The Changing Landscape of Cocoa Sourcing: Part 3

Before You Begin ⋯

⋯ it makes sense to read Parts 1 and 2.

The Changing Landscape of Cocoa Sourcing: Part 1

For decades, large traders have dominated cocoa sourcing ecosystems. While that is still true, there are many new, alternative, sourcing options these days. But do all of them (any of them?) offer meaningful alternatives to the status quo? Part 1 of 4 parts.

The Chocolate LifeClay Gordon

The Changing Landscape of Cocoa Sourcing: Part 2

When evaluating a cocoa sourcing partner, two good places to start are: know your supplier and being clear about how you communicate your stances on key issues to yourself, your employees, your suppliers, and your customers. Part 2 of 4 parts.

The Chocolate LifeClay Gordon

But, if you want to dive right in or don’t feel the need for a recap, here’s a summary:

1. Thesis: Exploitation in cocoa persists after two centuries of “ethical” efforts in part because certifications and consumer-facing fixes largely commodify morality without altering structural power relationships in global trade.
2. Ethics as market category: The late-20th-century rise of (so-called) “fair” trade effectively built awareness and infrastructure while creating a two-tier market that outsourced moral responsibility to consumers, and enabling corporate greenwashing via the “certification industrial complex.”
3. Specialty chocolate’s promise and entanglement: Bean‑to‑bar/Craft/Specialty values (including direct trade, transparency, paying premiums, community-led projects) became differentiators, yet logistics and manufacturing dependencies tie many “ethical” actors to multinationals (e.g., trading arms and processors), blurring the lines between specialty and industrial supply chains.

Key Takeaways:

• Ethical labels can mitigate harms and raise awareness, but they can also reinforce rather than transform existing systems. “Meaningful change demands shifts in power, not just premiums and paperwork.”
• “You cannot separate the ethics of consumption from the ethics of production.”

Thesis

When evaluating cocoa suppliers, you must build on a clear understanding of what’s important to you, along with a commitment to unambiguously communicating that understanding to your employees, your customers, and your suppliers.

You want to make sure that you are not sending mixed or misleading signals, as, in this day and age, it’s easy to fact-check just about everything.

While consumers may be comfortable outsourcing their ethics to a certification program they cannot independently verify, you don’t have that luxury.

Background

My first “real” job out of college was working for the VP, Marketing of a startup computer graphics firm. I got the job because a) I had a degree from an art school (Rhode Island School of Design), and b) I had experience working with computers other than playing video games.

Keep in mind that this was a rare combination back in 1983.

The first task I was assigned was to develop a competitive comparison matrix, comparing the features and specs of the software and hardware my company offered against the features and specs of the software and hardware offered by our competitors.

I was given (as I recall) almost no direction on how to approach the task. What I was given – and remember, this is a decade before the World Wide Web – was a stack of brochures that had been collected at trade shows.

I read the brochures for each of our competitors, organizing the data according to a topical structure I had developed. If a competitor mentioned a feature we did not offer, I added that to the list, going back to the literature on our products to fill in the gaps. I got feedback from the developers, salespeople, the marketing department, and prospective customers, constantly evolving and updating the matrix to make it more functional and usable.

The comparisons I create 40 years later are built using this iterative process.

A version of this process is what I outline below, but in this case, there are as many as four constituencies to consider:

1. Your company
2. Its target customers
3. Your peers
4. Your suppliers

Creating Evaluation Rubrics

The first place to start is with you and your customers

Create a table (this can be a worksheet in a workbook) and start listing what’s important to you, why it’s important (or not) to you, your ranking of its importance to you, and then its importance to your customers.

“Fair” trade certification might no be important to you. In the Why/Why Not? column of the table list reasons why. For example, you might say, “We buy directly from farmers and prefer to pay the cost of certification to the farmers directly.”

This (or these) reasons are the foundation of what and how you train your employees and speak to your customers about these topic.

Next, consider how your peers address the criteria that matter to you

1. Create a new table with all the criteria in your My Company table.
2. In the US column write a short summary of your position for each criterion listed.
3. Then visit at least a half-dozen companies you consider to be your peers. For each of those companies, write down how they handle those criteria. Be specific as possible, using the language they use.
4. If a peer gives you an idea for a new criterion, add that to your list and explaing Why/Why Not? in your My Company table. (You may have to revisit the other companies to see how/if they also address it.)
5. Try to rank the importance of each criterion for each peer using the same 1-7 scale. (A company might have a criterion you add to your list you don’t care about at the moment but add and rank it on your My Company table)

Study the answers for similarities and differences, and generate language that articulates your position(s) clearly and consistently.

Finally, apply your updated understanding to your suppliers

1. Create a new table with all the criteria in the US table.
2. In the US column, write a summary of your UPDATED position for each criterion listed.
3. Then visit all the suppliers you are considering. For each, write down how they handle those criteria. Be as specific as possible, using the language they use.

Rank each criterion. This forces clarity and comparability. It can help to reorient the table. If you’re a spreadsheet wizard, you might be able to do this automatically using pivot tables.

Updated: the wicked bad & wicked good lists

New and Improved! Renamed and updated! Now easier to use than ever to follow.

The Chocolate LifeClay Gordon

Take a look at the Wicked Lists post and the predecessor Blacklist post for the criteria I used to develop the lists and how I applied them.

For example, I know that ECOM and Cargill are/were involved in a case that alleges that cotton dealers profited from forced child labor in Uzbekistan. ECOM initially denied any violation of the Guidelines, but in the final agreement the company acknowledged its responsibility for their contributions to the (child) labor situation there.

As Cacao Latitudes is, de facto if not de jure, a wholly-owned subsidiary of ECOM, Black/Wicked list criterion 4 (Incomplete and/or disingenuous supply chain disclosures) could reasonably be counted against them.

Your list of criteria might include (e.g., “I want my supplier to”):

• publish a transparency report annually
• have an affirmative gender-equity program
• have a farmer income verification program
• have a traceability system in place
• be independent (not be owned by a multinational)
• have grievance mechanisms in place
• transparently report prices and premiums
• etc.

If publishing annual transparency reports is important to you, you need to verify that the reports are accurate and, if they report prices, that the prices are comparable. (For example, if they report in €Euros and you don’t know the date of the transaction, which will give you a hint about the exchange rate, you can’t convert €uros into $USD. This same cautionary statement applies to all of the criteria that are important to you.

R^3 – Review the Rubric Regularly

Reviewing the rubric regularly (at least 2x/year if not 4x/year) enables you to react to market shifts and changes in your own thinking.

Summary

Before you can evaluate your cocoa suppliers, you need to determine what’s important to you and your company.

Example 1: You may value “direct” (or as direct as possible) trade relationships, sourcing as close to the farm gate as possible. You want to know the name(s) of the farmer(s) you source from and visit them.

I argue that the nature of direct trade relationships requires long-term commitments to farmers (as opposed to transactional relationships based solely on price) and regular visits – it’s a relationship, after all. Visiting farms is the best way (if not the only way) to gather the information you need, first-hand, to tell genuine stories that are fundamental to the bridges you’re building between your chocolate customers and your cocoa farmers.

This is a legitimate reason not to rely on a social certification. You may be able to make the connection to the cooperative that is certified, but it can be next to impossible to determine which farmer grows your beans (if that’s important to you). Practices like mass balance do make it impossible.

Example 2: If your brand image leans into a small/independent framing, it makes sense to prefer to work with smaller, independent suppliers. (Because you want to support small, independent, or family-owned businesses over giving your money to multinational corporations directly or through a subsidiary, even though a smaller, boutique bean supplier may not be able to directly compete on price or ancillary services.)

Understand that it might not be easy to determine corporate parent relationships (take a look at the Wicked Bad/Wicked Good post for evidence of that), investment cap tables, the price suppliers are actually paying at the farm gate, or what their annual/“fair”/transparency/sustainability/sourcing reports actually mean in practice.

But that is the work you need to do to ensure that your suppliers correctly and fully reflect your values.

The Role of Technology in These Conversations

One of the things I learned very early on in my tech career is that “No technology, in and of itself, is the answer to any problem. Technology needs to solve real problems that real people/businesses have.”

And, ideally, the technology adapts to the way you do business, not force you to change your business processes and systems to use it.

That means that a specific technology can be a criterion to consider in your rubrics.

But you must be very aware of the problem(s) the technology solves, and, perhaps more importantly, a) the problems the technology doesn’t solve; and b) whether the manner in which the technology is implemented creates new, bigger problems or creates new opportunities.

One example of misunderstanding the implications of specific technologic implementations is playing out right now. The EC tapping on the brakes on the the effective date of the EUDR, realizing the systems in place may (are?) not be up to handling the masses of data EUDR due-diligence and compliance reporting requires.

Another example is blockchain. Blockchain may be a part of a solution, on its own, blockchain is not the solution. Just saying “traceable blah-blah-blockchain-blah-blah” does not mean the solution works in real-world scenarios.

One reason is that there are different types of blockchain technologies and platforms. You want to be familiar with the differences so you can understand what a particular implementation does and is capable of doing; it’s not necessary to know the ins and outs of how they work.

Another thing to consider: If you want to be ISO-341o1 (Sustainable and traceable cocoa standards, adopted in 2019) compliant, you want to make sure any supply chain traceability system your cocoa supplier uses generates compliance reports that you can use to prove your compliance.

In Part 4:

Part 4 will be the Friday, October 17th episode of #PodSaveChocolate (No 155), dedicated to reviewing Parts 1–3, with additional thoughts and guidance on assessing cocoa supply chain partners. Of course, I will also be taking comments and questions from people watching live.

Comments? Questions?

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