8 tips to go green in the cocoa sector

2. Use traceability and monitoring to stop deforestation

Tip 1 explained that deforestation and climate change are among the biggest risks in the cocoa sector. The biggest opportunity to address this is by improving the farmers’ situation. Tip 2 will explain how you can help stop deforestation more directly.

The first step is to improve the traceability of your cocoa. With traceability in place, you can start mapping farms, monitoring deforestation and working in projects that reduce deforestation.

Know where the cocoa comes from (using traceability)

Many European Union (EU) importers demand to know where the cocoa they buy comes from. This may be because consumers are asking for it, or it may be required by law. Traceability also reduces the risk for companies because they have more certainty about the origin of the cocoa.

Traceability has 2 main advantages. If you can provide proof of where your cocoa comes from, it can make the cocoa more attractive to your buyers. It is also helpful when addressing environmental risks in cocoa.

Many companies already use systems to trace their cocoa. Companies are also starting to report which cooperatives they buy from. However, a lot of cocoa is still untraceable. Trase, a supply chain transparency initiative, reports that less than half of the cocoa can be traced back to the cooperative. If you don’t know where your cocoa comes from, then you also don’t know whether it came from deforested areas.

You can prove the source of your cocoa in several ways. You can develop your own traceability system or you can use an existing system. Existing systems include the systems of certification programmes such as Rainforest Alliance, Fairtrade and Organic. National traceability systems are also being developed by Côte d’Ivoire and Ghana. When national traceability systems are set up, exporters can also start using those systems for traceability.

There are many levels of traceability in cocoa. They include:

1. No traceability;
2. Mass balance, which benefits farmers that may or may not be in your supply chain. There is no physical traceability, but you know that farmers somewhere are benefiting from certification. Certification programmes have this option (see tip 7 for details);
3. Country-level traceability or Origin Matching Mass Balance, which ensures that if there is demand for certified cocoa from a specific country, the farmers in that country benefit. For more details on traceability to country level, see ‘Origin Matching’ Brings More Equity to Certified Cocoa Sourcing;
4. Directly working with or supporting cooperatives that you are not buying from physically (dedicated cooperatives without traceability). You know which farmers you are supporting, but you don’t know if you are physically buying their cocoa;
5. Traceability in part of your supply chain, for example from farm to cooperative, first point of purchase, exporter, or factory door. Traceability is not in place for your entire supply chain but only for part of it.
6. A combination of 3-5;
7. Segregated supply chains. This means that the certified cocoa is kept separate from non-certified cocoa in the entire supply chain. This is more difficult to put in place than the levels listed above. One reason is that cocoa is often stored or processed in large quantities. This makes it difficult to keep the cocoa separated throughout the process;
8. Mixed Identity Preserved. This means that you know which cooperatives produced the cocoa you are purchasing;
9. Identity Preserved. This means that you know which specific cooperative produced the cocoa that you are purchasing. Options 7, 8 and 9 are also offered by certification programmes (see tip 7 for details); and
10. Full traceability back to farm level.

Track deforestation with remote sensing or farm plotting

When you know the supply chain of your cocoa, the next step is knowing where the cocoa is grown. You can do this with a deforestation monitoring system. Many companies are setting up such systems.

It is also important to know about the different cut-off dates for deforestation. If the land conversion happened after this cut-off date, it counts as deforestation.

These are the main cut-off dates used for cocoa:

• Rainforest Alliance: 1 January 2014.
• Cocoa & Forests Initiative: 2017 (start of the partnership)
• Fairtrade: 31 December 2018
• EU Deforestation Regulation: 31 December 2020

Figure 2: It is important to know where your cocoa comes from

Source: Shutterstock

3. Reduce your environmental footprint

Determine your carbon footprint

Agriculture is a major cause of greenhouse gas (GHG) emissions. According to the United Nations, Agri-food systems contribute 31% of all GHG emissions, with deforestation as the largest source of these emissions. Cocoa is one of the main drivers of deforestation, and therefore also one of the main causes of GHG emissions. WWF reports that cocoa imports are responsible for more than 11 million tons of CO2-equivalent in the Netherlands.

GHG emissions in the value chain are commonly described as Scope 1, 2 and 3 emissions:

• Scope 1 emissions are ‘direct emissions from owned or controlled sources’;
• Scope 2 emissions are ‘indirect emissions from the generation of purchased energy’; and
• Scope 3 emissions are ‘all indirect emissions (not included in scope 2) that occur in the value chain of the reporting company, including both upstream and downstream’.

See the Greenhouse Gas Protocol for more details.

The largest share of the footprint in cocoa is at the cocoa production level, mainly because of land use change. Farm management can also be a large contributor. According to Wageningen University, farm management is a key factor in producing climate-friendly cocoa. The main farm management causes of GHG emissions come from composting cocoa residues and using fertilisers.

The rest of the supply chain also has a carbon footprint. The key parts of the footprint are fermentation, drying, transport, processing, manufacturing and packaging. For cocoa exporters, most of the carbon footprint of cocoa will be outside direct operations (outside scope 1).

Table 1: Main contributors of your carbon footprint in cocoa

Reduce your carbon footprint in cocoa production

The main area to reduce your carbon footprint is by making changes at the farm level.

Agroforestry

One way to reduce your GHG emissions is by helping farmers change to agroforestry. According to Tropenbos, agroforestry has many benefits. It can help mitigate the impact of climate change by storing carbon. It can also help protect cocoa farms from droughts and pests.

It is important that you support farmers if they switch to agroforestry. Farmers need to know why it is important to switch to agroforestry and how they should do this. Farmers also need to be supported financially, since extra investments are needed.

Figure 3: Different ways of growing cocoa, from full-sun to cocoa agroforests

Source: Frontiers

Reforestation

You can also take part in projects to replant forests. Cocoa can become more attractive for importers in the EU if it relates to a reforestation project. There are many EU companies that report on these projects for their supply chains. Such projects include Nestlé’s project to reforest the Cavally forest reserve in Côte d'Ivoire and the World Cocoa Foundation’s reforestation project in Ghana.

Climate-friendly farming

Farmers can change to more climate-friendly farming. A more climate-friendly system causes lower GHG emissions. It will also store a high amount of carbon and produce higher cocoa yields.

One way to do this is with Climate Smart Agriculture (CSA). The objectives of SCA are to increase productivity and income, adapt to climate change and reduce net GHG emissions.

There are also actions that you can take after the harvest. For example, a natural drying process has a lower carbon footprint than gas-dried cocoa.

Reduce your carbon footprint in the value chain

You can also reduce your carbon footprint in the value chain. This includes transportation, processing and grinding, and packaging.

The main way to reduce the carbon footprint in transport is by making transportation as efficient as possible. For example, exporters can make sure that they use full containers when shipping cocoa. Small specialty cocoa brands can make sure they avoid transporting cocoa by plane, even if it is just a few bags.

The main way to reduce the carbon footprint at factories is by lowering the use of energy and switching to green energy. You can do this by installing solar panels, using wind energy, or using other sources of renewable energy.

You can also reduce your carbon footprint in packaging. For example, manufacturers can reduce or stop plastic use, switch to recycled or FSC certified paper, or use compostable packaging.

Report on your goals and actions

Many European companies and consumers expect companies to report on their carbon footprint. Reporting on your goals and actions can help exporters get better market access in Europe. You can report using the 5-step process of the Science Based Target Initiative (SBTi):

1. Commit: submit a letter establishing your intent to set a science-based target;
2. Develop: work on an emissions-reduction target in line with the SBTi’s criteria;
3. Submit: present your target to SBTi for official validation;
4. Communicate: announce your target and inform your stakeholders;
5. Disclose: report company-wide emissions and track target progress.

Many cocoa companies already use SBTi to set their targets. You can look at the public reports of these companies to learn how to do this. For example, Mars has shared how they set their targets and what they learned from the process. In some cases, reporting is even required by law (see tip 5).

4. Consider carbon finance mechanisms to generate extra income

Another way to generate extra income for cocoa farmers is by setting up a carbon finance project. These projects create carbon credits by reducing GHG emissions. Companies can use these credits to offset their own emissions.

Opinions on carbon credits and carbon finance vary. Some reports show that carbon offsets can contribute to reaching climate targets, others say that carbon credits help companies continue to pollute. Climate-neutral claims among many companies have been increasing in recent years. Be aware that some companies may start to move away from carbon-neutral claims.

This report will focus on the opportunity of carbon finance for farmers and exporters. Carbon finance can be a way to create extra income for farmers. It can also help exporters make their cocoa more attractive to buyers who want to reduce their carbon footprint.

Set up a project

Carbon projects usually need to be quite large. The costs are often too high for smallholder farmers. It can be difficult to set up a carbon project in cocoa. In recent years there have been some new initiatives for smallholder farmers, including the Gold Standard Micro-Scale Programme, Acorn and SarVision.

There are many ways to reduce carbon emissions at cocoa farms, like using cocoa farming as a carbon sink. This means that extra carbon is stored in vegetation (trees), for example in an agroforestry system. This is also called carbon sequestration, as done in the Farmstrong and Acorn project in Côte d’Ivoire.

You can also set up a biochar project. Biochar is created from cocoa husks. By capturing the carbon, you prevent the release of carbon from decomposing cocoa husks into the atmosphere. Biochar can also be used as a fertiliser, as done in the Beyond Beans biochar project.

Inform and involve farmers

It is important to inform and involve the farmers. The chances of success are higher when the farmers know why they are doing certain things. Project partners should share the money they receive for the carbon credits fairly. This includes all the participating stakeholders, including the farmers.

5. Prepare for European laws and regulations

Becoming a greener cocoa producer or exporter is not only important for the environment or for finding new buyers, it is also becoming a need for doing business in Europe. There are many laws and regulations that you need to meet when exporting cocoa to Europe, and many voluntary requirements that are seen as a minimum for doing business.

Prepare for regulation on deforestation-free products by December 2024

The European Union (EU) wants to minimise the contribution to deforestation and forest degradation worldwide. The EU has therefore proposed a regulation to curb EU-driven deforestation and forest degradation. All cocoa products that you export to the EU must meet the deforestation regulation. This regulation is relevant for all exporters of cocoa to the EU.

The new regulation is expected to enter into force in May or June 2023. Companies will then have 18 months to meet the new rules. This means that exporters would need to meet this regulation by December 2024. Micro and small enterprises (MSEs) will have an extra 6 months to comply, which means they would need to be compliant by June 2025.

Here is a brief description of the key elements:

• Due diligence statement. Exporters are only allowed to export cocoa that is both deforestation-free and legal. You need to cover all cocoa exports with a due diligence statement.
• Traceability. The regulation requires traceability of the cocoa to the plot of land where it was produced.
• Deforestation cut-off date. Cocoa from land that was deforested or degraded after 31 December 2020 cannot be sold in the EU.
• Benchmarking system. There will be a benchmarking system that assigns risks to countries and regions. The risk level determines what you need to do.
• Agroforestry is not an alternative. Agroforestry cocoa produced on degraded or deforested land cannot be sold in the EU.

EU Corporate Sustainability Reporting Directive

The EU also has other laws and regulations that could be relevant. You may likewise need to meet the Corporate Sustainability Reporting Directive (CSRD), which encourages accountability and transparency. Businesses that fail to meet the CSRD can receive financial penalties.

The CSRD will be mandatory for all companies with over 250 employees and over €40 million in annual turnover. This will start in 2024, 2025 or 2026, depending on a few factors. See the EU website for details.

Some exporters may need to meet the CSRD. This is the case if:

• You generate a net turnover of over €150 million in the EU; and
• You have at least 1 subsidiary or branch in the EU.

You may also get information requests from your buyers if they fall under the CSRD.

EU Green Deal

The European Commission launched the European Green Deal (EGD) in 2019. The EGD aims to make the EU climate-neutral by 2050. See the article The EU Green Deal – How will it impact my business? for more details.

6. Incorporate green principles in requirements for your suppliers

Aligning with the requirements of your buyers can make it easier for you to become more environmentally friendly. Many cocoa companies publish the requirements in a Supplier Code of Conduct. These requirements often include both social and environmental requirements. For more details on social requirements, see Tips to become a socially responsible exporter in the cocoa sector.

Learn about Supplier Codes of Conduct

Supplier Codes of Conduct can contain many elements. These are often about social topics, but sometimes also include environmental requirements. See the table below for examples.

Table 2: Examples of environmental requirements in a Supplier Code of Conduct

Publish a Supplier Code of Conduct for your suppliers

You can also set up your own Supplier Code of Conduct to make sure that your suppliers are more environmentally friendly.

In a Supplier Code of Conduct it is important to consider how far up the supply chain it applies. It can apply only to your direct (tier 1) suppliers, or further up the supply chain to the suppliers of your suppliers (tier 2). You can increase your impact by increasing how far the Supplier Code of Conduct applies.

A Supplier Code of Conduct can also have requirements for suppliers that are not cocoa producers or cooperatives, such as:

• Suppliers need to have a Supplier Code of Conduct or environmental policies.
• Suppliers need to have targets and action plans for reducing the impact on the environment.
• Suppliers need to report on their greenhouse gas emissions, also in their supply chain (scope 2 and 3).

7. Work with certification and service providers

When going green in cocoa, there are programmes and services that can help you with practical guidance and support. There are many programmes and services in the cocoa sector. These include certification programmes such as Fairtrade, Rainforest Alliance and Organic. There are also many platforms and initiatives.

Learn about the phases of sustainability

To determine where to find the right support, it is helpful to first describe where cocoa is in the transition to sustainability. New Foresight describes 4 phases in the transition to sustainability.

1. Inception. This is when people start to be aware about the sustainability issues in the sector.
2. First Movers. Some companies start to take action and use sustainability as a competitive advantage.
3. Critical Mass. Most companies are taking action. Multi-stakeholder initiatives are set up with industry, civil society, governments and academia.
4. Institutionalisation. There is a level playing field. Sustainability is the ‘new normal’.

Source: New Foresight

The cocoa sector is now starting phase 4 of this model. There are already many multi-stakeholder initiatives. These include the Cocoa & Forests Initiative, the Initiatives on Sustainable Cocoa and the International Cocoa Initiative. In tip 5 we described how laws and regulations are implemented to create this level playing field. These are included in the multi-stakeholder dialogue for sustainable cocoa.

You can work with a certification or sustainability programme to help you reach your environmental goals. Below we describe the main Voluntary Standard Systems in cocoa and how they can help you.

Work with Rainforest Alliance and Fairtrade

Certification can help you become more environmentally friendly. The largest certification programmes available in cocoa are Rainforest Alliance and Fairtrade. Study both programmes to determine which one works best for you.

A factor that can determine your choice is the available traceability levels. It is essential to know where your cocoa comes from when you want to address sustainability risks in your supply chain. The level to which you can trace cocoa varies per standard. The main traceability levels are Mass Balance, Segregated and Identity Preserved. For more details, see the explanations from Fairtrade and Rainforest Alliance.

Another factor that can determine your choice is the mapping and deforestation monitoring of the programmes. Both programmes have mapping requirements. Rainforest Alliance requires that all farms have a GPS point. This means that you will know where the farm is on the map (by 1 point). Part of the farms also need to be polygon-mapped. This means drawing an area (‘polygon’) around the farm. The new Fairtrade standard also requires farms to have a GPS point.

Work with organic-certified cocoa

Selling organic-certified cocoa can help you get access to new buyers. CBI reports that demand for organic cocoa in the EU continues to grow.

Complying with organic criteria can be quite demanding. You can only sell a product as organic if all the ingredients are organic-certified. This is not always possible when a product has too many different ingredients. Some companies will still buy organic cocoa even if the company will not sell the final product as organic.

The use of pesticides in other crops is a major threat to organic cocoa. There is a higher risk of pesticides leaking to cocoa production from other crops that are not organic (for example rice or bananas). In some areas it is even becoming too difficult to sell organic because of the contamination. Some regions cannot produce enough organic cocoa to meet demand. This risk is especially high in Latin America.

If you want organic certification, it is important to discuss with farmers why it can help to grow organic cocoa. Farmers also need technical support to help them grow organic cocoa. You can help farmers make sure that they meet organic standards.

Africa Regional Standard (ARS)

There are also other standards for cocoa production. One of these is the Africa Regional Standard (ARS) developed by Côte d’Ivoire and Ghana. The ARS was finalised in 2021. National implementation guides will be developed in 2023. The ambition is to make this standard mandatory for all cocoa farmers in those 2 countries.

It is important to note that if the cocoa is compliant with the ARS, it does not automatically mean that it meets the EU due diligence requirements. Read this paper for details.

Company programmes

Many companies have their own sustainability programmes that claim to make cocoa more sustainable and environmentally friendly. However, in many cases these programmes are not independently verified. This means that they are not checked by independent third-party organisations. Also, many programmes do not publish a Standard. It is therefore difficult to compare the quality of these company programmes.

8. Find funding partners and investors

Many of the tips described above are costly. It is helpful to find funding partners and investors to finance going green in cocoa. Environmental plans can also make you more attractive for funding partners and investors.

Working with funding partners and investors can make your cocoa more attractive for buyers as well. This is because buyers know that you have external financial support for your projects and initiatives.

There are many funding partners and investors that can help you. These include:

• GIZ. See the project data page for details on current and new projects;
• The Initiative for Sustainable Trade (IDH). Check their website for new Calls for Proposals;
• USAID. See Funding Opportunities for details;
• Swisscontact can be a partner with their development programme;
• World Bank. See Procurement Framework and Regulations for Projects for details;
• United Nations Development Programme. See Procurement Notices for details;
• Rainforest Alliance (for example through the Africa Cocoa Fund) and Fairtrade; and
• The Swiss Initiative for Sustainable Cocoa (SWISSCO) made funding available for cocoa landscape projects in 2023. Beyond Chocolate also made funding available for 9 projects.

This study was carried out on behalf of CBI by Molgo Research, Long Run Sustainability and Ethos Agriculture.

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