COCOA INTERRUPTED THE ROLE OF SOCIAL ENTERPRISE IN COCOA SUSTAINABILITY - Jacobs Foundation
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COCOA INTERRUPTED THE ROLE OF SOCIAL ENTERPRISE IN COCOA SUSTAINABILITY
Acumen Cocoa Interrupted Report: Opening Letter
OPENING LETTER: ACUMEN
J ames Tebi is a cocoa farmer in Ghana. He
does not own his own land, so he works
James’s story raises questions about the ways
in which we are interconnected. Questions
as a sharecropper on someone else’s land about our shared accountability. The world
and has an agreement with them to share can be a fragmented place, rife with divisions
the profit from the beans that are harvested built by physical, ideological and generational
from the land. In order to secure inputs for distances. But cocoa is something with
the cocoa farm, like fertilizer, James needs the the potential to bridge these distances,
landowner to approve and invest in the inputs. as a product that is globally enjoyed, and
He has expanded the amount of land under produced through a complex value chain
cultivation, planting new seedlings which he that spans every corner of the world.
intercrops with plantains. On this land, he earns
Cocoa is something that challenges us to
a greater percentage of income from the crop.
work together, as social and environmental
When I met James he was pruning his trees, issues across cocoa growing regions reveal
a laborious process that involves using a saw vulnerabilities in our current systems. Ignoring
blade attached to a long pole, and reaching these issues, ranging from poverty and child
high into the trees to remove branches that labor to climate change and deforestation,
can limit shade that is needed for pollination, will only lead to bigger challenges down
and to generally maintain tree health. Being the road. Leaders across the cocoa industry
a cocoa farmer is labor intensive, especially recognize this. Despite this, effective and
when trees are being pruned and fertilized scalable solutions have been elusive.
before the rainy season, and during harvest.
This report is the result of Acumen’s Cocoa
Interrupted Initiative, our partnership with
The average cocoa farmer Hershey. It is a call to action to support
earns $0.78 per day, and is new solutions to the challenges of poverty
that face cocoa growing communities in
typically paid in a few lump West Africa through partnership with social
enterprises. At Acumen, we find innovative
sums that must be managed and purpose-driven entrepreneurs who design
during periods of no income. and deliver solutions to the many problems
associated with poverty. These entrepreneurs
This income must cover not only the family’s start by understanding the needs of local
basic needs, but also any investments they communities, and then create products and
need to make to increase their productivity. services to meet those needs, ultimately
The reality in Ghana and Côte d’Ivoire is treating individuals as customers and as agents
that farmers rarely have the resources to in the transformation of their own lives.
fully optimize production of cocoa, and that
An entrepreneur sees a challenge like the
even if they did, they would still earn less
persistent poverty faced by cocoa growing
than what is considered a “living income.”
2
Acumen Cocoa Interrupted Report: Opening Letter
James Tebi, a cocoa farmer in Ghana. Credit: Hershey.
communities as a chance to engage with people tremendous potential to change the storyline
as potential customers who seek products and – to discover and scale solutions that will have
services that can boost their incomes and well- a meaningful and measurable impact on cocoa
being. In Latin America, Acumen has learned farmers, often through close collaboration
from cocoa industry disruptors like Cacao de with industry actors and local governments.
Colombia and Uncommon Cacao that work
We believe that this kind of collaboration is
directly with smallholder farmers to source
critical to designing sustainable solutions to
high quality cocoa beans that can be traced
poverty and to business challenges. It is our
to a “single origin.” Their business models
hope that through this report, corporations can
first drew our interest to the cocoa industry.
see the potential for social enterprises to play a
When we learned of the two million cocoa
growing role in making cocoa a product that is
farmers in West Africa and the monumental
associated with human dignity and prosperity.
challenges they face, we wondered how our
It is a first step and we want to work with
experiences investing in West Africa, and
others who read this and want to go further
engaging with cocoa industry innovators,
to determine what we can achieve together.
could be of value to the cocoa industry.
Cocoa Interrupted is seeking to partner with
the cocoa industry to bring new ideas, new
solutions, and the contributions of local social
enterprises into the story of cocoa. Social
enterprises will not save the day, but they have Yasmina Zaidman
Chief Partnerships Officer,
Acumen
3
Acumen Cocoa Interrupted Report: Opening Letter
OPENING LETTER: HERSHEY
C hocolate is a simple product that means
so much to so many people around
part of the word are well known and publicized
– labor intensive farming process, fluctuating
the world. For many of us, cocoa, milk and global prices that affect incomes, aging trees,
sugar come together in a wonderful alchemy, aging farmers, limited opportunities for
which helps explain why cocoa beans have youth, child labor, limited local infrastructure,
historically been used as currency and the unsecure land rights, and the list goes on.
Mayans referred to it as the food of the gods.
The chocolate industry has been actively
For cocoa farmers, it means much more as
working to address these issues by engaging
cocoa equals livelihoods and opportunity.
across manufacturers, suppliers, origin
But working in the cocoa sector is complicated. governments, and civil society. For Hershey’s
Cocoa grows in very specific locations, requiring part, our Cocoa For Good strategy is focusing on
a very narrow tolerance across multiple factors, four areas which we believe are interconnected:
including temperature, humidity and rainfall. helping children reach their full potential,
Conditions so specific that two countries (Côte equipping youth with the skills and resources
d’Ivoire and Ghana) grow about 70%1 of the they need to build successful futures, increasing
world’s cocoa. The challenges to cocoa in this household incomes for men and women, and
Credit: Hershey.
1
https://www.imvoconvenanten.nl/~/media/files/imvo/banking/news/imvo-cocoa-value-chain-analysis-en.ashx
4
Acumen Cocoa Interrupted Report: Opening Letter
zero deforestation and promoting agroforestry. improve lives in communities, and local
But most of our collective approaches to date solutions that have less impact on the
have been outside-in thinking, bringing in environment vs. imported goods and services.
support, training, and funding from outside Acumen has a history of investing in social
sources to be applied to the situations we face. enterprises that serve low-income communities
across Africa, South Asia, Latin America and
What about an inside-out approach? As the
in the United States. They’ve shown that these
members of the cocoa and chocolate industry
entrepreneurs just need some support. A small
continue to look for new ways to achieve
amount of capital combined with business
our collective ambitious goals, perhaps
expertise and coaching can result in thriving
local entrepreneurs are a key piece in this
enterprises that serve vast numbers of people
complicated puzzle. Entrepreneurism has
in developing countries. We are excited to be
always been the drive-engine of innovation
working with Acumen on Cocoa Interrupted
and commerce. In 2018, U.S. small business
to bring their proven model to positively
accounted for half of overall GDP growth.
impact cocoa farmers and communities.
The Hershey Company was started by Milton
Hershey, a lifelong entrepreneur who failed at However, we cannot do this alone. The best
his business ventures multiple times before sustainability work is shared and collaborative.
ultimately having the success that is now The There are many people across the cocoa supply
Hershey Company. All great companies start chain – other manufacturers, a network of
with an individual, an idea and a dream. suppliers, national and local governments, other
social impact groups, and, of course, the cocoa-
Cocoa Interrupted builds on the farming families – that will have roles to play in
achieving our mutual objectives of championing
premise that West Africa is full entrepreneurship and the resulting impacts this
can create, stimulating economic activity and
of individuals with ideas and improving the lives of thousands of individuals.
dreams, who have the potential We are hopeful, we are determined, but most
importantly we are confident that together
to start great businesses with we will find the solutions needed to make
meaningful impact on their a positive difference for entrepreneurs,
for farmers, for communities and for
communities. everyone who loves chocolate so much.
Hershey believes that entrepreneurs can help
solve many of the issues we are confronting
– more efficient services for cocoa farmers,
youth employment, income diversification
opportunities, goods and services that can Jeff King
Sr. Director Global Sustainability and Social Impact,
The Hershey Company
5
Acumen Cocoa Interrupted Report: Executive Summary
EXECUTIVE SUMMARY
COCOA
INTERRUPTED
The story of cocoa I n this context, we are defining a social
enterprise as a for-profit business with a
growing communities in social purpose at its core that is designed to
scale and achieve financial sustainability.
West Africa is largely a
Acumen launched this project because we
story of poverty. Cocoa had understood that there are many actors
Interrupted: The Role within the cocoa industry that want to see
more progress and more impact, and are
of Social Enterprise in open to bold new ideas, even if they are risky
and unproven. This report is a first step.
Cocoa Sustainability
After nine months of research and 40 interviews
is seeking to partner with corporations, social entrepreneurs, cocoa
with the cocoa industry experts and intermediaries focused in West Africa,
we have seen and believe there is tremendous
to bring new ideas, opportunity for corporations to work with social
enterprises to tackle many of the highest priority
new solutions, and the issues impacting cocoa communities and the health
contributions of local of the industry. Our research uncovered examples
of partnerships between chocolate industry leaders
social enterprises into and social enterprises, demonstrating the potential
of this approach as well as its complexity.
the story of cocoa.
This report highlights the stories of four social
enterprises in Ghana and Côte d’Ivoire and seven
other organizations that use for-profit models
to creatively and sustainably address the varied
needs of cocoa growing communities. It includes
concrete recommendations for how to add social
enterprise to a corporate sustainability toolkit. It
is our hope that through this report, corporations
can see the potential for social enterprises to
play a role in making cocoa a force for good.
6
Acumen
Acumen Cocoa Interrupted CocoaExecutive
Report: Interrupted Report
Summary
Cocoa beans on a Ghanaian farm. Credit: Hershey.
7
Acumen Cocoa Interrupted Report: Contents Credit: Hershey. 8
Acumen Cocoa Interrupted Report: Contents
CONTENTS
01 02
CHAPTER 1 CHAPTER 2
Introduction The Story of Cocoa in West Africa
page 10 page 14
03 04 05
CHAPTER 3 CHAPTER 4 CASE STUDIES
Industry Priorities for Cocoa Social Enterprise - A New Farmerline + Hershey, Eneza
Sustainability & Emerging Trends Ally in Cocoa Education + Nestle, PEG Africa
and Advans in Côte d'Ivoire
page 22 page 30 page 40
06 07 08
CHAPTER 5 CHAPTER 6 BIBLIOGRAPHY
Making Corporate - Social Conclusion and Call to Action Acknowledgements and
Enterprise Partnerships a Reality Interviewees
page 56 page 64 page 66
9
Acumen Cocoa Interrupted Report: Chapter 1
CHAPTER 1
INTRODUCTION
A round the world, the challenges of
sourcing food and commodities to meet
Report estimates the average farmer income
to be just $0.78 per day.3 For two million cocoa
rising global demand in a sustainable way are farmers, low income exacerbates the issue
growing. These challenges are felt more acutely of persistent poverty, made more acute by
by smallholder farmers, with cocoa being a low levels of productivity. Low productivity
prime example, particularly in Ghana and Côte and poverty form a vicious circle as farmers
d’Ivoire where the majority of cocoa is sourced. struggle to invest in farm improvements or
rehabilitation without sufficient financing
The perfect storm of and unclear land ownership rights.
government policies, volatile The cocoa industry is on high-alert, aware of
the challenges, and taking a proactive stance
commodity pricing, and a to address them. But some of the underlying
challenges in the system are proving difficult
complex value chain with to tackle. In both Ghana and Côte d’Ivoire the
many steps between harvest government regulates the industry and sets
farmgate (the price farmers receive) prices based
and consumption has resulted on global commodity markets, often drawing
from unreliable predictions about supply and
in farmers receiving only 6% demand. Income from cocoa and export taxes
of revenue from the price of are a significant portion of government revenue,
which leaves government bodies with little
a typical chocolate bar.1 incentive to change their approach in favor
of farmers and their long-term well-being.
This distribution of value is not uncommon,
The political and economic context for cocoa
but has had an especially negative impact for
production in these two countries creates a
cocoa farmers as commodity prices for cocoa
challenging environment for industry to play
have fallen in recent years. The world market
a role in engaging with farmers – in Ghana for
price fell sharply between September 2016
example, all cocoa must be sold by farmers
and February 2017, which reduced already-low
to Licensed Buying Companies, which must
incomes by 30-40%.2 The 2018 Cocoa Barometer
agree to operate within government pricing
1
Make Chocolate Fair Factsheet, 2013. The Bitter Side of Chocolate: https://makechocolatefair.org/sites/makechocolatefair.org/files/factsheet01_e6_boegen.pdf
2
2018 Cocoa Barometer Report: http://www.cocoabarometer.org/cocoa_barometer/Download_files/2018%20Cocoa%20Barometer%20180420.pdf
3
2018 Cocoa Barometer Report: http://www.cocoabarometer.org/cocoa_barometer/Download_files/2018%20Cocoa%20Barometer%20180420.pdf
10Acumen Cocoa Interrupted Report: Chapter 1
policies. The heavily regulated nature of cocoa little progress has been made. Productivity
in Ghana and Côte d’Ivoire can be a hindrance, enhancing measures have often failed to change
but it is the reality, and cocoa industry farmers’ growing practices, which is linked
stakeholders are looking for ways to have to the fact that lack of access to secure land
an impact in partnership with, or alongside, tenure or agricultural finance makes it hard for
government engagement in the industry. farmers to take advantage of opportunities to
increase their output. Technical fixes are not
Huge efforts are underway by industry, from
having the desired outcome, and many in the
chocolate brands to the cocoa traders that
industry are frustrated by the lack of progress.
provide them with ingredients, to address
issues on the ground, with a major focus in The role of government and the global pricing
the past decade on increasing productivity. structure for cocoa, which is based on global
The logic was that if farmers could reach demand and supply, is not going to change
their potential to produce three to four times any time soon. Industry is adapting their
as much cocoa through better inputs and efforts with programs focused on income
growing practices, they would see growth in diversification and agroforestry alternatives
their incomes even if prices remained low. as a means to increase overall income.
However, based on reports like the 2018 Cocoa There is a third critical issue that shapes and
Barometer, which looks at income levels and defines so many of the challenges surrounding
social issues in cocoa growing communities, unsustainable production of cocoa, and it is
Home of a Ghanaian cocoa farmer. Credit: Hershey.
11Acumen Cocoa Interrupted Report: Chapter 1
poverty itself. Recognizing poverty as the root communities. Social enterprises tackle problems
cause, and not a symptom, of many of the issues faced by consumers by developing products
addressed in the cocoa sector, is an important and services that can scale, and will adjust and
shift in the dialogue about cocoa. iterate until they hit on the right approach.
The spirit of entrepreneurship, combined with
The challenge of poverty, a drive to tackle complex social problems,
make social enterprises a natural ally in the
while complex, also opens effort to tackle the systemic issues associated
with the cocoa industry in West Africa.
up huge possibilities for new
While West Africa represents a relatively
creative solutions that, when nascent environment in which to try to develop
aggregated, begin to change a flourishing social enterprise ecosystem, we
can draw lessons from examples further east in
the day to day realities for countries like Ethiopia and Kenya, where social
enterprises are demonstrating their potential
farmers. to produce large scale impact. A 2017 study
by the British council estimated that there are
This is why social enterprise should be seen
roughly 40,000 social enterprises operating in
as a major new source of opportunities to
Kenya, and the Global Impact Investing network
tackle the challenges facing cocoa growing
reported that USD 650 million of non-DFI capital
Schoolchildren in Ghana. Credit: Hershey.
12Acumen Cocoa Interrupted Report: Chapter 1
With insights on what it takes to partner
with a social enterprise and how to help
build a stronger ecosystem of social
enterprises, the goal of this report is to
inject into the current dialogue on cocoa
a new set of ideas, a new community
of allies, and a chance to accelerate
progress in addressing some of the
biggest challenges in the cocoa sector.
and more than USD 3.6 billion of DFI capital This report also provides a high-level overview
has been invested into impact enterprises in of the cocoa industry and efforts to date to
Kenya alone.4 These social enterprises are address the challenges therein, but will focus
tackling issues from access to healthcare, to primarily on the ways that social enterprises
energy, to agricultural development, and to could play a larger role in addressing some of the
education. In off-grid energy for example, 9 intractable issues currently facing the industry
million people have gained access to renewable and the communities they rely on for cocoa.
energy, powered primarily by local start-ups.5 The report endorses a model of partnership,
Each country has its own unique context, but where large industry, investors, entrepreneurs,
the potential to build a thriving social enterprise and farmers themselves each play their part in
network that effectively tackles major social working towards a more sustainable model.
challenges locally is there. There are abundant
The report will offer examples of social
lessons on how to accelerate this process,
enterprises that are already demonstrating
and they will be highlighted in this report.
impact for cocoa farmers, and that are
showing a path for scale or replication.
4
British Council 2017, The State of Social Enterprise in Kenya: https://www.britishcouncil.org/sites/default/files/state_of_social_enterprise_in_kenya_
british_council_final.pdf.
Note: A development finance institution (DFI) is a financial institution that provides risk capital for economic development projects.
5
Solar Magazine, Jan 7, 2019. December Caps a Bright, Busy Year for Off-Grid Solar in Sub-Saharan Africa: https://solarmagazine.com/december-caps-a-bright-
busy-year-for-off-grid-solar-in-sub-saharan-africa/
13Acumen Cocoa Interrupted Report: Chapter 2
CHAPTER 2
THE STORY OF
COCOA IN
WEST AFRICA
T he journey of a cacao pod into a conventional chocolate bar takes place in one
of the most complex value chains in the food industry. In most cases after the
farmers grow, harvest and sell the beans, the role of the farmer ends. From here, the
cocoa value chain looks slightly different in the two largest producing countries,
Ghana and Côte d’Ivoire, but both follow a similar pattern: cocoa beans are sold
to intermediaries who sell them to trading companies. Trading companies sell to
processors who turn the cocoa beans into value-add products like cocoa butter and
cocoa liquor, which brands like Hershey, Mars, and Nestle purchase to create and sell
chocolate products to retailers, which then market and sell them to consumers.
COCOA VALUE CHAIN
STAGES
smallholder trader / grinder manufacturer retail consumer
OUTPUTS
beans powder liquor butter chocolate products
14Acumen Cocoa Interrupted Report: Chapter 2
Credit: Hershey
15Acumen Cocoa Interrupted Report: Chapter 2
In this chapter, we note some of the major infrastructure and opportunities outside of the
challenges that cocoa farmers face, while in the farm. Cocoa is a key source of income for most,
rest of the report, we highlight the opportunities but this reliance brings its challenges, the extent
for collaboration and social enterprise of which is born by the entire family. A 2018
engagement within the cocoa supply chain and report from Fairtrade International found that
its complex set of actors. We are aware that this the median income for cocoa farmers in Côte
is not an exhaustive review of the cocoa sector, d’Ivoire is $2,707 per year.1 This is significantly
nor all of the approaches to collaboration and below the living income of $7,318 per year.
problem-solving that are underway. We focus In Ghana, the International Cocoa Initiative
on sharing the perspectives and opportunities estimates the annual cocoa farmer income
we heard most throughout our research, and fell between $983 to $2,627 per household in
their relevance to opportunities to engage 2017.2 Income levels have been a major area of
with social enterprises. Understanding the concern, because of the links between income
conditions within cocoa growing communities and other issues at the community level.
has been a focus of many industry groups
Below we highlight several cocoa community
and NGOs, and the information summarized
challenges which have driven action on
below is reflective of the existing data and
the part of the cocoa industry, and to set
the perspectives shared in our research.
the stage for discussion of collaboration
opportunities between corporations and
A CLOSER LOOK AT COCOA social enterprises. The greatest of these is
GROWING COMMUNITIES farmer income, which is a complex issue on
There are roughly two million cocoa farmers in its own, with a variety of contributing factors:
West Africa, and the vast majority of them face
+ Over-reliance on income from cocoa,
a range of challenges associated with poverty.
a volatile and seasonal crop
Cocoa growing communities are largely
+ The role of government, which sets prices
spread out across Ghana and Côte d’Ivoire,
and regulates almost every aspect of the
often in remote areas lacking access to basic
cocoa sector in Ghana and Côte d’Ivoire
“The route to impact really comes from other
types of interventions in rural areas. The best
choice is to think about other areas of life
that impact the business of growing cocoa.”
- Kristy Leissle, Cocoa Expert and Author of Cocoa
1
2018 Fairtrade International Report, Cocoa farmer income: the household income of cocoa farmers in côte d’ivoire and strategies for improvement: https://www.fair
trade-deutschland.de/fileadmin/DE/01_was_ist_fairtrade/05_wirkung/studien/fairtrade_international_response_study_cocoa_farm er_income_2018.pdf
2
International Cocoa Initiative, 1 December 2017, Cocoa Farmers in Ghana Experience Poverty and Economic Vulnerability: https://cocoainitiative.org/news-media-
post/cocoa-farmers-in-ghana-experience-poverty-and-economic-vulnerability/
16Acumen Cocoa Interrupted Report: Chapter 2
“There is not one cocoa farmer I know who
doesn’t want to diversify income. They know
how precarious the industry is and that you
cannot function with just cocoa as the main
source of income.”
- Kristy Leissle, Cocoa Expert and Author of Cocoa
+ Lack of access to finance, which farmers Value added activities for non-cocoa crops,
could use to invest in their productivity including bananas, cassava, palm, coconut
and others are somewhat limited, but are
+ Lack of organization among farmers,
needed to convert low value crops into higher
which would give them the ability to pool
value products to improve farmer incomes.
resources and negotiate collectively
Aggregating crops and increasing their
We explore each of these in greater detail below. value through local processing at scale is an
underdeveloped area where new opportunities
are emerging that could be explored in the
OVER-RELIANCE ON COCOA
context of social enterprise development
Cocoa accounts for 74% of total income for
and farmer income diversification.
the average cocoa-growing household in Côte
d’Ivoire, creating a great reliance on the crop.3
Our research suggests that this reliance on cocoa THE ROLE OF GOVERNMENT
creates a shared financial burden for families In both Ghana and Côte d’Ivoire, governments
of farmers and larger cocoa growing regions. play a large role in the regulation of cocoa
Farmers often rely on cocoa bean income to last production and trading - in ways that
them throughout the year, and having a poor both support and restrict opportunities to
harvest due to weather patterns, poor farming improve the livelihoods of cocoa farmers. In
techniques, or limited access to labor can be both countries, government involvement
devastating for farmers and their families. While has an impact in two areas: farmer
many cocoa farmers seek other forms of income, income and community infrastructure.
few other crops have the international market
Farmers receive a fixed price for their cocoa, set
that cocoa does, so additional crops are sold
by the respective governments, and based on
into local markets alongside the crops of their
factors including global commodity prices and
neighbors, and with little impact on income.
national policies and objectives with regards to
3
2018 Fairtrade International Report, Cocoa farmer income: the household income of cocoa farmers in côte d’ivoire and strategies for improvement.
17Acumen Cocoa Interrupted Report: Chapter 2
cocoa production. Farmers have no individual or should be changed in a way that the industry
collective rights to negotiate on cocoa prices. In has access to deal directly with the farmer.”
both Côte d’Ivoire and Ghana, the government
Some of the ways that the government can
pre-sells part of the current year’s harvest to
support efforts to address cocoa community
local cocoa traders before it occurs, which can
challenges are through extension services,
benefit farmers who know the government will
investments in infrastructure, and support
buy their cocoa. However, these systems are
for local businesses that want to engage with
sensitive to global market prices and farmers
cocoa farmers directly. In Ghana, for example,
can end up bearing that risk. In April 2017, Côte
Farmer’s Hope is a company providing organic
d’Ivoire’s Conseil du Café-Cacao cut their prices
fertilizers to farmers that are cheaper than
to farmers by 36% as a result of a global price
imported synthetic fertilizers, and better for
decline, passing the losses to farmers directly.4
long-term soil health. In order to get certified
Cocoa growing communities also sometimes by the government for use on cocoa farms,
lack rural infrastructure including roads, Farmer’s Hope must go through an 18-24 month
energy, clean water, healthcare and internet evaluation process, which presents a major
access. These infrastructure gaps have a barrier to their growth. They have received
tremendous impact on farmers’ lives and some funding to support the certification
present a shared challenge for farming process from USAID, who are helping the
communities and the industry that relies on company to meet government requirements.
farmers. Some believe that corporations should At the same time, Farmer’s Hope is starting
have more influence with the government to to work with an international cocoa trader
address infrastructure gaps and be a voice that can serve as a buyer once certification is
for farmers in this regard, and others believe achieved. Often, corporations have knowledge
that the government needs to change the of government policies and resources to engage
structures of the cocoa system to give farmers with governments that a social enterprise does
power as citizens and microentrepreneurs. not, and in a heavily regulated environment
such as the cocoa market in West Africa, this
While it is not useful to single out any one
becomes an extremely important asset.
type of organization as being at fault for the
complex problems associated with cocoa Government policies intended to help farmers
production in West Africa, the major role can also sometimes backfire. Programs to
played by governments in Ghana and Côte subsidize or provide free fertilizer often
d’Ivoire often draw criticism. According to reach only a limited number of farmers, but
Warren Sako, the CEO of the Farmgate Cocoa can send the wrong signal about the value
Alliance and a former cocoa farmer, “The of fertilizer, suggesting that fertilizer should
biggest enemy to a farmer as far as we’re be free, and making it difficult for a local
concerned are national governments of cocoa market for fertilizer to develop. Farmers that
producing countries. When the government are offered credit for fertilizer will turn it
protects their citizens, then industry will down, but miss their opportunity to fertilize
follow regulations. We believe that the system their trees when the free fertilizer does
not materialize before the rainy season.
4
2018 Cocoa Barometer Report: http://www.cocoabarometer.org/cocoa_barometer/Download_files/2018%20Cocoa%20Barometer%20180420.pdf
18Acumen Cocoa Interrupted Report: Chapter 2
Many of the solutions that have been identified growing communities. One study by IFC saw
and prioritized by the cocoa industry are in areas that in their survey of Côte d’Ivoire cocoa
where the government has an important role and farmers, just 6% held a bank account.7
responsibility to play a part. Primary education,
nutrition and extension services for farmers are “Even if we give the farmers great
all areas where governments in Ghana and Côte suggestions [for their farms], there are
d’Ivoire play an active role. Currently, there are
challenges for them to find access to
gaps in the quality, consistency, and coverage
of government programs in these areas. The finance and credit to be able to adopt
cocoa industry often steps in to address these the practices that are recommended.”
gaps, but ultimately, they too recognize that - Alfred Kojo Yeboah, Grameen Foundation
government policies and practices are needed
to create the right enabling environment Further in the report we highlight Advans,
and deliver certain basic services at scale. a social enterprise that supports cocoa
farmers specifically through a loan that
ACCESS TO FINANCE helps families budget for school fees, and
Cocoa farmers generally receive the bulk of BanQu, PEG Africa and Mosabi, who are
their annual income within several months. thinking creatively about how to build
They have to budget throughout the year and alternative credit profiles for farmers.
carefully preserve cash on hand. Farmers are While income is one key issue, it is not the only
often constrained by competing priorities challenge facing cocoa farmers. Our interviews
to take care of the farm or take care of the with a variety of stakeholders, as well as data
family, and in 2017, the International Cocoa from reports including the 2018 Cocoa Barometer,
Initiative (ICI) reported that only 36% of farmers reveals that low income is just one challenge
in the 29 cocoa growing communities they faced by cocoa farmers and their families,
support could afford to purchase farming who face a more complex range of challenges
inputs. In 2010, ICI found that cocoa farming that can have an impact on their incomes
households’ expenditures, excluding farming and well being. Beyond income, the following
inputs, exceeded their mean total income.5 issues have been identified as major areas of
Compounding this struggle, the majority of concern within cocoa growing communities.
cocoa farmers are unbanked, forcing them
to take financial risks to invest in the farm, LACK OF FARMER ORGANIZATION
often at the expense of their quality of life. Due to the remoteness of many cocoa
According to the 2017 Global Findex report communities and a lack of resources like
created by the World Bank, the percentage internet and infrastructure, reaching farmers
of poor adults with access to a bank account and organizing them is a challenge. Many cocoa
or a mobile money system was 29% in Côte farmers lack membership in large associations
d’Ivoire and 42% in Ghana.6 These figures that can provide representative leadership. While
are likely much lower in hard-to-reach cocoa co-ops and organizing groups do exist, they are
5
International Cocoa Initiative, 1 December 2017, Cocoa Farmers in Ghana Experience Poverty and Economic Vulnerability.
6
World Bank, The Global Findex Database 2017: https://globalfindex.worldbank.org/sites/globalfindex/files/2018-04/2017%20Findex%20full%20report_0.pdf
7
IFC and Mastercard Foundation, Opportunities for Digital Financial Services in the Cocoa Value Chain, C’ote d’Ivoire: https://www.ifc.org/wps/wcm/connect/
2d3ae2fc-ae9a-45e1-bb9a-f039927a2f89/IFC+Côte+d%27Ivoire+Digitizing+Cocoa+Value+Chain+report+ENGLISH.pdf?MOD=AJPERES
19Acumen Cocoa Interrupted Report: Chapter 2
small compared to the millions of unaffiliated carrying heavy bags of fertilizer or cracking
cocoa farmers. Farmer-led organizations can open cocoa pods with machetes or cutlasses,
lead to increased negotiation power, access to are universally considered inappropriate
resources such as banking, legal support and for children, and efforts are under way to
agricultural inputs, and is a giant step towards sensitize families about the right ways to
legitimizing farmers’ role in the value chain. engage younger members of the family.
“There is very rough rural infrastructure There is widespread consensus that
with loose connections or co-ops of farmers education needs to be a top priority for
who are spread far out, deep in the jungle. cocoa growing communities and is being
It’s hard to drive efficiencies in terms of addressed by initiatives like the Jacobs
reaching them.” - Chris Czerwonka, Mosabi Foundation’s Transforming Rural Education
in Cocoa Communities (TRECC) and
Further in the report we highlight Divine partnerships we highlight later in the report
Chocolate as an example of how creative between Eneza Education and Nestle.
co-op design supports cocoa farmers and
how technology from AgroCenta, Mosabi
and Farmerline can help bridge the physical
GENDER DISCRIMINATION
distance between farmers to access While women play significant roles on the farm
markets and essential information. and in the households, they are often relegated
to cocoa production roles such as harvesting
and planting which are devalued compared
CHILD LABOR AND LOW to other parts of the process. Men typically
QUALITY PRIMARY EDUCATION lead mechanical and technical tasks and
Growing and harvesting cocoa is a complex traditionally manage the revenue transactions.
and time-consuming process, and it is often This results in women earning less income and
a family affair. It is known that children being excluded from independent ownership
participate in the farming process for a myriad of the cocoa production and sales process.
of reasons: lack of educational opportunities,
According to the World Cocoa Foundation,
a parent’s value judgment on their time on
women cocoa farmers remain at approximately
the farm versus school, forced labor, limited
20-25% of the total cocoa farmer population
access to adult labor, and more. The 2018 Cocoa
in Ghana and 5% of the total cocoa farmer
Barometer report estimates that there are
population in Côte d’Ivoire. Though cocoa is
2.1 million children working on cocoa farms
still considered a “man’s crop” by traditional
in Côte d’Ivoire and Ghana. Farming is often
gender norms and constructs, women do
an activity that children participate in after
provide an estimated 45% of the labor on
school, or during the harvest season, and it is
smallholder family cocoa farms according to
not always the case that children should be
Oxfam.8 The specific activities that women
excluded from farming activities. At the same
most heavily engage in are cocoa harvest and
time, certain farm responsibilities, including
post-harvest activities such as pod-breaking,
8
African Development Bank, 2015, Economic Empowerment of African Women through Equitable Participation in Agricultural Value Chains:
https://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/Economic_Empowerment_of_African_Women_through_Equitable_
Participation_in_Agricultural_Value_Chains.pdf
20Acumen Cocoa Interrupted Report: Chapter 2
bean fermentation, and transportation, as well as between 50 and 55, youth are seeking
as plot maintenance and weeding. Despite this different lives and often moving to cities to
significant contribution to farm labor, this is find economic opportunity. According to the
considered unpaid family or casual labor and UN, between 2000 and 2013 the percentage
the contribution goes unrecognized. Women are of rural populations declined by 9% in both
rarely compensated for their labor and rarely Côte d’Ivoire and Ghana.9 Experts on the
are involved in any final sale points, instead ground are in agreement that this trend is
depending on men to collect the cocoa payments. especially prevalent in cocoa growing regions:
The small percentage of women who do “A challenge is trying to convince the
identify as cocoa farmers face additional
farmers to keep growing cocoa. We need
constraints accessing resources due in part
to social gender dynamics, land ownership, to show that they can earn a fair amount
and cooperative membership. Several of and the social conditions in which they
these constraints have been identified as:
live are improved. The young generation
+ lack of financial assets and access to credit just wants to go to the city. ”
+ lack of market access
- Barbara Wettstein, Nestle
+ lack of protective gear
+ used or hand-me-down tools Throughout the report we’ll highlight several
+ lack of training social enterprises and partnerships that are
+ lack of cooperative membership engaging youth as part of their strategy to grow
+ lack of leadership roles and opportunities their business in cocoa growing communities,
+ lack of planting materials and inputs including PEG Africa and Farmerline.
+ lack of labor support
These issues, related to women, underemployed
Addressing gender equity will entail youth and children in cocoa growing
addressing these issues, engaging them communities underscore that cocoa
more proactively in cocoa production, and sustainability relies not only on the health of a
opening up new opportunities for income cocoa tree or cocoa farm, but on the health of
generation for women outside of cocoa. the community that sustains agricultural activity.
Taking a holistic view of the issues impacting
Further in the report we highlight
farmer incomes and cocoa community well-
Divine Chocolate’s efforts to
being allows for a broader set of solutions
empower female cocoa farmers.
to emerge, from local and international
entrepreneurs, and from communities
YOUTH FLIGHT themselves, that can lead to lasting change.
When children grow up in cocoa growing
communities, they know the life of a farmer
firsthand. As the age of current farmers
continues to rise, with the average age reported
9
Unicef Ghana Migration Profiles: https://esa.un.org/miggmgprofiles/indicators/files/Ghana.pdf
Unicef Côte d’Ivoire Migration Profiles: https://esa.un.org/miggmgprofiles/indicators/files/CôteIvoire.pdf
21Acumen Cocoa Interrupted Report: Chapter 3
CHAPTER 3
INDUSTRY
PRIORITIES
FOR COCOA
SUSTAINABILITY
AND EMERGING
TRENDS
The challenges in the cocoa sector are well understood
by companies operating within the global cocoa
industry, and this has prompted significant financial
commitments and collaboration to address cocoa
growers’ needs.
22Acumen Cocoa Interrupted Report: Chapter 3
C ocoa companies have chosen priority areas
to focus on, given specific opportunities
income from additional crops or commercial
activities, empower women economically
for a positive impact in their supply chains. through savings and loans programs, and
The four major priority areas that recur across provide employment opportunities for youth,
many of the sustainability strategies of cocoa preventing mass urban flight. Too often, these
industry leaders and collaborative efforts are: issues are treated like technical challenges
solved by implementing programs that offer
1. Achieving sustainable livelihoods for
a single solution - like training for farmers,
farmers, including living incomes,
or creating loan programs for women.
2. Eliminating child labor and
Over the past decade, the cocoa industry made
promoting the rights of children,
productivity a priority, both because it was
3. Advancing economic opportunities for believed that greater productivity would lead
women and underemployed youth, and to higher incomes for farmers, and because it
would support industry goals to maintain a
4. Stopping deforestation. strong and high quality source of cocoa. The
To address these issues, cocoa industry players focus on productivity occurred during a period
have set goals and developed strategies to of strong growth in both the farmgate and
make measurable progress. Addressing the international cocoa prices but in 2017 when
issue of low incomes and lack of economic the price retreated by over 30%, farmers and
opportunity in particular, strategies include national governments were stuck with massive
efforts to improve cocoa productivity, diversify losses. As a result, discussions began on what
Nature Conservation Research Center, Hershey and Acumen on a 2019 site visit in Ghana. Credit: Hershey.
23Acumen Cocoa Interrupted Report: Chapter 3
should be done beyond cocoa in cocoa growing The traditional corporate-NGO partnership
areas, which has led to new thinking about how usually takes the form of a grant, which can
cocoa prices are set, cocoa within a landscape lack long-term financial sustainability, and
approach, and income diversification both thus also lack sustained impact beyond the
on-farm and off-farm. Views are starting to grant cycle. Grants are useful for piloting new
shift towards an understanding that poverty is approaches and building capacity, but in the
the cross-cutting issue, and perhaps the root long term, interventions that are financially
cause of many of the priority issues just cited. self-sustaining will have a greater likelihood
of scaling and lasting beyond a grant cycle.
Our interviews revealed a Many companies are examining the role of
concern among industry microenterprise to help members of local
communities to increase their incomes. These
players that a single-minded approaches can offer training and access to
small loans, often for women who are otherwise
focus on productivity has not excluded from the cash flows of their family
effectively moved the dial in cocoa business, official land tenure, and access
to finance. Cargill, Mondelez and Mars have
terms of reducing poverty. all worked with CARE to support programs to
develop Village Savings and Loans Associations
According to one industry representative, (VSLAs) that have collectively impacted over
“I wouldn’t look at the cocoa issue by itself 250,000 women in Ghana and Côte d’Ivoire and
- its a rural development issue. It cannot linked 50,000 of them to formal financial services.1
be disconnected from other issues in rural
While these programs have been subsidized
areas where cocoa growing communities are
through grants from multinational corporations,
located. Maybe we have been too focused
they could pave the way for additional
on cocoa, not the whole ecosystem.”
opportunities to increase incomes and build
With reducing poverty, rather than boosting productive assets at the community level
productivity, as the foundational focus, the through financially self-sustaining social
cocoa industry is exploring new approaches enterprise models. Through VSLAs, women are
and new levels of collaboration. Below are able to invest in their own small businesses
some of the current activities and trends and can supplement household finances
among chocolate industry actors. and achieve greater financial agency in the
household. One of the challenges of such
BUILDING FINANCIALLY microenterprise programs, however, is that even
when they are successful, they do not scale
SUSTAINABLE MODELS without additional grant funding. In addition,
As corporations work towards long-term even when women utilize small loans to start a
sustainability of the cocoa supply chain, they small business, they are not necessarily designed
are also starting to look for approaches that to have commercial viability because they are
have more potential for financial sustainability.
1
Care Global VSLA Reach 2017: https://insights.careinternational.org.uk/media/k2/attachments/CARE-VSLA-Global-Outreach-Report-2017.pdf
24Acumen Cocoa Interrupted Report: Chapter 3
Credit: PEG Africa.
not linked to markets outside of the village. report is the size of such impact compared to
As one example, there have been attempts to the scope of the problem. Finding solutions
create local industries around soap making, that scale is a difficult process and while
but it is unclear if these initiatives can scale, corporations want to see the impact of their
or if they would exist without subsidies. programs grow, they are also keenly aware that
the number of individuals and issues in need
According to Kristy Leissle, who researches cocoa
of support exceed those they have been able to
in Ghana, “Each region is different and there is a
reach to date. For example, with an estimated
lack of robust research behind livelihood income
2 million cocoa farmers in West Africa, the
diversification schemes. The most important
plans laid out by CocoaAction in 2015 aimed to
thing to do is to know your customer and know
reach 300,000 cocoa farmers. The living income
what they’ll buy from you. The NGO approach
level set by Fairtrade International is $2.51 per
is to provide the training, but not to build the
day and current average farmer income sits
market itself. But that’s exactly what you need.”
at $0.78 per day in Côte d’Ivoire according to
the Cocoa Barometer. While progress is being
SEARCHING FOR SOLUTIONS made, large gaps exist, and this increases
THAT SCALE the importance of scalable solutions.
After years of corporate sustainability efforts, It bears mentioning that many of the solutions
industry leaders are assessing their impact. A that have been identified and prioritized
topic addressed in the 2018 Cocoa Barometer by the cocoa industry are in areas where
25Acumen Cocoa Interrupted Report: Chapter 3
the government has an important role and CocoaAction’s role is to align the sector on
responsibility to play a part, if not lead. Primary regional priority issues, enable scale through
education, nutrition, healthcare, infrastructure common interventions and a results framework,
and extension services for farmers are all support project design and implementation
areas where governments in Ghana and Côte of social and environmental impact programs
d’Ivoire play an active role. Currently, there are in cocoa communities, and to convene
gaps in the quality, consistency, and coverage sustainability leaders from cocoa companies
of government programs in these areas. The and other stakeholders (governments, NGOs,
cocoa industry often steps in to supplement foundations, researchers, thought leaders, etc.)
the role of government and partially fill the to share lessons learned and compile data to
gaps, but ultimately, they too recognize that accelerate impact. In this way, companies are
government policies and practices are needed actively encouraged to make investments in
to deliver certain basic services at scale. an aligned fashion through their own supply
chains, ultimately bringing the benefits of
In developing long-term solutions, multi-
collective action together with the individual
stakeholder partnerships across sectors,
efforts of the leading companies in the sector.
including with governments, civil society,
and the private sector often prove to be the Both within CocoaAction, and independently,
most successful. In the case of the Energize given their direct engagement with cocoa
Learning project, a school feeding program farmers, trading companies and chocolate
in Ghana launched by Hershey (see sidebar), brands have taken on large and ambitious roles
partnership with government has been a critical in creating, financing and delivering on-the-
success factor. However, developing a robust ground programs to tackle a range of issues
and sustainable local market for fortified food, facing cocoa growing communities in Ghana
both for schools and private consumers, would and Côte d’Ivoire. Each individual company
require a significantly greater commitment of program has their own strategy, impact
resources over the long term from government. goals, and set of implementation partners
including NGOs and local agencies, as well as
COLLABORATING FOR IMPACT dedicated teams inside the corporations that
work alongside implementing partners and
CocoaAction, one of the most collaborative and
internal sourcing and procurement teams.
progressive pre-competitive initiatives in cocoa,
was spearheaded by nine industry members of The pre-competitive, collaborative approach
the World Cocoa Foundation. To date it is the of CocoaAction serves as an example to other
most significant industry-wide effort designed to industries facing sustainability challenges. It
“align complementary roles and responsibilities, is an enormous task for corporations to build
leverage scale and efficiency through collaboration, the internal and external capacity to tackle
and catalyze efforts to accelerate sustainability this wide range of challenges and to do so
in the cocoa sector.” It was one of the first with competitors in similar areas of operation.
initiatives to combine productivity and Delivering impact of this magnitude and
community development for a holistic focus. depth is an ongoing process, and requires
26Acumen Cocoa Interrupted Report: Chapter 3
HERSHEY VIVI: BRINGING IMPROVED NUTRITION VIA
FORTIFIED FOOD PRODUCTS TO CHILDREN IN GHANA
The Energize Learning project in Ghana and operates the factory in Kumasi,
brings together Hershey, Ghana’s School Ghana. An impact assessment lead by
Feeding Program (GSFP), Project Peanut the University of Ghana showed that in
Butter (PPB), and USAID, to help improve ViVi’s first year, anemia was reduced by
children’s nutrition. 43% and test scores were significantly
improved. Anecdotal evidence from
The project, which launched in 2015, school headmasters indicates that school
delivers a fortified food product called attendance has also improved.
ViVi to more than 50,000 students across
160 primary schools each day in Ghana. ViVi was developed with the intent to
Made from peanuts and providing 110 transition the product to a Ghanaian
calories and 5 grams of protein, ViVi is food manufacturer as a new product line
fortified to deliver a 30% daily supply of and to expand its scale and financial
vitamins and nutrients to children and sustainability. While ViVi continues to
provides the students with a supplement rely on Hershey funding to operate, the
to the Ghanaian school lunch program. company is currently exploring alternate
business models to drive greater scale
PPB, an NGO and ViVi’s manufacturing and financial sustainability.
partner, sources 45% of peanuts locally
continual learning and experimentation. more to understand the potential impacts of
CocoaAction itself is evolving, and this climate change on cocoa productivity, and
represents an opportune moment to bring developing innovations including climate
fresh insights and approaches to the process. resilient hybrids, data collection and sharing
models to help governments and farmers plan
ADDRESSING CLIMATE for shifts in climate. They are also supporting
best practices in agroforestry that can mitigate
CHANGE RISKS
climate shifts. This year Hershey launched the
Cocoa farms are particularly sensitive to Kakum Cocoa Agroforestry Landscape Program
climate change, relying on rainfall rather than to protect forests, encourage shade grown
irrigation, and requiring specific conditions of coffee, and support livelihoods for farmers living
shade, temperature and moisture for seedlings in buffer zones around the national forest.
and young trees to thrive. Small climatic
changes could have a devastating impact for One of the most significant collaborative efforts
farmers who are already seeing thin margins launched by the World Cocoa Foundation
and volatile incomes. Cocoa buyers are doing is the Cocoa and Forests Initiative which
27Acumen Cocoa Interrupted Report: Chapter 3
encourages companies to develop deforestation While most programs are meticulous about
commitments and related action plans, develop monitoring the number of farmers reached
strong traceability systems for cocoa, and ensure and estimating expected changes in land use
that cocoa does not encroach on remaining and productivity to gauge their effectiveness
forests that need to be protected and reforested. and impact, specific data on farmers and their
experiences is harder to come by. Securing
In order to address climate change and its
this type of data has been an expensive
impact on farmers, large companies are
endeavor, which means that only a few
exploring ways to reach farmers through mobile
organizations can afford to collect it.
technology, training and distribution of better
planting material. Mondelez and other members These gaps limit our understanding of progress
of the World Cocoa Foundation are working with towards outputs that industry players are
Tree Global (see sidebar), to support nurseries striving to influence, such as improvements in
for climate resilient and generally more income, empowering women, and protecting
robust cocoa tree seedlings, helping farmers children. Even more difficult to assess is
transition to more productive cocoa trees. whether farmers feel that their lives are
The World Cocoa Foundation and Rainforest improving due to the various interventions
Alliance with support from USAID, CGIAR by corporations and other stakeholders.
and the Ghana Cocoa Board, have developed
Efforts are underway by the World Cocoa
best practices for extension officers to share
Foundation and member companies to
with farmers on climate smart agricultural
develop improved company reporting
practices.2 The challenge lies in how to make
of outcome indicators and to conduct
this information more widely available, and to
specific periodic studies designed to fill
provide support to farmers who wish to adopt
knowledge and understanding gaps.
better practices or invest in farm improvements.
With such a large number of cocoa farmers
ADDRESSING DATA GAPS spread across many regions, collecting unbiased
As cocoa industry actors work to develop meaningful data presents a real challenge.
programs focused on improving farmer Acumen is currently exploring the use of Lean
livelihoods, there is growing interest in securing DataSM as a tool to capture the farmer voice in the
data and metrics that can illustrate which context of cocoa farmer livelihood improvement.
programs and methods of impact are most By creating the space to understand the
effective. Reports abound that describe active farmers’ lived experiences of being participants
programs and the number of farmers reached, in livelihood programs, we will understand
including CocoaAction, the Cocoa Barometer, quality of life improvements grounded in
and more specific reports on issues like gender, customers own voices and experiences.
climate and mapping of the industry. We share Over the past 4 years, Lean Data has surveyed
many of these reports, which we consulted over 15,000 agriculture supply chain actors,
for this research, in our bibliography. primarily farmers, associated with 35
2
WCF Climate-Smart Agriculture in Cocoa, A Training Manual for Field Officers, 2018: https://ccafs.cgiar.org/publications/climate-smart-agriculture-
cocoa-training-manual-field-officers#.XH1LXIhKjIU
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