Blockchain Technology shines a light on the dark side of chocolate

The world is changing.

As people become more conscious of the origin, background, and sustainability of the products they consume, suppliers are finding they need to be transparent and responsible about sharing this information with their customers.

The chocolate industry is no different. Chocolate sends many people into frenzies of delight, and although the Aztec and Mayan civilisations celebrated this magical bean, it wasn’t until Europeans combined it with milk and sugar and mass production began, did the deliciousness of chocolate really begin to be appreciated.

For the chocolate connoisseur who savours a piece of brown gold like they would a fine wine, they are becoming more interested in the provenance of the beans used in their chocolate bars. They are concerned about the sustainable production of high-quality cocoa. In which area are the beans cultivated? Which forest deep in the South American jungle did they grow? Are the beans organic? What percentage of the chocolate uses palm oil? Was child labour used? It makes sense that they are asking for high standards and traceability.

Issues in the production of cocoa

Ghana and Ivory Coast produce 60% of the world’s cocoa. More than 10m people survive off the industry. Price declines and fluctuations are one of the most urgent issues affecting the cocoa production sector today. Farmers are at the losing end where they bear the risks of a volatile price, while other entities in the supply chain adapt and even make massive profits. Some reports from farmers indicate that not only are they not even earning a living income and that some are now growing cocoa at a loss! Smallholder cocoa farmers in Cote d’Ivoire, already struggling with poverty, have seen their income from cocoa (by far their most important income source)
decline by as much as 37% from one year to the next.

Slave-free chocolate, anyone?

There is a dark and murky side to chocolate production too. The Tulane Report, released in 2015, drew attention to the worst forms of child trafficking and labour in cocoa production. Despite more than a decade of efforts, child labour numbers are still unacceptably high – and it’s seen that when there’s an increase in cocoa production, it leads to an increase of child labourers. 70% of the world’s cocoa originates in West Africa, where it’s been found that child labour is increasing. In 2013/2014, over 2.2 million children worked in cacao production in the two largest producing countries, Ghana and Côte d’Ivoire.

The situation is complicated. Despite efforts to end the scourge of children working in the industry, it seems to have driven the practice more underground. Root causes such as farmer poverty, the absence of and access to good schools, inadequate local infrastructure, lack of awareness still need to be addressed.

Not a single company or government is anywhere near reaching the sector-wide objective of the elimination of child labour, and not even near their commitments of a 70% reduction of child labour by 2020.

Chocolate production is dangerous work too as it includes the use of machetes and harvesting hooks, but also carrying heavy loads and working with toxic fertilisers. 96% of children working in the industry still continued to be involved in these dangerous tasks, rising 13% from 2008/2009.

The environmental impact of chocolate

Global cocoa production has increased fourfold since 1960, and West African forests have been particularly hard hit. Cocoa has been cheap, and corporates and governments haven’t paid attention (or have totally foregone protection of these areas in the interests of profits) to the environmental effects of production – more than 90% of West Africa’s original forests are gone, and any remaining forest must be protected.

The need for standards

The chocolate industry is valued at $98.3 billion, of which the European market of chocolate represents 21.6 billion euros. In 2016, the European Union Members exported about 2 million tons of chocolate. The EU countries have imported 1.7 million tons of cocoa beans, most of them coming from Africa (Eurostat figures: Ivory Coast, 720 000 tons; Ghana, 340 000 tons; and Cameroon, 140 000 tons).

It makes sense that Europe is at the forefront of standardisation for sustainability and traceability of cocoa beans.

Standards make sure there are good agricultural practices, that environment and human rights are protected, and social conditions and lives of farmers are improved. The standardisation efforts aim to unify requirements for the cocoa supply chain and its effectiveness, creating transparency and fair competition. They will be of use to all parties involved in the cocoa supply chain from the farmers to the purchasers of cocoa.

Isn’t it all a grand PR exercise?

The production of certified chocolate has risen dramatically since 2009, from 2% of all chocolate to 16% in 2013. A number of cocoa certifications now exist, including Fair Trade, UTZ and Organic as well as self-certification by many producers.

Although certifications help support better conditions for poor farmers and sustainability programmes are implemented, at the end of the day they remain a “PR effort” that placates customers who are now so aware of the dark side of cocoa production. Plus certification is still not widely adopted in the industry.

As at the end of 2017, an international standard for sustainable cocoa sampling and quality requirements was finalised, but standards for sustainability management, sustainable and traceable cocoa, economic, social and environmental performance and requirements for certification schemes still under development.

Blockchain, anyone?

It seems logical (and fairer) that blockchain technology could solve this complicated supply chain issue and make the journey from Bean to Bar more transparent.

What would need to be tracked would be all the farmers and what they’re supplying into the chain. This information could be entered through a rural farmer’s mobile phone and/ or an RFID or QR code added to the order. We’d also be able to derive how those farmers sourced those beans and a sense of their reputation (i.e., do they use child labour?). The location of the plot of land would be registered too. This batch of cocoa would then be tracked through middlemen at the co-op and again entered into the chain and tracked further as the full shipment worked its way up through West Africa to Europe.

Once it arrives and is concocted into chocolate, we could have similar tracking of the milk, palm oil or cocoa butter and sugar used in the product. A full history of the journey of this bar could be built up and accessible via the secure blockchain. All records of payments can be tracked too, and it would be clear whether the poor farmer got fair compensation for his beans. The financial record could be followed right through to the merchant who buys to sell to the end consumer. All relevant information would be visible throughout.

Is Omnitude the solution?

There are many pilots and proof of concepts currently underway that track supply chains end to end. These are specific solutions based on particular needs.

Omnitude is an ecosystem that allows multiple companies to integrate their existing data systems and push that data into the blockchain. It doesn’t require a complete overhaul to build new systems and can be up and running in a couple of weeks (not years!).

The advantage of the Omnitude middleware solution is that it talks to multiple systems and creates true connectivity between existing processes and systems while maintaining the privacy of the distinct systems, so only sharing data that needs to be shared and not opening up all systems to all actors on the network. So Colin the Cocoa Supplier in Ghana won’t have full access to Nestle’s complete backend. It then creates a record to be stored on the immutable blockchain, which can be seen by anyone interested in sourcing the origin of the chocolate bar.

With Blockchain then making the journey so transparent, one asks whether there is a need then for all these certification bodies? Inevitably blockchain records create the necessary transparency that cannot be altered to provide the necessary authenticity of the cocoa bean and back up its journey.

But that’s a conversation for another day. It’s worth bearing in mind that this industry is changing – not only because customers are demanding more accountability, but because technology is evolving so rapidly and disrupting the current status quo. And that should be something we should celebrate!

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