Home Opinion Special Reports EUDR Driving Positive Change in Cocoa Supply, But Key Issues Persist

EUDR Driving Positive Change in Cocoa Supply, But Key Issues Persist

Cocoa farming

The Retailer Cocoa Collaboration’s (RCC) latest trader assessment, published today, highlights that the upcoming EU Deforestation Regulation (EUDR) is enhancing traceability in cocoa supplies.

However, the report also points out a lack of substantial progress in addressing poverty and child labor within the sector.

Based on a 2023 questionnaire sent to nine global cocoa traders prevalent in RCC Member supply chains, the report assessed their performance against various social and environmental metrics. Seven traders responded, while two were evaluated based on publicly available information and prior data. The assessment, conducted by sustainability advisors 3Keel on behalf of the RCC—a coalition of 11 UK and EU retailers including Tesco, Aldi, and Sainsbury’s—reveals significant findings.

Key Findings

Indirect Supply Chains: Major Risk Areas

Indirect supply chains, where traders do not buy directly from farmers, pose significant risks for environmental and human rights issues. Most commitments and initiatives only cover direct supply chains, leaving large portions of supply chains vulnerable to unchecked abuses and deforestation.

Traceability Progress

The EUDR is driving improvements in traceability for direct supply chains. The average proportion of traceable direct supply jumped from 52% in 2022 to 71% in 2023. Three traders reported nearly full traceability of their direct supply chains.

“This is welcome news,” said Holly Cooper, the report’s lead author. “However, it’s a different story when it comes to cocoa from indirect sources.”

In 2022, only 9% of indirect cocoa supply was traceable. This increased to 22% in 2023. While this is a positive development, traders source up to 97% of their cocoa indirectly, meaning significant blind spots remain in understanding and addressing sustainability risks.

Progress on Key Issues

The report notes some progress in addressing cocoa-linked deforestation. Most traders now have zero-deforestation commitments, though these are often geographically limited and exclude land conversion.

On poverty and child labor, the report shows a distinct lack of progress:

  • Only five traders reported using Child Labour Monitoring and Remediation Systems (CLMRS), and none applied these systems to indirect supply chains.
  • Just over half of direct supply farmers for the top two traders received a living income, while three traders reported that 10% or fewer of their farmers did so.
  • Only one trader reported on living wages in indirect supply chains, with 51% of farmers receiving a living income.

Certification Schemes

Certification schemes, particularly the Rainforest Alliance, remain crucial for supporting improved practices and demonstrating a commitment to sustainable production. The proportion of certified supply chains has increased, though many traders rely on proprietary certification schemes.

Market Context

Recent poor harvests have driven cocoa prices to unprecedented levels, creating both risks and opportunities. High prices may stall or reverse progress on environmental and social issues as traders scramble for high-quality supply.

Holly Cooper noted, “With global supply tight and prices exceptionally high, there is a real risk that progress on addressing environmental and social issues could be stalled or even reversed in the scramble for high-quality supply. The lack of policies and commitments covering indirect supply makes these particularly high-risk.”

RCC Recommendations

To address these challenges, the RCC recommends:

  1. Include Indirect Supply Chains: Ensure sustainability commitments and actions cover indirect supply chains.
  2. Comprehensive Deforestation Commitments: Adjust deforestation policies to cover all possible sources and causes, including land conversion.
  3. Child Labor: Address and report progress on tackling child labor in supply chains.
  4. Living Income: Ensure all cocoa farmers receive a living income.

These recommendations aim to bolster efforts in creating a more sustainable and equitable cocoa industry.

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