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Monday, May 16, 2022

Taking a Chomp Out of Child Labor

Visitors to Nestle USA’s headquarters in Glendale pass by a long wall filled with 3-D logos of the company’s products, including the popular Crunch, KitKat and Butterfinger candy bars. Not far away is the office of Kevin Petrie, whose job it is to ensure there is a steady supply of chocolate and other ingredients to keep those products on store shelves. But he also has some unusual responsibilities, such as building schools in the Ivory Coast where much of the world’s cocoa supply originates. Welcome to the new world of running a multinational company. The U.S. subsidiary of Switzerland’s Nestle S.A., the world’s largest food and beverage company, is the target of activists who believe it and U.S. rivals such as Hershey Co. and Mars Inc. are turning a blind eye to child labor within their international supply chains. And while the controversy hasn’t received the publicity of Apple Inc.’s problems with its subcontracted labor in China, it’s still been a thorn in the company’s side. Nestle has battled litigation over the issue for nearly a decade now, and in 2009 made the decision to establish its Nestle Cocoa Plan and invest $120 million to ensure the company has a sustainable supply of cocoa that is produced through fair labor practices. Building schools provides an education and a future – and keeps kids off the farms. “Having cocoa is very important to us and to our consumers and, clearly, to the farmers producing it,” said Petrie. “The Cocoa Plan is a roadmap to sustainable cocoa for Nestle. We want to improve farmer quality with higher yielding trees, and the second piece is about improving the social condition.” Halfway into its venture, experts say Nestle and other global chocolate manufacturers are already making an impact, but critics have not let up the pressure. Just two years ago, the Fair Labor Association, a Washington, D.C. global employee rights group that has corporate members, including Nestle, found continued child labor violations within Nestle’s supply chain. And San Francisco activist group Global Exchange is pursuing federal litigation filed in 2005 that accuses Nestle of forced labor and torture involving three former West African child laborers. Petrie referred to the company’s statement on the litigation, which said Nestle has sought to have dismissed. Borjana Pervan is a spokeswoman for the International Cocoa Initiative, established in 2002 by activist groups and major confectionery companies, including Nestle, to eradicate child labor in the growing and processing of cocoa beans and their derivatives. While she acknowledged that “there still is a long way to go before we can claim that all children in cocoa-growing communities are adequately protected,” she said the accusations have to be put in perspective. “Considering the complexity of the issue and its multiple root causes that go beyond what one single company or actor can tackle alone, Nestlé is one of the companies leading the way in confronting the problem,” she said in an email. The child labor controversy goes back at least 13 years when activists charged the cocoa giants of wrongfully allowing children to work on their farms. The main catalyst was an investigative series by cable news network CNN in Atlanta. That prompted the establishment of the International Cocoa Initiative. The Nestle Cocoa Plan, developed a few years later, sought to meld the goals of improving working conditions and eradicating child labor with increasing supply as demand for cocoa products continues to grow. Nestle’s goal is to plant at least 1 million higher-yielding, disease-resistant cocoa trees in plantations within the Ivory Coast annually to ensure a reliable supply. Many of the existing trees are past their cocoa-production lifespan of about 30 to 40 years, Petrie said. The plan also calls for building or fixing up 40 schools in the Ivory Coast by next year in an effort to keep children away from farms. Additionally, Nestle invested in providing training to about 25,000 farmers each year to help them receive a higher price for high-quality, sustainable cocoa. Local eye About 1,000 of Nestle USA’s 25,000 employees are based in Glendale. Petrie, who is responsible for buying all goods and services for the company, including raw materials and packaging materials, works closely with a small group of those employees in Glendale as well as with counterparts in Vevey, Switzerland where the parent company is headquartered. He heads up procurement efforts that impact cocoa sales in the U.S., which is Nestle’s biggest market for chocolate. Petrie also is the public voice of the company on many of the cocoa issues worldwide. He has traveled to more than 40 countries working for Nestle and most recently spoke about cocoa concerns in June at the Sustainable Brands Conference in San Diego. “We really want to bring awareness to this issue,” Petrie said. “Nestle believes in outcomes, but this isn’t done alone.” Indeed, competitors Hershey in Hershey, Pa., and Mars in Morristown, N.J., have joined the cocoa initiative. Christopher DaVault, Mars’ global cocoa sustainability manager, said it takes an industry-wide effort to deal with these cocoa farming issues at origin. “Competition will always exist but the industry is facing a more imperative challenge for the future with cocoa sustainability,” he said. Global Exchange isn’t convinced of Nestle’s progress. It continues to name Nestle on its “Top 10 Corporate Criminals Alumni” list which calls attention to alleged human rights violations within businesses. Global Exchange acknowledged Nestle’s efforts, but the group calls the Nestle Cocoa Plan “insufficient in ensuring child safety and decent wages for its laborers,” according to its website. “Child labor could be dramatically curbed if adult cocoa field workers were paid a livable wage, and the Nestle Cocoa Plan makes no such promises,” the site states. The organization’s 2005 lawsuit, filed in U.S. District Court in San Francisco, seeks unspecified compensatory and punitive damages. The case was dismissed but later reinstated by the Ninth Circuit Court of Appeals and it’s currently awaiting trial. Nestle is named as a defendant, along with two of its suppliers, Archer Daniels Midland Co. and Cargill Inc. Co. Attorney Terrence Collingsworth is executive director of International Rights Advocates in Washington, D.C., who represents Global Exchange in its litigation. He said the lawsuit needs to be pursued. “These kinds of cases tend to take a long time because many courts are allergic to international cases and the difficult procedural hurdles they present,” Collingsworth said. “Under Nestle’s desired standard, the blind eye defense would work: ‘Well, we condemn child labor, but we didn’t directly participate, so bring on the cheap cocoa.’” Cocoa demand But even for all this controversy, Nestle is doing well amid high demand for cocoa, which hit a three-year high on international markets last month at $3,281 a ton. The International Cocoa Organization announced cocoa farmers worldwide will see 4.345 million tons of cocoa this season, or 10 percent more cocoa than one year ago. Nestle, which generates most of its sales from chocolate and confectionery products, reported solid growth last quarter with 4.2 percent organic growth across all divisions. Between 2011 and 2013, the company’s confectionery sales were up 4.6 percent, making it a $19 billion segment. Chocolate made up the majority, accounting for $13 billion. The high cocoa prices are being passed on to consumers. This past summer Mars announced price hikes of 7 percent, while Hershey announced prices will jump by 8 percent to offset costs for cocoa and dairy ingredients. Erin Lash, an analyst with Morningstar Inc. in Chicago, said that although there are pricing pressures, demand for chocolate is up, which means most consumers will continue to buy from Nestle. “Within confectionery, Nestle operates a solid portfolio,” Lash said. “We think that brand strength and product and geographic diversity will serve it well.” Petrie said rising costs are often inevitable, which is yet another reason the company remains committed to improving farming conditions and labor practices in West Africa. “In the most efficient supply chain, we could absorb some of these issues that do come into the marketplace, but the efficiencies can’t always make up for it,” he said. “But through the Cocoa Plan and all that we’re doing, we know we are creating value.”

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