Barry Callebaut: I’m in love with the cocoa

Climate change is forcing “Big Chocolate” to go up the supply chain to secure a solution for its cocoa bean farmers.

Barry Callebaut: I’m in love with the cocoa

Operating primarily in the B2B space, Barry Callebaut isn’t the Company that the average consumer would identify as one of the titans of the global chocolate industry (see Nestle, Hershey’s, Lindt). Nevertheless, there’s a one in four chance that the last chocolate bar you ate was at least partially manufactured in one of Barry Callebaut’s 53 factories across the world.[1] As a major player, Barry Callebaut must stay abreast of emerging threats to the chocolate industry’s supply chain, and with mounting evidence linking climate change to a future decline in cocoa bean (chocolate’s most important input) production, the Company along with other industry participants approached cocoa farmers with a multipronged solution. [2]

From tree to the bar

Chocolate in its simplest form is a mixture of cocoa liquor, cocoa butter, sugar and sometimes milk. Cocoa liquor and butter are extracts from grounded cocoa beans, of which nearly all is produced in (i) emerging economies (70% from West Africa) and (ii) small family-run two to four hectare farms. Cocoa farming is a delicate process, with trees that are susceptible to changing weather patterns, diseases, insects and that don’t reach peak production until the 5th year.[3] As opposed to large, industrialized crops, a threat as serious climate change can’t be left for fragmented cocoa farmers to solve on their own.

It’s getting hotter, so what?

The major wakeup call came in the form of a climate-based report, Africa’s Chocolate Meltdown, published by The International Center for Tropical Agricultural with funding from the Bill and Melinda Gates Foundation. In it, researchers found that the situation for chocolate in an ever so warmer planet is indeed quite dire. With an expected annual temperature rise of more than two degrees Celsius by 2050, many of West Africa’s cocoa-producing areas would be too hot for production. The research findings also predicted that areas of cocoa suitability will begin to decline as soon as 2030, as average temperatures increase by one degree Celsius.[4]

The report highlighted several potential solutions but the biggest conclusion was that the farmers couldn’t do it alone. “Big Chocolate” needed to step in.

Protecting the golden goose

In its 2014/2015 sustainability report, Barry Callebaut outlined its plan to address climate change by focusing on two fronts:[5]

  • Mitigation: Reduce the Company’s greenhouse gas emissions by consuming less energy and switching from fossil fuels to renewable energies, such as biomass.
  • Adapting:
    • Work with farmers to adapt to climate change. Encourage the planting of shade trees, such as timber trees which can also serve as a buffer crop.
    • Develop and propagate heat resistant forms of cocoa.

Furthermore, as a member of the World Cocoa Foundation (WCF), a public-private partnership that brings together donors, industry members, producing country governments, research institutes and non-governmental organizations to promote sustainable cocoa farming practices, Barry Callebaut was a part of a consolidated industry effort to tackle climate change.[6]

In May 2016, the WCF announced an initiative to help cocoa farmers prepare for the impact of climate change. The partnership combined numerous stakeholders across the cocoa value chain to develop solutions to climate and weather variability and deforestation, which pose critical economic, social and environmental threats to millions of smallholder cocoa farmers and the global chocolate industry. Moreover, the initiative will seek to develop a common strategy to address climate’s impacts on cocoa and develop innovations to assist farmers in adapting to changing weather patterns, such as research and development of climate resilient planting material, improved farming practices, and new agroforestry models.[7]

What else can be done?

While the industry has recognized the threat climate change poses to cocoa farmers and taken steps to address the problem, other alternatives could also be explored.

Adapting

  1. Raise awareness from African farmers: Currently, there’s a gap between West Africa and central America when it comes to acknowledging climate change as a threat. Before farmers will be motivated to respond and change farming practices to combat the impact of climate change, they need to be educated on the real threat it poses to future production.[8]
  2. Grafting: Farm rehabilitation by grafting original trees with superior hybrid varieties has been commonly used in Costa Rica over the last 10-20 years. This practice is not as common in Western African countries such as Ghana and could be used to increase farm productivity, giving farmers a better chance of combatting climate change’s impact.[9]

Mitigation

  1. Prevent deforestation: As farmers scramble to look for new areas suitable for farming cocoa, deforestation may increase in the near term. Cocoa farming’s carbon footprint is much larger when this factor is taken into account.[10]

 

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References

[1] Barry Callebaut, Roadshow Presentation – 9 Month Key Sales Figures 2015-2016, pg 9, https://www.barry-callebaut.com/sites/default/files/publications/roadshow_presentation_q3_2015-16_final.pdf accessed November 2016

[2] ”Africa’s Chocolate Meltdown: climate change could threaten cocoa farmers,” Modernghana.com, September 29, 2011  https://www.modernghana.com/news/353155/1/africas-chocolate-meltdown-climate-change-could-th.html accessed April 2011

[3] World Cocoa Foundation, Cocoa Market Update, pgs 2-3, http://www.worldcocoafoundation.org/wp-content/uploads/Cocoa-Market-Update-as-of-4-1-2014.pdf  accessed November 2016

[4] International Center for Tropical Agriculture, “Predicting the Impacts of Climate Change on Cocoa Growing Regions in Ghana and Cote d’Ivoire,” September 2011. http://www.ciatnews.cgiar.org/wp-content/uploads/2011/09/Ghana_ivory_coast_climate_change_and_cocoa.pdf  accessed November 2016

[5] Barry Callebaut, Sustainability Report 2014/2015, pg 33, https://www.barry-callebaut.com/system/files/download/barry_callebaut_chocolate_sustainability_report_2014-15.pdf  accessed November 2016

[6] World Cocoa Foundation, http://www.worldcocoafoundation.org/about-wcf/history-mission/ accessed November 2016

[7] “Leading Cocoa and Chocolate Companies Join Together to Help Cocoa Farmers Adapt to Weather and Climate Impacts,” WCF press release (May 31, 2016)

[8] Hutchins, Ashley. “Assessment of Climate Change Impacts on Cocoa Production and Approaches to Adaptation and Mitigation: A Contextual View of Ghana and Costa Rica,” International Development Studies, pg 16, https://elliott.gwu.edu/sites/elliott.gwu.edu/files/World%20Cocoa%20Foundation.pdf accessed November 2016

[9] Hutchins, Ashley. “Assessment of Climate Change Impacts on Cocoa Production and Approaches to Adaptation and Mitigation: A Contextual View of Ghana and Costa Rica,” International Development Studies, pg 18, https://elliott.gwu.edu/sites/elliott.gwu.edu/files/World%20Cocoa%20Foundation.pdf accessed November 2016

[10] Harris, Nancy. “How Much Rainforest is in that Chocolate Bar?,” World Resources Institute¸ August 6, 2015, http://www.wri.org/blog/2015/08/how-much-rainforest-chocolate-bar accessed Novebmer 2016

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4 thoughts on “Barry Callebaut: I’m in love with the cocoa

  1. Really enjoyed this post! Strongly agree that raising awareness, grafting more productive trees, and reducing deforestation would go a long way in combatting this issue. Per the NOAA,/NPR perhaps one more way of mitigating the impact of climate change is “cabruca [which] involves retaining, or in some cases replanting, other rainforest trees, which provide cacao trees with shade”. Cabruca provides protection from wind and soil erosion; it also stores more carbon. Most importantly for the farmers, it can also double production in a climate friendly manner. Perhaps this is another argument for carbon credits – farmers would get money for both growing cocoa and preserving trees.

  2. Great read and thanks for detailing a pivotal company in the chocolate space that we have never heard of. Barry Callebaut holds an interesting position in the supply chain — should they force pressure on farmers to adopt sustainable growing practices such as develop new forms of cocoa or plant buffer/shade trees, or to invest in less harmful technologies within their own firm, they may pass along a price increase to their end manufacturers or the consumer. Does this worry Barry Callebaut? After all, cocoa is a commodity product and they sit between producers and brands. Sounds like they need to convince their customers that a price hike due to improved sustainability is justified.

  3. When reading this blogpost, my attentions turned back to coffee bean production given the similar challenges it is facing due to climate change. The adaptation strategies you outline 1) working with farmers to adapt to climate change) and 2) developing and propagating heat resistant forms of cocoa have much in common with coffee bean production and the steps being taken by big players in that industry (like Starbucks) to mitigate the effects of climate change. I wonder whether similar industries like cocoa, coffee beans and any other commodities affected by global warming would achieve more by banding their resources, research and lobbying clout together rather than working towards similar goals in tandem but in isolation.

    Food for thought… and now I want some chocolate!

  4. Wow! Great read. I did not know about the impact of climate change on the chocolate industry. I wanted to challenge some of the comments above. I think it will be difficult to convince cocoa farmers to adapt to climate change by adopting practices such as planting shade trees and developing heat resistant forms of cocoa. However, as you argued in your recommendations, Barry Callebut will need to educate farmers about the risks of climate change on their business in order to get their support. If the farmers understand how detrimental the effects of climate change will be on their business, they will have to adapt in order to ensure the livelihood of their business in the future. One way Barry Callebut can do this is by showing the farmers in Africa how farmers in Central America are shifting towards more environmentally sustainable practices. Once they see that their competitors are doing this, they will be more inclined to follow.

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