Scale of solutions vs. problem

18%

Number of children in
ICI CLMRS ambition for2020: 400,000
Number of children
in cocoa in West Africa:(Source ICI)

15%

Number of farmers in
CocoaAction ambition
for 2020: 300,000
Number of farmers inCôte d’Ivôire and Ghana:cocoa
barometer
2018
Executive Summary
Scale of efforts vs. scale of problem
Sector-wide efforts to improve the lives of farmers,
communities and the environment made in thepast decade have not led to significant impact atscale. Most of the cocoa farmers are not reachedby current interventions. In fact, the modest scopeof the proposed solutions does not even comeclose to addressing the scale of the problem. If
business as usual continues, it will be decades – ifever – before human rights will be respected andand environmental protection will be a basis forsustainability in the cocoa sector.
Price Decline
The world market price for cocoa saw a steep
decline between September 2016 and February
2017. More than a third of its value was wiped out,
with a tonne of cocoa going from above US$3,000
to below US$1,900 in a matter of months. Despite
various voices warning that a focus on production
increase policies would lead to a price collapse, mostcompanies and governments were not preparedwhen it happened.

(Source CocoaAction)

Current farmer income:
$0.78
31%

Living income:(Source Fairtrade)

Smallholder cocoa farmers in Cote d’Ivoire, alreadystruggling with poverty, have seen their income fromcocoa (by far their most important income source)
decline by as much as 37% from one year to the next.
Although prices seem to be recovering at present,
the point remains; farmers are vulnerable to pricedrops.
Low prices (as well as price fluctuations) are a major
threat to all efforts to achieve sustainable cocoa
sector. As such, price declines are one of the mosturgent issues the sector should address. Farmers
bear the risks of a volatile price, while other market
actors have means to adapt and even make windfall
profits. Some reports from farmers indicate that
not only are they not earning a living income, butthat some of them are now growing cocoa at aloss. Still, there is no concerted effort by industry orgovernments to alleviate even a part of the burdenof this income shock for the already impoverishedsmallholder farmers.

Living income
Since our focus on living income in the 2015 Cocoa
Barometer, living income and farmer livelihoods
have become keystones in the cocoa conversation,with some promising steps being taken. This startof an alignment should lead in the short term tocoordinated activities to increase farmer’s income
levels, specifically in West Africa. For this to progress,
companies need to commit to to pay living income
and living wages in their supply chains, and makedata on this available. Productivity and available
labours hours are important elements within thiscalculation.
A recent report by Fairtrade International submits afirst attempt to calculate a living income for cocoa
farmers in Côte d’Ivôire of $2.51 per day, andcompares this to actual farmers’ income of $0.78 perday. On average, cocoa farmer households earn only
37% of a living income in rural Côte d’Ivôire.
Child labour
The release of the 2015 Tulane Report on theworst forms of child labour in cocoa production
demonstrated that despite more than a decade ofefforts, child labour is widespread. Although therewas a slight relative decline of child labour, anincrease in cocoa production had led to an absoluteincrease of child labourers to 2.1 million children
in West Africa alone. Not a single company or
government is anywhere near reaching the sectorwide objective of the elimination of child labour,and not even near their commitments of a 70%
reduction of child labour by 2020. Since child labour
is a symptom of deeper problems, it will not be
eradicated without tackling systemic poverty and alack of local infrastructures. The recent price decline
will most likely also negatively affect child labour.
Child Labour Monitoring and Remediation Systems
are useful project-based approaches, and should
be scaled up. At the same time, with the collected
data and evidence, more comprehensive national
interventions will be necessary to achieve thenecessary scale. It is a matter of urgency for efforts to
be increased – in funding as well as in ambition andpolitical will – as current levels of engagement will
not succeed in eliminating child labour.
Deforestation and land use
Global cocoa production has increased fourfold
since 1960, at the expense of native forests,
specifically in West Africa. This can be equallyattributed to corporate disinterest in theenvironmental effects of the supply of cheap cocoa,
and to an almost completely absent government

enforcement of environmentally protected areas. As
a result, more than ninety per cent of West Africa’s
original forests are gone, and any remaining forest
must be protected. In dealing with deforestation,governments and industry must address several
important elements. National deforestation plans are
not enough; a global moratorium on deforestationis needed to ensure cocoa transitions from a slashand-burn crop to a sedentary commodity. This must
be coupled with land tenure reform, and policies
to stimulate agroforestry. It is essential that humanrights are upheld when protecting forests; forced
evictions coupled with violence have no place in asustainable cocoa sector.

Infrastructure, Public Spending and Corruption
The past years have seen governments claiming toroll out infrastructure to rural areas. However, there
is a gap between the claims and actual delivered
services. For example, the Ghana COCOBOD has
been shaken by corruption scandals in the lastyears, where millions of dollars of public funds havebeen diverted. Transparency and accountability
are needed around public spending and support
measures for cocoa farmers. It is a matter ofimportance for the sector to come up with acomprehensive strategy to foster transparency andaccountability.
Legislative Frameworks
Voluntary corporate social responsibility initiatives
by companies alone cannot prevent human rights
violations and environmental degradation. Someof the core challenges will require legislation in thecountries that are either the home of – or important
operating bases for – the largest companies. Suchlegislation should be based on the United Nations
Guiding Principles on Business and Human Rights.
There should be coordination for a commonprocess, preferably at EU level, or even at UN level.
Governments and companies from the cocoa andchocolate industry should support such an effort.
Sector-wide efforts
The global cocoa sector is engaging in an ever more
inclusive dialogue and recognition of the challenges.
National platforms, international platforms, andsubject specific platforms all exist beside each other.
Such platforms need to lead to actual change, notjust more dialogue. There should be much morealignment at a transnational level to achieve proper
impact. Moreover, retailers must be much moreengaged in the global cocoa dialogue

Produced/sold as Certified

Additionally, almost all of the efforts in the cocoa
sector are based on technical solutions, e.g.
increased productivity, crop diversification, use ofagrochemicals and new planting material, or theprovision of trainings to improve farming techniques.
However, the challenges facing the cocoa sector areoften not technical, but deal with power and political
economy, such as price formation, the asymmetricalbargaining power of farmers, unbridled market
concentration of multinationals, and a lack oftransparency and accountability. Tackling politicalproblems with technical solutions will not foster asustainable cocoa sector, but simply install anotherform of a business-as-usual scenario.

National developments
Producing nations have set a few careful first steps
in aligning cocoa policies. This should be further
developed to include supply management andholistic agricultural policies, to ensure significant
improvements for cocoa farmers. Transparency
and accountability are key principles within thisalignment.
Western Europe, the United States, and Australasia
are not only the largest bloc of consuming nations;they are also the home states for almost all of thelarge cocoa and chocolate multinationals. As such,they have a doubly important role to play in making
the cocoa sector respect human rights and protect
the environment.

291
136

2016

252
93

70

2014

RFA/SAN

2015

178

2017

218

458

481
177

2016

223

2015

238

2014

2017

2016

2015

2014

UTZ

491

639

390

582

575

1,166

918

879

1,188

1,449

(data from questionnaire)

Fairtrade
Certification
Several companies have committed to reaching
100 percent certification of their cocoa. However,even if they reach this goal, certification alone, using
existing standards, is not a sufficient solution. Noneof the major standards (Rainforest Alliance, UTZ orFairtrade) have been able to significantly contributeto ensuring farmers achieving a living income,reducing child labour, or halting environmental
degradation. Though average income of certified
farmers might be slightly higher, the overall impact isrelatively low. Premiums make only a slight difference
to a farmer’s income, although they are an importantsource of revenue for cooperatives. Standard-settingorganisations are aware of these problems, but thecompetition between certification schemes has put
them under pressure, and chocolate companies
and retailers looking for the cheapest label havenot led to the bar being raised. Companies areeither moving away from buying certified cocoa
or combining the work of the standard settingorganisations with own projects.
All standards should include living income as a key
requirement. This should include a minimum farm
gate price based on living income calculations, which
could be coupled with a flexible premium.

Focus: Ensuring a Living Income
Cocoa farming will not be sustainable until it canprovide a living income to farmers. There is a clear
role for companies to fundamentally change theirCompanies: Certified cocoa* / used cocoa 20171* certified or own project verified cocoa

Trader/Grinders
36%

Barry Callebaut 3

26%

Olam

42%

950
750

38%

593

19%

500

22%

400

102

Cemoi 4 31%

100

Cocoanect

N.A.

Blommer

1,020

Cargill 5

EcomSucden

Touton 425%

Chocolate Producers
35%

450

Mondelēz International 2

43%

434

Nestlé> 50%

410

75% 200

Hersheys 2Mars 2,470%

135 Ferrero 3

45%

128 Lindt und Sprüngli 6(1) most companies refered to ICCO conversion rates: Cocoa
butter 1.33, Cocoa paste/liquor 1.25, Cocoa Powder andcocoa cake 1.18
(2) cocoa demand estimated(3) 1.9.16-31.8.17(4) 2016(5) 01.06.2016 – 31.05.2017(6) traceable and verified

approach, promoting not just a one-sided productivity
drive, but using net income, not beans per hectare, asa key metric. Net farmer income must become a Key
Performance Indicator for the sector, and data on thismust be publicly shared. Farmers should be supported
and encouraged to increase yield in a sustainable
manner, including through diversification, properuse of agrochemicals, and rejuvenation. In the shortterm, companies should pay a higher farm gate price,
potentially through flexible premiums or unilateral pricehikes. In the medium term, government supported
supply management solutions should be put in place
to control the amount of cocoa available. This should
be coupled with holistic national agricultural policies
that also look at reforestation, crop diversification, land
reforms, and pension schemes.

Focus: Transparency & Accountability
Transparency and Accountability are essential steps
for both companies and governments towards
safeguarding human rights and implementing
sustainability. HRDD should be implemented at nationaland EU or even global level. Grievance mechanisms forvictims of human rights should also be developed andput in place at a mandatory level. While recognising thatgovernments have sovereignty on expenditure, there
is a real need for financial transparency on revenues
from various forms of cocoa taxes and export tariffs, aswell as transparency on expenditures on infrastructure,social, educational and health services, thedevelopment of local communities, and the protectionof the environment.
In the absence of mandatory HRDD, companies shouldseek to develop such processes for their global value
chains and support efforts towards the introductionof such regulation. Additionally, a more balanced
perspective and transparent approach on corporate
reporting should be adopted by companies; not justcommunicating successes and intentions, but also
being open about errors and failures so that sectorwide lessons can be learned.

Conclusion
Many stakeholders in the sector are well aware thatthe present approach – with a multitude of different
strategies and hundreds of projects that are notnecessarily focused on the underlying issues – will not
be successful. Additionally, stakeholders know thatthe ongoing investments in measures to make cocoa
production more sustainable are by far too low to
improve the situation significantly. There is not enoughpolitical will, neither is there enough alignment, senseof urgency, or ambition to tackle the sector’s challenges.