Forever Chocolate Progress Report - Barry Callebaut - Free Download PDF

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2017/18Forever ChocolateProgress ReportIncreasing our verifiable impactForever Chocolate is our plan to make sustainablechocolate the norm by 2025 – to ensure that chocolate willbe around forever. As the world’s leading manufacturerof high-quality chocolate and cocoa products, we have amoral obligation as well as a business interest to tackle thestructural issues in the chocolate supply chain. Therefore,we have to lift cocoa farmers out of poverty, ensurechildren are not engaged in child labor1, become carbonpositive, eliminate deforestation from our supply chainas a step to becoming forest positive, and have 100%sustainable ingredients in all our products.In fiscal year 2017/18, we made great progress toachieving the targets we set ourselves in 2016. Ourquantified, time-bound objectives enable us to engrain oursustainability agenda across all our business functions.The progress data show how, through our sourcing,processing and sales, we are driving change, supportingcocoa farming communities, reducing resourceconsumption in our factories and driving the uptake ofsustainably sourced chocolate.But we have to do more: Forever Chocolate is aboutincreasing our verifiable impact and systemic change. Wededicated the past fiscal year to developing our theoryof systemic change, identifying those activities whichcreate self-sustaining cocoa farming communities. Theseactivities range from farm-focused activities, such asincreasing farm productivity and crop diversification,to community-focused activities, such as empoweringwomen to generate income, taking measures againstthe worst forms of child labor and improving access toquality education.Forever Chocolate Progress Report 2017/18Programs for changeTo assess our theory of change, we developed andimplemented five “programs for change” which will allowus to learn how we can drive systemic change in thechocolate supply chain: first, we are building large farmerdatasets, which are obtained primarily through interviewsand on-farm mapping. Through our Katchilè database,we are collating an unprecedented amount of details toensure consistency as well as impact measurement andmonitoring each year. We currently have detailed location,agronomic, economic and social survey data on over130,000 cocoa farms in our supply chain. This figure willrise to 500,000, demonstrating our ambition to lift halfa million farmers out of poverty by 2025. These datasetsallow us to create tailor-made programs zooming in onthe key issues of specific cocoa farming communities andwill support us in assessing our theory of change: do ouractivities lead to the impact we are aiming for?Second, to learn how we can accelerate impact on theground, we have developed pilot projects in five key cocoasourcing countries, Côte d’Ivoire, Ghana, Cameroon,Brazil and Indonesia. Through these pilots we want toverify if our approach is replicable, scalable and eventuallyleads to farmers’ self-sustenance. We are partnering withWageningen University & Research, the world’s leadingagricultural university, which has defined the baselineand analytical framework against which we can assessthe outcomes.Third, through our Farm Services business, we offer cocoafarmers products and services to improve the productivityof their cocoa farm. These services include coaching ingood farming practices, supporting farmers to accesscredit and providing cocoa farmers with improved plantingmaterial and farm inputs. Together with participatingfarmers, we are developing customized Farm Business1

Plans. In 2017/18 close to 9,500 Plans were developed.Following a multi-year approach, we advise on the bestmix of seedlings and fertilizers, and support farmersto access labor on credit for each farm. The offering ofthis mix will also include an assessment whether it willallow the farmer to achieve a higher yield, allowing him/her to recuperate the costs against which the serviceswere provided. For example, in 2017/18 we decided forCôte d’Ivoire not to include fertilizer in the mix, as theadditional costs could not be recuperated by the cocoafarmers considering the relatively low cocoa bean prices.Fourth, to understand where we have our biggestcarbon impact, we calculate our carbon footprint everyyear. Through this annual benchmarking we can trackour progress in shifting our supply chain to a carbonpositive trajectory.Finally, Cocoa Horizons is our preferred vehicle todeliver on our Forever Chocolate targets. It enables ourcustomers to join the journey and invest in sustainablecocoa production. Cocoa Horizons is an effectivesustainability program with the vision to drive cocoafarmer prosperity by creating self-sustaining farmingcommunities that protect biodiverse landscapes andsupport children’s rights.But the need for systemic change in the chocolate supplychain requires us to focus on all of our ingredients, notonly cocoa. We have created heat maps to assess which ofthe ingredients we source are at risk of including theworst forms of child labor, or contributing to deforestation.Through certification and additional requirements ontraceability and the mapping of farms we are committedto driving systemic change in the supply chains of all theingredients we source.Creating the movementForever Chocolate goes beyond Barry Callebaut. It isabout creating a movement with industry, government andsocietal partners, in order to scale up our impact. In thepast fiscal year we saw remarkable progress in this area.For example, we actively supported our customers withsustainable solutions, implemented programs and projectson their behalf and worked together to generate demandfor sustainable ingredients.In addition, we were one of the leading companies toestablish sustainable multi-stakeholder frameworkssuch as the Cocoa and Forests Initiative Frameworks forAction, signed by the governments of Côte d’Ivoire andGhana, leading cocoa and chocolate companies as wellas NGOs. The goal of these frameworks is to eradicatedeforestation from the cocoa supply chain in West Africa.Furthermore, we signed letters of intent with Côte d’Ivoireand Ghana to work towards the design and validation of asustainable cocoa farming model. In order to have a properand long-lasting impact, we need the support of NGOs,governments and the industry.Barry Callebaut is annually assessed by the companySustainalytics, to provide us with a solid third-partyassessment of our investments in sustainability.The assessment looks at all our efforts in the area ofenvironment, social and governance (i.e. corporate codeof conduct, anti-corruption policy, etc.), and ranksagainst the efforts of other participating food companies.In 2017/18, Barry Callebaut was ranked as ‘outperforming’on sustainability.2We are confident that we are progressing towards systemicchange in the chocolate supply chain. There is still a lot tobe done, but through assessing, learning and improving,we are confidently increasing our impact.According to the International Labour Organization, not all work doneby children should be classified as child labor that is to be targeted forelimination. The term ‘child labor’ is often defined as work that depriveschildren of their childhood, their potential and their dignity, interfereswith their schooling and is harmful to their physical and mentaldevelopment. Activities such as carrying heavy loads or using chemicalsare considered as ‘unacceptable forms of child labor’ because they arephysically dangerous for children.1Sustainalytics, Barry Callebaut AG ESG Report 20182Forever Chocolate Progress Report 2017/182

Prospering FarmersLifting cocoafarmers out ofpovertyOur GoalBy 2025, we will lift more than 500,000 cocoa farmers outof poverty.Our ApproachWe can only lift cocoa farmers out of poverty if we pursuenothing less than systemic change in cocoa farming.Systemic change means cocoa farming that is prosperingand self-sustaining. The first step in achieving systemicchange is to understand the specificities and needs inorder to enable each cocoa farm in our global supply chainto be self-sustaining. This is why in 2017/18 we startedthe creation of farmer data sets that map, amongst otherthings, the size of the farm, its soil quality, its productivity,as well as the household it has to support. We have so farmapped 130,811 cocoa farms in our Katchilè database andwill increase this number to half a million by 2025. Thisdatabase gives us the unprecedented capability to designtailor-made Farm Business Plans for participatingcocoa farmers. In 2017/18 208,329 farmers participated inour sustainability programs. Furthermore, 9,486 farmershave a Farm Business Plan.In addition, we need to understand what self-sustainingcocoa farming looks like in the major cocoa growingcountries. This is why in 2017/18 we designed pilotprojects in Côte d’Ivoire, Ghana, Cameroon, Brazil andIndonesia. These pilot projects will test the effectivenessof productivity packages, which include measuring theimpact of proper pruning techniques, fertilizer packages,designing the diversification of farm income throughintroduction of alternate crop packages to farmers,and giving the farmers access to innovative financialinstruments. Wageningen University & Research, theworld’s leading agricultural university, will assess theeffectiveness of our interventions in these pilots.We distributed over 2,1 million young cocoa seedlings forreplanting and around 393,000 shade trees.Forever Chocolate Progress Report 2017/18Cocoa Horizons, as an impact driven sustainabilityprogram, ensures that activities are focused on relevantareas and implemented efficiently. In 2017/18 premiumsfrom the purchase of HORIZONS products generatedCHF 10.5 million and the program reached more than70,000 farmers. Farmers participating in Cocoa Horizonshave access to coaching, access to a Farmer BusinessPlan, are supported to access financial services and farmservices, and are supported on income diversificationactivities and women empowerment. All of the abovewill ensure that cocoa farming again becomes aprofitable business.Creating the movementSystemic change to cocoa farming requires support fromthe governments of cocoa growing countries. In fiscalyear 2017/18, we partnered with the Ivorian governmentand the Ghanaian government, signing two letters ofintent on sustainable cocoa farming. The purpose ofthe letters of intent is to encourage the signatories towork collaboratively towards the design and validationof a sustainable cocoa farming model, with a specificfocus on the clearing and re-planting of cocoa treesinfected with the swollen-shoot virus (CSSV) disease.Also, the cooperation will include agroforestry, morespecifically income diversification for cocoa farmers andthe planting of shade trees. This is a great example of themovement required to make sustainable chocolate thenorm, creating models of farming that positively impactfarmers livelihoods.Our measured impactIn 2017/18, 12,395 farmers ( 113%) in Côte d’Ivoire,Ghana, Cameroon, Tanzania, Brazil and Indonesiaparticipated in our Farm Services business, and receivedcoaching and other inputs such as tools and seedlings orsupport to access finance. We supported cocoa farmers inreplanting 281 hectares ( 60%) with young cocoa trees,as well as other crops that provide shade, and help cocoafarmers diversify their income. After the 23% increase3

in productivity measured in 2016/17, we did not see asignificant increase in productivity with Ivorian cocoafarmers participating in our Farm Services businesscompared to the control group in 2017/18. This is partlydue to young cocoa trees only starting to positivelyimpact cocoa farmer productivity once they start to growcocoa pods after 4–5 years. In addition, productivitywas negatively impacted by our decision to not includerelatively costly fertilizer in the Farm Services packagein order to avoid creating additional costs for the cocoafarmer which, due to the low cocoa bean prices, could notbe recuperated.Based on the World Bank threshold for extremepoverty, USD 1.90/day, we estimate as a baseline that in2017/18 169,460 cocoa farmers in our supply chain areout of poverty.Key Metric169,460Baseline measurement of the number of cocoa farmersin our supply chain out of poverty, measured against theWorld Bank’s USD 1.90/day threshold for extreme povertyEnabling KPIs12,395Number of cocoa farmers who have access to coaching,inputs such as tools and seedlings, or financeNo measurable productivity improvement per hectare ofthese farmers in 2017/18281Number of hectares of cocoa replantedOur commitment to the UN SDGsForever Chocolate Progress Report 2017/184

Zero Child LaborEradicatingchild laborOur GoalBy 2025, we will eradicate child labor from oursupply chain.1Our ApproachThe existence of the worst forms of child labor is anindication that the cocoa supply chain in West Africa isnot prospering, nor self sustaining. Systemic change incocoa farming will reduce poverty and therefore reducethe incidence of the worst forms of child labor in the cocoasupply chain. But systemic change in cocoa farming aloneis not enough. We are rolling out child labor monitoringand remediation systems, prioritizing those cocoa farmingcommunities at highest risk. In addition, eliminatingchild labor requires systemic change in the farmingcommunities through awareness of the consequences ofthe worst forms of child labor for a child’s development,education, and quality access to primary, secondary andvocational education. This is why we include child laborawareness in the training we offer to cocoa farmers. Infiscal year 2017/18 we trained 105,406 farmers on childlabor awareness.Access to quality education and awareness of children’srights also need to be addressed. Through partnershipswith a number of our customers, we are supporting theconstruction of schools in cocoa farming communities.The worst forms of child labor are not limited to cocoa,but also occur in the value chains of other chocolateingredients. We therefore created a heat map to identifycommodities and origins that are at risk of includingthe worst forms of child labor in their supply chain. Weprioritized our efforts to focus on commodities at highrisk, such as cane sugar and palm oil, working with oursuppliers to eradicate the worst forms of child labor.Forever Chocolate Progress Report 2017/18Creating the movementThe letters of intent we signed with the Ivorian andGhanaian governments on sustainable cocoa farmingspell out a commitment to increased cooperation on theeradication of the worst forms of child labor. This includesworking together on community led initiatives to eradicatechild labor and support women cocoa farmers, as well asyoung cocoa farmers. In addition, through the World CocoaFoundation (WCF) and the International Cocoa Initiative(ICI), we are actively working together with governmentsto prepare for a survey in 2019 on the continuedprevalence of the worst forms of child labor in the Africancocoa supply chain. This report will be a follow-up to the2015 Tulane University report, which is still considered tobe one of the most precise assessments of the situation ofchild labor in the African cocoa supply chain.Our measured impactWith the support of ICI, we continue to implementmonitoring and remediation systems on child labor. Thisconstitutes on the ground household and farm visits byour staff to survey practices concerning child employmentand education in cocoa farming communities. Thesesurveys allow to identify children performing hazardoustasks and to estimate the prevalence of the worst formsof child labor. In 2017/18, we deployed monitoring andremediation in 21 farmer groups covering 12,018 farmersin Côte d’Ivoire and Ghana. We established that in 2017/1812% (2016/17: 3.2%) of the farmer groups we directlysourced from have systems in place to prevent, monitorand remediate child labor. The monitoring uncovered 4,230cases of the worst forms of child labor, in all cases childrenworking on their family’s farm. This increase is the resultof the coverage of a broader range of farmer groups. As weroll out remediation and monitoring systems, additionalcases of the worst forms of child labor are expected to befound. All the cases of worst forms of child labor we foundare being remediated.5

In order to ensure that there are no worst forms of childlabor present in any of the other ingredients we aresourcing for our products, we have updated our suppliercode to incentivize suppliers of non-cocoa ingredients tohave systems in place to prevent, monitor and remediatechild labor. Our focus in the upcoming fiscal year will beto establish what type of systems are being used by oursuppliers. This means that for fiscal year 2017/18 we arenot reporting on the number of third-party suppliers whohave equivalent systems in place.Key Metric4,230Number of child labor cases identified and beingremediated in our supply chainEnabling KPIs12%of the farmer groups we directly source from have systemsin place to prevent, monitor and remediate child laborData available 2018/19Number of third-party suppliers who have equivalentsystems in placeOur commitment to the UN SDGsAccording to the International Labour Organization, not all work doneby children should be classified as child labor that is to be targeted forelimination. The term ‘child labor’ is often defined as work that depriveschildren of their childhood, their potential and their dignity, interfereswith their schooling and is harmful to their physical and mentaldevelopment. Activities such as carrying heavy loads or using chemicalsare considered as ‘unacceptable forms of child labor’ because they arephysically dangerous for children.1Forever Chocolate Progress Report 2017/186

Thriving NatureBecoming carbonand forest positiveOur GoalBy 2025 we will be carbon and forest positive.Our ApproachIn order to become carbon positive, we are not just lookingat the carbon footprint created by our own operations(scope 1) and generated by the energy we use (scope 2).We also take into account the carbon footprint of ourentire supply chain (scope 3), including the productionand processing of all raw materials we source, and relatedland use changes. About 60% of our carbon footprint isgenerated by land use change, meaning the conversionof forests to agricultural land and the subsequent lossof carbon storage capacity. One way of tackling thisis by looking into enhancing carbon sequestration ofagricultural land, by implementing good agriculturalpractices and making the planting of shade trees anintegral part of the farm packages we provide to cocoafarmers. We have also teamed up with a renownedresearch consultancy, Quantis, to undertake analyticalwork required to more accurately understand carbon inthe cocoa supply chain. This means developing a completecocoa carbon footprint, including methodologies toaccount for the carbon loss from deforestation. Thesemethodologies will be made publicly available oncefinalized. Another important challenge are carbonemissions generated by the production of dairy. Here,we are working with our suppliers to create a moresustainable dairy production, including lower carbonemissions, through the Vision Dairy program. We havealso joined the Cool Farm Alliance in September 2018 inorder to further drive the convergence of environmentalimpact assessment methodologies on farms and to enabledairy farmers in our supply chain to better measure andmitigate their carbon impacts.Optimizing our carbon footprint constitutes a mixof minimizing the carbon footprint of our factories,the carbon footprint of the energy we are using for theproduction of our products, as well as the carbon footprintForever Chocolate Progress Report 2017/18of our transport activities and our non-cocoa ingredients.For example, 14 out of our 59 factories (24%) are poweredby renewable energy.In order to become forest positive, we first of all needto become deforestation-free. This will require us towork w

Forever Chocolate Progress Report 2051/5fi 3. Our Goal. By 2025, we will lift more than 500,000 cocoa farmers out of poverty. Our Approach. We can only lift cocoa farmers out of poverty if we pursue nothing less than systemic change in cocoa farming. Systemic change means cocoa farming that is prospering and self-sustaining.