CSR5003 Module 3 supply chain responsibility analysis example

Six Tiers From Bar to Farm: Following Responsibility for Child Labor Down a Chocolate Maker's Cocoa Supply Chain

Student Name

American College of Education

CSR5003: Principles and Practices of Corporate Social Responsibility

Module 3 Assignment

Instructor Name

July 17, 2028

The Scale of the Problem at the Farm

The last tier of the chain is where the harm occurs, so the analysis starts there. A survey commissioned by the U.S. Department of Labor estimated that about 1.56 million children were engaged in child labor in cocoa-growing households in Côte d'Ivoire and Ghana in the 2018 to 2019 season, nearly all of them in hazardous work such as using sharp tools, carrying heavy loads or applying agrochemicals, and it found that the proportion of children in agricultural households in cocoa-growing areas doing child labor in cocoa production had risen over the previous decade as cocoa production expanded (NORC at the University of Chicago, 2020). Most cocoa in the two countries is grown on small family farms, where children often work alongside parents and where household poverty, distance to schools and the cost of hired labor all shape whether children work.

Marrow Creek Confections, the composite chocolate maker in this course, buys about 18,000 tonnes a year of cocoa beans and cocoa products, most originating in these two countries. At the scale of the sector, its purchases are small; at the scale of the families who grow them, they represent tens of thousands of farms. A buyer that cannot name the cooperatives its cocoa came from cannot know whether any child worked to grow it.

The Six Tiers

Tier 1 is Marrow Creek's direct suppliers, two large international trading houses that buy beans, grind them and sell cocoa liquor, butter and powder. They hold contracts, logistics data and, increasingly, sustainability program records. Tier 2 is the exporters and licensed buying companies in each country; in Ghana, cocoa marketing is regulated by the state cocoa board, and in Côte d'Ivoire, by the national coffee and cocoa council, which set farm-gate prices and license buyers. Tier 3 is farmer cooperatives, which aggregate beans from member farms and, in sustainability programs, are the level at which monitoring is usually organized. Tier 4 is local intermediaries who buy from farms that are not in cooperatives. Tier 5 is the farms themselves, typically a few hectares each. Tier 6 is the households, including the children.

Information thins at each step. Marrow Creek currently knows only the country of origin of its cocoa. The traders know which exporters and, for cocoa bought through their own sustainability programs, which cooperatives supplied it. Cooperatives know their member farms. Cocoa bought through intermediaries outside cooperatives is often traceable no further than the district.

How Cocoa Can Be Traced

What Marrow Creek can claim depends on the model under which it buys. Under a mass balance model, the trader buys a quantity of cocoa from certified or program cooperatives equal to the quantity sold to Marrow Creek as program cocoa, but the physical beans are mixed with others, so the company supports good practice without knowing that its own beans came from monitored farms. Under a segregated model, program cocoa is kept separate through the chain, so the beans in Marrow Creek's products come from program cooperatives, though from many of them. Under an identity-preserved model, the beans can be traced to a specific cooperative or group of farms. Each step up costs more and reduces flexibility.

The European Union's deforestation regulation, which applies to the roughly 12 percent of Marrow Creek's sales made in European markets, requires the geolocation of the plots of land where the cocoa was grown (European Parliament and Council of the European Union, 2023). That requirement is pushing the sector toward farm-level mapping, which also creates the foundation for child labor monitoring, because a company that knows where its cocoa was grown knows which communities to ask about.

Where Influence Sits

Marrow Creek has direct influence only over Tier 1, the two traders it pays. It chooses its traders, writes their contracts and pays for their products and services. Its influence over lower tiers runs through the traders, which operate sustainability programs with the cooperatives they buy from, including child labor monitoring and remediation systems in which community facilitators identify children in hazardous work and arrange support such as school kits, birth certificates, community schools or income activities for their families. The international guidance on business and human rights expects companies to use such influence where they have it and to increase it where they can, for example by collaborating with others who buy from the same sources (United Nations, 2011).

The company's influence also runs upward to its retail customer, which buys from many chocolate makers. A shared requirement from the retailer to all its suppliers could move the traders more than Marrow Creek alone. Responsibility, in other words, does not diminish at each tier; it changes form, from direct control to contractual requirements to collaboration.

Three Requirements for the Next Contracts

Marrow Creek's cocoa contracts with both traders renew in eighteen months. The analysis recommends three requirements. First, cooperative-level disclosure: each trader must identify, at least annually, the cooperatives that supplied cocoa sold to Marrow Creek under program terms, and the share of total volume that is traceable to cooperative level. Second, monitoring coverage: each trader must report the share of households in those cooperatives covered by a child labor monitoring and remediation system, the number of children identified and the number receiving remediation, with results verified by an independent party. Third, a growing segregated share: at least 30 percent of Marrow Creek's cocoa should be bought under a segregated model within three years, rising thereafter, so that the company's claims can refer to its own supply rather than to equivalent volumes elsewhere.

The analysis also recommends one thing the contracts should not contain: a zero-tolerance clause that terminates a cooperative's supply when a case of child labor is found. Such clauses are easy to write and satisfying to announce, but they punish the cooperatives whose monitoring is good enough to find cases and reward those that do not look. Experience in the sector has led many monitoring programs to treat identifying a child in hazardous work as the start of remediation, not the end of a relationship. The contracts will instead require that identified cases be followed up and remediated, with repeated failures to act, rather than the finding of cases, as the ground for review. The same logic applies to Marrow Creek's own reporting: a rising number of identified cases in the first years of monitoring is likely to mean that monitoring is working, and the company should explain this to its retailer before the first report rather than after.

Each requirement costs money, which the next module prices. None guarantees that no child works on a farm in Marrow Creek's supply chain. Together they move the company from knowing only its cocoa's country to knowing its cooperatives, which is the level at which responsibility can actually be exercised.

References

European Parliament and Council of the European Union. (2023). Regulation (EU) 2023/1115 on the making available on the Union market and the export from the Union of certain commodities and products associated with deforestation and forest degradation. Official Journal of the European Union, L 150, 206-247.

NORC at the University of Chicago. (2020). NORC final report: Assessing progress in reducing child labor in cocoa producing areas of Côte d'Ivoire and Ghana.

United Nations. (2011). Guiding principles on business and human rights. United Nations Human Rights Office of the High Commissioner.