Summary
There is growing support for the payment of the living income differential to cocoa farmers, but with the Ghana Cocoa Board and Conseil du Café Cacao of Cote d’Ivoire insisting on the need for close monitoring of how the initiative is implemented alongside private sector sustainability schemes. The LID needs to be seen as floor price on which private sector initiatives can build to ensure cocoa farming communities not only survive but prosper.
Speaking at the World Cocoa Federation (WCF) Partnership Meeting in Berlin in October 2019 Rick Scobey the President of the WCF endorsed calls for the implementation of the Living Income Differential proposals advanced by the Governments of Ghana and Cote d’Ivoire. He went on to claim ‘WCF company members are incorporating the living income differential into their individual procurement plans for the 2020-2021 crop season’. He sought to link the attainment of a living wage through the implementation of the Living Income Differential initiative to the effective implementation of responsible farming practices and the attainment of wider sustainability goals (1).
Scobey called for effective action in support of
- the ‘transformation of traditional smallholder farming into modern businesses that enable farmers to earn sufficient income to achieve a decent standard of living’;
- the empowerment of communities to ‘feed their own development where human rights are protected and the safety and well-being of children and their families are strengthened’;
- ‘resilient and bio-diverse landscapes with reduced carbon footprints’.
He further called for ‘effective government policy and regulatory frameworks not only in the origin countries but also in the cocoa importing or cocoa consuming countries’ (1).
During the same event Finland’s former Minister for International Development and current vice- chair of the Greens–European Free Alliance in the European Parliament, Heidi Hautala (2), called ‘for a responsible cocoa supply chain’, maintaining ‘there is a strong case for mandatory due diligence legislation to ensure human rights and environmental protection’. She maintained legislation was now needed to ‘create a level playing field’ and ‘support responsible companies and their voluntary certification schemes’. She called for ‘the right combination of mandatory, voluntary, national and international measures …. to effectively force businesses to respect human rights’ and eliminate the irresponsible ‘freeriders’ in the cocoa sector (3)
She made reference to the ‘French Corporate Duty of Vigilance Law which places the onus on large corporations to identify and prevent risks to human rights and environment that could occur as a result of business activities’ (3), as a possible basis for such a mandatory approach focused on the fight against deforestation and child labour and empowering and improving ‘the livelihoods of the cocoa farmers and their wages to benefit their communities’ (3).
The EU is seen as having a critical role in providing leadership on this issue, since it has ‘the biggest internal market in the world and therefore any legislation would radiate way beyond its borders’ (3).
This needs to be seen in a context where John Ament, global vice president cocoa at Mars Incorporated sought to argue ‘ensuring cocoa farmers can thrive is an objective that is too big for any one company to tackle alone’ with this requiring ‘intense effort from a wide range of other stakeholders’. He told delegates to the WCF Partnership Meeting ‘the cocoa supply chain is broken, and current interventions are not enough to fix it’. In this context he reiterated the support of Mars for the Living Income Differential proposals (1).
Meanwhile a report from the German Initiative on Sustainable Cocoa (GISCO – a joint initiative of the German Federal Government, the German sweets and confectionary industry, retail grocery and civil society) has argued ‘the cocoa sector will not be sustainable as long as cocoa farmers cannot earn a living income’, noting how ‘between 1988 and 2008, ….two to three million hectares of forest were destroyed worldwide for the cultivation of cocoa, mainly in West Africa’ (4).
Support for effective action to promote a living income, halt the use of child labour and end deforestation is receiving endorsement from multiple retailers such as Lidl whose representatives have argued ‘binding European standards would not only ensure fairer international competition but would also increase effectiveness in complex global supply chains’ (4).
Within this emerging consensus amongst other demands GISCO has called for:
- ‘improved farm-gate prices, minimum price and premium systems as well as other income-generating measures’ to effectively contribute to a living income for cocoa farming households;
- support to strengthening the engagement of farmer organizations and civil society in the cocoa value chain in the producing countries;
- abolition of worst forms of child labour and the enhancement of gender equality;
- the enforcement of compliance with human rights (implementation of the UN Guiding Principles on Business and Human Rights) and environmental requirements ‘by all actors in the cocoa supply chain’ ;
- support to productivity and quality improvements in cocoa production;
- ending deforestation and contributing to conservation of forests and biodiversity (4).
Meanwhile Henk Jan Beltman CEO of the Dutch ethical chocolate company Tony’s Chocolonely has launched a petition for a million signatures ‘with the aim of making 100% corporate responsibility obligatory in the worldwide’ (5)
Significantly in Berlin representatives of the Ghana Cocoa Board and Conseil du Café Cacao of Cote d’Ivoire claimed ‘the proposed living income differential (LID) is to permanently stay and would co-exist and complement chocolate companies’ sustainability and certification programs’. This amounted to a partial withdrawal from an approach which would have seen the Ghana Cocoa Board and Conseil du Café Cacao of Cote d’Ivoire withdraw support from corporate sustainability programmes in the absence of acceptance of the proposed living income differential. They declared ‘we shall monitor and evaluate the complementary co-existence of the LID and sustainability programs being implemented in our respective countries to decide on them, going forward’ (6).
COCBOD’s Joseph Boahen Aidoo said ‘the LID will go directly to the farmers, and will improve their income’, maintaining ‘it is here to stay, and it will work together with certification programs’. Funds raised from LID will serve to ‘guarantee farmers receive 70% of a $2,600 a ton free-on-board target price for cocoa’. This would deliver to farmers $1,820 per tonne compared to current standard prices of around $1,520 per tonne in Ghana and 1,370 per tonne in Cote d’Ivoire (5).
It was highlighted how if ‘global prices rise above $2,900, proceeds from the LID will be placed in a stabilization fund that would be used to ensure farmers get the target price when market prices fall’ (6).
| Comment and Analysis
Following the WCF partnership meeting there is now growing support for the LID initiative, with the key question being just how this arrangement will be implemented in practice. It is apparent that both the Ghana Cocoa Board and Conseil du Café Cacao of Cote d’Ivoire are keenly aware of the need for close monitoring of how prices actually evolve and how this interacts with corporate sustainability initiatives. However it is important to place the proposed LID initiative in perspective. While the LID price would deliver a price around 20% above the current standard price in Ghana and 32% above the current standard price in Cote d’Ivoire, this would still be 13.3% below the price paid by Tony’s Chocolonely to Ghanaian cocoa farmers ($2,100 per tonne) and 17.3% below the price paid to Ivorian cocoa farmers ($2,200 per tonne). Given the criteria for payments into a stabilisation fund proposed by the Ghana Cocoa Board and Conseil du Café Cacao of Cote d’Ivoire the maximum farm gate price which cocoa farmers would receive would be $2,030 per tonne. This highlights the extent to which private sector initiatives can still build on the LID initiative to ensure cocoa farming communities not only survive but prosper. It is in this context that the LID price level should be seen as a floor price which farmers should be paid, with private sector initiatives building on this floor price. However the focus in EC President Von Der Leyen’s New Green Deal on working with global partners to curtail biodiversity loss could see the focus of public concern (and hence pressure on chocolate companies) shift back to the deforestation effects of cocoa farming in light of the loss of between two to three million hectares of forest mainly as a result of the cultivation of cocoa in West Africa. This could then see the impetus towards improving retained farmer incomes in the cocoa sector undermined by new environmental related sustainability verification requirements, the costs of which would be passed back down the supply chain to cocoa farmers (see companion epamonitoring.net article “Implications for ACP Agriculture of the new EC President’s Agenda”, 6 January 2020). It is essential the implementation of biodiversity preservation initiatives and wider sustainability initiatives the costs of verification are not passed back down to cocoa producers, reducing the net income retained as a result of moves towards the payment of the Living Income Differential. |
Sources:
(1) confectionerynews.com, ‘ WCF president backs Living Income Differential for cocoa farmers, and puts ‘children first’ 23 October 2019
https://www.confectionerynews.com/Article/2019/10/23/WCF-president-backs-Living-Income-Differential-for-cocoa-farmers-and-puts-children-first
(2) Wikipedia, ‘Heidi Hautala’
https://en.wikipedia.org/wiki/Heidi_Hautala
(3) confectionerynews.com, ‘European Union calls for level playing field in cocoa supply chain, backed by legislation’, 24 October2019
https://www.confectionerynews.com/Article/2019/10/24/European-Union-calls-for-level-playing-field-in-cocoa-supply-chain-backed-by-legislation
(4) confectionerynews.com, ‘Germany at forefront as a Driver of Change in cocoa sector as host of WCF Partnership Meeting’, 21 October2019
https://www.confectionerynews.com/Article/2019/10/21/Germany-at-forefront-as-a-Driver-of-Change-in-cocoa-sector-as-host-of-the-WCF-Partnership-Meeting
(5) confectionerynews.com, ‘Tony’s Chocolonely records ‘0% profit and 100% impact’, latest results show’, 22 November 2019
https://www.confectionerynews.com/Article/2019/11/22/Tony-s-Chocolonely-records-0-profit-and-100-impact-latest-results-show
(6) confectionerynews.com, ‘Ghana and Cote d’Ivoire drop threat of cocoa sustainability ban’, 28 October 2019
https://www.confectionerynews.com/Article/2019/10/28/Ghana-and-Cote-d-Ivoire-drop-threat-of-cocoa-sustainability-ban