inside this edition…
- SUSTAINABILITY SPOTLIGHT:
‘ONE-STOP’ TECH PLATFORM LEADS TO GREATER SUSTAINABILITY AND TRANSPARENCY THROUGHOUT ALL LEVELS OF THE COCOA SUPPLY CHAIN
Technology change and innovation are recognized as critical drivers to boost productivity, competitiveness, and economic growth in the global economy. Within the cocoa sector, these factors have huge potential to accelerate sustainability and raise cocoa farmers out of poverty.
WCF is deepening its focus on technology change and innovation, and how we can better help member companies and origin governments develop stronger “innovation ecosystems.” To this end, the 2017 WCF Partnership Meeting on October 24-25, 2017, in Washington, D.C. will showcase opportunities, challenges, and good practices to spur “inclusive innovation” in the supply chain with the theme “Accelerating Sustainability through Technology and Innovation“.
The biggest game-changers are at the farm level, where technologies like satellites, drones, and sensors are creating new opportunities for precision agriculture. Likewise, there are interesting advances to reducing cocoa production costs through mechanization, and improve cocoa flavor and quality through new approaches in fermentation and drying. Companies continue to pilot new service delivery models to improve the profitability of farmers and their integration into value chains.
We read stories daily about the transformative potential of information and communication technologies for agriculture – WCF and member companies have already been piloting innovative mobile phone applications to deliver information about good farming practices, fertilizer usage, farm safety, labor practices, health, pest and disease prevention, post-harvest handling and crop marketing to cocoa farmers in Ghana. In West Africa, where land tenure remains a major barrier to sustainable farming, startups are pairing mobile phones with blockchain technology to track and verify land titles and deliver digital payments.
For processors and manufacturers, innovations in sourcing and processing offer new opportunities to increase supply chain efficiency, transparency and accountability. Smart image recognition technology may be able to grade beans on-farm, while smart containers can track batches of cocoa beans from farm to factory and ensure traceability. Many supply chain companies are leveraging new digital technology platforms to simplify supply chain data tracking and compliance monitoring.
There are also many exciting innovations underway related to the cocoa and chocolate products themselves, including more flavors, healthier ingredients, portion size, and customization.
While technology and innovation alone will not solve the fundamental challenges in the cocoa sector, a healthy innovation ecosystem is essential to achieve our goals of sustainable growth and poverty reduction. As Albert Einstein said, “We can’t solve problems by using the same kind of thinking we used when we created them.”
THE CASE FOR SUPPLY CHAIN TRANSPARENCY
In May, WCF spoke with SeaWeb, a sustainable seafood non-profit, to share cross-sector learnings and best practices about supply chain traceability and transparency. WCF’s Director of Monitoring & Evaluation, Jennifer Golden, shared with them why transparency is important in the cocoa sector and how WCF members are embedding transparency into their business models.
SeaWeb (SW): What do you think is the future of traceability and transparency?
Jennifer Golden: Before talking about traceability and transparency we need to differentiate the two. Traceability refers to tracing the product throughout the value supply chain; whereas transparency can relate to the sharing of all types of data and information – with respect to financial flows, sustainability practices, impact, and so on.
There is a trend toward more of both which is driven by increased demand from companies throughout the value chain, consumers, civil society organizations, governments and other stakeholders. In terms of traceability one issue will continue to be the value-add of traceability as compared to the cost associated with tracing back from the chocolate bar up the value chain throughout the different touchpoints to the smallholder farmer. There are some innovations especially in technology that have potential to close this gap.
SW: How does WCF think about traceability? Does WCF think about it mainly in terms of supply chain management, or as a way to communicate to the marketplace?
Jennifer Golden: Cocoa and chocolate companies think about transparency with respect to both supply chain management in order to be able to follow the consignments of product through from the cocoa on the farm to the end user and also to be able to communicate to business and/or consumer customers. The importance of traceability increases with risk associated in the supply chain (could be risks associated with the quality of a product, or practices associated with the development of the product, etc.)
SW: How should companies think about traceability and transparency?
Jennifer Golden: As a first step, companies should think about what the purpose of traceability and/or transparency is for their organization. Neither is an ‘end’ in and of itself but rather a ‘means’ toward something else. Traceability may be used to ensure that the supply chain is in compliance with certain declared practices. Having this traceability may then enable transparency to be able to openly report outside the organization on the practices. And this transparency then will enable accountability by the company that it is acting in a manner aligned with what it communicates in terms e.g., of a social impact commitment. Once determining the specific objectives, it will also enable a company to then map out the supply chain and determine where the greatest risk areas are to then determine in which areas traceability is most crucial. Without doing some of this initial framing and prioritizing, companies may end up spending a lot of extra money and time to build in traceability in areas that are not crucial.
SW: What are some examples of companies getting market value from traceability?
Jennifer Golden: In the cocoa/chocolate value chain there is an increased move towards traceability/transparency. One indication relates to the use of certification schemes by cocoa and chocolate companies. In addition, companies have their own sustainable sourcing programs which emphasize traceability and in turn transparency of company practices and practices by those throughout the value chain. For example, Mondelez tracks farmer volume and premium in its Cocoa Life Program. Further, it is very transparent in sharing its progress, results and learnings. Lindt & Sprungli emphasizes knowing where the beans come from in its sustainability program, and TCHO’s business model revolves around partnering directly with the cocoa producers. These examples show the increasing focus on tracing the ‘bean to bar’. These and many more emphasize the move towards more transparency by companies of their practices and results. When a differentiator, these actions help companies get market value.
‘ONE-STOP’ TECH PLATFORM LEADS TO GREATER SUSTAINABILITY AND TRANSPARENCY THROUGHOUT
ALL LEVELS OF THE COCOA SUPPLY CHAIN
Olam International, a WCF member, registered 100,000 smallholder farmers to Olam Farmer Information System (OFIS), a ‘one-stop’ tech platform for improved yield, traceability, and financial access. OFIS allows access to farm data and analysis to cooperatives, smallholders, and customers. For cooperatives, OFIS provides commercial management services to better manage stock, creditor, and debtor values. For smallholders, the system provides detailed farm mapping for support in individual farm management plans, text advice, and mobile payment wallets. For Olam International customers, OFIS improves the transparency of cocoa products through ‘geo-tagging’ and intervention insight which will reduce supply chain risk and improve funding efficiency.
As part of Olam’s sustainability interventions under the Olam Livelihood Charter, OFIS can now give personalised farm development plans to each farmer with advice on how to make the most of each plot and crop. Over 10,000 have been generated for cocoa farmers. This advice, such as when and how to prune based on the exact age of the trees, can be texted straight to the farmer’s mobile phone. Having a plan empowers the farmer while progress against recommendations can be tracked over time, and adapted where necessary. They can also receive payments for their crops into a ‘mobile wallet’, allowing for the creation of credit histories and eventually bringing financial services to the rural disenfranchised.
OFIS Director Simon Brayn-Smith emphasizes the platform’s capability in helping all participants in the supply chain:
“You have to remember that while big data usage is commonplace among large-scale farms, our field officers are working in some of the world’s most isolated places. With the OFIS technology they have been able to survey and record, on the spot, thousands of farms, the surrounding landscape, as well as the farmer’s social circumstances. This gives the farmers, Olam, and our customers greater insight into how to tackle issues from poor yields to climate change and child labor. And by ‘geo-tagging’ each bag of produce we can trace it from farm to fork, providing assurance to end users on product provenance.”
Each farm has been mapped and surveyed via an Android app with the uploaded data harnessed to provide tailored support for smallholders and more precise details to customers who need to make critical choices about financial interventions, such as agri-training, school or healthcare infrastructure.
Currently, OFIS is being rolled out across Olam’s cashew, cocoa, coffee, hazelnuts, palm, pepper, rice and rubber supply chains, with a goal to reach half a million farmers by 2020. OFIS is in daily use in 21 separate countries including Brazil, Côte d’Ivoire, Ghana, Indonesia, Nicaragua, and Nigeria.
 Over 300,000 smallholders are supported under Olam’s Livelihood Charter
• Eliminating Deforestation from the Cocoa Supply Chain, World Bank
This report examines the cocoa supply chain, its associated deforestation, and the role and limitations of certification schemes to reduce deforestation. The deforestation-related commitments from cocoa companies are analyzed across the value chain by looking at commitment types, implementation, and the enabling environment. These findings are compared with lessons from palm oil since it has the most similarities to cocoa due to its large contingent of smallholder producers and limitations that exacerbate deforestation. Finally, a vision for zero-deforestation cocoa with key principles and strategies is described. This work is meant to inform industry, governments, and development partners to be effective actors in a zero-deforestation cocoa future.
• WCF African Cocoa Initiative Final Report, World Cocoa Foundation
The World Cocoa Foundation (WCF) launched the African Cocoa Initiative (ACI) project in September 2011 through a global development alliance (GDA) with the United States
Agency for International Development (USAID) and 14 WCF company members
active in the cocoa and chocolate value chain. The program, funded in part from resources of the United States Government’s Feed the Future initiative, responded to the need for enhanced capacity in the cocoa sector within national institutions and addresses specific gaps in cocoa productivity improvements, including the provision of better planting materials, pesticides/fertilizers, and credit to cocoa farmers.
• Market Concentration and Price Formation in the Global Cocoa Value Chain, SEO Amsterdam Economics
This report explores to what extent market concentration in the cocoa value chain is responsible for the widespread poverty of cocoa farmers. The report finds that market concentration among chocolate manufacturers and cocoa processors is not the key cause. Instead, there are two other key reasons why most cocoa farmers live in extreme
poverty. The first is the fact that the productivity of cocoa farmers is very low, particularly in West Africa. The second is that there are many cocoa farmers without realistic alternative income options. As a result, these farmers continue to supply cocoa even at very low prices. While raising productivity can help individual cocoa farmers to earn a better income, this cannot be a sustainable solution for all farmers, as this would result in an oversupply of cocoa and an even lower cocoa price. The best solution is to create conditions that would allow cocoa farmers to earn alternative income sources and become less dependent on cocoa.
This study has been commissioned by the German Federal Ministry of Economic Cooperation and Development (BMZ) in close cooperation with the four West and Central African cocoa producing countries to get a deeper insight into the huge challenges cocoa production and cocoa producers face regarding their livelihoods. The paper aims at analysing the global cocoa market’s structure and pricing mechanisms as well as the sector policies of the eight most important cocoa producing countries (Côte d’Ivoire, Ghana, Indonesia, Ecuador, Nigeria, Cameroon, Brazil, Peru) to identify measures that strengthen sustainability of cocoa production and improve livelihoods of producers.
En français >>
• Raising Farm Gate Prices, Voice Network
Over the past years, the cocoa sector has come a long way. Governments, companies and civil society have learned to engage each other in critical and constructive dialogue around diverse topics. Which approaches to reduce child labour work best, non-competitive collaboration on yield increase programmes, streamlining training curriculums and audits for certification; the sector has developed a broad and varied vocabulary in its approaches towards a more sustainble cocoa sector. On one topic, however, we seem to have far too little conversation; farm gate prices. There is no discussion on viable options to raise farm gate prices to the level that allows farmers to escape structural poverty and attain a living income. The goal of this paper is to initiate deeper discussions around cocoa farmers’ incomes. To do this, the paper outlines the challenges and potential approaches to addressing the problem that have
been put forward over the years.
COCOA INDUSTRY EVENTS
SAVE THE DATE:
WCF Partnership Meeting, October 24 – 25, 2017, Washington, D.C.
6 – 9: Salon de Cacao y Chocolate 2017,
Lima’s Convention Center, Lima, Peru
18: ICCO Consultative Board Meeting,
Abidjan, Côte d’Ivoire
See more cocoa industry events here.
STAFF & MEMBER UPDATES
WCF also welcomes Matthew Yinger (Finance Intern) and Scarlett Cinotti (Communications & Outreach Intern), Laura von Wahlde (Operations Associate), and Mihaele Alexe (MAP Associate/Temporary UX Volunteer) to the D.C. office, and bids a heartfelt thank you and farewell to Iain Edmundson (Learning and Strategy Intern) for his service to WCF.