Nestlé tackles child labor risks by offering financial incentives to cocoa farmers

27 Jan 2022 --- Nestlé has unveiled an initiative to mitigate child labor risks in cocoa production. This ties in with a newly launched income accelerator program, which aims to improve the livelihoods of cocoa-farming families, while also advancing regenerative agriculture practices and gender equality.

Farmers and their spouses will receive cash incentives for increasing sustainable cocoa productivity while securing additional source of income and activities that help women and children.

Nestlé CEO Mark Schneider says these payments incentivize practices to reduce child labor.

“Our goal is to have an additional tangible, positive impact on a growing number of cocoa-farming families, especially in areas where poverty is widespread and resources are scarce, and to help close the living income gap they face over time,” he says.

As Nestlé continues to expand its cocoa sustainability efforts, the company plans to invest CHF 1.3 billion (US$1.4 billion) in this overall program by 2030, more than tripling its current annual investment.

Nestlé will expand the program to include 10,000 families in the Côte d’Ivoire, before extending it to Ghana in 2024.Nestlé will introduce a range of products with cocoa sourced from this program, offering consumers the opportunity to support the improvement of the families’ livelihoods and the protection of children.This will start with a selection of KitKat products in 2023.

Creating cash incentives to grow income substantially
With Nestlé's new approach, cocoa-farming families will now be rewarded not only for the quantity and quality of cocoa beans they produce, but also for the efforts they provide to the environment and local communities.

As part of its income accelerator program, a cash incentive will be paid directly to cocoa-farming households for certain activities. These include the enrollment of children in school and the implementation of good agricultural practices – like pruning or planting shade trees – which increase crop productivity and climate resistance.

By engaging in these practices, families can additionally earn up to CHF 500 (US$539) annually for the first two years of the program.

In a departure from normal practice, the program also offers financial incentives for the farmer's spouse, who is typically responsible for household expenses and childcare. By dividing the payments between the farmer and the spouse, the program helps empower women and improve gender equality.

Payments will be delivered via a secure mobile service transfer that will ensure traceability directly from Nestlé suppliers to the intended recipient. Because cash flow throughout the year is often a challenge, cash incentives will be distributed when they are needed most.

Based on feedback from farmers, this includes the back-to-school period and before the rainy season. Third parties, including the International Cocoa Initiative and Rainforest Alliance, will work with Nestlé to monitor participation.

Scalable horizons for humanitarianism
Building on the positive results of an initial pilot in 2020 with 1,000 farmers in Côte d'Ivoire, in 2022 Nestlé will expand the program to include 10,000 families in the country, before extending it to Ghana in 2024.

Nestlé plans to invest a total of CHF 1.3 billion (US$1.4 billion) in sustainable chocolate by 2030, more than tripling its current annual investment.It will then assess the results of that test phase and adapt where necessary, before moving to reach all cocoa-farming families in its global cocoa supply chain by 2030.

Nestlé outlines its plan to help ensure farmers have the resources, training and social and financial structures to make changes through:

• Enhancing the existing monitoring and remediation system to help identify, prevent and address child labor risk and increase school enrollment.

• Offering families training through the Gender Action Learning System and on household financial planning and entrepreneurship.

• Organizing and training local groups to perform pruning and other beneficial agricultural tasks within a given cooperative each year.

• Providing income diversification opportunities for farmers and their spouses.

• Helping set up Village Savings and Loans Associations , focused on women, to encourage savings and provide loans for small business opportunities.

Tracing all cocoa from origin to factory
As part of the program, Nestlé aims to transform the global sourcing of cocoa to achieve full traceability and segregation of its cocoa products from origin to factory.

"Our actions can help catalyze change on an important topic that is so close to our hearts. They will drive accountability and transparency across the industry, at a time when customers, employees and communities increasingly expect companies to deliver on their shared values," says Magdi Batato, executive vice president and head of operations.

Nestlé has invested in sustainability through the Nestlé Cocoa Plan since 2009. Through a monitoring and remediation system instituted since 2012, 149,443 children have been assisted to protect them against the risk of child labor, and 53 schools have been built or refurbished

Edited by Benjamin Ferrer

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