Fairtrade Cocoa Standard Review

Poverty and imbalance of power in supply chains are relevant root causes of human right violations in the cocoa sector.

All our supply chain partners worldwide will soon have to abide by new international HREDD regulations.

The proposed changes to the Cocoa Standard aim to:

• Facilitate new HREDD processes and procedures with emphasis on relevant issues in cocoa such as child labour, especially in West Africa;
• Empower SPOs and their members to avoid causing or contributing to negative human rights and environmental impacts;

• Encourage stakeholders to be more proactive when it comes to protecting human rights and the environment rather than relying on a punitive approach;
• Formalise requirements for contributions from all non-producer supply chain actors for monitoring and remediation to support producers who have identified HREDD risks;

• Introduce reporting indicators – to be shared with Fairtrade International annually – to enable aggregated and anonymised reporting to the public and stakeholders on request.

Poverty has also been a root cause of deforestation.

Huge tracts of tropical forest have been cleared – particularly in West Africa – to facilitate cocoa production. This widespread deforestation has had a massive environmental impact.

We need to strengthen the Cocoa Standard to further reduce the risk of deforestation and vegetation degradation caused by cocoa farming.

The proposed changes to the Cocoa Standard aim to:

• Introduce a cut-off date to end deforestation and implement mandatory risk assessment procedures, such as the use of deforestation monitoring data;

• Make geolocation data available for 100 percent of farms and gradually introduce farm polygons;

• Introduce prevention and mitigation plans based on the results of risk assessments and monitoring;

• Introduce reporting indicators – to be shared with Fairtrade International annually – to enable aggregated and anonymised reporting to the public/stakeholders on request.

Fairtrade offers stakeholders the option of operating traceable and/or mass balanced cocoa in their supply chains once the Fairtrade certified cocoa has left the SPO.

However, most commercial cocoa partners opt for mass balance and very few choose to be audited for physical traceability.

But this will soon change. New EU regulatory requirements on deforestation and human rights will require commercial stakeholders to be much better informed about supply chain sourcing and related practices.

National Cocoa Platforms in Europe want better traceability and transparency in cocoa supply chains to ensure more accountability and sustainability.

Full traceability from farm level to first purchase point is one of the commitments of the Cocoa & Forests Initiative and the African Regional Standard (ARS) will require the segregation of ARS cocoa up to the point of export.

The proposed changes to the Cocoa Standard aim to:

• Improve the accuracy of production/sales data recorded by SPOs through credible yield estimation, detection and management of production versus sales irregularities and the regular calibration of weighing equipment;

• Improve SPO traceability procedures;

• Promote the use of technical solutions to track cocoa beans sold by SPOs back to individual farms;

• Require the physical segregation of Fairtrade products up to the point of export.

Every household needs sufficient income to be able to afford a decent standard of living for all its members. This is called a living income.

Fairtrade’s strategic ambition is to achieve a living income for cocoa farmers globally.

In West Africa, we are working with committed commercial partners on pilot living income projects.

Now we want to explore how elements of our living income strategy can be woven into the new Fairtrade Cocoa Standard.

The proposed changes to the Cocoa Standard aim to:

• Enable SPO members to calculate their net income while also building up their financial history;

• Assess the net income of SPO members against living income benchmarks;

• Support smallholders to make informed decisions on income resilience strategies, including income diversification;

• Analyse farmers’ production costs and net income and train them in finance and business management;

• Encourage SPOs to seek financing for their members.

In Côte d'Ivoire and Ghana, sharecropping and tenant farming are common models of cocoa farming. But it is primarily landowners who are recognised as members by SPOs. This means the benefits of Fairtrade certification are at the discretion of the landowner.

The proposed changes to the Cocoa Standard aim to:

• Create visibility for anyone who operates a farm registered with a Fairtrade certified SPO;

• Register farm operators (sharecroppers, tenant farmers, caretaker farmers) and their families so that they are brought under the remit of the Fairtrade Standards, especially for HREDD requirements;

• Enable more equitable distribution of Fairtrade benefits between farm owners and farm operators.

It is so important for Fairtrade that certified SPOs sell sufficient quantities of their produce on Fairtrade terms.

To achieve this, the supply of Fairtrade certified cocoa should grow at the same pace or slower – than the demand for certified cocoa.

Since June 2020, prospective Fairtrade certified cocoa SPOs and traders must prove they already have a buyer for their produce or that their trading activity relates to additional volumes traded on Fairtrade terms.

The changes to the Cocoa Standard (published in July 2022) aim to:

• Limit the entry of new SPOs and exporters into the Fairtrade system;

• Define, within one year, a limit for the growth of membership within existing Fairtrade certified SPOs;

• Create transparency and reliability for Fairtrade certified producers on the allocation of purchase volumes to help them plan how much they can sell to a certain trader;

• Encourage long-term partnerships based on mutual commitments.

Internal management systems (IMS) enable SPOs to manage compliance with Fairtrade requirements among all cocoa producers in the organisation.

Essentially, they are a set of agreed and documented procedures and processes that must be followed to ensure compliance with the Fairtrade Standards and internal organisational policies.

Effective IMS enable producers to monitor how many farmers are adopting better practices and identify and implement improvements based on this data.

Accurate data helps SPOs develop tailored services based on member needs.

An IMS implementation review was carried out in late 2019. It found there is urgent need for producer organisations to make progress developing their own approaches and to use data more efficiently to encourage continuous improvement and better performance.

The proposed changes to the Cocoa Standard aim to:

• Support producer organisations to analyse their organizational capacity and progressively improve how effectively they both comply with the Fairtrade Standards and drive organisational development.

• Ensure producer organisations have more control over and gain more benefit from IMS such as: accurate member needs analysis, accessible data to support risk management and efficient audits. This will result in improved reporting to commercial partners, higher sales and greater insight for SPO organizational learning and continuous improvement.

• Improve lines of communication by ensuring roles, responsibilities and qualifications of producer organisation staff are clearly defined. This will also promote inclusivity as individuals are able to see the bigger picture and how their role contributes to the organization;

• Improve awareness and communication of Fairtrade costs vs benefits - at both producer organisation and farmer level - to enable informed decision-making;

• Ensure SPOs share details of their commercial agreements, such as. committed sales, joint programmes, performance indicators, etc., with members to drive transparency and increase farmers’ knowledge of the organisation’s business.

Consultations on HREDD requirements were carried out in Africa and Asia in August-October 2021 during the first phase of consultations on the Fairtrade Cocoa Standard.

The proposals received positive feedback from most stakeholders but it was clear they needed to be simplified.

In the Latin America and the Caribbean region, both the regulatory and funding situations are different from those of the other main Fairtrade cocoa-producing region: Africa and the Middle East.

This consultation presents the updated and simplified proposed requirements considered most relevant for Latin America

(Only SPOs from Latin America and the Caribbean are asked to reply.)

The proposed changes to the Cocoa Standard aim to:

• Facilitate new HREDD processes and procedures with emphasis on relevant issues in cocoa such as child labour.
• Empower SPOs and their members to avoid causing or contributing to negative human rights and environmental impacts;

• Encourage stakeholders to be more proactive when it comes to protecting human rights and the environment rather than relying on a punitive approach;
• Formalise requirements for contributions from all non-producer supply chain actors for monitoring and remediation to support producers who have identified HREDD risks;

• Introduce reporting indicators – to be shared with Fairtrade International annually – to enable aggregated and anonymised reporting to the public and stakeholders on request.

Fairtrade is exploring if requirements in the Cocoa Standard can be strengthened to further reduce the risk of deforestation and vegetation degradation while, at the same time, taking into consideration the important link to Internal Management System requirements, first mile product traceability and the new EU regulation.

During the research phase, key stakeholders expressed strong support for the use of geodata and cut-off dates. No concerns were voiced regarding the collection of and access to geolocation points.

The topics of deforestation and first mile product traceability were covered during the consultations in early 2022 with both a global and regional scope.

We are now seeking feedback on the requirements discussed during the regional consultations in Latin America and the Caribbean in 2021.

These requirements have already been discussed with Fairtrade stakeholders elsewhere.

(Only SPOs from Latin America and the Caribbean are asked to reply.)

The proposed changes to the Cocoa Standard aim to:

• Make geolocation data available for 100 percent of farms and gradually introduce farm polygons;

• Promote the deployment of technical solutions to track cocoa beans sold by SPOs back to farms;

• Introduce reporting indicators – to be shared with Fairtrade International annually – to enable aggregated and anonymised reporting to the public/stakeholders on request.