Big companies take reins on sourcing schemes

rom cocoa to tea, food and drink giants are setting their own standards for ethical sourcing of raw materials, moving away from third-party labels such as Fairtrade.

Mondelez International, owner of chocolate brands Cadbury and Toblerone, Unilever, behind tea brands such as Lipton and PG Tips, and Barry Callebaut, the world’s biggest producer of chocolate and cocoa products, have all introduced their own schemes. They say their targets are more comprehensive and some claim their schemes are more effective in tracking whether a product is ethically sourced every step of the way.

With companies under financial pressure, analysts say it has also been a way to save money.

But critics are worried that the standards that third-party groups such as UTZ Certified or Rainforest Alliance have fought to establish risk being muddled and what is deemed ethical and sustainable could become more ambiguous.

“Standards measuring environmental and social issues need to be transparent because, once this process happens behind closed doors, it is difficult to see how companies and farms apply them,” said Sloane Hamilton, labour rights policy adviser at Oxfam, a charity focused on alleviating poverty.

“We don’t want to see standards watered down, and neither do we want customers to be faced by a bewildering proliferation of different certification schemes.”

Third-party certifiers are not opposed to all selfcertification, even though the loss of fees could threaten their future. Rather, they are worried standards could become meaningless if too many companies set their own criteria.

Mondelez started selling the first Green & Black’s chocolate in the UK without a Fairtrade logo in August, more than 23 years after the brand’s Maya Gold bar received Britain’s first mark.

The bar instead carries the stamp of “Cocoa Life”, a Mondelez scheme started in 2012 with broad goals including improved productivity, protection of fertile land and gender equality in farming communities.

Mondelez says Fairtrade is still an “implementing partner” and the group’s auditing arm is used to vet cocoa sourced through “Cocoa Life”.

Fairtrade, a non profit, aims to push for a better deal for farmers and workers in developing nations.

It sets standards, including a minimum price for raw materials, and requires companies to contribute towards businesses or community projects, in exchange for the Fairtrade stamp.

But as the concept of ingredients has become better ethically-sourced understood by consumers, brands have started adopting standards that work for their business and image.

“It’s opened the door for companies to say ‘well let’s develop a standard that suits our business and also has the impact that we want to have on the ground,” said Alan Rownan, ethical labels analyst at Euromonitor.

Crafting in-house standards has also become a way to trim costs for big companies under financial pressure as economic growth slows and consumers opt for healthier snacks or smaller, more artisan brands.

“When the whole market is certified, the ability to have a higher price for it becomes less,” said Jon Cox, analyst at Kepler Cheuvreux in Zurich, who follows companies such as Nestle and Barry Callebaut.

“So why not bring it in-house anyway and save money. And if they can convince consumers that it’s as good as some of the independents, if not better, then that maybe helps them as well.”

While third-party labels have had a leading role in the drive to stamp out practices such as deforestation and child labour on farms, they have also faced criticism. Think-tanks and industry groups say the way they enforce standards is not transparent enough and they have failed to align their programmes to reduce complexity.

Rainforest Alliance and UTZ Certified are now expected to streamline their standards after recently announcing plans to merge.

With consumer awareness growing, companies are also seeking to track more closely the sourcing of their ingredients and show the impact of certification to their consumers.

Fairtrade ensures that the sourcing of raw materials including coffee and bananas can be traced at every step of farming and processing but it does not provide the same guarantee for cocoa and tea.

It says certified cocoa beans are difficult to track as they can get mixed with conventional beans at the processing stage in countries that do not have the capacity to keep them separate.