Corporate Actions to Address Child Labor in Cocoa Production: Case Study – The Hershey Company
In our role to support institutional investors in their active ownership activities to align their investments with their mission and values, the Tri-State Coalition for Responsible Investment (Tri-CRI) has supported the American Baptist Home Mission Society in engaging The Hershey Company along with other members of ICCR since 2009 about the prevalence of child labor and hazardous working conditions in West African cocoa production where Hershey sources most of its cocoa. An estimated 2 million children are working on cocoa farms in Cote D’Ivoire and Ghana, using sharp tools, carrying heavy loads, and spraying toxic pesticides. This dangerous work is classified as one of the worst forms of child labor, and companies like Hershey have a responsibility to eliminate the use of child labor in cocoa production.
This year, Hershey adopted its first comprehensive Human Rights Policy as part of ongoing efforts to address child labor and other salient human rights impacts. Hershey and peer companies in the chocolate industry must ensure that their human rights commitments translate into real change at the farm level, that business models are adjusted so that companies are not reliant on exploited labor in violation of labor laws, and that they meet their responsible sourcing goals in order to contribute to solutions to eradicate child labor in cocoa.
In June 2019, the Washington Post exposed how the chocolate industry has repeatedly failed to meet goals to eradicate child labor in West African cocoa production despite countless sector-wide commitments to end child labor. The original timeline for companies to meet this goal was 2005, and this deadline has been pushed back numerous times. The latest industry goal was weakened from complete eradication to reducing child labor in Côte d’Ivoire and Ghana by 70% by 2020, which the industry still is not on track to meet as it quickly approaches. Child labor is still so prevalent in cocoa production that U.S. Senators recently called for DHS to block imports of cocoa from Côte d’Ivoire. Poor labor practices, increased public scrutiny, risks of litigation, and loss of consumer trust as deadlines are extended, present financial risk to the industry and warrant more oversight from the Boards of Directors and senior management in the industry.
Engagement Case Study: The Hershey Company
While the industry as a whole has not yet met ambitious goals to completely eradicate child labor in cocoa, Hershey is taking steps and attempting to make progress with respect to responsible sourcing and management of human rights risks, and Tri-CRI is engaging the company to encourage meaningful implementation of human rights commitments. Hershey has a commitment to source 100% Certified and Sustainable Cocoa by 2020, which the company reports it is on track to meet. There are criticisms that purchasing certified cocoa alone is not enough to guarantee improved livelihoods for farmers and end child labor, as farm inspections only capture a moment in time and cannot necessarily guarantee the operations are free of child labor, though this is still a positive step as it helps give companies better visibility into their supply chains. It is important to couple responsible purchasing with investment in communities to address root causes that contribute to child labor, and Hershey is doing this through its Cocoa for Good program, through which the company is “investing half a billion dollars by 2030 to nourish children, elevate youth, build prosperous communities and preserve natural ecosystems.”
Limitations of Corporate Actions to Date
Sector-wide initiatives led by the World Cocoa Foundation, International Cocoa Initiative, and other organizations have not been aggressive or holistic enough to meet goals to eradicate child labor due to insufficient efforts to address root causes of poverty in cocoa-producing communities where child labor persists. Most children are working on cocoa farms alongside their parents in order for families to generate enough income to meet basic needs, and forced child labor also exists in cocoa production. The majority are between the ages of 12 and 16, but children as young as 5 have been identified working in cocoa farms. Government enforcement of child labor laws isn’t enough to prevent parents from bringing their children to work. Cocoa farmers need to be paid a living wage and cocoa must be priced in a way that supports livelihoods and respect for human rights. In Côte d’Ivoire, for example, a cocoa farmer’s annual household income is approximately $1,900, which is well below the poverty line set by the World Bank. Companies need to drive efforts to increase farmer wages, through price premiums paid by governments or other initiatives, to make a meaningful contribution to the eradication of child labor in cocoa.
Engaging with Hershey on Strengthening Its Human Rights Commitment
In April 2019, The Hershey Company published its first comprehensive Human Rights Policy following an in-depth human rights saliency assessment and stakeholder feedback process. Tri-CRI was invited to provide feedback on Hershey’s draft policy due to the longstanding engagement with the company focused on human rights. We were pleased to see this step, as Tri-CRI had supported the American Baptist Home Mission Society (ABHMS) in filing a shareholder resolution on ethical recruitment risks in the supply chain in 2017, which we ultimately withdrew after Hershey committed to adopt this human rights policy, which would also address forced labor and ethical recruitment. This resolution withdrawal was followed by multiple dialogues with Hershey about the company’s approach to human rights due diligence and salient human rights impacts. When the final Human Rights Policy was released, we provided suggestions to strengthen the language to better align with the human rights due diligence framework of the UN Guiding Principles for Business and Human Rights that were included in the final policy.
What Makes This a Good Human Rights Policy
Tri-CRI considers Hershey’s policy, as well as the saliency assessment and feedback process that informed it, to be a best practice example for the food and beverage sector. The policy has many strengths, including alignment with the UN Guiding Principles on Business and Human Rights (UNGPs), applicability to operations and business relationships throughout the value chain, and a clear listing of the company’s most salient human rights issues.
Strengths of Hershey’s Human Rights Policy, which we consider to be best practices and encourage other companies to follow:
- Applicable to company-owned operations and throughout the value chain, including part-time workers, temporary workers, and independent contractors and business relationships with co-manufacturers, independent suppliers, and other business partners
- Explicit reference to international human rights treaties (UN UDHR, the International Covenants, and ILO Principles) and standards (UNGPs, UN Global Compact, SDGs)
- Cross-reference to related internal company policies (Code of Conduct, Supplier Code, Shared Goodness Promise, health and safety policies, and harassment and discrimination policies)
- Recognition of linkages between human rights and the environment
- Commitment to align practices with stricter international human rights laws and standards when local laws may be weaker
- Encourages suppliers to cascade human rights policy principles down the supply chain
- Salient human rights issues identified as part of a formal assessment with stakeholder input, named explicitly in the policy, including:
- Access to grievance mechanisms
- Access to water and sanitation
- Child labor
- Climate change
- Forced labor and human trafficking
- Land rights and acquisition
- Living wage and income
- Safety and health
- Women’s rights and empowerment”
- Acknowledgement that different vulnerable groups may be at greater risk of facing adverse human rights impacts and that different forms of remedy may be required
- Establishes governance of human rights, including executive and board oversight over human rights risk management
- Uses human rights due diligence framework in line with the UNGPs
- Describe tools used to carry out Human Rights Due Diligence: “human rights impact assessments, social compliance audits, and legal and regulatory compliance reviews”
- Commitment to provide remedy if human rights harms are linked to company activities
- Discusses investments to address root cause issues of child labor in cocoa as part of commitment to human rights
- Signed by the CEO
We commend Hershey for its progress and are pleased to have played a role as investors by raising concerns about the company’s human rights impacts to signal to the company that investors have a responsibility to respect human rights and want to see more robust human rights risk management not only to reduce harm but also to support long-term sustainable shareholder value. ABHMS’s shareholder proposal and our ongoing dialogue with The Hershey Company were part of the ecosystem of stakeholder pressure that contributed to the development of a robust Human Rights Policy. We are hopeful that this will lead to improved human rights performance as Hershey begins to embed the policy throughout its operations and supply chain. As we see from the ongoing child labor crisis in cocoa, companies, in partnership with governments, NGOs, and other actors, have much more work to achieve the eradication goal and contribute to solutions to improve the livelihoods of cocoa farmers and their children.
Moving forward, Tri-CRI and ABHMS are committed to ongoing engagement with Hershey to press for meaningful implementation of the Human Rights Policy and monitor disclosures on its effectiveness in reducing the company’s human rights risks. The cocoa sector still has a long way to go before child labor is completely eradicated from the supply chain and other adverse human rights impacts connected to Hershey’s business activities are fully remedied, but steps such as adopting a strong Human Rights Policy send a meaningful signal of the company’s commitment to address human rights.