Chocolate is far more than just a popular treat; it represents a massive global industry valued at over $100 billion annually. The sector is crucial for the livelihoods of millions of farmers in developing countries who cultivate cocoa beans, the key ingredient in chocolate production. However, recent fluctuations in cocoa prices have spotlighted the broader implications of climate change on agriculture and underscored the urgent need for more sustainable farming practices.

Cocoa farming is unique due to its strict growing requirements. Cocoa trees thrive only in a narrow belt, 20 degrees north or south of the Equator, and need a stable, humid climate with plenty of rainfall. This limits viable production to about 50 countries worldwide, with Ghana and Ivory Coast leading the charge in West Africa, accounting for 60-70% of global cocoa production.

"Smallholder cocoa farmers in West Africa are the backbone of the chocolate industry, yet they remain at the losing end of the supply chain," remarks Kwame Osei, senior director for global programmes at the Rainforest Alliance, a non-profit dedicated to protecting forests through responsible business practices. Despite their critical role, these farmers face significant challenges, including minimal returns and increased vulnerability to climate change.

Impact of Climate on Cocoa Prices

The surge in cocoa prices this year, driven by extreme weather conditions in West Africa, has raised concerns. Severe heat and inconsistent rainfall have severely diminished crop yields, leading to a spike in prices on the futures market, which doubled since the year's start to exceed $10,000 per tonne for the first time. While higher prices could potentially increase farmers' incomes, the reality is more complex.

Osei highlights that farmers in the region earn only around 6% of a chocolate bar's retail price. The current price surge, driven by climate volatility, brings with it a precarious economic outlook. If cocoa farming is to be profitable for these farmers, there must be structural changes and support to adapt to new environmental realities and ensure the sector's sustainability.

Challenges in the Cocoa Industry

The recent upheaval in cocoa prices exposes the pressing need for adaptive strategies in cocoa production to address climate change impacts and reduce environmental harm. Unfortunately, existing incentives often encourage harmful practices like deforestation and excessive water use. This needs to change if the cocoa industry is to become more sustainable.

According to a 2023 World Bank report, global subsidies—direct payments, tax breaks, and other forms—exceed $7 trillion annually, with a significant portion allocated to agriculture. These subsidies often promote practices that are detrimental to the environment, such as the use of fossil fuel-based fertilisers and the cultivation of cash crops for export.

The case of cocoa in Ivory Coast illustrates this issue. Increased subsidies have been linked to deforestation, as farmers clear more land to grow cocoa trees. Between 2000 and 2010, agricultural subsidies in Ivory Coast were 56% higher than in neighbouring Ghana, correlating with a 3% higher rate of deforestation. Data from Trase, a non-profit tracking commodities, shows that from 2003 to 2017, cocoa production in Ivory Coast led to the loss of 1.65 million hectares of tropical rainforest—equivalent to the size of New York City.

Towards Sustainable Cocoa Farming

To combat these issues, both Ivory Coast and Ghana are now implementing measures to make their cocoa industries more sustainable and shield them from the growing impacts of climate change. These efforts include shifting subsidies towards practices that promote environmental sustainability and mitigate deforestation.

Transforming subsidies isn't merely about eliminating harmful incentives but also involves redirecting funds to support regenerative agriculture. As Osei from the Rainforest Alliance notes, poorly designed policies that neglect producers can lead to significant political backlash, as seen with European farmers protesting against new green regulations and the removal of diesel subsidies.

Supporting the transition to sustainable farming practices, particularly in developing countries, requires substantial financial and technical backing. "Decades of inadequate investment in cocoa farmers mean they lack the resources to implement climate mitigation strategies," explains Surmaya Talyarkhan, a senior sustainable sourcing manager for cocoa at the Fairtrade Foundation. She believes that ensuring farmers receive a fair and stable price for their cocoa is crucial for enabling them to invest in practices that address climate change and other challenges.

To achieve this, the Rainforest Alliance suggests measures such as taxing chemical fertilisers and pesticides and ending monoculture practices that deplete soil health and biodiversity. Instead, subsidies should be directed towards practices that enhance soil quality and local ecosystems, such as growing cover crops to maintain soil nutrients and planting shade trees to protect young cocoa plants from extreme weather.

"Adopting regenerative agriculture techniques can improve soil health and productivity, diversify income sources, and increase resilience to climate impacts," says Kerry Daroci, cocoa sector lead at the Rainforest Alliance.

Global Partnerships for Sustainable Cocoa

In 2022, Ivory Coast and Ghana took a significant step by signing the Alliance on Sustainable Cocoa with the European Union. This agreement aims to establish a government-led system of transparency and traceability to reduce deforestation associated with cocoa production. The initiative includes comprehensive monitoring and data collection in high-risk areas, supported by a €25 million investment from the EU.

The importance of such collaborations is evident. Trase data reveals that in 2021, the EU and Switzerland imported 1.1 million tonnes of cocoa products from Ivory Coast, contributing to 800,000 hectares of deforestation. The cocoa alliance represents a proactive approach to managing cocoa supply chains and ensuring sustainability, ahead of the EU's upcoming deforestation law, which targets high-risk commodities like cocoa.

The European Commission views the recent rise in cocoa prices as an opportunity to enhance sustainability, provided that farmers directly benefit. A spokesperson emphasised the need for farmers to earn a living income that supports necessary investments in sustainable practices, such as agroforestry, which enhances soil fertility in tropical climates. Additional support could include promoting fair labour practices, incentivising environmentally friendly methods, and building resilience against climate change.

Innovative Solutions from West Africa

Both Ghana and Ivory Coast are already implementing innovative programmes to foster sustainable cocoa farming. Ghana's climate-smart initiative spans over six million hectares of the West Guinean forest, incorporating practices like planting shade trees to boost crop yields. This programme is expected to generate $45 million in carbon credits by the end of 2024 through the World Bank.

Meanwhile, Ivory Coast is investing in a significant biomass power plant that utilises waste from cocoa harvesting. Traditionally, the cocoa pod husks and shells are discarded, but now they will be repurposed to generate renewable energy. This initiative not only reduces waste but also contributes to the country's renewable energy goals.

Osei from the Rainforest Alliance emphasises that with smallholders producing approximately 30% of the world’s food crops, it is in the interest of governments to help these farmers become more resilient to climate change. "This must be done in a way that safeguards the environment and enhances the health of soils, forests, and ecosystems that cocoa depends on," he notes.

Regenerative Agriculture

Regenerative agriculture offers a promising pathway for transforming food systems and addressing critical challenges like climate change, biodiversity loss, food insecurity, and water scarcity. By improving farming practices, enhancing soil health, and promoting biodiversity, regenerative agriculture can help create a more sustainable and resilient cocoa industry.

Ultimately, the future of cocoa farming hinges on balancing economic viability with environmental sustainability. The shift towards more sustainable practices is not just about preserving a beloved commodity but also about ensuring the livelihoods of millions of farmers and protecting our planet for future generations. By investing in sustainable practices and supporting smallholder farmers, we can create a chocolate industry that is not only profitable but also kind to the planet.