BARRY CALLEBAUT AG ANNUAL SOCIAL
AND ENVIRONMENTAL IMPACT REPORT
2023/24
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Sustainability | Our People | Business Conduct | GRI Report | Policies |
Table of Contents
- Sustainability
- Overview of our Forever Chocolate strategy
- Our Approach to Due Diligence
- Prospering Farmers
- Human Rights
- Thriving Nature
- Sustainable Ingredients
- Progress in Numbers
- Our People
- Employee Development
- Chairman's Awards 2024
- Business Conduct
- GRI Report
- Cross Reference to Relevant Policies
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Letter to Stakeholders
- Setting a new benchmark for supply chain transparency by prioritizing a rigorous, organization-wide approach to meet the EU Deforestation Regulation (EUDR)
- Significant increase in farm mapping to reach almost 670,000 plots, enabling farm-level traceability
- Publication of our Net Zero Roadmap to support the Paris Climate Agreement's goal of limiting global warming to 1.5 degrees Celsius
- Significant Scope 3 emissions removals through our scaled-up agroforestry approach and establishment of over 33,700 new hectares of agroforestry
- Expansion of paid labor groups by nearly +126%, supporting farmers with pre-harvest interventions across more than 44,000 hectares of cocoa farms
Dear Valued Stakeholder,
Fiscal year 2023/24 presented a challenging landscape for advancing our impact in sustainability, with cocoa prices reaching record levels due to a global shortage influenced by weather and climate factors. However, we remained resolute in our commitment to making sustainable and traceable chocolate the norm.
Best-in-class sustainability is a core promise of our strategic investment program, BC Next Level, and is essential to delivering on our four growth priorities. This year, we strengthened collaborations with sector stakeholders, leveraging on-the- ground expertise to meet customer needs and align with evolving consumer expectations, while promoting ethical practices and reducing environmental impact.
At the core of our sustainability efforts is end-to-end traceability. In fiscal year 2023/24, we made significant progress in building a sustainable and traceable cocoa and chocolate supply chain. The key focus has been implementing a rigorous, organization-wide approach to prepare for the EU Deforestation Regulation (EUDR). This has strengthened our traceability efforts and set a new benchmark for supply chain transparency. We remain committed to be compliant with the EUDR requirements by the new application date to be set out. As such, in 2023/24, our mapping initiatives expanded to cover 669,174 cocoa farm plots, enabling farm-level traceability for cocoa sourced from these farms.
Amid this year's challenging volatility in cocoa bean prices, we increased the proportion of products containing 100% sustainable cocoa or chocolate to 55.5%. This achievement reflects the commitment of our customers and suppliers to a sustainable cocoa and chocolate supply chain, as well as Barry Callebaut's drive to deliver the most sustainable, high-value solutions.
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In addition, we published our Net Zero Roadmap, describing how we will support the goal of the Paris Climate Agreement to cap global warming at 1.5 degrees Celsius. We also achieved significant Scope 3 emissions removals through our scaled-up agroforestry approach, with significant carbon removals
(-388,433 tCO2e) and established 33,795 new hectares of agroforestry.
Our paid labor groups program, supported by our customers, expanded by 125.8%, covering nearly 44,000 hectares. Along with boosting cocoa yields, this work has also deepened our engagement with the farmers we source from. As a result, despite bean shortages, the volume of cocoa beans supplied by these farmer groups has remained stable. Furthermore, we commenced partnerships with three international child rights organizations to tackle the socio-economic factors driving child labor and impacting child rights in Côte d'Ivoire, Ghana, and Nigeria. Through these collaborations, we are advancing a new community-based approach to create long-term, community-driven ownership.
Building on our vision first set in Ecuador in 2022, we launched the Future Farming Initiative (FFI) this year-an innovative strategy to scale sustainable, high-tech cocoa farming, beginning with a 5,000-hectare pilot in Bahia, Brazil. Through this project, we aim to set new benchmarks in the industry while sharing our insights and expertise from FFI with partners across all our sourcing regions, supporting their ongoing efforts toward more productive and sustainable cocoa farming.
This year has been an extraordinarily heavy lift, made possible by the expertise, dedication, and hard work of our Barry Callebaut colleagues, sustainability partners, customers, and the invaluable encouragement of our families and friends. Their commitment, passion, and unwavering support have been the foundation of our success.
At the heart of this report, you will find our familiar Forever Chocolate report, enhanced with a more granular explanation of our due diligence processes, aiming to provide a comprehensive picture of our efforts to make sustainable and traceable chocolate the norm.
Together with our customers, we are building a sustainable future of innovation and lasting impact. Do not hesitate to get in touch with Barry Callebaut if you have suggestions or comments on our efforts.
Peter Feld
Chief Executive Officer
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Sustainability | Our People | Business Conduct | GRI Report | Policies |
Overview
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Our Approach to Materiality
7 Risk Overview
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Our approach to materiality
In October 2023, Barry Callebaut published its most recent comprehensive double materiality assessment. Through a materiality assessment, a company identifies, assesses, and prioritizes, based on extensive external stakeholder consultation, the Environmental, Social and Governance (ESG) topics with the highest relevance for a company's operations. The concept of "double materiality" urges a company to not only consider the impacts they impose on humans and nature ("impact materiality") but also the risks and opportunities related to ESG topics that might affect their financial situation ("financial materiality"). Beyond adhering to the GRI standards (2021), our materiality analysis also considered the EU's Corporate Sustainability Reporting Directive (CSRD) framework.
The framework of ESG topics, based on CSRD topics, served as the basis for broad stakeholder engagement, through surveys and interviews, including cocoa farmers, public interest groups, suppliers, customers, employees and investors, resulting in a shortlist of priority topics. Several key aspects were underscored in this shortlist, including the importance of climate change adaptation and resilience of cocoa farms, as well as the importance of reinforcing alliances with on- the-ground stakeholders to, among other things, ensure traceability to farm-level.
Double materiality also includes the benchmarking of the list of priority ESG topics against the impact each of them has, or can have, on the financial performance of a company and its business model. For this, our Enterprise Risk Management specialists worked alongside our ESG task force to identify the financial and business risks tied to the shortlisted ESG topics. In this process, the entire value chain was analyzed and a time horizon for actions up to 2030 was adopted.
Overall, our 2023 double materiality assessment reconfirmed our commitment to the Forever Chocolate pillars: Prospering Farmers, Human Rights, Thriving Nature, and Sustainable Ingredients. Within these pillars, there are five standout topics considered to be material: Supply Chain Traceability, Climate and Energy, Biodiversity and Ecosystems, Workers in the Value Chain, and Affected Communities.
The material topics were approved at the Board of Directors' meeting in April, 2023.
For the full insight into our double materiality assessment, please see our publication, Barry Callebaut's approach to Double Materiality.
Materiality Matrix
Topics Evaluated
Supply Chain Traceability | |||
Environmental | |||
Climate and Energy | |||
Pollution | |||
Water and Marine Resources | |||
Biodiversity and Ecosystems | |||
Biodiversity and | Social | ||
Workers in the | Ecosystems | ||
Own Workforce | |||
Water and Marine | |||
Value Chain | Climate and Energy | Workers in the Value Chain | |
Resources | Consumers and | ||
Affected Communities | |||
End Users | |||
Consumers and End Users | |||
Own Workforce | Affected Communities | Governance | |
Taxation | Supply Chain Traceability | ||
Business Conduct | |||
Governance & Legal Compliance | |||
Governance & legal compliance | Taxation | ||
Resource Use and | Pollution | ||
Circular Economy |
Stakeholder's Priorities
Business Conduct
The results of our materiality assessment are mapped onto a Materiality Matrix. In this matrix, impact materiality forms the x-axis, while financial materiality forms the y-axis. To visually represent the results of the stakeholder survey on the matrix, we used bubble sizes; the larger the bubble, the higher the assessment from the stakeholder survey and interviews.
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Risk Overview
Enterprise Risk Management
The Group operates in the food industry and faces a wide range of uncertain opportunities and threats (risks) that could impact its strategic objectives. To manage these risks effectively, the Group has implemented an Enterprise Risk Management (ERM) framework designed to ensure that the effects of uncertainty on objectives are thoroughly evaluated throughout the organization and integrated into critical decision-making processes. The ERM framework fosters the adoption of tailored risk management practices that are fully integrated into the Group's business processes. Risk considerations are seamlessly incorporated into strategic planning and daily operations, thereby avoiding any isolation from other business activities. In addition to the implementation of specific embedded risk management practices, the Group employs a comprehensive ERM process. This structured approach systematically identifies, analyzes, aggregates and evaluates all types of risks, encompassing strategic, external, operational, financial, or compliance related risks, including the integration of ESG related risks. As a result, a comprehensive view of the Group's risk landscape is established, ensuring clear accountabilities, evaluations, and prioritization of the Group's key risks in alignment with the overall business strategy.
This holistic approach to risk management helps the Group navigate uncertainties and seize opportunities that align with its resilience objectives by:
- Raising awareness among key internal stakeholders about the Group's risks and their potential impacts.
- Providing critical, risk-relevant information that empowers leadership to make well-informed, timely decisions.
- Leveraging strategic opportunities that arise from a comprehensive understanding of risks.
- Protecting the Group's desired credit rating to ensure funding and liquidity, thereby ultimately safeguarding shareholder interests.
- Enhancing compliance with corporate governance standards, practices, and applicable laws and regulations.
Governance and Organization
The ultimate responsibility for establishing, reviewing, and adapting the organization-wide governance, risk management, control, and compliance procedures lies with the Board of Directors (Board). The Board has assigned the evaluation of the Group's governance, risk, and control frameworks to the Audit, Finance, Risk, Quality & Compliance Committee (AFRQCC). Additionally, the Board has entrusted the Executive Committee (ExCo) with the duty of implementing and carrying out risk management processes, which are
then cascaded and integrated into regional and functional management.
The responsibility for fostering risk awareness, incorporating significant risks into pertinent decision- making processes, and ensuring the efficacy of measures and controls lies with regional and functional management. Moreover, they are tasked with implementing supplementary mitigation actions when deemed necessary. The Group Risk Management function plays a pivotal role in facilitating the comprehensive enterprise risk assessment process. It aids in the identification and comprehension of the Group's principal risks, allocation of ownership, and enforcement of appropriate measures to mitigate said risks.
Monitoring and Reporting
The Group's continuous monitoring of its primary risks and the corresponding risk management efforts are deeply embedded in regular management review meetings and dedicated committees. The AFRQCC convenes as frequently as necessary, holding a minimum of three meetings per fiscal year, to address any notable concerns raised by Management, Assurance functions (including Group Risk Management, Quality Assurance, Safety Health and Environment, Digital Security, ESG, Compliance, Internal Audit, etc.), or external authorities and regulators.
Furthermore, Group Risk Management facilitates the evaluation of key risks with the ExCo and AFRQCC on an annual basis, while also providing regular reports on the progress of key initiatives. This ensures continuous oversight and responsiveness to emerging risks, thereby aligning risk management activities with the Group's strategic objectives.
While it is acknowledged that the Group faces many risks, the Board has identified the key risks, which includes topics identified in the Group's Double Materiality Assessmentthat could potentially impact the achievement of the Group's strategic objectives, as outlined in the table on the subsequent pages.
To delineate the approach of how the Group integrates ESG material topics into its Enterprise Risk Management framework, the subsequent table enumerates ESG material topics as identified in the Group's Double Materiality Assessment from one to five and associates them with pertinent keywords in the risk description and mitigation section. For instance, ESG material topic one, pertaining to climate and energy, is linked to the risk of climate change, denoted as one. This approach is intended to facilitate stakeholders' comprehension of the integration of ESG considerations within risk management, thereby underscoring the Group's dedication to transparency and accountability in addressing ESG-related risks.
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Key Risks
Environmental, Social and Governance (ESG)
Long-term sustainable supply of cocoa and other agricultural raw materials
Risk Description
The Group's strategic and operational business objectives and associated performance frameworks are linked to a complex, highly interconnected and continuously evolving global ESG transition and physical risk landscape. Factors such as the effects of climate change (1), carbon emissions (1), deforestation (1,2), human rights abuse (4), business ethics, diversity and inclusion, equality and stakeholder impact represent a wide source of uncertain drivers that can lead to opportunity and threats in the pursuit of business objectives and the creation of stakeholder value. ESG-related transition risk factors include uncertainties in relation to stakeholder expectations (civil society, customers, investors, NGOs, regulators and suppliers) associated with social and environmental accountability towards governance, strategy, risk management, metrics and reporting. Furthermore this encompasses continued uncertainty over the adequate operational implementation of various recent and emerging ESG regulations such as end to end supply chain traceability (5) and due diligence. Uncertainty on enforcement practices (1-5) by relevant competent authorities could expose the Group to supply chain disruptions and litigation and negatively impact the Group's commercial position and reputation.
The Group is dependent on a sustainable supply of quality cocoa beans and other agricultural raw materials so that it can produce high-quality cocoa and chocolate products. ESG risk factors such as declining productivity attributable to poor agricultural practices (3), nutrient- depleted soils and aging cocoa trees (3), waning interest from the next generation in becoming cocoa farmers (3), child labor in supply chains (4), shift in the cultivation preferences of farmers from cocoa and other related raw materials to alternative, more attractive crops (3), and the long- term impacts of deforestation (1,2) and climate change (1) could lead to a shortfall in high-quality cocoa beans and other essential agricultural raw materials in the mid- to long-term.
Mitigation/Measures
The Group has a long-standing commitment to sustainability. The Group identifies material ESG topics according to the double materiality assessment principles and outlines in detail its plan to make sustainable chocolate the norm in this Annual Social and Environmental Impact Report. Key elements of the Group's sustainability strategy and performance are described in more detail in this Annual Social and Environmental Impact Report (1-5). The Group is committed to continuously improving and implementing ESG specific oversight structures, agile resilience and adaptation measures, robust supply chain traceability and due diligence processes (5) and effective reporting frameworks (1-5). A dedicated ESG task force is employed to oversee, coordinate and align all relevant ESG activities in order to achieve those objectives. The aforementioned principles are also actively promoted in the Group's dealings with suppliers and customers and are as far as possible, imposed through the Group's contractual relationships with these stakeholders. Further stakeholder assurance is obtained through external ratings and audits. The Group publicly discloses sustainability performance, policies, programs, actions, and metrics (1-5) to address the needs of its stakeholders. The Group's progress is reflected in several renowned ESG performance benchmarks and assessments. Dedicated teams are proactively monitoring the evolving regulatory landscape to ensure the Group complies with emerging regulatory requirements as they develop.
Under the umbrella of its overall sustainability strategy Forever Chocolate, the Group focuses and reports on four pillars to make sustainable chocolate the norm: Prospering Farmers (3), Human Rights (4), Thriving Nature (1-2)) and Sustainable Ingredients (1-2). Long-term measures also include the continuous evaluation and diversification of supply sources in origin countries (1), developing improved and innovative agricultural practices for cocoa farms (2) and maintaining an industry dialogue with key stakeholders in origin and consumer countries (1-5). The Group's sustainability strategy and framework is described in more detail in the Sustainability section of this Annual Social and Environmental Impact Report.
ESG Material Topic
The Group links the following ESG material topics directly to this key risk pillar:
- climate and energy
- biodiversity and ecosystems
- workers in the value chain
- affected communities
- supply chain traceability
The Group links the following ESG material topics directly to this key risk pillar:
- climate and energy
- biodiversity and ecosystems
- workers in the value chain
- affected communities
- supply chain traceability
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Key Risks
Rapidly shifting trends
Business transformation
Risk Description
Rapidly evolving trends among customers such as food manufacturers, chefs, artisans, and consumers have the potential to disrupt market dynamics and impact the Group's future growth. Societal shifts, environmental concerns, technological advancements, dietary preferences, political developments, and regulatory changes significantly shape both customer and consumer habits. These factors collectively influence preferences and behaviors, driving changes in market demand and reshaping industries. A deep understanding of these forces is crucial for anticipating shifts and adapting effectively to evolving customer and consumer needs, ensuring sustained growth and continued market relevance.
The timely commencement and successful implementation of business transformation initiatives (1-5) are critical in pursuing strategic objectives, avoiding disruptions, enhancing agility, and adapting to evolving market conditions. Ineffective project portfolio management and execution, insufficient due diligence, inaccurate assumptions in the business plan, or inadequate acquisition and divestment processes can all lead to unfavorable outcomes. Investing in technology that is no longer competitive or rapidly becomes obsolete may further impede the successful execution of business transformation. These factors have the potential to result in an underperforming business, diminished benefits, or higher than anticipated costs.
Mitigation/Measures
Trend analysis by the Group's marketing and customer insight teams, together with cross-functional commercial and operational teams working closely with customers, aim to identify trends in the marketplace, both positive and negative, at an early stage.
The Group constantly invests in consumer and customer research, data analytics, R&D and operational capabilities as part of a well-structured process, enabling the Group to develop new products, capabilities and distribution channels which proactively address evolving trends and changing demand patterns.
All major business transformation initiatives are prioritized and overseen by the Business Transformation and Strategy Team, which is carefully selected by the Group's ExCo. The Group assigns specialized teams with significant experience, proficiency and capability to handle each specific business transformation project (1-5). These teams proactively follow market, technology and other trends and work in close collaboration with functional and regional experts, external advisors, and the Group's ExCo. A clearly defined process for the evaluation, execution and integration of major business transformations is employed. The performance of major transformational projects is periodically reviewed against their goals. A similar process is employed for the execution of major acquisitions and divestitures.
ESG Material Topic
Customer and consumer sentiments are impacted by ESG material topics. Nevertheless, the Group does not explicitly establish a direct correlation in this disclosure. However, it does acknowledge the indirect association between ESG material topics and customer and consumer sentiments.
The Group links the following ESG material topics directly to this key risk pillar:
- climate and energy
- biodiversity and ecosystems
- workers in the value chain
- affected communities
- supply chain traceability
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Key Risks
External political and economic environment
Long-term outsourcing agreements
Risk Description
Uncertain political and economic conditions, shaped by the increasing complexity of a multipolar world, characterized by shifting global power dynamics, growing regional influence, and fragmented alliances, may require the Group to reassess key long-term assumptions underlying its global strategy and operating model. Moreover, sudden major crises, such as pandemics, regional blackouts, armed conflicts, terrorist attacks, natural disasters, trade embargos, financial crises, hyperinflation, or economic depressions, could severely disrupt markets, operations, supply chains and access to critical raw materials. These challenges may lead to reduced demand for cocoa and chocolate products, create obstacles to expansion, necessitate adjustments to the Group's footprint, and negatively affect financial performance. Failure to adapt swiftly to these evolving conditions could compromise the Group's strategic objectives and long-term sustainability. Nonetheless, the Group could also find growth opportunities in regions experiencing economic expansion and through new trade agreements, positioning itself to benefit from these developments.
The Group has entered into a number of important long-term outsourcing agreements with customers. Failure to renew, early termination of existing long- term outsourcing agreements, failure to enter into new agreements or failure to negotiate terms that are attractive could have a material impact on the result of operations.
Mitigation/Measures
The Group operates in both developed and emerging markets, maintaining a well-diversified portfolio across various markets, products, and customer segments. Leveraging its global operations and innovation networks, the Group is well-positioned to swiftly respond to customer demands and provide flexible, optimized solutions that adapt to evolving market conditions. By continuously monitoring global political and economic developments, particularly in regions of heightened uncertainty, the Group anticipates potential scenarios and makes informed decisions on how to prepare. The Group's adaptable organization and robust strategy, business transformation and issue management processes enable it to address both temporary supply and demand shocks, as well as structural shifts in the political and economic landscape. To further enhance robustness against unforeseen external events beyond the Group's control, the Customer Supply and Development team considers a wide range of external factors when making strategic decisions about the Group's operational footprint to improve resilience, while the treasury department carefully manages capacity across multiple funding sources to maintain financial stability and secure access to liquidity in the face of such events.
The Group has a highly diversified global customer base representing a healthy mix of small, medium and large customers. For global strategic customers, the Group has established long-term outsourcing agreements governing mutual cooperation, addressing standards for quality, quantity commitments, pricing, service levels, innovation and ethics.
For these customers, the Group has appointed dedicated teams that develop and maintain a close relationship in order to respond to customer needs professionally and promptly and to provide high-quality services that are mutually beneficial for all stakeholders concerned. These teams have expertise in customer relationships, service and innovation, as well as in commercial and pricing matters.
ESG Material Topic
Various ESG material topics constitute a highly significant foundation of local, regional, and global political and economic deliberations and frameworks. However, the group does not explicitly establish a direct connection, but rather recognizes its interconnectedness as part of this disclosure.
The Group recognizes the inherent interconnectedness between ESG material topics and its customer value proposition. Although the Group does not explicitly establish a direct correlation in this disclosure, it acknowledges the substantial relevance of these factors for its customers.
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Barry Callebaut AG published this content on November 08, 2024, and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on November 08, 2024 at 12:59:05.381.
