Innovation Forum: Sustainable cocoa - A manifesto for change
03.03.2020
Share
Following up their recent analysis of the challenges around developing a sustainable cocoa sector, Peter Stanbury and Toby Webb outline why the sector should reform and how this might be achieved
As we reported recently, the cocoa sector is facing significant pressures. Questions have been raised about the effectiveness of procurement standards, and west Africa’s largest producing countries are making veiled threats about permitting companies to continue their sustainability programmes because of a perceived reluctance by those companies to pay the governments’ new living income differential (LID). The notion of minimum pricing is spreading to other parts of the world too, not least South America and the Caribbean.
However, the only way to make cocoa properly sustainable is to engage in a fundamental restructuring of the sector. As the Ghanaian government’s Shared Growth and Development Agenda makes clear, what is needed is a fundamental modernisation of the sector, including better crop care and harvesting techniques, increased mechanisation and improved infrastructure.
Latest thinking on how economic development happens suggests that, over the longer term, real sustainability will only come from reform of the smallholder model of cocoa farming.
Such a fundamental change is not going to take place quickly. Nor can it be achieved by company sustainability programmes or procurement standards on the one hand, or government imposed minimum prices on the other. This sort of change will require unprecedented collaboration between host governments, donors, cocoa and chocolate companies, and civil society.
What is needed is collaboration, and commitment over time. However, to demonstrate progress and hold together the constituency for reform, any process will also need show successes even over the relatively short term.
Difficult? Yes. Impossible? No. Here’s how it can be done.
Responding to cocoa’s challenges
Step 1: Identify synergies
In late 2019, the Ivoirian and Ghanaian governments seemed to imply that unless companies got more enthusiastic about the LID in the cocoa sector, then those governments may start to interfere with, or indeed potentially halt, companies’ own sustainability efforts.
While the governments subsequently have pulled back a bit on this, rather than regarding it as a threat, companies should see this approach as an opportunity to engage in a detailed assessment of the synergies between their efforts and work done by the national governments, and by donor programmes.
By being proactive in this way, it will be possible to demonstrate that success in improving the cocoa sector is not an either/or situation. It will be clearer that success will come from a combination of both work done by governments funded by the LID and work done by companies. A proper analysis can identify how different activities are synergistic, not antagonistic.
Step 2: Detailed political economy analysis
Cocoa is a highly sensitive topic in both countries. In Ghana for example, it accounts for 7% of GDP and, as was observed by the Financial Times, “cocoa farmers are a powerful political constituency”. Companies need to understand the granularity of these challenges if they are to be able to operate effectively and avoid being accused of interference in states’ domestic business.
The Indonesian palm oil pledge collapsed in part because it was seen as the exertion of undue influence by companies. According to one senior Indonesian official, as a result of the pledge, “We lose our sovereignty … Our authority is being taken over by the private sector.” How can companies in the cocoa sector learn this lesson in west Africa?
The answer is by undertaking a detailed political economy analysis. Given the sensitivity of the issues, a PEA will need to be undertaken with the greatest of sensitivity. However, it needs to be geared to answering questions such as these:
- These countries fare poorly on international governance benchmarks: but how precisely does this impact on the cocoa sector? What are the specific problems in the sector, and how might they be addressed? What are the issues for the ministries relevant to the cocoa sector, for example the ministries of agriculture, finance ministries, and departments focussing on economic development?
- How is the cocoa sector structured, in terms of domestic governance at different levels – national and local; what interest groups exist that exert influence; what membership organisations (chambers of commerce, for example) exist and how do they operate?
- How is the 30-40% of the cocoa sale price retained by the governments spent, and how might it be used better to support development of the sector? It is important to establish how to begin a conversation about this, but in a way that is seen as legitimate in this sensitive area? It may be relevant to learn from the experience of ‘south-south’ cooperation – what might be learned, for example, from the experience of central America?
- How does power operate in these countries, where is the balance between rules-based and relationship-based governance? Understanding this will be essential in order to know how best to make things happen – pushing on both formal and informal channels.
Step 3: Explore how change happens
Over time, significant and fundamental change is needed in the west African cocoa sector: this can seem both daunting and frightening. However, there is a good deal of evidence that changes can happen organically; changes which over time could lead to the systemic shift that is required. Research by Nespresso and INCAE Business School demonstrated the importance of what they termed “pride” in effecting change in the coffee sector.
Similarly a study undertaken last year in northern Bangladesh revealed that activities aimed at improving farmer incomes can actually lead to deeper structural changes in farming communities. Farmer education programmes in the Chars communities significantly improved productivity and incomes.
However, more important were the psychological changes: farmers greatly gained in confidence and proactivity. This led to significant changes in behaviours, for example some smallholder farmers were beginning to act as agents for their colleagues – taking their local community’s produce to market and charging a commission on sales. This kind of differentiation marked a significant move away from traditional smallholder farming structures.
An analysis is needed of what similar changes may have already occurred in cocoa in west Africa. Some corporate programmes already reach well beyond farmer training. Mondelez’s Cocoa Life, for example, has a strong focus on developing “empowered and inclusive cocoa communities”.
It will be important to examine initiatives like this to see what systemic changes might already occurred. These should be captured, both to make change look less scary, and to provide models for change on which to build.
Step 4: Who does what?
A fundamental shift in the cocoa sector over time will require joined-up actions by various stakeholders. A key question to explore, therefore, is who is best placed to do what?
In 2014-15, a project led by IFC, but including representatives from the private sector and civil society asked this very question in relation to supply chains of major investors in fragile states. How could large-scale investments by multinationals create jobs for local people, and contracts for local companies?
A key element of this project was a mapping exercise which identified, for example, the need for host governments to improve regulations to facilitate multinationals working with smaller firms; for companies to re-work procurement procedures to allow for more, smaller suppliers than would normally be the case; and for civil society to work with training institutions near investors’ sites to provide properly-skilled people.
Work is needed to understand what an analogous division of labour would look like in reforming the west African cocoa industry. To achieve this, companies in the sector should commission an analysis to assess how best the, host government agencies, donors, civil society actors and others might best collaborate to achieve lasting change in the cocoa sector.
Step 5: Build a broad constituency of support
It is vital that the process is, and is seen to be, a collaborative one. This process has already begun. As Chris Wille, formerly agriculture chief of the Rainforest Alliance, said in an email to us: “The Nestle Cocoa Plan and the Cocoa and Forests Initiative already point the way toward a substantial restructuring of the cocoa sector.” They are examples of healthy collaboration among companies, NGOs, farmer organisations and governments.’
However, additional efforts could be made to further widen the network of support for the process, specifically by engaging with the new architecture for international development.
In 2011, the Busan declaration changed the rules of the game in international development. Previously, activities to support and develop emerging economies had been seen as the work of those countries’ governments, and of international donor organisations. Busan declared that development would only happen if everyone got involved – governments, civil society and, yes, the corporate sector.
A collaboration between the Ivoirian and Ghanaian governments, companies in the cocoa and chocolate business, and NGOs would be a significant and high-profile example of this approach in practice. There would be a number of potential advantages arising from this.
Firstly, the involvement of the Busan process would help counter any accusations of corporate overreach.
Secondly, operating under the auspices of the Global Partnership for Effective Development Cooperation (GPEDC) might make it easier to address issues such as domestic governance in Côte d’Ivoire and Ghana.
Thirdly, a combined effort may make it more likely that international donors would make additional funding available as well. On the back of a deeper engagement by companies with the host governments, it would be possible, over time, to explore options for engagement at this level.
Getting started
The manifesto is challenging, but eminently deliverable. Nothing in it is untried, and it builds on real and cutting-edge practice. The ball is firmly in the court of companies in the cocoa sector to pick this manifesto up, and make it work.
If they do, and engage in ways this manifesto recommends, it will be possible – over time – to create a genuinely sustainable cocoa sector in west Africa. Moreover, this would not just benefit cocoa farming communities, but which would also contribute to the wider economic development of Côte d’Ivoire and Ghana. Consumers can enjoy their chocolate, safe in the knowledge that it is contributing to the countries it comes from, not damaging them.
What is the best way to proceed? Here’s how:
- Such is the sensitivity of the issues – for example, the risk that any action by companies is characterised as unwanted interference – the key starting point will be to understand the political economy of cocoa in Cote d’Ivoire and Ghana. An analysis as outlined as step 2 above, could be undertaken in a relatively short time-frame – two to three months – and would provide a detailed understanding as the basis for planning further activities.
- A proper political economy analysis would enable a sensitive and informed approach to the governments of Cote d’Ivoire and Ghana. This would make it possible to work on identifying synergies between company and government activities (step 1); and start to explore which stakeholders are best place to do what (step 4).
- A closer working relationship with governments would also provide a solid basis for exploring what sort of change (step 3) had already happened as a result of existing work to improve farmer incomes.
- Working with host governments as suggested would provide the basis for a combined approach to the GPEDC (step 5). A combination of the host states proposing a course of action, with this being backed up by what companies are advocating, and engaging their own home governments on the same agenda would be very powerful.
It is important that these activities are undertaken in a discreet fashion, on order to build trust between companies and other stakeholders. High profile events, or anything which seeks to ‘PR’ this process, is to be avoided. The focus needs to be on making change happen, not on making headlines.
In practice, this process would work best as the fruit of combined actions by companies in the cocoa sector, since this would demonstrate a common desire on the part of the whole industry to address these issues. Ideally, the process should be convened through a neutral agent which would have the credibility to engage with host governments, development agencies and civil society groups.
Sustainable cocoa is possible – it is up to the companies involved to kick start the process to get there. We previously called for a “collaborative development governance” paradigm to be used, to make real change happen.
Whatever the right term truly is, the process of change needs to start today, given how much there is be done.
Dr Peter Stanbury is principal of the Frontier Practice. Toby Webb is founder of Innovation Forum.
We hope you have found this article thought-provoking. It reflects our growing understanding that achieving genuine sustainability is a complicated business. At Innovation Forum we are committed to exploring further the wider societal and political issues relevant to supply chains, food security and apparel manufacture. As well as content like this, we are developing additional resources, formats and ways to support partner organisations in making real change happen on these issues. See here for more details, or contact Toby Webb by clicking here.
.jpg){kind=logo}
.jpg){kind=logo}
.jpg){kind=logo}
1.jpg){kind=logo}
.jpg){kind=logo}
1.jpg)
1.jpg)
1.jpg){kind=logo}
1.jpg){kind=logo}
.jpg)
.jpg)
