Analysis of cocoa and chocolate purchasing practices that could undermine living incomes for cocoa farmers

1. Unfavorable trading system for actors upstream the supply chain

To which extent does the trading system (including the stock market) lead to inequality by design?
Is there proof that companies (or other actors) use their influence to keep this “business as usual” trading system in place?
What are the barriers that upstream actors need to confront to challenge this system?

2. Which internal business practices of companies lead to a downward pressure of cocoa prices?

How important are bonusses for purchasing clerks who manage to “beat” the market?
What’s the importance of cocoa stock management and reporting on grinding ratios.
Is there an impact of the recipes that companies use for their recipes (raising or lowering cocoa content) on cocoa prices?
To which extent do companies change cocoa sourcing to different areas when prices are raising in one origin. How does this company policy in-fluence prices? To what extent has this happened in the context of the LID?
Are companies purposefully delaying their cocoa purchases in order to lower negotiation power of governments, cooperatives and farmers?
How can the identified unfair purchasing practices best be included in the revision of the Directive 2019/633 on Unfair Trading Practices? See also research question 6.

3. Who negotiates down the different (country) differentials?

How are the country differentials determined?
Do certain companies have excessive power on the height of the differentials?
How does the influence of different actors in the supply chain compare when it comes to the height of the differentials? What’s the role of traders, confectionery brands and supermarkets?

4. How is financialization and speculation on commodity markets un-dermining the bargaining power of actors upstream in the supply chain (governments and cooperatives)?

Are traders (or other actors) using their privileged position and access to information to lower prices on the commodity markets?
Do traders (or other actors) use this position to increase volatility and thereby eliminating financially weaker actors on the market and consolidating their own position?

5. How do different strategies and actions compare in terms of influence on prices?

Make a ranking of strategies and actions from “low influence on prices” to “high influence on prices”
Are there other strategies and/or actions companies are using to under-mine the negotiation power of upstream actors and lower cocoa prices?

6. To what extent are these strategies and actions in line with current and upcoming (inter)national legal frameworks (UTP, UNGP, Devoir de Vigilence, CSDD-Directive, etc…).

Are these frameworks adequate to prevent companies from harming the right to a living income through their purchasing practices?
How could these frameworks be amended so they protect the rights of farmers and workers better through human rights sensitive purchasing practices?
How could Multi-Stakeholder-Initiatives help regulate these actions that undermine sustainability in the sector?

With this study we would like to get a better understanding of the actions that companies (willingly and unwillingly) are doing that are keeping cocoa prices down and therefore potentially harming the right to a living income for cocoa farmers. This better understanding should help policymakers to create adequate rules that push companies to respect the right to a living income through their business mod-els as a whole.

Voluntary multi-stakeholder initiatives
Sustainability certification schemes
Market-concentration in the cocoa supply chain
Government export bodies
Futures markets
mHREDD

Producer country’s export policy
Producer country’s social protection policies
EU deforestation policies
EU trade policy

The cocoa supply chain is characterized by extreme inequality in terms of power and risks between the producers (small scale farmers) and the co-coa/chocolate industry that buys and transforms this product.

The central concept of research will be the Anker & Anker methodology for calculating living income.

Desktop study and where possible stakeholder interviews to recon-struct theories of change (ToCs) implied in currently implemented business initiatives and programs aimed at raising farm gate prices as a strategy to allow farmers to reach a living income. Producing data on existing ToCs
articipatory qualitative research (including interviews, focus groups) with key stakeholders (farmers, farer cooperatives, local government, key chain actors) to investigate and validate different hypotheses/ToCs present in these approaches and map their ef-fects.
Data collection (through participatory surveys) to compile firsthand testimonies of farmers and families who have been involved in a scheme that raises farm gate prices as well as data on income

The CS should create clarity on who has the power to influence the cocoa and therefore, who has the responsibility to safeguard the human right of living income for cocoa farmers. This should also inform policy makers, specifically for mHREDD to put the burden on the actor(s) that have agency.