How Tony’s Chocolonely is tackling exploitation in cocoa supply chains

Speaker A: Foreign. Hello and welcome to this episode of Futures, the podcast series brought to you by cips, the Chartered Institute of Procurement and Supply. Hello everyone and welcome to the second episode of SIPS foundation takeover of SIPS Futures podcast. I'm Emma Scott and I'm hosting this miniseries of SIPS foundation podcast looking into human rights and child labour in cocoa farming. For those of you who still aren't aware of SIPPS foundation, we exist to transform people's lives through professionalizing procurement and supply chains. By using best practice procurement as a system lever, the foundation is tackling environmental and and social change head on to embed lasting systemic change. In this episode we're joined by Pascal Baltasin, Chief of impact and operations at Tony's Chocol only. And he's here to share a case study on how conscientious chocolate producers are making a real impact in human rights across cocoa farming. Hi Pascal, thanks for joining us. Welcome to the pod. Hi Emma, can you start by telling us a bit about your role and um, what you're doing at Tony's? Uh, I know you've got a great ethos there at Tony, so if you could share with our members a bit about what you're doing um, in this space that would be really great to get started.

Speaker B: Yeah, of course Emma and nice uh, to be here today with you and uh, with all the listeners. Um, so I'm Pascal, um, I have the pleasure to represent within Tony's the work we do on our impact which means for us everything that we do on cocoa farming communities in West Africa and how do we try to uh, improve lives uh, in West Africa falls under my uh, my remit as it does by the way to everybody within Tony's because that's our main part of our mission and our key mission is to end exploitation in cocoa and second to that I also run our operations. So I look after all the beans as they come out of Africa and as they make it into our delicious bars of chocolate and end up in consumer hands.

Speaker A: And you've been at Tony's quite a while now haven't you? You've been there a good few years now.

Speaker B: Yeah, I've been, I've been with Tony's for five years. So prior to Tony's I spent uh, about 20 years in FMCG businesses across the world decided to make the big move from uh, big corporations to a small scale up company, especially small when Tony's uh, when I joined Tony's five years ago but have been experiencing quite some tremendous growth and impact over the last couple of years.

Speaker A: Can you start by giving our listeners an idea of the size of the issue of cocoa farming, particularly in West Africa, um, when it comes to um, human rights and child labor.

Speaker B: I hope some people are already aware. In the meantime, in terms of the issues that are uh, there in cocoa, especially if you're listening to this podcast, you'll probably have a bit of an interest in that already. But if you look at cocoa farming in West Africa, it's about two and a half million cocoa farmers in West Africa. So cocoa is grown on what is called smallholder farmer models in West Africa, which means that a cocoa farmer normally has between one and three hectares of a cocoa farm. Um, the yields that come out of that cocoa farm, uh, together with the price they get for that cocoa means that a lot of these farmers are actually in extreme poverty. They are living below the poverty line and they are not getting a lot of money for their delicious cocoa that they're making. And as a result basically of poverty, there are human rights issues in that supply chain as well. So what happens is that uh, children of cocoa farmers are working on cocoa plantations, uh, not going to school. There is also has been a tremendous amount of deforestation and also cases of forced labor happening uh, in that space. So if you look at the size of it that two and a half million cocoa farmers, there's an approximate latest study that was done in 2019 that shows that there's about 1.56 million children working uh, in child labor in West Africa in cocoa. And about 95% of them are doing hazardous uh, activities on the farm. And that means working with machetes, taking cocoa, pots of trees, etc. So it's a, it's, it's a very sizable problem. And the problem that, yeah, the reason why we exist is to see if we can prevent and solve this problem for the entire cocoa industry.

Speaker A: Yeah. On uh, our first podcast in this series we spoke to the guys at Auctioneed who are doing some work out there and it, these lots of small farm holders, um, family run businesses. This, this issue has probably been going for generations and generations hasn't it, where everyone in the family pitches in. So it's, it's trying to change some hearts and minds really um, on kind of practices. That's one end of the scale and then I guess the other end of the scale is more um, the forced labor side as well. So some of it would just be expecting family to pitch in but, but there's some darker sides to it as well. Not that either are right. But you know, Tonys have demonstrated that it's possible to build a profitable brand and um, business and also invest in doing the right thing and making what you do in your supply chains do as, act as possibly as responsibly and ethically as possible. How have Tony's made that work where others perhaps have struggled in this area?

Speaker B: Yeah, uh, I think for us the reason we exist is to end exploitation in cocoa. We always say that we are an impact company that makes chocolate. We're not a chocolate company that's trying to make impact. So the origins of Tony's came about where journalists identified the issue on uh, human rights issues in cocoa in West Africa more than 20 years ago. And as a bit of a stunt they created a chocolate bar to show to the industry that you can make a piece of chocolate that is free of exploitation of West African cocoa farmers and still sell that product profitable to consumers. Now that stunt has grown into what Tony's is today. Uh, where last year we did about 244 million of revenue. Um, we have gained a lot of traction with consumers around the world, not just because of what we do, but also because of the great chocolate that we make. Um, and people do love our chocolate, they love the varieties that we bring, they love the flavors that we bring to the market. But all of that is grounded in a ethical sourcing model that nobody's been able to demonstrate before that you can actually solve these issues. So if you look at our supply chain and our impact in with cocoa farms, we put in a tremendous amount of effort into solving these issues for these cocoa farmers. So we pay a living income reference price. That basically means that we always pay an amount of money to a farmer that should allow that farmer to get out of poverty and start earning a living income. We help tremendous amount of effort on child labor remediation and making sure that children that we identify as being uh, working on cocoa farms, how do we resolve those issues? And we help those, those families for those children to go to school. We help them financially if they can't afford any other labor like how do we support them on funding some labor on work that has to be done in the farm. And what we've shown is that we, we throw everything at it but the kitchen sink as we say it, but that we're able in vast amount of cases to solve these issues and at the same time still build a brand and still the business that is, that is growing tremendously. That is uh, where today 16% market share in the Netherlands with 3% market share in the UK, 3% market share roughly in the US so you can see that the traction that we're building year after year after year is picking up. And we're doing that not at the cost of lowering our impact model in West Africa. So what we're actually showing is that you can be a good business that solves the issue in your supply chain and at the same time be an attractive brand to consumers and retailers to give profitability and growth.

Speaker A: And one thing that we've seen, and I completely admire that Tony's, uh, philosophy, is the traceability of what you're doing as well. So there's full accountability, um, that transparency within your supply chain, so you know exactly what's going on. What are the hardest aspects of building in that transparency, that, um, traceability into the supply chains? And where do you see the most resistance and how do you overcome that?

Speaker B: So Tony's has built our impact model on five sourcing principles. The first one, clearly, as you say, Emma, um, is traceability, because one of the things is that if you do not know where your product comes from, then it's very difficult to be held accountable for the circumstances of the. Those farmers that you're sourcing your products from. So for us, traceability is a fundamental one because it also gives us the accountability to solve those issues that those farmers that we know that work in our supply chain, that we have accountability for them. Uh, there are four other sourcing principles in our business next to traceability. One is stronger farmer models. So we believe in cooperatives, we believe in organized farming models where farm. The, the unity of the voices of these farmers is stronger than individually a farmer has. Right. So today, last year, we did about 33,000 farmers in our model, where we've grown that a bit. But the stronger voice that we have is that those 33,000 farmers also tell us what they want. It's not us telling them, but it's also them telling what they want. I think then, um, we pay a higher price, as I already explained. We pay a living income reference price. Uh, next to that, we believe in productivity and quality because as those smallholder farmers are relatively small, we know that they need to do better and can do better in terms of, uh, productivity and quality. And next to that, we are in for the long term because some of these changes, they don't happen overnight. So we commit ourselves to at least five years to these cooperatives and farming families. Now, the reason I say that is because the hardest thing is to do all five yeah, the easy thing is to pick one and to say, oh, I'm just going to pay a higher price and that is it. Um, but if you don't combine all these five sourcing principles into a united model, then they don't work, uh, because you cannot be doing that for one year and then next year go to a completely different group of farmers. So you have to do that consistently time after time after time again. And the real issues is doing that and continuing to do that. I think we have shown that you can do it and you have to do it together. Um, but what you see is that many companies, they will pick one or two or three. And many of those companies that come to us, they say, oh, what you do? Can I just pick three of those five sourcing principles? Because that's easy, right? I can pick the three that I think fit my values as a company and then forget about the other two because they're either too hard or too expensive. And the reality is that if you want to bring systemic change to a smallholder farmer model that is super complicated and not easy to, uh, to evolve into, our realization and lesson is that you have to do all those five sourcing principles in unity.

Speaker A: Yeah, these are really complex issues that have been common practice for a long time and that, that takes a long time to, to change.

Speaker B: And the sourcing policies, I think for the sourcing community on the podcast as well, they are things that you can change in your policies in terms of how you deal with your commodities and especially on cocoa. But they're also the hardest habits to break.

Speaker A: How important is it to engage with the, uh, communities and wider agencies such as these partner cooperatives on the ground? Can you share more about the, uh, child labor monitoring and remediation system that you, that you have in place?

Speaker B: Uh, I think there's two questions there, Emma. So I think if I go to the first one around, we interact a lot with the communities that we work with. Yeah. And the Communities are twofold. 1 It's the villages that people live in and then the other community is the corpse, uh, through which they sell their cocoa and which we buy their cocoa. So, uh, in both cases you have to have deeply rooted relationships in the communities and with those co ops, because you're asking a lot, and we are asking a lot of those communities and those farming practices sometimes to change some of their behaviors. And they will not do that if they don't trust you. Yeah. So on a child labor monitoring and remediation system, to give you an example, is we have community facilitators that come and visit every single farming family at least once a year. Uh, and they talk to the parents, they talk to the children, and that's the way that we can identify whether there is something happening on that farm that uh, we are not happy with. For example, if children are participating in the harvesting of the cocoa, and in order to do that you need to build that trust with these cocoa farmers, uh, because you cannot m. Punish them if that happens. What you then have to understand is why is that child participating in activities on a cocoa farm that it should not be participating in? And in order to do that, it is a very sensitive topic. Right. Even in Western communities and Western society, uh, it's easier sometimes to not talk about that. Um, and that's, I think very true as well in West Africa. So to build that trust you have to then show that if we find issues that we help families remediate those. Um, and that means that we then look into like why did that child, or did that person, uh, participate in child labor activities and what is the root cause of that and then how do we help solve that? And that could be very simple around uh, that the child, that the parents can't afford a school kit for the child to go to school. So then we help the children with providing school kits. It can be birth certificates, that the children don't have registered birth certificates. So then we help them with getting birth certificates. So all these things are deeply, I would say, communal aspects of the work we do. And uh, in order to do that you need to have trust in both ways. And that means for us that you have to be a credible, trustworthy party for people to open up to us and allows us to help them.

Speaker A: Absolutely. It's a massive trust building exercise as well. Um, do you think that human rights and child labor are kind of still the poor relative of the whole sustainability movement? You know, um, are people investing as much effort in it as they are perhaps carbon? Do you agree with that?

Speaker B: It's harder, I think, to solve. Carbon is a financially solvable problem and people understand what can be done more and more as we work through scope one, two and three. And there is a lot of institutions that have started to understand like what companies can do and it's a, it's in a way a problem you can put your arms around a little bit. Um, I still think scope three is an undervalued, uh, accountability problem where I think a lot of companies then build sourcing policies that say as a supplier, thou shalt Reduce your carbon. And as such I am contributing to my carbon offsetting or carbon reduction plan. Um, for human rights issues, it's pretty, you know, in that way it's a bit the same, but it's a much more complicated problem to solve because you're having to tackle something that is deeply rooted in, as you say, generational uh, activities or has to do with extreme poverty situations and extreme to solve. Extreme poverty is expensive and is a difficult problem to solve. And I think the social inequality that we have in the planet is the root cause of why there's a lot of deforestation and there's a lot of carbon problems. They actually come from, I think, a socially unequal system that we have in our planet. Especially when you think about the agricultural systems that we have. So our belief is that you cannot bring social justice to a broken planet. At the same time, you cannot fix social issues when, uh, the, you know, when the planet is not, when you're not doing the activities on carbon. And I think the same is true for fixing the planet. You have to, I think, solve some of the social issues that are also underlying to the root cause of our, of our environmental problems.

Speaker A: Do you think the um, increase in legislation that we're seeing popping up, um, do you think this will be a wake up call for people? Will it drive the right behaviors? Maybe?

Speaker B: I think it's helping. I definitely think legislation has stepped up, uh, quite a bit in the last couple of years. It was way below par, I would say, five to 10 years ago. I still don't think it's enough. I think more needs to be done both on the social and the environmental side of business. Things like EUDR and traceability, they help. But I don't think that just doing that is enough to fix the issues that we have. So I think there is, it's almost the um, raising the floor versus raising the bar discussion that we always have. And I think it's helping to raise the floor, but I don't think the floor is high enough yet to really solve these issues.

Speaker A: What would your um, do this now piece of advice be for our listeners? With more and more legislation coming through, it puts the onus on supply chain due diligence. Um, what advice would you give to our listeners on where they should focus their efforts when it comes to human rights and supply chains? Just a big question there, really.

Speaker B: Yeah, it's a huge question. And I think if I look at what Tony's does and what we've done in the past for a lot is, um, you have to be clear and honest about the issues that are in your supply chain and in your business. And if you face them with real honesty and real clarity and real accountability, then I think you'll come to the right conclusions about what is the work that can be done and how can you solve those big problems. I think a lot of people get lost a bit in that journey because they're either afraid of the internal politics within a company. They feel that either the price tag is too high and as such the management or the leadership of a company won't accept the solutions that need to be put in place, or people don't really fully own and understand the problem that lies beyond, uh, uh, their own reach at first. Right. So I think you have to really look for the issues to understand those issues and then work solutions through those problems and not try to resolute them from your own point of view, but try to find solutions together with the people that are in the mud sticking through those problems and really understand what they need or what the world needs in order to solve those problems. And I think that's, for me, uh, is the heart of it, is you have to really be honest about some of the issues and then you have to listen to the people that are dealing with those issues and don't think for them. Right. Listen to them and then think about what they need and listen to what they need because they'll tell you what they need and that is probably the heart of the solution.

Speaker A: Yeah, no, you're right. It's, uh, a big listening exercise, uh, a big investment in time as well. But yes, I think it's understanding those, those root causes. These things haven't just evolved for no reason. Pascal, thanks so much for joining us. Fascinating, uh, discussion. I love Tony's. I've just, uh, recovering from a knee operation. Have been gifting several bars, which I've really enjoyed in my recovery. Um, but I just really love what you stand for as an organization as well. So thanks for joining us.

Speaker B: No, thanks for your time, Emma, and good luck with your, uh, recovery.

Speaker A: So this is our second episode in this mini series. Please join us for episode three coming up very soon. But that's it for us today. Don't forget to like and subscribe. Subscribe so you don't miss future episodes. This podcast has been brought to you by cips, the Chartered Institute of Procurement and Supply. For more information on CIPS and in fact more information on CIPS foundation, head over to cips.org where you can find out more about the exciting projects that we are funding for now, though. That's it from us. See you next time.