The Evolution of Sustainability in
the Cocoa and Chocolate Industry
Edward Millard
University of Copenhagen
September 2014
©2009 Rainforest Alliance
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Industry Snapshot 2000
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Traditional buying behaviour: cost, quality and service
Assumption that supply of cocoa continuous
Competition based on: innovation, operational efficiency, distribution
Communications based on branding, product qualities
Buyers rewarded on margins
Cocoa and Chocolate Supply Chain
Production
and
Harvesting:
Cocoa beans
Trading and
Processing:
Manufacturing:
Cocoa Beans
Chocolate Products
Liquor and Butter
Confectionery
Chocolate
Aggregation at source
Cocoa farmer
Distribution
Brand Marketing
Own Label
Processing
Producers / Groups
Exporters / Importers/Processors
Brands / Retailers
Forces for Change 1. Supply risk
Long term availability of cocoa threatened by:
 Pests and diseases
 Failure of intensification
 Low productivity
 Farmers substituting cocoa for other crops
 Young people moving away
Forces for Change 2. Reputation risk
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Companies came under attack 2001 for child labour
Brands lacked visibility of supply chains
Consumers want answers: don’t trust companies
Other industries adopting certification
Initial Response 2001-2008
 Investigation of problem: first Tulane
report 2007
 International Cocoa Initiative formed
 Industry collaboration with governments
 World Cocoa Foundation projects
 Third party certification only in niches,
unlike coffee
Third Party Certification
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Kraft first mainstream mover – collaboration Rainforest Alliance
Cote d’Or launched with certification seal 2009
Sustainability became a competitive issue
Mars launched certified chocolate 2010
Supply chain companies responded by building supply
Growth of Certification 2009-2013
 Over one million tons now certified to independent schemes
 Mars, Hershey, Ferrero all committed to 100% certified cocoa
Rainforest Alliance certified cocoa
AT ORIGIN
IN THE MARKET
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Voluntary Certification Schemes
 Verify practices defined in a standard
 Set standards through multi-stakeholder consultation
 Standard reflects mission of organization
 Apply to individual farms and smallholder groups
 Credible voluntary standards are members of ISEAL
Benefits from certification: for Farmers
Study 2011-12
by Committee
on Sustainability
Assessment
Benefits to environment (Rainforest Alliance)
 Forests Protected
 Hunting, trading or selling wildlife prevented
 Water bodies protected from untreated waste water or solids
 Buffer zones along rivers, streams and lakes
Benefits to companies
 Positive impact on productivity,
quality and reliability of production
 Improved traceability
 Leadership in sector
 Employee satisfaction and retention
 Public finance available
Salon du Chocolat launch Cote d’Or
Credibility with consumers
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A changing mood
Despite benefits, companies see certification as insufficient response
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Costs: to farmer and to company
Market differentiation more difficult
Systematic problems remain in sector
Attacks from NGOs and media continue
Does not address other concerns: food
safety, planting material, farmer financing
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Industry remains under attack
Miki Mistrati
Documentary 2012
Oxfam Behind the Brands 2013
Key Issues: Child Labour, Palm oil, Gender
Greenpeace
campaign 2010
The next stage of cocoa sustainability
New cocoa sustainability initiatives are characterized by:
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Company leadership
Independent verification of results
Integration into core business
Innovative responses to issues
Company-led sustainability
Incorporating third party verification
Nestlé works with UTZ
Certified to ensure a
sustainable supply of cocoa
by helping farmers to
implement good practices
and offering advice on how
to build their businesses.
Nestlé works alongside
Fairtrade to ensure that a
fair price is always paid to
farmers, as well as
investing in long-term
community and business
projects.
Nestlé have partnered
with the Fair Labor
Association (FLA) to
investigate whether
children are working on
cocoa farms which are
supplying its factories
Sustainability as core business strategy
 Out of CSR team and into senior management
 KPIs on social and environmental impact
 Sustainability targets in commercial team’s goals
 Investing at origin
 Forming partnerships and alliances
Businesses that address both the direct concerns of citizens and the
needs of the environment will prosper over the long term.
Innovation in cocoa sustainability: Climate smart cocoa
Lessons
 Certification bodies must diversify their approach and
increase their value to companies
 Companies must retain credible NGO partners
Thank
You
Comments
welcome