One year into its signature action plan to promote industry sustainability through stakeholder collaboration, the cocoa industry has made noticeable strides, but tall hurdles still remain.
Hesitations by some of the world’s largest corporations to fully align their performance measures under a collective alliance underscore a common conundrum among private actors: how to partake in pre-competitive collaboration in a way that does not compromise profitable returns.
For the cocoa industry, that common umbrella is CocoaAction — a coordinated effort by 11 of the world’s largest cocoa and chocolate companies to boost productivity and strengthen community development in the two largest cocoa-producing countries.
Output lags and threats to future cocoa supplies have spurred this effort. Challenges facing the industry range from aging cocoa trees to smaller yields and stagnant production that arise from inefficient agricultural practices. Cocoa farmers themselves are also aging, but without a steady pipeline of younger farmers to continue the trade.
Local communities bear the brunt of these challenges as well — smaller yields lead to lower incomes for already struggling farmers, which in turn reinforces a desire among youth to pursue other livelihoods.
Adding to the risks, the global cocoa industry is characterized by a de facto monopoly of supply, with West Africa — mainly Ghana and Ivory Coast — providing roughly 70 percent of world output. Any supply disruptions in the region, therefore, can have dramatic global implications.
Amid those headwinds the World Cocoa Foundation launched its CocoaAction strategy in Ghana and Ivory Coast in 2014 with the goal of aligning the industry’s largest players under a common set of practices that promote long-term sustainability.
In practice, this means providing farmers with better planting materials and improving farmer education and training. Results will be measured by an agreed upon set of six performance indicators.
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The goal by the end of the decade is to boost productivity on at least 100,000 farms in Ghana and 200,000 in the Ivory Coast — an intervention that seems necessary given the foundation’s estimates that the global cocoa supply needs to increase 20 percent annually to meet projected demand over the next 10 years.
Not surprisingly, major corporations gladly jumped on board.
“If we [don’t] do something about the supply of cocoa, we are going to limit our growth in the future,” said Hugo Van Der Goes, vice president for sustainability at commodities trading giant Cargill, at a recent industry gathering in Washington, D.C. “We actually have a very good economic reason to make sustainability part of our strategy.”
In practice, this also means that by signing up to a collective platform, those same private companies are agreeing to align their best practices with competitors.
Not surprisingly, this has stymied efforts to collaborate, with corporations often preferring to abide by their own systems and methodologies.
“Pre-competitive collaboration of the industry is both a great opportunity and something we need to work at and keep going,” said Andy McCormick, The Hershey Co.’s senior director for cocoa sustainability.
But promoting common methodologies and best practices among competitors creates obvious obstacles among cocoa stakeholders and across other agricultural sectors.
“This has been one of the most challenging parts of cocoa action,” said World Cocoa Foundation President Bill Guyton, who admits that the process is not as far along at this stage as initially envisioned. “Companies already have very advanced data collection systems. Then we come in with CocoaAction … as you can imagine, some companies don’t want to give up the way they are doing things.”
A lack of alignment among corporate initiatives also has implications for local communities and partners who often run the trainings or distribute inputs. Varied reporting mechanisms and potential competing interests can lead to confusion, uneven distribution of resources, and potentially less effective interventions for the cocoa farmers and their communities.
CocoaAction is an interesting case to watch, especially as collective action is more widely discussed and implemented. The cocoa industry has a reputation for having established a clear link between smallholder farmer success and global value chains — and built the necessary business case to support investment.
If the collective action model can work in cocoa — an industry with a reputation for having established a clear link between smallholder farmer success and global value chains — perhaps lessons can be replicated across other industries. But the early challenges could also forewarn continuing obstacles, especially in collective action platforms that require pre-competitive collaboration.
Do you think collective action can work among corporate competitors?
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