Climate Change and Chocolate – Not so Sweet

Climate change is presenting a terrifying threat to global cocoa production – what are the largest chocolate manufacturers in the world doing about it?

Climate change seems to be advancing at a terrifying pace in recent years – with ever more superstorms, droughts, fires, and other natural disasters around the world. However, climate change is just as treacherous when it works in more subtle ways – gradual changes in temperatures which impact one of the planet’s most important resources: our agriculture and food supply. While global warming impacts a variety of crops, one crop that may hit particularly close to home is cocoa – the key ingredient in chocolate, much-loved treat around the world.

Approximately 70% of the world’s cocoa is grown in Central and West Africa, and farmers have seen that as average temperatures have risen, cocoa crop yields have been decreasing[1], putting both the farmers’ livelihood and the world’s cocoa supply at risk. In fact, it is predicted that a number of key cocoa-growing regions in Africa may no longer have a suitable climate for crop production in 30 years[2]. As farmer’s yields have fallen due to global warming, they have been forced to clear more forest land to increase farmland – which in fact further deteriorates the environment.

This disturbing trend is of great concern to all consumers of cocoa beans – notably, the major global chocolate conglomerates, who consume a majority of the world’s cocoa bean consumption. These companies (Nestle, Hersheys, Mars, and Mondelez) earn billions of dollars in revenue selling processed chocolate products around the world – revenues which depend entirely on the availability of cocoa beans. Mondelez, for example, makes brands such as Cadbury’s, Toblerone, and Milka, and has (like many of its peers) acknowledges the significant risk posed to their supply chain by climate change.

Mondelez has chosen to combat this through a number of corporate initiatives intended to combat the impacts of climate change on cocoa production. The overarching umbrella of this initiative is their Sustainability 2020 Goals, a set of plans intended to (among other things), reduce absolute carbon dioxide emissions from manufacturing, and reduce deforestation in the agricultural supply chain[3]. Within this initiative, perhaps the most important element is the “Cocoa Life” program, which helps Mondelez cocoa farmers with sustainable farming practices. As part of this program, the company recently signed a Memorandum of Understanding with the government of Cote D’Ivoire, working with the Ministry of Environment to prevent deforestation near cocoa farms, caused by farmers illegally expanding farms to combat falling yield. Mondelez will simultaneously help farmers increase productivity and train them in sustainable agricultural practices[4]. Specifically, they are helping implement the U.N.’s REDD+ (Reducing Emissions from Deforestation and Forest Degradation in Developing Countries) sustainable agriculture practices. Additionally, by 2020, Mondelez will reduce its carbon emissions from manufacturing by 15%, and reduce its water consumption by 10%[5].

Source: Mondelez International. http://www.mondelezinternational.com/~/media/MondelezCorporate/com/uploads/downloads/sustainability_2020_goals.pdf, accessed 14 November 2017.

These goals all sound admirable and legitimate, but the question looms – is it enough? To combat a risk that can displace your entire business, is there such a thing as “enough”? Let’s briefly compare Mondelez’s sustainability plan to that of Mars – the world’s largest chocolate manufacturer. Mars recently pledged a $1 billion investment to fight climate change – including cutting greenhouse gas emissions by 27% by 2025 and by 67% by 2050[6]

In the face of such bold moves, it appears clear that Mondelez is not doing enough to combat this critical risk. For example, they target a 15% reduction in carbon emissions by 2020 based on aligning with “current approaches to setting science-based targets to support the global effort to limit climate change to less than 2º C”[7] – but why not be a leader and beat these recommendations? In this regard, Mondelez is doing the bare minimum that is recommended by scientists, rather than taking a strong position to minimize their emissions as much as possible – which is their responsibility, due not only to their moral obligation but their dependence on cocoa production.

Mondelez states that they will train and coach farmers and distribute seedlings for trees to provide shade over crops (reducing the impact of droughts)[8]– but provide no numbers on the scale or scope of this goal. They need to provide measurable plans which are not just cosmetic but create meaningful change on the ground.

However, other questions still remain – is Mondelez the correct party to do more on deforestation, or should that responsibility lie with the governments of countries which are major cocoa producers? Will shareholders support Mondelez increasing the amount of capital invested in sustainability, or will they prove unable to see the long-term necessity of these investments?

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[1] Ashley Hutchins, Assessment of Climate Change Impacts on Cocoa Production and Approaches to Adaptation and Mitigation: A Contextual View of Ghana and Costa Rica. George Washington University Working Paper. https://elliott.gwu.edu/sites/elliott.gwu.edu/files/World%20Cocoa%20Foundation.pdf.

[2] Peter Läderach, “Climate change adaptation of coffee production in space and time”, Climactic Change Magazine. March 2017, Volume 141, Issue 1, pp 47–62. https://link.springer.com/article/10.1007/s10584-016-1788-9.

[3] “Mondelez International Accelerates Action on Climate Change with New 2020 Global Sustainability Goal. October 21, 2015.http://ir.mondelezinternational.com/releasedetail.cfm?ReleaseID=937669. Accessed 14 November 2017.

[4]Mbalo Ndiaye, “Protecting Forests and Combating Climate Change”, Cocoa Life Blog, 14 June 2017. https://www.cocoalife.org/progress/protecting-forests-and-combating-climate-change. Accessed 14 Novermber 2017.

[5] “Mondelez International Accelerates Action on Climate Change with New 2020 Global Sustainability Goal. October 21, 2015.http://ir.mondelezinternational.com/releasedetail.cfm?ReleaseID=937669. Accessed 14 November 2017.

[6] Natasha Bach,“The World’s Largest Chocolate Maker is Committing $1 billion to Fight Climate Change,” Fortune Magazine, September 6, 2017.hhttp://fortune.com/2017/09/06/mars-pledge-one-billion-fight-climate-change. Accessed 14 November 2017.

[7] “Mondelez International Accelerates Action on Climate Change with New 2020 Global Sustainability Goal. October 21, 2015.http://ir.mondelezinternational.com/releasedetail.cfm?ReleaseID=937669. Accessed 14 November 2017.

[8] “Cocoa Life and Climate Change: Position Paper”, Mondelez International, May 2017. https://www.cocoalife.org/~/media/CocoaLife/en/download//article/Cocoa_Life_Climate_Change_Position_Paper_053117.pdf. Accessed 15 November 2017.

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4 thoughts on “Climate Change and Chocolate – Not so Sweet

  1. Climate change articles always make a more significant effect on us when they are about impacts on the food supply. Therefore it is great that you chose this industry as a topic. I agree with you on the fact that the company Mondelez, as one of the largest cocoa consumers in the world, has a responsibility to contribute to the race against the climate change. However, as we recently saw in the IKEA case, in order to have a considerable impact, there are much more to do and many other authorities to include into this movement. This is not easy as governments, NGOs, labor unions, standardization organizations, and local farmers need to work with companies, like Mondelez, in order to achieve a sustainable supply chain. Therefore Mondelez is currently limited only with local measures to reduce emissions of its own manufacturing plants, which are only a portion of the supply chain. This also explains the company’s rationally chosen goals based on 2 degrees temperature rise limit parallel to the global efforts, rather than unrealistically higher goals that they would not be able to achieve. The 15% carbon emissions reduction initiative that the company introduced is, in my opinion, a valuable first step with a strong signal of company’s goals for sustainability. The next step should be working with corresponding African authorities, in order to educate suppliers and create standards. Then the company also needs to invest on training and auditing programs in order to assure a certain quality. Certain is that such a fundamental change will take time and Mondelez needs to take higher cocoa costs into account.

  2. I have the same concern as you do regarding the strategy that Mondelez is planning to deploy to combat the impacts of climate change on cocoa production. As you have mentioned, this is a massive risk for Mondelez business, but it seems that they are not doing enough to address it and secure the future supply of cocoa. As an additional factor, cocoa plants are also highly susceptible to diseases that can be spread easily due to the increase of international commerce. Many of these outbreaks could harm profoundly the cocoa production, and affect it for serveral years.
    Considering the situation, Mondelez needs to take a more drastic approach and look for additional solutions in other fields, such as the production of hybrid cocoa plants that can resist diseases and climate change effects. Mondelez could partner with hybrid developers to come up with a stronger plant, and enable the small farmers to acquire these varieties. Other companies such as Mars are already working with this hybrid plants that produce cocoa with the same quality, higher yield, and more resistance. It might be time for Mondelez to think about this strategy that will allow the company to secure a sustainable future supply for their cocoa beans.

    Source: Myles Karp, “A Battle to Save the World’s Favorite Treat: Chocolate,” The New York Times”, September 25, 2017. https://www.nytimes.com/2017/09/25/science/cacao-fungus-chocolate.html, accessed November 2017

  3. When it comes to the sustainability of the world supply of cocoa, I do think that the main issues have been identified in this article as well as in DCS’s comment: climate change and crop diseases. While, one can always make an argument as to why an organization could be doing more, I think that Mondolez is adequately doing its part. In addition to its direct initiatives, Mondelez is an integral part of CocoaAction an initiative stemming from the World Cocoa Foundation, which also regroups players such as Cargill or Nestle (http://www.worldcocoafoundation.org/about-wcf/cocoaaction/). The importance of having a group dedicate its time to sustainability in the space is primordial, particularly given the fact that 70% of the supply is grown in Africa by fragmented groups of farmers who may not otherwise have the adequate level of foresight. One important ongoing battle is against the Swollen Shoot virus, which is destroying 15% of the yearly global production (https://www.confectionerynews.com/Article/2017/11/23/CocoaAction-Is-chocolate-industry-sustainability-push-working). Let’s hope that together, these industry leaders can make a difference for what Ivorians call the “brown gold”.

  4. Thanks for a great article!

    I believe the article lays out in a very clear way the huge challenge that exists for many agricultural and food producers when thinking about climate change. I believe clearly producers, governments and also society need to do more and with ever more urgency. The question is no longer whether food producers will be hit, the question is more how quickly. That is why I believe neither Mondelez nor any of the other food producers are doing enough and bolder steps should be taken.

    Lower yields mean lower production of cocoa beans which in turn will mean an upward pressure on the price of the beans. This is not good news for Mondelez – and investors/shareholders should be aware of this. If Mondelez wants to make real impactful investments to reduce the damage of climate change (or delay it) the first stakeholders that need to consent are its shareholders. That is why the company should prove and make public the negative prospective effects climate change will have on the company’s results directly and in the industry as a whole and hopefully get investors to agree on the necessity to take more radical steps.

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