Sustainable Cocoa Sourcing

• The future of sustainable cocoa production will hinge on brands, suppliers, and manufacturers committed to complete supply chain traceability and transparency.
• Time is of the essence in ensuring deforestation-free, EUDR compliant cocoa. Farm-level traceability – with the geo-located farmland tied to the transaction history of your cocoa beans at the source – is necessary to audit-proof your cocoa supply chain.
• Third-party certifications or spot audits are no longer sufficient to verify sustainable cocoa. Your brand needs real-time visibility to keep your cocoa supply chain ethical.

The allure of chocolate has captivated taste buds for centuries, but behind this indulgence lies a complex web of issues, from deforestation to labor rights violations. 

As the largest consumer of chocolate worldwide, Europe has taken proactive measures to mitigate the negative consequences of increased cocoa production. By enforcing the pioneering regulation on deforestation-free products (EUDR), the European Union (EU) aims to rid the market of cocoa that contributes to forest harm and child labor. In this piece, we will explore the current state of cocoa supply chains and how to shift to sustainable and equitable cocoa farming for audit-proof compliance. Let’s dive in!

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The State of Cocoa & Sustainable Cocoa Today

To get a clear picture of the current state of the cocoa industry, we must start at the source: cocoa bean farming. West African smallholder farmers, specifically in Côte d'Ivoire and Ghana, are responsible for producing 70% of the world's cocoa. About five to six million farmers grow cocoa beans along the equatorial belt, as the cocoa plant requires high humidity and rainfall to thrive. Cocoa beans are collected from pods that grow on the cocoa tree, with each pod containing 30 to 40 beans and each tree producing around 30 pods for 30 years. The typical cocoa value chain looks like: 

• Production: Cocoa bean farming, cooperative collectors, fermentation/drying 
• Processing: Refineries, grinders 
• Manufacturing: Food manufacturing, chocolate confectionary, cosmetics and pharmaceuticals 
• Retail & Consumption: Food retailers, consumer outlets

With cocoa production expected to rise in the coming years, major cocoa sustainability issues, such as child labor and deforestation, have increased scrutiny of the industry. Unfortunately, about 90% of West Africa’s primary forests have been destroyed. Since 1970, cocoa production expansion has resulted in a quarter of the deforestation in Côte d'Ivoire. On top of this, child labor remains prevalent, with an estimated 1.56 million children working on cocoa farms, 43% in hazardous conditions, in Côte d'Ivoire and Ghana. What is the commonality between these two issues? Extreme poverty. Farmers typically do not receive a living wage for their cocoa beans. As a result, farmers clear forests to boost harvests, and children are forced to work on farms to support their families. 

So, with these pressing issues, what can your brand do to ensure sustainably sourced cocoa? Spot audits, unsubstantiated claims, and greenwashing will no longer cut it under the new regulations. The future of sustainable cocoa production will hinge on brands, suppliers, and manufacturers committed to complete supply chain traceability and transparency. Do you know the farmer? If not, your brand needs real-time, farm-level data on your cocoa’s origins to keep your supply chain responsible and accountable. 

The Business Benefits of Sustainably Sourced Cocoa

Sustainable cocoa production isn't just a win for the environment and ethical concerns; it also offers a myriad of advantages for businesses within the cocoa industry. These benefits extend to every player in the cocoa supply chain, from farmers and producers to chocolate manufacturers and consumers.

Supply Chain Resilience

A significant advantage of sustainable cocoa production is enhanced supply chain resilience. Ethical cocoa requires source-level visibility of your production processes. This level of visibility enables your brand to secure your supply by eliminating uncertainties and mitigating compliance and disruption risks. Monitoring cocoa farming techniques that prioritize soil and forest health – especially as climate change poses a severe threat to agriculture – and verifying that your farmers receive a living wage can future-proof your cocoa supply. 

Regulatory Compliance 

The cocoa industry is increasingly regulated, with governments and international bodies implementing stricter environmental and ethical standards. By adopting sustainable cocoa sourcing practices, your businesses can position themselves to navigate the evolving regulatory landscape effectively. With sustainably sourced cocoa, and complete visibility into your cocoa value chain, your company can avoid litigation, costly fines, shipment seizures, and reputational damage.

Secured EU Market Access

The EU is one of the largest consumers of cocoa products globally. Access to this lucrative market is essential for cocoa-related businesses. The EU has been particularly committed to promoting sustainable cocoa practices, as is evidenced by the recent regulation on deforestation-free products (EUDR). By sourcing sustainably, your business can secure access to the EU market, so you can grow your business while doing good.

Brand Reputation & Customer Loyalty

Your company's reputation for ethical and sustainable practices can make or break your success. Consumers today are searching for products that align with their values. Brands that can transparently demonstrate sustainable sourcing through, for example, a Digital Product Passport, can increase customer loyalty and a broader customer base. 

EUDR Compliance for Cocoa Supply Chains: Producing Deforestation-Free Cocoa

Businesses are actively working to achieve EUDR compliance for their cocoa supply chains as the December 2024 compliance deadline draws near. To assist you in commencing your journey toward deforestation-free cocoa sourcing, consider the following valuable tips: 

Farm-Location

Proving that your cocoa is free from deforestation during an audit necessitates concrete, traceable evidence regarding your product’s origin. It's essential to record the precise geo-located boundaries of the farmlands where your cocoa beans are cultivated. Using satellite imagery or public cadasters, you can confirm that the land in question has not contributed to deforestation. This geolocated farm data should then be securely linked to the transaction history of your cocoa beans and maintained throughout your product’s journey to guarantee no commingling with non-compliant cocoa.

Segregated Product

Mass balance involves blending non-compliant and compliant commodities throughout the production process. Your entire cocoa batch must be certified, rather than just a portion, to ensure that your final product meets the EUDR's criteria. Implementing product segregation, which entails keeping cocoa from various certified sources separate from non-conforming cocoa throughout production, is necessary to prove your final product is deforestation-free.

Maintained Chain of Custody 

Maintaining a comprehensive chain of custody record for every batch, spanning from the initial farmland to distribution and all intermediary stages, simplifies EUDR compliance. Digitally tracking and monitoring sustainable cocoa initiatives alongside your procurement data – from soil to shelf – establishes a secure audit trail of social and environmental impact. By preserving primary source data linked to your product's chain of custody, you can confidently present evidence of deforestation-free practices at the farm level.

Cocoa Traceability For Brands and Manufacturers

Whether you are an EU chocolate brand wanting to ensure your cocoa is child-labor-free or a cocoa manufacturer exporting to the EU aiming to prove deforestation-free at its origin, implementing supply chain traceability initiatives will be key to success. In the past, brands and manufacturers have used third-party certifications or spot audits to verify cocoa sustainability. However, these methods lack the real-time visibility you need to keep your supply chain auditable and ethical. 

The below essential criteria will guide you in selecting the right traceability software for your business:

Proof of Provenance

The traceability partner or software you choose must be proficient in capturing source-level, primary data. High-level shipping data and aggregated records don’t provide the granularity needed to identify the precise origin of your cocoa. Your traceability system should be able to capture geo-located data starting at the origin to monitor deforestation status, farmer wages, and procurement practices.

Real-Time Tracking

Proactively mitigating the negative consequences of cocoa production requires real-time data and insights. Spot audits don’t allow for up-to-date, consistent information on the social and environmental impact of your cocoa sourcing. Choose a traceability software that can track and trace your cocoa as it moves throughout your supply chain - with ESG data tied to your product’s traceability. 

System Interoperability

Maintaining data integrity requires seamless compatibility with the diverse systems integrated throughout your supply chain. Implement a dependable traceability platform that effortlessly integrates with your existing systems (e.g., ERP, MRP, PLM) to create a single source of truth and streamline data analysis. Furthermore, your traceability system should integrate with existing supplier data to eliminate redundant data entry and build on any missing details. Opting for a blockchain-based, decentralized solution can provide maximum security of confidential information, fostering greater engagement with suppliers.

Ground Game Expertise

Encouraging supplier engagement in your sustainability and supply chain programs requires a user-friendly, secure data capture platform built from the ground up. This means your traceability software is device-agnostic and completely accessible in remote locations – no smartphones or apps are required! For example, BanQu, an advanced traceability platform, sends SMS messages to farmers for proof of payment to create digital economic identities. Additionally, your traceability partner must have a globally experienced support team – that provides in-field implementation and ongoing guidance – to overcome any cultural barriers.

Sustainable Cocoa Conclusion

Cocoa companies can no longer hide behind greenwashing and faux sustainability claims. Dire cocoa sustainability issues – such as deforestation and child labor – have moved consumers and government bodies to closely monitor the industry. To keep your supply chain compliant, your business must make the shift to sustainable cocoa production through farm-level supply chain traceability initiatives. With real-time data and insights from the origin of your cocoa supply chain, you can safeguard your cocoa supply while improving farmer livelihoods and protecting the planet. 

BanQu is a globally experienced supply chain traceability platform with multi-purpose solutions to achieve audit-proof EUDR compliance, prove ethical cocoa production, and drive strategic sourcing. Our blockchain-based platform was built from the ground up – so you can track and trace your cocoa from the farm it originated and eliminate supply uncertainties. Schedule a free risk assessment with our expert team today!