BLOOMBERG – A visit to the chocolate aisle of any grocery store can yield a bewildering array of certification logos, each seeking to assure buyers that the cocoa used to make it was produced according to some measure of sustainability.
Labels from groups like the Rainforest Alliance pledge the cocoa inside “was produced by farmers, foresters, and/or companies working together to create a world where people and nature thrive in harmony”. Fair Trade Certified says items bearing its label are made using methods that support social, economic and environmental sustainability. Many chocolate brands have their own sustainability logos: Mondelez’s “Cocoa Life” represents the chocolate was “made the right way – protecting the planet and respecting the human rights of people in our value chain.” Nestle’s “Cocoa Plan” echoes that sentiment.
Today, around one-third of cocoa products carry some guarantee of estimable provenance. But that leaves a lot of room for what suppliers and human rights advocates contend is a broader reality – that a lot of cocoa production is far from sustainable. Marked by child labour, deforestation and allegations of greenwashing, the industry has arrived at a critical juncture.
As demand for cocoa climbs, the African nations where most of it is grown are seeking more compensation for impoverished farmers.
The USD13 billion cocoa market has been expanding at a steady clip for decades. Asian consumers led by China and India are projected to soon overtake Western Europe in terms of cocoa consumption, according to Singapore-based food ingredients maker Olam Group.
But at the beginning of the supply chain, all is not well. More than two-thirds of the global supply comes from West Africa, and the prices paid to farmers are often rock bottom. Just six per cent of the price of a chocolate bar ends up in their hands, according to the Fairtrade Foundation. Some 90 per cent of farmers in Ivory Coast and 70 per cent in Ghana fall below the International Labour Organization’s poverty threshold of USD2.14 per day.
Last year, Ivory Coast and Ghana increased the price they pay to farmers for their crop at the start of the main harvest by nine per cent and 21 per cent respectively, but the price hikes failed to offset surging inflation.
“The system has always been designed to give consumers the cheapest possible product and make sure that the large global multinationals are making sufficient profit,” said managing director of Voice Network Antonie Fountain, an organisation of NGOs and labor unions focussed on cocoa sustainability. “But it’s driving extreme poverty at the beginning of the supply chain.” The World Cocoa Foundation, a global industry lobby, didn’t respond to requests for comment.
This dissonance between cocoa industry claims of sustainability and the economic crises faced by many farmers has had a grave knock-on effect for the environment. Cocoa grows in the warm, humid conditions endemic to regions once covered by tropical rainforests.
Growers desperate to make enough money to survive have sought to expand their acreage, with disastrous consequences. In Ivory Coast, the world’s top cocoa producer, about 80 per cent of rainforests have been destroyed – much of it to grow cocoa.
“In desperation, the farmer just goes and grows more cocoa,” said Miguel Orellana, whose company Cacao Criollo Arriba makes chocolate sold in Germany with beans grown in Ecuador. “And the way to do that is destroy more rainforest and plant more cocoa trees.”
“Farmers in Ghana and Côte d’Ivoire are only paid about 80 per cent of the cost of production,” said Obed Owusu-Addai, a campaigner for EcoCare Ghana, explaining the financial straits of cocoa growers. The two nations tried to impose a “living income differential” fee of USD400 per metric tonne, but some buyers responded by lowering a separate payment made to producers in the two countries, the “origin” premium. Eight out of ten of those Owusu-Addai’s organisation polled said they would prefer to get out of cocoa altogether, he said.
A research fellow at University College London Michael Odijie who has studied Ivory Coast smallholder farms, from which most of the nation’s cocoa originates. He said the way out of the vicious cycle – both for farmers and the environment – is to pay them a living wage.
“Raising income means they can employ more labor to replant instead of moving into the forest,” Odijie said. His study found the labor cost of destroying forests for cocoa planting is two workers; replanting on land already being cultivated, as becomes necessary when trees age and productivity diminishes, requires eight workers.
Some consumer giants said they are trying to help farmers boost tree yields by providing both fertiliser and agricultural training. They have developed programmes to teach efficient pruning methods or encourage the planting of other crops alongside cocoa. Growing bananas or mangoes for example helps keep forests intact and increase cocoa crops, since cocoa grows best in the shade of other trees.
Nestlé helps pay for trained laborers to assist West African farmers with better growth practices, said Darrell High, who leads the company’s cocoa sustainability strategy. But Odijie said programmes such as these, which are also aimed in part at diversifying farmer income, miss a larger point. “The problem is that to qualify, you have to keep on producing cocoa,” he said.
Ken Giller is a professor in the department of plant sciences at Wageningen University in the Netherlands. He supports company initiatives to improve cocoa yield in a sustainable fashion – though with caveats.
“They often really show great benefits, but it’s impossible for companies to do that for every farmer” because of the expense, he said. So these programmes tend to be aimed at larger farms, while smallholders who need the benefits most miss out. Giller also noted that “boosting productivity makes it more attractive to grow cocoa – and therefore more attractive to clear rainforest”.
High contends such perverse incentives can be addressed by aligning payments to households, rather than to the amount of cocoa a household produces. Nestle’s programmes are reaching small farmers, he said, “but the frustration has been a lack of adoption of key practices like pruning”.
Smaller companies and entrepreneurs who boast direct control of supply chains criticise major players for overstating the effectiveness of sustainability campaigns, given the human and environmental calamities bedeviling the industry. Orellana of Cacao Criollo Arriba is one of them. “If you read the companies’ websites about cocoa,” he said, “you would be ready to give them donations for the work that they are doing.”
Short of controlling the entire supply chain, another strategy is to shorten it. Beyond Good, a company based in New York City, buys direct from farmers in Madagascar and manufactures its chocolate there. While the roughly 12,000 metric tonnes of cocoa produced annually by Madagascar is negligible in a global market of 5.5 million metric tonnes, it nevertheless means significant income for farmers there.
Beyond Good’s founder and chief executive Tim McCollum, contends he’s seeing results in terms of environmental sustainability. “Most of the deforestation in Madagascar is due to human poverty, and the only place I’ve seen forest being regenerated outside of NGO replanting projects is in our supply chain,” he said. The country experienced a 25-per-cent decrease in tree cover between 2001 and 2021.
Owusu-Addai said he hopes the European Union (EU) and United States government will step in to help. But he fears an EU initiative requiring buyers of six commodities (including cocoa) to insulate their supply chains against deforestation will further burden smallholders. “There need to be regulations that will compel these chocolate companies to pay fair prices for cocoa farmers,” Owusu-Addai said.
That might lead to a new label affixed to chocolate bars: Now 20 per cent more expensive.
