Going its ‘own way’: Lindt invests $14m in sustainable cocoa in last eight years
The Swiss chocolate maker previously set a target for its entire cocoa supply to be traceable and verifiable by 2020.
The firm – which posted CHF 3.9bn ($3.8bn) in 2016 sales - is not purchasing certified cocoa from bodies such as UTZ and Fairtrade, but is instead relying on its own program.
How does Lindt define sustainable cocoa?
“For Lindt & Sprüngli, sustainable cocoa means cocoa that is sourced in a way that does not harm or hinder, but fosters 'sustainable development'. 'Sustainable development' is not a static concept, but requires continuous adaptation and flexibility in thinking and action,” said a company spokesperson. Lindt said its own program aims to improve agricultural, social, environmental and business practices to enhance the livelihoods of cocoa farmers and their families.
‘Mass balance is not an option for us’
“Lindt & Sprüngli prefers to go its own way,” a spokesperson told ConfectioneryNews.
She said Lindt shares the values of bodies like the World Cocoa Foundation, Fairtrade International, Fair Trade USA, UTZ and Rainforest Alliance, and would collaborate where possible.
“Nevertheless, we chose to build up our own sustainable cocoa sourcing model….
“We consider our control over every step of the production chain as the perfect base to ensure and guarantee a sustainable sourcing model,” said the spokesperson.
She added: “Mass balance is not an option for us, as we want to know where our beans come from.”
Mass balance allows chocolate companies to buy a specific volume of certified cocoa. That cocoa may later be mixed with other non-certified cocoa along the supply chain, meaning some certified chocolate brands may contain non-certified cocoa.
Lindt’s spokesperson claimed the company’s own program allowed it to ensure farmers directly benefited from its support.
“Our sourcing model targets our entire cocoa bean supply, and is not limited to individual products or product groups,” she added.
Lindt’s farming program
Lindt launched its Lindt & Sprüngli Farming Program in 2008 in Ghana. It expanded the program to Ecuador in 2014 (3,000 farmers) and to Madagascar in 2015.
It says it has trained 56,000 farmers under the initiative, which is implemented by non-profit organization Source Trust.
The company’s Ghanaian cocoa supply became fully traceable and verified in September last year.
Inputs rather than cash premiums
Under the program, Lindt does not pay cash premiums to farmers – as is the case for certified cocoa - but delivers “in-kind premiums” via farming equipment and seedlings.
“The result is that farmers are in our program because they want to improve themselves, and not because they receive a little more cash for their cocoa beans. As such, we consider this as a more sustainable solution,” said the company's spokesperson.
Lindt told us it has a child labor action plan in its Ghana program, which includes a Child Labor Monitoring and Remediation System (CLMRS). It said further details would be published its upcoming sustainability report.
Financial outlay
The company has invested around $14m in its cocoa program from 2008 to 2016, excluding its own staff costs.
Third party view: International Labor Rights Forum
Abby McGill, director of campaigns at nonprofit organization the International Labor Rights Forum (ILRF) said Lindt’s push for traceability, long-term relationships with farmers and transparency were steps in the right direction that should be followed by the entire chocolate industry.
“But traceability is not enough to ensure decent conditions, and there is clear evidence that the low price farmers receive for their cocoa is causing the ongoing poor working conditions in many cocoa-growing regions.
“Chocolate companies are more sustainable if they keep yield high and prices low, which the in-kind contributions in Lindt’s program would help do, but for cocoa to be truly sustainable, farmers need to be able to speak for themselves to help set prices that allow for decent livelihoods,” she said.
It has also received additional funds from organizations such as IDH-Sustainable Trade Initiative, Solidaridad and the Cocoa Rehabilitation and Intensification Programme for Ghana (CORIP).
The Lindt Cocoa Foundation, setup in 2013, also funds some activities through dividends received from Lindt shares. The foundation will invest $2m in 2017.
Sourcing cocoa: Hedging or direct sourcing?
Lindt’s annual report describes the firm as a ‘bean-to-bar’ chocolate maker and it says it selects its own cocoa beans.
Later in the report, it says the company “enter[s] into contracts with suppliers for the future physical delivery of the raw materials”.
Asked how its cocoa is sourced, Lindt’s spokesperson said: “We are one of the few companies that still produce our own cocoa liquor with cocoa beans we select ourselves. That’s what we mean by ‘bean-to-bar’.
“We get the high quality cocoa beans from our long-term suppliers - for 2016, we had even 97% of those cocoa beans sourced with traceability certificates.”
“We do, however, of course hedge the cocoa beans price on the cocoa futures exchange in London or New York to manage price volatilities (additionally, a differential is paid to the supplier directly)," she said.
Third party verification
Lindt appointed The Forest Trust (TFT) as a third-party evaluator of its program in 2015 and became a TFT member last year. It says TFT visits and evaluates each of the Lindt & Sprüngli Farming Programs at least once a year.
Lindt said progress will be reported on the TFT’s Transparency Hub.
Lindt started gathering quantitative data on farmer income for those in its program in cocoa season 2015/2016 via questionnaires, developed together with COSA (Committee on Sustainability Assessment).
“At the moment, we are in the second year of collecting this data, and are therefore not able to report on outcomes or impacts,” said Lindt’s spokesperson.
The company expects that, by the end of 2017, it will have sourced almost 95% traceable cocoa beans, and close to 90% of traceable and verified cocoa beans from all origins for Lindt branded products.
The company sells products under other brands such Ghirardelli.
Lindt says it is also working with suppliers for strategies on traceable, sustainable and verified cocoa butter and cocoa powder.
‘We, of course, need to source more cocoa’
The company grew revenues by 6.8% in 2016 and is seeing strong demand for higher cocoa (70%+) in markets such as Germany.
“As we grow in volume, we, of course, need to source more cocoa to meet that future demand – this has also been the case in the past," Lindt’s spokesperson said.
She added that Lindt should be able to meet its 2020 as more farmers join its programs and its existing farmers increase their yields.
