, as well as the social and environmental problems that come with it, and is a clear illustration of why cocoa traders and chocolate companies must now commit to paying a price that provides farmers with a living income.”
Corporate approaches
According to the paper, current approaches by chocolate and cocoa companies to raise farmer income have had a marginal impact at best. “This is because most programmes aimed at improving livelihoods are focused on higher yields, farmer training, and income diversification, rather than reforming companies’ own purchasing practices. A notable exception of this is Tony Chocolonely’s Open Chain approach. But other than that no large chocolate or cocoa companies are paying higher prices at farmgate level”.
The need to change
Bakary Traoré, IDEF, Cote d’Ivoire said: “Companies have made numerous commitments to improve producers' incomes, but the data keeps coming back, and everywhere, it's the same, implacable observation. Most companies are still stuck in purchasing practices from another era. It's time for the market to adopt fairer practices.”
After 20 years of limited progress on cocoa, companies need to start addressing their core business, which is the buying and selling of cocoa products. A farmgate living income reference price (LIRP) is the core of any good purchasing practices. Next, the Cocoa Barometer claims that transparency and long-term contracts are needed to reduce the risk to farmers.
Antonie Fountain, director of the VOICE network, said: "The core business of companies is the buying and selling their products, not running sustainability programs. Companies are only sustainable if their core business is. And their core business is only sustainable if their purchasing practices are. This means to pay a fair price, take a fair share of the risk, and be accountable for it.”
Report recommendations
- Traders, retailers, and brands should implement long-term asymmetrical contracts within a specific timeframe, including realistic volumes, the living income reference price, renegotiation mechanisms, and clear rights and responsibilities for buyers and farmers.
- Standard, sector-wide contracts for trading at the farmer/cooperative level should be implemented, providing clarity and assurance to farmers and farmer organizations
- Contracts and volumes must be respected, and effective complaint mechanisms with real consequences for noncompliance should be in place.
- The development of robust and democratically run cooperatives should be supported as a critical mechanism to reduce risks for farmers.
- Companies should publish a time-bound living income policy and annually report on how the living income gap is closed, including a gender-disaggregated measurement.
- Companies should publicly report annually on responsible purchasing KPIs, including volumes and farm gate prices paid.
- Farmers should be paid for data sharing and ensure access and ownership
Ethical standards
VOICE Network’s analysis comes on the back of another damming report from Ethical Consumer claiming leading chocolate brands have been criticised for having ‘inadequate’ ethical standards in their cocoa supply chain. Only 17 out of 82 brands investigated by the consumer organisation were judged to be using chocolate from suppliers, ensuring farmers were paid enough to live on.
As a result, there is a risk that Advent calendars, chocolate Santas and other Christmas treats will have been produced with child labour, the magazine claims. Approximately 60% of the world’s cocoa comes from West Africa, and about six in 10 cocoa-growing households in Ghana are estimated to use child labour, with four in 10 in Cote d’Ivoire, the organisation claims.
Ethical Consumer recommended Tony’s Chocolonely, Divine, and Chocolat Madagascar among the brands that paid Fairtrade International or Rainforest Alliance rates or higher and use chocolate made in the country of origin rather than from imported beans. That helps the economies of cocoa-producing countries rather than European manufacturers.
It rated Mars, Nestlé, and Mondelēz, which owns the Cadbury brand in the UK, as poor and ‘brands to avoid,’ while Ferrero was rated poor. In response, the companies said that they have adopted initiatives to further improve the sustainable sourcing of cocoa and support a living income for farmers.
Joke Aerts, of Tony’s Open Chain, the company’s supply chain platform, told the Guardian it was trying “to put human rights at the core of purchasing practices” by using traceable cocoa beans, paying the living income reference price (the amount a typical farmer needs to make to be able to live), helping farming co-ops to become more professional, working with them for at least five-year periods, and helping farmers improve crop yields so they had less incentive to clear land to plant more cacao trees.