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REPORT LAMENTS ABSENCE OF LIVING INCOME COMMITMENTS IN CERTIFICATION SCHEMES

REPORT LAMENTS ABSENCE OF LIVING INCOME COMMITMENTS IN CERTIFICATION SCHEMES



Certification schemes for cocoa should include a living income as a key requirement, said the authors of the 2018 Cocoa Barometer

Published earlier this year, the Cocoa Barometer 2018 provides an overview of sustainability developments in the cocoa sector and highlights critical issues that are not receiving sufficient attention. Ensuring a living income is one of two thematic focus points in this year’s report (the other being transparency and accountability).

The report found that cocoa-growing communities, particularly in West Africa, are facing poverty, child labour and deforestation that have been made worse by a rapid fall in prices for cocoa. Widely touted efforts in the cocoa industry to improve the lives of farmers, communities and the environment made in the past decade are having little impact. In fact, the modest scope of the proposed solutions “does not even come close to addressing the scale of the problem,” said the authors of the report.

Price volatility an issue

Smallholder cocoa farmers in Côte d’Ivoire – the world’s largest producer – have seen their income from cocoa decline by more than a third in a year because of the world market price for cocoa, which saw a steep decline between September 2016 and February 2017. “Farmers bear the risk of a volatile price and there is no concerted effort by industry or governments to alleviate this income shock,” the report said.

An average cocoa farmer in Côte d’Ivoire earns only a third of what he or she should to earn a living income. Child labour remains at very high levels in the sector, with an estimated 2.1 million children working in cocoa fields in Côte d’Ivoire and Ghana. Not a single company or government is anywhere near reaching their commitments of a 70 per cent reduction of child labour by 2020.

Recommendations for action in the report include making net income the key metric for all sustainability projects; a commitment to a sector-wide goal of achieving a living income; a moratorium on deforestation; a focus on agroforestry and reforestation as environmental solutions; a move from voluntary to mandatory requirements; the introduction of sectorwide approaches at scale that address root causes of child labour; and a much greater scale of ambition to tackle the issues facing the sector, that reflect the scale of the problems.

On the issue of certification, the report said: “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. With an increase in efforts, in data and research, and in actual experience, the sector now has a much wider range of interventions at its disposal.

“In addition, the standards organisations are starting to diversify their activities, becoming more involved in capacity building and advocacy. All standard organisations are deeply involved in the debate about a living income and conducting research on how to achieve it.”

However, as the authors of the barometer point out, the terms ‘certified cocoa’ and ‘sustainable cocoa’ are often – mistakenly – used interchangeably, especially in ‘sustainability commitments’, such as those made by several national platforms and by major companies.

Although certification can be an important step for companies in improving their supply chain, becoming sustainable will require a lot more, including joint efforts with other companies, as well as significant government involvement.

Standards and living income

“None of the standards have significantly contributed to farmers achieving a living income or lifted them out of poverty,” said the report. “Although average income of certified farmers might be slightly higher, the overall impact is relatively low; the average certified cocoa farmer is still poor.

“Although standard-setting organisations are aware of these problems, the competition between certification schemes has put them under pressure. Chocolate companies and retailers tend to look for the cheapest label, neglecting the potential negative effects of price pressure. The race for certified volumes has not led to the bar being raised.

“In addition, standard-setting organisations have no direct control over the variables that are essential to farmers’ livelihoods, including access to infrastructure (schools, health care, roads and access to markets), the quality and enforcement of land laws and availability of inputs.

Fairtrade

“Fairtrade is the only major standard that has a minimum price (of US$ 2,000 per tonne as export price). With the 2016/17 price crash, for the first time in a decade, Fairtrade had to activate the minimum price in Côte d’Ivôire for a few months.

“This means that the Fairtrade minimum price is probably far too low to be able to ensure that farmers escape poverty,” said the barometer. “In addition to the minimum price, Fairtrade is also the only one of the three major standards to have a fixed premium of US$200/ tonne, providing some protection to farmers from their weak bargaining position at the bottom of the supply chain.”

As it noted, Fairtrade is currently in the final stages of a much-needed major review of its pricing systems in cocoa. This review is critically assessing the guaranteed minimum price and premiums, as Fairtrade’s research shows that the average cocoa farmer is only earning 37 per cent of a living income in rural Côte d’Ivôire. The median percentage is much lower (25 per cent).

“Fairtrade’s decision to conduct a review, and publicise the results, is an important step forward, and other standards are encouraged to follow suit,” said the barometer.

UTZ/Rainforest

The two other major standards in cocoa, UTZ and Rainforest Alliance, merged in January 2018 and will be known as Rainforest in future.

By mid-2019 the two standards will be operating under one – still to be developed – standard and the authors of the report see the merger as an opportunity to develop instruments and new approaches to make a living income for certified farmers a reality.

“UTZ and Rainforest do not have systems in place to protect farmers from market developments such as the current price crash. Lessons could be learned from Fairtrade on fixed premiums and minimum prices,” said the barometer.

“The new standard will need to go beyond just agronomical solutions, and address the power imbalances in the supply chain, and specifically the pricing of cocoa, to ensure a living income for smallholder cocoa farmers.”

CEN/ISO

After many years of being developed, a global CEN/ISO standard is almost complete and should be approved later this year. Many elements of the standard are by already incorporated into the existing standards, or into company-owned standards.

There are still many questions as to how and if the CEN/ISO will be used in practice, as there will be no central organisation responsible for its implementation.

Company-owned projects

Companies such as Hershey’s and Mars continue to roll out 100 per cent certification commitments – often in conjunction with additional sustainability programmes. Other companies are now choosing to develop their own in-house sustainability programmes, such as Mondelez’s Cocoa Life programme, which has taken over from Fairtrade certification in Ghana.

Although it can be a good thing that companies choose to take ownership of sustainability efforts, rather than outsourcing responsibility to a standard body, there are also concerns around this, specifically about transparency and reliability of reporting, making farmers – who are already struggling with power asymmetry in the relationship with buyers – even more dependent on the large cocoa companies.

Premiums

Although certified farmers might only receive a small net income increase, the authors of the 2018 barometer say premiums make a difference for the operation of the cooperatives of which farmers are members. For this reason alone, they noted, certification remains an important tool, provided this makes cooperatives stronger, and not dependent on a buyer or a buyer’s vision of sustainability.

One of the major challenges is to see how co-operatives and certification can extend their reach beyond the easily organised farmers to harder-to-reach growers.

This might be easier if all certified cocoa could be sold as certified, and therefore at a premium; depending on the standard, between 20 per cent and 60 per cent of cocoa that is produced as certified does not get sold as certified.

 Over-promising and under-delivery

“It is essential that standards do not over-promise and under-deliver,” said the barometer. “On issues such as poverty alleviation or adherence to human rights there seems to be a gap between what consumers expect they are buying, and what standards can reasonably claim to be selling.

“At the beginning of the supply chain, there is often a gap between farmer expectation and reality. When expectations are not met, this can lead to an all-round disillusionment. Certification needs to be much more transparent, for consumers and farmers and cooperatives.”

The missing piece

All standards should include living income as a key requirement in their codes of conduct, the report concludes. This should include a minimum farm gate price based on living income calculations. This could be coupled with a flexible premium.

In parallel, farmers should not be dependent on their bargaining power for the level of their premium.

“Further downstream,” said the report, “it would be interesting to explore whether standards could require Human Rights Due Diligence (HRDD) as part of their Trader Code of Conduct,” so that companies and retailers wishing to sell a product with a certification label on it would need to comply with, at minimum, a Living Income and HRDD standards. ■ C&CI

 

 

Poorest farmers are falling through the gap

A study published in Biological Conservation suggests that certification schemes could be missing the poorest farmers who are most in need of their benefits.
A team of researchers from the UK and the US mapped the world’s commodity crops, including coffee, cocoa, banana and tea, showing where they are certified. Their work suggests that if the schemes developed stronger standards and targeted poor areas more effectively, they could make a bigger impact – if they can also increase consumer demand for certified products.
“As a consumer, a certification standard can give you some assurance that what you’re buying has been produced in a way that is good for the environment and good for farmers,” said Dr Catherine Tayleur, lead author of the study from the University of Cambridge, The Royal Society for the Protection of Birds and BirdLife International. “But it looks as though some of the world’s poorest farmers are currently missing out on the benefits of certification.”
Certification programmes such as Fair Trade and Rainforest Alliance set out standards farmers must meet in terms of protecting the environment, such as reducing water use and protecting biodiversity. The schemes also provide many benefits to the farmers, who are often smallholders. They can offer a price premium and improve the farmers’ access to the market. Some focus on encouraging good agricultural practices that improve yields and profits.
The number of certification schemes has increased significantly over the last decade, but we know little about where they operate and whether they are best serving farmers and the environment in those locations.
The team collected data from different certification schemes to map farms, producing the first global map of crop certification. The results showed that only about 4 per cent of all crop growing areas had some certification. Most of the certification was found in tropical areas; while these areas are well targeted to protect biodiversity, but although they are not necessarily the areas most in need of poverty alleviation.
“Certification tends to operate in areas that are really important for biodiversity,” said Dr Tayleur. “But we also found that certification wasn’t operating in the poorest areas; it seemed to be missing some of those farmers that might benefit most from the livelihood aspects of certification.”
Dr Tayleur and her colleagues suggest that strengthening certification standards could help improve this, by targeting the right issues within the standards, such as biodiversity, depending on where the crops are located. The standards should also be made more accessible to farmers; certification is often expensive and complex. The researchers believe there is an opportunity for expansion, if it’s done strategically to address the gaps identified in the research.
They said there is also a significant challenge that certification needs to address, that is, that supply of certified products currently tends to outstrip demand. Although there has been a notable increase in consumer awareness of sustainability issues, the certification schemes will only have a big impact if shoppers are demanding certified sustainable products.
Dr Tayleur is now working with farmers who were falling through the gap in certification in Sierra Leone and Liberia. “These farmers are a long way off being able to meet the standards of an international certification scheme, so we’re developing rainforest-friendly cocoa guidelines that are relevant to this local context and which are achievable by the local farmers,” she concluded. ■ C&CI

 

Competing interests and interdependencies addressed in study

Research published in International Journal of Biodiversity Science, Ecosystem Services & Management entitled ‘Unpacking ‘sustainable’ cocoa: do sustainability standards, development projects and policies address producer concerns in Indonesia, Cameroon and Peru?’ suggests that stakeholders have different understandings of what sustainable cocoa is. It also suggests that they have differing interests and are taking different approaches to advancing sustainable cocoa.
The paper analyses cocoa sustainability and the extent to which sustainability standards, policies and development projects address sustainability concerns and contribute to ecosystem services. The analysis is based on literature reviews and interviews in Sulawesi (Indonesia), Ucayali (Peru) and Centre Region (Cameroon). Producers in all three countries shared concerns about price volatility, weak farmer organizations and dependence on few buyers. Public and private development actors were concerned with low production volumes.
Research has so far focused on biodiversity loss, which differed from country to country. Policies and development programmes in all countries have focused on cocoa sector expansion and productivity increases, irrespective of smallholder needs for economically viable farming systems and existing market structures that result in little bargaining power to farmers.
“Sustainability standards have spread unevenly and have converged in compliance criteria over time, although initially differing in focus. Recently added business and development criteria can potentially address farmers’ concerns,” said the authors of the study, but noted that competing interests and interdependencies between different actors have not been openly acknowledged by public or private sector actors. ■ C&CI

This article first appeared in the July’18 issue of C&CI, click on subscribe now if you wish to read other informative articles in the July and future issues of C&CI.

 

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