We are delighted to have been featured in The Guardian’s Top Sustainability Stories of 2015. This was the coverage of the launch of the 2015 Earth Security Index report in February last year.
The featured piece “How can we avoid peak chocolate?”, was based on our case study of cocoa and global business risks for the chocolate industry in our 2015 report. The article has been reproduced below with the permission of The Guardian.
The other top stories of 2015, which correspond to each of the months in the year, cover topics such as the World Economic Forum in Davos, Nissan’s safety failures, the 5th anniversary of BP’s Deepwater Horizon oil spill; Citibank’s low-carbon report and the VW emissions scandal, among others.
How can we avoid peak chocolate?
A shortfall in chocolate in the next five years is only likely to be averted if major manufacturers such as Nestlé create a business model that includes cocoa farmers, says report out today
Fast-forward ten years and the cocoa industry is predicted to be in crisis. Productivity in Ghana and Cote d’Ivoire – which together account for 60% of global cocoa production – will have dropped due to land degradation, lack of investment by smallholder farmers and the declining availability of suitable land due to climate change.
You can’t sustain a booming chocolate industry worth billions while the producers are living in poverty. Alejandro Litovsky
Combine these with rising demand for chocolate from Brazil, China and other emerging markets, and the $9bn cocoa industry is likely to face supply shortages unless it takes action now, warns a new report.
Major chocolate companies, including Nestlé and Barry Callebaut (which processes almost a quarter of the world’s cocoa beans), all claim to have invested money in sustainability programmes designed to support smallholder cocoa farmers. The latter account for more than 85% of global production.
However, this is not likely to be enough to stop poverty-stricken farmers switching to more lucrative crops like palm oil or rubber, suggests the report by the Earth Security Group.
The Earth Security Index 2015, published today, warns that a number of other major commodities, including palm oil, soybeans and maize, are also likely to face future supply chain volatility. From trough to table: mapping the food chain saves lives.
Growing economic inter-dependence means that sustainability pressures in commodity producing countries are more likely than ever to trigger economic risks across the globe. This, says the report, puts an onus on multinational companies to work much closer with their supply chains to help manage future risks.
In the case of chocolate, climate change and unsustainable farming techniques have already decreased the amount of land for cocoa crops by 40% in the past four decades. At current production rates, the shortfall is expected to reach one million tonnes by 2020.
In key producing countries such as Cote d’Ivoire and Ghana, cocoa is grown by more than a million small-scale family farmers, most of whom have never tasted a bar of chocolate and live in chronic poverty. A lack of capital and poor governance, says the report, is holding back much needed investment in productivity, logistics and rehabilitation of land.
“You can’t sustain a booming chocolate industry worth billions while the producers are living in poverty. It’s not sustainable,” says Alejandro Litovsky, report author and founder of the Earth Security Group.
Nestlé and other major chocolate companies point out that they are all members of the World Cocoa Foundation’s CocoaAction strategy, which works to improve the livelihoods of cocoa farmers. However, the report says multinationals and countries benefiting economically from the industry such as Switzerland, the global hub of the lucrative chocolate trade, need to do much more to prevent a future supply chain crisis.
“It’s great that they’re focusing on sustainability, but they must now move from incremental changes to business innovation,” says Litovsky. “Given the extent of the impending crisis, I doubt that an incremental approach can succeed. Companies need to reinvent their business models to put farmers at the centre of the value creation process. Nestlé’s approach to creating shared value must now move to create shared equity. It’s a provocative statement, but the Divine Chocolate business model shows it is possible for companies to create more inclusive business models where farmers benefit even more,” he adds.
The risks to the chocolate trade also apply to other commodity chains, including maize, palm oil and soybeans, explains the report, putting greater pressure on a wide range of multinationals to intervene in their supply chains.
“Global companies operating in emerging markets are feeling the greater political, reputation and operation risks associated with resource pressures,” says Litovsky. “To manage these risks they must go beyond compliance and focus their business diplomacy effort in supporting country governments to improve sustainability conditions.”
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