His new goal?

Helping companies build a better chocolate bar.

Global cocoa demand is on the rise and its market value is expected to double by 2025 compared to 2015 levels. Over half of the world’s supply comes from West African countries like Ivory Coast and Ghana, where cocoa isn’t just one of the hardest supply chains to monitor and track, it’s also one of the most destructive.

For as long as there’s been chocolate bars, the cocoa supply chain has been rife with illegal deforestation, human rights violations and child labour. Just last month, The Washington Post reported that two decades after candy makers like Mars, Nestlé and Hershey pledged to stop using cocoa harvested by children, it’s still likely that a chocolate bar purchased in the United States was the product of child labour.

Major cocoa companies use a few different methods to find out how the beans they put on store shelves were grown, picked, traded and processed. Audits and monitoring are one approach. Certification is another. Still another is legislation.

So far, the system isn’t working.

One reason is size. There are 4 to 6 million smallholder cocoa farms around the world. Three of the largest brands, Mondelez, Mars and Nestlé, have a chain of nearly half a million farms. They usually have a direct relationship with over half of the suppliers that source and sell beans from those farms. This leaves millions of suppliers with whom they have no direct relationship, which is where problems arise.

“Cocoa can’t be sustainable unless it’s traceable,” says Juliette Barre of Sourcemap.

Implementing Sourcemap’s app in the field in Ghana

Another is the paper trail. Low tech commodities like cocoa beans exist in a low tech chain. Transactions are tracked on paper and transported on bicycles and trucks, leaving room for social and environmental corruption that isn’t recorded or subject to regulation. Often there’s no digital tracking or paper trail to verify that payroll was made, or taxes paid, or to ensure that the cocoa being sold by one farm wasn’t smuggled in from another.

Bonanni wanted to build a platform to address these challenges directly. But timing was key. In the last few years, Android phones have become better and cheaper. Mobile phone use in Sub-Saharan Africa is growing faster than in any other part of the world. This laid the groundwork for increased traceability even in parts of the continent where electricity can be sparse, and at the end of last year, Sourcemap launched its Responsible Cocoa Platform.

Today, if a farmer has a smartphone, the platform can trace the cocoa he or she produces down to the size, shape and location of the farm as well as its yields, income and workforce.

Suppliers are registered with an online network (the first of its kind), data is captured and scores on sustainability, social compliance, risk and performance are calculated using web or mobile apps. Everything gets stored in the cloud.

Sourcemap’s app used to outline farms in West Africa

Mapping beans—and communities—can mean addressing the system’s inherent inequality. Knowing whether or not a farmer has enough electricity to turn on the lights, confirming the farm’s proximity to drinking water and useable roads and understanding the availability of health care, schools and access to credit is critical.

“That constellation of support,” says Bonanni, “is what powers a sustainable supply chain.”

Technology has a large role to play: in the search for a solution to cocoa’s ills, political will has often come up short. Agreements meant to reduce child labour, like the Harkin-Engel Protocol from 2001, floundered when the chocolate industry failed to meet its goals. Etelle Higonnet of Mighty Earth, a D.C.-based non-profit that works on environmental protection, says that a recent agreement designed to address deforestation, the World Cocoa Foundation’s Cocoa & Forests Initiative, is important—its 34 company signatories account for 85% of the world’s cocoa use—but still needs to deliver real monitoring and traceability.

While certification accounts for a small portion of the market, approximately 20%, it’s received a large amount of attention. In the last three years, two companies, Cadbury (a subsidiary of Mondelez) and Mars, distanced themselves from the Fairtrade and Rainforest Alliance certification standards they had committed to a decade ago and replaced them with their own programs, a move many consider problematic because of a lack of third-party oversight and international consistency.

While Mars had committed to selling 100% certified sustainable beans by 2020 and 50% of its beans were already certified by 2018, that year the company’s global VP of cocoa told Reuters that “certification isn’t enough.” Said John Ament, “Our belief is that we need to set more demanding standards than certification sets today.”

Ament isn’t alone in his critique of certifications. Mighty Earth’s Higonnet says that certification bodies such as Fairtrade and Rainforest Alliance need to commit to a higher price floor to address extreme poverty and implement more rigorous monitoring and intervention at every stage of production.

All of which makes traceability and transparency pivotal. To Higonnet this means “you know where your cocoa comes from, so you can discover all the problems in the chain, then start fixing them.”

Bonanni agrees. “There’s no excuse for a chain not to be traceable.”

On the platform today, 250,000 cocoa farms are mapped and traceable and thousands are being added each month for clients like Hershey and Mars. Sourcemap is working on a 100% traceable supply chain, including non-certified cocoa, by 2025—the first time non-certified cocoa has been mapped at scale and an important first step.

The post Fixing chocolate’s troubled supply chain appeared first on Corporate Knights.

I don’t think there’s a more iconic Easter treat than Cadbury Creme and Mini Eggs. Just seeing the packaging gives me a sugar high. Cadbury is a British confectioner that was bought by American food conglomerate Mondelez International (MDLZ) in 2010.

In 2016, Cadbury made the controversial announcement that it would be removing the Fairtrade logo from the front of its certified brands and replacing it with Mondelez’s in-house Cocoa Life program. While Cocoa Life claims it pays farmers at least as well as Fairtrade requires, questions linger about how stringently its internal guidelines will be applied. For its part, the Fairtrade Foundation says it remains an “implementing partner” and that FLOCERT (Fairtrade’s independent assurance and certification body) will continue to independently verify the supply chain of Cocoa Life as the program grows.

According to Mondelez’s Impact for Growth 2017 Progress Report, 35% of Mondelez’s cocoa was ‘sustainably sourced’ under the Cocoa Life program and the shift from Fairtrade to Cocoa Life covers five times the amount of cocoa previously certified Fairtrade.

While third-party seals have faced their share of criticism for not doing enough to improve the lives of farmers, industry watchdog Fair World Project isn’t impressed with the trend in leading manufacturers moving to self-certification, arguing that it leads to uneven standards, undermines consumer confidence and encourages “fairwashing.”

A fairwashing scandal could trigger a public relations nightmare, and I’d expect the stock to decline in that scenario. For now, I’m happy to see that Fairtrade is still working in partnership with Mondelez and produces an Annual Partnership Statement, but sustainable investors need to keep an eye on Mondelez.

Beyond ditching the Fairtrade logo, Mondelez has been slammed for its deforestation practices. Back in November, Greenpeace issued an entire report dedicated to Mondelez’s troubled palm oil sourcing called ‘Dying for a Cookie – how Mondelez’s dirty palm oil is driving the climate and extinction crisis.’ Greenpeace says that between 2015 and 2017, 22 of Mondelez’s palm oil suppliers cleared over 70,000 hectares of rainforest and almost 25,000 hectares of that was orangutan habitat. With lacklustre performance on other sustainability indicators,  Mondelez only gets one star.

We looked far and wide for the most sustainable chocolate company, but the companies doing really cool things are all either co-ops or private companies. Since we can’t invest in those, we decided to look at Swiss chocolatier Lindt & Sprungli (LISN). Lindt won the Good Egg Award from Mighty Earth in this year’s Easter Chocolate Shopping Guide as the chocolate company with the greatest improvement in sustainable policies.

Lindt also uses an in-house program called the Farming Program to measure progress on social and environmental impact. I’m impressed by their commitment to transparency with 79% of the cocoa beans in their supply chain both traceable and verified by The Earthworm Foundation, up from just 32% in 2015. However, like Mondelez, it doesn’t guarantee a minimum price to farm workers or use third-party labour or environmental certifications, which explains its lack of points for Clean Revenue (below).

Both companies are similar from an investment standpoint. Mondelez is much larger and more diversified, although they both have similar risk and return profiles. This week’s Sustainable Stock Showdown is practically a coin toss, although I’d give it to Lindt by a bunny’s whisker.

Either way, I’m going to satisfy my ‘hair of the rabbit’ craving by supporting Camino, a Canadian chocolate co-op with products that are certified as both organic and fair trade.

Have a company in your portfolio that you want to replace with a more sustainable option? Write us an email or tweet us!  

Tim Nash blogs as The Sustainable Economist and is the founder of Good Investing. Tweet him at @timenash.

The post Tim Nash’s sustainable stock showdown: Mondelez (Cadbury) vs. Lindt appeared first on Corporate Knights.