Are chocolate certifications effective?
Fairtrade International and Rainforest Alliance (which former certifier UTZ merged with) are the only large-scale cocoa certifiers that guarantee a premium. Low income is the root cause of cocoa issues like child labour and deforestation, so a premium on top of the market price is important, but the premium from Fairtrade is more than three times as high as the premium from Rainforest Alliance.
- Best = Fairtrade International
- Adequate = Rainforest Alliance
- Usually unfit for purpose = corporate sustainability schemes.
How is the price of cocoa determined?
Cocoa pricing is complex. There’s ‘farmgate’ price, which describes exactly what the farm gets paid. The Ghanaian and Ivory Coast governments agree this price with international chocolate companies. It’s $1,330 per metric ton (MT) in Ivory Coast, for example.
However, this price increases when the cocoa leaves the farm and passes over to intermediaries. So, another important figure is the ‘Free-On-Board’ (FOB) price, which refers to the price on export. In Ivory Coast the government has set this to $2,347 per metric ton.
What’s the impact of Fairtrade certification?
Fairtrade minimum price
Part of the Fairtrade model is to have a minimum price, which must be paid when the market price falls below it. In our last chocolate guide (2020) the minimum price was lower than the Ivory Coast government’s price, so the Fairtrade minimum effectively wasn’t doing anything. However, in 2021 the government lowered its price, meaning that if a company bought chocolate on Fairtrade terms those farmers wouldn’t face as much of a financial hit. This shows how Fairtrade helps limit farmers’ exposure to market volatility.
The Fairtrade Minimum Price at FOB for cocoa is $2,400 per MT ($53 above the minimum market price at FOB required by the government in Ivory Coast.)
The Fairtrade premium
Buyers also have to pay a Fairtrade premium (community investment) of $240 per MT.
The premium goes into a communal fund for workers and farmers to use – as they see fit – to improve their social, economic, and environmental conditions. Combining minimum price and premium, buying Fairtrade chocolate contributes an extra 12.5% into the Ivory Coast farmers’ community than non-certified chocolate. (NB, 'fair trade' isn’t a protected term, so sometimes it means virtually nothing. Make sure you’re looking for Fairtrade’s official logo or the words: “Fairtrade International”. We have an article on fair trade labels and certification schemes for food.)
What’s the impact of Rainforest Alliance certification?
Sustainability Differential
Rainforest Alliance requires payment of a Sustainability Differential (SD): an extra payment made to certified producers on top of the market price.
At the time of writing this was $70 per MT, meaning that farmers signed up to its scheme receive an extra 3% on top of the market price.
It doesn’t have its own minimum price like Fairtrade, however, so if the market price drops farmers could still find themselves in the lurch (but they’ll still be getting $70 more than non-certified farmers).
Sustainability Investments
Rainforest Alliance also requires payment of Sustainability Investments (SI), which are cash or in-kind investments from buyers that should help farmers reach compliance with Rainforest Alliance’s standards.
But we found no information on whether there was a minimum SI, what the average SI was, or how impactful SI investments actually are.
Do corporate sustainability schemes have any impact?
Most big chocolate companies have their own sustainability schemes, for example Mondelēz (Cadbury)’s ‘Cocoa Life’, Nestlé’s ‘Cocoa Plan’, Hotel Chocolat’s ‘Gentle Farming’, and Mars’ ‘Cocoa for Generations’.
But these schemes tend to cover just a proportion of the company’s cocoa suppliers, as opposed to 100%, meaning some farmers get the benefits but others get none. As Sandra’s story in the Channel 4 Dispatches programme shows (see below), even conditions on farms participating in schemes can be terrible – which may not come as a surprise to those of you who have doubts about multinational corporations marking their own homework.
A 2023 Oxfam report says: “robust, public data on the income effects of companies’ interventions are virtually nonexistent … The price premiums paid by companies are too low to make a significant difference in farmers’ incomes … Without more pronounced and ambitious efforts by companies, a living income will remain an illusion for most farmers across companies’ cocoa supply chains.”
Example: Hotel Chocolat
Hotel Chocolat’s Gentle Farming programme pays $2.33/kg, which is lower than Fairtrade but much higher than market rates. But there’s no clear figure stating how much of its overall cocoa is sourced through the programme.
What should big brands be doing about cocoa certification?
Despite what their sustainability reports claim, big chocolate brands are dragging their feet when it comes to improving conditions for cocoa farmers. The Ivory Coast and Ghana governments accuse chocolate companies of doing “everything possible” to prevent the cost of cocoa from increasing, and even trying to drive it back down.
According to Oxfam, there are two clear options for big companies who want to take meaningful action towards a living wage for cocoa farmers:
1. Honour the Living Income Differential (LID): Companies’ public statements of support for the LID have according to Oxfam “not been shared by their procurement teams”, with companies using bargaining power to offset the higher costs.
2. Honour the Fairtrade Living Income Reference Price (LIRP) model for cocoa. This means making additional payments to farmers to enable a living income. Tony’s Chocolonely is the only company to have adopted this at large scale. See further below for a profile of Tony's.
