Barry Callebaut : Forever Chocolate Progress Report 2021/22 publications

2021 / 22

FOREVER CHOCOLATE PROGRESS REPORT

Our springboard for fresh ambition

Introduction

Sustainability is at the heart of Barry Callebaut, representing one of our four strategic pillars. In 2016, we launched Forever Chocolate, the next chapter in our long-standing commitment to building a sustainable cocoa and chocolate supply chain.

Forever Chocolate is our plan to have more than 500,000 cocoa farmers in our supply chain lifted out of poverty, to eradicate child labor from our supply chain, to become carbon and forest positive, and to have 100% sustainable ingredients in all of our products. Every year, we report on the progress of these time-bound, measurable targets, which are assured by a third-party independent assurance provider.

Halfway through our Forever Chocolate timeline, we have used the past year to take stock of the impact we have generated since 2016. In addition, as the future requirements for a sustainable chocolate supply chain are constantly evolving and transforming, we have assessed where our targets need sharpening. Our conclusion? We want to add fresh ambition to our Forever Chocolate Plan. In fiscal year 2022/23, we will present a set of sharpened targets, using our ongoing Forever Chocolate targets for 2025 as a springboard.

Our sixth Forever Chocolate Progress Report, covering fiscal year 2021/22, shows that we continue to scale

up our activities by partnering with customers as well as societal and industry stakeholders to create tangible impact on the ground, while at the same time publicly advocating for policies to make sustainable chocolate the norm.

Our over 1,600 colleagues in cocoa origin countries give us a unique pool of expertise. As an early sustainability adopter in the cocoa and chocolate industry, we have developed strong sustainability know-how and capabilities.

That is a key enabler of our robust program implementation and impact-driven solutions, and a point of differentiation for our customers. We continue to be the preferred partner to drive impact, delivering on our Forever Chocolate ambitions, and addressing customer needs.

"A fully sustainable cocoa and chocolate sector can only be achieved with the support of all   stakeholders .  We continued to scale up our activities with partners

to create tangible impact on the ground, while also advocating for policies to make   sustainable choco- late the norm."

Nicolas Mounard

VP Sustainability and Farming

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Our key achievements in 2021/22 include:

• Prospering Farmers - Our Farm Services business continued to support 171,710 (+36.7%) farmers in 2021/22. In addition, programs to support subsidized soil inputs and paid labor teams were ramped up across 8,000 hectares in Côte d'Ivoire and Ghana.
• Zero Child Labor - 80.6% of the farmer groups that are part of our direct supply chain¹ have systems in place to prevent, monitor and remediate child labor compared to
  61.4% in prior year.
• Thriving Nature - We launched our intensified agroforestry ap- proach across 11,000 hectares in Ghana and Côte d'Ivoire with a focus on long-term success through training, extended monitoring and payment for ecosystem services.
• Sustainable Chocolate - With the support of our customers, we increased the proportion of prod- ucts sold containing 100% sustain- able cocoa or chocolate to 49.4% in 2021/22, compared to 42.6% in prior year. This corresponds to one in two products.

More information on these and other achievements, as well as on our approach and measured impact, is given in the following sections on each pillar.

Shaping policy, regulations and norms

A fully sustainable cocoa and chocolate sector can only be achieved when all supply chain actors are committed to supporting the development of an enabling environment. A cause for which Barry Callebaut has been

a driving force from the start. In

1 According to the Agri-Logic report

"FFB Côte d'Ivoire company report Barry

Callebaut", on the state of the cocoa sector in Côte d'Ivoire analyzing data collected between March 2020 and February 2021.

December 2019, Barry Callebaut partnered with industry associations, companies and NGOs, requesting that the European Union introduce legislation imposing due diligence obligations on all companies that sell cocoa or cocoa products in the EU market. We are happy to see that our vision and accompanying advocacy work are yielding results and are supporting the development of a level playing field for all companies - the proposed EU legislation on deforestation and human rights, and environmental due diligence will provide impetus to strengthen an enabling environment, as well as the market pull, for sustainable cocoa. In 2021/22, we continued to actively participate in the EU Cocoa Talks, a multi-stakeholder dialogue on sustainable cocoa. In this forum, we contributed to the development of the EU-ledAlliance on Sustainable Cocoa and its roadmap. In June 2022, this roadmap, which aims to advance sustainability across the cocoa supply chain through collective action and partnerships, was endorsed by the European Union, Côte d'Ivoire, Ghana, as well as industry associations. In addition, in July 2022, Barry Callebaut, together with other industry players, signed the Côted'Ivoire-GhanaCocoa Initiative (CIGCI) Economic Pact, joining forces with the Ivorian and Ghanaian governments to accelerate the transition to a living income for all farmers.

Traceability - a key priority that can only be achieved through collaboration

Traceability to farm level - knowing where the cocoa we source is grown - plays a crucial role in addressing some of the structural sustainability issues in the cocoa supply chain. Accurate insights into cocoa sourcing, gathered through polygon mapping and geo-localization based on satellite images, are imperative for us in our efforts to eliminate deforestation. Barry Callebaut has already achieved high levels of traceability in its direct

supply chain. We have been publicly disclosing the geolocation of our direct suppliers in Côte d'Ivoire, Ghana and Cameroon since 2018/19 and regularly update the map, most recently in February 2022. In 2021/22, a total of 230,749 farms located within 25 kilometers of a protected forest area were mapped and monitored. This led to full traceability for beans originating from these farms.

In order to achieve traceability in our indirect supply chain, developing

1. government-mandated,national traceability system is essential. In this respect, Barry Callebaut supported a cocoa and chocolate industry statement affirming a willingness to consolidate and share industry-­ gathered data with Ghanaian and Ivorian authorities. The data will be aggregated into a single database owned and driven by producing countries, with the aim of achieving robust national traceability systems.
   In addition, we are also in support of Ivorian and Ghanaian efforts to set up a cocoa farmer identification registry. In 2021/22, we partnered with the CCC (Le Conseil duCafé-­Cacao) on a traceability pilot project.
   This pilot was established to test data sharing between government agencies and industry to feed the learnings into the development of a consolidated national farm database, currently being built by the CCC.
   We are also actively working on transferring our traceability know- how from our direct to our indirect supply chain. In 2021/22, we con- ducted a pilot program with three key indirect suppliers in Côte d'Ivoire, training them on precise and timely data collection. Building on the insights, we have gained regarding current levels of traceability among local indirect suppliers and how we can best assist them, we plan to onboard additional suppliers, and the cooperatives they source from, to further improve and scale up their traceability efforts.

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Our commitment to reporting on Environmental, Social and Governance risks

Our values represent a mindset and way of doing business that is committed to generating sustainable returns over time and creating long-term value for all stakeholders. We are dedicated to running all our operations with transparency and integrity, which includes reporting on our Environmental, Social and Governance (ESG) policies and risks. Identifying and addressing the key ESG issues facing our business and our approach to addressing these issues requires regular dialogue with our stakeholders. This principle underpins our approach to our non-financial reporting and our materiality assessment practices. In addition, we publicly disclose our GRI Reports and CDP Reports and maintain

a dedicated public website covering a range of key ESG topics that impact our operations and supply chain.

External recognition of our progress and impact

In September 2022, Barry Callebaut was ranked #1 out of close to 600 companies in the "Food Products" category by Sustainalytics, a leading player in assessing industry efforts to manage Environmental, Social and Governance (ESG) risks in supply chains. This is the fourth consecutive year that Barry Callebaut has been recognized as an industry leader in the management of the Environmen- tal, Social and Governance risks in our supply chain. This result once again confirms our leadership position, not only in the cocoa and chocolate sector, but also in comparison to our peers in the broader food and beverage industry.

In addition, CDP, an independent organization that assesses the carbon reduction plans of over 14,000 companies, awarded Barry Callebaut, for the first time, an A in global forest stewardship for 2021, along with

23 other high-performing companies leading in corporate action and transparency on deforestation. We were also ranked "CDP Leader"

for the fourth consecutive year for our carbon reduction achievements and our supplier engagement efforts to reduce scope 3 emissions, which are emissions that extend beyond our direct supply chain.

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Prospering Farmers

Lifting cocoa farmers out of poverty

Our goal

By 2025, more than 500,000 cocoa farmers in our supply chain will have been lifted out of poverty.

Our approach

Cocoa cultivation, unlike many other food crops, is still largely dependent on manual labor in many cocoa-­ growing regions. Almost two-thirds of global cocoa is produced in Côte d'Ivoire and Ghana and is predominantly grown by independent smallholder farmers supplying a range

of companies, sometimes via several cooperatives. According to Agri-Logic data, in Côte d'Ivoire, the average farmer age is 48 years, with an average household size of 10.6 people, or 7.5 people when excluding dependents who may or may not be relatives but are nonetheless dependent on the farm. Cocoa farmers and their families usually live in villages and are required to travel a few kilometers to work on the farm, with most of the work and labor on the farm undertaken by the farmer and their families themselves. Most farmers work on more than one field, sometimes owning one of the plots and leasing the others.

In Côte d'Ivoire, farms are around

5.12 hectares in size, with an average of 3.61 hectares primarily dedicated to cocoa. The yield sourced from, on average, 1,352 cocoa trees per hectare, is around 341 kg². This means farmers face a challenge when it comes to making a living from a

small farm. It is also very difficult to increase cocoa production without investing in labor-intensive and time-­

consuming­ pre-harvest activities and costly farm inputs.

At the same time, cocoa accounts for a significant part of these smallholder farmers' income, 70% to 85% in Côte d'Ivoire³ and two-thirds in Ghana⁴.

As we progress towards our 2025 target to have more than 500,000 farmers in our supply chain lifted out of poverty, our focus is to continue supporting farmers to modernize agriculture and cultivation methods,

8,000

hectares covered by programs

to support farmers with subsidized soil inputs and paid labor teams

increase yields, diversify income and professionalize farming practices.

We are focusing on three main components to improve a cocoa farmer's quality yield per hectare: im­- proved planting material, productivity­ packages and financial support for third-party labor services. Because we believe that low levels of farm invest-

ment are the key challenge that must be addressed. In addition, Barry Callebaut is working alongside customers­ on several premium paying programs.

We are continuously exploring ways of innovating cocoa farming practices that are climate-smart and enhance farm profitability. In 2022, for example, Barry Callebaut established the Farm of the Future in Ecuador to power cocoa farming research and innovation. This research and innovation farm represents our firm commitment to developing sustainable solutions that are impactful beyond our own operations, encompassing the wider cocoa and chocolate industry.

Besides such research, it is also critical to have an in-depth understanding of the conditions, challenges and potential of the farms and farmers we work with. At the end of fiscal year 2021/22, our unique and extensive farm mapping database covered 235,817 (+13.0%) farmers

• According to the Agri-Logic report "FFB
  Côte d'Ivoire company report Barry Calle­ baut", on the state of the cocoa sector in Côte d'Ivoire analyzing data collected between March 2020 and February 2021.

• Pluess, J. (November 2018), Children's Rights in the Cocoa-Growing Commu- nities of Côte d'Ivoire, Abidjan: UNICEF Côte d'Ivoire. Available from https:// sites.unicef.org/csr/css/synthesis-report-children-rights-cocoa-communities-en. pdf (accessed August 5, 2021).

4 Cocoa Farmers in Ghana experience pov­ erty and economic vulnerability (2017). Available from https://cocoainitiative.org/ (accessed August 2, 2021).

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with full data. This means we have captured their socioeconomic and household data through census interviews and mapped the geographical location and the size of their farms. Currently, we have mapped 399,413 cocoa farm plots, covering 79.7% of our direct supply chain⁵ in 2021/22. Our focus on mapping and data collection applies to our indirect supply chain too. As such, in 2021/22 we launched projects to integrate the data of several indirect supply chain partners during the coming fiscal year.

The gathering of farmer data also helps us to gain a more detailed picture of farmer profiles and a better understanding of farmer needs for our Farm Services business. Our individualized Farm Business Plans (FBPs) constitute a multi-year model of the potential income a specific farm can generate if managed optimally. In one-to-one consultations, our Farm Services specialists and the farmer evaluate the farm landscape - soil analysis, age of cocoa trees, pre­- sence of alternative crops and livestock

• and categorize the agricultural skills the farmer already possesses. Such a tailored approach is unique and is only made possible by the over
  1,600 dedicated people we have working on the ground in cocoa-pro- ducing countries. More than 120,000 (+29.8%) farmers adopted FBPs
  in 2021/22, and a total of 171,710 (+36.7%) cocoa farmers in Côte d'Ivoire, Ghana, Cameroon, Brazil,
  Ecuador and Indonesia benefited from our Farm Services support this fiscal year.
  In 2021/22, we significantly increased the number of cocoa seedlings distributed to 3.91 million (+46.3%). We also invested in a large nursery production facility in Brazil through which we plan to grow and distribute 1.2 million cocoa seedlings in the coming fiscal year. Distributing more robust and higher-yield seed- ling varieties helps to rejuvenate cocoa farms. Cocoa farms also thrive best in a diverse ecosystem that

includes a variety of tree species. In 2021/22, we continued scaling up the capacity of our shade trees nursery production facilities in Côte d'Ivoire, Ghana, Cameroon, Brazil, Ecuador, and Indonesia. This has resulted in the distribution of over

• million (+165%) non-cocoa trees, helping to diversify farmer income while providing beneficial shade for cocoa seedlings, removing CO₂ and improving soil quality and biodiversity on cocoa farms.
  In 2021/22, we also further increased the number of farmers receiving productivity packages to
  57,926 (+17.4%). Given the increased costs for fertilizers generated by the post-COVID recovery and the war in Ukraine, we focused on subsidizing fertilizers for farmers in Ghana and
  Côte d'Ivoire. Partly funded by Cocoa Horizons customers, we spent a total of over CHF 2 million on subsidies to keep prices at a more reasonable level.
  To realize the full benefits of fertiliz- er, a second critical input is needed - correct pruning techniques. The combination­ of soil inputs and ade-­ quate pruning enables cocoa trees to produce more fruit, which can lead to an increase in quality and yield.
  In 2021/22, in order to help farmers perform the time-consuming and labor-intensive work of pruning, Barry Callebaut together with a number of global customers such as Mondelēz
  International, Nestlé, Ben & Jerry's, and customers of the Cocoa Horizons Foundation launched a program to support farmers in Côte d'Ivoire and Ghana by offering them access to external labor resources. The pro- gram established professional service providers as it recruited and trained local community members and cocoa farmers to form labor teams, provid- ing them with the necessary equip- ment and giving them access to an additional source of income. The paid labor teams focused on the tasks of pruning and weeding, and the correct application of fertilizers and pesti- cides. In exchange for the pre-harvest labor support provided, the farmers

committed themselves to purchasing productivity packages with subsidized fertilizers. In 2021/22, this covered 8,107 hectares, 5,620 in Côte d'Ivoire and 2,490 in Ghana.

A historical approach to supporting cocoa farmers has focused on demonstration plots and farmer field schools. Through our close collaboration with farmers, we acknowledge that there is not a lack of farming knowledge. The challenges farmers face are related to structural and agricultural issues associated with the cost of production. Therefore, we shifted the focus of our Farm Services business from farmer training to more active support of their pre-harvest activities by providing them with external labor teams and subsidized soil inputs. This initiative can be traced to a trial project with one of our largest global customers under our Farm Services business, which demonstrated that increased investment in pre-harvest labor, particularly for tree pruning, as well as higher investment in the right mix and amount of soil inputs, can improve cocoa yields and increase farmer income. However, one of the challenges cocoa farmers face is the financial cost of pre-harvest work. In West Africa, the average farmer spends

70% of their time doing post-harvest activities and only 30% doing pre-harvest activities. Cocoa farming is also primarily a family-operated business, and the cost of additional labor for pruning as well as soil inputs is often out of reach for farmers. In the coming financial year, we plan to significantly scale our new approach, aiming to offer additional support via external labor and access to inputs such as fertilizers to 20,000 more farmers in Ghana and Côte d'Ivoire as well as Cameroon.

• In line with our core principle of partnering with other stakeholders to create tangible impact on the ground and make sustainable chocolate the norm, this KPI extends beyond our direct supply chain, covering more than 12,000 farmers from our indirect supply.

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