Cacao: Bitter or Sweet?
Special article
People in many parts of the world enjoy chocolate as a treat on everyday occasions. All in all, Europe and North America represent over 70% of the market and are host to much of the processing industry.
However, the main chocolate ingredient, cacao, only grows in warmer climates, along a ‘cacao belt’ that stretches on both sides of the Equator. Africa produces 77% of the global cacao bean production while Latin America represents 17%, with Asia and Oceania accounting for the remaining 6%. This ‘geographic divide’ between consumption and production is one of the distinctive features of this industry. But not the only one...
Chocolate has brought nutrition and enjoyment for centuries now and the industry has expanded to reach over USD 135 billion in 2020. But the industry also shares a bitter side, facing accusations of contributing to consumers’ expanding waistlines and sourcing raw materials from areas affected by chronically poor social and environmental conditions. The Cocoa Barometer, published by a global network of NGOs and Trade Unions working on cacao sustainability, identifies human rights violations, environment degradation, and poverty as persistent problems in many cacao growing communities.
Indeed, up to 90% of global cacao is produced by 40-50 million people, often in plots no larger than 2 hectares. Low and volatile prices, lack of land tenure security, no access to financial means and inputs, low yields, and aging cacao trees mean that most cacao farmers struggle to achieve a profitable cacao production.
Further, rural poverty is framed in a context where government services are often lacking, and where public and private regulations not being enforced are at the root of human rights violations. A report published by the University of Chicago estimates that 1.5 million children work in cacao production in Côte d’Ivoire and Ghana and that 95% of the child laborers are exposed to the worst forms of child labor, such as working with dangerous tools or harmful pesticides.
Pressure to expand the areas to grow cacao has also put additional pressure on the environment and led to deforestation and degradation in cacao growing regions. It is estimated that natural forest cover in Ghana and Côte d’Ivoire has declined by more than 70% in the past three decades. Rainforest habitats in Asia and Latin America are also under pressure from the expansion of land to grow cacao. Furthermore, forests are being cleared in areas that are already sensitive to climate change, creating additional pressure on the environment.
These issues are not new, but progress has been spotty and slow… Lack of awareness is not to be blamed. Newspaper headlines, non-governmental organizations, and activist campaigns frequently bring to the surface the difficult reality faced in cacao-producing regions. Large initiatives to combat deforestation or to tackle child labour have often been announced in conferences around the world. So why are these issues still as large and the problems so persistent? Like any complex challenge, the reasons are multiple and intertwined.
At least 3 things need to happen for any real traction to occur:
Visibility into the entire chain is important in understanding all the steps involved in the process and all the stakeholders involved in each of these steps. Economic transparency can also be a useful approach to understand how both value and risk are distributed along the chain.
Certifications were initially used by chocolate manufacturers to identify producers and support traceability efforts. Encouraged (or imposed) by civil society organizations, some companies have set up their dedicated traceability projects, often combined with polygon mapping of the cacao farms, which gives a much deeper insight and increased information on farming conditions.
For producers, technology platforms can support increased information on weather and prices and can also be a tool to connect more directly with buyers that appreciate the work put into growing good cacao and to capture more of the value of this hard work.
Approximately half of the cacao in the world is still bought via indirect supply chains and the companies involved do not know its origin, ignoring whether the cacao comes from illegal plantations in protected areas or is connected to human rights abuses.
Over the past 20 years, multiple certification standards have emerged focused on defining and verifying practices used at the farm level that are intended to support farmers on the path to sustainable production and to eradicate the problems of child labor or deforestation, among others. Although these certifications have influenced practices in farms and have served to support farm-level organizations, they have often fallen short of the promise to deliver ‘sustainable cacao’.
Focusing on practices rather than impact and addressing the farm rather than the system, certifications have had a positive influence but also need to be revised to increase their impact. For example, good practices in fermenting and drying cacao beans prevent mold formation. However, this practice takes time and additional effort to do correctly. If local buyers pay the same price for all beans, there is limited incentive to do the additional work.
Changes required to be more sustainable can be expensive or complex to implement. Even though many certifications offer a small premium, this is generally not sufficient to pay for the changes required. Thus, the brunt of the cost to implement these changes tends to fall on the weakest link of the chain: the individual farmer family.
Some organizations have started to move beyond certifications, seeking broader solutions that include regulation and broader landscape approaches, as well as an increased focus on the economic viability of growing cacao.
Voluntary initiatives and certifications often focus on practices that are expected to lead to a positive impact. This model of change faces challenges and has put the burden of proof (and often the cost) at the farmer level.
A historian has estimated that back in the 1540s, 100 cacao beans could buy one hen or three rabbits in Mesoamerica… At today’s prices, a typical farmer selling 100 cacao beans would receive less than 20 cents of a dollar, barely enough to buy an egg, let alone the hen…
Over the past 60 years, the value received by cacao farmers for their produce has declined in real terms. Aside from a supply shock in the late 1970s, the price of cacao in the New York Exchange has followed a downward trend and is today, in real terms, almost half of what it was 50 years ago. Further, the price that is actually paid to the farmer varies across countries. Farmers in countries like Brazil and Colombia are paid over 80%-90% of the New York Exchange price, while the percentage for farmers in certain countries in Africa can be close to 50%. Overall, from the value of a chocolate bar, farmer’s capture on average less than 7%, chocolate manufacturers keep 35% and retailers earn 44%!
In an industry where productivity has not increased, this has meant that cacao growing in many regions has not been a ‘career of choice’ but rather the subsistence option where there are few other alternatives to making a living.
Less than 10% of cacao farming households achieve what is called a ‘living income’, calculated as the ‘net annual income required for a household in a particular place to afford a decent standard of living for all members of that household’.
The current market price of cacao does not acknowledge appropriately the work of the farmer or account for the true environmental and social costs that the crop carries.
On one side, there is the cost of producing cacao beans. These costs should include the risks associated with cacao growing as well as the cost of land and the cost of family labour. The ‘True Price’ movement also aims to incorporate into this cost the costs that affect people or the planet but that are not included in traditional costing. This can be things like climate change impact for the use of a certain type of fertilizers or the costs involved in ensuring workers’ safety standards.
Along the same lines, we could also value the positive effects of growing cacao that are not reflected in the price it sells for. For example, when cacao is grown in agroforestry systems, benefits for the environment include increased biodiversity, CO2 capture, and protection of water basins. These benefits could be paid as part of the value of cacao beans, or they could also be separately quantified and paid for as voluntary carbon credits or environment services. New technologies are making this estimation of benefits easier and cheaper to assess. Satellites can identify green coverage and the environmental benefits of cacao farms’ reforestation activities can be calculated using specialized algorithms.
The chocolate industry does not need to be a bitter story. When done right, cacao growing can provide income and be a source of pride to families in rural areas, it can grow in agroforestry systems that can sequester carbon, promote biodiversity, and protect water sources. It can be a healthier treat for children and adults. It can represent a sensorial exploration for connoisseurs of good chocolate.
Quality chocolate is the result of picking good cacao beans and combining the ingredients the right way. Equitable chocolate further involves traceability of both the process of sourcing the beans and the entire supply chain, ensuring that appropriate work conditions are met, that no child labour is involved, and that farmers and workers are paid a fair price for the products they produce so that a consumer’s choice has real impact.
Finding new paths in the industry, several smaller companies connected to organizations in origin countries and empowered by technology have emerged over the past 5-10 years. These companies use new approaches, technology, and new business models to connect lovers of good chocolate more directly with cacao growing communities.
no name, a Swiss-Colombian chocolate brand, was launched to connect cacao farmers with chocolate lovers. Joining hands with Product DNA, a company specialized in traceability, it provides credibility and visibility to the hard work put into every bar of chocolate. The entire product supply chain is made visible to the consumer via a QR code printed on the chocolate packaging and linked to the platform respect-code.org
To guarantee its approach, Product DNA uses the blockchain technology in its traceability system, making all data irreversible, tamper-proof and secured. The level of trust between all actors along a supply chain is therefore enhanced: from the end consumers, to brands, suppliers and third parties. It makes a traceable product, a product for which, we have a reliable track record of its supply chain.
Every chocolate bar is traced back (ascendant traceability), every step of the process all the way to the farm and the plot where the cacao pod was grown. The consumer or any interested organization can get access to the farm’s description, values, work conditions, certifications and sustainable commitment.
no name chocolate adds to traceability the opportunity for consumers to close its circular chocolate life cycle with its original and unique impact model: they can donate to a motive that they support by giving 10% of sales to the farmers through a specific project, namely reforestation, economic development or education. They are then regularly updated with news and progresses reached with the project.
no name’s flavor is the result of the amazing and loving work of the men and women of Hacienda La Tentación. The cacao beans that are used in the chocolate come from Caldas, in Colombia and are certified by ‘Echar Pa’lante’, an environment and social impact program.
no name has developed an innovative value chain model with a direct impact by paying cacao farmers 10% of the value of the bar. This directly connects the wealth of the farm with the commercial result of the chocolate.
Further, an expanded impact through the contribution of 10% of the sales is allocated to three specific projects in rural regions of Colombia: education through an empowering and inspiring book for a young girl from a rural community, economic growth through quality cacao plants given to cacao farmers to promote better yields that translate into higher income, and reforestation by planting native trees in designated areas.
Founded in 2005, Product DNA is a Swiss company specialized in product traceability, supply chain mapping and brand advisory. The company makes its multi-sectoral expertise and know-how available to any company or public organization in their efforts to achieve transparency.
With the vision to unite all actors along a supply chain around a dynamic approach toward a more respectful and sustainable economy, Product DNA aims to build a transparent economy in which suppliers, brands, and consumers commit to collaborative values based on a commitment for social and environmental responsibilities.
Thanks to the respect-code.org, a traceability platform detailing information about product supply chains, Product DNA has traced over 120 million articles worldwide to this day.