May 16, 2014

Why Commitments Are Not Enough – The Case of Sustainable Cocoa

Kedar Mankad

The 25th World Cocoa Foundation Partnership Meeting, and the 6th Indonesian International Cocoa Conference wrap up today in Bali, Indonesia. These meetings marked an important moment for the cocoa industry. Unlike other major commodity sectors, market demand for sustainably sourced cocoa isn’t in question. Mars, Ferrero, and Hershey have all committed to sourcing 100% sustainable cocoa by 2020. From 2008-2012, certified cocoa soared from 2% to 16% of the market. So with long-term commitments from major purchasers, and an increasing market share, why are we still worrying about sustainable cocoa?

Because meeting demand is no foregone conclusion

Demand from the private sector is great, but supply is having serious trouble keeping up. Cocoa production is dominated by two countries, Ghana and Cote d’Ivoire, who produce over 56% of the world’s cocoa production. Include Indonesia and Brazil and just four countries represent over 85% of the global market. Expanding the area under cultivation isn’t the answer, since the majority of cocoa growing regions overlap with biodiversity hotspots, as the map below shows.

Cocoa and Biodiversity Hotspots Overlap Map

Cocoa production overlaps significantly with hotspots of globally significant biodiversity. Sources: Monfreda et al. (2008), “Farming the planet: 2. Geographic distribution of crop areas, yields, physiological types, and net primary production in the year 2000, Conservation International (2011) “Biodiversity Hotspots.” Map by Louise Willemen/EcoAgriculture Partners and Cornell University.

A solution can be found through increasing yields on existing plantations. Productivity in many cocoa-growing regions is low. Farmers in these areas are faced with challenges of low technical capacity, pest and disease issues, aging trees, and steadily declining soil fertility from long periods of under-investment. Furthermore, dependency on cocoa as the sole cash crop has left many farmers at risk from fluctuations in prices and the climate. Many of them are quitting cocoa for less labor intensive, more lucrative (and more input intensive) options like palm oil and rubber. Therefore, increasing production requires approaches that train and build the capacity, diversify incomes and bolster the resilience of of cocoa smallholders, and find innovative solutions to disease and pest risk.

Five years of work in sustainable value chains has shown us two key factors for achieving this: investing in biodiversity in cocoa landscapes, and focusing on pre-competitive cooperation within the industry.

Investing in biodiversity is central to supply

As soil fertility decreases over time on cocoa farms, inputs like fertilizer can help boost yields in the short term. However, it is on-farm biodiversity through agroforestry techniques that can truly help smallholders in the cocoa sector develop farms that generate positive outcomes for sustainable livelihoods, productive crops, and healthy environments.

Agroforestry in the cocoa sector allows farmers to maintain and sustain a diversity of shade trees, food crops, cocoa and other cash crops. Doing so reduces dependency on high cocoa prices, allows for food security through non-cash crops, can reduce pest and disease risk and increases productivity of cocoa.

To meet demand for certified sustainable cocoa, and ensure that certification signifies a real difference to both producers and consumers, suppliers need to define biodiversity and figure out how to measure it cost-effectively. Recently, cocoa supplier Armajaro Trading and NGO partner Bioversity International co-led a public-private partnership, with support from the IFC’s Biodiversity and Agricultural Commodities Program, that ran across the value chain to address these very issues.

Public-Private Partnership actor map for Armajaro-Bioversity partnership

The PPP between Armajaro Trading and Bioversity International invited the participation of many actors in the cocoa supply chain.

Armajaro and Bioversity reviewed existing knowledge on biodiversity and then conducted a Rapid Biodiversity Assessment and mapping of over 10,000 cocoa farms in Ghana. This assessment led to the development of targeted training modules for farmers that have the potential to be replicated throughout Armajaro’s cocoa sourcing regions. Armajaro is willing to make this data available to researchers in order to further test and learn.

However, one company defining and measuring biodiversity will not move the market from a 16% share to 100%. Nor will biodiversity indicators be credible or viable if they are not cross-comparable, if multiple companies are counting the same farmers, or if the number and complexity of requirements cause farmers to drop out and revert back to business as usual. This is why companies need to work together to ensure that higher-level indicators are harmonized and cost-effective to monitor, and their commitments are effective.

Strong PPPs require PPPPs

That is, Pre-Competitive Private-Private Partnerships. One company acting in its own regional value chain is not enough. Sourcing areas in cocoa overlap significantly, and therefore companies ought to work together to reduce the costs of assessments like the one Armajaro conducted and increase the overall supply of sustainable cocoa. Unlike soy and palm oil, the cocoa sector doesn’t have a multi-stakeholder roundtable where industry-wide consensus can be reached. Pre-competitive company to company knowledge-sharing and solution-building is critical for the future of the world’s chocolate.

World Cocoa Foundation (WCF) represents over 100 companies across the value chain to bridge the needs of farming communities, industry, and the environment. WCF has, through BACP support, generated a set of biodiversity indicators in its CocoaMap Platform that 12 major cocoa companies and other value chain stakeholders have endorsed. Through the work of WCF and close cooperation of NGOs like Rainforest Alliance and Fairtrade, frontrunner companies can begin to monitor and measure progress at an industry level.

Uniform sets of indicators and data gathering can demonstrate credibly whether or not the industry is meeting its environmental performance targets while also helping ensure that supply will meet the increasing demand for sustainable cocoa. The evidence shows that biodiversity is among the critical sets of indicators that should be collected, and that knowledge sharing can be the rising tide that carries the sector upward. If cocoa companies want their commitments to matter, the opportunity for pre-competitive cooperation has never been clearer.

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This post is the third in a four-part series (check out the first and second posts) highlighting key lessons learned from EcoAgriculture Partners role as Monitoring & Evaluation Unit of the Biodiversity and Agricultural Commodities Program.  These insights are collected in the recent work Transforming Markets for Conservation, co-authored by Kedar Mankad, Christine Negra and Lee Gross, and published by EcoAgriculture Partners.
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