BenefitsandBarriersofIntroducingFairtradeCertification
forCocoaFarmersinIndonesia
ComparingFairtradewithCurrentCertificationSchemesUTZandRainforest
Alliance
Photo:R.Jermann
EssayonDevelopmentPolicy
Zürich,April2016
SubmittedbyRominaJermann
MasterofAdvancedStudiesinDevelopmentandCooperation
NADEL,ETHZürich
1
Tableofcontents
ListofFigures.............................................................................................................................................................3
ListofTables...............................................................................................................................................................3
1. Introduction.......................................................................................................................................................4
2. Researchquestionsandmethods.............................................................................................................5
3. CocoaproductioninIndonesia..................................................................................................................6
3.1.
Economicfactors...........................................................................................................................................6
3.2.
Socialfactors...................................................................................................................................................7
3.3.
Environmentalfactors................................................................................................................................8
3.4.
Overviewofchallenges..............................................................................................................................8
4. Comparisonofcertificationstandardsforcocoa................................................................................9
4.1.
UTZ.....................................................................................................................................................................9
4.2.
RainforestAlliance....................................................................................................................................10
4.3.
Fairtrade........................................................................................................................................................11
5. ImplementationandimpactofUTZandRainforestAllianceinIndonesia...........................12
5.1.
Implementation..........................................................................................................................................13
5.2.
Impact.............................................................................................................................................................14
5.2.1.
UTZ.........................................................................................................................................................14
5.2.2.
RainforestAlliance...........................................................................................................................16
6. ImpactandbarriersofintroducingFairtradecertificationinIndonesia..............................18
6.1.
Possibleimpact...........................................................................................................................................18
6.2.
Benefitsandbarriers................................................................................................................................20
7. Conclusion.......................................................................................................................................................22
8. References.......................................................................................................................................................24
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ListofFigures
Figure1:MapofIndonesia(VredesEilandenCountryOfficesVECO,2011) .................... 6
Figure2:ThematicfocusoftheUTZstandard(ownfigure) ............................................... 9
Figure3:ThematicfocusoftheRainforestAlliancestandard(ownfigure) .................... 10
Figure4:ThematicfocusoftheFairtradestandard(ownfigure) .................................... 11
Figure5:Conventionalvs.certifiedcocoainIndonesia(Pottsetal.,2014) .................... 12
Figure6:Certifiedvs.uncertifiedfarmers’useofGramoxone(SCPP,2015c) ................. 15
Figure7:Cocoaprices1994–2011(FairtradeFoundation,2011) .................................. 18
ListofTables
Table1:ChallengesintheIndonesiancocoasector(owntable)........................................ 8
Table2:PotentialofUTZcertificationtotacklechallenges(owntable) ......................... 16
Table3:PotentialofRainforestAlliancecertificationtotacklechallenges(owntable). 17
Table4:PotentialofFairtradecertificationtotacklechallenges(owntable) ................ 20
Table5:Potentialofallcertificationschemestotacklechallenges(owntable) ............. 21
3
1. Introduction
IndonesiaisthethirdlargestproducerofcocoaworldwideafterIvoryCoastandGhana(Potts,
Lynch, Wilkings, Huppe, Cunningham & Voora, 2014). In Indonesia, cocoa provides the main
sourceofincomeformorethanonemillionsmallholderfarmers(CocoaSustainabilityPartner‐
ship,2013).ThelargestdevelopmentprojectintheIndonesiancocoasectoristheSustainable
CocoaProductionProgram(SCPP),implementedbytheSwissfoundationfortechnical cooper‐
ationSwisscontact.TheSCPP(2015a)estimatesthatapproximatelyhalfofits60’000targeted
farmerslivebelowtheinternationalpovertylineof2.5dollarsperday.Volatilecocoapricesas
wellasdecliningfarmproductivityputIndonesianfarmersinachallengingsituation.Ultimate‐
lytheseobstaclesposeathreatfortheIndonesiancocoaproductionbydiscouragingnewgen‐
erationsfromgrowingcocoa.Besidestheeconomicdifficultiesfarmersface,inadequatesafety
conditions(socialdimension)andenvironmentallyharmfulfarmingpractices(environmental
dimension)characterizetheIndonesiancocoasector.
The end consumers of chocolate products are more and more aware of these challenges and
aredemandingcocoaproductsthathavebeenproducedinasustainableway(Bethge,2014).
Handinhandgoesthedemandfortransparencyandproducttraceability.Asaresult,interna‐
tional brands are increasingly under pressure to source sustainable products, as well as to
provideinformationabouttheirsupplychains,includingfulltraceabilityofthecocoatheyuse
inchocolateproducts(Kuit&Waarts,2014).Itwillcomeasnosurprisethatmayorplayersin
the cocoa industry, such as Mars, have formulated sustainable sourcing commitments until
2020.Onewaytokeeptheirpromisesistouseexternalcertificationlabels.Onaninternational
levelalready22%ofthe cocoaproductioniscertifiedbythefourlabelsUTZ,RainforestAlli‐
ance,Fairtrade,andOrganic.Incontrast,only10%ofthecocoaproductioniscertifiedinIndo‐
nesia,wherebyprivatecompaniesworkwiththetwolabelsUTZandRainforestAlliance(Potts
etal.,2014).
Therefore, the SCPP sees a large potential in scaling up certification in the Indonesian cocoa
sector.Theprogramisalsoawarethatotherinternationallyrelevantlabelsforcocoa,suchas
Fairtrade,couldentertheIndonesiancocoamarketinthefuture.Againstthisbackground,this
essayanalysestheimpactofthecurrentcertificationschemesinIndonesia(UTZandRainfor‐
est Alliance), and elaborates benefits and barriers of introducing the new certification label
FairtradeinIndonesia.Theresearchquestionsaswellasthemethodsaredescribedinchapter
2. Chapter 3 gives an overview of the cocoa production in Indonesia and its challenges, and
chapter4comparescertificationstandardsforcocoa.Chapter5describestheimplementation
andimpactofthecurrentcertificationschemesUTZandRainforestAllianceinIndonesia,chap‐
ter6discussesthebenefitsandbarriersofintroducingFairtradecertificationinIndonesia,and
chapter7concludestheessay.
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2. Researchquestionsandmethods
According to the structure mentioned above this study aims at answering the following re‐
searchquestions:
1. Whataretheeconomic,social,andenvironmentalchallengesforcocoafarmersinIndone‐
sia?
2. What is the potential of the already implemented certificationlabels, UTZ and Rainforest
Alliance,intacklingcurrentchallengesintheIndonesiancocoasector?
3. What are specifically benefits and barriers of introducing Fairtrade certification for the
Indonesiancocoaproduction?
The reason why the current certification schemes in Indonesia, UTZ and Rainforest Alliance,
areassessedindetailistounderstandwhatbenefitscertificationalreadyprovidestotheIndo‐
nesiancocoasector.ThesebenefitsarethencomparedwithbenefitsthatFairtradecouldbring
about.TheideaistofindoutwhataddedvalueFairtradecertificationcouldprovideadditional‐
lytothecurrentlabelsinIndonesia.
Thestudyismainlybasedonaliteraturereview.Duetotherisingimportanceofcertification
labelsworldwide,thistopichasreceivedbroadattentionintheliterature.Mostlycertification
labels, governmental and non‐governmental organizations, universities, and consulting firms
analyzed the impact of sustainability certification on the living conditions of farmers. These
studiesmainlyfocusonwell‐establishedcropssuchascoffee(Kuit&Waarts,2014). Farless
literaturecanbefoundoncertifiedcocoaandmostanalyzecocoaproductioninthetwomain
producingcountriesIvoryCoastandGhana.Indonesiaasthethirdlargestproducerofcocoais
hardlycoveredbytheliterature.
Inordertoanalyzetheliterature,theconceptofsustainabledevelopmentisusedasatoolto
screenandorganizetherelevantcontentaccordingtothethreemaindimensionsofsustaina‐
bledevelopment:Theeconomic,social,andenvironmentaldimension(UnitedNations,1987).
Inthecontextofdevelopingcountries,theeconomicdimensionmainlyreferstopovertyallevi‐
ation,thesocialdimensionrelatestobasicservicesbutalsoworkingconditions,andtheenvi‐
ronmentaldimensionreferstotheuseofresourcesandmaterials(Bethge,2014).
Specifically,theconceptwasusedtofiltertheeconomic,socialandenvironmentalchallenges
thattheIndonesiancocoasectorface.Moreover,theimpactofthedifferentlabelsontheliving
conditionsofthefarmerswerestructuredaccordingtothethreedimensions.Theconceptof
sustainable development not only helped to analyze the literature, but also to examine the
three standards UTZ, Rainforest Alliance and Fairtrade. The different requirements of the
standardswereattributedtothethreedimensionsofsustainabledevelopment.Netdiagrams
werecreatedInordertovisualizethecontent‐wisefocusofthestandards.
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3. CocoaproductioninIndonesia
IndonesiaisthethirdlargestproducerofcocoaafterIvoryCoastandGhana.Indonesia’smar‐
ketshareisaround11%,whereasWestAfricacoversaround58%ofglobalcocoaproduction
(Pottsetal.,2014).CocoainIndonesiaismainlygrownbysmallholderfarmers(withonaver‐
ageonehectareperfarmer),andprovidesthemainsourceofincomeformorethanonemillion
farmers(CocoaSustainabilityPartnership,2013).
WhenlookingattheplantedareasbysmallholdersinIndonesia,cocoaisthefourthimportant
cropafterpalmoil,coconut,andrubber,coveringaround1.6millionhectares.Thelargestco‐
coa production area is concentrated on the island of Sulawesi that belongs to Indonesia (see
figure 1 below). Cocoa is also produced on the islands of Sumatra, Java and Papua (Statistics
Indonesia,2015).
Figure1:MapofIndonesia(VredesEilandenCountryOfficesVECO,2011)
The International Cocoa Organization (ICCO, 2016a) forecasts that Indonesia will produce
around 300’000 tons of cocoa in the years 2015/2016. Only a few large private companies,
suchasNestlé,Mars,BarryCallebaut,andCargill,buy,process,orexportIndonesiancocoa.Itis
mainly exported to the neighboring countries Malaysia and Singapore, but also to India and
Thailand (Statistics Indonesia, 2015). The exports generate an income of around 1.2 billion
dollarsperyear(VredesEilandenCountryOfficesVECO,2011).
3.1. Economicfactors
The SCPP (2015a) estimates that around 7% of the 60’000 targeted farmers earn below the
international poverty line of 1.25 dollars per day, and around 47% below the international
povertylineof2.5dollarsperday.Threeimportantfactorsthatinfluencetheincomeofcocoa
farmersaredescribedinthefollowingsections.
First,whenlookingattheIndonesianmarket,smallholderfarmersfacedecliningfarmproduc‐
tivity (VECO, 2011). There are two main reasons for this. On the one hand, most cocoa trees
wereplantedinthe1990sduringtheIndonesiancocoaboom,andhavenotbeenreplantedyet.
The old trees attract pest and diseases, which leads to smaller yields (SCPP, 2015a). On the
6
otherhand,cocoafarmershavealowknowhowongoodagriculturalpracticessuchasproper
plantingmaterial,pruning,harvestingand,fertilizerapplication.Amulti‐stakeholderforumin
Indonesia,calledCocoaSustainabilityPartnership(2013),believesthattheimplementationof
goodagriculturalpracticesoncocoafarmscouldsignificantlyincreaseyields.
Second,fromamacroperspective,worldmarketpricesforcocoaarecharacterizedasvolatile.
Short‐term fluctuations of prices are mainly influenced by weather conditions, whereby the
price falls in periods with favorable weather conditions, and the price rises in periods with
unfavorable weather conditions (i.e. extreme wet or dry weather) (Fairtrade Foundation,
2011). Moreover, smallholder farmers only receive a tiny share of the world market prices.
Potts et al. (2014) estimate the share to be around 40%, and sees the reason for this small
shareinthelargeconcentrationofpowerfulcompanieswithinthecocoasupplychain.
Third, formal farmer organizations organized into cooperatives are rare in Indonesia
(Sa'danoer,2015).Oneofthereasonsisthatcooperativeshavehistoricallyhadabadreputa‐
tion in Indonesia because they mainly acted as agents serving the central government pro‐
grams.Furthermore,thetransformationof“leadfarmers”or“smalltraders”intosoundboard
managersisamajorchallenge(Lyssens,2015).Forthesereasons,cooperativesareoftennot
viewed as an instrument to improve the economic situation of their members (Suradisastra,
2006).Nevertheless,SCPPandotherNGOsstronglysupporttheformationofcooperativesbe‐
cause they believe that well‐organized cooperatives can enhance farmers’ bargaining power
andofferrelevantservices(suchascredits)totheirsmembers(Sa'danoer,2015).
3.2. Socialfactors
Oneofthereasons,whycertifiedcocoagainedmomentumonaninternationallevelwerepub‐
lishedreportsbydifferentUNagenciesinthelate1990sonthewidespreaduseofchildlabor
incocoaproduction(Kuit&Waarts,2014).Thefocusofthosereports,butalsoofcurrentstud‐
ies,ischildlaborinWestAfricancountries(FairtradeFoundation,2011;KPMG,2012;Ingram,
Waarts,Ge,vanVugt,Wegner,Puister‐Jansen,Ruf&Tanoh,2014;Ryan,2011;TulaneUniversi‐
ty, 2011). Indonesia is not specifically mentioned in these reports. However, a broad study
conducted by Statistics Indonesia and the International Labor Organization (2009) assumes
that there are around 1.76 million child laborers aged between 5 and 17 in Indonesia. More
than50%ofthesechildrenworkintheagriculturesector.Anumberonhowmanychildrenare
workingspecificallyoncocoafarmsinIndonesiadoesnotexist.Butbasedonthestudiesmen‐
tionedaboveitisfairtoassumethatchildlaborintheIndonesiancocoasectorisacriticaltop‐
ic.Anotherconcernfromasocialperspectiveisthesafetyoncocoafarms.Astudyconducted
bytheSCPP(2015b)foundthatonly10%ofthetargetedfarmersuseprotectiveclotheswhen
spraying the farm with pesticides, negatively affecting the health of the farmers. Protective
clothesarei.e.boots,gloves,masksandglasses.
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According to the human development report, conducted by the United Nations Development
Programme (2015), Indonesia progressed quite well on its human development indicators
(HDI).Inthelastdecades,thelifeexpectancyrateinIndonesiahasincreasedby9.3years,and
reachedalevelofaround68.9yearsin2015.Moreover,theyearsofschoolinghaveincreased
by4.5years,andreachedalevelof7.6years(wherebythemeanistaken)in2015.Theliteracy
rate,at92.8%,ishigh.Allchildrenareenrolledinprimaryschool,and82.5%gotosecondary
school(grossenrollmentratio).
3.3. Environmentalfactors
Cocoaproductionaffectstheenvironmentinmanyways.First,theinappropriateuseofpesti‐
cides,whichcannegativelyaffectwaterandsoilquality,iscommonincocoaproduction(Potts
etal.,2014).Onereasonforthewidespreaduseofpesticidesarepestsanddiseasessuchas
theCocoaPodBorerorthediseaseBlackPod,whichcanbefoundonmanycocoafarmsinIn‐
donesia.However,astudyconductedbytheSCPP(2015b)foundoutthattheknowhowofthe
cocoafarmersonintegratedpestmanagementislow.Anintegratedpestmanagementwould
include the awareness of what pesticides are allowed respectively banned, how to spray the
pesticides(i.e.howoften)andhowtomanagethewasteofthepesticide(i.e.theemptypesti‐
cidebottles).
Second,deforestationisacommonpracticeinIndonesiainordertoclearlandforagriculture.
ManyofthelargeforestfiresontheislandsofSumatraandBorneoin2015weretheresultof
clearing land for plantations such as palm oil (World Resources Institute, 2015). However,
therearenoreliablestatisticsonhowmuchforestisclearedspecificallyfortheproductionof
cocoa. Smallholder farmers can make a positive contribution by conserving ecosystems or
plantingshadetreesontheirfarmsinordertoincreasecarbonsequestration(SCPP,2015a).
3.4. Overviewofchallenges
Inthissectionthechallengesthatwerementionedintheprevioussectionsarebrieflysumma‐
rizedandwiththisresearchquestion1isaddressedhere.Thislististhenusedduringtheas‐
sessmentofthethreecertificationlabels,specificallywhenanalyzingthepotentialofthelabels
totacklethecurrentchallengesintheIndonesiancocoasector.
Economicchallenges
Socialchallenges
Environmentalchallenges
Lowfarmproductivity
Inadequatesafetyonfarms
Inappropriateuseofpesticides
Lowandvolatilecocoaprices
Childlaboroncocoafarms
Deforestation
Absenceofformalcooperatives
Table1:ChallengesintheIndonesiancocoasector(owntable) 8
4. Comparisonofcertificationstandardsforcocoa
This chapter compares the certification standards for UTZ, Rainforest Alliance and Fairtrade.
Forthispurposetherequirementsofthestandardsareexaminedandthethematicfocusofthe
respectivestandardsispresented.
4.1. UTZ
ThemaingoalofUTZcertificationisthatthefarmersincreasefarmproductivityandmanage
theirfarmsprofitablywithrespectforpeopleandplanet(UTZ,2016).Accordingtothecertifi‐
cation scheme, this goal can be achieved by implementing good agricultural practices on the
farms.TheUTZstandardencompasses112requirements.Mostoftherequirements(58%)can
beattributedtotheeconomicdimensionofsustainabledevelopment,31%tothesocialdimen‐
sionand11%totheenvironmentaldimension.Thenetdiagrambelowvisualizesthethematic
focusoftheUTZstandard.
Figure2:ThematicfocusoftheUTZstandard(ownfigure)
Theeconomicrequirementsofthestandardmainlyfocusontheimplementationoffarming
practices (46 requirements). It includes practices such as soil fertility management (8 re‐
quirements),pesticideandfertilizerapplication(8requirements),irrigation(6requirements)
aswellasharvestandpost‐harvest(6requirements).Therestoftheeconomicrequirements
arerelatedtothemanagementofthecertification,forexamplecertificationtrainingsarepro‐
videdtothefarmers,recordsarekeptinordertoensuretraceabilityandapremiumdistribu‐
tionprocessisinplace.UTZdoesnotrequireacertainpremiumtobedistributedtothefarm‐
ers, but the amount of premium is discussed upon the members (farmers, cooperatives and
privatepartners).
Thesocialrequirementsrefertotheworkingconditionsofthefarmersandincludeworkers’
rights(38requirements)suchaseducation,freedomofassociationandworkinghours.Moreo‐
ver,discriminationandchildlaborareprohibitedonfarms(inlinewiththestandardsofthe
InternationalLabourOrganization).Moreover,15requirementsrefertothehealthandsafety
ofthefarmers,whichincludespesticidehandling,hygieneandfirstaid.
9
Finally,only14requirementscanbeattributedtothe environmentaldimension.Itencom‐
passesrequirementswithregardtotheprotectionofnature,water,air,energyandwaste.In‐
terestingtomentionhereisthatgeneticallymodifiedorganismsarenotprohibitedonfarms.
4.2. RainforestAlliance
ThevisionofRainforestAllianceis“aworldwherepeopleandplanetprospertogether”(Rain‐
forestAlliance,2016).Theshortsloganalreadyindicatesthefocusofthelabelonsocialaswell
asenvironmentalissues. Thisfocus alsobecomesvisiblewhenlooking atthedistribution of
therequirementswithinthestandard.RainforestAllianceworkswiththeSustainableAgricul‐
ture Standard (Sustainable Agriculture Network, 2010). In total, the standard covers 101 re‐
quirements,wherebymostoftherequirementsarelinkedtothesocialdimension(46%)and
theenvironmentaldimension(44%)andonlyafewrequirementstotheeconomicdimension
ofsustainabledevelopment(11%)(seefigurebelow).
Figure3:ThematicfocusoftheRainforestAlliancestandard(ownfigure)
ThesocialrequirementsoftheSustainableAgricultureStandardfocusonworkingconditions
(20 principles), occupational health (20 principles) and community relations (6 principles).
TheworkingconditionsofthefarmersmustbeinlinewiththestandardsoftheInternational
Labor Organization that prohibits worst forms of child labor and allows workers to organize
andassociatethemselvesfreely.Occupationalhealthreceivesmoreattention,ascomparedto
theUTZstandard,with20requirements.Thestandardsaysthatallproducersthatusechemi‐
cals have to be trained in how to handle pesticides and have to wear personal protective
equipment.
TheenvironmentalrequirementsoftheSustainableAgricultureStandardaremuchbroader
thanwiththeUTZstandard,theyincludei.e.ecosystemconservation(9principles),watercon‐
servation (9 principles), integrated crop management (9 principles), wildlife protection (6
principles) and integrated Waste Management (6 principles). The standard emphasizes the
protectionofnaturalecosystems,i.e.byreforestationorbyidentifyingallexistingecosystems
10
throughaconservationprogram.Withregardtowildlifeprotection,producersarenotallowed
tohuntwildanimalsontheirfarms.Finally,RainforestAllianceprohibitstheuseofgenetically
modifiedorganismsonthefarm(incontrasttoUTZ).
Theeconomicrequirementsonlyreferto11principlesconcerningthemanagementsystem
thatmakessurethatthememberscomplywiththestandard.SimilartotheUTZstandard,the
SustainableAgricultureStandarddoesnotrequireacertainpremiumtobedistributedtothe
farmers,buttheamountofpremiumisdiscusseduponthesupplychainpartners.
4.3. Fairtrade
The mission of Fairtrade is “…to connect disadvantaged producers and consumers, promote
fairertradingconditionsandempowerproducerstocombatpoverty,strengthentheirposition
andtakemorecontrolovertheirlives”(FairtradeInternational,2016a).Onewayofpromoting
fairertradingconditionsistointroduceaminimumpriceforthecertifiedcrop.Incomparison,
Rainforest Alliance and UTZ do not directly intervene in the market. Another key role of
Fairtrade is to empower democratically organized producer organizations. The producer or‐
ganizationsreceiveafixedFairtradepremiumanddecidethemselveshowtoinvestthepremi‐
um in favor of the whole community. In comparison, Rainforest Alliance and UTZ leave the
levelofthepremiumopentothesupplychainpartnerstobecertified.
TheFairtradestandardworkswithastep‐wiseapproach,wheretheproducershavetofulfill
core requirements (necessary requirements to become certified) but also development re‐
quirementsthatshowcontinuousimprovements(FairtradeInternational,2016b).Inorderto
analyze the standard, only the core requirements are taken into account. The vision of
Fairtradeisreflectedinthestandardthroughthefocusonthesocialdimensionofsustainable
development. In total, the Fairtrade standard covers 84 core requirements, whereby most of
therequirementsarelinkedtothesocialdimension(55%),followedbytheeconomicdimen‐
sion(24%)andtheeconomicdimensionofsustainabledevelopment(21%)(seefigurebelow).
Figure4:ThematicfocusoftheFairtradestandard(ownfigure)
11
ThesocialrequirementsofthestandardrefertotheFairtradepremiumthattranslatesintoa
FairtradeDevelopmentPlanforthecommunity(7corerequirements).Therequirementsem‐
phasizethatthecooperativeshavetobedemocraticallyorganizedandthatthe membersde‐
cide together what investments the community needs (11 core requirements). These social
requirements are unique with the Fairtrade system. Similar to Rainforest Alliance and UTZ,
FairtradereferstothestandardsoftheInternationalLaborOrganizationthatprohibitsworst
formsofchildlabor(7corerequirements).Moreover,workerscanassociatethemselvesfreely
and discrimination is not allowed (7 core requirements). The Fairtrade standard also under‐
linesgenderequityandtheeconomicempowermentofwomen(2corerequirements).Finally,
similartoRainforestAlliance,thestandardemphasizesongoodworkingconditionsbydescrib‐
ingrequiredconditionsofemploymentaswellasoccupationalhealthandsafetyindetail(12
corerequirements).
Theeconomicrequirementsarerelatedtofairtradingpracticesandaremainlyoutlinedin
theFairtradestandardfortraders(FairtradeInternational,2015).Itsaysthattradershaveto
paytheFairtrademinimumpriceaswellastheFairtradepremium.Themanagementofpro‐
duction practices in the producer standard covers relatively few requirements compared to
UTZ and Rainforest Alliance. However, traceability is prominent in the standard with 8 core
requirements.
The environmental requirements mainly focus on the handling of pesticides (7 core re‐
quirements)andthechoiceofpesticidesused(4corerequirements).Similartotheothertwo
certificationschemes,thestandardcoversintegratedpestmanagement(3corerequirements),
waste(1corerequirement)andbiodiversity(2corerequirements).SimilartoRainforestAlli‐
ance,geneticallymodifiedorganismsarenotallowedonFairtradefarms(1corerequirement).
5. ImplementationandimpactofUTZandRainforestAllianceinIndonesia
SustainabilitycertificationinIndonesiaisratheranichemarketrepresentingonlyaround10%
ofthenationalmarketsharein2011/2012(Pottsetal.,2014).
Figure5:Conventionalvs.certifiedcocoainIndonesia(Pottsetal.,2014)
12
Asfigure5showsUTZcoversaround4%,RainforestAlliance6%andOrganiclessthan0.1%of
the market share (Potts et al., 2014). Cocoa processors and manufacturers decided to work
withUTZandRainforestAllianceinIndonesiain2012(Molenaar,2016).Sosustainablesourc‐
ingcommitmentsinIndonesiaarerathernewwhichreflectstherathersmallmarketsharefor
certified cocoa in Indonesia. The reasons why the industry decided to work with these two
certificationschemeswerecompiledduringanownstudythatwasconductedfortheSCPPin
Indonesia in 2015 with the title “Is Certification a Viable Tool for the Indonesian Cocoa Sec‐
tor?”.PrivatesectorpartnerssuchasCargill,Nestlé,MarsandBarryCallebautexplainedduring
thequalitativeinterviewsthattheyseecertificationasatooltorespondtotheglobaldemand
forcertifiedcocoa,toincreasetheirreputation,tomeetsustainablesourcingcommitments,to
improvefarmproductivityandproductqualityandtohavemorecontrolontraceabilityandto
buildloyaltyofthefarmers.
5.1. Implementation
Usuallythefirstbuyer(whichcanbeaprocessororexporter)oracooperativeholdthecertifi‐
cateinIndonesia,whichmeansthatitisresponsibleforimplementingandmonitoringthere‐
quirements of the label. The certificate holder trains the farmers according to the standards
andsetsupanInternalControlSystem(ICS)toensurethatthewholeorganizationandallthe
producers are certification compliant. ICS staff mainly consists of key farmers, who have the
roletoauditaround10‐30farmersintheirarea.
Additionally, compliance is determined by independent audits generally once a year (UTZ,
2016). The Swiss auditing company Institute for Marketecology (IMO) conducts the external
auditsforUTZcertifiedfarmersinIndonesia.AndRainforestAlliancefarmersareauditedby
Rainforest Alliance itself. If the farmers are certification compliant, the certificate holder is
rewardedwithapricepremiumbasedontherespectivecontractualagreementwith thepri‐
vatepartners.Then,thecertificateholderdistributesthepremiumtotheinvolvedstakehold‐
ers(Ingrametal.,2014).IntheSCPPworkingareathesplitofthecertificationpremiumisas
follows:60%goestothefarmers,30%tothecooperativesand10%tothebuyingunits.
DuringtheabovementionedownstudyfortheSCPP(“IsCertificationaViableToolfortheIn‐
donesianCocoaSector?”)challengesofimplementingfarmcertificationinIndonesiawereex‐
amined. The analysis showed that one of the main challenges isthat the cooperatives, which
wereselectedtoholdthecertificate,doonlyhaveweakfinancialandmanagementcapacities.
For example the premium distribution process from the cooperatives to the farmers is very
slowandthefarmershavetowaitaroundoneyearuntiltheyreceivethecertificationpremi‐
um.Moreover,thecooperativeshaveproblemstomanagetheincreasedcostsofcertification.
Theyarei.e.notabletopaytheICSstaff,althoughtheICSstaffhasacrucialroleincontrolling
whetherthefarmersimplementthecertificationrequirementsornot.Theseandotherreasons
13
lead to the fact that not all certification requirements are effectively implemented on the
ground and consequently some of the farmers were expelled from the certification system.
Thisinturnnegativelyaffectedtheprivatepartners’trustinthecertificationsystem.
5.2. Impact
ThissectionshowstheimpactofthetwocertificationschemesUTZandRainforestAllianceon
thelivingconditionsofthefarmers.AsthereisonlyoneUTZimpactstudyandnoRainforest
AllianceimpactstudiesatallthatwereconductedintheIndonesiancocoasector,resultsfrom
cocoacertificationinothercountriesarealsoconsidered.Thesectionthenconcludeshowwell
thetwocertificationschemesperformintacklingthecurrentchallengesintheIndonesianco‐
coasector(seeresearchquestion2).
5.2.1. UTZ
Asdescribedinsection4.1thethematicfocusoftheUTZstandardliesontheimplementation
ofgoodagriculturalpractices.Thisfocusalsobecomesvisiblewhenlookingattheeconomic
impactofthecertificationscheme.Molenaar(2016)thatevaluatedUTZcertificationforcocoa
inIndonesia,Ingrametal.(2014)intheIvoryCoastandDengerink(2013)inGhanafoundout
thatcertificationleadstoahigherimplementationofgoodagriculturalpracticesonfarmsand
thereforeahigherlevelofyields.Dengerink(2013)underlinedthatUTZcertifiedfarmersap‐
plied good agricultural practices such as pruning and weeding more intense than uncertified
farmers.Thetrainingsaswellasthefollow‐upsupportprovidedbytheprogramshelpedthe
farmerstoimplementgoodagriculturalpractices(Ingrametal.,2014).Asaconsequence,UTZ
certificationseemstoperformverywellintacklingoneofthemaineconomicchallengesinthe
Indonesiancocoasector(economicchallenge1),whichisdecreasingfarmproductivity.
Asdescribedinsection4.1theUTZstandarddoesnotrequireacertainpremiumtobedistrib‐
uted to the farmers. In reality the premium price for UTZ certified cocoa farmers ranges be‐
tween60and100dollarspertoninIndonesia(Molenaar,2016).Theratherlowpremiumis
probablyareasonwhythefarmersbelievethattheycanimprovetheirincomeratherthrough
anincreasedproductivitythanthroughthepremium.SomeoftheUTZcertifiedcocoafarmers
inIndonesiaarenotevenawarethattheyreceiveapremium,becausethefirstbuyerincludes
thepremiumintothefarmgateprice,whereitisnotvisibleanymore(Molenaar,2016).There‐
fore,itcanbesaidthatUTZcertificationonlyhasalimitedcapacitytotacklethechallengeof
lowandvolatilepricesintheIndonesiancocoasector(economicchallenge2).
Moreover, Molenaar (2016) found that UTZ certification promotes the formation of farmer
organizationsandIngrametal.(2014)reportedthat75%ofthefarmersbelongtoacoopera‐
tive.However,thisinformationdoesnotindicatehowwellthecooperativesarefunctioning.A
studyspecificallyconductedonUTZcooperativesinIndonesiashowedthatthesuccesssofaris
14
limited(Lyssens,2015).Therefore,itcanbesaid,thatUTZcertificationhasingeneralagood
potentialto promotetheformationofcooperatives,butstillthespecificcontextof Indonesia
hastobetakenintoaccount(economicchallenge3).
WithregardtothesocialimpactofUTZcertification,bothstudiesonlyfoundlittleevidence.
Thisisinlinewiththeratherlowfocusofthestandardonthesocialdimension(asseeninsec‐
tion 4.1). Although Ingram et al. (2014) observed that children in Ivory Coast worked less
hours on certified farms than allowed by the standard, some of the children still performed
hazardousactivitiessuchaspruningandpodopening(whichisnotallowedbythestandard).
Moreover, Ingram et al. (2014) emphasized that although the use of personal protective
equipmentishigherwithcertifiedfarmersthanuncertifiedfarmers,thescoreisstillverylow.
AlsoMolenaar(2016)andDengerink(2013)seeroomforimprovementwhenitcomestothe
useofpersonalprotectiveequipment.Thereforeitcanbesaid,thatUTZcertificationonlyhasa
limited capacity to tackle Indonesia’s social challenges, which are inter alia child labour and
alsotheinadequatesafetyonfarms(socialchallenge1and2).
Withregardtotheenvironmentalimpact,Molenaar(2016)foundoutthatcertifiedfarmers
havereducedtheuseofbannedpesticidesontheirsfarms.AstatisticoftheSCPP(2015c)un‐
derlinesthisevidence,butshowsatthesametimethatstill3.7%oftheUTZcertifiedfarmers
usebannedpesticidessuchasGramoxone(seefigurebelow). Figure6:Certifiedvs.uncertifiedfarmers’useofGramoxone(SCPP,2015c)
Inotherwords,UTZcertificationperformswellinreducingtheinappropriateuseofpesticides
on farms (environmental challenge 1), because certified farmers seem to i.e. use less banned
pesticides than uncertified farmers in Indonesia. However, there is room for improvement,
becausestillsomeofthecertifiedfarmersusebannedpesticidesontheirsfarms,whichisnot
allowedbythecertificationscheme.
15
Moreover,Dengerink(2013)foundoutthatUTZcertifiedfarmersplantmuchlessshadetrees
thanuncertifiedfarmers.Furthermore,UTZcertificationdidnotseemtoinhibitdeforestation
asmostofthefarmersreportedthattheyhaveclearedprimaryorsecondaryforestwithinthe
pastyear.Therefore,UTZcertificationonlyhasalimitedcapacitytotackletheenvironmental
challengeofdeforestationinIndonesia(environmentalchallenge2).
ThefollowingtablesummarizesthepotentialofUTZcertificationtotacklecurrentchallenges
intheIndonesiancocoasector.
Challenges
UTZ
Lowfarmproductivity(economicchallenge1)
Lowandvolatilecocoaprices(economicchallenge2)
Absenceofwell‐organizedcooperatives (economicchallenge3)
Inadequatesafetyonthefarms(socialchallenge1)
Childlaboroncocoafarms(socialchallenge2)
Inappropriateuseofpesticides(environmentalchallenge1)
Deforestation(environmentalchallenge2)
Table2:PotentialofUTZcertificationtotacklechallenges(owntable)
5.2.2. RainforestAlliance
Asdescribedinsection4.2thethematicfocusoftheSustainableAgricultureStandardlieson
theenvironmentaldimension,whichalsobecomesvisiblewhenanalyzingtheimpactofthe
certificationscheme.AstudybyKrain,Miljard,KonanandServat(2011),whoanalyzedRain‐
forestAlliancecertifiedcocoaproductioninIvoryCoast,reportedthatcertifiedfarmersinIvo‐
ryCoasthadabetterunderstandingofnaturalecosystemsthanuncertifiedfarmers.Certified
farmersplantedshade trees forthe firsttime andwildlifeareasweremarkedforprotection.
Moreover, Bethge (2014) found that Rainforest Alliance certification reduced the misuse of
prohibitedchemicalsordisadvantageousamountofchemicals.Tosumup,itcanbesaidthat
RainforestAlliancehasaverygoodpotentialintacklingtheenvironmentalchallengesinherent
intheIndonesiancocoasector,whichareinteraliatheinappropriateuseofpesticides(envi‐
ronmentalchallenge1)anddeforestation(environmentalchallenge2).
Withregardtothesocialimpact,Krainetal.(2011)didnotencounterchildlabourwithinthe
sixcertifiedcooperativesexaminedinIvoryCoast.Howevertheothertwostudiesdonotmen‐
tionthereductionofchildlaboroncocoafarmsatall.Regardingthesafetyonthefarms,Beth‐
ge (2014) reported that all farmers used personal protective equipment and Rainforest Alli‐
ancehelpedthemtobuytheequipment.Incontrast,Krainetal.(2011)andPaschall(2012)did
not raise the issue of increased protective clothing for the farmers. Therefore, it can be said
16
thatRainforestAlliancehasagood(butnotverygood)potentialtotacklethesocialchallenges
inherent in the Indonesian cocoa sector, which are inter alia inadequate safety on farms and
childlabor(socialchallenges1and2).
Withregardtotheeconomicimpact,Krainetal.(2011),Bethge(2014)andPaschall(2012)
foundoutthattheproducerscouldincreasefarmproductivityaswellasfarmqualitythrough
certification.Krainetal.(2011)explainedthattheintegratedpestmanagementhelpedtosig‐
nificantlyreducethenumberofcocoapodsaffectedbydiseases.Moreover,theimplemented
goodagriculturalpracticessuchaspruning,cropmanagementandraisingseedlingshelpedto
improvefarmproductivity.AninterestingconclusionofPaschall(2012)isthatfarmproductiv‐
ityplayedamoreimportantroleasanincentiveforthefarmerstobecertifiedthantheprice
premium.FinallyKrainetal.(2011)reportedthataftercertificationmorefarmerswereorga‐
nizedincooperatives.ThepotentialofRainforestAlliancetotackletheeconomicchallengesin
the Indonesian cocoa sector are very similar to UTZ. Both certification schemes have a very
goodpotentialtoincreaseproductivity(economicchallenge1),butonlyhavealimitedimpact
onprices(economicchallenge2).Finally,bothcertificationschemeshaveagoodpotentialto
promotetheformationofcooperativesandthereforeimprovethesituationinIndonesiathat
sofarhasalackofwell‐organizedcooperatives(economicchallenge3).
AlthoughtheSustainableAgricultureStandard(seesection4.2)didnotindicatetheemphasis
ontheeconomicdimension,theimpactstudiesshowthatRainforestAlliancehasasimilareco‐
nomicimpactasUTZ.Areasonforthisdiscrepancybetweenstandardandimpactcouldbethat
theimplementationofthestandardcandifferaccordingtothestakeholdersinvolvedandthe
context.Moreover,therequirement1.9oftheSustainableAgricultureStandard(“thetraining
topics must be identified according to the standard, the position, and type of work carried
out”),givestheprivatesectorpartnersthepossibilitytosettheirowntrainingpriorities.
ThefollowingtablesummarizesthepotentialofRainforestAlliancecertificationtotacklecur‐
rentchallengesintheIndonesiancocoasector.
Challenges
RainforestAlliance
Lowfarmproductivity(economicchallenge1)
Lowandvolatilecocoaprices(economicchallenge2)
Absenceofwell‐organizedcooperatives (economicchallenge3)
Inadequatesafetyonthefarms(socialchallenge1)
Childlaboroncocoafarms(socialchallenge2)
Inappropriateuseofpesticides(environmentalchallenge1)
Deforestation(environmentalchallenge2)
Table3:PotentialofRainforestAlliancecertificationtotacklechallenges(owntable)
17
6. ImpactandbarriersofintroducingFairtradecertificationinIndonesia
InthefirstsectiontheresultsoftheimpactstudiesonFairtradecertificationforcocoaarepre‐
sented.Thesecondsectionthenconcludeswithacomparisonofthethreelabelsandtheirpo‐
tentialtotacklecurrentchallengesintheIndonesiancocoasector.Specificbenefitsofintroduc‐
ingFairtradecertificationarehighlightedbutalsopossiblebarriers.
6.1. Possibleimpact
With regard to the economic impact, a study by Nelson and Galvez (2000) that analyzed
FairtradecocoaproductioninEcuadorfoundoutthatcertifiedfarmersreceiveaslightlyhigher
pricethanuncertifiedfarmersduetotheFairtademinimumprice.Incontrast,anotherstudy
(Nelson,Opoku,Martin,Bugri&Posthumus,2013)thatanalyzedthecooperativeKuapaKokoo
in Ghana stated that Fairtrade certification does not have a positive impact on the farmgate
pricebecausetheFairtrademinimumpriceisbelowthenationallyfixedpriceforcocoa(bythe
Ghana Cocoa Board). According to Fairtrade International (2016c) the Fairtrade minimum
priceforcocoaworldwideis2000dollarsperton.Since2006,theinternationalcococaprices
arehigherthantheFairtrademinimumprice(FairtradeFoundation,2011,seefigurebelow).
Figure7:Cocoaprices1994–2011(FairtradeFoundation,2011)
AlsothefarmgatepriceforcocoainIndonesiaishigherthantheFairtrademinimumpricefor
cocoa.Since2013thefarmgatepriceforcocoainIndonesiarangedbetween2100dollarsper
tonand3300dollarsperton(ICCO,2016b).Inotherwords,Fairtradewouldhaveonlyalim‐
itedpotentialtotacklethechallenge oflow andvolatilecocoapricesin Indonesia(economic
challenge2).
AclearbenefitofFairtradecertificationasreportedbyNelsonandGalvez(2000)aswellasthe
Department for International Development (DFID, 2000) is that Fairtrade empowers farmer
groups through capacity building activities. Nelson et al. (2013) explained that in the case of
thecocoacooperativeKuapaKokooinGhana,FairtradeInternationalplayedanimportantrole
in assisting the cooperative in trade facilitation as well as strengthening the capacity of the
18
organizationbyprovidingtrainingsonorganizationaltopics(i.e.howtosetupanICS),man‐
agementtopics(i.e.howtosetupabudget)andtechnicalissues.Today,thecooperativerepre‐
sentsmorethan60’000farmersandprovidesnearlytwo‐thirdsoftheinternationalsupplyof
Fairtradecertifiedcocoa(DFID,2000).Moreover,accordingtotheannualreportofFairtrade
Switzerland(MaxHavelaar‐StiftungSchweiz,2014)halfofthepremiumworldwideisinvested
in the functioning of the cooperative itself. In sum, it can be said that Fairtrade certification
wouldhaveaverygoodpotentialinbuildingupandstrengtheningcocoacooperativesinIndo‐
nesia(economicchallenge3).
Incontrast,theimpactofFairtradecertificationonyieldsseemstoberatherlimited.Nelsonet
al.(2013)observedthattherewasnosignificantdifferenceofthelevelofyieldsbetweencerti‐
fiedanduncertifiedfarmers.OtherstudiesdidnotreportonanyimpactofFairtradecertifica‐
tiononyieldlevel.ThereforeitcanbesaidthatFairtradecertificationhasalimitedpotentialin
tacklingthechallengeoftheIndonesiancocoasectorofdecliningfarmyields(economicchal‐
lenge1).ThisresultisinlinewiththethematicfocusoftheFairtradestandard.Astheanalysis
ofthestandardshowed(seesection4.3)Fairtradecertificationdoesnotemphasizemuchon
themanagementofproductionpractices(ascomparedtoUTZandRainforestAlliancecertifica‐
tion).
With regard to the social impact, Nelson et al. (2013) underlined the importance of the
Fairtradepremiumtoinvestindevelopmentactivitiesforthecommunity.In2013,thecooper‐
ativeKuapaKokooinGhanaearnedapproximately375’000dollarsfromtheFairtradepremi‐
um(CenterforEvaluation,2012).TheFairtradepremiumwasinvestedinboreholes,schools,
mobile clinics, child labour programs and agricultural trainings. A part of the premium was
also invested in the functioning of the cooperative itself, in this case in the ICS. Only a small
shareofthepremiumwasdirectlypaidtothefarmers.
Moreover,theTulaneUniversity(2011)reportedthatFairtradecertificationeffectivelyworks
towardstheeliminationofchildlabour.ThereportreferredtotheKuapaKokoocooperativein
Ghana,wheretheauditingcompanyFLO‐CERT(whichisindependentfromFairtradeInterna‐
tional) foundchildlabourduringtheirauditsandconsequentlysuspendedtherespectiveco‐
coafarmingcommunitiesfromtheprogram.Afterthatthecooperativeinitiatedachildlabor
awarenessprogramandimplementedacorrectiveactionplan.Afterfollow‐upauditsthesus‐
pension was lifted. This example shows that Fairtrade certification would have a very good
potential to fight child labour inherent in the Indonesian cocoa sector (social challenge 2).
TheseresultsareinlinewiththethematicfocusoftheFairtradestandardonsocialissues(as
seeninsection4.3).
Finally,regardingthesafetyonthefarms,Bethge(2014)reportedthatinthecaseoftheKuapa
Kokoo cooperative in Ghana some certified farmers sprayed theirs farms without personal
19
protectiveequipment.Nelsonetal.(2013)underlinedthisfindingandreportedthatFairtrade
farmers in Ghana mentioned the non‐availability of safety clothing as one of the challenges
theyhave.Itcanthereforebeassumed,thatFairtradeonlyhasalimitedpotentialtotacklethe
challengeofinadequatesafetyonIndonesiancocoafarms(socialchallenge1).
With regard to the environmental impact, Nelson et al. (2013) observed that in the case of
cocoaproductioninGhana,thereareimprovementsinfarmingpracticessuchasthesafeuseof
chemicalsorthesafedisposalofcontainers.Moreover,Nelsonetal.(2013)reportedthatthe
cooperativeKuapaKokooinvestedinanafforestationprogram,wherebyaround50’000trees
were planted in four districts. For this project, the cooperative collaborated with the Swiss
chocolatemanufacturingcompanyChocolateHalba.However,ithastobesaidherethatthese
kindsofprojectsarehighlydependentonthedecision‐makingofthecooperativesthemselves.
Nevertheless it can be concluded, that Fairtrade certification would have a good potential to
tacklethechallengeofinappropriateuseofpesticide(environmentalchallenge1)andthechal‐
lenge of deforestation in Indonesia, using cooperatives as driver for afforestation programs
(environmentalchallenge2).
Challenges
Fairtrade
Lowfarmproductivity(economicchallenge1)
Lowandvolatilecocoaprices(economicchallenge2)
Absenceofwell‐organizedcooperatives (economicchallenge3)
Inadequatesafetyonthefarms(socialchallenge1)
Childlaboroncocoafarms(socialchallenge2)
Inappropriateuseofpesticides(environmentalchallenge1)
Deforestation(environmentalchallenge2)
Table4:PotentialofFairtradecertificationtotacklechallenges(owntable) 6.2. Benefitsandbarriers
In this section benefits and barriers of introducing Fairtrade certification in the Indonesian
cocoasectorarediscussed.InordertoseewhataddedvalueFairtradecertificationcouldpro‐
videtotheIndonesiancocoasector,theassessmentofallthreelabels(asdiscussedinsections
5.2.1,5.2.2and6.1)aresummarizedinthefollowingtable(  tandsforalimitedpotential,
 tandsforagoodpotentialand
standsforaverygoodpotentialtotacklecurrentchal‐
lengesintheIndonesiancocoasector).Verygoodresultsaccordingtoimpactstudiesarehigh‐
lightedinred.
20
UTZ
Rainforest
Alliance
Fairtrade
Lowfarmproductivity
(economicchallenge1)
Lowandvolatilecocoaprices
(economicchallenge2)
Absenceofwell‐organizedcooperatives
(economicchallenge3)
Inadequatesafetyonthefarms
(socialchallenge1)
Childlaboroncocoafarms
(socialchallenge2)
Inappropriateuseofpesticides
(environmentalchallenge1)
Deforestation
(environmentalchallenge2)
Table5:Potentialofallcertificationschemestotacklechallenges(owntable) Economicimpact
Withregardtotheeconomicimpact,thetableshowsthatUTZandRainforestAlliancecertifica‐
tionhaveabetterpotentialtoincreasefarmyieldsinIndonesiathanFairtradecertification.As
seeninsection4.1theimplementationofgoodagriculturepracticesisamainfocusoftheUTZ
standard.Moreover,impactstudiesshowthattherequirementsinthestandardalsotranslate
in a higher level of yields in reality. This is turn is attractive for private sector partners. As
mentioned in chapter 5 cocoa processors and manufacturers decided to work with UTZ and
RainforestAlliancebecausetheybelievethatthelabelscanhelptoimprovefarmyields.Incon‐
trast, Fairtrade certification only pays little attention on the implementation of good agricul‐
tural practices on cocoa farms. Although some cooperatives invest the premium to deliver
trainingstotheirfarmers,thereisnodirectlinkbetweenFairtradecertificationandimproved
productivity. As a consequence, a possible barrier of introducing Fairtrade certification
inIndonesiacouldbethattheprivatesectorisnotwillingtoworkwiththelabel.
OntheotherhandthetableshowsthatFairtradecertificationwouldhaveabetterpotentialto
strengthencooperativesinIndonesiathanUTZandRainforestAlliancecertification.Asseenin
section4.3theempowermentofdemocraticallyorganizedproducerorganizationsisakeyrole
ofFairtradecertification.Moreover,producerorganizationsreceiveafixedFairtradepremium
and decide themselves how to invest the premium in favor of the whole community. Impact
studies(seesection6.1)observedthatFairtradeInternationalprovidedtrainingstocoopera‐
21
tives and that the premium was partly invested in the functioning of the organization itself.
Theprofessionalempowermentoffarmcooperativesseemstobeaclearbenefitofthe
Fairtradesystem.ThesupportofFairtradeInternationalandcomprehensivetrainingswould
helpIndonesiatobuildupandstrengthenitscocoacooperatives.
However, another possible barrier of introducing Fairtrade certification in Indonesia
couldbethattheprivateindustrydoesnotacceptafixedpricepremiumbutprefersthe
market driven models of UTZ and Rainforest Alliance where the premium can be negotiated
betweenthecertifiedproducerandthefirstbuyer.
Socialimpact
With regard to the social impact, Fairtrade seems to have a clear benefit in reducing child
laboroncocoafarmsastheexampleoftheKuapaKokoocooperativeinGhanashowed.The
auditingcompanyFLO‐CERTapparentlytakestheissueofchildlabourseriously.Asmentioned
insection3.2childlaborisalsoacriticalissuefortheIndonesiancocoasector.Itcantherefore
beassumedthatFairtradecertificationwouldprovideanaddedvalueforthecountry.
Another benefit of Fairtrade certification as compared to UTZ and Rainforest Alliance
certificationisthatapartoftheFairtradepremiumisinvestedincommunityprojects.
In thecase oftheKuapaKokoocooperativeinGhanathepremiumwasinvestedinteraliain
boreholes,schoolsandmobileclinics(asseeninsection6.1).AlthoughIndonesiaprogressed
quite well on its human development indicators in the last decades there is still potential to
improvei.e.accesstohealthservicesandeducation.
Environmentalimpact
WithregardtotheenvironmentalimpactRainforestAlliancecertificationseemstohavethe
bestpotentialtotacklecurrentchallengesinherentinIndonesiancocoasector,whichareinter
aliatheinappropriateuseofpesticidesanddeforestation. Impactstudies showed(as seenin
section5.2.2)thatthroughcertificationwildlifeareaswereprotected,shadetreesplantedand
theinappropriateuseofpesticidesreduced.Theseresultsarereflectedintheemphasisofthe
SustainableAgricultureStandardonenvironmentalrequirements(asseeninsection4.2).Asa
consequence, it can be said that Fairtrade certification would not necessarily contribute an
added value in tackling environmental challenges in Indonesia because Rainforest Alliance
certificationisalreadypresentinthemarket.
7. Conclusion
ThepresentessayshowedthattheIndonesiancocoasectorfacessomemayorchallengesthat
can be attributed to the economic, social and environmental dimension of sustainable devel‐
opment.Economicchallengesaredecliningfarmproductivityandvolatilepricesthatcharac‐
terize the Indonesia cocoa sector. Moreover, cocoa farmers only receive a tiny share of the
22
worldmarketprices.Sofartherearenoprospectsforafundamentalchangeofthissituationas
Indonesia lacks strong farm cooperatives that could enhance the bargaining power of the
farmerswithinthecocoasupplychain.Socialchallengesarecriticalworkingconditionssuch
as a lack of adequate safety on Indonesian cocoa farms. Moreover, child labor seems to be a
critical topic for the agricultural sector in Indonesia. Finally, environmental challenges are
deforestation,whichisacommonpracticeinIndonesiainordertoclearlandforagriculture,
andtheinappropriateuseofpesticidesoncocoafarms.
All three certification schemes UTZ, Rainforest Alliance and Fairtrade have a similar vision,
whichistoenhancefarmers’livingconditionsatthebeginningofalongsupplychain.Howev‐
er, every label has its own thematic focus. Whereas UTZ emphasizes more on the economic
dimension,RainforestAlliancefocusesmoreontheenvironmentaldimensionandFairtradeon
thesocialdimensionofsustainabledevelopment.Asimpactstudiesshowthisthematicfocusis
also reflected in the impact and the potential of the label to tackle current challenges in the
Indonesiancocoasector.Thenextsectionsummarizesthesefindings.
ThethematicfocusoftheUTZstandardliesontheimplementationofgoodagriculturalprac‐
tices.ImpactstudiesforcertifiedcocoainIndonesia(Molenaar,2016),IvoryCoast(Ingramet
al.,2014)andGhana(Dengerink,2013)foundoutthatUTZcertifiedfarmersappliedgoodagri‐
cultural practices such as pruning and weeding more intensely than uncertified farmers and
thereforereachedahigherlevelofyields.Incontrast,thethematicfocusoftheRainforestAl‐
liancestandardliesonenvironmentalissues.ImpactstudiesshowedthatRainforestAlliance
farmers reduced the misuse of prohibited chemicals (Bethge, 2014) and planted shade trees
forthefirst time(Krain et al.,2011).AclearbenefitofintroducingFairtradecertificationin
Indonesia would be to emphasize more on social issues such as child labor but also to favor
wholecommunitiesthroughdevelopmentplansthatareelaboratedbyfarmercooperatives.
However,apossiblebarrierofintroducingFairtradecertificationintheIndonesiancocoa
sectoristhattheindustryisnotwillingtocooperatewiththelabel.Reasonsmightbethatoth‐
erlabelssuchasUTZandRainforestAlliancecertificationaremorebusinessfriendly,interms
oftheirpotentialtodrivefarmproductivitybutalsobecausetheydonotinterveneinthemar‐
ketwithafixedminimumpriceandpricepremium.
Ontheotherhand,Fairtradehasaverygoodpotentialtostrengthenfarmcooperatives.
ThisisrelevantfortheIndonesiancontextasstrongcooperativesarequiterare.Empowered
cooperativescanhelpenhancingthebargainingpowerofthefarmers.Butstrongcooperatives
thatholdacertificatearealsocrucialfortheimplementationofeffectivefarmcertification.If
cooperativesmanagetosetupawell‐functioningICS,thechancesarehigherthatsustainable
practicesclaimedareeffectivelyimplementedontheground.Thisinturnincreasesthetrustof
privatesectorpartnerstosupportcooperativesandfarmcertificationinthesupplychain.
23
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