Achieving sustainability in the cocoa sector: the shared load of private and public policies

Achieving sustainability in the cocoa sector: the shared load of private and public policies

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Driven by the continuous rise in international demand, the production of cocoa has shot up for the last few decades. In the meantime, concerns about the sustainability of the sector have been at the centre of both private and governmental policies (in both producing and importing countries), following growing concerns about social abuses and environmental destruction linked to cocoa production. The particularities of cocoa, a forest crop that is mainly farmed by small-scale family farmers, makes it a paradoxical case among export-led food commodities: while it is seen as a potential forest-friendly development path for rural communities, it is also increasingly singled out as one of the main vectors of imported deforestation in the European market, following decades of careless monocropping practices in the main producing countries, namely Côte d’Ivoire, Ghana and Indonesia. It is therefore no surprise that cocoa has triggered a heated European debate about commodity market regulation, which is now extending beyond the cocoa sector.

In a study published last October, IDDRI tries to unpack the complexity of the cacao value chain in order to assess the gaps to fill in order to achieve sustainability in the cocoa sector, building on lessons learned from existing initiatives in the sector: from Fairtrade to organic, and to voluntary commitments made by the private sector.

Cocoa-led deforestation, a growing concern

The cocoa tree thrives in climates where its cultivation competes with tropical forests. Clearing tracts of forest for cocoa production is a common practice and produces substantial yields in the first years of production. As a consequence of rising demand, cocoa-planted areas increased from 4 million hectares (ha) in the 1970s to more than 10 million ha in 2013 (according to the FAO-STAT database). At least 50 % of this 6 million ha expansion was gained at the expense of forest areas. This makes it a major source of global deforestation, even though its impact can weighed against other activities such as livestock or soya farming.

To address this concern, cocoa agroforestry, in other words cocoa grown under forest cover in association with local forest and fruit trees, is increasingly presented as an alternative to conventional cocoa farming and a means to preserve forests. However, the science suggests that even when maintaining a certain ecological complexity, an agroforest remains a highly impactful activity and cannot be compared to a natural forest. Agroforestry can be effective in maintaining a certain level of biodiversity locally, when compared to full-sun and monocropping practices. However, natural forest conservation and improvements in biodiversity-friendly agricultural practices are different approaches that should not be confused. 

Recent changes in the cocoa supply chain are putting pressure on people and ecosystems

In the1990s, new stakeholders in the cocoa sector radically changed the game. Worldwide cereal giants such as Cargill and ADM made a massive shift by adapting their logistics and technology schemes to the cocoa supply chain: loose transportation, silo stocking and standardisation. In less than a decade, the logistical chain was completely overhauled. As a consequence, the number of grinding facilities in Europe fell from 40 to fewer than 10. Old factories were replaced by huge industrial facilities that required a continuous supply in order to guarantee a satisfactory return on investment.

This situation led to a typical “bottleneck” in the chocolate industry, where a handful of companies were processing cocoa from millions of producers, and redistributing manufactured products to millions of customers. As a direct consequence, not only did those stakeholders become unchallenged price makers, leaving rural producers at their mercy, but the precarious economic balance of this industrial shift also made them dependent on a constant, predictable supply of cocoa beans. Thus, by putting pressure on producers and challenging them to improve quality and productivity, the market progressively organised a structural overproduction situation on the world cocoa market. This overproduction drove prices down over the last two decades, and eventually led to sudden market shocks, such as in 2017, when the world price dropped by nearly 30 %. In addition, this pressure on cocoa supply had detrimental effects on biodiversity by encouraging full-sun monocropping and increased use of chemical inputs, especially in standard quality producing countries such as Côte d’Ivoire and Ghana (the world’s top two cocoa producers, whose cocoa exports account for up to 10 % of GDP).

Labelling is not enough

As a strategy to improve sustainability along the supply chain, most buyers resort to “labelling” procedures, whether external procedures (Fairtrade, organic, Rainforest Alliance), or voluntary company policies. With the exception of a few local success stories, all of these approaches are seriously hampered by a strong dependency on the world conventional cocoa market, which prevents them from developing alternative (and more expensive) production and supply schemes, beginning with their incapacity to substantially raise farmers’ incomes above conventional prices.

In addition, most of these initiatives primarily rely on inducing changes at the local plot level by encouraging changes in farmers’ agricultural practices. Nevertheless, as previously stated, the general pressure exerted on people and the environment by the cocoa market largely originates in the middle segment of the value chain, at the grinding and “couverture chocolate” production stages. In fact, although labelling strategies have proved effective in developing new market offers, these remain marginal and additional to the conventional cocoa market, and it seems unlikely that they will ever produce any radical change in the cocoa-chocolate industry.

A case for European legislation on imported deforestation… and beyond

The current situation requires profound changes along the whole supply chain, and not only at the production level. In order to trigger such changes and to help the market to shift towards sustainability, prior changes to the institutional context are required. First, it is crucial that market regulations at the international level begin to disincentivise the (over)exploitation of people and nature. Preventing deforestation-linked commodities from entering the market could be a first step.

The European Commission recently published a communication presenting options for a possible regulation on imported deforestation. Such a regulation, if applied to agricultural commodities, would clearly contribute to enhancing the institutional context in order to foster sustainable practices and to discourage destructive behaviours. However, as we have learnt from the FLEGT initiative on legal timber, such market regulations cannot be adopted if there is no real offer from the European Union to accompany the producing countries on their path to sustainability. In this respect, the recent declaration by the European Commission that Europe would back the request by Côte d’Ivoire and Ghana for a floor price, in order to help to tackle child labour and deforestation in the cocoa sector, is encouraging. But looking further, this can also be seen as an opportunity to begin integrating biodiversity and social “red lines” into market rules, which could inspire not only European domestic legislation, but also future agri-food related trade agreements, far beyond the case of cocoa alone.


Author: Frédéric Amiel, Institute for Sustainable Development and International Relations (IDDRI)

Image courtesy of Forest and Kim Starr, via Flickr.

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