cocoa
barometer

executive summary2020

Challenges as large as they have ever been

Rampant farmer poverty, extensive deforestation, human and labour rights
violations including child labour, an over-dependency on pesticides; thechallenges facing the cocoa sector remain as large as they have ever been.
Two decades of interventions and increasing dialogue have not tackled
the challenges at the necessary scale, and have failed to solve the root
problem of cocoa farmer poverty. These voluntary and top-down efforts
have not been able to address underlying problems such as structurally
low cocoa prices, weak rural infrastructure, a lack of transparency andaccountability, and sometimes corrupt and inefficient government
interventions and policies.

Market concentration remains highA small group of cocoa and chocolate companies dominate the market;
each sourcing from hundreds of thousands of farmers, giving them
immense market power. Retailers - large players on a national but notglobal level, driving prices down while making higher margins than mostof the supply chain - are increasingly becoming part of the discussion,
especially on national levels through the national cocoa platforms.

Challenges in the Cocoa Sector

HumanRights
Environmental
Protection
Poverty &Malnutrition
Child Labour& Human Trafficking

LivingIncomeLabour Rights& Safe Working Conditions

Production / Consumption

Lack of Education& Healthcare

Cocoa production in 1,000 tonnes 2019/20 (forecast)
Domestic consumption of cocoa in 1,000 tonnes 2018/19
Source: ICCO 2020, Table 2, 40

Low Farm
Gate Prices

Deforestation& Degradation
Loss of biodiversity
High use ofagrochemicals
Climate Change

Low Yields
High Risks

1,922348

Rest ofAmericas

1,164816
USA376

Rest ofAsia

Europe

779

169
666

188

3,598

Brasil328

Ecuador

849
331

Rest ofAmericas

190

Brasil2,130

Côte d’ Ivoire

Rest ofAfrica

802

Ghana

51

India

183

Japan

86
83 China

Australia

200 277

Indonesia

77

Rest of Asia

Certified cocoa has not raised the bar

Most companies report significant progress in traceability of cocoa
sourcing, though definitions of traceability differ. The race for certified
volumes has not led to the bar being raised, and with a wider range ofinterventions at the sector’s disposal, the relevance of certification standards
has been declining. Cocoa cannot claim to be sustainable merely on thebasis of certification, although its infrastructure provides a framework bywhich many other necessary interventions can be rolled out.

Voluntary sector collaborations

National multi-stakeholder platforms have been developed in several
major cocoa consuming countries, outlining national ambitions forsustainable development of the cocoa sector. Precompetitive industry
collaboration on productivity increase, deforestation and child labour are
in various stages of implementation, though they have shown little impact
so far. A sector-wide commitment to a living income for cocoa farmers is
notably missing, although a weakness of all these collaborations is theirvoluntary nature, and the lack of consequences if ambitions are not met.

Living Income

A living income is a human right. Furthermore, solving poverty isnecessary because the wide range of challenges facing the sector will
be impossible to tackle if farming households still live in poverty. Current
efforts focus on technical solutions such as increasing productivity anddiversifying production. Though these are necessary steps, these technicalsolutions alone will not suffice. Additionally, technical approaches also
have their own challenges, and require available and affordable inputs,
labour and financing. Furthermore, productivity increase could lead tooverproduction, deforestation and price collapse if not managed well.
To provide a living income to farmers will require dealing with issuesof power and political economy, such as price formation, skewed value
distribution, the asymmetrical bargaining power of farmers, unbridledmarket concentration, and a lack of transparency and accountability in thesector. Farm gate prices are a key missing ingredient, and are a short termsolution that every company can engage in almost immediately. The Living
Income Differential - a $400 per tonne premium - has been implemented
by the main cocoa growing countries Côte d'Ivoire and Ghana, thereby
raising farm gate prices by 21% and 28% respectively. This is an importantstep, although it is far from sufficient to provide farmers a living income,despite its name. Additionally, concerns remain at the lack of inclusion ofother stakeholders in the development of these plans, including farmerorganisations, civil society, and other cocoa producing governments.

Current farm gate prices / desired farm gate prices
Ghana$ 1,810
Côte d’Ivoire$ 1,804$ 3,116$ 3,166

Human Rights

Human rights violations are pervasive in the cocoa sector. Sanitationand clean drinking water, quality education and healthcare are often
unavailable or unaffordable, and poverty leads to infant malnutrition andstunting, which can lead to a range of health disadvantages. Rule of law,land and tree tenure security, and labour rights for tenants as well as
seasonal and hired workers are often overlooked in most human rights
discussions. Cross-cutting through all of this, women do much of the workin cocoa, but are not recognised or remunerated accordingly, and areoften excluded from ownership and participation in many aspects of life.
All cocoa sustainability programmes should be designed specifically withfemale inclusion in mind.

Child Labour

Despite company promises to reduce the worst forms of child labour,child labour remains a major issue in the cocoa sector. Most of the 1.5
million child labourers in cocoa in Ghana and Cote d’Ivoire are exposed
to multiple forms of hazardous work, such as working with dangerous
tools or harmful pesticides. Companies have done too little, too late totackle the problem. Though current best-practice interventions might
be able take some children out of child labour, root causes – such as
farmer poverty, absence of or access to good affordable schools andinadequate local infrastructure – must be addressed to solve the problemof child labour. Investments and ambitions must be increased by several
magnitudes, focussing on both remediation and prevention.

Environment

Environmental concerns are increasingly coming to play in the cocoa
sector. Global climate change as well as regional microclimate change
due to deforestation already have a massive impact on cocoa production
and will do so even more in the coming years. This is further exacerbatedby land degradation through other competing commodities, aswell as mining and logging. The indiscriminate and untrained use ofagrochemicals is largely inefficient and endangers the health of cocoa
farmers and the entire cocoa growing landscapes. It can also lead tofurther destabilisation of natural ecosystems, whilst not providing efficient
benefits to yields.

Deforestation

Cocoa production threatens rainforests globally - from West Africa,
through Indonesia, the Amazon Basin, Colombia, and the Congo Basin- leading to loss of biodiversity, habitat and ecosystem services. The
disappearance of rainforests contributes to accelerating climate change,

as they are massive carbon storage systems and also function as ‘rainmachines’. Monitoring systems - at both farm and landscape level are essential first steps that must be taken, as is forest restoration andprotection of remaining forests.

Necessary Change
in the Cocoa Sector

Agroforestry

Agroforestry should not replace original forests. However, in previously
degraded areas, agroforestry can bring a wide range of ecologicalbenefits; biodiversity conservation of flora and fauna, carbon
sequestration, preserving and strengthening soil moisture and fertility,
contributing to pest and disease control, and microclimatic control such as
stimulating rainfall, and many other benefits. It is important for alignment
on definitions of agroforestry at landscape level, and for all cocoa to begrown in increasingly diverse agroforestry systems.

Inclusive approachesAlthough local civil society organizations in producing nations haveincreasingly started to take part in the political dialogue in the cocoa
sector, efforts to solve complex issues of injustice and unsustainability
in the cocoa sector have not been inclusive or holistic enough. Insteadof inviting farmers and civil society to take a seat at the decision-making
table, problems have been assessed using a top-down industrybased approach. Although this might serve the interests of industryand government, it does not serve the producer farmers and theircommunities. Inclusive and deliberative approaches are necessary, withfarmers and civil society being co-equals in these processes.

Regulatory approaches necessary

Cocoa grown under what should be illegal circumstances still finds amarket because it is not prohibited to profit from human rights abuses
and deforestation in cocoa consuming countries. Within the multitude ofgovernment-driven covenants, national multi-stakeholder platforms andsector-wide collaborations, there are no penalties for non-compliance,neither is there enforcement to meet targets. Ironically, those at thebottom – cocoa farmers often living below the poverty line – do lose theirsustainable cocoa certification if they do not comply. The past two years,
however, have seen increasing support for mandatory human rights andenvironmental due diligence regulations, from both government andcorporate side

HumanRights

CLMRS

Environmental
Protection

Due
Diligence

Community
Development

Traceability
Agroforestry

Women's
Empowerment

LivingIncomeLand andTree Tenure

Access to financeHigher Yields

Access to Infrastructure

Higher Farm Gate Prices
Income Diversification

Farmer Organisation & Empowerment

Necessary Enabling
Environment
MandatoryRegulations

Transparency &Accountability
Holistic LandscapeApproaches

Bottom-up
Inclusion

Conclusion

Most challenges in the cocoa sector are systemic and require structuralinterventions at landscape, national, and global level. The core of
the solution lies in the enabling environment; from a mandatoryenvironmental and human rights due diligence regulation, through a solidand empowered position for smallholder farmers in global supply chains,
to empowering farmers and local civil society to keep their governments
accountable, supported by transparency, due diligence and accountability
systems, and open monitoring and traceability of the sector. This enabling
environment must be supported through much greater investments andefforts by all actors; industry, governments and donors alike.

Colophon Executive Summary 2020 Cocoa Barometer, Text: Antonie C. Fountain and Friedel Huetz-Adams

www.cocoabarometer.org