Nestlé offers cash to cocoa farmers to keep kids in school in $1.4B sustainability push

Dive Brief:

• Nestlé will triple its cocoa sustainability funding to 1.3 billion Swiss francs ($1.4 billion) by 2030, using some of the money to provide financial incentives to cocoa-farming families in Africa who help prevent child labor and reduce their environmental footprint.
• The world’s largest food manufacturer said it will pay farmers who implement efforts that include sending their children to school; adopting good agricultural practices, such as pruning, to increase crop productivity; using practices like planting shade trees to boost their climate resilience; and diversifying their household income by planting other crops or raising livestock.
• Cocoa production, the majority of which comes from Ivory Coast and Ghana in West Africa, has long been dogged by environmental concerns and allegations that companies depend on child labor but have not done enough to eradicate it from their supply chains. 

Dive Insight:

Few ingredient industries have been thrust in the spotlight in recent years as much as cocoa production. 

The industry has faced a number of challenges, including fluctuating prices, low farmer incomes, persistent child labor and ongoing impacts from climate change. Nestlé and Cargill were sued by six former child slaves who claimed the companies were complicit in contributing to slavery at cocoa farms in Ivory Coast. The U.S. Supreme Court threw out the lawsuit last June.

Despite the ongoing challenges facing the industry, consumer demand for cocoa products is increasing. The cocoa and chocolate market is projected to surpass $67 billion by 2025, according to a 2020 report from Fortune Business Insights. In addition, consumers are placing more importance on sustainability efforts and traceability when it comes to determining what products to buy. This has not gone unnoticed by food makers, prompting companies like Nestlé to invest billions of dollars to create a more transparent and sustainable sector. 

In 2018, Hershey announced a $500 million investment in cocoa sustainability strategies in Ghana and Ivory Coast. Chocolate ingredient supplier Barry Callebaut has vowed to eradicate child labor from its supply chain; lift half a million cocoa farmers out of poverty; become carbon and forest positive; and provide 100% sustainable ingredients by 2025. And Olam announced it achieved 100% traceability in 2020 for the cocoa it directly sources thanks to new technology. 

Few companies have been as active on this issue as Nestlé, but Thursday’s announcement indicates that the company realizes more needs to be done. 

“Supporting a sustainable future for cocoa, in both environmental and social impact, makes business sense, but it’s more than that,” Mark Schneider, Nestlé’s CEO, said in a post on the company’s website. “It’s about helping a generation of children access education and grow up in a safe and healthy environment.”

A 2018/2019 survey conducted by the University of Chicago found that 45% of children living in agricultural households in cocoa growing areas were engaged in child labor.

Nestlé said the payments will be divided between the farmer and their spouse in order to empower women and improve gender equality. The Nespresso and Toll House maker also said it will work with nonprofits, including the International Cocoa Initiative and Rainforest Alliance, to monitor participation. 

Farmers and their families will receive up to $536 during the first two years to encourage participation. The amount will be reduced to $268 after that, the Switzerland-based company said. The money will be paid directly to cocoa-farming households. Building off of a pilot in 2020 with 1,000 farmers in Côte d’Ivoire, Nestlé said it will expand the program to include 10,000 families in the country this year, before extending it to Ghana in 2024. 

“The program rewards cocoa-farming families for practices that help them increase their incomes and benefit the environment and community. Those incentives start building long-term changes,” Schneider said. “Ultimately, those changes contribute to better farmer income, sustainability, and social impact, while providing farmers and their families an immediate financial benefit.”

Just over half of the cocoa Nestlé used in 2021 was directly sourced and traceable. The company, which has committed to tracing all of its cocoa back to the farm by 2025, said the plan announced this week will contribute to that goal.