Fair Trade and Ethical Sourcing in the Cocoa Trade: A Comparison of Business Practices

The origin of food continues to grow in importance in the minds of many consumers. Organic, locally-grown produce is more widely available that ever before, and the term of “farm-to-fork” has extended beyond status as a trend found in dining out to become a philosophy that many consumer require as essential understanding of the supply chain of the food they purchase and consume.

Concerns about the practices surrounds the growth, harvest and production of cacao have been widely publicized for decades. Sustainability of the industry in the midst of ongoing concerns of shortages in supply are magnified by increasing scrutiny of the farming practices used from both an environmental and human rights perspective.

CNN - "Many cocoa growers work on small family-run farms.  Jean inherited his two-hectare plantation seven years ago when he was just 11, after his father died."
CNN – “Many cocoa growers work on small family-run farms. Jean inherited his two-hectare plantation seven years ago when he was just 11, after his father died.”

While the cocoa and chocolate is a multi-billion dollar global industry, many cacao farmers remain poor, living in poor conditions, and earning a very small income which must support their family, the farm, and its staff. Many farmers have never tasted, nor can they afford, the finished chocolate product that is the result of their careful cultivation and harvest of the cacao tree. The cocoa famer is “is right at the bottom of a multi-layered global supply chain which sees cocoa transformed from bean to bar, and as such, the fundamental cocoa-nomics are firmly against him. Traders, processors, exporters and manufacturers all demand their margin, and for everyone to make a profit, the system dictates that (the farmer) who has little or no bargaining power — receives the bare minimum for his bag of beans.” (CNN)

In response to consumer concern about origins of food, ethical sourcing, and human rights concerns in the farming industry in developing countries, fair trade labeling organizations such as FINE were created and support the work of fair trade certifiers such as Fairtrade International, Fairtrade Labeling Associations International and Fair Trade USA. The World Fair Trade Organizations.  “The World Fair Trade Organization (WFTO) believes that trade must benefit the most vulnerable and deliver sustainable livelihoods by developing opportunities especially for small and disadvantaged producers.  Recurring global economic crises and persistent poverty in many countries confirm the demand for a fair and sustainable economy locally and globally. Fair Trade is our response. “ (WFTO)

“WFTO and its members believe that the path to Fair Trade means changing the practices in the supply chain to follow the 10 Principles of Fair Trade. To be able to deliver the promise of Fair Trade, practices from the production to sale of products should pass the global Fair Trade Standard set by WFTO. Fair Trade scrutiny should not only focus on the production sphere but also on the buying behavior of organisations. This is because for WFTO the burden of proving Fair Trade compliance covers the entire supply chain, and is not the sole responsibility of producers. “

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Companies such as Theo Chocolate, in Seattle were created in response to serving a consumer desire for delicious chocolate that is sourced within the guidelines of fair trade.

Theo Chocolate - The First Organic, Fair Trade Bean-to-Bar Chocolate Company in the United States.
Theo Chocolate – The First Organic, Fair Trade Bean-to-Bar Chocolate Company in the United States.

I had a chance to tour Theo Chocolate last week and see the entire process from start to finish. In speaking with their employee partners, it is clear that the company takes great care in handcrafting their product in small batches with an eye to the product and a socially responsible process from bean to bar. According to their website Theo was “the first organic and Fair Trade chocolate factory in the country, our founding principle is that the finest artisan chocolate in the world can (and should) be produced in an entirely ethical, sustainable fashion. All of our ingredients are carefully screened and 3rd party verified to ensure they meet our standards for social and environmental responsibility.”

Theo Chocolate - Seattle, Washington
Theo Chocolate – Seattle, Washington

Theo is Fair Trade certified by IMO, http://www.fairforlife.org. who “guarantee(s) producers have been paid a price that enables positive economic growth for the individual and the region.” (Theo) Fair for Life states that the organization “offers operators of socially responsible projects a solution for brand neutral third-party inspection and certification in initial production, manufacturing and trading. It combines strict social and fair trade standards with adaptability to local conditions. The system is designed for both food and non-food commodities (like cosmetics, textiles or tourist services).”

fairforlife.org
fairforlife.org

Fair Trade organizations such as IMO, are focused largely on the cooperative groups to which cocoa farmers belong. The cooperatives ensure that farmers receive fair prices for their cocoa, access to credit so they can invest in their farms, and protects against unfair labor practices and child labor. Review and certification is targeted to the cooperative with a focus on empowerment of the farmers in the cooperative through participation, training and development; economic development through fair pricing and wages; social responsibility, and environmental  stewardship. While each organization is slightly different their principles are largely very similar and a this detailed example is representative of many Fair Trade Organizations. FTUSA_Standards_Principles

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Starbucks Coffee Company has taken a different approach by implementing Ethical Sourcing enterprise-wide and Cocoa Practices specifically for the acquisition of tens of millions of dollars in cocoa annually.  According to their website, the Starbucks “approach to buying cocoa, is… based on a commitment to ensuring a long-term supply of high-quality, ethically sourced cocoa while contributing positively to the environment and to cocoa-farming communities. Our Cocoa Practices program seeks to verify the supply chain for the cocoa beans used in our beverages, with inspections performed by independent verifiers overseen by SCS Global Services. Our Cocoa Practices program is designed to understand the supply chain for cocoa beans and provide valuable sustainability information to producers and purchasers alike.”

The Starbucks “Cocoa Practices program has helped us identify key areas for improvement and increased our understanding of the dynamics of cocoa farming in West Africa. ”

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Starbucks Cocoa Practices: Key Areas for Improvement

Unlike Fair Trade, Starbucks Ethical Sourcing and Cocoa Practices are targeted directly to the farmer, not just the cooperative, no matter the size of their operation.

Starbucks uses a detailed audit found here and though a team of highly trained third-party verification teams works year-round to ensure that very pound of cocoa they purchase meets their very strict standards for ethical sourcing.  Their standards are high, extending beyond broad statements of protection of workers and include requirements for freedom of association, paid time off, access to education and health care, and non-discrimination.  Several requirements of the program have a zero-tolerance policy for non-compliance including forced labor, child labor, and the use of trafficked labor.  Additionally, for children over the age of 14 who are permitted to work, must have work schedules that do not conflict with school hours.

I was fortunate enough to spend time with the leader than oversees cocoa sourcing and acquisition and the Cocoa Practices program for Starbucks last week. He shared with me that the enterprise focus on ethical sourcing of cocoa and coffee in particular was intended to be “disruptive” from the very beginning.  Their goal is to do for cocoa what they did for coffee which was to ensure that 100% of all coffee beans met their strict standards for sourcing. The goal is not just for Starbucks to be 100%, but also to change to expectations of consumers for the sourcing of the coffee and cocoa they consume, as well as increase the visibility to and accountability of every company that sources coffee and cocoa around the world.

Starbucks is extremely transparent, and published the scorecards used to evaluate each of their farmers here.  As I met with our leader of this program I was able to go into the database that contains the information for every farmer from which the company buy cocoa.  I saw single owner-operated units as small as a hectare, family run operation of 10 hectares and much larger operations.  The expectations for each are the same, and the level of detail that the company uses to track every aspect of the individuals, family members and employees is staggering and includes perceptions about well-being, potential vulnerability to do availability of fresh water and cooling for the home, along with detailed question about the business and finances.

I asked about scores and what constitutes “passing” or “failing” and I was told that zero-tolerance, is exactly that, but beyond that there is no pass or fail as the company sees it as their obligation to provide support and resources to the individual farmers who may be struggling in an area to ensure they can sustain their livelihood and the supply of cocoa for the long-term.

While Theo and Starbucks have taken very different approaches, arguably their individual decisions on how to approach protecting cocoa farmers and their workers seems appropriate for the scale of their business and long-term business needs.  Theo has shown consumers that gourmet chocolate can be produced from bean-to-bar in small batches using only organic and fair trade cocoa and ingredients.  Starbucks, on of the world’s largest consumers of cocoa has put into place ethical sourcing practices that are designed to protect the long-term supply of cocoa and are also in support of the health and well-being of the individual farmer.  Both companies command a premium price for their product, but based on the history of slavery and child-labor in the cocoa trade it is hard to argue that the premium price is not worth it.  In fact, from a sustainability perspective for both the environment and the human race I wish more companies would be as bold and more consumers would be as informed.

Sources:

Chocolate, Social Responsibility and Fair Trade  Whinney, Joe, “Chocolate, Social Responsibility, and Fair Trade” (2011). Speakers & Events. Paper 1400.http://digitalcommons.spu.edu/av_events/1400

Fair For Life  http://www.fairforlife.org/pmws/indexDOM.php?client_id=fairforlife&page_id=home

Fair Trade USA  http://fairtradeusa.org/certification/producers/cocoa

Motavalli, Jim. Sweet dreams: Seattle’s Theo is a fair trade version of Willy Wonka’s chocolate factory.(Eating Right) E, Nov-Dec, 2007, Vol.18(6), p.42(2)

Percival, Matt. From Bean to Bar: Why Chocolate Will Never Taste The Same Again. February 28.2014 Web. http://edition.cnn.com/2014/02/13/world/africa/cocoa-nomics-from-bean-to-bar/

SBC Global Services http://www.scsglobalservices.com/starbucks-cocoa-practices?scscertified=1

Starbucks http://www.starbucks.com/responsibility/sourcing/cocoa

Theo Chocolate   https://www.theochocolate.com/

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