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Making Chocolate Better

In January 2020, Hershey Company reached its target of sustainably sourcing 100% of the cocoa that goes into its famous candy bars and other confections. But rather than indulge in self-congratulation, within months the 125-year-old chocolate maker had expanded its commitments, pledging in May to buy 100% direct-sourced cocoa in Ivory Coast and Ghana by 2025. As part of its announcement, the company stated: “this expanded commitment will make Hershey’s cocoa from these countries traceable from the farm to the first point of purchase, giving Hershey a clear line of sight into where all of its cocoa from West Africa is grown and how it is produced – providing more transparency for consumers and all stakeholders.”

Hershey’s commitment is significant in its own right, but even more so in the context of the struggle for progress on sustainable, ethical cocoa production over the last 20 years. West Africa produces approximately 70% of the world’s cocoa beans, with Ivory Coast and Ghana alone accounting for 60% of the global total. After the 2013/2014 season, a US Department of Labor-commissioned study estimated that 2.12 million child laborers in those two countries worked in cocoa production, with almost 96% of those children estimated to engage in hazardous work (including, but not limited to, burning and clearing fields, spraying pesticides, using sharp tools, and carrying heavy loads). Some were also working under conditions of forced labor, as migrant children from Benin, Burkina Faso, Guinea, Mail, Nigeria, and Togo had been found on cocoa farms in the Ivory Coast after being sold as slaves or indentured servants.

As more consumers have become aware of these conditions, demands for transparency have grown loud. The first reports of child labor in the cocoa industry made the news cycle in 2001, at which point Congress created the Harkin-Engel Protocol. Harkin-Engel brought together the members of the Chocolate Manufacturers Association of the United States of America, now known as the National Confectioners Association, to agree to eliminate the worst forms of child labor in the Ivory Coast by 2005. But the Harkin-Engel protocol was voluntary and self-regulating, which resulted in the deadline being pushed to 2008, then 2010, and most recently to 2020.

As Harkin-Engel deadlines slid, outcry and lawsuits from consumers and other stakeholders prompted major manufacturers, including Hershey, Nestle, and Mars, to launch their own programs to address sustainable and ethical cocoa. In 2014 and 2015, Hershey responded to shareholder lawsuits by disclaiming responsibility, pointing instead to corporations like Cargill who serve as middlemen for cocoa sourcing. But by 2016 Hershey had certified 60% of its cocoa; in 2017 the company published open sourcing maps for several products; and in 2018 its “Cocoa for Good” program launched with the promise of a $500 million investment over 12 years. Despite these positive steps, however, a late 2018 report from UNICEF suggested that the number of child cocoa laborers had hardly budged.

While some indicators do show incremental progress (e.g. fewer children now doing hazardous work), the lack of bottom-line improvement is likely attributable to issues with the sustainable certification process. The major US chocolate companies work with three certifying organizations: The Rainforest Alliance, UTZ, and Fair Trade Certified. These certifying agencies, in turn, target improved supply chain traceability, farmer cooperatives, and a higher degree of farm management. But while these improvements bring real benefits, critics point out massive loopholes. For example, third-party inspectors are generally required to visit less than 10% of farms, and even those visits often come with advance notice, meaning child labor can simply be hidden away until the inspection is complete. Another criticism is that the creation of cooperatives can actually negatively affect small-scale farmers. Registration fees may be unaffordable for many, and if farmers do join cooperatives, they rarely get paid the higher, negotiated price for their crop; instead, money often stays with the management of the cooperative. Additionally, after initial acceptance into a certified cooperative, compliance audits happen less than annually, which may be too long to ensure labor standards are being upheld. Still, even critics of certification acknowledge that while the system is imperfect, it is far better to have one than not.

Today, Hershey’s direct-sourcing commitment represents a different, more ambitious approach. Direct sourcing gives the company more leverage and visibility in ensuring farmers meet sustainability standards, and provides more opportunities to directly support the communities where its supply chain originates. The Cocoa for Good program and its $500 million in funding targets farming community challenges such as poor nutrition, at-risk youth, poverty, and vulnerable ecosystems. Hershey also plans to expand its Child Labor Monitoring and Remediation System (CLMRS), to assess over 125,000 children and provide any necessary remediation. Such remediation might include providing birth certificates so children can stay in school, since many families lack the necessary documentation for their children to continue into secondary school. In 2019, Hershey’s CLMRS monitored 68,988 children, already double the number in 2018. The program also aims to invest in farmer training, with the goal to help address poverty by improving efficiency.

Appointed to the job in 2017, CEO Michele Buck may be helping drive Hershey’s new approach. One of only 33 female CEOs of Fortune 500 companies, Buck has also prioritized Hershey’s nascent move into hearty snacks such as beef jerky, snack mixes and nuts, and away from its reliance on less healthy confections. Gender diversity is a strength from top to bottom, with the company’s workforce approximately 48% female, 42% women on the Board, and a 0.99 gender pay ratio (compared to the 0.82 national average). Such near-parity, along with the company’s ambitious goals to reduce carbon emissions, water use and waste by 25% and packaging material by 25 million pounds by 2025 (on top of 13% emissions reductions already achieved since 2015), have landed it on the Dow Jones Sustainability World Index for 7 years, with high rankings from Corporate Responsibility Magazine, DiversityInc and the Human Rights Campain (HRC), among others.

Perhaps most important in our view, Hershey’s position on child labor in cocoa has gone from that of laggard to leader, with the company choosing transparency and facing up to its challenges. As Buck said in Hershey’s 2019 CSR Report: “we continue to make good progress within our Cocoa for Good Strategy, but we know there is a long way to go to resolve some of the most pressing issues facing cocoa-growing communities, including child labor.”