* Nestle aims to source all cocoa sustainably by 2025
* Child labor common on cocoa fields in Ghana, Ivory Coast
ZURICH/LONDON, Jan 27 (Reuters) - Nestle said on
Thursday it will start paying cocoa farmers cash if they send
their children to school rather than out to tend crops as part
of a push to purchase all of its cocoa through a fully
traceable, directly sourced supply chain by 2025.
Chocolate makers are coming under mounting pressure from
investors, consumers and governments to make sure the cocoa
beans they source are not produced using child labor or in
illegal cocoa plantations in protected forests, both of which
are common in West Africa.
The food group behind KitKat chocolate bars and Smarties
confectionery said it will triple its current annual spending on
sustainable cocoa to give a total investment of 1.3 billion
Swiss francs ($1.41 billion) by 2030.
"Nestle's new initiative focuses on the root causes for
child labor and the living income gap farmers and their
families face," Nestle Chief Executive Officer Mark Schneider
said during a webcast.
He said the new income accelerator program was a major
step towards farming practices that benefit farmers and the
environment, but acknowledged the path to a living income for
cocoa households would be long and winding.
A recent survey by the University of Chicago found that
among children in agricultural households in Ivory Coast and
Ghana cocoa growing areas 45% were engaged in child labor https://www.reuters.com/article/uk-cocoa-childlabour-ivorycoast-ghana-idUKKBN2742FU.
Ivory Coast's Prime Minister Patrick Achi said his country
welcomed the new program, saying it would help companies and
countries meet the requirements set out in looming due diligence
legislation, notably in the European Union.
"We must at all costs and by all means deal with the root
cause of the ills on which we all agree, which is the income of
the farming population," he said during the webcast, adding that
Ivory Coast and Ghana's living income differential had so far
yielded mixed results.
To qualify for the payments from Nestle, farmers have to
send their children to school, prune cocoa trees, plant shade
trees and diversify their income with other crops or livestock.
To check that children really are attending school and
farmers are following the rules, IDH, The Sustainable Trade
Initiative, will monitor the program with other third parties.
Children casually helping on family farms outside of school
time do not fall under the International Labour Organization's
definition of child labor. https://www.ilo.org/ipec/facts/lang--en/index.htm
The sustainability schemes which chocolate makers have used
to date have had limited success in tackling human rights and
environmental issues in cocoa, and Western governments are now
looking to legislate.
Nestle said 51% of the cocoa it used in 2021 was directly
sourced and traceable, versus 46% in 2020. By 2025, it wants to
be able to trace 100% of its cocoa back to specific farms under
its in-house sustainability scheme, the Nestle Cocoa Plan.
"We're very confident this will be a game changer on the
road to reducing the risk of child labor," Magdi Batato, head
of operations at Nestle, told Reuters in an interview this
'BIG STEP FORWARD'
Under the new program, farmers will receive direct cash
payments via mobile transfer of up to 500 Swiss francs ($543) a
year, which Batato said represented 20-25% of a farmer's average
annual income. The incentive will then be leveled at 250 francs
after two years and progressively extended to all of Nestle's
160,000 cocoa farmers by 2030.
Unlike current premiums that are paid per tonne and can
encourage overproduction, Nestle, which used over 436,000 tonnes
of cocoa in total in 2020, said it would pay farmers and their
spouses directly, independently of volumes produced.
"An incentive to the household is much more inclusive of the
smaller farmers, really making sure that nobody gets left out,"
Alexander von Maillot, Nestle's head of confectionary, said in
Nestle is going to launch KitKat products next year made
with cocoa from farms that received cash incentives. Von Maillot
said the company's efforts might ultimately lead to higher
prices for consumers.
"Over time, there might be an increased price for some of
the products, definitely," he said, adding that consumers were
willing to pay if responsible business practices justified the
price. Batato said operational efficiencies would also help
finance the investment.
The VOICE Network, a global grouping of non-governmental
organizations and trade unions working on sustainability in
cocoa, said Nestle's cash transfer plan was "a big step
It added, however, that cash transfers were not a substitute
for a commitment to paying a fair overall price for the bean and
farmers were still vulnerable to low world market prices.
($1 = 0.9200 Swiss francs)
(Reporting by Silke Koltrowitz and Maytaal Angel, Editing by
Alexandra Hudson and Paul Simao)