Fairtrade International, the most recognized global ethical certification system, is one of the few schemes with the ability to improve sustainable livelihoods for cocoa farmers and workers. Now Fairtrade has introduced Living Income and sustainability strategies to help West African cocoa farmers. Organic & Wellness News' Warren Beaumont spoke with Fairtrade International, including Global CEO, Dario Soto Abril, and Senior Advisor for Cocoa, Jon Walker.
OWN: We see lower prices for cocoa globally, despite efforts to make cocoa production in West Africa sustainable. Can major global traders and chocolate companies be encouraged to pay higher prices for Fairtrade cocoa?
DARIO SOTO ABRIL: The findings of Fairtrade’s recent research on household income in Cote d’Ivoire reconfirm the urgency for us – and other actors concerned with sustainability in the cocoa sector – to intensify our collective efforts towards achieving sustainable livelihoods for cocoa farmers in West Africa. We believe that a living income is a fundamental condition for a sustainable livelihood.
Fairtrade International recently developed a Living Income Strategy. In taking this action, we aim to create the environment where price, when combined with a holistic approach, becomes recognized as a critical element in reaching a living income.
Other elements of the Living Income Strategy include building Fairtrade sales, so farmers can sell more of their product as Fairtrade and receive the associated benefits, for instance, the Fairtrade Premium; achieving sustainable yields and improving cost efficiency through programmes for farmers and strategic investment of the Fairtrade Premium; and fostering an enabling environment of policies and market systems that support the needed changes.
The findings of our recent research emphasize the need for sector-wide coordination and bold steps to lift cocoa farmers out of poverty. While Fairtrade is moving forward on the journey towards genuinely sustainable cocoa, we welcome collaboration with all actors in the cocoa sector – including farmers themselves, companies, governments, and civil society – to be able to affect the changes needed especially on cocoa pricing.
OWN: Can cocoa traders/governments be encouraged to stop deforestation and allow farmers to move to sustainable and organic cocoa production?
FAIRTRADE: Environmental protection is a key element of Fairtrade’s view of sustainability, and we welcome all efforts to tackle the issue of deforestation in cocoa growing areas.
As part of Fairtrade certification, cocoa producer organizations must adhere to a series of standards. The Fairtrade Standard for Small Producer Organizations requires members to avoid having negative impacts on legally protected areas and areas of high conservation value designated by local communities. This may include areas within or outside the farm or production areas.
Fairtrade provides training to certified farmers in West Africa promoting environmental protection and encourages information to be shared with the broader community to achieve a widespread understanding of matters underpinning sustainability.
OWN: Like plans in France, could supermarkets be forced to raise prices and reduce discounting, such as large chocolate bars selling for around $2.00 to 3.00 dollars (equiv.) in the USA, UK, and Australia?
DARIO SOTO ABRIL Fairtrade works to amplify the voices of farmers and workers in key policy debates, aiming to support the broader change process needed to deliver the Global Goals for Sustainable Development effectively.
Fairtrade cannot legally dictate retail prices. Instead what we check is that farmer organizations earn a fairer price for their products at origin, regardless of the final price to consumers.
The Fairtrade Minimum Price applies at the point where the producer organization sells to the next person in the supply chain. It is not calculated as a proportion of the final retail price, which is negotiated between the product manufacturer and the retailer.
Because the major costs of the finished product are incurred after the producer has sold the commodity, the return to the producer will inevitably make up a relatively small percentage of the retail price.
For farmers, the value of Fairtrade is not about the relationship of their selling price to that of the finished product, but to their costs of production and the conventional market price. There are also many complex and variable factors to consider in comparing different elements of the final price paid by consumers which can be misleading.
OWN: Regarding the mooted reference price for achieving a living income - how long is this expected to take?
JON WALKER: As part of the current Fairtrade Minimum Price and Premium review for cocoa, we are exploring feasible ways to implement a living income reference price. This is a price that would support a living income for cocoa households in Côte d’Ivoire, assuming certain parameters of farm size and productivity.
A living income reference price would cover the costs that farmers will incur to improve their productivity and achieve adequate yields while implementing sustainable agricultural practices. We are considering different options for the application of the living income reference price, including compulsory and voluntary approaches since it is likely that the new Fairtrade Minimum Price will not reach the level of the living income reference price for cocoa in Côte d’Ivoire in the short term.
We are consulting with producers and commercial partners, and civil society organizations, to make an informed decision. A key consideration is that without market acceptance of our pricing model, farmers will lose sales volumes on Fairtrade terms which will cancel the potential price impact, and thus we need to thoroughly analyze the effect on the market before we come to a conclusion on this very important aspect.
OWN: Can Fairtrade raise the Fairtrade premium substantially to help West African farmers?
FAIRTRADE: Fairtrade is the only certification scheme that guarantees a minimum price and a fixed premium that goes directly to the producer organization. Currently, the Fairtrade Minimum Price for conventional cocoa beans is 2,000 USD per metric tonne FOB. For organic cocoa beans, the Fairtrade Minimum Price is currently 2,300 USD per metric tonne FOB.
The Fairtrade Minimum Price is separate from the Fairtrade Premium, an extra sum of money paid on top of the selling price that farmers invest in projects of their choice. The Fairtrade Premium is currently 200 USD per metric tonne of cocoa beans, the highest of any certification scheme.
The Fairtrade Minimum Price and Premium are reviewed on a regular cycle, and we are currently in the process of conducting a price review for cocoa.
We take the position that cocoa prices, in general, need to be significantly higher, as this is one critical measure within a holistic approach to addressing the deep poverty of cocoa farmers and therefore the sustainability of cocoa production.
For small-scale cocoa farmers from 2012-13 to 2013-14, the volume of cocoa sold under Fairtrade grew by 17 percent, reaching 70,600 tonnes and the amount of Fairtrade Premium paid increased by 9 percent, reaching EUR10.8 million.
OWN: On the Mass Balance system, can this incorporate a higher level of Fairtrade cocoa in the finished chocolate bars to give farmers higher incomes?
FAIRTRADE: Mass balance is used by Fairtrade and many other certifiers to ensure farmers and workers have maximum opportunities to sell their certified crops. Under mass balance, companies may mix Fairtrade and non-Fairtrade products during the manufacturing process, as long as the actual volumes of sales on Fairtrade terms are tracked and audited through the supply chain.
In Fairtrade, mass balance is only allowed for cocoa, tea, sugar and fruit juices. These products are routinely mixed or go through complex manufacturing processes in local mills, factories or at the point of shipping.
While it is possible to achieve full physical traceability in cocoa, tea, sugar and fruit juice supply chains, for many farmer organizations who only produce and sell small volumes it is far too difficult and costly. So, demanding physical traceability would effectively push them out of the market and reduce benefits for them.
Fairtrade allows both models but is committed to transparent communication.
OWN: Are there any other initiatives that Fairtrade believes will help raise Fairtrade cocoa prices and improve farmer's incomes and livelihoods?
JON WALKER: Many initiatives focus on cocoa productivity and increasing yields to achieve better incomes for cocoa farmers. While we do think that these initiatives are necessary, we don't think increasing productivity is sufficient.
According to our consultations with producers in West Africa so far, a reasonable productivity level is around 800 to 1,000 kilograms per hectare. Additional consultations are being undertaken to further determine a feasible target productivity level. The current productivity level across the sector in West Africa is approximately 450 kilograms per hectare, Fairtrade included.
So, there is room for improvement, but even assuming yields as high as 1,500 kilograms per hectare, cocoa producers would still not earn a living income at current market prices. This is why the price needs to be part of the discussion.