Why are Cadbury and Mars adopting these ethical certification marks now, at this time?

Mars spokesperson:

This is the next major step towards a long term global commitment to purchasing only cocoa that is certified as being produced in a sustainable manner and ensuring a better quality of life for cocoa farmers and communities, as well as protecting the environment and the wildlife that depend on it.
 
Mars has been working for 30 years on cocoa sustainability, investing over $10m in each of the past several years in a wide range of sustainability initiatives. This is the first major step towards a long term global commitment to purchasing  “certified” cocoa.
 
Cadbury spokesperson:

Cadbury’s commitment to go Fairtrade is a culmination of a 100 year history of working with its supply chain, including cocoa farmers in Ghana. Cadbury originally established sustainable cocoa sourcing in Ghana a century ago, to ensure the quality of life of cocoa farmers.

Building on Cadbury’s values, last year Cadbury announced the groundbreaking Cadbury Cocoa Partnership through which we have committed to invest £30 million in the country over a ten year period.

We have been in discussion with the Fairtrade Foundation for two years, both learning from them and sharing our experience from our leading Cadbury Cocoa Partnership.

Bama Athreya and Tim Newman:

We can only speculate as to why it has taken these chocolate companies so long to finally acknowledge their responsibility to implement stronger standards for their cocoa supply chain. However, it is partly due to the consistent pressure over years from advocates and farmers themselves.

These recent announcements also point to the failure of the “certification” program developed through the Harkin-Engel Protocol that reached an important deadline last July. It is no surprise given the weaknesses of that program that companies are committing to additional and stronger certification systems to ensure that they are not violating international labor standards in their cocoa sourcing. We expect and hope that other companies will follow suit in the near future.

Michael Niemann:

I wish I could say that global pressure to address the child labor question in the West African cocoa sector had brought about the adoption of ethical certification marks. But I don't believe that to be the case. The sleight of hand with which the industry has created its own 'certification' standard seems to have gotten it off the hook. The politicians have signed off, what else is there to worry about?

I believe self-interest is the primary motivation. The chocolate industry as a whole was obviously spooked by the wild cocoa price gyrations over the past two years. The boom between December 2007 and July 2008 was due to speculation in an otherwise recessionary market and fizzled quickly. But the price increases since then are linked more to the fear of shortages.

The 2008/09 cocoa year got off to a bad start when Ivorian farmers blocked cocoa deliveries in protest against low prices. When the protests ended, however, deliveries did not pick up again. There were weather issues, outbreaks of diseases, etc. Later in the season, cocoa farmers protested yet again. Only in early 2009 did deliveries catch up and exceed deliveries from the previous year. Ghana's production is down as well and Indonesia, facing aging trees and an outbreak of cocoa diseases, reported significant downturns.

In early March 2009, the International Cocoa Organization (ICCO) predicted a revised global shortfall of 193,000 tons for the current year. Add to that a revised shortfall of  88,000 tons for the previous year and the chocolate industry is looking at the third year where production did not match consumption as measured by cocoa grindings. The total stocks available at the end to the current year are estimated to be 35% of current grindings--historically a low ratio. The ICCO has shown that low ratios are inversly related to world market prices.

The global recession, however has made a dent into that projected demand. By now it is clear that the often hoped for explosion of chocolate consumption in Asia had not yet materialized. But both companies are looking at the long term. And for the long term, they want stable supplies at low or moderate prices. To ensure such supplies, sustainable production remains the only option. In the past, industry and farmers have been living off the 'forest rent', to use agronomist Ruf's term. With the amount of rain forest dwindling, and land increasingly scarce, that option is no longer feasible.

One more word about prices. The news was all aflutter with 24 year highs in cocoa prices. Those figures, though, don't take inflation into consideration. Adjusted for inflation, current prices are less than half of the prices of the late 1970s.

What is the scale of the commitments and how much will they cost each company?

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