The World Cocoa Foundation, an entity created by the chocolate industry and cocoa trading companies, announced today its sustainability principles and goals. The foundation was created in 2000 to address farming practices in cocoa producing countries. But I can’t shake the suspicion that its creation was also part of the industry response to the reports of child labor and child slavery on cocoa farms in West Africa. Its practice bears out that suspicion. The WCF does more publicity when it comes to child labor than the International Cocoa Initiative, which was mandated by the Harkin-Engel protocol.
These are the sustainability principles and goals:
- Profit: Improved and more equitable economic returns for farmers, built upon expanding entrepreneurial skills, stronger and more effective farmer associations, and more productive, profitable farming practices.
- People: Healthy and thriving cocoa-framing households and communities, where children can enjoy childhood and attend school, international labor standards are followed, and farming practices are safe; and,
- Planet: Responsible, sound environmental stewardship in cocoa-farming communities where soil and water are conserved, Integrated Pest Management approaches are followed to limit the use of agricultural chemicals, and the fragile tropical ecosystem is protected.
On the face of it, these are laudable standards and it is clear that there is some common ground between farmers, cocoa producing countries and industry. Each is interested in maintaining cocoa production into the long-term future. Farmers because they have invested an extraordinary amount of labor and capital into their farms. Producer countries because they depend on the export revenue and taxes for their budgets. The chocolate industry because that’s what they sell and they don’t want their business model to go down the tubes because cocoa has become scarce.
At the same time, there is a fundamental contradiction between farmers and the industry. The latter wants to ensure a steady or increasing supply of cocoa beans at the lowest price possible. Farmers, on the other hand, are primarily interested in income–not quantity.
A quick review of the programs supported by the WCF shows that its main emphasis is on increasing quantity (and, to some extent, quality). The term “more productive, profitable framing practices” in the first bullet point highlights that objective.
I have pointed out before that while it it in the interest of an individual farmer to increase output, the collective impact, given the concentration of cocoa production in West Africa, is not beneficial to farmers, as it will increase supply and thus exert downward pressure on prices.
The experience in the Côte d’Ivoire over the past several months has highlighted how decreasing supply has resulted in higher farm gate prices. Clearly, the opposite holds true as well.
The only scenario that supports both increased supply and stable or increasing prices is a significant and sustained increase in the demand for chocolate world-wide. Yes, we’ve all heard about the Chinese and Indian middle class developing a taste for chocolate, but it is not at all clear how this demand will materialize.
International Cocoa Organization, in its annual market forcasts of March 2008, predicted an annual growth rate of 2.8% in cocoa grindings, an indicator of demand. That’s hardly a dramatic level of growth. The further deterioration of the global economy since then will likely reduce that level for the next few years.
The sustainability principles and goals, laudable as they are, do not address this contradiction.
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