ASSESSING DEFORESTATION AND CLIMATE
When biting into a crunchy caramel-filled chocolate candy or savoring the warm aroma from a steaming mug of hot chocolate, many chocolate lovers don’t know where the ingredients or the cocoa come from, nor the costs that their production can bring on nature and the climate. West Africa produces 75% of the world’s cocoa, with Côte d’Ivoire and Ghana producing the lion’s share. In the last 60 years, these two African countries have lost around 94% and 80% of their forests, respectively, with approximately one-third of that forest loss to make way for growing cocoa.
Many of the remaining tropical forests under threat in these two countries are within legally protected areas, provide critical habitat to endangered species like chimpanzees, and contain vast stores of carbon, which, if released, could exacerbate global climate change exacerbate local climate vulnerabilities. Companies representing 85% of global cocoa usage and the governments of Côte d’Ivoire, Ghana, Colombia, and Cameroon have committed to ending cocoa-driven deforestation through the Cocoa & Forests Initiative (CFI) in furtherance of their earlier New York Declaration and Amsterdam Declarations. The CFI can be a credible pathway to ending deforestation in West Africa origins, but it has many inherent fundamental weaknesses which need to be remedied. A version 2.0 consisting of renewed company actions was announced in February 2023. CFI strengthens existing efforts through certification to address deforestation. Furthermore, the European Union Deforestation Regulation (EUDR) has passed and comes into force in 2024, putting a higher obligation on companies to end all deforestation in their supply chains. This category of the Chocolate Scorecard focuses on the efforts to end deforestation in cocoa production.
As such, this theme also focuses on the industry’s contribution to global annual greenhouse gas (GHG) emissions leading to severe climate change. The Science Based Targets initiative (SBTi) stresses that the industry needs to halve its GHG emissions, at a minimum, if we want to give the planet a chance at sticking to the 1.5°C global temperature rise prediction. Most emissions in chocolate companies come from category one of their scope three emissions, which requires actions to address deforestation and land use change in their supply chains. Setting ambitious climate targets, therefore, compliments overall company efforts to reduce carbon emissions to improve the resilience of farmers.
We analyzed the responses to deforestation and climate change in the following areas drawing inspiration from the best-in-class guidance (see AFI box): https://accountability-framework.org
Application of no-deforestation policy to global sourcing and percentage of cocoa purchased through a deforestation-free monitoring system;
Percentage of cocoa sourced from deforested areas since 2010 when satellite monitoring systems became widely available;
Percentage of cocoa sourced from actors who have been deforesting since the launch of the CFI in 2017;
Detailed plans for how to respond to evidence of suppliers sourcing cocoa from recently deforested land; and
Policy to achieve net-zero carbon emissions company-wide; or using science-based targets.
In grading the deforestation and climate change category, we drew on expert scorers who have worked on deforestation and climate - Philip Rothrock, an environment specialist at Satelligence. Grading was done separately by the scorers, followed by a scorers discussion of their scoring to ensure consistency and validity as a means to improve the reliability of the scoring. Further details of the scoring are provided in the methodology. Also, the wild card section of this theme allowed companies to provide additional information about innovative projects, actions, or policies to address deforestation and meet climate commitments that were not covered in the questionnaire.
So Here It Is…
The highest score of the deforestation and climate change theme went to Original Beans Congratulations!
Congratulations to Tony's Chocolonley, Beyond Good, Halba, Ferrero, Nestlé, and Mars, who are in the 'green' or top-scoring category.
All these companies have undertaken efforts that put them at the top of the pack relative to their peers.
The lowest scores for deforestation and climate change went to Kelloggs Company, Daito Cacao, Glico and Morinaga. Their participation is perhaps a sign of willingness to engage and improve their environmental and climate performance. This willingness to engage sets them apart from larger companies like General Mills and Uniliver[1], who avoided the survey. Also, based on a review of their publicly available material, they appear worryingly behind the industry on many sustainability metrics, including those for their cocoa regarding forests/climate. As a result, they remain at the rock bottom. What are they hiding?
We assessed the performance of retailers in this category in this year's survey. On one end, those that performed well are Aldi Nord, Aldi Sud, Ahold Delhaize, and Sainsbury, all receiving yellow scores. These retailers demonstrated a better understanding of the deforestation and climate problem than their peers. Walgreens, FamilyMart scored the least scores in this category of the survey. On the other end is Metros, who deserve special mention for failing to participate in the survey. To these large grocers, we ask the question - what are you hiding? Where is your action to address the deforestation problem you profit from? The overall performance of retailers compared to brands suggests they are generally lagging in efforts to end deforestation and reduce carbon emissions in the supply chains. Therefore, it is not impressive when companies like Metro avoid opportunities presented by this survey to reflect on their environmental mission.
Japanese Chocolate companies are improving but need to define greater ambition and articulate clearer strategies to address deforestation in cocoa origins. For example, some companies have new supplier codes of conduct, which have no deforestation requirement but have little engagement with producers on the ground. Holding suppliers to no deforestation is a significant first step, but more is required.
Grading for the deforestation and climate change theme was generally challenging. We looked for specific and verifiable data for many questions – usually figures and percentages, with publicly verifiable weblinks. While many of our companies excelled at narrative accounts, some key figures were missing.
Ok, we will start with what was done not so well (don't worry, there is a lot more positivity to end on!):
Satellite monitoring – Companies need to develop and expand satellite monitoring systems for the locations they buy from. However, the responses to the survey suggest that only a few companies use satellite or remote sensing tools for deforestation detection. There is the technology to predict areas likely to be deforested, allowing companies and other interest groups to take preemptive action to stop or remediate this risk. For this reason, polygon mapping alone without satellite monitoring is inadequate for addressing deforestation.
Deforestation mapping – Before the EU Deforestation Regulation, companies committed to ending deforestation from Cote d’Ivoire and Ghana by 2017 through the CFI. They also further committed to putting in place a monitoring system by 2019. Therefore, it is logical to expect that by 2021 or 2022, most signatories will have reached at least 100% deforestation mapping in these two countries. However, the data suggests that very few companies have 100% deforestation mapping covering all the areas they source from. With the EU regulation set to start in 2024, it is no longer tenable to have less than 100% deforestation-free cocoa and, for that matter, 100% deforestation mapping. Therefore, we awarded points to companies that had significantly advanced on this indicator.
Different deforestation cutoff dates – Very few companies had consistent deadlines to end sourcing from cocoa origins. For instance, CFI companies have committed to ending deforestation in west Africa in 2017, but some provided information suggesting they will continue souring deforestation cocoa until 2023 or later. As seen in West Africa, bulk cocoa is inherently deforestation-driven; hence, a cross-regional approach to sourcing prevents the problem in new frontier cocoa countries. In another instance, some companies used later deforestation baselines (2019 or 2020), different from the certification cutoff dates. This is notwithstanding sourcing from that area/region for much longer.
The nature of the grievance systems – It is refreshing to note that many companies have some form of grievance redress mechanisms, even though fewer have a publicly accessible system. Most of these grievances appeared to focus on staff complaints and much less on environmental grievances. Some company systems had grievance logs summarizing how complaints have been addressed in the past. Allowing individuals, NGOs, and others to report grievances easily could strengthen due diligence systems and reduce risk.
Verifiability – Like last year's survey, we awarded points where respondents provided reference to their data/figures, e.g., just like in school, you must cite your sources. In several instances, citations and URLs were not provided. Some companies updated their links in time for the scoring. Without proof of specifics, it is difficult to award high points. Also, some companies didn't provide all the relevant information, but accessing the provided web links and combing through other online materials helped us better understand the company on a particular question.
Transparency is critical – Public transparency about deforestation and climate change is essential, so it would be great to have participating companies keep publicly sharing their sustainability initiatives and achievements! Additionally, taking the time to understand the deforestation questions to produce the required company evidence and narratives is crucial in this scorecard process. That allows companies to continuously improve. That also allows civil society to live the reality of the adage: trust but verify.
Now on to what was done well.
Monitoring systems - Most of the companies we surveyed have some form of a monitoring system. The most common is a polygon mapping for farms, most others waypoint monitoring, and some others with remote sensing technology. Many companies have also conducted a deforestation risk assessment of their sourcing locations using the services of third-party companies specialized in monitoring systems. This demonstrates the effort of companies to reduce risk, thus helping companies to focus on specific problem areas. This is an area where most companies have shown significant improvement.
Collaboration to eradicate deforestation - Many of the participating companies have joined the 'Cocoa & Forest Initiative' (CFI) and or Initiatives for Sustainable Cocoa (ISCOs) and or the Retailer Chocolate Collaboration (RCC) - particularly traders. RCC is a collaboration between a few UK and EU retailers working to drive environmental and social improvements among their suppliers. However, joining any or all of these platforms is only one step. Leaning in, collaborating inside for robust group efforts, and individual actions on the ground is vital for promoting change. Merely joining does not obviate the need for companies to continue their individual work on deforestation and climate change, nor their need to invest in conservation and restoration.
Deforestation-free policies - It was great to see that most of our participants had gone beyond CFIs to embrace a global deforestation-free cocoa policy or even a cross-commodity deforestation-free policy (for some or all regions they source from). It shows that companies in this industry are trying to take the issues of deforestation and climate change in their supply chains seriously.
Net-Zero carbon emission - We see significant positive change with some key cocoa/chocolate companies embracing 'Net Zero' with SBTi. The SBTi's Corporate Net-Zero Standard "is the world's first framework for corporate net-zero target setting in line with climate science. It includes the guidance, criteria, and recommendations companies need to set science-based net-zero targets consistent with limiting global temperature rise to 1.5°C". We awarded points for joining SBTi's race to zero or any such initiative. Some companies have not signed up for the SBTI process but showed evidence of efforts to reduce emissions in their scopes 1, 2, and 3. Companies that have committed to reaching net-zero carbon emissions for Scopes 1, 2 & 3; and are developing policies for this ambition scored higher on this indicator. While some companies showed some percentage emission reductions by 2050, others have better timetables focused on achieving net zero in scope 1 or 2 by 2030. In future grading of deforestation and climate change, the scorecard should look at specific actions and progress to reaching these targets. For companies that claim to be already carbon neutral, evidence of this neutrality will cement their leadership in this transition to low-carbon cocoa production.
A note on CDP, which some cocoa/chocolate companies flagged. We've been carefully reviewing our materials and we think CDP is providing a valuable service in promoting transparency for investors and nudging companies to be more explicit with the types of data and analysis they report. Their Forest questionnaire explicitly requests companies provide valuable details on commitments, policies, and implementation. However, there is uneven public access to CDP disclosures, and it is most valuable when companies share their forest disclosures on their websites rather than hiding behind a login and paywall. Best practice in the cocoa space could mean that companies opt to submit forest disclosures to CDP and post a copy of their disclosures to their company website so it can be easily verified.
Looking Forward
Despite progress to end deforestation and reduce carbon emissions, more work must be done. Ending deforestation is the start, but even with this, many companies are far behind. As we see it, the finish line for this category is cocoa in diverse forest landscapes and ecosystems, producing not just quality beans but also delivering on their environmental functions and adequately providing the producer's needs. Some companies have shown leadership, but many others are still at risk from sourcing deforestation cocoa. The European Union Deforestation Regulation (EUDR) comes into force next year, 2024, and companies risk sanctions if they fail to comply. We cannot over-emphasize the need for national efforts from producer countries - no doubt. National deforestation-free cocoa monitoring systems are like a rising tide - it lifts all boats. But in the face of declining cocoa prices and government revenues, farmer poverty, increasing cost of inputs, and many other challenges, what can we expect of these governments who get a fraction of the small fraction of the cocoa business? Overall, we see lots of potential for continued refinement in policy, monitoring, and action in relation to deforestation and climate change, but this is not a bad place to be, at least for the higher-performing companies in this category!
Authors:
Stephanie Perkiss is a Senior Lecturer in Accounting at the University of Wollongong and explores social and environmental accounting and accountability in her research – you can either make yourself accountable or be made accountable by someone else!
Sam Mawutor is a Ph.D. student at Oregon State University and a Senior Advisor at Might Earth. His research examines the cocoa agrarian question in southwestern Ghana.
References:
[1] Unilever failed to participate but Ben & Jerry’s, an independent subsidiary brand of Unilever participated in the survey.