Summary
The decision by Nestlé UK&I to abandon Fairtrade cocoa purchases and bring sustainability certification in-house, is in line with a wider corporate trend towards in-house certification in response to growing public concern over the need to promote more sustainable child labour free production practices. This can be seen as part of corporate efforts to pre-empt the introduction of potentially costly mandatory ‘due diligence’ regulations. However, moves away from guaranteed farmgate prices and cocoa farming community Premiums, which the abandonment of Fairtrade sourcing represents, demonstrates a singular lack of understanding of the underlying economic forces which drive deforestation, child labour and unsustainable farming practices. To be effective ‘due diligence’ requirements must be based on delivering a decent income to cocoa farmers and must promote thriving cocoa farming communities. To date beyond some rare corporate initiatives only Fairtrade certification has effectively addressed this issue. Without solid economic foundations, deforestation, child labour and sustainable farming practice commitments are likely to face periodic reversals whenever prices take a downturn.
Having informed the concerned cocoa farmers in May 2020 Nestlé UK and Ireland announced publicly in June plans to ‘stop using Fairtrade cocoa and sugar in its chocolate bars, including the top-selling KitKats’. In future Nestlé UK&I plans to ‘source all its cocoa from its in-house Cocoa Plan sustainable scheme’ and use Rainforest Alliance certification instead. This would bring the sourcing practices of Nestlé UK&I into line with the global sourcing practices of Nestlé as a whole, which uses Rainforest Alliance and UTZ certification schemes (1).
According to a spokesperson for Nestlé UK&I the decision to work with the Rainforest Alliance was taken ‘because their mission and approach aligns closely with our Nestlé Cocoa Plan’. Nestle takes the view that ‘building farmer resiliency and tackling key social and environmental issues such as child labour are fundamental to the long-term sustainability of the sector’ (1).
Although, Nestlé has denied the move is a cost cutting exercise (2), it has acknowledged the ending of the Fairtrade Premium ‘will have an impact on some farmers’ (3). To mitigate these impacts, Nestlé has launched its own £1m living income pilot programme, which will make ‘direct, conditional cash transfers to farming households for making clear progress in the areas of good agricultural practices, re-forestation, child labour and alternative incomes’ (1).
Fairtrade cocoa farmers ‘expressed grave concerns about the loss of income’, given ‘Nestlé is one of the leading buyers of Fairtrade certified cocoa through its KitKat brand’. According to Atse Ossey Francis, chairman of the Board of Directors of the Ivorian Fair Trade Network, ‘the Fairtrade Premium has meant communities have been able to invest in classrooms, dispensaries, canteens and programmes to help women increase and diversify their income.’
A critical consideration has always been cocoa farming communities themselves who decide how the Fairtrade Premium is used. This has meant, for example, that cocoa farmers ‘have been able to act quickly during the Covid-19 crisis to protect their health, support their communities and compensate for disruption to income. As a result, farmers and their co-operatives have been able to buy protective equipment, distribute hand-sanitisers, raise awareness and support families struggling due to illness’ (4).
The decision of Nestlé needs to be seen in the wider context where ‘a typical cocoa farmer in West Africa lives below the extreme poverty line and earns on average 74p per day – less than half of a living income’ (4). Confectionerynews.com, reports the Fairtrade scheme ‘has the highest fixed Premium of any independent certification scheme in cocoa, currently $240 per tonne’, with this being on top of the market price and with this income going ‘directly to the producers cooperatives’. What is more this is ‘coupled with a Minimum Price that protects farmers if world markets collapse’. It is reported that according to research from Fairtrade International ‘the overall financial value to Ivorian Fairtrade cocoa cooperatives and their farmer members increased by almost 35% in 2019’ (1).
Against this background it is maintained ‘a non-Fairtrade trade relationship means regression and continued poverty’, with this leading Fairtrade advocates to urge Nestlé to ‘listen to farmers’ and not to ‘choose this moment of global crisis to exacerbate the inequalities in the cocoa industry’ (1).
| Comment and Analysis While the elimination of child labour in the cocoa sector is seen as an important priority, alongside the need to protect forest cover and promote sustainable farming practices, it needs to be recognised, ensuring a decent income to cocoa farmers and thriving cocoa farming communities is the essential pre-condition for sustained progress on these major issues of concern. The recent experience in Cote d’Ivoire in regard to the increased use of child labour in the cocoa sector in response to the economic disruptions and household level economic pressures generated by the Covid-19 pandemic, highlights just how fragile hard won improvements can be unless more secure economic foundations for cocoa farming are set in place (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). Against this background, movement away from sourcing practices which guarantee cocoa farmers a higher fixed price and provide funds for investment in cocoa farming communities can only be a matter of concern. Moves towards ‘due diligence’ regulations which fail to address the vital economic issue of the net price paid to cocoa farmers are likely to be only partially successful and are likely to leave laudable objectives largely unmet. The move by Nestlé to in-house certification forms part of a wider trend in which companies in the face of growing calls for due diligence and greater compliance with climate, sustainability and child labour standards are increasingly seeking to establish their own ‘in-house’ certification arrangements, which bring all issues of growing regulatory concern under a single standard. This allows companies to take matters into their own hands ‘appraising their own ethics to their own satisfaction.’ In this regard Nestlé UK&I is following in the footsteps of fellow cocoa sector companies. Mondelez has set up its own in-house ‘Cocoa Life’ certification scheme, Barry Callebaut its own ‘Cocoa Horizons’ programme, Cargill its own ‘Cocoa Promise’. This trends if even evident in other sectors, with Starbucks having established its own ‘CAFE Practices’ scheme, and even McDonald’s its own ‘McCafé Sustainability Improvement Platform’. In the face of mounting pressure for regulatory action it appears as if ‘increasingly, companies are finding it easier and more expedient to produce their own certifications’ (5), rather than complying with independent verification schemes which raise the tricky issue of the prices paid to primary producers. This could form part of broader efforts to pre-empt mandatory regulatory ‘due diligence’ initiatives which would place formal obligations on corporate players in supply chains where production processes are increasingly coming under scrutiny on climate and environmental sustainability grounds. |
Sources:
(1) confectionerynews.com, ‘Shock decision by Nestlé UK&I to stop using Fairtrade cocoa means farmers will lose Premium’, 23 June 2020
https://www.confectionerynews.com/Article/2020/06/23/Shock-decision-by-Nestle-UK-I-to-stop-using-Fairtrade-cocoa-means-farmers-will-lose-Premium
(2) business-humanrights.org, ‘Nestlé’s KitKat drops Fairtrade commitment, set to impact 27,000 cocoa & sugar farmers in Ivory Coast, Fiji & Malawi’
https://www.business-humanrights.org/en/nestl%C3%A9s-kitkat-drops-fairtrade-commitment-set-to-impact-27000-cocoa-sugar-farmers-in-ivory-coast-fiji-malawi
(3) Guardian, ‘Profoundly disappointing: KitKat cuts ties with Fairtrade’, 23 June 2020
https://www.theguardian.com/business/2020/jun/23/profoundly-disappointing-kitkat-cuts-ties-with-fairtrade?
(4) fairtrade.org.uk, ‘Fairtrade producers raise their voices to ask Nestlé to keep KitKat Fairtrade cocoa’, 23 June, 2020
https://www.fairtrade.org.uk/Media-Centre/News/June-2020/Fairtrade-producers-raise-their-voices-to-ask-Nestle-to-keep-KitKats-Fairtrade
(5) Guardian, ‘Is fair trade finished?’, 23 July 2019
https://www.theguardian.com/business/2019/jul/23/fairtrade-ethical-certification-supermarkets-sainsburys