The world market price for cocoa is at an all-time high due to poor harvests. Over the past weeks, reports have surfaced in the media of large companies actively trying to reduce the world market price. Ivorian and Ghanaian farmer-based and civil society organisations have responded in this joint statement last week. Attached (also in French) and below are the thoughts of the members of the VOICE network.

Over recent years, chocolate manufacturers have enjoyed record profits, whilst the vast majority of the farmers at the base of their cocoa supply chains have been unable to meet the basic needs of their families due to low cocoa prices and unfair contract terms. During recent weeks, supply shortages caused by a low harvest have seen cocoa prices climb steadily upwards, offering some hope that small-scale growers in West Africa, where most of the world’s cocoa originates, could begin to reap greater rewards for their labour.

Instead, the companies supplying major chocolate brands have refused to buy cocoa at the increased market prices, claiming that doing so would “create too much risk” for them, if the chocolate companies refuse to pay the asking price down the line.

Clearly, there is a double standard at play. When prices are low, cocoa companies claim “you can’t interfere with the market”. But suddenly, when prices are high, they want intervention in the market. This position is untenable.

Though higher farm gate prices are only part of what’s required to ensure cocoa growers earn a living income, they are a key prerequisite. There is not a business case for higher productivity if prices for farmers are too low and their risks too high. But that has been the stark reality for a very long time now. Farmers cannot simply grow their way out of poverty. But that has been the industry’s flawed approach to poverty alleviation.

Smallholder cocoa farmers do not have the capacity to avoid risk – risks of prices falling due to windfall harvests, or risks of crops failing due to weather or pests and diseases. They absorb the full brunt when prices are low.^[1] And even when prices are high, they hardly benefit, as prices are only high when harvests are bad.

Furthermore, in the two major cocoa producing countries of Ghana and Côte d’Ivoire, the forward sales system means that farmers are not receiving the currently high market prices in any case. Most of the cocoa harvested at the start of the new season on 1 October 2023 was sold already last winter/spring when prices were much lower.

Meanwhile, the large cocoa and chocolate companies continue to make hundreds of millions in profits every year. Companies can do so precisely because they can push risk further upwards in the supply chain – basically saying that the risk is not their problem, but the problem of their supplier – and because they can hedge their risks on the terminal markets.

It is clear who ‘can’t afford’ low prices: cocoa farming households, the vast majority of which live far below a living income line. The same families bear almost all of the risk in the sector.

This current market dynamic should be a wake-up call to everyone about the current system of ‘price discovery’, which benefits the most powerful actors in the supply chain and makes the weakest actors compete with each other.

Farmers cannot win in the current situation.

Virtually all large cocoa and chocolate companies either individually or collectively^[2] have committed to ensuring the farmers in their supply chain earn a living income. Yet just when the price is getting closer to what would be necessary for this to be possible, these same companies turn around and try to push the prices back down again.

These companies are not just the traders – who are directly engaged in the present standoff – but also the chocolate manufacturers and supermarkets, who make the vast majority of the profits in the supply chain and who are also refusing to buy cocoa unless the price is discounted.

Companies engaging in this behaviour are guilty of hypocrisy of the highest order.

As the VOICE Network, we call on companies to:

• In the short term, buy their usual volumes of cocoa at the current market price instead of trying to force the origin governments to lower the price by delaying their purchases or by reducing country differentials (as they are currently doing)
• In the medium term, adopt purchasing practices that enable farmers to earn a living income, including paying a Living Income Reference Price and negotiating long-term asymmetric contracts with small farmer suppliers where the companies start to assume a more equitable portion of the risk.

We call on producer governments to

• Provide transparency on current sales prices – including country differentials and
• Provide transparency about management of the Living Income Differential

We also call to the European Union To ensure that the implementation of the Deforestation Regulation (EUDR) and Corporate Sustainability Due Diligence Directive (CSDDD) ensures a living income for producers and requires companies to adjust their purchasing practices accordingly.

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^[1] The 2022 Cocoa Barometer, as well as the Living Income Compendium of September last year, clearly argue that the business case for Good Agricultural Practices builds upon a conducive enabling environment, which requires governments to ensure good policies are in place, and which requires companies to ensure they are conducting Good Purchasing Practices. A more detailed perspective on these purchasing practices will be available in our forthcoming consultation paper, to be released early December.

^[2] All of the five national Initiatives for Sustainable Cocoa (ISCOs) in Europe, of which all the major cocoa and chocolate multinationals are members, have commitments to achieve a living income. Furthermore, all major cocoa and chocolate companies have signed the Economic Pact with Côte d’Ivoire and Ghana, committing to paying the Living Income Differential.

The Cocoa Coalition welcomes key improvements proposed by the Committee on Legal Affairs of the European Parliament in its vote to define the position of the Parliament on the proposed Corporate Sustainability Due Diligence Directive. We urge the Members of the European Parliament to uphold these improvements in the upcoming vote in plenary.

We have consistently expressed our support for an ambitious Corporate Sustainability Due Diligence Directive (CSDDD), as a steppingstone to make cocoa value chains more sustainable. However, as expressed in our position paper of September 2022, the European Commission’s proposal needed to be improved to ensure it benefits people and nature worldwide. The European Parliament has an important role to play to fill in these gaps, and the vote today in the Committee on Legal Affairs (JURI) is a key step in that direction.

We commend the rapporteur, MEP Lara Wolters, and the shadow rapporteurs, for their efforts to reach ambitious compromises. The compromise package adopted today goes a long way toward aligning the CSDDD with the international due diligence standards, as laid out in the UN Guiding Principles on Business and Human Rights and OECD Guidelines for Multinational Enterprises. It also reflects some of our key recommendations to improve the proposed Directive in a number of important aspects, namely:

• –  the inclusion of living income as a key element for companies to look into when conducting due diligence;
• –  the obligation for companies to address the impact of their purchasing practices as part of the due diligence process;
• –  the obligation to engage meaningfully with stakeholders – with a specific focus on vulnerable stakeholders – throughout the whole due diligence process;
• –  the precision that disengagement must take place as a last resort, taking into account the potential adverse impacts of such disengagement.

[Note: the Cocoa Coalition comprises companies (Ferrero, Hershey, Mars Wrigley, Mondelēz International, Nestlé, Tony’s Chocolonely, Unilever), certification organisations (Fairtrade International, Rainforest Alliance), NGOs (Fair Trade Advocacy Office, Solidaridad, VOICE Network) and multi-stakeholder organisations (International Cocoa Initiative). For our position paper on the CSDDD see here.]

A wide range of problems are facing families in cocoa communities, including child labour; gender inequality; (infant) malnutrition; lack of access to education; insufficient health care facilities and sanitation; and a variety of labour rights violations for smallholders, workers, and tenants. Environmental issues such as deforestation and climate change remain a growing concern.

Driving all of these problems is the key issue of farmer poverty. Current approaches to tackle this problem are failing, because they are not taking into account a key issue; prices at farm gate are simply far too low. Colonial-era dynamics in cocoa supply chains, which saw vast wealth extracted from cocoa producing regions, continue to influence corporate and political attitudes to the problem.

In order for living income to become a reality for cocoa farmers, action is needed on three separate fronts: good governance policies by public bodies; good purchasing practices by the private sector; and good agricultural practices by farmers. For the past two decades, however, almost all of the cocoa sector efforts have been focused on farmers themselves, sidestepping the necessary changes in government policy and purchasing practices needed to tackle sustainability issues.

It is high time the focus shifted to the necessary changes at the level of good governance and purchasing practices.

The 2022 Cocoa Barometer is a biennial state-of-sustainability overview of the cocoa sector, diving deep into the issues discussed above, and much more. Visit www.cocoabarometer.org to download the full report and read the executive summary.

Over the past weeks, the Cocoa Barometer Consortium – hosted by the VOICE Network – has published three consultation papers ahead of the release of the 2022 Cocoa Barometer (planned for an early/mid-December release). A baseline Barometer for cocoa in Latin America, a Living Income Compendium, and a consultation paper on Transparency & Accountability.

Latin America Baseline Cocoa Barometer
Latin America is the second largest cocoa growing region in the world, and Ecuador has overtaken all but Ghana and Cote d’Ivoire in cocoa production volumes. However, Latin America cocoa is often overlooked in the broader sustainability conversations. This is why, together with a range of Latin American civil society organisations, we released the first Latin America Baseline Cocoa Barometer. This document outlines the major structures and challenges of cocoa in Latin America as a whole, and also dives deeper into the specifics of the major producing, processing and consuming nations there. 
Available in English and Spanish. 

Living Income Compendium
This is an attempt to bring facts to the conversation around living income as well as debunking stubborn myths (and lazy excuses). The Compendium also offers a framework of how the sector should tackle farmer poverty; there is a real place for Good Agricultural Practices in achieving a living income, but this is only feasible if the enabling environment of Good Governance and Purchasing Practices are in place. In that light, we argue, the cocoa sector has been attempting to solve the issue of farmer poverty in exactly the wrong order; after two decades of focussing on agricultural practices, perhaps we need to address the enabling environment first.
Available in English and French

Transparency & Accountability
Transparency and accountability are essential to make sustainability efforts both credible and effective. They also provide a level playing field for all supply chain actors, enable improved market access, and help increase farmer income. However, there’s a lot of confusion about what we’re talking about – and often not so much action to be transparent, let alone accountable. Today, together with several key expert organisations in this field (EFI, UCLouvain/Trase, IIASA, the Hamburger Stiftung für Wirtschaftsethik, and Fairfood) the Cocoa Barometer Consortium is pleased to release deep dive Consultation Paper on this key topic. 
Available here

Cocoa Coalition welcomes the EU Directive on Corporate Sustainability Due Diligence, calls for improvements, releases position paper.

The Cocoa Coalition welcome the publication of the proposed EU Directive on Corporate Sustainability Due Diligence (CSDD). In earlier position papers from 2019 and 2021, we have been calling for robust and effective policy action, including EU-wide harmonised regulation,  to drive the necessary transformation of the cocoa and chocolate sector. In this regard, we find that the proposed EU Directive represents an important step forward.

For example, we welcome the detailed description in the proposal of the steps companies are to take in implementing their due diligence obligation, the many references to the need for support for SMEs affected by the EU Directive (which should encompass SMEs outside the EU as well as inside), and provisions to enable access to effective remedy, including civil liability, particularly as no such proposals were included in the Deforestation Regulation. However, we find important shortcomings in the proposal that need urgent attention. These shortcomings can be found in this position paper released today, September 19th 2022.

The main weakness of the proposal in our view is insufficient alignment with international standards set out in the UN Guiding Principles on Business and Human Rights (UNGPs) and the OECD Due Diligence Guidance for Responsible Business Conduct. We believe that the restriction of the due diligence obligation to ‘established business relationships’ should either be removed or reworded to make it clear that companies are obliged to conduct due diligence across their entire supply chain.

The Directive should also reflect the UNGPs in that companies should be expected to take appropriate action to identify, prevent, mitigate, and account for their adverse human rights and environmental impacts depending on whether the companies caused, contributed, or were linked to an impact through a business relationship (we prefer this term to ‘established business relationship’), as well as the extent of their leverage on their suppliers and business partners. Similarly, the extent of civil liability should also take into account the extent of a company’s involvement in an adverse impact.

Partnership agreements: We welcome the recent announcement of the ‘Alliance for Sustainable Cocoa’ between the EU and cocoa-producing countries and the mention of partnership agreements in the Directive’s recitals. Given the importance of the enabling environment required to address the root causes of human rights abuses and environmental harms in global supply chains, we believe that partnership agreements should also be addressed in the Directive’s text itself.

Material scope: With reference in particular to land use and forests, and the production of agricultural commodities such as cocoa, we believe that this should be strengthened by the addition of references to the following two elements. First, the list of the rights of land tenure and access, which are critical to sustainable land governance and management, must be completed to include all relevant conventions and documents (including the UN Declaration on the Rights of Indigenous Peoples, ILO Convention 169). Second, it must include the right to an adequate standard of living including a living income, as a fundamental human right.

Engagement with stakeholders: We believe that the Directive should more clearly recognise the need for meaningful and continuous engagement with affected stakeholders or their legitimate representatives: A stronger requirement for meaningful and continuous engagement should be written into the Directive as part of each stage of the due diligence process. Special efforts should be made to engage with particularly vulnerable groups, including smallholders and indigenous peoples and local communities, and engagement strategies should be gender sensitive.

We look forward to a revised and improved version of the EU Directive on CSDD and will continue to engage with EU policy-makers and other stakeholders in the next stages of the legislative process.

Enquiries should be addressed to: Paolo Giro (Paolo.Giro@be.nestle.com)

The Cocoa Coalition is composed of a group of companies (Ferrero, the Hershey Company, Mars Wrigley, Mondelēz International, Nestlé, Tony’s Chocolonely, Toms Group), certification organisations (Fairtrade International, Rainforest Alliance), NGOs (Fair Trade Advocacy Office, VOICE Network) and multi-stakeholder organisations (International Cocoa Initiative).

The VOICE Network – at the request of key civil society organisations (CSOs) throughout Europe – are setting up a CSO alignment platform across the various national multi-stakeholder Initiatives for Sustainable Cocoa (ISCOs). We are looking for a Coordinator to function as a flexible and lightweight secretariat that supports content-based engagement at national and cross-national level by individual CSOs.
More information in the document attached. Please respond by June 21st 2021

https://voicenetwork.cc/wp-content/uploads/2022/06/220608-Job-Description-V2.pdf

The Cocoa Coalition believes that the European Commission’s proposed Regulation on Deforestation represents an important step forward in driving the necessary transformation of the cocoa and chocolate sector.

As a coalition of companies, certification organisations, NGOs and multi-stakeholder organisations operating in the cocoa and chocolate sector, we have consistently called for the EU to introduce mandatory obligations of due diligence extending throughout the supply chain.

We welcome many elements of the regulation, including the application of the due diligence requirements throughout the cocoa and chocolate supply chain within the EU, and the inclusion of the requirement for full geolocation information on the origin of the products covered by the regulation.

We believe it could be further strengthened through the following steps, explained in more detail in the attached position statement:

– A strengthening of the requirements on the Commission to develop partnerships with producer countries, recognising that effectiveness of the legislation will be limited unless it is coupled with the creation of the enabling environment required to address the root causes of deforestation.
– The Commission should conduct a comprehensive needs assessment of the challenges that will be faced by smallholder farmers in complying with the regulation; this should not wait for the regulation to enter into force. 
– The scope of the regulation should be extended to other natural ecosystems as well as forests.
– The threshold company size should be changed to from SMEs to micro-enterprises.
– Operators should be obliged to engage with relevant stakeholders, including smallholder farmers, as part of the due diligence procedure, and measures should be required to ensure that the ownership of the geolocation data provided as part of the information requirements remains with the farmers.
– The benchmarking analysis should be extended to include a wider range of elements in the producer country.

The Cocoa Coalition welcomes the European Commission’s proposed Directive on Corporate Sustainability Due Diligence published on 23 February; we regard it as a genuinely ground-breaking legislative proposal. As a coalition of companies, certification organisations, NGOs and multi-stakeholder organisations operating in the cocoa and chocolate sector, we have consistently called for the EU to introduce mandatory obligations of due diligence extending throughout the supply chain. (See our detailed proposals published in 2019 and 2021.) 

Requiring companies to work together with their suppliers, supply-chain partners and other stakeholders throughout their supply chains to identify, address and communicate on human rights and environmental risks in their operations and supply chains is essential to achieving the transformation of the cocoa and chocolate sector. In line with the UN Guiding Principles for Business and Human Rights, which have largely inspired the proposed legislation, we believe that all companies in the cocoa and chocolate sector, regardless of their size, must implement such due diligence obligations; they are well-placed to generate and protect social and environmental benefits through their due diligence efforts.
We recognise that smaller companies may possess simpler supply chains. We do not believe, however, that these companies should be exempted from the due diligence obligation. In a very fragmented end market, the inclusion of smaller players is critical to establish a level playing field and to ensure that all companies do their part and work closer together to improve the sustainability of the cocoa sector.

For the legislation to be fully effective it needs to be coupled with the strengthening of the enabling environment for sustainable cocoa farming, and we therefore also call on the European Commission to make greater efforts to engage in stakeholder dialogue – notably, in the cocoa-sector context, with smallholder farmers and their communities – and to pursue the establishment of bilateral partnership agreements between the EU and cocoa-producing countries. One major objective of this combination of elements – this corporate sustainability due diligence directive, the proposed regulation on deforestation and action on the ground in producer countries – should be to aim to deliver living incomes for cocoa farmers, an essential step in achieving a sustainable cocoa sector.

We look forward to engaging with Members of the European Parliament and representatives of member-state governments in further improving and implementing the proposed directive.

[Note: the Cocoa Coalition comprises companies (Ferrero, Hershey, Mars Wrigley, Mondelēz International, Nestle, Tony’s Chocolonely), certification organisations (Fairtrade International, Rainforest Alliance), NGOs (Fair Trade Advocacy Office, Fern, Solidaridad, VOICE Network) and multi-stakeholder organisations (International Cocoa Initiative).]

The VOICE Network – at the request of key civil society organisations (CSOs) throughout Europe – are setting up a CSO alignment platform across the various national multi-stakeholder Initiatives for Sustainable Cocoa (ISCOs).

We are looking for a Coordinator to function as a flexible and lightweight secretariat that supports content-based engagement at national and cross-national level by individual CSOs.

More information in the document attached. Please respond by December 31st 2021.

ISCO CSO Alignment Platform for ISCOs – Coordinator Job Description

A group of companies, NGOs, certification organisations and multistakeholder organisations has furthered its calls to the EU, demanding ambitious human rights and environmental due diligence legislation.

The legislation should apply to all companies, without exclusions, should allow for a broad mix of means of enforcement including the option for civil liability, and should cover a wide range of rights including the right to a living income.

The call for regulation can be found here, and a full press release can be read here.