Confectionery supply chain due diligence becomes ever-more vital for cocoa sector

The issue of due diligence within confectionery supply chains is particularly topical, with mounting pressure on industry to deliver major progress on key environmental and corporate goals to improve conditions for key cocoa farming communities in Africa, as Keith Nuthall reports for Confectionery Production

The global chocolate industry has been making all the right noises about practising due diligence over supply chains, so that brands ensure their cocoa is grown and processed responsibly – environmentally and socially.

But doubts persist among NGOs that enough checks are made by companies and supplier country partners (including governments) and when wrongdoing is discovered it is contested effectively, in the confectionery and other sectors. So much so that regulators are mulling making supply chain due diligence mandatory.

A study released by the European Union (EU) executive, the European Commission, in February, flagged up a range of policy options, from doing nothing, releasing new voluntary guidelines, a new EU regulation requiring due diligence reporting and a tougher law that would make such reporting a legal duty of care, with potential judicial remedies if such due diligence was not undertaken.

The report stated there is “widespread use of child labour in cocoa farms in Côte d’Ivoire and Ghana to produce goods, including chocolate, for the European market”, but also that “several major chocolate companies have publicly called for an EU level regulation on mandatory human rights due diligence.”  The two country’s account for about two thirds of the world’s cocoa supply, and pressure keeps coming from NGOs for more due diligence action.

A recent briefing paper from Mighty Earth on cocoa and African deforestation argued that despite in late 2017, the governments of Ghana and Côte d’Ivoire both signing a Cocoa and Forest Initiative ‘Joint Framework for Action’ working with 34 of the world’s leading cocoa and chocolate companies, “deforestation linked to cocoa production in the top two cocoa producing nations of Ghana and Côte d’Ivoire has increased — not decreased” in the two following years.

The international confectionery industry does want action but is keen to stress this should be pre-competitive and not affect free markets. A joint paper issued at the end of 2019 by Barry Callebaut, Mars Wrigley, Mondelēz International, along with Fairtrade International, the Rainforest Alliance and the VOICE Network, stressed: “Most cocoa growers live in poverty, and the cocoa poverty trap has led to the widespread use of child labour and other human rights problems,” and that “cocoa is a major driver of deforestation, particularly in Côte d’Ivoire and Ghana” – comprising two-thirds of global production.

The paper noted the value of a robust EU regulation that will force all companies sourcing cocoa for the EU market to comply with legal obligations to proactively improve the social and environmental impact of cocoa production – preventing them being undercut by companies avoiding such responsibilities.

The logic behind this approach is the dominance of the European market on global confectionery sales, with 49 per cent of chocolate receipts being earned in Europe in 2017, according to Dutch government figures.

Even with the UK now outside the EU, such a regulation would inevitably be influential, telling chocolate companies to help local governments to apply social and environmental rules, rather than boycotting regions where there is a high risk of poor practice.

For such a system to work, accurate information on social and environmental practice linked to cocoa production would be needed via national producer country traceability systems for cocoa beans, with the joint paper asking the EU to help establish them. The paper called for consultation to deliver a draft EU regulation by December 2020.

A spokesperson for Mars said the company’s support of sustainability regulation “to create the desired state of having a supply chain where human rights are respected, the environment is protected, and everyone has the opportunity to thrive”.

Furthermore, a key benefit of good supply chain regulation, said Mars, is helping businesses, governments and civil society work together “to effectively address the systemic human rights and environmental challenges in the cocoa supply chain”. National governments, said Mars, need to enforce and strengthen their own labour and environmental laws, while companies conduct due diligence to identify and respond to human rights and environmental risks, with “mutually beneficial results for cocoa farming families and their communities”.

The company welcomed pre-competitive collaboration with other brands and suppliers to spread knowledge on supply chain improvements via industry forums including the World Cocoa Foundation and the International Cocoa Initiative, which promotes child protection in cocoa-growing communities.

Mars also said it would proactively spread sustainability information through messages on packs, social media, brand publicity and its annual Cocoa for Generations report.
Meanwhile, Francesco Tramontin, director global public affairs, Mondelēz International, agreed that regulation would help: “A harmonised due diligence regulatory approach will provide legal certainty, level-playing field and more importantly more aligned impact of various programmes on the ground.”

The company presently operates its $400 million Cocoa Life programme, which involves monitoring of farmers and liaising with local authorities to report child labour on cocoa farms and work to ensure such children are instead sent to school. The system also alerts the company if cocoa farming is being undertaken in protected conservation areas, providing “appropriate due diligence…to address social and environmental risk”, said Tramontin.

“We’ve achieved transparency in our cocoa supply chain that was unthinkable just few years ago,” said the Mondelēz director, who added, however, that while online information was useful, labelling such data on products was not: “We do not think that overloading packs with a lot of information will necessarily resonate with consumers.”

He hoped the EU would continue focusing on sustainability goals during and after the Covid-19 crisis, stressing that “alignment and improvements are needed” on due diligence policy, saying this was “a more logical starting point than other approaches (eg mandatory labelling)”.

Researchers are certainly pushing for proactivity on the topic. For example, a master’s thesis released last year (2019) by the EU-funded Global Campus of Human Rights, a global network of universities focusing on human rights and democracy education, called for set EU mandatory standards for companies to undertake cocoa supply chain due diligence to root out child labour.

A policy paper released last March (2019) by Dutch sustainable forestry NGO Tropenbos International and the Dutch national committee of the International Union for Conservation of Nature (IUCN NL) called for mandatory cocoa sector due diligence for commodities companies. Ultimately, however, a key issue is how much cocoa farmers earn – where they cannot afford paid help, children are drafted in, especially during harvest times.

Despite efforts by the Ghana and Côte d’Ivoire cocoa boards to insist last July (2019) on a $2,600 per tonne floor for their exports, and commitments by cocoa buyers to pay a $400/tonne supplement should prices fall, global cocoa prices have been tumbling of late. The International Cocoa Organisation (ICCO) said that in March they were USD2,338/tonne on average, down from USD2,716/tonne in February. How that impacts buying in a globally competitive market disrupted by a global pandemic remains to be seen.

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