October 30, 2017
Hannah Hobden’s speech at the Partnership meeting of the World Cocoa Foundation on October 24, 2017, Washington DC
Hello – my name is Hannah Hobden. I work for OPTEL and I’m here to challenge you to turn full traceability – from bean to bar – from an aspiration into a reality for the cocoa sector.
Traceability systems are the operational infrastructure on which you hang data to create transparency. An effective system requires full traceability from bean to bar and the ability to capture data as the product moves through the supply chain. Technologically this is possible, as I will show later. The challenge is how to implement a system in cocoa. To do so will require collaboration and, ultimately, a willingness to move away from a mass balance system – because mass balance effectively creates a wall against transparency and traceability.
But before we go any further, what do I mean when I say that a full traceability system provides the operational infrastructure to create transparency? Well I like to think about it in terms of a train track. A tracing system is like the railway tracks that link different components of the supply chain – for example farmers, warehouses, ports, plants …. Once the tracks are in place different information can move along them between the supply chain stakeholders. In the case of cocoa this could be information on the producers, such as data relevant for monitoring gender equality, living income, deforestation, use of child labor. Information can be collected on the price and bonuses farmers receive for their cocoa and this can be compared with the amount of money received by the cooperative. In the past we have created risk assessments for child labor at a farm level and we are currently in discussions about doing this at a community level. Having this risk assessment data as part of a traceability system would mean a final batch of cocoa having a child labor risk level associated with it. Data can be collected on the cooperative, warehouses, ports, plants. The quality of the cocoa can be tested and recorded at different points along the supply chain. What I am trying to demonstrate is that once the tracks of traceability are in place, multiple levels of data can be added. But, to be most effective, tracing data needs to start with the farmer and a bag of cocoa and go all the way along the supply chain. Mass balance interferes with this because it creates a barrier against the movement of data and information and so cuts the tracks off between farmers and final customers.
So, you might now be thinking, that’s all very well Hannah but it’s not realistic to achieve. But I’d like to challenge you and say that with collaboration and investment into existing operational frameworks it is possible. I think the most inspirational story to show what can be done is from the palm oil sector. As I’m sure you are all aware, there are significant challenges in palm oil around deforestation. Many of the consumer brands have made promises to have supply chains free from deforestation and have decided to use traceability as one tool in achieving this. However, making the link between mills and farmers was a significant challenge. As in cocoa, there is a complex web of smallholder farmers, cooperatives, and middle men. For a while it seemed hopeless. But two years ago, we started a project which was a collaboration between IDH, Wilmar and ourselves to pilot a tracing system linking farmers to fresh fruit bunches, fresh fruit bunches to middlemen, and middlemen to mills. The system was simple and effective and demonstrated the possibility of laying the tracks of traceability between the farmers and the mills. This initial pilot allowed us to develop a commercial model, which we are now able to roll out to other mills, this time without the need for donor funding. And now the basic tracing system is in place, we are able to increase transparency though data collection. So, we are collecting data on the farmers’ production methods, which allows us to create business plans for each farm for productivity improvements. We know the exact size and location of each field and so can monitor over time whether these fields encroach into forest. We can record what training each farmer has received and any follow-up visits they’ve had. We have delivery records of the amount of fruit a farmer sold, on which date and for what price. We can record all this information again when the middleman sells the fruit to the mill. A key factor in palm oil is that the fresh fruit needs to be processed within 42 hours of harvesting. So, we have started implementing an alert system which notifies the mill when fresh fruit bunches have been collected from the farmers but not delivered to the mills for processing – this means the mill can take actions to retrieve the fruit before it goes off. The technology is also available to send text messages to the farmers informing them of when trucks will be sent to collect their fruit, or when training will be happening on a topic. This simple tracing system from farmer to mill can then be linked with the tracing systems already being implemented at mill level and further along the supply chain and relevant data passed along.
This has all been achieved as a culmination of:
I am not saying the issue of deforestation is solved in palm oil by any means, but what I am saying is that something which seemed impossible three years ago – having full traceability along the supply chain – is now possible.
So, what needs to be done in cocoa to make traceability a reality here too? Others in this session are discussing transparency at a policy level so what I want to focus on are some operational solutions. Firstly, from a technology perspective there are plenty of solutions out there. The key is that technology should be collaborative, in the same way that organizations must be. Therefore, when investing in supply chain data and traceability systems it is essential that they be interoperable – this means regardless of who is providing the technology, it will be able to link to other systems. So, overtime you can link tracing data with mobile payments, cooperative sales records, soil testing, financial support, farmer loyalty schemes etc. Secondly, we need to start implementing traceability from farmer level. At OPTEL we have worked with the traders and exporters to implement tracing systems. But the issue here is that these organizations do not usually use the systems that are implemented – they pass the data onto their clients, who get frustrated with the fact that slightly different data is being provided to them in multiple formats by different organizations, but who usually do not have the power to demand specific data from their supply chain. So, my suggestion is to copy the palm oil model and develop a tracing system that can be implemented initially by cooperatives and build up from there. This is particularly important to do because it is at this level that we need to tackle the significant challenges of living income, deforestation, child labor, modern day slavery, and climate smart agriculture. Commercial models need to be developed for systems that allow cooperatives to take charge of their own data collection and provide traceability data to the people they sell to. We have already started working with Root Capital in the Ivory Coast to provide a basic data collection system to cooperatives but more needs to be done to enhance this and ensure relevant data is captured and effectively passed along the supply chain.
I expect momentum will develop around traceability in cocoa as we see continued political pressure for it by national governments and internationally; organizations needing to meet their own traceability commitments and so having to start tackling the traceability problem caused my mass balance and not knowing who their farmers are; and collaboration between organizations to develop a commercially viable system that works for the private sector.
So, I hope I have inspired you today with the possibilities for transparency and communication along the supply chain which are possible when full traceability is in place. I’ve challenged you for the need of greater collaboration to make traceability a reality for cocoa and have suggested a simple place to start is with farmer organizations and cooperatives.