THE CHOCOLATE INDUSTRY'S WEALTH DISPARITY: HOW CAN WE FIX IT?
What do the third richest family dynasty in the USA, the fifth richest man in Germany, the richest man in Italy, the richest man in Austria, and one of the largest privately owned companies in the USA have in common?
They are all chocolate company owners.
With all this money in Chocolate, why are many cocoa farmers still not being paid a living income for their work?
When you purchase a standard chocolate bar, only 6% of the price you pay is going back to cocoa farmers. Small holder farmers need to earn several times what they are right now to earn a living income.
This is just one element of a broader global issue - that the wealth disparity between high and low-income countries continues to grow at a rapid rate.*
In an industry that includes some of the wealthiest, most powerful companies in the world, cocoa farmers deserve better. They deserve to have the money to send their children to school, access healthcare, build their savings, and set their families up for generational success.
THE 4TH EDITION SCORECARD SURVEY RESULTS
The 4th Edition of the Chocolate Scorecard survey showed that there is a lot of misunderstanding in the cocoa sector about living income, with companies mixing up definitions of benchmarks (what a farming household should be earning) vs a living income reference price (what a company should be paying their farmers so they can achieve a living income).
Some companies are starting to pay a living income reference price (LIRP), which is the price an average** farmer needs to receive to earn a living income. Interestingly enough, several retailers – and even discounters – in mainland Europe are leading the way in paying a fair price and giving farmers a good deal, often through using the Tony’s Open Chain principle. All companies that are working with a LIRP at some level of scale or pace received a green egg on living income.
There are also interesting interventions around cash transfers – basically, giving the farmers more money – or decreasing the risk for farmers – for example by putting in place long term contracts that give farmers security of sales for several years. Companies that have these in place – but are not yet paying a fair price at farm gate level – can receive a yellow egg.
However, far too many companies are still hiding behind certification or pointing towards their suppliers. All companies know that dire poverty is the driver for almost all of the problems in the cocoa sector. This means they need to have credible and ambitious plans in place to tackle it. Hiding behind suppliers or certifiers is too easy an answer for a challenge that is as large as this.
WHAT ARE THE KEY STEPS WE’D LIKE TO SEE COMPANIES TAKING?
Investigate the current income of farmers. Under a Due Diligence approach, farmer poverty will come out as a key challenge that needs to be addressed.
Formulate a time-bound action plan to ensure that farmers can earn a living income. These plans must include the necessary changes to the company’s purchasing practices. Farmers need to be receiving a higher price at farm gate level, and merely relying on certification premiums is far from sufficient. Furthermore, the risk needs to be reduced for farmers through long-term contracts that give farmers rights and give the purchasing companies more responsibilities.
Invest in community development and education programs within farming communities that reduce the risk of poverty.
Measure the impact of these initiatives to make sure they are continuing to improve conditions in the community.
I AM BUT ONE INDIVIDUAL CHOCOLATE-LOVER, WHAT CAN I DO TO HELP?
It’s not all bitter, we’ve found a number of companies that are leading the way, and more and more are joining the ranks with innovative programs. What makes companies really pause and pay attention is data and their bottom line. With that in mind, the best way to create positive change is to get out and eat some chocolate! We can think of worse ways to be an activist.
Click here to explore the top-ranked brands in the living income category.
Authors:
Carolyn Kitto and Antonie Fountain, co-written by Athina Greenhalgh.
References:
*Justice For Africa’s Children, Laureates And Leaders For Children, 2023, https://www.laureatesandleaders.org/_files/ugd/811759_fdddfe07e2144d68baf7243dd409a1ae.pdf
** This doesn’t mean that every farmer would then earn a living income. Some households are larger than others, and therefore have more mouths to feed. And some farms are smaller than others, and will not have as much cocoa to sell, so the higher price won’t help them as much. However, what is important to understand is that these aren’t excuses to not pay higher price, but they are actually arguments to put in place additional measures besides paying higher farm gate prices.
What is Tony's Open Chain?
Tony’s Open Chain is a scalable model for sourcing cocoa, achieved by following five basic principles. This model can be used by a company of any size) and some companies have already adopted these principles to source their beans! The five principles answer to some of the widespread issues in the cocoa supply chain, which we’ve condensed for you below:
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Traceability is knowing the whole life cycle of a bean, from farm to cooperative to processor and beyond. Buying from known farmers and partner cooperatives means that you can know the social circumstances under which the beans are produced.
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Paying a higher price for cocoa isn’t a luxury, but a necessity. Farmers are paid per kilogram of cocoa they produce, which sometimes doesn’t even cover the costs of producing the cocoa, while many chocolate companies report big profits. Achieving living income for farmers to meet the basic needs like housing, food, clothing, education for children and healthcare is a priority.
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Cooperatives are business entities whose patrons are the cocoa farmers. This consequently makes them business partners to a chocolate company! Co-developing cooperatives means that chocolate companies can best assist the farmers by working directly with them.
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Investing in 5-year (or more) plans means stability for the farmers, ensuring that they will receive a higher amount for their cocoa beans. Emphasis on the long-term allows farmers to make better-informed financial decisions and plan more effectively for the future with the knowledge that their beans will be purchased.
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Assisting farmers to put their best foot forward. This includes investing in agricultural education and increasing productivity & diversification. This way, farmers can increase yield in not only cocoa, but other crops too, without increasing farm size or labor force.
If you want to read more, check out Tony’s 2021-2022 Open Chain Impact Report, or have a look at the principles on their website.
Let’s make chocolate slavery free!