Supply Chain

Direct Sourcing, Community Development Paving Paths to Sustainable Chocolate

With major markets passing environmental and human rights due-diligence requirements, sustainable commodity sourcing may soon no longer be optional — and brands that have invested and built relationships with farmers will be the winners.

By Nithin Coca | Published 8 months ago | About a 5 minute read

Image: Luker

We all know that chocolate has a dark side. Since the early 2000s, revelations about the prevalence of child and forced labor in cacao farming — driven primarily by low prices — has created challenges for brands; and while brands such as Tony's Chocolonely have based their entire business model around producing 100% slave-free chocolate, many have been largely unable to change conditions in their supply chain for various reasons.

The sad truth is that over the past few decades, rising global demand for chocolate and other cacao products has, quite simply, failed to improve livelihoods for farmers in the main cacao-growing regions of West Africa, Latin America and Southeast Asia. It is clear that the traditional model is not working, and that efforts such as fair trade and other sustainability certifications have not scaled up enough to have a broad impact.

The answer? Brands need to do more to know exactly where their cacao is coming from — and ensure that farmers are both getting paid a living wage and also have the resources and skills to farm sustainably. In fact, some are looking to address this by going far beyond sourcing — to working in communities to address the root of the problem and ensure sustainable livelihoods.

One company taking an innovative approach to this is Luker — a 115-year-old, family-owned chocolate manufacturer based in Colombia working to make a difference in its home country, which is a small but growing producer of cacao. Luker’s goals: increase farmers income and sustainability, and make cacao farming appealing to future generations.

“We involve farming families as partners and not beneficiaries,” Julia Inés Ocampo Duque, Luker’s VP of cocoa sourcing and sustainability, told Sustainable Brands®. “To be responsibly sourcing, you have to be working with the family, so that they can have better income and better living conditions.”

Through a multi-year effort called The Cacao Effect, Luker worked with over 1,500 cacao-farming families — focusing on providing both technical assistance to increase productivity (by 42 percent), as well as psychological and social support to increase school attendance and entrepreneurship by farmers. This forced Luker — which supplies chocolate to brands and retailers for private-label products —to change its model and put the farm at the center.

“In this project, the community are partners,” Ocampo said. “Because it's not only cocoa farmers; we were inviting everyone — including non-farmers — to design the project together.”

The results have been positive so far — with not only increased productivity, but also more women entrepreneurs, stronger farmer associations, and — perhaps most important — more children going to school.

While notable, Luker’s effort is a drop in the bucket — considering there are an estimated 5-6 million cacao farmers around the world. In the traditional model, most users of cacao purchase their raw material via major trading companies — which collect cacao from countless farmers, often via a network of traders. This means there is often limited visibility into their supply chains.

In Indonesia, the world’s third largest cacao-producing country, Rikolto — a Belgium-based non-profit — has been taking a similar approach to Luker, focusing on finding innovative ways to help farmers generate additional income.

One project focuses on training farmers to ferment cacao — a higher-value product used in more gourmet food production. Rikolto is also trying to help farmers get better income through the use of agroforestry and intercropping — training farmers on how to grow cacao beans alongside other fruits, spices, or even wood crops — which can provide both income and sustenance for farmers.

“We’re working with farmers to intercrop cassava, spices, durian and jackfruit in between cacao,” said Peni Agustijanto, Rikolto’s cocoa manager in Indonesia. “The goal is that farmers get better income.”

Like Luker, Rikolto’s work is long term — requiring time to build community relationships, and invest in training and capacity building. In order to expand its impact or scale up its efforts, Rikolto wants more brands to be involved — especially the big players.

“At the moment, a lot of the private sector are considering inclusive models,” Agustijanto said. “We want to share our experience with other stakeholders and duplicate our success.”

For Luker, too, its potential impact is limited by its relatively small size and the smaller cacao industry in Colombia. But the company hopes that the industry will learn from its efforts and explore different sourcing relationships with farmers.

“I think the biggest learning for the whole sector is that you can increase productivity with very simple practices,” Ocampo said. “When you increase productivity, you increase income and reduce deforestation.”

There are also other benefits of taking a sustainability-first approach. The European Union, the world’s largest chocolate-consumption market, recently passed new regulations mandating that anyone exporting cacao-related products to Europe must prove that there is no link to deforestation. Not a problem for Luker.

“We already have all the information, and we don’t have deforestation,” Ocampo asserted. “We’re fulfilling the regulation and aligned with it, but we didn’t mean to do it.”

With more markets looking to adopt mandatory environmental and human rights due-diligence requirements, sustainable commodity sourcing may soon no longer be a choice. And it will be brands that are invested and have built relationships with farmers who will be the winners.

Nithin Coca

Media, Campaign and Research Consultant

Nithin is a freelance writer who focuses on global economic, and environmental issues with an aim at building channels of communication and collaboration around common challenges.

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