Forging a Sustainable Future for Cocoa: Is the EU Embracing a Cooperative Approach?
By: Giovanni Dall’Agnola
The cocoa supply chain spans continents and impacts millions of lives, from producers to consumers. In recent years, increased consumer awareness and evolving regulatory landscapes have put sustainability at the forefront of discussions surrounding cocoa. Sustainability challenges loom large over the cocoa industry, posing threats to both the environment and society. Deforestation, child labor, forced labor, and economic disparities mar the sector, underscoring an urgent need for action. Efforts to address these challenges resonate with the United Nations’ Sustainable Development Goals (SDGs), emphasizing the interconnectedness of social, economic, and environmental sustainability.
Against this backdrop, the European Union (EU) has launched initiatives like the Sustainable Cocoa Initiative to promote sustainability in cocoa-producing regions, particularly in West Africa. This blog post explores the multifaceted dimensions of the Sustainable Cocoa Initiative and its potential for advancing sustainability in the cocoa supply chain. The interplay between the Sustainable Cocoa Initiative and other EU measures, including trade agreements and unilateral trade measures, is also examined, highlighting opportunities for synergy.
The Cocoa Supply Chain in Numbers
The cocoa sector, worth billions of dollars, operates through a complex north-south global supply chain that consists of chocolate manufacturers and cocoa traders in Europe and the United States of America and cocoa producers in West Africa, Asia, and South America. Cocoa production grew from 4.27 million tons in 2008 to 5.76 million tons in 2020. In 2022, the global cocoa beans market reached a value of approximately USD 14.5 billion, and its value is expected to grow to USD 16.32 billion by 2025. Although cocoa is a basic raw material for various goods, it is primarily used by the chocolate industry, which exceeded a retail value of USD 100 billion in 2021 and is projected to experience a compound annual growth rate between 4.5% and 5.5% until 2027.
Up to 6 million farmers work directly within the cocoa sector, underpinning the livelihoods for 40-50 million people who work for industries reliant on cocoa to produce their end products. About 90% of growers are smallholder farmers, defined by the Food and Agriculture Organization as small-scale farmers who manage areas varying from less than one hectare to 10 hectares, generating low income levels and usually living in conditions of poverty. Specifically, smallholder cocoa farmers typically cultivate cocoa on lands less than 5 hectares and often live in severe poverty conditions. Only 5% of the world’s cocoa production originates from plantations that exceed 40 hectares in size.
For many decades, West Africa has been the most important region for cocoa cultivation. In 2022, the leading countries exporting cocoa were Ivory Coast, with exports valued at USD 3.7 billion, and Ghana, with exports worth USD 1.5 billion. The EU stands as the largest global importer of cocoa, responsible for 60% of all cocoa imports worldwide. The primary sources of cocoa for the EU market, valued at EUR 4.6 billion in 2021, are Ivory Coast, Ghana, and Cameroon. Cocoa beans and primary processed products, like cocoa butter or paste, make up 71% of Ivory Coast’s, 58% of Ghana’s, and 29% of Cameroon’s total exports to the EU. These products are imported into the EU tariff- and quota-free under the Economic Partnership Agreements (EPAs).
The Sustainability Challenges Associated with Cocoa Supply Chains
Cocoa is associated with various environmental, social, and economic sustainability challenges, many of which are directly linked to the SDGs. From the rainforests of West Africa to the markets of Europe, the journey of cocoa is fraught with complexities and challenges that have profound implications for the health of our planet and its inhabitants.
From an environmental perspective, cocoa is considered a “forest-risk commodity,” given that it drives deforestation, land degradation, and biodiversity loss in the countries where it is cultivated. The preservation of forests plays a crucial role in combating climate change and safeguarding natural resources and ecosystem services, and its importance is acknowledged in SDG 15. Efforts to prevent deforestation and land degradation are integral to environmental stability, climate initiatives, the promotion of human health, the stimulation of economic growth, and the enhancement of community resilience.
From a social perspective, child labor is the main concern in the cocoa industry, together with forced labor. The promotion of decent labor conditions and the prevention of child labor are at the core of SDG 8. Women also face specific barriers that limit their access to services and hinder their ability to own land. These constraints can significantly impact their productivity and income, perpetuating a cycle of economic disadvantage. Achieving gender equality, ending all forms of discrimination against women, and giving women equal rights to economic resources are crucial goals under SDG 5.
From an economic perspective, wealth is unevenly distributed in the cocoa supply chain due to the market being dominated by a small group of transnational corporations that earn the greatest portion of profits and make farmers in developing countries the weakest link in the supply chain, vulnerable to negative socio-economic externalities. Empowering local communities, smallholders, and farmers is the main way to increase their incomes, eradicate poverty, reduce inequalities, and encourage sustainable economic growth and sustainable supply chains. These are important goals to be achieved under SDGs 1, 2, 10, and 12.
The EU Sustainable Cocoa Initiative: Advancing Sustainable Cocoa Production in West Africa Through a Cooperative Approach
In 2020, the European Commission launched the Sustainable Cocoa Initiative to improve the sustainability of cocoa supply chains in West Africa, particularly in Ghana and Ivory Coast. This initiative responds to growing consumer expectations and a strong political ambition of the EU to make supply chains more sustainable by improving the incomes of cocoa farmers, closing the living income gap, protecting the environment and forests, and eliminating child labor. The EU will contribute EUR 25 million to support the Sustainable Cocoa Initiative. This support is scaled up by country-specific EU-funded programs, including with Ghana and Ivory Coast.
As part of the Sustainable Cocoa Initiative, the European Commission has organized eight thematic roundtables on a wide range of sustainability issues in the cocoa supply chain, known as the Cocoa Talks. These roundtables have provided a platform for in-depth dialogues among various stakeholders, including industry representatives, traders, farmers, non-governmental organizations, EU Member States, and partner countries.
Stakeholders participating in the Cocoa Talks endorsed the following goals, each with a designated timeline for achievement, related to five main “thematic areas” that touch upon all three dimensions of sustainability.
Under the first thematic area, “prices and markets,” stakeholders have committed to improving the analysis of cocoa markets and prices to identify the necessary actions that could improve market transparency and achieve decent living incomes for farmers. They also committed to designing adequate supply management systems that take into account the impacts on local processing and contribute to increasing primary transformation capacity as needed.
Under the second thematic area, “standards,” commitments have been made to strengthen and implement the standards on sustainable cocoa, including the African Regional Standard on Sustainable Cocoa (ARS 1000), a series of standards developed by the African Organization for Standardisation (ARSO) that aims to achieve economic, social, and environmental sustainability and the traceability of cocoa. Producing countries have continued the development of sustainability standards through ARSO and expressed their need for support to meet the traceability, transparency, and accountability requirements of the EU legislation on deforestation. This is particularly relevant due to the recent entry into force of the EU Deforestation-Free Products Regulation (EUDR), which prohibits the import into the EU of six forest-risk commodities, including cocoa and derived products, if their production has resulted in deforestation.
Under the third thematic area, “traceability, transparency and accountability,” action has been taken to address deforestation and child labor. Regarding forest protection, emphasis has been placed on strengthening national deforestation monitoring systems and early warning systems, both satellite- and community-based. This is essential for obtaining accurate, reliable, and transparent data on deforestation. Additionally, making this data available to all stakeholders is crucial, as it enables them to link instances of deforestation to specific cocoa consignments and plots. The importance of developing traceability and transparency mechanisms has been emphasized not only for preventing deforestation in cocoa production but also for addressing child labor, the primary social concern in the cocoa industry. These mechanisms help prevent child labor by enabling companies to track cocoa’s origin, share data transparently, and hold suppliers accountable for responsible practices. Specifically, the establishment or reinforcement of national child labor monitoring systems has been mandated, suggesting that these systems should incorporate data sourced from private or community child labor monitoring systems, as well as from other national and international organizations. This would ensure a comprehensive set of data that allows stakeholders to link incidents of child labor to individual cocoa consignments and plots.
The implementation of traceability, transparency, and accountability mechanisms is crucial, not only due to the EUDR, which imposes due diligence obligations to ensure that cocoa and derived products are deforestation-free, but also in response to two additional EU measures: the Directive on Corporate Sustainability Due Diligence (CSDDD) and the Proposal for a Regulation on Prohibiting Products Made with Forced Labour on the Union Market (Proposed Forced Labor Regulation). The CSDDD lays down obligations for large companies regarding the adverse impacts on the environment and human rights of their supply chains. The Proposed Forced Labor Regulation, if adopted, will prohibit the importation on the EU market of all products, from all sectors and industries, made using forced and child labor.
Under the fourth thematic area, “regulations and due diligence,” commitments have been made to develop best practices on traceability for the cocoa sector and support the improvement of national traceability systems to fight child labor and deforestation. Due diligence recommendations will also be developed taking into account the EU rules on deforestation and corporate sustainability due diligence, including to facilitate the adaptation of smallholders and cooperatives to the new due diligence requirements. The relevant legislation in the countries of production will also be mapped to identify gaps and possibilities for reform. These commitments will help producing countries and companies to comply with the EUDR, the CSDDD, and the Proposed Forced Labor Regulation.
The fifth thematic area, “sustainable cocoa production,” stresses the importance of scaling-up agroecological practices that combine local knowledge with scientific research, identifying incentives to encourage the transition towards sustainable practices, and supporting farmers and their organizations through capacity-building initiatives.
To attain the objectives outlined in the five key thematic areas above, efforts will be coordinated at multiple levels, including the EU level, the producing countries level, and the inter-governmental EU-producing countries level.
At the EU level, the Cocoa Talks roundtables will continue on a needs’ basis, to report on the work of the focus groups, which comprise experts from both EU stakeholders and producing countries, or to serve as information sessions on other specific issues.
At the level of the producing countries, national action plans on sustainable cocoa production will be prepared anew or, if already in existence, updated, involving all relevant stakeholders, including representatives from civil society. The plans serve as reference documents and take into account the results of the national-level dialogues. Additionally, a technical focus group on prices and markets is slated to be established.
Lastly, at the intergovernmental level, the EU and the producing countries will continue dialogue in the framework of the EPAs committees. Concurrently, a dedicated focus group on standards and traceability will be instituted. The possibility of creating additional optional focus groups remains open.
Other EU Measures with Sustainability Implications for the Cocoa Sector in West Africa: the Cotonou Agreement, the Economic Partnership Agreements, and the Recent Unilateral Trade Measures
Before the Sustainable Cocoa Initiative was launched, the EU had already been involved in initiatives promoting, or impacting the promotion of, sustainability in West African countries, including in the cocoa supply chain. Given that West Africa is the most significant region for cocoa cultivation worldwide and that the Sustainable Cocoa Initiative is directed towards this region of the world, a number of instruments and EU measures are relevant.
Amongst the first sustainability initiatives is the Cotonou Agreement, signed in 2000 to strengthen partnerships between the EU and 79 African, Caribbean, and Pacific countries, including Ghana and Ivory Coast. It aims to support the sustainable development of the partner countries, including in the agricultural sector, through a cooperative approach that involves not only governments but also parliaments, local authorities, civil society, the private sector, and economic and social actors. Cooperation arrangements vary according to countries’ levels of development, and each country is free to determine its development policies.
Later, in 2014, the EU concluded the negotiation of an EPA with West Africa, which, however, has not yet entered into force, as the ratification process is still ongoing. Unlike most of the trade agreements that the EU has concluded with countries in other regions of the world, the EU-West Africa EPA does not contain chapters dedicated to the promotion of sustainable development, sustainable agriculture, and sustainable food systems. It only affirms general commitments to contribute to “sustainable development” in its preamble, objectives, and in some other provisions, such as those on agriculture. It does not refer to international conventions on environmental and labor protection. Social issues are treated generically under the notion of sustainable development, which is not supported by implementation mechanisms. However, some fundamental labor rights are recognized through reference to the Cotonou Agreement but there are no provisions preventing the lowering of environmental and social standards or encouraging their improvement. Most likely, the reason why the EU has adopted a weak approach to sustainability in the EU-West Africa EPA is historical. In 2014, the EU had concluded only two trade agreements containing “Trade and Sustainable Development” chapters; one was concluded with Korea, in 2010 and another with Colombia, Ecuador, and Peru in 2012. At that time, the EU’s strategy to pursue sustainability objectives through its trade agreements was still under development. This is also the reason why two interim EPAs, entered into provisional application in 2016, that the EU concluded with Ghana and Ivory Coast (in 2007 and 2008, respectively) also lack chapters dedicated to sustainability and only reaffirm commitments to achieve the objectives of the Cotonou Agreement.
More recently, the EU started discussing and adopting unilaterally—to avoid engaging in bilateral negotiations—measures that condition imports of products from third countries to due diligence requirements aimed at proving compliance with specific environmental and social sustainability standards. While these measures are not exclusive to West Africa or the cocoa sector—since they apply to global imports into the EU and cover a wide array of goods—they will inevitably impact cocoa-producing countries, including those in West Africa, because they establish import conditions that also apply to cocoa and cocoa-based products. These measures, discussed above, are the EUDR, the CSDDD, and the Proposed Forced Labor Regulation. The unilateral approach adopted reflects the EU’s 2021 Open, Sustainable and Assertive Trade Policy strategy, which emphasizes the EU’s ability to “shape the world around it” according to “its strategic interests and values” through the use of “autonomous tools”.
The Interplay Between the EU Sustainable Cocoa Initiative and the Other EU Measures
The Sustainable Cocoa Initiative further advances the cooperative approach that the EU initiated with West African countries through the Cotonou Agreement. This approach was subsequently pursued also in the trade sector with the EU-West Africa EPA and the two EPAs with Ghana and Ivory Coast. While the Sustainable Cocoa Initiative and the EPAs are not formally related and are distinct tools, the EPAs provide platforms for regulatory dialogue between the EU and partner countries in the context of the EPAs committees. The sustainability of the cocoa supply chain and shared efforts for the advancement of the Sustainable Cocoa Initiative are systematically on the agenda of these meetings. Considering the EPAs’ particularly weak focus on sustainability and their affirmation of only general and non-enforceable commitments, the additional push for sustainability provided by the Sustainable Cocoa Initiative was indeed much needed. The use of the EPAs committees as a venue for the continued development of the Sustainable Cocoa Initiative is particularly beneficial for fostering mutual synergies.
The most interesting interlinkages, however, are not those between the Sustainable Cocoa Initiative and the EU’s other bilateral or plurilateral initiatives, such as the Cotonou Agreement and the EPAs. Instead, they are the links between the Sustainable Cocoa Initiative and the unilateral trade measures that the EU has recently implemented or is currently deliberating. Indeed, the Sustainable Cocoa Initiative supplements the EUDR, the CSDDD, and the Proposed Forced Labor Regulation in various ways: by developing standards on sustainable cocoa, establishing mechanisms and best practices for traceability, transparency and accountability, issuing recommendations for due diligence requirements, providing capacity building and technical assistance to assist in meeting EU due diligence requirements, and identifying development partners and sources of funding. Therefore, the cocoa sector could benefit from the complementarity between the Sustainable Cocoa Initiative and the EU’s unilateral trade measures.
The Sustainable Cocoa Initiative shares with the EUDR, the CSDDD, and the Proposed Forced Labor Regulation a significant overlap in vision and objectives. Both the Sustainable Cocoa Initiative and the unilateral trade measures are designed to guide farmers and supply chain actors in the cocoa sector towards sustainable, deforestation-free, and forced labor-free cocoa production, including through the identification of social, economic, and environmental risks that companies and producers need to mitigate through appropriate procedures.
The overlap extends beyond their shared vision and objectives. These frameworks employ similar tools for the collection of information and evidence about the risks that need to be managed by the actors in the supply chain. At the heart of these tools is the establishment of traceability systems, aimed at enhancing transparency and ensuring accountability of the relevant actors based on defined due diligence obligations and recommendations. Typically, these frameworks also offer guidance to assist smallholders in adapting to the due diligence requirements. At a minimum, efforts should be made to ensure that cocoa operators are not required to provide similar, but not identical, information for the purpose of complying with the EUDR, the CSDDD, and the Proposed Forced Labor Regulation.
In addition, both the Sustainable Cocoa Initiative and the unilateral regulatory frameworks aim to set strict criteria for sustainable production, including in the cocoa sector. This means that, within just a few years, each of these policy frameworks will establish separate sets of sustainability criteria. Therefore, it is essential to optimize the alignment between the different policy frameworks to provide unambiguous guidance to the different participants in the cocoa supply chain. Aligning definitions is the first step to be taken to avoid confusion or contradictions. Any inconsistencies could potentially hinder the effort to increase sustainability in the cocoa supply chain. The clarification of both differences and overlaps will facilitate the dialogue between policymakers and competent authorities to devise strategies for addressing, and potentially reconciling, any divergence. When setting standards, the EU’s unilateral trade measures should carve out standards negotiated bilaterally between the EU and its partner countries in the context of the Sustainable Cocoa Initiative. Alternatively, the unilateral measures could define “minimum” general standards. This would enable the EU and its partner countries to negotiate more specific standards, tailored to the specificities of the countries involved in the Sustainable Cocoa Initiative. Compliance with the standards set through the Sustainable Cocoa Initiative should, in turn, be acknowledged as compliance with the standards in the EUDR, the CSDDD, and the Proposed Forced Labor Regulation.
Avoiding parallel systems in traceability is also crucial to avoid unnecessary burdens and is especially in the interest of smallholders. Close cooperation between the public and private sectors will be crucial to ensure that the national traceability systems established under the Sustainable Cocoa Initiative to fight deforestation and child labor can serve as a basis for operators to comply with the due diligence requirements under the EUDR, the CSDDD, and the Proposed Forced Labor Regulation.
Ultimately, the Sustainable Cocoa Initiative offers the flexibility needed to complement the one-size-fits-all approach characterizing the unilateral measures by tailoring commitments to the specific needs of West African countries, which can be identified through constructive engagement facilitated by multistakeholder dialogue platforms like the Cocoa Talks. Enhanced dialogue and engagement also address the legitimacy deficit associated with unilateral measures, arising from the lack of bilateral negotiations. Moreover, the Sustainable Cocoa Initiative serves as a valuable tool for providing country-specific technical and financial assistance, specifically targeting the cocoa sector, to aid West African countries in meeting the sustainability standards set by the EU for imports. The Sustainable Cocoa Initiative is also a valuable platform for the EU’s partner countries to identify areas where they need EU assistance to ensure the export of deforestation-free and child-labor-free products.
Conclusion
The Sustainable Cocoa Initiative and the other plurilateral, bilateral, and unilateral EU measures with sustainability implications for West Africa can be combined and aligned to be mutually reinforcing and foster human rights and environmental protection along the cocoa supply chain. With regard to the Sustainable Cocoa Initiative alone, it is too early to assess its impact and effectiveness in improving sustainability, since most of the objectives outlined in the five key thematic areas will have to be achieved by 2026.
In the cocoa sector, the impact of due diligence legislation will be limited, unless it is coupled with measures to address the root causes of human rights abuses, such as child labor, and environmental harms, such as deforestation, which are often the result of farmer poverty, slow rural development, and weak institutions and infrastructures. Therefore, to progress towards sustainable cocoa farming, it is essential to cooperate with cocoa-producing countries to address these issues.
Accordingly, it is of the utmost importance that the recent unilateral shift in the EU’s trade strategy, characterized by the emphasis on due diligence initiatives, including the EUDR, the CSDDD, and the Proposed Forced Labor Regulation, does not result in the EU disengaging from its cooperation-based initiatives, including the Sustainable Cocoa Initiative. Pursuing strong and ambitious cooperation with partner countries through the Sustainable Cocoa Initiative is crucial for helping them in meeting the objectives set by the EUDR, the CSDDD, and the Proposed Forced Labor Regulation. This can be achieved only by tailoring the one-size-fits-all approach of the unilateral measures to the peculiarities of local contexts, and the Sustainable Cocoa Initiative is a suitable platform for doing this. Stronger cooperation grounded in dialogue with local community representatives, farmers, industry, and civil society would also help the EU in tackling the accusation of adopting “inherently discriminatory and punitive” measures. This is crucial to address the root causes behind environmental and human rights violations.
This blog post was finalized on September 30, 2024