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Outsource magazine: thought-leadership and outsourcing strategy | September 21, 2017

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Challenges in Global Chocolate Industry – Tackling Child Labor

Challenges in Global Chocolate Industry – Tackling Child Labor
Global Sourcing Council

As of 2016, the global chocolate industry is roughly a $100 billion industry1. The main resource required to support that industry is, of course, cocoa. Cocoa requires a very specific growing condition and as a result can only be grown 10 degrees north or south of the equator. In fact, five of the top ten cocoa producing countries are in Africa2. More specifically, 70% of the world’s cocoa supply comes from West Africa3–  60% from Côte d’Ivoire (Ivory Coast) and Ghana4. The sad truth is that the majority of the cocoa is produced using unfair labor practices, specifically child labor. The International Labor Organization (ILO) standards from Convention 182  “Concerning The Prohibition and Immediate Action For The Elimination Of The Worst Forms Of Child Labor,” includes cocoa production. Eliminating unfair labor practices is a key material issue to the cocoa industry5.

Contrary to popular belief, child labor is not typically caused by slavery or human trafficking but rather by the simple need for children to help support their families financially. Culturally, in West Africa it is not uncommon for children to leave home at a young age to seek work to help provide for their family. The main cocoa producing regions are well below the international poverty line and the cocoa farmers rely on cheap controllable labor. In West Africa, cocoa production is labor intensive, with little use of mechanized tools. Most of the production is in the hands of small-scale farmers with little resources that often use their entire family unit to contribute to cocoa farming6.

Cost pressures throughout the entire confectionary industry could be a contributing factor for child labor as well. Consumers are not willing to pay a high price, as retailers rely heavily on impulse buys which are inherently linked to low price points. The average consumer is only willing to pay $1 for a candy bar and the retailer and chocolate manufacturer protect their profit margin (typically about 30%). Unfortunately, in this current environment the farmer is squeezed out from making any profit with fair labor. This, however, does not justify the use of child labor but it does provide insight on why this is such a prevalent issue. This form of labor is not sustainable and will have an impact on the long term viability of the cocoa supply chain.

There are many eyes on this issue and many different organizations contributing to eliminating the use of child labor. There is a very simple business case that supports the elimination of child or slave labor; the top chocolate manufacturers, which include; Mars, Mondelez, Ferrero, Hershey and Nestle, and top cocoa suppliers, which include; Cargill, Olam, and Barry Callebaut, can either jump or be pushed. A viable course of action would be to work with the farmers and countries involved to replace these unfair labor practices with a sustainable infrastructure that will ensure a reliable source of cocoa supply for years to come. The alternative would be to ignore it, in which case these manufacturers and suppliers will find themselves in a situation where someone else eliminates child labor without replacing it with a more sustainable option which could cripple the world’s cocoa output.

unwrapping chocolate plans

Efforts are being undertaken by a multitude of organizations and government bodies to address the issue of unfair labor practices within the cocoa industry. As a whole, the industry has pledged to reduce child labor in the Ivory Coast and Ghana by 70% by 20201. Additionally, major chocolate manufacturers have included child labor as a key issue in their sustainability programs. The largest and most collaborative initiative at the moment has been launched by the World Cocoa Foundation, which includes the top ten chocolate manufacturers in the world. This initiative is called CocoaAction7 which9 provides training programs to farmers in Ghana and the Ivory Coast to help boost productivity. The program has $500 million in funding from the chocolate manufacturers and targets 300,000 farmers. The driving concept behind this initiative is simple; more productive farms will provide better economics for farmers which will in turn create better conditions for their children and families.

hot cocoa

So far, indicators are somewhat mixed. In 2015, Tulane University released1 a report that showed that child labor in Ghana and the Ivory Coast had increased by 21% since 2010.  Even so there are initial signs that there has been some positive impact such as school attendance rates in Ghana going up to 96%.

In the immediate future the major cocoa suppliers and chocolate manufacturers should continue to work with local governments and global organizations to continue to create guidelines and robust certification programs to ensure that any cocoa being purchased from the region was not produced using unfair labor practices. There are three trusted independent certification schemes for cocoa sustainability – Fairtrade, Rainforest Alliance Certified7 and UTZ Certified. For example, Fairtrade certified producer organizations must comply with a number of requirements, related to social, economic and environmental developments8. If commitment to purchasing only certified sustainable cocoa increases, it will force those producers within the region that rely on child labor to change their business practices.

It is encouraging that the cocoa industry has recognized the child labor issue, its importance, and is addressing it. Cargill’s Cocoa Promise states, “ Our aim is to accelerate progress towards a transparent global cocoa supply chain, enable farmers and their communities to achieve better incomes and living standards, and deliver a sustainable supply of cocoa and chocolate products7.” Ultimately, a cocoa industry without unfair labor practices will be better for everyone involved.

References

  1. O’Keefe, B. (2016, March 1). Inside Big Chocolate’s Child Labor Problem. Retrieved April 17, 2017, from http://fortune.com/big-chocolate-child-labor/
  2. Barnato, K., & Graham, L. (2016, March 24). Future of the chocolate industry looks sticky. Retrieved April 17, 2017, from http://www.cnbc.com/2016/03/24/future-of-the-chocolate-industry-looks-sticky.html
  3. Statista. (n.d.). Cocoa production by country 2015/2016. Retrieved April 17, 2017, from https://www.statista.com/statistics/263855/cocoa-bean-production-worldwide-by-region/
  4. World of Agroforestry. (n.d.) Cocoa and Chocolate. Retrieved April 17, 2017, from http://www.worldagroforestry.org/treesandmarkets/inaforesta/documents/cocoa%20and%20chocolate/cocoa%20and%20chocolate.pdf
  5. http://www.ilo.org/dyn/normlex/en/fp=NORMLEXPUB:12100:0::NO::P12100_ILO_CODE:C182#A1
  6. http://digitalcommons.ilr.cornell.edu/cgi/viewcontent.cgi?article=1151&context=key_workplace
  7. http://www.worldcocoafoundation.org/about-wcf/cocoaaction/
  8. https://www.cargill.com/sustainability/cargill-cocoa-promise
  9. https://www.icco.org/about-cocoa/chocolate-industry.html

150x150JoeMaurerJoe Maurer is currently a Buying Operations Analyst with Mars Chocolate North America. In this role, Joe manages all aspects of the packaging material pipeline, including production art, prepress services, and packaging print & conversion.

Before joining Mars in 2014, Joe worked for two years for multiple Johnson & Johnson medical device and diagnostics operating companies as an External Operations Planning Analyst. Joe is a qualified Procurement Professional and holds a Bachelor of Science in Supply Chain Management and Marketing Science from Rutgers Business School. In addition, Joe is currently pursuing a Master of Science in Supply Chain Management from Rutgers Business School.

To contact Joe Maurer please email maurerj26@gmail.com or go to https://www.linkedin.com/in/joe-maurer-bs-aa-a48a8564/


Maung Min 150Dr. Maung K. Min is a Board Member of the Global Sourcing Council. The GSC is a non-profit organisation focused on sustainable, socially responsible sourcing practices. Dr. Min is an experienced management executive and academic with over 25 years of track record of leading functions and initiatives in the areas of Sustainability, EHS and Supplier Management, IM, Manufacturing, and Quality Systems (including Operations Excellence/Continuous Improvement). He has led initiatives in the Americas, Europe and Asia. Dr. Min has held roles in Italy as well as in Puerto Rico and is passionate working in a global and multi-cultural setting. Dr. Min has teaching experience at Baruch College, Rutgers University, and is Director of Business Programs and Faculty at Penn State University – Lehigh Valley.

 

 

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