Tuesday, July 10, 2012

Insetting C emissions in the cacao supply chain – an opportunity?

With increasing consumer pressure on companies to reduce their environmental impact, developing an environmentally-­‐‑sound supply chain is increasingly an integrated part of many companies’ strategies in becoming more transparent in their operations and their commitment to help fight climate change. As for any agricultural entity, for the cocoa industry this is doubly important as integrating sustainable practices is essential to securing the long-­‐‑term supply of cocoa.

Traditionally, sustainability efforts have focused on improving farming practices, increasing cacao volumes and helping farmers to improve their livelihoods – focusing on the production side of the supply chain in isolation. A new approach, being adopted by innovative companies looking to integrate production sustainability within a wider climate change strategy, is the reduction of whole supply chain environmental impacts. Chocolate production for example is based on many production stages (see text box) which are dependent on intensive usage of natural resources, material resources and energy, all which generate emissions of green house gases that contribute to global warming. The main way to estimate this effect is by calculating the carbon footprint. Through the calculation of this carbon footprint, the major emission sources or emission hotspots can be identified and mitigating opportunities can then be put in place along the supply chain. For some companies, their commitment to sustainability ends here, but others go on to offset their remaining emissions by engaging in energy efficiency, renewable energy or afforestation and reforestation projects that reduce GHG emissions outside of the company’s corporate boundaries.

Insetting however makes the process of engaging in GHG emission reduction more ‘personal’ as it identifies emission reduction activities that are of benefit to its wider supply chain and stakeholders. The benefits of this are multivariate and will show in overall increased supply chain efficiency, costumer loyalty and a reduction of GHG emissions along the supply chain. With increasing emphasis put on low carbon economies and cap and trade schemes this will give businesses that invest in a sustainable supply chain a cutting edge over those without such a strategy. The cacao sector is currently facing many challenges. Cacao trees in some of the major producing countries are aging and low farmer investments mean that their corresponding yields are dwindling. Sustainability is therefore becoming a key element of cocoa supply chains, to ensure that future supply will be able to keep up with global demand. This has opened up a unique opportunity for insetting its supply chain emissions. Sustainable production and sustainable supply can be linked through increasing farming standards, increasing cocoa bean quality through farmer training programs, improving harvesting and post-­‐‑harvest techniques, and working with farming communities to build standards of education and health care. At the same time, this allows for the re-­‐‑introduction of suitable levels of farm shade from trees which if managed correctly will help not only the sustainable production of cocoa but also to offset, or in this case, inset the remaining GHG emissions from along the supply chain. By engaging in the sustainable ‘upgrade’ of farms or the establishment of new farming entities that favor the insetting approach, the entire supply chain could fruit from the long-­‐‑ term benefits. GGC is currently working on a number of projects in Nicaragua and Cameroon that will allow companies in the cocoa industry to become truly sustainable. We recognize the challenges of rapidly changing weather patterns and the fast moving degradation of vast ecosystems that add pressure to an already stretched production systems. But by developing sustainable farming solutions that address these threats as a whole, the inherent risk related to supplies can be reduced. As such insetting is fast being considered a mechanism that could help secure the sustainable supply of quantity and quality within the cocoa supply chain.

Martin Noponen, International Forest Carbon Project Manager