In preparation for my Ethics in Food Production exam today, I went over the ‘Shared Value Approach‘, a new concept of Corporate Social Responsibility (CSR) pioneered in 2011. It has been hugely successful with multinational companies, since it highlights the business perspective while acknowledging the linkages between corporate practices, social conditions and environmental concerns. According to the concept, instead of just redistributing current profits among different stakeholders – say, paying suppliers more or funding community programs from a designated CSR budget – , companies endeavor to create more value that is shared between the corporation and society.
How does it work in practice?
MARS is implementing the concept in Côte d’Ivoire, the leading cocoa producing country in the world that has significant challenges ahead of it – after market liberalization, cocoa prices dropped dramatically and remain volatile. This fact, in addition to the political instability in the last 10 years, has led to a lack of investment in the cocoa farms and a very low planting of new trees. Furthermore, cocoa farming is not seen as a viable job alternative for many young Ivorians who prefer to leave the farm for the city, leaving the older generation behind – the average age of cocoa farmers in West Africa is around 50 years, with a life expectancy in the region of 60. At the same time, world demand for cocoa is supposed to rise by 1 million tons – 25% of the current world production – in the next decade.
To address these problems that linked socio-economic issues in Cote d’Ivoire and their own future supply worries, the company established a cocoa sustainability strategy with the goal to revitalize the country’s cocoa sector.
In addition, it was the first big company in the chocolate industry that committed to source only certified cocoa (certified by the Rainforest Alliance) by 2020, and is seen by some to be the front-runner in sustainable initiatives in the sector.
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Mars’ “Vision for Change” strategy includes the three pillars of sustainability:
- Economic: improving farmers’ incomes through increased yields;
- Social: invigorating and empowering local communities which will benefit from the reinvestment of higher incomes; and
- Environmental: using Good Agricultural Practices to increase soil fertility and prevent the expansion of farms into protected forest areas.
According to the strategy’s website, while they are still in a pilot project phase, in 2012 they already reached some significant accomplishes:
- They established 17 cocoa development centres in Soubré (where their pilot project is located);
- They selected 5 cocoa village center operators;
- They delivered and distributed 60 tons of fertilizer;
- They signed a letter of agreement with the governmental Conseil du Café et Cacao for coinvestment in education, health, water, and protective environments for children;
- They developed methods of evaluation and collected baseline data for their first cocoa development centres; and
- They established important coalitions, e.g. with the World Bank and Agence Française de Développement (AFD), as well as spreading the message sector-wide.
It will be interesting to watch how MARS intends to scale up these initial achievements in 2013; while the idea and first steps are most certainly laudable, the cocoa sector is notoriously difficult to reform in any way because of the large number of tiny farms that are spread out and difficult to reach due to a lack of infrastructure and transportation.
Image by Nestlé, via Flickr Creative Commons.
In addition, the 2012 Cocoa Barometer report emphasizes that while yield improvements have been the magical bullet put forward by the industry to achieve a win-win situation, it always depends on how these yield increases are reached, what inputs are necessary to make these improvements and whether farmers are supported in that endeavor. In Ghana, for example, fertilizer is subsidized and taxes are low, making it more likely that enhanced production techniques will be profitable for farmers. On the other hand, in Côte d’Ivoire where farmers face higher taxes and margins of traders, as well as no governmental subsidies in fertilizer (I am not sure whether Mars’ strategy included giving away the fertilizer for free; the ‘distribution’ aspect mentioned is inconclusive on that from my point of view), the improved yields could lead to an improvement of Mars’ supply without actually furthering the social cause, since farmers might make the same profit margin as before.
Also, unless you can stabilize prices again in Côte d’Ivoire and make them less dependent on world market fluctuations, as for example with Ghana’s Cocobod, a cocoa board that guarantees its farmers stable prices, it will be difficult to attract young farmers to continue the business. The creation of the Ivorian Conseil du Café et Cacao mentioned above might be a first step in that direction, though it might take some time until it is well-established enough to take on that responsibility.
Overall, a main conclusion that can be drawn in my opinion is that it needs the collaboration of industry, non-governmental organizations, and the governments of both producing and consuming countries to create long-lasting change – but that the Shared Value concept might give one more argument to industry members to get involved in the first place.
Do you think Shared Value concepts are powerful concepts of change or just a measure for companies to “fairwash” their own business interests?
Bonus: The 2012 Cocoa Barometer is a really interesting and balanced read about the initiatives underway and the challenges faced in the cocoa sector. Its theme is “Beyond Productivity” and therefore ties really well into this discussion – I can recommend it!
Dear Grabs, I am glad that you mention the cocoa industry in this forum.
Although I have not taken a course in ethics, I think that this approach is solely in the interest of the consumer countries and the chocolate factories. I start by questioning the effectiveness of yield in raising farmer’s income while there are more appealing strategies like revisiting the price mechanism. Recent studies show that the vertical integration (from top to bottom) and market concentration have hampered the farmer’s bargaining power in the cocoa sector causing a low share in the chocolate value chain. Moreover, cocoa prices began to drop since early 2011 and are expected to worsen due to the fall in demand of chocolate (because of the crisis in the Euro zone and in USA) and equally due to the additive effect of cocoa production from the various producing countries (hence excess supply over demand).
From an ethical and social point of view therefore I wonder why countries who rely on imports of food staples like milk and milk products, rice, fish, etc and whose population suffer from hunger, malnutrition and undernourishment indulge in the production of crops they do not consume…. does the pursuit of foreign earnings justify this? I think that balance of trade (of payment) accounts should be given more emphasis, rather than just foreign earnings.
That is a really good point, Chi, thank you for commenting! I agree that the concept that is so intent on creating ‘new value’ seems to assume that the current distribution of value is adequate and fair – which is very debatable. And the increased influence of cocoa companies on the production practices of small farmers might lead to even greater dependency on them, especially if yield improvements hinge on expensive inputs…
And the Cocoa Barometer also talks about the necessity of farmers to diversify and not only produce one cash crop in order to hedge against volatile prices. On the other hand, for a lot of countries these cash crop exports are the only way that they can gain foreign currencies and that the government can raise revenue – how that revenue is used then again depends, obviously, but if it were to be used for social development investments, maybe the people would benefit from it? But I agree that a controlled shift to more domestic production, keeping your trade balance balanced (haha), could be considered for greater domestic food security.