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Olam calls for global cocoa rules as EU plans ethical chains

(September 28): Europe must work with other regions to prevent its proposed ethical supply chain rules from becoming a burden on the local cocoa industry, says Olam Food Ingredients (OFI ).

The world’s third-largest cocoa processor has urged the European Union to reach out to the United States and Asia to ensure a level playing field, said Gerry Manley, head of cocoa business at OFI and Director of Sustainable Development. A coordinated approach is also needed with producing countries, so that they can adopt EU rules as production standards.

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The EU plans to hold companies accountable for human rights abuses and environmental damage in their supply chain, with fines and compensation claims for those who fail to act. Strict rules could put European industry at a disadvantage if other cocoa consuming and producing countries do not follow.

“The legislation is there for a reason, to foster better practice,” Manley said in an interview for the launch of OFI’s second sustainability impact report. “What we need to do is copy this elsewhere in the world. There has to be this level playing field approach. If we can use this EU model, and it is fully considered by producing countries as a standard, then I think we are in a good position.

Olam can already trace all cocoa from its direct supply chain in nine countries to an individual farm, community or first point of purchase – where a farmer or cooperative is paid. That’s about 60% of all the grain the company buys. Expanding this will require a coordinated approach and legislation, Manley said.

Sustainability efforts

This is because some of the grain she buys comes from other traders, who follow different practices. In Ghana, for example, the cocoa supply chain is controlled by the government, which means the OFI cannot count them as its direct supply chain, he said.

Cocoa companies have stepped up their sustainability efforts as customers and governments increasingly want to know where food comes from and whether it was produced ethically. But so far the approach has been uncoordinated, with various standards being applied by different companies and producing countries.

Côte d’Ivoire and Ghana, for example, have joined forces to impose a premium of US$400 per metric ton on their cocoa futures prices. But the so-called living income differential has been offset by a reduction in quality – sometimes as high as US$200 a ton – determined by market supply and demand.

In some cases, farmers also do not get the minimum price set by the state, notably in Côte d’Ivoire.

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small farms

Olam says most farms are still too small for producers to earn enough. The company – which aims to ensure that 150,000 growers in its chain are earning a living income by 2030 – says increasing yields could be a way to help farmers earn more by using the same land area. Manley says the company can help double productivity to 700 kilograms of cocoa per hectare.

Producing countries have criticized some sustainability practices, blaming previous rounds of overproduction on things like disease-resistant trees. Ivory Coast, the world’s largest producer, ended the distribution of high-yield planting material in 2018, a ban still in place. As a result, the distribution of cocoa seedlings by OFI has dropped by 40% globally since 2017-18.

“We appreciate where the growers are coming from about the oversupply. There has to be some control over that,” Manley said, adding that he believed global consumption continued to grow and that the worst-case scenario would be global shortages driving prices so high, that it would force consumers To reduce.

“I was in Asia recently and it’s such a positive vibe,” he said. “You’re seeing double-digit increases, people looking for real expansion in demand for cocoa and chocolate. The outlook is positive and we need to produce more cocoa. »

Child labor

Child labor remains a challenge, but industry has invested in building schools, Manley said. Olam’s goal is to eliminate child labor from its supply chain by 2030. In its recent report, the company again identified over 11,000 cases, none classified as forced labor – another subject on the EU radar.

The EU made it clear they wanted the elimination much sooner, Manley said. “If these processes can happen with the necessary funding to go to producing and developing countries, then the elimination of the worst forms of child labor can be achieved.”

“If the world is serious about alleviating poverty, we must eradicate child labour,” he said.

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Other report highlights:
  • While child labor remains a challenge, OFI identified 6% fewer cases than in 2019-20.
  • The company has polygonally mapped 68% of its sustainability programs, a measure that will help it prevent deforestation.
  • OFI has helped farmers in its programs in nine countries increase productivity to 635 kilograms per hectare, up 9% from 2019-20.

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