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In June 2019, a coalition of organisations in cocoa issued a position paper that rejected certification as a long-term solution to poverty and sustainability in the cocoa supply chain and called on all standards to implement a minimum price

Seeking what it described as “systemic solutions,” a position paper issued by the VOICE Network in June 2019 has highlighted what it said is a potential race to the bottom on pricing, and the need for all sustainability standards – not just Fairtrade – to implement minimum prices and premiums.

“When the only tool you have is a hammer, a lot of your problems start looking like nails. For a long time, in the cocoa sector, it seemed like the only tool available to achieve sustainability was certification,” said VOICE Network.

“With a slew of major developments – such as the release of the new ISO standard, Fairtrade’s revised Minimum Price and Living Income Reference Price, and the work on the new merged Rainforest/UTZ standard – it is time for civil society to take stock of where we are.

Failing to improve farmer incomes

“Chocolate companies and retailers have a tendency to look for the cheapest label, neglecting the potential negative effects of this price pressure,” said the Network in the paper, entitled ‘Certification is not the systemic solution to unsustainable cocoa.’

“The race for certified volumes has not raised the bar. None of the standards have been able to significantly contribute to farmers achieving a living income or lift farmers out of poverty. Although the average income of certified farmers might be slightly higher than non-certified farmers, the overall impact is relatively low; a certified cocoa farmer is still nowhere near earning a living income.

“Income interventions from certification have not been sufficient. The recent announcement by the governments of Côte d’Ivoire and Ghana of a floor price of US$2,600/ton was a good step but falls far short of the US$3,467 (resulting in US$2,668 at the farm gate) that Fairtrade claim is necessary for a living income. Neither Rainforest nor Fairtrade have plans to pay anywhere near that price, except in small pilot projects. (As highlighted elsewhere in this issue, in July 2019, Côte d’Ivoire and Ghana reached an agreement that they believe will help farmers earn more but will not now be implementing a recently agreed price floor for cocoa).

“Despite the fact that between a quarter and a third of all the global cocoa production is grown under a certification label or company sustainability label, major problems persist, including on certified farms. Child labour is still a major challenge in all major West African cocoa-growing nations and deforestation is the norm rather than the exception.”

Systemic solutions needed

The Network said what it described as systemic solutions are needed. “In order to be able to find solutions, clarity on the nature of the problems is urgently required. After almost two decades of efforts trying to improve cocoa farming itself, it’s time to realise that the cocoa farmer is not the problem; the problem is systemic.

“Systemic problems require systemic solutions, not a tick-box exercise at farm level. Currently, the cocoa farmer bears almost all of the risk, reaps hardly any of the reward, and no one is taking the responsibility for this systemic failure. 

“Solutions should deal with the distribution of risk, reward, power and responsibility throughout the value chain. The systemic failure of voluntary initiatives provides strong evidence that legislative measures on environmental issues and human rights due diligence are needed. In the meantime, all standard-setting organizations need to improve their systems, acknowledging that a sustainable solution needs to include price mechanisms.”

Fairtrade welcomes minimum price call

Responding to VOICE Network, Fairtrade said it welcomed the call for all certification schemes to introduce a minimum price and fixed premium for cocoa in order to prevent a race to the bottom on cocoa prices.

“We welcome VOICE’s call for Rainforest Alliance/UTZ to adopt a minimum price to protect farmers and to give clarity on whether the intended mandatory premium under their new standards will have a fixed minimum or is negotiable,” said Jon Walker, Fairtrade International’s Senior Advisor for Cocoa.

“Fairtrade believes a critical factor to eliminate extreme poverty is to pay farmers a fair price for their cocoa, but we can’t do it by ourselves,” said Walker. “Real change will only come about through a collective approach, and the recent announcements by the Ivorian and Ghanaian governments of a floor price are therefore an exciting development.”

Regarding VOICE Network’s call for Fairtrade to publish a timeline to require buyers to pay a mandatory living income reference price, Mr Walker said, “Fairtrade cannot reach living incomes by unilaterally increasing prices to buyers. Higher prices will only have an impact if buyers are prepared to pay, and a unilateral increase of this size risks wiping out many of the gains made so far made for cocoa farmers. We have always been clear that raising the Fairtrade minimum price was only the first step – albeit an important one – towards a decent income for west African cocoa farmers.

“We agree with VOICE that systemic solutions are needed. This includes levelling the playing field on price. Fairtrade’s strategy for achieving living incomes for cocoa farmers incorporates an enabling environment by government which should lead to a collective approach. Price is one of the critical elements for achieving living incomes. As VOICE themselves point out, chocolate companies and retailers have a tendency to look for the cheapest label.

“We take the VOICE statement seriously. Addressing the issues that it raises are part of our continuous efforts to improve our work towards sustainable livelihoods. The chocolate that so many of us love to eat cannot continue to be produced at the expense of farmers and their families living in poverty without access to the basic human rights enabled by a living income.” 

The Rainforest Alliance told C&CI that it welcomed the position paper and said the new standard it is working on with UTZ will include a mandatory premium. “We believe the positions expressed in the paper help to inform our continued efforts to bring the cocoa sector in West Africa to a more sustainable reality,” said RA.

Sector-wide challenge

“Low prices in cocoa are a grave, sector-wide challenge and one that is not restricted to certification,” said RA. “Our approach to raising farmer incomes focuses on good agriculture practices that enable cocoa farmers to increase their productivity, achieving higher yields with lower costs, enabling them to produce better quality crops.

“In Côte d’Ivoire and Ghana minimum prices are fixed by government and adjusted every few months, but they are based on fluctuating global cocoa prices. 

“Due to a variety of factors, including oversupply, global market prices are low. In response, the Ivorian and Ghanaian governments recently decided to take action to address farmer incomes. This is an important step. 

“The issue of pricing has been a key consideration in the future Rainforest Alliance Sustainable Agriculture Standard, which we began developing following our merger with UTZ in January 2018. Our aim is to develop a certification system that rewards investment in sustainable practices across all sectors. 

Mandatory premium, but no minimum price

“The Rainforest Alliance 2020 standard will have a mandatory premium. However, we are aware that simply requiring a premium is not enough. We have therefore decided that in addition to the mandatory requirement of a premium, we will be providing sector specific guidance in all our priority sectors including cocoa.

“We believe a ‘one size fits all’ approach will fail to deliver sustainable impacts as the realities and challenges are different for all actors in the supply chain. The goal is to have a pricing policy that rewards investment in sustainable practices.

“Systemic issues and long-standing power imbalances in global supply chains can only be effectively remedied through sustained engagement and cooperation among all relevant actors. We take our role in that context very seriously and are working with key stakeholders to address the serious ongoing challenges that are prevalent in the cocoa sector.”

Responsible business

Rainforest Alliance said it is committed to doing its part to make responsible business the new normal. “We believe we have a shared responsibility along with all actors in the global supply chain including governments, companies and NGOs to address these challenges and to work together to bring the cocoa sector to a more sustainable reality,” it told C&CI.

“Rainforest Alliance believes that certification is one tool among many,” it concluded. “It works best when tailored to meet farmers’ needs and is supported by long-term commitments from all actors in the supply chain.” 

The Rainforest Alliance 2020 Standard is now in its second round of public consultations and will be published in early 2020.■ C&CI

This article  first appeared in the September’19 issue of C&CI. Click on subscribe now if you wish to read more informative articles in the current and future issues of C&CI.

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