Ethical chocolate: Barry Callebaut leads Sustainalytics rankings

15 Jul 2019 --- Barry Callebaut’s “Forever Chocolate” scheme is the number one sustainability strategy in the packaged foods industry. This is according to data from research and analysis firm Sustainalytics’ annual assessment of 178 packaged food companies on the management of environmental, social and governance (ESG) risks in their supply chains. In terms of companies in the packaged foods subindustry, 47 percent are deemed to have a severe ESG risk, while 43 percent have a high risk.

“Sustainability is a key pillar of Barry Callebaut’s business strategy and is fueling our growth. For us, it is a combination of managing the risks in our supply chain to make sure everyone can continue to enjoy chocolate in the future, as well as a clear demand from consumers for knowing that the products they consume have been sustainably produced. This push and pull is driving the business case and, therefore, the trend for sustainability in the food industry,” Pablo Perversi, Chief Innovations, Sustainability and Quality Officer at Barry Callebaut tells FoodIngredientsFirst.

Time is a major challenge in making chocolate production more sustainable.In Sustainalytics’ risk rating summary report, Barry Callebaut is given a low risk of experiencing material financial impacts from environmental, social and governance (ESG) factors, due to its medium exposure and strong management of material ESG issues. 

However, the risk is not negligible as Barry Callebaut is materially exposed to more ESG issues than most companies in Sustainalytics’ network. As well as having the lowest risk in the packaged foods subindustry, the company comes third out of 402 companies in the food product industry (1st percentile), and 900 out of 10584 (9th percentile) in terms of Sustainalytics’ global universe. 

Time is a significant constraint for chocolate companies trying to become sustainable, explains Perversi. “Some of the issues we are trying to solve are the results of years of sub-optimal cocoa farming and low incomes for cocoa farmers. The issues are structural and therefore require structural solutions, which take time,” he says.

“Getting everyone around the table and agreeing on a plan will not happen from one day to the next. However, it’s like planting a tree; we do it now so that future generations can enjoy its shade.”

The company was given a negligible risk rating for human rights (supply chain), carbon (own operations) and resource use; a low risk rating for human capital and environmental and social (E&S) impact of products and services; and a medium risk rating for corporate governance. Perversi notes that this has to do with a lack of diversity in senior management. “Our Chief Human Resources Officer, Isabelle Esser, joined the company this year, and last year we also welcomed two women to the Board, so while we are on the right track, I agree that this is a point for further attention,” he notes. 

The challenges facing the cocoa industry
The report notes that Barry Callebaut’s medium risk exposure is due to its cocoa reliance, which has been historically linked to child labor and forced labor. Over two million children are still estimated to work on cocoa farms in the Ivory Coast and Ghana as a result of poverty. Since 66 percent of the company’s sales volume, as of 2018, is to food manufacturing companies, it is important that they meet customers’ strict food quality, health and safety requirements. Additionally, as cocoa farming is an agricultural activity that requires extensive land and water use, reputational risks and impacts could ensue from being linked to deforestation.Child labor, farmers' poverty, carbon and forest footprint, and sustainable sourcing are key issues. 

“The actions we have to take to make sustainable chocolate the norm require a movement of industry, NGOs and governments driving a systemic change in the cocoa and chocolate supply chain. We are constantly pushing the business case for sustainability with these organizations and within the industry associations where we are a member. The Cocoa and Forests initiative is one example of a multistakeholder platform that we have been very active in driving. I believe it offers a very interesting case for other topics of relevance for the cocoa and chocolate industry,” continues Perversi. 

The strong management score given to the company stems from its 2016 Forever Chocolate strategy which focuses on four key challenges of the cocoa supply chain: child labor, farmers’ poverty, carbon and forest footprint, and sustainable sourcing. Barry Callebaut has published goals and targets for 2025 and releases annual progress reports. As of 2018, 44 percent of its cocoa beans were sourced sustainably, compared to 36 percent in 2017.

“There is no doubt that sustainable chocolate will become the norm as there is simply no alternative. The biggest variable we need to focus on is the speed with which we can make it happen. We set our target to be 100 percent sustainable by 2025, which is challenging but doable. We already sourced 44 percent of our ingredients sustainably last year,” concludes Perversi. 

Other chocolate companies have also responded to pressure to step up their moral credentials. Mondelēz recently pledged for all of its chocolate brands to be sustainably sourced by 2025. Additionally, Mondelēz and Nestlé are both laying out action plans to combat West African deforestation.

By Katherine Durrell