ESG in coffee and cocoa
The world is witnessing a global ethical movement within the supply chain, whether it be tackling carbon emissions, deforestation, child labor, or a range of other issues. This is especially true for agricultural commodities, which are under scrutiny from ESG companies and indeed, world governments, for their sustainability practices. Two specific industries in this arena, those of cocoa and coffee, are currently undergoing environmental and social transformations via their biggest clients that demonstrate these changes.
Cocoa production for the globe is only increasing. In Nigeria, a hotbed of cocoa harvesting, production is set to increase from 340,000 tons to 500,000 tons this year. As a result of this dramatic increase, a number of companies sourcing from Nigeria and the other two massive cocoa hubs – Cote D’Ivoire and Ghana – are ramping up their ESG practices.
Hershey recently finalised a $500 million investment by the year 2030 focused on improving farmer livelihoods in cocoa-growing communities through a few set pillars: “nourishing children, empowering youth, prospering communities, and preserving ecosystems.” As Ghana and Cote D’Ivoire produce 60% of the world’s cocoa, Hershey’ is also aiming for 100% cocoa sourcing visibility from these countries by 2025. They currently sit at 68%. And finally, the company has signed a 5-year agreement to combat child labor by investing in over 2500 classrooms.
Nestle has set themselves the ambitious goal of making their supply chain free from deforestation by 2025. The consumer giant is partnering with the governments of Ghana and Cote D’Ivoire and has so far restored 400 hectares of forest in these areas. It has also contributed to the mapping of over 100,000 farms and provided more than 2 million fruit trees to the area to promote agroforestry and regenerative agriculture. While research shows that cocoa-related deforestation is lower than most other industries, it is heavily concentrated in a select few areas. Mapping projects such as the one carried out by Nestle can ensure that cocoa companies avoid these vulnerable areas.
Coffee is difficult to ‘ethicalise’, as a significant amount of the environmental impact in coffee production occurs at the farm level. This means that the onus of sustainability efforts in coffee production falls upon farmers – the most vulnerable group to climate change throughout the various stages of coffee production.
The current criteria for what constitutes ‘sustainable coffee’ is problematic, as sustainable coffee is equated with certified coffee. ‘Certified coffee’ has hundreds of criteria, but currently none of these criteria is that the coffee farmer makes any money off their production. One suggestion for helping to standardise ESG practices for coffee is to begin by establishing a farmer’s living income as a core metric. This would trigger a domino effect of better ESG practices throughout the supply chain and provide a good foundation for organisations to base their practices off.
The coffee giant is no stranger to sustainability efforts, having been consistently at the forefront of coffee producers working towards responsible sourcing. Their agenda involves two major sustainability goals: first, to reach 100% responsibly sourced coffee, tea, and oil by 2025. They currently sit at 30% for coffee, an increase of 1% over 2021.
Olam’s coffee activities began in India in 1994. Now, they are a global leader in coffee origination and sustainable farming, continuing upon this trajectory for the foreseeable future. By 2025, the business is aiming for a 15% reduction of greenhouse gas emissions from their global coffee footprint as well as having implemented deforestation remediation plans in all high-risk areas, with the goal of planting 5 million native trees.
Softs and agricultural commodities seem to be doing better than a lot of their other counterparts in commodities, and this is reflected by rising demand for coffee traders. With countries like Kenya expanding their coffee plantations to non-traditional areas, there is reason to believe that we’ll soon see a manufacturing boom in certain areas as they develop their coffee production capabilities. As for cocoa, we can see a similar trend occurring, as well as growing demand for sustainability officers and those experienced in supply chain transparency. Ultimately, there is economic opportunity in agricultural commodities which is contributing to the continued talent squeeze felt by most of the commodities world. However, softs can be seen as more desirable than other sectors due to its continued trajectory of increased prices and promise of sustained economic growth.
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by Joe Russellview my profile