This presentation gives an overview on the advantages and shortcomings of the voluntary sustainability standards Fairtrade, Utz et Rainforest Alliance in the cocoa sector. It is based on 16 independent impact studies that compare certified and conventional farms in Ghana, Ivory Coast, Indonesia and Peru.
The presentation was given by TDC during an academic session on labels and living income at the University of Ghent, March 15th 2019.
In response to the increasing importance attached by consumers to greener supply chains and the protection of human rights, and in order to address some of the challenges faced by the global cocoa industry, cocoa markets have witnessed the rapid rise of voluntary sustainability standards (market-driven tool to address key social, economic and environmental issues), the most common being UTZ Certified, Rainforest Alliance, organic and Fairtrade.(1)
Cadbury (today part of Mondelez) was the first chocolate maker to offer certified cocoa. As for Mars, it has promised to sell in 2020 only certified chocolate products. Ferrero, Nestlé and Hershey followed suit. Major European retailers, such as Ahold, Sainsbury’s and Carrefour, are also increasingly investing in certified products, which is adding to the pressure. Voluntary standards systems play an important role in providing independent third-party evidence of progress towards sustainability.(2)
The International Trade Centre in 2018 estimates that the combined certify cocoa area (Fairtrade International, organic, Rainforest Alliance and UTZ) makes up on average 30.2% of the total cocoa cultivated area and has almost trebled between 2011 and 2016.(3)
“But does certification offer a solution to these problems or should we be cautious about endorsing certification as a universal panacea for improving rural livelihoods?”(4)
Fair Trade International has managed the principal international fair trade label since 1988. “Fairtrade sets a Minimum Price for each of its commodities while farmers and their communities also benefit from the Fairtrade Premium. The minimum price seeks to ensure more stability for farmers in times of volatile commodity prices.”(5)
There are two options for cocoa: on the one hand, there is the label on pack model, where a chocolate bar carries a blue and green logo (with other ingredients than cocoa such as sugar, nuts or vanilla being certified), and on the other hand, the Fairtrade Sourcing Program, where a company purchases a quantity of cocoa under Fairtrade conditions and processes it in its chocolate products, which the producer can advertise with a specific logo. Such mass balance system is also offered by Utz and the Rainforest Alliance.
189 cocoa producer organisations are Fairtrade certified, representing 226,579 farmers in 22 countries.(6) Over 722,000 hectares of cocoa were certified in 2016, constituting 7.1% of the global cocoa area. In 2016, almost 292,000 metric tons of Fairtrade cocoa were produced, or 6.5% of global cocoa production. That area more than doubled between 2011 and 2016, and grew by almost 27% between 2015 and 2016 alone.(7) In 2017, Fairtrade cocoa farmer cooperatives earned nearly $43 million in Fairtrade Premium to invest in their communities and businesses.
In contrast to some other certification schemes that focus on improving farm efficiency, “Fairtrade believes that a holistic approach to addressing poverty must include a price for cocoa that enables a sustainable livelihood for cocoa farmers.”(8)
On December 3, 2018, Fairtrade International announced the raising of its guaranteed minimum price for cocoa producers. It goes from $ 2,000 to $ 2,400 per metric ton at the point of export (FOB). The additional Fairtrade Premium is also raised by 20%. It will be $ 240 per metric ton instead of $ 200. Fairtrade organic cocoa will cost $ 300 more than the market price or the minimum fair trade price. These increases follow the failure identified by the organisation itself: 77% of Fairtrade certified cocoa farmers in Côte d’Ivoire are below the poverty line.(9) The new Fairtrade Minimum Price at FOB level would equate to approximately $1,600 per metric tonne at farm gate level in Côte d’Ivoire and is still below the Fairtrade Living Income Reference Prices of $2,668 per metric tonne of cocoa in Côte d’Ivoire and $2,300 in Ghana. Those LIRF prices are based on what the ISEAL Living Income Community of Practice has calculated to be needed in each country to support the average cocoa farming household’s basic costs for food, housing, clothing, health care, education plus a small provision for emergencies.
As mentioned by Fairtrade International : “The Living Income Reference Price should enable full-time cocoa farmers to earn a living income if implemented as part of a holistic strategy that also includes increased productivity and diversified crops”. “Fairtrade is a certification scheme which also engages in civil society campaigning, advocacy work for trade justice, consumer awareness raising, and agricultural extension and capacity building. Fairtrade is half-owned by representatives of producer organisations.”(10)
Founded in 1986, Rainforest Alliance (RA) is an International NGO which first focused on protection of the environment and the promotion of biodiversity. Later, certification of sustainable crops followed.
Rainforest Alliance has no set prices (unlike Fairtrade, there is no minimum price for the farmers) and does not ‘interfere’ in trading relationships(11) It has no official premium structure but says most farmers are paid above the conventional market price.(12)
RA certified more than 692,000 hectares in 2016. Almost 473,500 metric tons of RA cocoa were reported in 2016, or 10.6% of the global cocoa production volume. That area increased more than fourfold between 2011 and 2016, but dropped by 6% between 2015 and 2016.(13)
In 2017, nearly 750,000 hectares of farmland produced Rainforest Alliance Certified cocoa. Production was estimated to account for 10.2 percent of the total global production of cocoa.(14)
UTZ is a Dutch coffee sector initiative. Since 2002 the NGO has been very successful and it expanded into the cocoa sector. Utz emphasises training of farmers and the fight against child labour. Again, there is no minimum price. The UTZ system includes a premium, an additional cash amount paid above the market price, but leaves buyers to negotiate the amount.(15)
2.1 million hectares of cocoa were UTZ-certified in 2016, or almost 21% of the global cocoa area. UTZ reported an estimated production volume of almost 1.2 million metric tons in 2016 (which is nearly 27% of the global cocoa production volume)16, and of 1.5 million in 2017 (more than twice the 691,490 tonnes in 2013). 15% of cocoa farmers worldwide are UTZ certified (estimation by the World Cocoa Foundation)”.(17)
In January 2018, UTZ merged with the Rainforest Alliance. The UTZ and Rainforest Alliance programs will continue to run in parallel until the publication of a single new program at the end of 2019.
Both UTZ and Rainforest Alliance cocoa programmes are based on the foundation that higher farmer knowledge can result in better implementation of good agricultural practices, higher productivity, higher net income and more satisfied farmers.(18) It is not based on so-called “artificial security nets such as fixed premiums”.(19)
IFOAM (the International Federation of Organic Agriculture Movements) defines Organic agriculture as “a production system that sustains the health of soils, ecosystems and people. It relies on ecological processes, biodiversity and cycles adapted to local conditions, rather than the use of inputs with adverse effects. Organic Agriculture combines tradition, innovation and science to benefit the shared environment and promote fair relationships and a good quality of life for all involved.”(20) Organic farming excludes the use of most synthetic chemicals.
“Over 384,000 hectares of cocoa were under organic management in 2017. This constitutes 3.8 percent of the world’s harvested cocoa bean area of 10.2 million hectares 2016 (FAOSTAT).”(21)
“The largest organic cocoa areas are found in the Dominican Republic (159,178 hectares), the Democratic Republic of Congo (51,905 hectares) and Sierra Leone (43,307 hectares). More than 60 percent of the world’s organic cocoa area is in Latin America, and nearly 40 percent is in Africa.”(22)
An organic product is not always certified. Nico Regout Marcolini, who buys the cocoa beans for the Belgian chocolatier Marcolini, puts it well: “Some farmers simply do not have enough money to pay for pesticides. Of course they do not always have organic certification, but their cocoa is 100% organic.”
In order to gain and/or maintain access to markets, producers have no choice but to get their production certified by different voluntary standards.
In Octobre 2018, Iseal Alliance published a report on multiple certification (Fairtrade, Rainforest Alliance, Utz) in coffee & cocoa.(23) It turns out that 13% of cocoa certificates and 21% of certified area is multiple certified and that 2% of all cocoa certificates are triple certified.
24% of the UTZ producers’groups and estates were certified for at least one other standard. A combination with the Rainforest Alliance is predominant (12%).(24)
“Multiple certified groups tend to be larger than non-multiple certified groups: 77% of multiple certified cocoa groups have greater than 300 members, compared to 61% of non-multiple certified groups. Multiple certification is higher in certain regions/countries than others: 68% of multiple certified cocoa certificates are in Ivory Coast. Peru has the highest concentration of multiple certification with 43% of cocoa certificates in Peru being certified by more than one ISEAL member scheme.”(25)
ISO-CEN standard for sustainable cocoa
Even though some chocolate companies have embraced three certification systems (UTZ Certified, Rainforest Alliance and Fairtrade) it is clear the industry does not want to invest all its money in this.
At their request, CEN (European Committee for Standardisation), the cupola of national standardisation organisations of 33 European countries, launched a process in 2011 to come to a ‘general standard for sustainable cocoa’.
This is quite ambitious, especially if you consider that CEN has left its familiar terrain of quality and safety standards for a difficult concept such as sustainability. Soon ISO, the International Organisation for Standardization, with 163 member countries, was also involved in the process. Many cocoa producing countries also joined the debate and through national mirror committees, other parties (such as companies and NGOs) joined.
The ISO/CEN is to become a global standard which clearly defines what sustainable cocoa is and which everyone in the field can apply. It consists of three sub-standards:
- A Management System Standard for the structure and management of the value chain.
- A series of criteria in three domains: People (living and working conditions complying with the standards of the International Labour Organisation), Planet (the impact on the environment) and Profit (the revenue of farmers and their productivity).
- Procedures to guarantee the origin of cocoa, probably via various systems: from fully traceable to formulas that allow for the combination with non-certified cocoa.
The targeted system is Low Threshold/High Bar, which implies different levels of application (basic, medium, high). Recognition at one level implies an action plan for the next step.
Unlike existing certification systems there is no CEN or ISO label on the final consumer product. It is up to the companies to check their claim of sustainable production.
Planned for the end of 2018, the ISO / CEN standard on sustainable cocoa is postponed because Côte D’Ivoire and Ghana say subscribing to ISO certification will worsen the already challenged situation of their farmers . Some of the clauses are indeed difficult to implement and the workload involved could be beyond the ordinary farmer. It is also feared that the standards will weaken the regulatory powers of the authorities in charge of cocoa production (COCOBOD in Ghana and Conseil du Café-Cacao in Côte d’Ivoire) by allowing external bodies to regulate the activities of cocoa organisations. The two countries say they would rather continue to develop their own standards.(26)