Better prices are not enough: good procurement practices are essential to ending povertyand deforestation in cocoa value chains, reveals new paper [Promoted content]

Poverty and inequality are at the root of many of the human rights and the environmental issues in the global cocoa value chain. At the producer level poverty leaves those at the beginning of this chain with few choices. It forces them to rely on their children instead of fully-paid adult workers for labour. And to stay above water, it leads many to expand their farms into forest land in an effort to increase their income.

Boukje Theeuwes is Head of Policy at Solidaridad Europe.

Suzan Yemidi is Senior Cocoa Policy Advisor at Solidaridad Europe.

This is despite numerous public and private interventions in the sector. Even today private sector strategies to improve livelihoods in cocoa through farm-level interventions such as good agronomic practices to increase yields and farm diversification to increase the sources of income, have only had a limited impact.  There is a growing consensus that to really transform the sector, fair distribution of value in the supply chain needs to be achieved. And today more and more companies can see that the main lever for this change can be found in their own procurement practices, including pricing practices. 

Focusing on price alone will not suffice

Updating procurement practices with an exclusive focus on price will not solve the unequal power and value distribution issues either, in the exact same way that an exclusive focus on supply management, development policies, or yield gains have proven insufficient. This is according to the findings of the VOICE Network’s latest paper on ‘Good Purchasing Practices’,  a consultation paper for the forthcoming 2024 Cocoa Barometer.

This startling reality is highlighted by the fact that at this moment the price of cocoa is at relative high. Despite this, farmers are not able to profit, due to other pressures, such as low harvests, higher production costs and rocketing living costs.  Improving the price paid for cocoa alone, then, cannot solve this issue. Therefore Good Procurement practices will need to be more holistic. 

Three elements that can transform corporate purchasing practices

The paper, written with the support of Solidaridad as a VOICE Network member, defines three elements that could be included in future corporate purchasing practices in order to effectively address unfair value distribution in cocoa chains. 

Firstly there is the basis of the remunerative pricing of cocoa, which builds on, rather than ends with, the core of a farm gate price that is sufficient for a living income. 

Next companies should include active risk sharing in their purchasing practices. This needs to go beyond the intermediaries whom they buy from and include down-the-line asymmetric contracts with the producers most at risk of loss of income. 

Finally transparency and accountability need to be embedded into any purchasing practice procedure that really wants to change the game in cocoa. This means that companies make available information on their purchasing agreements, value chains and practices to the public so that they may be independently verified, and kept to account.

Good procurement practices can have an immediate effect

A change to purchasing practices is an immediate measure that companies can use to directly impact the lives of farmers, supporting them in reaching a living income and achieving balance with nature as a result. 

Improving livelihoods through better procurement practices is a responsibility for companies and public sector entities sourcing goods from producers. In the private sector, Solidaridad advocates for traders, processors, brands and retailers to do so directly – through engagement with individual companies – and indirectly – through our work on influencing MSIs and legislation, such as due diligence legislation being developed by the EU. We hope and expect that in the foreseeable future due diligence as described by the UN Guiding Principles on Business and Human Rights and the OECD guidelines for Responsible Business Conduct will no longer be voluntary but made mandatory, at least in Europe. This will impact procurement practices, certainly if procurement and living income are embedded in the EU Corporate Sustainability Due Diligence Directive. 

It is time for companies to take responsibility

Unfortunately the implementation of Due Diligence law is someway off, and despite the evidence that these changes could provide real impact, there seems to be little appetite by major players in the cocoa industry to take on this responsibility as regards better purchasing practices.  As of now there are few examples of companies taking this most necessary of steps. 

We hope that this paper inspires companies and policy makers to act now. In it they can find a lot more detail on what needs to be done and why, and from it we hope they can begin to build into their purchasing practices to put a stop to the unnecessary and endless cycle of poverty and destruction in global cocoa value chains. 

Solidaridad believes that it is only when companies put the farmer at the centre of their operations that they are really addressing the root causes of unsustainable farming. By enhancing their purchasing practices as part of the  bigger  strategy of responsible procurement practices, companies can take a step towards living incomes, farmers’ well being, and a more sustainable future.

Read the VOICE paper on ‘Good Purchasing Practices’