Webinar Summary – Salon Series II

In Spring 2014, The Institute of Corporate Responsibility (ICR) at GWU and Capitol Food Ventures hosted the second conversation in a Salon-Series titled, “A Path to Conflict-Free Chocolate?”, which continued to explore a number of negatively associated impacts within the cocoa industry. (The webinar can be viewed at www.capitolfoodventures.com or below).  Our first conversation is here.

The overarching theme of the webinar was to explore the means of reducing negative impacts the cocoa supply chain can have on social, political, and economic settings – and build a business case for taking action. The expert panelists were Dary Goodrich at Equal Exchange, Han de Groot UTZ Certified, Daniele Giovannucci of The Committee on Sustainability Assessment, and Alex Whitmore of Taza Chocolate. Dr. John Forrer of the George Washington University ICR moderated the event.

Panelist Company Overview

Dary Goodrich shared Equal Exchange’s mission to closely connect small-scale farmers with the market. Their company aims to bring more transparency in the supply chain system and make sure the benefits of trade are more equitably distributed. Han de Groot takes the certification approach to ensure conflict-free cocoa is verifiably sourced. UTZ Certified aims to help farmers engage in better and more sustainable agriculture practices. Daniele Giovannucci uses a business perspective to approach issues within the chocolate industry. At The Committee on Sustainability Assessment they work to understand the production of different commodities through standardized methods. They consider economic, social, and environmental aspects in unison to understand where the tradeoffs are and to better determine the optimal policies and best approaches are to make these commodities viable for producers. Alex Whitmore works directly with producer groups in several Central/South American countries and the Caribbean. Taza Chocolate is a pioneer in ethical trading practices where they purchase at very high premiums of market price and make sure those premiums are distributed to their producers.

Is slave labor prevalent or should it be a worry in cocoa supply chains?

The panelists discussed the social menace of slave and forced labor, particularly among children, in the production of cocoa and how to address it within the supply chain. From the discussion it was evident that some of the main factors that contribute to forced labor are poverty, displaced families, and migration of families to unfamiliar regions in search of better opportunities. There are many approaches to handle this issue, fortunately. For example, UTZ is eliminating child labor by incorporating this metric for certification and they make sure there are frequent audits to identify the use of child labor in production. Another approach, especially used by smaller companies such as Taza Chocolate, is spreading awareness through community development and education, and building a sustainable supply chain. They make sure that people from the company spend some time in the communities with the producers and educate them about the perils of forced and child labor and the importance of sending the children to school. Even though different approaches are being implemented by different organizations and companies, Daniele feels that one of the major challenges is getting consistent information to access what approaches are working and whether those approaches can be scaled up and implemented in multiple regions. The need of the hour is to develop greater linkages among the people selling the product, where companies such as Hershey’s and Mars have to start seeing cocoa not just as a mere commodity but as a means of livelihood for workers around the world.

In the second half of the webinar, the conversation shifted to labor from the point of view of retailers and the reason businesses need to characterize to their customers the idea that their products do not use indentured or slave labor through labeling.  Is this a reasonable standard that firms should aspire to? The answer is not straightforward and varies from company to company and from region to region. Especially for chocolate, it is more challenging when the chocolate value chain is very narrow. The narrow part of the value chain is dominated by maybe 10-20 international companies, and they can make a lot of difference. What organizations should seek to do is target those who can have a big impact, rather than focusing on retailers or consumers. The challenge is to push larger companies to showcase that their supply chain is free from slave labor for the right reasons, not just because the market is telling them to do so. Most people consuming chocolate do not want to think about how cocoa is grown or from where the raw ingredients for chocolate are sourced. This puts corporations in a difficult position to know what the best way is to make and represent their product. However, Han suggests that,

there is a dichotomy between what the consumer expresses to researchers and what he does in the supermarket as a consumer, making purchases within a split second. We think that the conscious consumer at max has maybe 5-10 percent market share, so we need to find ways to convince to companies to get involved”.

So what is the model that can help firms make that change?

The existing reality is that for the bulk of chocolate managed by large firms, it is nearly impossible to tell where the chocolate came from and what the conditions were. For the moment, we are dealing with levels of trust, essentially, and because of the complexity of the supply chain, many large companies have made the bet that to handle this risk is to certify. Although certification is not the only answer and certainly not the perfect answer for the farmer, it is one of the best solutions available right now to increase transparency for large firms. Certification is certainly one of the best proxies available in terms of a market mechanism to transmit value from the consumer and hopefully all the way down to the producer. There is no magical solution. Ultimately, the solution is to investment in education and systems that better trace products and to shift incentives within the supply chain. Pricing also plays an important role. The panelists feel prices of chocolate need to go up, so that it incorporates externalities, and this enables the consumer to understand the true value of that chocolate bar. In addition, the people involved should be able to have conversations with the government in the origin countries to bring out policies that highlight transparency in the supply chain and improve the agriculture infrastructure. Finally, the key to achieve success is empowering the farmers, increasing transparency, shortening the chain, and making sure the farmers are moving up the chain by capturing more value. In order to do this, farmers need to be a part of these discussions and be an equal player, so they can become an economic and political power in the countries where challenges exist.

*Vinay Koodli contributed significantly to this post.

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