Nestlé, the world’s largest foodmaker, will triple its cocoa sustainability funding to SFr1.3bn ($1.4bn) over eight years, including direct payouts to African cocoa farmers in a bid to remove child labour from its supply chain.
The Swiss group said it was focusing on poverty as the root cause of child labour. It will be the first multinational food company to pay farmers directly, starting in Ivory Coast and Ghana, the two largest producers of the key ingredient for chocolate. The company, whose brands include Kit Kat and Aero, will distribute payments of up to SFr500 a year to households from whom it sources its cocoa.
The chocolate industry has been dogged by accusations of failing to address the use of child labour in its supply chains. Cocoa is mainly grown by smallholder farmers in tropical Africa, Latin America and Asia, where children are often used in tending to cocoa trees and harvesting the fruit.
Despite commitments by the chocolate industry to eliminate poverty, child labour remains endemic in many of the poorer cocoa producing countries.
In Ivory Coast and Ghana, which account for almost 65 per cent of global cocoa production, 1.56m children, or 45 per cent of agricultural households in the two countries, were engaged in child labour in the industry, including those using sharp tools and agricultural chemicals and carrying heavy loads, according to a study in 2020 by social research group NORC at the University of Chicago.
“Our goal is to have an additional tangible, positive impact on a growing number of cocoa farming families, especially in areas where poverty is widespread and resources are scarce,” said Mark Schneider, Nestlé’s chief executive.
Cocoa farming households will receive payments for sending their children to school, implementing good agricultural practices like pruning, and sustainable measures such as planting shade trees. Those diversifying their incomes through other means, including additional crops and livestock, will also be paid.
Households will be paid for two years while they increase their productivity and income through training and good agricultural practices, which could increase yields up to threefold, a pilot scheme in Ivory Coast with 1,000 farmers showed.
This year the number of Ivorian farmers in the scheme will be increased to 10,000. It will be extended to growers in Ghana in 2024 and to other countries by 2030.
Nestlé said the payments would be “shareholder neutral” as consumers would pay more for sustainable products. It will raise prices on some of its chocolate and push to make its own operations more efficient.
The process of buying bulk commodities from a wide range of sellers makes it difficult to separate out unsustainably produced cocoa. Many chocolate makers and cocoa traders are trying to increase their direct sourcing. Nestlé has pledged to source all of its cocoa through its direct supply chain by 2025, up from the current 46 per cent.
Campaigners, who have been calling on the chocolate industry to pay more for cocoa to reduce poverty, said Nestle’s announcement was encouraging.
“As part of a broader strategy to encourage higher productivity and fair pay for cocoa, [direct payments] could be successful,” said Antonie Fountain, managing director of the Voice Network, an umbrella group for 17 non-profit organisations. He said the programme’s broader impact remained to be seen, but added that “maybe every company will need to do this in the future”.
The payments will help farmers who have struggled with volatile cocoa prices as chocolate demand fluctuated because of the effects of the pandemic. The border closures because of Covid also left some cocoa farmers without migrant labour, affecting production.
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