Indirect supply chains pose major deforestation risk for global cocoa industry

26.03.2020

A new report has emphasised the threats multinational firms face in not having a full picture of their cocoa suppliers

Cocoa farm workers in Ivory Coast. Photo: Shutterstock

The world’s largest chocolate firms continue to be blindsided by risks in their indirect supply chains which is likely causing further cocoa-linked deforestation in producing nations.

A new report by Lumina Intelligence analysed issues facing the global cocoa sector and how firms are trying to tackle long-standing deforestation and worker issues in supply chains.

The top six chocolate brands - Mars, Mondelez International, Nestlé, Ferrero, Hershey, and Lindt & Sprüngl - are responsible for 36 per cent of global cocoa supplies. The report estimated that these firms combined produce 1.7 million tonnes of cocoa annually and source from 1.2 million farmers.

However, 60% of these farmers are left outside of corporate sustainability initiatives set-up by the likes of Nestlé and Ferrero to assist them. Consequently, significant numbers of farmers miss out on potential benefits and their production methods are more likely to be going unchecked.

The report’s author Oliver Nieburg told Food Navigator he thinks that while companies are trying to better monitor direct suppliers, tracking the indirect supply chains –producers who then sell on to direct suppliers - is a “much bigger problem”. 

"Unbeknownst to them [the companies], they have chocolate that contains cocoa which may have come from the deforested area,” he said. 

“There are a lot of farmers, particularly in Cote d’Ivoire, in this disorganised supply chain who are operating in previously illegal areas in classified forest.”

Even within their direct supply chains, firms are yet to form a full view of suppliers.

Nestlé states that only 49 per cent of its suppliers can be tracked. Mondelez, makers of Cadbury chocolate, said in 2018 that only 43 per cent of supply was covered by its cocoa sustainability programme and Mars only knows 24 per cent of the farms they source from. 

The cocoa industry has long been blighted by sustainability and sourcing problems.  In Ghana and Ivory Coast, multinational firms have been condemned for years by groups over issues of poverty wages and child labour as well as deforestation and pollution concerns. 

Forest loss increased 60 per cent in Ghana and 26 per cent in Ivory Coast during 2018 – the highest country increases observed in Global Forest Watch’s 2019 report on deforestation. 

The low incomes earned by many farmers in the West African nations - which together produce two-thirds of the world’s cocoa – have left some farmers pursuing additional land to grow crops.  

“The income among farmers, particularly in West Africa is so low and there are multiple reasons for that. It isn’t just a matter of price. It’s linked to aging tree stocks,” Nieburg told Food Navigator. "It’s linked to supporting a large family size. There are unpredictable factors like weather. Farmers may struggle to access finance to be able to invest in crops and diversify their income. 

"That poverty scenario has been driving farmers to seek more land, to grow more cocoa on, to get more income.”

A 2017 investigation by US advocacy group Mighty Earth found that “illegal deforestation for cocoa is an open secret throughout the entire chocolate supply chain.”

What’s more, it is estimated that two million children work in exploitative and hazardous conditions in cocoa fields in Ghana and Ivory Coast.

A 2018 EU Parliament hearing concluded that the EU should set mandatory rules to tackle deforestation and child labour in cocoa supply chains after years of failed corporate voluntary action.

Nestlé, along with Mars and Hershey, agreed in 2001 to eradicate child labour from its cocoa supply chains but that and several other voluntary pledges to adequately monitor its suppliers and traceability have failed to deliver on their promises.

The Cocoa & Forest Initiative (CFI), a World Cocoa Foundation programme, was set up with cocoa firms and countries to try and halt deforestation and reforest land in producing nations. Companies accounting for 85 per cent of global cocoa sales are signed up to the CFI.

And while farm mapping, community conservation, new farmer training and financing are seen as some positive steps, progress remains slow. 

The Lumina report estimated that between 2012 and 2016, 14.1 million hectares of forest were lost in the top 30 cocoa producing countries. Nieburg believes that the initiative could do more.

“The indirect cocoa supply outside of company programmes remains a deforestation risk and even where CFI is present,” he said. “The barriers to agroforestry implementation are high, which is detrimental to the UN’s 2030 target to restore degraded land and to urgently halt the loss of biodiversity.”

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