Mars Commits to Sustainability … Sort Of

I’ve taken a little time with this post to process some older information I had. But here it is:

Mars has committed to sourcing sustainable cocoa. According the company’s press release, Mars is “aiming to certify its entire cocoa supply as being produced in a sustainable manner, by 2020.” The firm plans to partner with the Rainforest Alliance (RA) which will provide the certification services. Well, at least for some of the cocoa. Here’s the press release again: “By 2020, the goal of the collaboration is to achieve Rainforest Alliance certification of 100,000 metric tonnes of cocoa annually for use in Mars products, a significant portion of Mars total cocoa requirements.” No word what significant means. Finally, the press release mentions that Mars will continue to work with UTZ Certified to achieve certification for cocoa produced in West Africa.

Of course, this is good news. Whenever a large chocolate companies in the world commits to third-party certification, it puts lie to the claim made by all the others that such certification is impractical. The major players in the cocoa market have claimed that third-party certification of any sort is impractical, not feasible or too expensive. If Mars can do it, there is no reason for the others to keep balking.

But some questions remain. First off, Mars is a privately held company. That means they only have to release minimal amounts of information to the public. How easy will it be to keep track of their commitment in the future? How thoroughly will consumers be able to check up on the follow through? Yes, there will a RA seal on the Galaxy bar, but what else will we know?

Second, and that is the  important part, neither the RA nor UTZ Certfied offer price guarantees or social premiums to farmers as the fairtrade certification does. I had the opportunity to speak with Edward Millard, Senior Manager for the Sustainable Agriculture Program of the Rainforest Alliance in November 2007. At that time, he explained to me that the focus of the RA certification is on farm management practices. He indicated that the RA tries to move away from the price of cocoa and focus on the entire farm economy instead.

He went to great length to explain that the RA does not use a punitive perspective or require high investments to qualify for the RA certification, but at the same time he allowed that there would be initial investments that farmers would have to make to comply with the RA standard. Some of these are the cost of planting shade trees and higher labor inputs.

Getting the RA certification is a bit tricky as well. According to Millard, the applicant has to pay for the certification. That’s the farmer unless another party, say the exporter, takes on that role.  The applicant has to pay a fixed annual fee and the actual cost of the inspections which happen yearly for the first three years. Who pays for the certification in Mars’s case? That’s one of the questions not answered in the press release.

The use of the RA seal on products, on the other hand, is free. Millard indicated that manufacturers may have to pay for chain of custody certification if that chain is convoluted but it is not clear if that applies to the current announcement. But irrespective of that issue, the free use of the seal strikes me as wrongheaded. Mars won’t have to pay for the seal, but, depending on the arrangement, the farmer will have to pay to be certified. How about having Mars pay for the seal and using that money to certify the farmer? In the current distribution of economic power around the world, that would seem a more appropriate arrangement.

When Cadbury announced that it would source fairtrade cocoa for its Dairy Milk bar, the impact on the farmer was immediate:  Guaranteed minimum price and a social premium. The benefits of the Mars deal for farmers are not so immediate. Yes, there are long-term benefits. But as I pointed out before, long-term benefits tend to fade into the background in the face of short-term challenges. As John Maynard Keynes quipped: “In the long run, we’re all dead.”

That’s not to say that sustainability is not important. Of course it is. Otherwise there won’t be any cocoa left. That’s the only reason Mars is choosing this strategy. But I doubt very much that sustainability can be achieved in the absence of income guarantees to farmers. It has to be a process that includes both farmer welfare and environmental protection. Fairtrade does a lot of that. It includes environmental standards–maybe not as stringent as those of the RA, but they are there.

For me the answer to the question why Mars chose the RA over the fairtrade standard lies in the cost of the commitment. Fairtrade requires a price commitment and a mandatory social premium, RA certification does not. Here’s one example: the 100,000 tons of cocoa to be certified by RA in 2010 would yield $15 million in social premium. It does not take a lot of imagination what that might do for housing, schooling and the general well-being of the cocoa farmers. And that’s the bottom line.