“There is no consistent strategy for implementing improvements”

Child labour on cocoa farms has been a major issue for years, yet we hear little about any concrete progress. How great is the risk today that the chocolate I buy in a German supermarket involves child labour?

DR CHRISTIANE HELLAR: Unfortunately, the risk remains extremely high – even though the majority of corporate initiatives are aimed at combating child labour and the governments of producer countries have also committed themselves to this goal. It is clear that the problem of child labour is closely linked to the overall living conditions of cocoa farmers. The two issues cannot therefore be addressed in isolation from one another.

FRIEDEL HÜTZ-ADAMS: And despite all the efforts, there is hardly any improvement in living conditions, even though all available studies show that families’ incomes must improve in order to effectively reduce child labour. Furthermore, governments must invest in more and better schools. Both are happening to some extent, but it is still far too little.

A key message of the era-paper is the threat to the security of raw material supplies as a result of poor working conditions and farmers’ low incomes. You have both seen the situation for yourselves in Africa. What are the conditions like there?

HÜTZ-ADAMS: Farmers generally work on relatively small plots of land. In most cases, these are only two to three hectares. Productivity is low, usually only 400 to 500 kilograms of dried cocoa beans per hectare. Cocoa production is very labour-intensive, which is why, at current prices, the world market relies on cheap labour. And the farmers face the problem that they cannot easily switch to other crops.

DR HELLAR: The fact that cocoa farmers are largely trapped in this dependence on a single crop has a great deal to do with the fact that cocoa cultivation can only be carried out with a certain long-term commitment. The inadequate educational infrastructure, which Friedel has already mentioned, also has a major impact on the living conditions of cocoa farmers. Furthermore, we must not forget how extremely poor the condition of the roads in the interior of the country is. Some cocoa farms are very difficult to reach. For the farmers themselves, this means restricted access to markets, and it is clear that this significantly weakens their bargaining position.

Conversely, why do farmers not benefit from the fact that the cocoa plant is very sensitive and thrives only under very specific conditions in a few regions of the world – especially as demand is constantly rising?

DR HELLAR: There is a significant power imbalance in the market, which works to the farmers’ disadvantage. The points just mentioned, such as a lack of education and limited access to information, are just some of the reasons.

HÜTZ-ADAMS: One must bear in mind that the approximately 5.5 million smallholders, who account for around 95 per cent of the global harvest, are largely unorganised. They are therefore unable to secure prices within the value chain that cover their costs and provide a living income. They are price-takers, so they have to accept whatever price the world market dictates.

DR HELLAR: They are often organised neither locally, regionally nor nationally. This is often also due to the fact that their interests differ. Nevertheless, efforts are currently under way to organise representation for farmers, even at an international level, and thereby strengthen their position within the value chain.

HÜTZ-ADAMS: Incidentally, this is also very important because, further down the value chain at every stage, there are a few large companies which collectively dominate the market. Although they are all under enormous price pressure, they ultimately pass this pressure down the chain. And that is where it hits the weakest links in the chain: the farmers.

But surely the chocolate manufacturers must have an interest in ensuring that sufficient cocoa remains available for their production in the future. Shouldn’t it be up to the companies to improve the farmers’ situation – and is the criticism levelled at some corporations, for example by NGOs, therefore justified? 

DR HELLAR: Companies certainly do have precisely this interest and are also very actively committed to improving farmers’ living conditions. Initially, some companies tried to tackle this on their own through individual projects; then it became clear that a collaborative approach, together with other stakeholder groups, was necessary to achieve industry-wide change. However, all too often, fear of competition still stands in the way of a genuine exchange of information on the successes and failures of these projects and of actual data sharing.

HÜTZ-ADAMS: Furthermore, it must be recognised that there are no mechanisms whatsoever within companies to enforce sustainable pricing. It can happen that one department within a company spends millions to support projects for farmers, whilst at the same time another department is trying to buy cocoa as cheaply as possible. At the moment, for example, company representatives are telling me that the slump in cocoa prices is a disaster. At the same time, the very same company does not see itself as being in a position to simply pay more for the cocoa. After all, companies do not know how their competitors are behaving in the market; they fear a competitive disadvantage if they voluntarily pay more – and so they adopt a wait-and-see approach, even if this then undermines the usually rather limited positive impact their projects have on farmers’ circumstances.

The current fall in cocoa prices appears to be in stark contrast to the assumption that the security of the raw material supply is at risk. 

HÜTZ-ADAMS: There is a very slight overproduction on the market this year – 264,000 tonnes according to the latest estimates. Now, one might say that this merely offsets last year’s deficit, which stood at just under 200,000 tonnes at the time. Nevertheless, this small surplus has led to a massive fall in prices. In previous years, there were supply shortfalls. Companies responded by processing less cocoa despite rising chocolate sales. Companies are much more flexible in this respect than farmers, as they can alter their recipes. For example, what should I put on supermarket shelves as a special offer: milk chocolate or the 300-gram bar of chocolate with biscuit filling? If I add biscuits, I need far less cocoa, but more of the much cheaper ingredients, flour and sugar.

If we consider the situation facing the industry, particularly the farmers: what advice would you give to consumers in Germany regarding their purchasing decisions?

DR HELLAR: In principle, despite their shortcomings, I believe that labels and certificates are still a good benchmark for conscious, responsible shopping. Comparison websites that assess the labels in terms of their credibility and reach are also helpful.

HÜTZ-ADAMS: I see it exactly the same way: certification is a helpful tool, particularly with regard to the follow-up measures designed to improve the organisation of farmers and to facilitate access to credit and savings schemes, crop diversification and other initiatives. However, it is also clear that we need impact assessments of corporate projects and certification programmes. It must be demonstrable that the farmers involved in the projects are actually better off. After all, ultimately we must return to a situation where the entire cocoa market becomes more sustainable and consumers can simply buy a bar of chocolate with a clear conscience, without first having to concern themselves with certification schemes or corporate programmes.

Corruption in the producing countries is also an issue addressed in the era-paper. Why is this such a major problem for the cocoa industry?

DR HELLAR: In the two main producing countries, Ghana and Côte d’Ivoire – which are the main focus of our era-paper – there are strong state structures, namely cocoa authorities, which regulate the cocoa market. On the one hand, such structures are very helpful in mitigating market failures or weaknesses; on the other hand, however, they are highly susceptible to corruption if the mechanisms for controls and sanctions are inadequate. 

HÜTZ-ADAMS: Any authority handling large sums of money must be organised transparently; otherwise, corruption cannot be prevented. There is still considerable room for improvement in both countries in this regard. However, corruption can also occur in liberalised markets. In Nigeria, for example, cocoa exports were used for fraudulent dealings for years. The government paid subsidies for exports other than oil. Some people exploited this and fraudulently obtained this money using forged documents.

Despite the many problems, the era-paper recognises the cocoa sector as having promising potential for change, with collective action initiatives as the key to success. However, despite numerous initiatives, not much has happened so far. What are the stakeholders doing wrong, or what needs to happen for improvements to finally materialise?

DR HELLAR: In the study, we examine the development of the various initiatives. It is clear that it is only in recent years that a genuinely collaborative approach – rather than a piecemeal and individual one – has been sought. We cannot yet conclusively assess the success of these initiatives at this stage. From our perspective, however, it is important to recognise that different steering mechanisms are required depending on the nature of the collective action initiative. And it is true of every stakeholder group that they must continue to pursue their own agenda and fulfil their own responsibilities, even within a collaborative process. Cooperation, yes, but always coupled with self-reflection on one’s own goals and motives.

HÜTZ-ADAMS: And coupled with openness, because the exchange of information – about who is actually doing what in the cocoa-growing regions and what impact this has on farmers – would be an important first step. In this way, we could learn from one another which steps hold the most promise. All approaches in the sector promise such an approach, but so far it has only been implemented in very tentative ways. The same applies to the discussion about what can actually be expected from the governments in the producing countries. There is no uniform strategy among companies, nor are there any strategies from business associations to bring about improvements in this area. This is completely incomprehensible given the significant role that government policy plays in the situation of farmers. Within the alliances and multi-stakeholder initiatives, there is constant talk about what is expected of policymakers, but very little has actually been done so far.

To what extent will the Hamburger Stiftung für Wirtschaftsethik continue to be involved in this area, and what influence can it exert?

HÜTZ-ADAMS: The Foundation has played an important role in enabling civil society to exert influence, for example, on the work of the Sustainable Cocoa Forum. Studies such as the recently published one, which seek to gauge the extent of this influence, are very important. Non-governmental organisations must now consider whether the route via voluntary multi-stakeholder initiatives is actually the right one, or whether they should shift their efforts towards advocating for binding legislation, in other words, ensuring that companies are legally required to uphold human rights throughout their value chains. This study suggests that, at least in the cocoa sector, we should do one thing but must under no circumstances neglect the other.

DR HELLAR: Driving this discussion forward is very close to our hearts. Unfortunately, there is a risk that civil society actors will fail to live up to their responsibilities and, above all, fall short of their potential. We see this time and again in other sectors too. In this respect, we hope that the era-paper will encourage critical discussion and self-reflection amongst the stakeholders. We are also continuing to be active in impact projects. We are contributing to the ISO standard on sustainable, traceable cocoa and serve on the advisory board of the international cocoa farmers’ initiative, the World Cocoa Farmers Organisation.

If we consider that, due to persistently poor working conditions and in view of the expected effects of climate change, declining cocoa production will meet rising demand in the future: must we assume that, in the future, chocolate will become a luxury good affordable only to a few people?

HÜTZ-ADAMS: If we look at the food situation in Germany and in many other countries, it could well be that cocoa becomes significantly more expensive and chocolate a little more so. So perhaps we’ll have to cut back on our consumption a little – which, incidentally, would have positive health benefits. In Germany, more than nine kilograms of chocolate are consumed per person per year – that’s more than 90 bars of chocolate! A slightly lower consumption at a higher price might actually be better and healthier for everyone. If this price increase were then passed on to the farmers as well, everyone would benefit.

DR HELLAR: I don’t see chocolate becoming a luxury item either, even if cocoa becomes significantly more expensive. It’s not really foreseeable at this stage, but I think developments relating to cocoa substitutes will be interesting in the future. In principle, however, I would have no objection to chocolate being seen as a more premium product, not least to raise awareness of the precious nature of cocoa as a raw material.