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Nestlé cocoa engagement assessed

26-04-2012 | Engagement Spotlight | Wilco van Heteren

In 2010, Robeco initiated an engagement with the Swiss food group regarding the sustainability of its cocoa supply chain. There’s still room for improvement, says Senior Engagement Specialist Wilco van Heteren.

The cocoa industry continues to face intense public scrutiny, in large part because of the widespread occurrence of child labor. In fact, “widespread” hardly covers it: a US government-backed report by Tulane University published in March 2011  revealed that more than 1.8 million children in West Africa were involved in the industry.

As the major player in the cocoa industry, with a market share of 12.5%, Nestlé has not avoided flak on the issue. For instance, a 2010 documentary, The Dark Side of Chocolate, claimed that the company buys beans from Ivory Coast plantations that use child labor.

Although critics argue that it has been slow to take action—after all, it is now more than a decade since the company signed a protocol to end child labor in the industry—Nestlé is facing up to these issues in its cocoa supply chain. Its participation in a number of initiatives in recent years culminated in the launch of the company’s Cocoa Plan in 2009, which is designed to help small-scale farmers by increasing their yields. Nestlé is planning to invest EUR 91.3 million over the next decade to implement the plan.

Wilco van Heteren acknowledges that such initiatives mean that Nestlé is making a significant effort to develop a sustainable cocoa chain. “But we believe that more improvements are necessary,” he says.

Robeco initiated engagement in 2010
Reflecting these concerns about the cocoa supply chain—and given Nestlé’s dominant position in the cocoa market—in 2010 Robeco initiated a constructive dialogue with the company to encourage further improvements.

Fast-forward to the first quarter of 2012. Robeco received an update from the company on its performance in terms of the engagement objectives that were set out two years ago. What progress has Nestlé made?

Engagement objective #1: transparency on Cocoa Plan’s risks/opportunities
The primary objective of the engagement, explains Van Heteren, was to persuade Nestlé to disclose and quantify the business opportunities and risks around the Cocoa Plan. “In particular, we wanted to know about the environmental and social conditions of its farmers,” he says.

Van Heteren says that although he believes that the company has made progress in this area in the last couple of years, the statistical evidence to corroborate it is not yet available.

Back in 2010, Nestlé indicated it would publish a report quantifying these issues. More recently, during Van Heteren’s conversation with the company in the first quarter of 2012, Nestlé declared that data on its sustainable supply-chain performance would be published on its website within a few weeks. But these reports have yet to appear. “We will be monitoring whether the company makes good on its promise to publish this data,” he says.

Engagement objective #2: incorporating fair-trade suppliers
The second objective was to persuade Nestlé to produce a plan and a progress report regarding the incorporation of fair-trade suppliers in each of the markets where it is active. Van Heteren notes that Nestlé said back in 2010 that it did not want to be linked to a single fair-trade label. Instead, it preferred broader initiatives.

Still, the company is expecting the share of fair trade suppliers to increase to 10% of the total in 2012, up from 6% in 2011. As part of this process, last year it gave training to 19,115 farmers on increasing their income via higher yields and improved quality. The company has also distributed high-potential plantlets. And in order to improve education, Nestlé plans to build 40 schools in Western Africa over the next four years. “Progress on this objective has been better,” judges Van Heteren.

Engagement objective #3: clarity on targets for multi-stakeholder initiatives
The third objective was for Nestlé to disclose what it aims to achieve by participating in the various multi-stakeholder initiatives in which it is involved. “We want to see quantifiable targets,” says Van Heteren. “We also feel it is important for the company to reveal the strategy behind this involvement.”

Nestlé responded by saying that it would seek out ways of further improving its transparency—which Van Heteren accepts has already improved since 2010—in the coming year. He says that Robeco will continue to monitor the company in this respect.

FLA partnership highlights Nestlé’s determination to sort out cocoa issues
Meanwhile, Van Heteren notes that Nestlé is making progress in other areas. Last year, for instance, it set up a partnership with the Fair Labor Association (FLA), an organization that is dedicated to improving working conditions globally.

In January, the FLA sent independent experts to investigate the cocoa farms in Ivory Coast that supply Nestlé for evidence of child labor and child exposure to pesticides and other chemicals. “The company’s confidence in taking part in such a verification exercise suggests that Nestlé is indeed taking responsibility for improving certain practices in its supply chain,” notes Van Heteren.

Moreover, following on from this collaboration, as well as an investigation into labor conditions in Turkey regarding Nestlé’s hazelnut supply, on 29 February, Nestlé became the first company in the food industry to join the FLA.

Conclusion: some progress but engagement continues
“Overall, we recognize that the company has made progress over the past two years,” concludes Van Heteren. That said, he adds that Robeco will be continuing its engagement activities with Nestlé with a view to prodding the company towards a more sustainable cocoa supply chain.

1 Oversight of Public and Private Initiatives to Eliminate the Worst Forms of Child Labor in the Cocoa Sector in Côte d’Ivoire and Ghana
http://www.childlabor-payson.org/Tulane%20Final%20Report.pdf


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