Chocolate Supply Chains: The not so Sweet Treat By Helen Carter

Let’s talk about chocolate. Christmas, Valentine’s Day and not forgetting Easter, which is now upon us, are peak times for the chocolate industry.

It is predicted that in 2022, the UK will consume 80 million chocolate eggs. That is an average of eight eggs per child. As a result, UK households alone will generate an estimated £415 million of revenue for chocolate companies. That is not an insignificant amount of chocolate or income.

But while we are all tucking into eggs, bars or chocolate hot cross buns (personally, not sure about that last one), give some thought to the supply chain and how your chocolate arrived in your box or on your plate.

The Players

The cocoa industry was worth $114 billion in 2019 and is predicted to increase to approximately $171 billion by 2026.

Currently, 10 global chocolate heavyweights control the industry:

  1. Mars Wrigley Confectionery (USA)
  2. Ferrero Group (Luxembourg / Italy)
  3. Mondelēz International (USA)
  4. Meiji Co Ltd (Japan)
  5. Hershey Co (USA)
  6. Nestlé SA (Switzerland)
  7. Lindt & Sprüngli AG (Switzerland)
  8. Pladis (UK)
  9. Ezaki Glico Co Ltd (Japan)
  10. Orion Corp (South Korea)

Whilst cocoa itself is a global commodity, 70% of cocoa consumed comes from West Africa. There are approximately 5-6 million farmers globally, all producing cocoa on their own plantations.

So, with income that substantial and so few players utilising the supply chain, shouldn’t sustainability be easy to achieve?

The issues

Okay, you know the answer to that question. You can pick up newspapers and read monthly reports of big chocolate using child labour in their supply chain. That is the familiar and easy pick, but I am talking sustainability here. So, in addition to child labour, you can add poverty, exploitation, climate change and deforestation to the mix. Put these issues together and you have one unsustainable supply chain that is creaking at the seams.

Due Diligence legislation

Global due diligence legislation is increasing, placing growing emphasis on supply chain due diligence. Whilst acts like the Modern Slavery Act in the UK and Australia have shone a light on human rights and exploitation, newer legislation proposed by the EU is asking for both environmental and human rights due diligence. This landscape is changing at a significant rate and the chocolate industry is showing how.

In 2021, organisations like Mondelez, Hershey and Nestle were hit with civil litigation on behalf of individuals and parents of those being exploited in the supply chain. Very shortly after the suit was issued, an American judge threw it out on the basis that he felt that there was no evidence of a direct link. Fast forward a year and we have seen the same case premise in the tea industry, with the defendants asking for the judge to throw out the case on the same grounds and that being denied by the judge.

The threat of civil litigation for failure to act is increasing globally, as is the appetite of governments to confiscate and refuse entry for goods that have evidence of forced labour in their supply chain.

Organisational Response

So how do organisations and the chocolate industry tackle this?

It is an interesting conundrum. The pressure that NGOs place on most of these companies focuses significantly on child labour. This is understandable, given the scale of the issue. Indeed, reports suggest over two million children are involved in the cocoa supply chain. Of these, 500,000 are exploited in conditions that constitute modern slavery. The average yearly income for farmers is between $1,400 and $2,000. That means he has (as it is predominantly a male-orientated supply chain) $5 a day to support his family. On average, a farmer will have 6-8 dependents to support.

Cocoa is a commodity. As of 8th April, its spot price is $2,521 per tonne. For context, a farmer will produce an average of 1-2 tonnes a year.

So, when looking at organisational responses, it is normal to hear the call for a fair price. Companies such as Tony’s Chocolonely and Hotel Chocolate base their entire business model on ensuring fair payment for farmers as part of their business strategies.

Other companies are taking a different angle. Earlier this week, I was at a conference looking at responsible sourcing and ethical trade. While there, I came across Nestle’s approach. They have recently launched their Income Accelerator programme, which incentivises farmers to focus on 4 key areas:

  • Good agricultural practices – including pruning which improved yields and increases productivity
  • Child education – ensuring children go to school
  • Building climate-resilient responses – encouraging farmers to adapt their farms and build resilience
  • Diversification – identifying and supporting opportunities for other farming activities, e.g., keeping livestock, beekeeping or processing cassava (an edible starchy root)

Upon working through these areas, farmers will receive a payment of £400 per year. Half of their income will go to their spouses. The programme also aims to address gender inequality and support local access to banking services and education.

So, this is a completely different approach to the issues many organisations, stakeholders and NGOs call for, which is to focus on a fair price.

As we know, the industry has been tackling the issue of child labour for decades with little success. It is now widely accepted that rather than seeing eliminating child labour as an issue of compliance and due diligence, addressing some of the fundamental issues around poverty and living income may just be a way to make a lasting difference.

Be Slavery Free – Chocolate Scorecard

In a bid to reward chocolate producers for their transparency and desire to address child labour issues, the Australian charity Be Slavery Free launched a chocolate scorecard for 2022. It provides an interesting look at policy and implementation for addressing issues in the supply chain. Whilst Be Slavery Free primarily works to combat modern slavery, its scorecard also analyses how chocolate producers approach environmental issues in the supply chain, such as deforestation, agrichemical management and agroforestry.

There is an argument that fair commodity pricing and incentivisation are separate ways of addressing the complex issues of the cocoa supply chain. I believe that there should be room for both approaches. We can increase the price of cocoa whilst working with the supply chain to create a more resilient and sustainable environment for all. And tools like the chocolate score card illustrate how some companies are already doing this.

Either way, when choosing your treats for Easter, take some time to examine what these companies are doing to address these issues. After all, more sustainable choices should make your Easter treats taste a little bit sweeter.


About us:

Action Sustainability specialises in sustainable supply chains and can support your journey in responsible and ethical sourcing and the drive towards transparency

For more information, contact Helen Carter – Lead Consultant – [email protected]


Sources:

For more information

Helen Carter
Lead Consultant
[email protected]

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