Summary
Some form of EU regulatory initiative to promote more sustainable and child labour free cocoa production in the course of 2021 now looks inevitable. The question arises: what form should such regulatory action take, if it is to support the attainment of a decent living wage for cocoa producers? This is a critical question since poor prices and heightened poverty levels have an important bearing on the use of child labour and the pursuit of environmentally damaging cocoa farming practices. A combination of initiatives founded on bilateral cocoa supply chain agreements between the EU and cocoa exporting countries, linked to the subsequent formulation of due diligence requirements and appropriate modifications to EU competition law, all aimed at addressing the low prices paid to farmers and ensuring net gains to the financial position of farmers as a result of the implementation of environmental and forest protection measures as well as the ending of the use of child labour, would appear to offer the greatest scope for effective action in addressing shared concerns.
The EU’s growing focus on the adoption of effective measures to combat climate change and halt environmental degradation, as manifested in the EU’s ‘New Green Deal’, includes an international dimension. Under the EU’s New Green Deal approach not only is the EU intending to establish a ‘European Climate Law to enshrine the 2050 climate-neutrality objective into EU law’, but the EU is also committed to actively working with other countries and regions through bilateral cooperation arrangements to achieve the goals of the Paris Agreement. Indeed, in ‘fighting climate change and achieving the transition to a climate-neutral society’ the EU is committed to ‘aligning action in all areas’, including in the sphere of international cooperation and development (1).
With the West Africa cocoa sector having been seen as responsible for some 2 to 3 million hectares of deforestation between 1988 and 2008 (2), pressure is growing for effective EU regulatory action to strengthen the fight against deforestation in the cocoa sector (see companion epamonitoring.net article ‘Growing Support for payment of the Living Income Differential in the Cocoa Sector’, 9 January 2020).
What is more EC President Ursula von der Leyen, ‘is on record saying she will have zero tolerance for child labour and deforestation in the production of chocolate bars’. Given the EU ‘is the world’s largest importer of cocoa and cocoa products’ it is seen as having a critical role to play in taking initiatives to end child labour, and halt deforestation and environmental degradation (3). This needs to be seen in the context of the regulatory power yielded by the EU which, given its size, can have a major influence on the global practices of international companies serving the EU market (4).
Against this background the recent discussions on the regulatory options for ensuring the effective establishment of sustainable systems of cocoa production, which stop the use of child labour deforestation and environmental degradation, has taken on increased importance.
In June 2019 the FairTrade Advocacy Office, FERN and Troppenbos International published a report entitled ‘Towards sustainable cocoa supply chains: Regulatory options for the EU’ (5), which reviewed the potential options for EU regulatory initiatives to promote more effective sustainability assurance systems throughout global cocoa supply chains. This report identified 8 basic option divided into 3 levels of interventions.
PRODUCER COUNTRY FOCUSSED OPTIONS
Option 1: Concluding Bilateral County Specific Cocoa Supply Chain Agreements
This option envisages the negotiation by the EU of bilateral agreements with the main cocoa-producing countries, involving the provision of financial and capacity-building assistance, to achieve the agreed standards for cocoa production in the producer country and improve standards of governance and law enforcement across the sector.
Option 2: The Introduction of a ‘Carding System’ Applied Country by Country
This option envisages the introduction of a ‘carding’ system through which the EU enters into dialogues with countries that export cocoa to the EU and issues ‘yellow cards ‘(warning) or ‘red cards’ (import ban or notification of high risk) to those countries not combatting illegal behaviour in the supply chain.
EU-MARKET FOCUSSED OPTIONS
Option 3: Using Public Procurement to Drive Change
This option envisages the use by EU governments to their public procurement policies to require that cocoa, or any products containing cocoa, purchased by government buyers meet minimum criteria for responsible sourcing in terms of legality and high social and environmental standards
Option 4: EU Wide Sustainability Requirements
This option envisages going beyond the use of public procurement to cover the entire EU market, through a requirement that all cocoa and cocoa products placed for sale on the EU market meet minimum criteria for responsible sourcing.
BUSINESS FOCUSSED OPTIONS
Option 5: Review Competition Law to Allow Joint Action to Address Low Prices and Sustainability Concerns
This option would require a review and amendment of EU competition law to allow businesses greater freedom to collaborate for sustainability purposes, factor in externality costs and in discuss and address low prices paid to farmers.
Option 6: Strengthen reporting and Scrutiny of Corporate Efforts
This option would involve placing a requirement on enterprises involved in placing cocoa or cocoa products on the EU market to scrutinise their supply chains for the risk of handling illegally produced cocoa, or cocoa not produced to high social and environmental standards, and to publish regular reports on the extent of the risk.
Option 7: Place Due Diligence Requirements on All Companies
This option envisages mandatory requirements for all enterprises placing cocoa or cocoa products on the EU market to have in place a system of due diligence designed to minimise the risk of their handling illegally produced cocoa, or cocoa not produced to high social and environmental standards
Option 8: A Multi-Sector Approach to Due Diligence
This option envisages a broader regulation under which companies operating in the EU would be required to have in place a system of due diligence aimed at minimising the risk of breaches of human rights, fundamental freedoms and health and safety rights and of environmental damage in their operations and supply chains, across a multiplicity of sectors.
The report pointed out that some combination of these various options would probably offer the best means of addressing deforestation, environmental degradation, and child labour issues on a sector wide basis.
Debates to date around these various options have reached a consensus that ‘the cocoa sector will not be sustainable as long as cocoa farmers cannot earn a living income’ (see epamonitoring.net article ‘Growing Support for payment of the Living Income Differential in the Cocoa Sector’, 9 January 2020).
| Comment and Analysis
Given the need for the payment of a decent living wage, which enables cocoa farmers to prosper is central to building sustainable cocoa supply chains which end deforestation, environmental degradation, and child labour, a case can be made for combining certain elements of these various options. The critical elements would appear to be: · Option 1 the conclusion of Bilateral Cocoa Supply Chain Agreements between the EU and governments of cocoa exporting countries (so called ‘Voluntary Partnership Agreement’), based on the recent “living income differential” proposals tabled by the Governments of Ghana and Cote d’Ivoire. This basic proposal would need to be elaborated to ensure the costs of specific measures to guarantee compliance with a sustainable production charter, aimed at ending deforestation and environmental degradation were shared equitable along the whole of the cocoa supply chain, in ways which ensure the net earnings of cocoa farmers still generated a decent living wage which made cocoa production attractive for the inter-generational renewal of the cocoa farming community. On this basis additional measures could be set in place to end the use of child labour, building on existing initiatives. The aim would be to reverse the financial incentive I regard to the use of child labour. · Option 7 the placing of Due Diligence Requirements on All Companies with the introduction of mandatory requirements to progressively exclude non-compliant cocoa from all EU cocoa supply chains being carefully sequenced with the mobilisation of financial and technical assistance programmes designed to put an end to deforestation, child labour and environmental degradation, while effectively supporting through corporate pricing policies the attainment of a decent living incomes for all cocoa farmers · Option 5 the Review of EU Competition Law to allow businesses to collaborate to address the low prices paid to cocoa farmers and the promote other sustainability objectives, while being subject to close monitoring to ensure these objectives are being attained via the process of intra-corporate consultations and concerted action. Other options discussed, based on experience, would appear to face serious problems in delivering sector wide changes or would appear to be inconsistent with the objective of improving the net incomes of cocoa farmers. Strengthen corporate reporting requirements and ‘carding systems’ tend to generate additional compliance costs for producers, which undermine their net revenue position. Experience suggests that without the full commitment of the concerned governments and well organised stakeholder bodies in cocoa producing countries, alongside concerted international regulatory action and mandatory corporate due diligence requirements, sector wide improvements are unlikely to be achieved. if the concerned ACP governments were to lead on this process, with appropriate commitments being made by bodies like the EU and the main cocoa sector international corporate sector players, then there would be a greater assurance that necessary national level measures would be effectively implemented. Changes to future realities on the ground need to be rooted firmly in the current realities on the ground, including This includes the high levels of poverty within cocoa farming communities across the ACP, which exerts strong pressures for the continuation of unsustainable labour and environmental practices (see companion epamonitoring.net article ‘The Covid-19 Pandemic Highlights the Fragility of Moves Towards Child Labour Free and More Sustainable Cocoa Sector Farming Practices’, 23 July 2020). |
Sources:
(1) EC, ‘EU climate action and the European Green Deal’
https://ec.europa.eu/clima/policies/eu-climate-action_en
(2) 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
(3) confectionerynews.com, ‘EU due diligence laws for cocoa sector could be in force by 2022’, 11 March 2020
https://www.confectionerynews.com/Article/2020/03/11/EU-due-diligence-laws-for-cocoa-sector-could-be-in-force-by-2022
(4) Anu Bradford, The Brussels Effect: How the European Union Rules the World’, Oxford University Press, 2020
(5) FairTrade Advocacy Office, FERN and Troppenbos International, ‘Towards sustainable cocoa supply chains: Regulatory options for the EU’, June 2019
https://www.fern.org/fileadmin/uploads/fern/Documents/2019/Fern-sustainable-cocoa-supply-chains-report.pdf