Cocoa Trade, Sustainability Initiatives in Belgian Chocolate, Lecture notes of Data Structures and Algorithms

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BEYOND CHOCOLATE

Annual Report

2019

CONTENTS

Dear partners,

Almost a year and a half has passed since the signing of our unique Beyond Chocolate partnership. Unique, as it is the first initiative to adopt a living income for cocoa farmers and to end deforestation due to cocoa growing for the Belgian sector as its main goals. Unique also in the fact that it was signed by almost everyone involved in the Belgian chocolate sector, including producers, retailers, public sector, NGO’s, trade unions, labels and member organizations.

Beyond Chocolate convened all these stakeholders over the last 18 months, setting clear goals and timelines, working together in expert groups, and raising awareness of the challenges we are facing. The Beyond Chocolate Steering Committee did field visits in Côte d’Ivoire to talk to and understand farmers’ and cooperatives’ needs. On top of that, the SteerCo engaged in a dialogue with local governments and NGO’s and strengthened ties with organization such as ICCO, SWISSCO and GISCO. This was done based on the conviction that we should join forces if we truly want to realize our ambitions.

Furthermore, a call for proposals was launched, and an accountability, monitoring and evaluation (AME) framework was set up. The challenge will be now to find a right balance between correct and necessary reporting and the focus on the actions needed to achieve our targets.

Unfortunately, this is not our only challenge. During our constructive and encouraging 1-year event on December 5th, 2019, nobody would have expected the world to enter a deep recession as seen today due to the coronavirus pandemic. The impact on our economy is huge, but it is important to remember it is even more so on that of emerging economies.

Therefore, we should continue our efforts, and all take our responsibility towards the farmers supplying to the Belgian sector. This starts with our 2025 target. By then, all chocolate produced and/or sold in Belgium must be certified. If we do not achieve this

2025 target, neither will we achieve our final 2030 target. Once all chocolate is certified, we can rely on certification standards and corporate schemes to raise the bar. We will also need the support and expertise of local governments in Ivory Coast and Ghana on deforestation and living income. We know that the challenge is big and complex, but if we work together, we can make it.

Finally, I want to thank everyone who has contributed to the development of Beyond Chocolate for their commitment and dedication. A special thanks to my team members of the Steering Committee. I loved working with you all during these last 18 months. Your enthusiasm and passion for our program was exemplary.

As you all know, I stepped down as Chairman of the Steerco as I’m moving to Moscow and I will be in a less neutral position as I was before, but I am convinced that Philippe de Selliers is the perfect man to steer our common project further. Philippe is an exemplary professional and a great man to work with.

Let us continue to work together with the same passion and enthusiasm as we have done until now so that Belgian Chocolate, our national pride, becomes a fully sustainable pride!

FOREWORD BY BEYOND CHOCOLATE STEERING

COMMITTEE CHAIRMEN PATRICK HAUTPHENNE

(2018-2019) AND PHILIPPE DE SELLIERS (2020)

Best regards,

Patrick Hautphenne

Dear partners,

I am excited to be taking over the role of Beyond Chocolate chairman from Patrick. Some people might wonder what convinced me to take on another task with an agenda already as busy as mine. Well, it is my personal conviction to strive for a win-win relationship for each and everyone involved in the process of chocolate. This is the reason why I was immediately attracted to and convinced by the Beyond Chocolate initiative. It is a great initiative because it represents the ideal combination of long-term sustainability and future growth, ensuring a long and bright future for qualitative Belgian Chocolate.

There is this strange conviction that protecting our people and planet means being less innovative or compromising our way of life. However, I believe the contrary. These actions will only enrich people’s creative thinking. We need to be well aware that consumers are waiting and expecting from us, the industry, to lead by example. Their mentality and priorities have evolved into less impact and more fair conditions for all. It is therefore our joint responsibility to ensure that all decisions have a positive impact on everyone involved. Everyone involved in the cycle deserves his/her moment of happiness. I am a great believer in sustainability for future growth and I am a great believer in Beyond Chocolate.

I am looking forward to working with all of you to increase the impact of the partnership and to make our chocolate something we can truly be proud of.

Best regards,

Philippe de Selliers

7

BEYOND CHOCOLATE

Partnership for a more

sustainable Belgian

chocolate sector

Making chocolate produced and/or sold in Belgium more sustainable. This

was the joint ambition of the Belgian government, chocolate and retail

sector, civil society, social impact investors and universities when signing

the Beyond Chocolate Partnership December 5th, 2018. The Belgian multi-

stakeholder partnership took on commitments more ambitious than was

ever before seen in the international cocoa sector. Moreover, the partnership

has an exceptionally wide scope, targeting the entire Belgian cocoa and

chocolate sector. In this chapter, we will provide an overview of the sector,

as well as of the partnership’s commitments. The data presented in this

chapter are taken from the report commissioned by IDH and carried out

by The University of Ghent. The full report can be found in annex B.

The larger part of these Belgian chocolate products, about 83%, is exported to the European consumer market. The biggest customers are the neighboring countries. 17% is exported outside the European Union, mostly to the USA.

Leading countries exporting cocoa and chocolate products in tons, 2018

From the University of Ghent report

1,000,

800,

600,

400,

200,

0 Germany Belgium

649,

Netherlands Canada Poland United States Italy France of America

Destination countries for cocoa and chocolate products exported by Belgium, 2018

From the University of Ghent Report

United States of America 19%

Japan 8%

Canada 8%

China Russia 7% 6%

Australia 4%

Saudi Arabia 3%

Turkey 3%

Brazil 2%

South Africa 2% United Arab Emirates 2%

Other non-EU countries 31%

South Korea 5%

Netherlands 19%

France 21%

Germany 16%

United Kingdom 11%

Italy 3%

Poland 3%

Spain 2% (^) Other EU-countries 11%

B. Beyond Belgian Chocolate

The Beyond Chocolate partnership wants to influence the fairness and sustainability of the entire Belgian cocoa and chocolate sector; including all couverture chocolate and consumer chocolate produced and or sold in Belgium, as shown in the figure above. The partnership goes beyond the abovementioned ‘Belgian chocolate’ which constitutes only 51 % of Belgian consumer chocolate. This ‘Belgian chocolate’ includes the chocolate produced within the country with Belgian couverture, as well as the small percentage of imported consumer chocolate that is Belgian (about 7%).

Beyond Chocolate also targets the consumer chocolate produced in Belgium that is not classifiable as ‘Belgian Chocolate’; that is to say, consumer chocolate made from imported and thus non-Belgian couverture. In 2018, Belgium imported around 86 000 tonnes of couverture chocolate (Eurostat), which is assumed to be processed into consumer chocolate in Belgium. 16 % of the chocolate produced in Belgium is part of this group and is thus not Belgian chocolate, but falls within the scope of Beyond Chocolate. Finally, Beyond Chocolate goes further than chocolate produced in Belgium by including also all chocolate sold in Belgium. This is not to be underestimated, as Belgium consumers are among the largest chocolate consumers worldwide, eating an average of 6,42kg chocolate per person per year. In 2018, about 117 000 tonnes of non-Belgian consumer chocolate was imported and then sold in Belgian supermarkets.

Overview of the Belgian chocolate sector

Data provided by the University of Ghent

Beyond Chocolate for a more sustainable Belgian chocolate sector

Export Other industrial processing

Export Other industrial processing

Chocolate couvertoure 84% Belgian

Production 463 000 tonnes 100% Belgian

Import 86 000 tonnes 0% Belgian

Production 170 000 tonnes 84% Belgian

Production 126 000 tonnes 7% Belgian

Consumer chocolate 51% Belgian

2. GOALS AND COMMITMENTS

2.1 What is sustainability?

Beyond Chocolate’s overarching goal is to make the Belgian cocoa and chocolate sector more sustainable. To know what exactly this means, we should first look at the concept sustainability. Sustainability, or more precisely, sustainable development is most commonly understood as it was described by the World Commission on Environment and Development (WCED), in the report Our Common Future, better known as the Brundtland Report:

“Sustainable development is development that meets

the needs of the present without compromising the

ability of future generations to meet their own needs.”

It is now widely accepted that sustainable development builds on three pillars: social, environmental and economic (Purvis et al. , 2019). ISEAL^1 , the global membership association for credible sustainability standards, provides details on what is covered under each pillar according its members: O Social: could include labour rights, gender rights, cultural rights, social services including education, health care, clean water, etc. O Environmental: including but not limited to water use/treatment, soil/ land impact, protection of biodiversity, responsible use of natural resources, carbon and other energy considerations. O Economic: including income considerations, such as minimum or living wage, considerations of enterprise resilience, productivity/ profitability, market access and security considerations, guaranteed pricing, etc.

However, this is not yet the partnership’s final definition as GISCO, SWISSCO and Beyond Chocolate are currently discussing to align cocoa sustainability definitions used by the different platforms and will propose a joint cocoa sustainability definition in 2020.

1. https://www.isealalliance.org/

2.2 What are the current issues?

For now, despite the action of national and international organisations, NGOs, trade unions, research institutions, governments and companies in cocoa growing regions, major challenges remain to be addressed to improve the sustainability of the Belgian chocolate sector. While cocoa farming could have a positive impact on cocoa farmers, their communities, and the economy of producing countries, this potential is not fully realized. The average cocoa farmer is far from earning a living income. The fact that many families in cocoa producing countries live below the poverty line often results in child labour and unjust working conditions. Moreover, poverty pushes farmers to converting new land, often in protected areas, leading to a dramatic reduction of forest cover in West and Central Africa.

2.3 What are the Beyond Chocolate commitments?

The abovementioned negative effects of cocoa production for the Belgian market on planet and people are exactly what the Beyond Chocolate Partnership is trying to put a stop to.

Concretely, the partnership’s commitments are the following:

1. By 2025 at the latest,

a. All the chocolate produced and/or sold in Belgium shall

comply with a relevant certification standards and/

or shall be manufactured from cocoa-based products

covered by a corporate sustainability scheme.

b. “Beyond Chocolate” partners shall comply

with applicable agreements between

governments and companies in the regions

included in the Cocoa & Forests Initiative.

2. The partners jointly undertake to ensure

that by 2030 at the latest,

a. Cocoa growers will earn at least a living income.

b. Deforestation due to cocoa growing for the

Belgian chocolate sector has ended.

2.3.1 Certification and sustainability schemes

The first upcoming Beyond Chocolate goal is that by 2025 at the latest, all the chocolate produced and/or sold in Belgium shall be certified, i.e. in compliance with a certification standard and/or covered by a corporate sustainability scheme. The partnership considers relevant certification standards to be Fairtrade, Rainforest Alliance/UTZ and Organic/EKO certification; the approved corporate programs are Cocoa Horizons for Barry Callebaut, Cacao- Trace for Puratos, Cocoa Promise for Cargill and Cocoa Life for Mondelez.

A. What is a living income?

While poverty alleviation focuses on basic subsistence and survival, living income goes beyond this goal. Living Income represents a decent standard of living for farmers. The Beyond Chocolate partnership uses the Living Income Community of Practice’s definition:

Living income is the net income a household would

need to earn to enable all members of the household to

afford a decent standard of living. Elements of a decent

standard of living include: food, water, housing, education,

health care, transport, clothing, and other essential

needs including provision for unexpected events.

A living income for cocoa farmers does not solely depend on the price paid to the farmer for the cocoa yield but takes into account several other variables including the size of the farmer’s cocoa field, his/her productivity, additional incomes from other sources and costs of production as well as household expenses.

B. How do we measure income gaps?

Over the next decade, Beyond Chocolate wants to completely close the living income gap; that is the gap between current farmer incomes and a living income. The Beyond Chocolate partnership will contribute to measuring current farmer incomes through guidance tools and co-funded projects. Information on farmer incomes is then compared to living income benchmarks which have been established by the Living Income Community of Practice for cocoa producing communities in both Ghana and Cote d’Ivoire and other relevant producing countries. This comparison reveals the living income gap which needs to be closed. It should also provide information and insight into the drivers of such gaps, i.e. cocoa production prices, food prices, etc. This provides an important foundation for developing models to close the living income gaps.

What is a living income?

Source: IDH

Housing Health Care Education

Transportation

Basic costs for the family (^) Food Other essential needs including provision for unexpected events

C. How do we close the living income gaps?

There are several levers that can be addressed to improve living income especially among supply chain actors. These include cocoa productivity, production costs, price and diversified incomes. The more these are addressed in combination, the higher chances there are to have an impact on improving farmer incomes. The Beyond Chocolate partnership is supporting the implementation of high impact models to close the living income gaps by co-funding projects and supporting collective learning by gathering and analysing insights on smart mix solutions.

2.3.3 Deforestation

Natural forests play a vital role in regulating climate and providing other critical ecosystem services. As a forest crop, cocoa needs these forests to thrive. However, cocoa production has been identified as a major driver of deforestation. For example, when smallholder farmers look for new and more productive land, to grow crops and sustain their livelihoods. As a result, In Ghana and Côte d’Ivoire alone almost 3 million hectares of forests have been cleared over a ten-year period. One quarter of this deforestation has been attributed to cocoa production. Cocoa-related deforestation is not limited to these two countries. Research demonstrates that cocoa is also driving deforestation in countries like Cameroon, or the Democratic Republic of the Congo.

The Beyond Chocolate Partnership aims to tackle deforestation in two steps. By 2025, all Beyond Chocolate partners shall comply with applicable agreements between governments and companies in the regions included in the Cocoa & Forests Initiative. Partners will then continue addressing deforestation in their supply chain so that by 2030, deforestation due to cocoa growing for the Belgian chocolate sector will have ended.

2.4 How will activities be implemented?

As stated in the Beyond Chocolate partnership document, the partnership will implement its activities based on the following pointers: O Work with what exists already: work should be based on ongoing sustainability initiatives and programmes, including sustainability standards (Fairtrade, Utz / Rainforest Alliance, to be supplemented if necessary with EKO certification) and corporate sustainability programmes and their measuring tools; O Supplement the work being done: such initiatives and programmes will be strengthened, improved and/or supplemented wherever necessary to help achieve the partnership objectives and foster open communication; O Identification: the intention is not to create new sustainability seals or logos. Sustainability is embedded in the concept of Belgian chocolate; O Belgian: all companies using the “Belgian chocolate” mark contribute to increasing sales of sustainable cocoa and chocolate; O Transparency: impacts in terms of sustainability will be measured by an independent third party at a reasonable cost and will be communicated openly, especially with regard to consequences for cocoa growers and their families. Raising awareness about sustainability and the improvements implemented in the cocoa value chain are an integral part of the partnership’s communication strategy; O Progress: the signatories undertake to make notable progress each year through innovation in order to achieve their goals.

2.5 Signatories

Companies, public institutions, knowledge institutions, NGO’s, impact investors, certification standards and trade unions; The Beyond Chocolate partnership has a diverse group of signatories. Some have signed from the very beginning and some joined along the way. As such, in 2019, the partnership welcomed Baronie, Galler, Port of Antwerp, Nestlé, Lita.co and Samilia Foundation. By signing the partnership, signatories have indicated they are committed to contributing in a meaningful way to the Beyond Chocolate goals.

An entire overview of the current Beyond Chocolate signatories can be found in Annex C.

The Beyond Chocolate

Governance Structure

The Beyond Chocolate Partnership does not have an executive decision-

making organ but relies on close consultation between all stakeholders.

The partnership receives funding from the Belgian Ministry for Development

Cooperation. The Ministry appointed IDH, the Sustainable Trade Initiative to

manage the program. Responsibilities are divided over the following actors.