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Barry Callebaut: Forever Chocolate
This case study was written by Lisa Duke, Research Associate, under the direction of N. Craig Smith, INSEAD Chaired Professor of Ethics and Social Responsibility, and Ron Soonieus, Executive in Residence, INSEAD and Partner, Camunico. It is intended to be used as a basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation.
To access INSEAD teaching materials, go to https://publishing.insead.edu/
Copyright © 2020 INSEAD
COPIES MAY NOT BE MADE WITHOUT PERMISSION. NO PART OF THIS PUBLICATION MAY BE COPIED, STORED, TRANSMITTED, TRANSLATED, REPRODUCED OR DISTRIBUTED IN ANY FORM OR MEDIUM WHATSOEVER WITHOUT THE PERMISSION OF THE COPYRIGHT OWNER.
06/2020-6512
Case Study
Winner of the 2019 EFMD Case Writing Competition
in the category “Corporate Social Responsibility”
Distributed by The Case Centre North America Rest of the world www.thecasecentre.org t +1 781 239 5884 t +44 (0)1234 750903 All rights reserved e [email protected] e [email protected] centre
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“We are a long-term company, a listed and a family company, interested in being around in 40, 50 years from now. If you depend on one thing, which is chocolate and, therefore, cocoa, you cannot turn a blind eye to sustainability. To be around in 40 years, you need to have cocoa trees. To have cocoa trees you need to have farmers and you need to have rain on the cocoa trees, and you need to be legitimate in the business that you’re doing. That is the first dimension.
The second dimension is that there is an obvious business driver behind that. You can look at the business driver in two ways – defending it or enhancing it. The latter is the way we have framed it. Our key customers have made commitments to sustainability, so if we want to be able to serve them, and delivering on these commitments is not easy, we have to be on the front foot, which also gives us a competitive advantage in a challenging industry.
The third dimension is one of personal beliefs. Between Andreas Jacobs and I, there was a meeting of minds. We were convinced that sustainability makes enormous sense and must be at the centre of what we are doing in order for us to be both competitive and legitimate. All three dimensions overlap.”
Antoine de Saint-Affrique, CEO, Barry Callebaut, 2018
In November 2016, Barry Callebaut (BC) set itself four bold, quantified, time-bound sustainability targets1 that would be deeply engrained across all of the company’s business functions. By 2025, it aimed to achieve success on the four biggest sustainability challenges in the chocolate supply chain:
Zero Child Labour - We will eradicate child labour from our supply chain
Prospering Farmers - We will lift more than 500,000 cocoa farmers out of poverty
Thriving Nature - We will become carbon and forest positive
Sustainable Chocolate - We will have 100% sustainable ingredients in all of our products
It was generally believed that there were no easy solutions to cocoa sustainability. Poverty, corruption, deforestation, child labour, education and infrastructure, empowering women – all of these elements were part of a complex picture that required aligned thinking and collaborative activities across the entirety of the cocoa supply chain. Governments, sourcing companies, FMCG companies, NGOs, and consumers who enjoyed chocolate, all had to play their part. De Saint-Affrique admitted that neither he nor anyone else in the company had a roadmap of definitive actions. Much would depend on building on existing as well as developing new initiatives and, vitally, working with other organisations on the ground, competitors, customers and governments. As 2018 became 2019 and with 2025 a mere six years away, had Barry Callebaut started to sufficiently generate momentum to achieve its bold targets?
1 Barry Callebaut, “Forever Chocolate”, https://www.barry-callebaut.com/en/group/forever-chocolate/forever-
chocolate-strategy/thats-what-forever-chocolate-all-about
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Barry Callebaut – A Brief History
Zurich-based, Barry Callebaut (BC) was the result of a merger in 1996 of Belgian chocolate maker, Callebaut, with its French competitor, Barry, and was both a B2B and B2C company, sourcing cocoa and creating chocolate for consumers. BC was owned by the Jacobs family (of Jacobs Suchard AG, the globally known coffee and chocolate company founded by Klaus Johann Jacobs). After an initial public offering on the Zurich stock exchange in 1998, the Jacobs family retained 69.9% ownership of BC. Despite acquisitions to grow the company, the share price fell and profits languished (see Appendix 1 for the share price and key financials).
In 2002, newly-appointed CEO, Patrick De Maeseneire, introduced three fundamental strategic pillars: cost leadership, global reach and innovation. His strategy was to exit B2C and focus on B2B where the promise of growth lay in servicing FMCG companies, such as Nestlé, Hershey, Unilever and Mondelēz (formerly Cadbury) amongst others, who wanted to outsource their chocolate production. De Maeseneire cut costs and presented a value proposition to potential B2B customers that focused on quality and expertise, turning BC into a cocoa sourcing leader and expert chocolate producer. In 2007, Nestlé agreed to work with BC, a major coup for the company, then Hershey came on board. Unilever, Mondelēz, Mars, and other FMCG companies would follow. BC grew through acquisitions and organically and by 2018 was the largest cocoa sourcing company in the world (the next largest competitors being Cargill and Olam) and an expert in chocolate production and innovation. In 2018 BC introduced ‘ruby’ chocolate – a new way to ferment cocoa that retained its red colour and tasted fruity. Nestlé’s KitKat bar was the first commercial product to have a Ruby variant.
The Complexity of Cocoa Sustainability
Exhibit 1: Critical Issues Facing Cocoa Farmers
Economic Issues
• Income for farmers (living income – see Exhibit 2, crop diversification to raise income, rising cost of living, price volatility in cocoa and speculation)
• Access to markets (credit, market information, investment risks) • Farming practices (training, low yields) • Infrastructure (hospitals, schools, roads, high taxes, transport costs) • Power relations (corruption, tax evasion through trade mispricing, political
instability, smallholder farmers versus multinational companies)
Social Issues • Human rights violations (child labour, forced labour, trafficking,
undernourished children) • Working conditions (use of pesticides and fertilisers, polluted water, hours of
work, harassment or abuse, discrimination, gender inequality) • Land tenure • Illiteracy and education • Freedom of association, collective bargaining, and farmer organisation • Ageing farmer communities (average age of a farmer was around 50 and life
expectancy was 60)
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Environmental Issues
• Ageing and diseased cocoa trees • Low quality of cocoa beans and monoculture • Deforestation, decreasing biodiversity and soil degradation • Climate change • Environment impact of use and sourcing of fertilisers and pesticides
Source: Cocoa Barometer 2012.
For more than two million smallholders and 10 million people in West and Central Africa, cocoa2 was the main source or part of their income.3 Economic, social and environmental issues4 threatened the cocoa crop, as shown in Exhibit 1. Farming cocoa was an unattractive lifestyle for the farmers’ children. Education brought better prospects for the children whose expectations changed towards work and lifestyles; many leaving for jobs in the cities. Cocoa farms were often several kilometres away from where the farmers lived. With low incomes and the isolated locations, it was difficult for farmers to both find and pay for additional manpower to help with farm maintenance. Hence the farmer’s wife and children helped around the farm.
Most farmers were small holders. In the Côte d’Ivoire, 50% of cocoa farms were less than 3.34 hectares5. It was considered difficult to raise household income above the poverty benchmark on less than four hectares. Many cocoa farmers already lived below the poverty line of $1.906. A living income (net income required for all household members to afford a decent standard of living e.g. food, water, education, healthcare, clothing, transport, etc.) for cocoa farmers in Côte d’Ivoire was calculated at $2.51 per day, compared to farmers’ actual income of $0.78 per day.7 A 341% increase would be required to raise farmers’ incomes to the poverty line in Ghana and a 1,608% increase for the same in the Côte d’Ivoire, see Exhibit 2. When a farmer did increase his income, he was often encouraged to take another wife by families in the community with daughters. This further added to household financial burdens as it meant being responsible for the wife’s family and any future children.
2 Cocoa is pronounced ‘coco’ in English, co-co-ah in non-native English and cah-kow in French 3 Early Detection Can Eradicate Cocoa Disease in West Africa, February 2019 https://www.worldcocoafoundation.org/blog/early-detection-can-eradicate-cocoa-disease-in-west-africa/ 4 2012 Cocoa Barometer,
http://www.cocoabarometer.org/Cocoa_Barometer/Download_files/Cocoa%20Barometer%20Full%202012.pdf 5 1 hectare is 100m x 100m or roughly the size of a sports field, e.g. a rugby field. 6 http://www.worldbank.org/en/topic/poverty/brief/global-poverty-line-faq 7 Cocoa Farmer Income: the household income of cocoa farmer in Côte d’Ivoire and strategies for improvement
https://www.fairtrade- deutschland.de/fileadmin/DE/01_was_ist_fairtrade/05_wirkung/studien/fairtrade_international_response_study_ cocoa_farmer_income_2018.pdf
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Exhibit 2: Income Increases Needed to Escape from Poverty and Absolute Poverty
Source: Cocoa Barometer 2012
The Challenges of Cocoa
Cocoa trees required a delicate ecosystem, with high rainfall and humidity, shadow trees, nitrogen-rich soil, little wind and fairly uniform temperatures.8 The Côte d’Ivoire produced most of the world’s cocoa (see Exhibit 3 for cocoa production by country).
Exhibit 3: Cocoa Production (‘000 tonnes)
Source: Cocoa & Confectionary Ingredients, LMC, October 2018
There were two harvests per year – a main and a mid-crop; timings varied depending on the country. Typically, in the Côte d’Ivoire, the main crop season was between October and March, with the mid-crop between May and August.9 This effectively meant that farmers received an 8 Cocoa and Chocolate https://www.worldagroforestry.org/treesandmarkets/inaforesta/documents/cocoa%20and%20chocolate/cocoa
%20and%20chocolate.pdf 9 What time of the year is cocoa harvested? International Cocoa Organization, July 2014 https://www.icco.org/faq/58-cocoa-harvesting/131-what-time-of-year-is-cocoa-harvested.html
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income from their cocoa crops only twice a year. Cocoa could not be stored for more than six months, prohibiting buffer stocks.
“Because the fruit grows on the trunk [see Exhibit 4], the way you look after the trunk and the branches directly impacts your production in the short and long-term. When the price is bad or demand drops, farmers stop pruning. The tree then loses its shape and grows into a bush. To prune it back into a V is a cost that regular farmers can’t afford. Farmers don’t regularly apply good agricultural practices - when prices rise, they fertilise to increase their yield. When it drops, they don’t fertilise. Because of the sociology of the farmer, because land tenure is not structured to develop a long-term business plan, and because of price fluctuations, it is a vicious circle.”
Alexandre Kaminski, West Africa Agricultural Development Manager, SACO
Improved yields were a political issue. In the Côte d’Ivoire, the cocoa industry was the biggest employer (approximately two-thirds of jobs), accounted for 15% of GDP and more than 50% of exports.10 Efficient farming meant surplus and price decline, which could drive farmers out of the sector as they wouldn’t be able to survive. For the Government, that would mean high unemployment as well as increased poverty. Grafting on to existing trees was seen as a solution to improved yields but wasn’t allowed.
Exhibit 4: Cocoa Plantations in Côte d’Ivoire11
10 Ivory Coast produced record cocoa crop, phys.org, September 29, 2017, https://phys.org/news/2017-09-ivory-
coast-cocoa-crop.html 11 Source photos exhibits 4, 5 and 6: Lisa Duke
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“The main improvement to farmers’ livelihoods in West Africa would be to allow them to graft, so that the same tree can produce three times the quantity of beans that it is actually producing. The problem is that the Government won’t allow grafting in the Côte d’Ivoire because it would be economically disastrous and lead to increased unemployment.”
Alexandre Kaminski, West Africa Agricultural Development Manager, SACO
Cocoa involved hard, manual, occasionally hazardous labour. Harvested pods were cut open by hand with a machete. The pulp containing the beans was scooped out and laid on banana leaves to dry.12 Each pod contained about 40 beans. The beans were left to ferment for five to seven days, as the pulp rotted away (see Exhibit 5). This fermentation process meant the beans changed from beige to purple to brown and developed their aroma. Beans were then left to dry in the sun for six days. They had to be continually turned to ensure the moisture content reduced as much as possible. Then farmers would pack them into sacks and take them to a collection centre. While familiar with cocoa, many farmers had never even tasted chocolate.13
12 https://www.barry-callebaut.com/sites/default/files/2019-01/ar07_cabosse_e_final.pdf 13 1 tonne of dried cocoa beans could serve approximately 2 tonnes of chocolate (the rest being milk, sugar, nuts,
etc.). This was roughly the equivalent of 20,000 x 100-gram bars
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Exhibit 5: Discarded Cocoa Pods; Cocoa Beans in Pulp Drying on Banana Leaves and in the Sun; Dried Beans Ready for Processing Next to a Digital Weighing Machine
Exhibit 6: Bernadette Kobon Asseu harvesting her cocoa
Ms Bernadette Kobon Asseu was a small holder and a member of the cooperative “COOPAAF”. Born 1975 in Afféry, a divorced mother of two sons, aged 17 and 13, she inherited her one-hectare plot from her parents, a larger plot going to her brother. The parcel had no land title but did have documentation. Ms Kobon Asseu was an exemplary farmer, applying good farming practices to her small holding. In three years, she had more than doubled her yield from 300kg to 624kg in 2017/18. To vary her income, she also had to create a secondary business of seasonal fruits and market gardening.
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The Long-Term Trend for Cocoa Prices
Generally, cocoa prices had been deteriorating for years as shown in Exhibit 7, effectively halving in real prices (indexed to 2015) from 1952 to 2017.
Exhibit 7: Long-term cocoa price trends (London & New York market prices)
Source: Cocoa Barometer 2018, based on Cocoa: the global market, LMC International
There was a steep price decline between September 2016 and February 2017 when many farmers saw their income from cocoa reduce by 30-40%.14 Prices started to rise in 2018 but volatility was still an issue. Farmers received the Farm Gate Price, which was determined in the Côte d’Ivoire by the Conseil du Café-Cacao and in Ghana by COCOBOD. They pre-sold the harvest and then determined the price around October 1st.15 In Côte d’Ivoire, the farm gate price was typically fixed at around 60% of the price realised in the pre-sale.16 In Ghana, the price was typically more or less a percentage of the world market price (approximately 70% according to COCOBOD).17
Farmer Organisation and Agricultural Practices
Typically, a strong, charismatic cocoa farmer would gather other farmers together to create a cooperative. They would jointly invest to build a warehouse and buy equipment to weigh and quality control the beans and a truck to deliver beans for processing. Farmers who were not members of a cooperative would usually sell their beans to private buying companies. Large cooperatives would typically sell directly to governmental export authorities, local processing facilities or to private companies.18 Coops encouraged good practices such as
14 Cocoa Barometer 2018 15 Ibid. 16 Ibid. 17 Ibid. 18 https://www.barry-callebaut.com/sites/default/files/2019-01/ar07_cabosse_e_final.pdf
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bank accounts or mobile money accounts19. Many also encouraged certification and promoted education and anti-child labour policies. Coops varied in size with the larger ones becoming sizeable businesses in their own right.
Certification Bodies
Certification schemes provided internationally recognised and independent standards for producing sustainable cocoa at a certain quality level, as well as increased transparency and responsibility in cocoa supply chains. They set out economic, environmental and social standards to help farmers improve farming practices and trained farmers accordingly. The three main Certification bodies were UTZ (founded 2009), Fairtrade (1994) and the Rainforest Alliance (1997 in Ecuador and 2007 in the Côte d’Ivoire). UTZ was the dominant certification programme in 2015.20 UTZ and Rainforest Alliance merged in 2018. They were monitored by independent bodies, Fairtrade, for example, worked with ISO-accredited FLOCERT.
The certification bodies offered a guaranteed premium for farmers’ beans above the price they sold their beans at. The premiums differed across the certification bodies. Pre-merger, for UTZ and Rainforest Alliance, the premium depended on the agreement between the buyer and the cooperative, which was negotiated on top of the London market price.21 In 2018, the premium for Fairtrade was $200 per tonne, rising to $240 for conventional cocoa in October 2019.22 Fairtrade was the only certification scheme that required a mandatory minimum price, to protect farmers when prices fell. Fairtrade cocoa farmer coops earned nearly $43 million in Fairtrade premiums in 2017.23 Typically, farmers split the premium 50/50 with their cooperative.
Nestlé and Lindt created their own programmes for sustainable cocoa. Mondelēz announced it would be moving from sourcing from the existing certification bodies to mainly sourcing from its own Cocoa Life programme.24 While certification was a good start, it was viewed as a tool but not the whole answer25 to raising farmers out of poverty.
19 It was suggested by a BC representative in Côte d’Ivoire that only 6-8% of farmers had bank accounts. Nearly 44%
of Ivorian adults had never used formal or informal financial services, higher amongst women, the poor and people in rural areas (source: CGAP https://www.cgap.org/blog/cote-divoire-financial-inclusion-crossroads )
20 Nieburg, O. (2018) Fair Game: How effective is cocoa certification? Confectionerynews.com, https://www.confectionerynews.com/Article/2017/12/20/Fair-trade-How-effective-is-cocoa-certification
21 Ibid. 22 Fruend, K. (2018) Cocoa farmers to earn more with higher minimum price, http://fairtradeamerica.org/Media-
Center/Blog/2018/December/Cocoa-farmers-to-earn-more-through-higher-Minimum-Price 23 Ibid. 24 Nieburg, O. (2017). Mondelēz scales up. Cocoa Life but total volumes sources sustainably flat at 21%,
Confectionerynews.com, https://www.confectionerynews.com/Article/2017/08/09/Mondelez-to-transition-out- of-certified-cocoa-to-focus-on-Cocoa-Life
25 Nieburg, O. (2018) Fair Game: How effective is cocoa certification? Confectionerynews.com, https://www.confectionerynews.com/Article/2017/12/20/Fair-trade-How-effective-is-cocoa-certification
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Climate Change, Deforestation and Disease
Traditionally, when existing cocoa trees were too old to produce a crop, farmers moved across the rainforest, destroying natural habitats and planting cocoa.26 Over decades, 90 percent of West Africa’s original rainforest had been destroyed,27 mainly replaced with cocoa.28 Goldmining and logging also caused deforestation and polluted soil and rivers. Overall, there was a lack of government enforcement to protect forests.29 Rising temperatures, reduced rainfall, and increasingly frequent hot winds also threatened the microclimate of West Africa.30 Research pointed to existing cocoa-friendly land decreasing in the future and moving to higher ground, much of which was protected (see Exhibit 8).31
Exhibit 8: Decreasing Footprint of Land Suitable for Cocoa Cultivation (2013-2050)
Source: Climate.gov (images adapted from Läderach et al., 2013) 32
Disease was also a problem. Cocoa Swollen Shoot Virus (CSSV), transmitted by a small insect, was a major threat to cocoa across West Africa. Symptoms took time to become visible and three years to kill the tree. Thus, farmers could infect each other’s plantations through sharing planting materials or grafting and transferring infected germplasm.33 There
26 Cocoa Barometer 2018 27 Swanborough, J. (2016). We need to save Africa’s forests. Here’s how. World Economic Forum,
https://www.weforum.org/agenda/2016/11/deforestation-africa-palm-oil/ 28 Chocolate’s Dark Secret, Mighty Earth
http://www.mightyearth.org/wp-content/uploads/2017/09/chocolates_dark_secret_english_web.pdf 29 Cocoa Barometer 2018 30 Schroth, Götz et al. (Läderach, P., Martinez-Valle, A.I., Bunn, C. and Laurence, J.) (2016). Vulnerability to climate
change of cocoa in West Africa: Patterns, opportunities and limits to adaptation. Science of the Total Environment Vol. 556, pp. 231-241
31 Scott, M. (2016). Climate & Chocolate. Climate.gov 32 Läderach, P., Martinez, A., Schroth, G. and Castro, N. (2013). Predicting the future climatic suitability for cocoa
farming of the world’s leading producer countries, Ghana and Côte d’Ivoire. Climate Change, August, Vol. 119, Iss. 3-4, pp. 841-854, https://cgspace.cgiar.org/bitstream/handle/10568/51470/Climate%20suitability%20for%20Cocoa%20farming.pd f
33 Early Detection Can Eradicate Cocoa Disease in West Africa, February 2019 https://www.worldcocoafoundation.org/blog/early-detection-can-eradicate-cocoa-disease-in-west-africa/
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was no known cure for CSSV other than cutting down trees and leaving the land fallow for three years.
Child Welfare and Women
Slavery, child labour and access to education were major issues in West Africa. It was estimated that there were 2.1 million child labourers in cocoa in the Côte d’Ivoire and Ghana.34 In 2000, a British documentary showcased child slavery cases in West African cocoa, which sparked further investigation.35 At the time, the European Cocoa Association dismissed the accusations as “false and excessive”36 and that the reports did not represent all cocoa farmers. The industry later acknowledged that working conditions were unsatisfactory and rights were sometimes violated and should not be ignored. The Harkin-Engel Protocol was signed in September 2001 based on the defined worst forms of child labour, according to the International Labour Organization37 – “work which, by its nature or the circumstances in which it is carried out, is likely to harm the health, safety or morals of children.” In 2010 the cocoa industry pledged to reduce child labour by 70% in West Africa, the deadline was later extended to 2020.38
The definition did not include supervised, light work on the family farm for a limited period of time, outside of school. Without means to pay external labour added to its limited availability, many farmers needed their families to help to keep the farm functioning. Where there were schools, they were often overcrowded, offered poor quality teaching and lacked books, pens, and paper. One way to address child-related issues was to focus on women and to empower them by growing their own crops to sell to supplement their income. Cocoa farming was considered a man’s job and women made up only 25% of cocoa farmers in the Côte d’Ivoire, although they were 68% of the labour force.39 It was believed that initiatives that targeted women improved the condition of the entire household, as they focused on the family welfare.
The Origins of Sustainability at Barry Callebaut
Andreas Jacobs, son of founder, Klaus Johann Jacobs, became BC’s Chairman in 2005. He had travelled extensively throughout Africa, witnessing the realities of farmers’ lives at first hand.
“At that time, it was pure interest of how do we help farmers and lift them out of poverty through improved productivity? It was emotionally triggered. Also, because I
34 Child Labour in Cocoa Growing https://cocoainitiative.org/our-work/child-labour-in-cocoa/ 35 Blunt, L. (2000). The bitter taste of slavery. BBC, http://news.bbc.co.uk/2/hi/africa/946952.stm 36 Fourth Annual Report, Oversight of Public and Private Initiatives to Eliminate the Worst Forms of Child Labor in the
Cocoa Sector in Côte d’Ivoire and Ghana (2010) Payson Center, pp. 26, https://web.archive.org/web/20120319080151/http://childlabor- payson.org/Final%20Fourth%20Annual%20Report.pdf
37 https://www.ilo.org/ipec/facts/WorstFormsofChildLabour/lang--en/index.htm 38 O’Keefe, B. (2016) Behind a bittersweet industry. Fortune, http://fortune.com/big-chocolate-child-labor/ 39 A long Way to go to equality for women cocoa farmers https://www.confectionerynews.com/Article/2017/11/02/Women-cocoa-farmers-A-long-way-to-go-to-equality
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knew that no beans meant no chocolate. Nobody was really listening to me on the Board, so I started to do speeches on cocoa sustainability externally.”
Andreas Jacobs, former Chairman, BC
Jacobs passion for cocoa sustainability in Africa was not shared at the time within BC. In 1999, the company had received a huge ‘tax bill’ from the Government of the Côte d’Ivoire; a common practice of African governments when additional funds were needed was to tax foreign companies operating in their countries. It left a bitter taste. BC did have a small Corporate Social Responsibility initiative, the “Quality Partner Programme” and had built two schools in Africa and helped a couple of farms. These were good for publicity trips with customers. Yet, few customers had enquired about sustainable beans. Then in early 2008, Jacobs received a call from the owners of Lidl, asking for 20,000 metric tonnes of certified Fairtrade beans. They wanted to differentiate their products and gain a price premium at retail level, which certified sustainable cocoa would enable them to achieve. Although the order represented only 4% of BC’s total cocoa beans processed for that year (471,149 tonnes), it was the first indication that there was an opportunity for BC to source and sell certified, sustainable cocoa.40 Fairtrade certified cocoa bean worldwide sales for 2008, for example, stood at 10,299 metric tonnes, while sales of organic beans were 1,153 metric tonnes41 (compared to Fairtrade certified sales of 136,543 tonnes in 2016).42
At the same time, Jacobs was looking for a new CEO for the company. As interim CEO and Chairman (2009), he was in a prime position to leverage his authority and push board members to agree to embrace certification and sustainability. Jacobs identified Juergen Steinemann43 to be CEO (effective 1st August 2009). Steinemann embraced the idea of cocoa sustainability and added it as the fourth strategic pillar to the existing pillars of cost leadership, global reach and innovation.
Sustainability Begins Under Steinemann
Under Steinemann, BC developed additional sustainability initiatives. Many customers had started to make commitments to cocoa sustainability. In 2010, Mars was the first to commit to being 100% certified sustainable by 2020.44 Hershey45 and Ferrero46 committed to a 2020 timeframe and Lindt made public announcements. Nestlé and Mondelēz also committed to increase sustainability, although did not time-bound it. BC was lagging behind. In March 40 Worldwide sales of fair-trade certified cocoa beans stood at 10,299 MT in 2008, according to Fairtrade.net,
www.fairtrade.net/fileadmin/user_upload/content/2009/resources/FLO_ANNUAL_REPORT_80-09.pdf 41 https://www.iisd.org/pdf/2014/ssi_2014_chapter_7.pdf 42 About Cocoa, Fairtrade.org, https://www.fairtrade.org.uk/en/farmers-and-workers/cocoa/about-cocoa 43 Steinemann was previously COO of Nutreco Agriculture and a member of its Executive Board since 2001. He was
formerly the CEO of Unilever’s former subsidiary, Loders Croklaan, which produced specialty oils and fats for the chocolate, bakery and functional foods industry (source: https://www.barry-callebaut.com/sites/default/files/2019- 01/cv_juergen_b_steinemann_april_2009_en_final_0.pdf)
44 https://www.mars.com/global/sustainable-in-a-generation/our-approach-to-sustainability/raw- materials/cocoa/sustainability-approach
45 https://www.thehersheycompany.com/en_ca/responsibility/good-business/creating-goodness/cocoa- sustainability.html
46 https://www.ferrerocsr.com/glocal-care-/our-goals/for-2020
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2012, BC launched “Cocoa Horizons” (see “Cocoa Horizons Foundation” section, below), a CHF 40 million cocoa sustainability initiative to boost farm productivity, increase quality and improve farmers and their families’ livelihoods. Marks & Spencer in the UK, known for its sustainability focus, both pushed BC and boosted its efforts by joining Cocoa Horizons.
“We wanted to work with Barry Callebaut because they have amazing chocolate making experience. We visited in 2012 and their sustainability work was fairly poor and behind their competitors. We have definitely pushed them a lot. We became one of the early adopters of Cocoa Horizons, which attracted other companies to buy with confidence.”
Hazel Culley, Senior Sustainability Manager - Foods, Marks & Spencer
Later in 2012, Steinemann gathered the CEOs of the main competitors and FMCG customers together at a conference organised by BC called CHOCOVISION. Combined, the participants controlled over 80% of the world’s cocoa and chocolate production. Steinemann’s mission was that these eight or so people would together commit to action on Africa and sustainability.
“The key companies including Mars, Nestlé, Mondelēz, Cargill, etc. came and [Steinemann] said, ‘We need to sit together and work this out because everything we are doing independently blatantly isn’t working. We have to work out a proper coordinated, approach to help farmers get out of poverty, eradicate child labour, etc. That was the beginning of CocoaAction.”
Nicko Debenham, VP, Head of Sustainability, MD of Biolands Group, BC
At the end of the three-day conference, William Guyton, President of the World Cocoa Foundation (WCF) announced the establishment of CocoaAction, which aligned initiatives of global chocolate producers to improve the livelihoods of cocoa farmers through partnering with governments, farmers and the industry. Companies that signed up to CocoaAction (which was officially launched in 2014) included: ADM, Armajaro, Barry Callebaut, Blommer Chocolate Company, Cargill, Ecom, Ferrero, The Hershey Company, Mars, Mondelēz, Nestlé, and Olam.47
“Steinemann was very strong. It was fantastic because we recreated and revitalised the World Cocoa Foundation with it. We found a new President for the WCF. We launched the Cocoa Action Plan for the Ivory Coast. This was a $500 million plan. It was a big change for Barry Callebaut. From huge scepticism in the sourcing department saying, ‘This is never going to fly. Nobody wants that stuff’, they moved to, ‘We have to accelerate. We have to reach out more’.”
Andreas Jacobs, former Chairman, BC
47 http://www.worldcocoafoundation.org/wp-content/uploads/FINAL-CocoaAction-CDI-Press-Release-
English_05202014.pdf
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Chocovision would become a biennial conference, gathering the leading industry players and their suppliers, NGOs, governments and civil society to Davos to discuss sustainability and innovation in cocoa and chocolate across the world. As the years went by, it became less of a proactive, coming together of decision makers, but instead showcased sustainability activities of different stakeholders, as well as an opportunity for executives across the industry to network together. During Steinemann’s tenure, BC bought outright the Biolands Group, from its 2008 49% stake. Biolands had originated in Tanzania producing and selling 100% certified (Rainforest Alliance) sustainable cocoa beans. The model was replicated in Sierra Leone and the Ivory Coast and later, Ghana.
Bold Sustainability Targets under De Saint-Affrique
Steinemann stood down as CEO of BC in August 2015. Antoine De Saint-Affrique, previously President Unilever Foods and Member of its Group Executive Committee, succeeded him. De Saint-Affrique was committed to furthering BC’s commitment to sustainability and would considerably ramp it up. He believed that sustainability shouldn’t be a separate activity but an integral part of the business and strongly tied to business outcomes. To do that, meant focusing on areas where BC could have a disproportionate impact to build overall momentum.
“Because you want to solve all the problems of the universe, you solve nothing and you start committing yourself to all kinds of things and you get your organization spinning on 20 different things, all of which are noble causes, but you spread yourself so thin that it becomes either a compliance exercise or you lose the economic focus of your company. This we couldn’t afford. I believe that sustainability can be sustainable only if it makes economic sense.”
Antoine De Saint-Affrique, CEO, BC
Nicko Debenham, MD of Biolands Group was already analysing what the most important drivers to address were, not just in cocoa but across the whole business. Becoming more sustainable meant working with suppliers of non-cocoa ingredients including vegetable fats, nuts, vanilla, sugar, dairy and others. The team reviewed peers, competitors, customers, potential customers, academics, NGOs, and certification bodies, to identify what they felt was important, as well as conducting an internal assessment.
“We tried to assess the impact of doing this - we identified that probably a third of our Côte d’Ivoire cocoa came from protected forests. Assuming that we can’t source cocoa from a third of the entire Côte d’Ivoire, what will be the business, financial and operational impacts? We tried to calculate that in dollar terms.”
David Imbert, Global Head, Sustainability Finance & Reporting, BC
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“The business case and its implications are vital. If we have 100% sustainable raw materials in our products by 2025 but only 75% of customers are interested in paying, we will have to carry the cost burden of 25%. What does that mean for our business case? Simplistically, we have to sell 100% if we are going to buy 100%!”
Nicko Debenham, VP, Head of Sustainability, MD of Biolands Group, BC
The work took a further year to complete as they decided, with De Saint-Affrique, where to focus. They developed a materiality matrix based on relevance to stakeholders and relevance to the company (see Exhibit 9).
Exhibit 9: Barry Callebaut Materiality Matrix 2015/16
Source: Barry Callebaut documents
With the materiality matrix developed, four high impact targets were identified. These tied strongly back to the biggest challenges identified by NGOs – child labour, farmers and their families and getting them out of poverty, the environment and making cocoa sustainable cocoa. “Forever Chocolate” was launched in November 2016. It put sustainability into everything that BC did from a business perspective, with bold commitments for 2025 (see Exhibit 10).
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Exhibit 10: Forever Chocolate’s Four Bold Targets Target Definition How Metrics Zero child labour – By 2025 we will eradiate child labour from our supply chain
Definition Child Labour – In alignment with the ILO, child labour is work that deprives children of their childhood, their potential and their dignity, interferes with their schooling and is harmful to physical and mental development
• Mapping direct supply chain to highlight at risk children and communities
• ICI pilot to understand the best techniques to prevent, identify and remediate any cases of child labour found
• Additional pilots and partnerships: these include different approaches to engage governments in solutions and develop thriving communities
• Access to education for children • Women’s empowerment programmes • Together with the Jacob’s Foundation,
we are running a programme to improve incomes and enable women to give their children access to education
Key Metric: Number of child labour cases identified and remediated in our supply chain Enabling KPIs: % of the farmer groups we directly source from, that have systems in place to prevent, monitor and remediate child labour % of third-party suppliers, who have equivalent systems in place
Prospering farmers – By 2025 we will lift more than 500,000 cocoa farmers out of poverty
Defined at the number of cocoa farmers out of poverty, measured against the World Bank’s USD 1.90/day threshold for extreme poverty
• Increase incomes by increasing farm productivity
• Ambitious, sustainable replanting model • Intercropping to improve soil conditions
and create additional source of income • Provide professional coaching, quality
agricultural inputs, and services and finance by establishing Farm Services Businesses
Key Metric: Number of cocoa farmers out of poverty, measured against the World Bank’s USD 1.90/day threshold for extreme poverty Enabling KPIs: Number cocoa farmers who have access to coaching, inputs such as tools and seedlings, or finance Number of hectares cocoa replanted Productivity improvement per hectare of these farmers
Thriving Nature – By 2025 we will be carbon and forest positive
Defined as the carbon footprint of our supply chain from farm to customer Number of hectares of forest regenerated
• Through footprint reduction across sourcing and operations, insetting and tailored offsetting projects, we will create enough of a positive impact on the climate to become carbon positive
• By being 100% deforestation free • Increase efficiency of factories and
optimization of transport • Preference to ingredients suppliers that
reduce the impact on the climate • On-farm interventions to lock carbon in
soil and plants (inset)
Key Metric: The carbon footprint of our supply chain from farm to customer and number of hectares of forest regenerated Enabling KPIs: CO2e (carbon dioxide equivalent) intensity per ton of product % of raw material volume proven to be free from deforestation
Sustainable Chocolate – By 2025 we will have 100% sustainable ingredients in all of our products
Defined as the percentage of agricultural raw material sustainably sourced
• Develop roadmaps for each raw material and each region
• Work with certifications and develop own programmes where necessary
• Expand sustainable sourcing capacity via Biolands
• Grow Cocoa Horizons programmes and regions
Key Metric: % of agricultural raw material sustainably sourced Enabling KPIs: % of sustainably sourced cocoa % of sustainably sourced raw materials: sugar, dairy, palm oil, coconut oil, soy lecithin, vanilla, nuts
Source: Barry Callebaut documents
“We are working at this as if there is no tomorrow. We need to put a stake in the ground with a timeline and with KPIs to ensure the needle is moving. People have been totally paralysed because they focus on standing up on that future day and saying, ‘we are
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only at X percent instead of the Z percent’. Well, I’d rather have tried extremely hard and got 90 percent of the way, than simply have sat on my hands because it was too hard to try. We publicly said we don’t have all the solutions or the roadmap. We know that we can’t do it alone, which is why we set up Forever Chocolate as a movement.”
Antoine De Saint-Affrique, CEO, BC
Despite no roadmap, the thinking was that sustainable chocolate should become the norm. Half measures that promised a ‘90% reduction’ in child labour, or ‘90% increase’ in sustainable ingredients left open the question as to what about the other 10%? As a movement, the intention for Forever Chocolate was to gain alignment from the different stakeholders in the cocoa industry (industry players, governments and NGOs); leverage BC’s R&D knowledge and expertise; implement sustainable sourcing policies for agricultural raw materials (across the supply chain); leverage Biolands direct sourcing; and, through Cocoa Horizons, introduce a Farm Services model; as well as implement energy and water management programmes. Importantly, there would be no separation of sustainability from the core activities. Pablo Perversi was named Director of Sustainability but would combine the role with being Director of Innovation, similar to everyone else who was more directly involved in the sustainability initiatives such as Nicko Debenham, Vice President, Head of Sustainability, as well as MD of Biolands Group. All employees were charged with making sustainability part of their roles. Initiatives such as “Seeds for Change” were rolled out where employees could give their time to activities such as clearing rubbish from their neighbourhoods to ‘earn’ Pod points48 that would then be translated into seedlings donated to farmers through Cocoa Horizons. Everyone, including the CEO and executive committee, would have a part of their compensation tied to sustainability targets; measured on KPIs such as sales of sustainably sourced products. All employees were encouraged to become sustainability advocates.
“Making sure that everybody is trained to confidently talk about sustainability and its value to customers is vital. It is important to push customers who are not into sustainability, so that they can understand that if they embrace it, they might be able to make increased margins, despite the slightly higher costs.”
Pablo Perversi, Chief Innovation, Sustainability & Quality Officer, Global Head of Gourmet, BC
Implementing Forever Chocolate
BC built on existing initiatives to try to strengthen partnerships across the industry with customers and suppliers, as well as with individual farmers, farming communities, governments and NGOs. Partnerships with the International Cocoa Initiative, Sustainable Trade Initiative and International Finance Corporation, addressed issues in the value chain. BC would work with customers to ensure alignment with targets on each side and would then implement programmes for them. Programmes were created in all cocoa-growing areas including South America and Indonesia but it was acknowledged that most of the severest
48 1 hour volunteered or 1 Swiss Franc collected in donations = 1 Pod Point = 1 seedling donated. A target of 100,000
Pod Points was set for the Seeds for Change initiative
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problems were in West Africa and that was where the majority of initiatives focused. Cocoa Horizons was the main avenue to implement initiatives on the ground.
Cocoa Horizons Foundation
The Foundation’s mission was to “improve the livelihoods of cocoa farmers and their communities through the promotion of sustainable, entrepreneurial farming, improved productivity and community development.” Horizons was audited by PwC and reported on an annual basis. It was funded by impact investors, donors, an annual donation of CHF 4 million from BC and premiums paid by BC’s customers for sustainable cocoa. BC charged customers approximately 135 euros per tonne for sustainable cocoa. Through Cocoa Horizons, BC pledged that premiums would be split between farmers and other initiatives, as per Exhibit 11.
Exhibit 11: Cocoa Horizon’s Premium Split and Distribution in 2017/18
Premium Element Percentage Expenses (CHF) Farmer/Farmer Group Cash Premium 20% 2,687,050 (premium) Productivity (coaching, support, credit for tools & materials)
37% 3,264,170 (expense)
Community (children, women, health) 20% 2,114,846 (expense) Environment (protection, waste, farm location mapping)
10%
Administration 13% 1,497,938 (expense)
Total 100% 10,538,368 (income &
contributions)
Source: Cocoa Horizons Methodology 2.0 & Snapshot Progress Report 2017/18
The Cocoa Horizons programme covered traceability of cocoa from farmer to the Barry Callebaut buying site, farmer groups and farmer training, activities that targeted cocoa productivity and production, and community development, and transparency of premium flows. Exhibit 12 describes two success stories.
Exhibit 12: Success Stories from Cocoa Horizons’ Initiatives
Madam Embolo in Cameroon: We were trained on how to prune cacao trees, how to plant new trees and how to look after the trees properly. Before that, I used to spend a lot on treatment products. Now they showed me how to give cacao trees more space. Before, there was too much shade. We didn’t remove the branches and now that they taught me how to remove them and bring light in the field, they produce a lot. I have a great yield.
Mr Amal Kadu Assein in Côte d’Ivoire: In the Cocoa Horizons Programme, they taught us good farming practices, and we saw our yields increase. Thanks to the programme, our harvest is better, and we get more money at the end of the year, which enables us to put our children in school. At home too, we can eat, get healthcare and so forth. What we have been taught has touched us deeply.
Source: Barry Callebaut documents
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At BC’s Agronomy R&D centre in Tiassalé, Côte d’Ivoire, agronomists and university researchers studied cocoa and intercropping. There was a nursery growing cocoa seedlings to sell to farmers. BC also worked in partnerships with its FMCG customers. One example was working with Mondelēz focusing on 40 farms in Côte d’Ivoire to prune and fertilise. At Tiassalé Cocoa Horizons educated 450 coaches to visit farms and work with cooperatives. Each cooperative might have two or three coaches who visited. Coaches taught farmers better agricultural methods and educated them on stopping child labour, malaria prevention, etc. Changing farming habits was not a short-term project, however. Overall, the results of coaching were difficult to quantify and would take time to show impact and embedded behaviour change. Coaches also offered to help farmers develop a business plan for their farms.
“One of our coaches will go into a farming community and explain that we have a programme to help you create a business plan for your farm with access to services like pruning, fertilising, spraying and even seedlings. The farm business plan is developed with the farmer making the decisions, so they own it and they are responsible. We then support them with farm services, training and financing. When that happens, they work themselves out of poverty and no longer need premiums and training because they have a sustainable livelihood.”
Nicko Debenham, VP, Head of Sustainability, MD of Biolands Group, BC
For BC, the agreement was that any money lent was repaid in cocoa or, if the farmer preferred, cash. The financial aspects were important as BC did not want to lend farmers money for them to default, nor was it philanthropic. There had to be a robust plan that would show a return. BC believed that in order to make sustainability scalable and sustainable, it had to focus on business and professionalising the farmers. BC developed a database covering marital status, children, if the wife was generating an income, crops grown, farm size, trees and how old they were, incidence of disease, types of diseases and how they were treated, if the farmer was pruning, what activities he was doing in terms of agricultural methods and what he wasn’t doing. By the end of 2018, 63,000 farmers in Côte d’Ivoire and Ghana were logged on the system.
“We consider all household incomes including women. Traditionally, cocoa, coffee, rubber and such commodities are for men and food crops for women. Slowly, this is changing. We support them with training and access to microfinancing to develop income generating projects. We are very linked to the Jacobs Foundation for education and work with other local NGOs on gender topics and the International Cocoa Initiative on child labour.”
Christophe Julienne, Sustainability & Cocoa Sourcing Manager, SACO
Another challenge was the lack of women’s decision-making authority. BC considered that the only way to improve this was to enable women to develop their own income streams. A core initiative looked at how women could create diversity in the household income through the farm services offering.
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“We’re looking at establishing women’s managed community greenhouses. The idea is that you grow vegetables in substrate at significantly high yields near a school, they’re managed by a community women’s group. The school gets a third of the vegetables, the women’s families get a third and the other third is sold. Three positive impacts: improvement in family nutrition, in school meals, and in income.”
Nicko Debenham, VP, Head of Sustainability, MD of Biolands Group, BC
Schooling remained an issue in the Côte d’Ivoire. From 2005-2018, 13 schools were built under BC’s auspices. Building a single school was considered to have minimal impact because of the issues of lack of teachers and resources. Quality education was more important than access. Thus, the focus was on encouraging governments to build the schools and guarantee teachers. BC did work with one NGO to build farm schools and with another NGO on a programme to improve literacy and numeracy in primary schools.
Sustainability across the Entire Value Chain and Beyond
By 2017, the Cocoa Barometer49 identified that BC was the largest trader/grinder of certified cocoa sourcing 36% certified cocoa on a volume of 1,020 MT total used cocoa. Key competitor, Cargill sourced 42% but on a lower overall 750 MT total used cocoa, while Olam sourced 26% (950 MT total used cocoa). Mars, which had committed to being 100% sustainable by 2020, used more than 50% certified cocoa (410 MT total used cocoa), and Hershey and Ferrero (albeit with lower overall volumes) at 75% (200 MT total used cocoa) and 70% (135 MT total used cocoa) respectively. As a chocolatier, BC relied on various ingredients that made up chocolate including sugar, dairy, oils, soya, and vanilla, sourcing them from multiple suppliers across the globe. BC adopted the strictest existing standards or went beyond them to define its policies for each ingredient. The company also started to map suppliers’ sustainability activities and levels. In sugar, for example, BC had signed up to the Sustainable Agriculture Initiative (SAI), which set the standard across Europe. In Russia, BC worked with Mars, Coca Cola, Ferrero and others and invited SAI to present to the industry to encourage Russian producers to embrace the standard. The level of interest in sustainability, however, varied greatly across different parts of the world both in terms of customers and suppliers.
“In America there is no willingness to pay a premium. In the Far East, countries like Indonesia, China and India, are not interested as their priority is to increase peoples’ diet and calorie intake. Japan is also not interested, nor Africa or the Middle East. In Australia and New Zealand, they are. So, we are a global player but there are regions where customers are sensitive to sustainability and regions where no one wants to talk about it. We try to onboard our suppliers but there is a big difference between Europe where 2/3rds of the raw materials are already sustainable and everywhere else, which is much lower.”
Massimo Selmo, Head of Global Sourcing, BC
49 Cocoa Barometer 2018
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As well as focusing on its supply chain, in June 2017, BC entered into a revolving credit facility (RCF) with a syndicate of 13 banks led by ING, where the interest rate was linked to its sustainability performance, as reported by Sustainalytics (see Appendix 2 for the summary). BC’s RCF increased from EUR 600 million to EUR 750 million, strengthening the company’s liquidity profile.50 Sustainalytics reported that BC’s performance in 2018 made it an Outperformer in its industry sector, across ESG – environmental (35% weighting), social (40% weighting) and governance (25% weighting) metrics. In July 2018, BC’s Sustainalytics relative position was 25 out of 176 companies, retaining its outperformer position and finding itself in the 86th percentile of companies rated. On environment, it was considered a ‘leader’ (4th), on social it was an ‘average performer’ (70th) and on governance, ‘outperformer’ (22nd). The lower social score was due to human rights issues in its supply chain and the continuing challenges of child labour and slavery that follow the industry.
Communicating Forever Chocolate’s Progress
“We are really delighted that Barry Callebaut has made the Forever Chocolate commitments. They need a few more years to show results and get to outcomes, however. The last reporting update focused on activities such as number of farmers trained, child labour surveys and you do need to do that to show you are doing activity, but obviously, in a couple of years, the more important thing will be outcomes – farmers earning more money, this many more women employed etc. They are getting more sophisticated about how they do this.”
Hazel Culley, Senior Sustainability Manager - Foods, Marks & Spencer
BC was transparent about its progress towards the 2015 targets. Each year it would publish its progress against the Forever Chocolate’s targets. In 2016/1751, 5,814 farmers in Côte d’Ivoire, Ghana, Tanzania, Indonesia and Brazil implemented productivity programmes such as access to coaching, tools and seedlings or financial solutions. In the Côte d’Ivoire, this resulted in a 23% average increase in productivity. 157,000 farmers were trained in best practice agriculture methods. BC did acknowledge that it was too early to claim a causal link to the number of farmers lifted out of poverty but promised to make that data available in 2018/19. Exhibit 13 presents a summary of key initiatives. In 2017/18 44% of cocoa and non- cocoa ingredients were sustainably sourced (2016/17 35% cocoa/30% non-cocoa). BC’s total sales that year was 2.035 million tonnes (2016/17 1.9 million), with sales revenue of CHF 6,948 million (? €) and EBIT of CHF 554 million (2016/17 revenue CHF 6,805.2m/EBIT CHF 488.2m).
50 Barry Callebatu couples sustainability with its renewed banking credit facility, June 23 2017, https://www.barry-
callebaut.com/en/group/media/news-stories/barry-callebaut-couples-sustainability-its-renewed-banking-credit- facility
51 Barry Callebaut, Forever Chocolate Progress Report 2016/17
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Exhibit 13: Forever Chocolate Initiatives
Target Initiatives & Progress Summarized
Zero child labour
• 2017/18 Child Labour monitoring ramped up to 21 farmer groups covering 12,018 farmers in Côte d’Ivoire and Ghana (2 pilots in previous year) - the result was increase in cases found but remediation action taken
• Partnering with customers to build schools • Creating ‘heat maps’ to identify non-cocoa commodities at risk of work forms of
child labour – high risk commodities included palm oil and cane sugar • Working with World Cocoa Foundation and International Cocoa Initiative to
prepare a survey on worst forms of child labour in the African cocoa supply chain
Prospering farmers
• More than 2.1 million cocoa seedlings & 393,000 shade trees distributed • In 2017/18 nearly 9,500 farms plans were developed with farmers • Premiums from Cocoa Horizons products generated CHF 10.5 million • Cocoa Horizons reached more than 70,000 farmers • Letters of Intent signed with Governments of Côte d’Ivoire and Ghana to work
towards design and validation of sustainable farming model, CSSV action to clear and replant, income diversity for cocoa farmers, planting of shade trees
Thriving nature
• Proactively involved in the Cocoa & Forest Initiatives Frameworks for Action to eradicate cocoa-farming-related deforestation (UN Climate Conference, 2017)
• Teamed up with the Swiss Federal Institute of Technology, Zurich, to develop a satellite-based system to monitor and map all cocoa farmers in direct supply chain to ensure they were not in protected forests and map all non-coca ingredient suppliers to ensure they didn’t contribute to deforestation
• Signatory to the Carbon Disclosure Project with annual reporting of greenhouse gas emissions
• Teamed up with Quantis (provider of environment measurement services) to more accurately measure carbon in the cocoa supply chain
• Joined the Cool Farm Alliance in September 2018 to further drive convergence of environmental impact assessments on farms
Sustainable chocolate
• Reviewed all sourcing policies with a third party to establish definitive sustainability standards
• Joined Palm Oil Innovation Group to introduce additional sustainability criteria and land use, labour and human rights violations
• Joined Cerrado Manifesto to prevent the further development of soy farms that destroy important grasslands in Brazil
Source: summaries made by authors
By 2018, more than 700 BC employees were involved in sustainability in their work, with a corporate team of 10 (total employees globally were circa 11,000). Corporate sustainability included: sales and marketing to sell sustainable products to customers and consumers, partnerships, ensuring sourcing of sustainable raw materials and adhering to the plan of becoming carbon positive. The company had further developed its theory of systemic change and identified activities which would enable self-sustaining cocoa farming communities. Exhibit 14 provides the key metrics for the two years since Forever Chocolate was launched.
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Exhibit 14: Forever Chocolate Metrics 2016/17 and 2017/18 (Progress Reports 2016/17 & 2017/18)
Target 2016/17 2017/18 Zero child labour By 2025 we will eradiate child labour from our supply chain
Key Metric: 247 child labour cases identified and remediated in our supply chain Enabling KPIs: 3.2% of farmer groups we directly source from that have systems in place to prevent, monitor and remediate child labour
Key Metric: 4,230 child labour cases identified and remediated in our supply chain Enabling KPIs: 12% of farmer groups we directly source from that have systems in place to prevent, monitor and remediate child labour Data available 2018/19 – number of 3rd party suppliers who have equivalent systems in place
Prospering farmers By 2025 we will lift more than 500,000 cocoa farmers out of poverty
Enabling KPIs: 5,814 cocoa farmers with access to coaching, inputs such as tools and seedlings, or finance 23% productivity improvement per hectare of these farmers 175.5 hectares of cocoa replanted
Key Metric: 169,460 baseline measurement of the number of cocoa farmers in our supply chain moved out of poverty, measured against the World Bank’s USD 1.90/day threshold for extreme poverty Enabling KPIs: 12,395 cocoa farmers with access to coaching, inputs such as tools and seedlings, or finance No measurable productivity improvement per hectare of these farmers in 2017/18, partly due to young cocoa trees only starting to positively impact productivity after 4-5 years 281 hectares of cocoa replanted
Thriving nature By 2025 we will be carbon and forest positive
Key Metric: The carbon footprint of our supply chain from farm to customer and number of hectares of forest regenerated 8.23 million tonnes of Co2e Enabling KPIs: 4.32 Co2e intensity per tonne of product
Key Metric: The carbon footprint of our supply chain from farm to customer and number of hectares of forest regenerated 9.1 million tonnes of Co2e Data available 2018/19 – number of hectares of forest regenerated Enabling KPIs: 4.45 Co2e intensity per tonne of product Data available 2018/19 – raw materials at risk of causing deforestation proven to be deforestation- free
Sustainable chocolate By 2025 we will have 100% sustainable ingredients in all of our products
Key Metric: 33% of agricultural raw material sustainably sourced Enabling KPIs: 36% of sustainably sourced cocoa 30% of sustainably sourced non-cocoa raw materials
Key Metric: 44% of agricultural raw material sustainably sourced Enabling KPIs: 44% of sustainably sourced cocoa 44% of sustainably sourced non-cocoa raw materials
Source: summaries made by authors
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Moving the Dial or Scratching the Surface?
Barry Callebaut had come a long way since 2008. From playing catch-up to some of its major customers in terms of sustainability, it had made a bold move in 2016 by announcing radical sustainability targets, knowing that it couldn’t achieve these targets alone. Efforts were being made to create a movement to create high impact and long-term change across the industry.
“This is a fundamental ecosystem change.”
Antoine De Saint-Affrique, CEO, BC
“In order to do that there has to be a movement and that’s why we’re not mining coal with a toothpick, which is what has happened historically, we’re going to blast the whole coalface.”
Nicko Debenham, VP, Head of Sustainability, MD of Biolands Group, BC
Bold words needed to be backed up with actions and then with outcomes. De Saint-Affrique had said they didn’t have a roadmap of definitive steps. Instead, working with different industry bodies, internally within BC, and through Cocoa Horizons on the ground, were piloting different initiatives, assessing and recalibrating to deliver impact. The company had signed up to several global initiatives on climate change, child and slave labour and had implemented metrics and analytics to measure its progress. Time was moving on, however. While some progress had been made, had Barry Callebaut started to sufficiently move the dial or was it merely scratching the surface?
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9I O
rd er
r ef
er en
ce F
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Co
py rig
ht ©
IN S
EA D
25
A pp
en di
x 1
B ar
ry C
al le
ba ut
’s S
ha re
P ric
e fr
om 1
99 8
to 2
01 8
S
ou rc
e: S
& P
C ap
it al
IQ
720-0030-1
P le
as e
no te
th at
y ou
a re
n ot
p er
m itt
ed to
r ep
ro du
ce o
r re
di st
rib ut
e it
fo r
an y
ot he
r pu
rp os
e. Y
ou a
re p
er m
itt ed
to v
ie w
th e
m at
er ia
l o n-
lin e
an d
pr in
t a c
op y
fo r
yo ur
p er
so na
l u se
u nt
il 13
-J ul
-2 02
1. P
ur ch
as ed
fo r
us e
by W
ei ni
L in
o n
13 -J
ul -2
02 0.
O rd
er r
ef F
38 66
62 .
E du
ca tio
na l m
at er
ia l s
up pl
ie d
by T
he C
as e
C en
tr e
C op
yr ig
ht e
nc od
ed A
76 H
M -J
U J9
K -P
JM N
9I O
rd er
r ef
er en
ce F
38 66
62
Copyright © INSEAD 26
Barry Callebaut’s Financial Highlights 1997 to 2018
Source: S&P Capital IQ
720-0030-1
P le
as e
no te
th at
y ou
a re
n ot
p er
m itt
ed to
r ep
ro du
ce o
r re
di st
rib ut
e it
fo r
an y
ot he
r pu
rp os
e. Y
ou a
re p
er m
itt ed
to v
ie w
th e
m at
er ia
l o n-
lin e
an d
pr in
t a c
op y
fo r
yo ur
p er
so na
l u se
u nt
il 13
-J ul
-2 02
1. P
ur ch
as ed
fo r
us e
by W
ei ni
L in
o n
13 -J
ul -2
02 0.
O rd
er r
ef F
38 66
62 .
E du
ca tio
na l m
at er
ia l s
up pl
ie d
by T
he C
as e
C en
tr e
C op
yr ig
ht e
nc od
ed A
76 H
M -J
U J9
K -P
JM N
9I O
rd er
r ef
er en
ce F
38 66
62
Copyright © INSEAD 27
Appendix 2 Barry Callebaut’s ESG Summary – Sustainalytics Report July 2018
Key ESG Issues for Barry Callebaut, as per Sustainalytics
720-0030-1
P le
as e
no te
th at
y ou
a re
n ot
p er
m itt
ed to
r ep
ro du
ce o
r re
di st
rib ut
e it
fo r
an y
ot he
r pu
rp os
e. Y
ou a
re p
er m
itt ed
to v
ie w
th e
m at
er ia
l o n-
lin e
an d
pr in
t a c
op y
fo r
yo ur
p er
so na
l u se
u nt
il 13
-J ul
-2 02
1. P
ur ch
as ed
fo r
us e
by W
ei ni
L in
o n
13 -J
ul -2
02 0.
O rd
er r
ef F
38 66
62 .
E du
ca tio
na l m
at er
ia l s
up pl
ie d
by T
he C
as e
C en
tr e
C op
yr ig
ht e
nc od
ed A
76 H
M -J
U J9
K -P
JM N
9I O
rd er
r ef
er en
ce F
38 66
62
