Capitalizing on Cocoa Market Trends: Latin America's Lucrative Opportunity

The demand for chocolates and cocoa-based products continues to drive the market demand for cacao. In recent months, major producing countries, especially Côte d'Ivoire, have encountered production issues, leading to a widening trade deficit. Consumers are increasingly seeking sustainably-produced, organic, and certified cocoa products. Although West Africa continues to be the main source of cacao for the European market, there is a growing interest in specialty cacao from distinctive origins. This dynamic creates significant potential for small-scale cacao producers in Latin America.

Jaume Martorell Mir, the HEAD OF cacaO sales at 12Tree and co-founder of Maüa chocolates, shares market insights and perspectives on prevailing trends and their implications for the Latin American coCoa market.

Recent bad weather in West Africa has threatened cacao supplies and resulted in record prices at the Intercontinental Exchange in London. How do you think will the recent supply deficits and bad weather events in West Africa influence the cocoa market in Latin America? Where do you see opportunities and risks?

Jaume Martorell Mir, Head of Cocoa Sales at 12Tree

Jaume: The deficit in West Africa has implications for cacao suppliers, as they must reduce their safety stocks and purchase more expensive cacao. Consequently, this is expected to lead to a medium-term increase in chocolate prices for consumers.

Latin America stands to benefit from this price increase as a potential cacao supplier to the industry, especially countries like Ecuador, Peru, and to a lesser extent, Colombia. However, the situation is not as straightforward because major chocolate manufacturers and brands have recipes based on African cocoa. Undoubtedly, changing these recipes is not a short-term solution. Nevertheless, some large companies are already exploring diversifying their supply sources to include Latin American countries among other origins.

What other factors influence the cocoa market in Latin America?

Jaume: Price fluctuations in various Latin American countries are closely tied to their domestic markets. Prices do not fluctuate to the same extent in Colombia, where there is a strong domestic industry, as they do in Ecuador, which is a net exporter of cacao beans. Additionally, Latin America is currently experiencing an 'El Niño' phenomenon, which is undoubtedly impacting productivity. This impact will become more evident by the end of the year when the largest harvest occurs.

Latin America boasts a wealth of fine cocoa. In many cases, fine flavor cocoa exhibits very different dynamics compared to the bulk market, although the stock market price usually serves as an unequivocal reference.

Cacao harvest at Hacienda Limon

Is this a good time to invest in the cocoa market? What are the opportunities and potential risks?

Jaume: Predicting the long-term outlook for the cacao market is a complex task. However, several indicators suggest that due to climate change, new deforestation regulations enforced by the European Union, and issues related to child labor in West Africa, cocoa prices are expected to exhibit a positive average annual growth, albeit with fluctuations influenced by global dynamics.

Latin America presents substantial opportunities for investment in farms and projects that prioritize traceability and sustainability. These initiatives, featuring agroforestry systems and improvements in the lives of producers and farm workers, hold the potential for significant positive impacts.

How did the pandemic affect the cocoa industry – and does the industry still suffer from these consequences?

Jaume: The pandemic has had a global impact on chocolate sales, leading to uncertainty for chocolate companies and, in many cases, reduced cocoa sales. During this period, cacao prices experienced a decline but remained relatively stable. Numerous pre-contracts and trade agreements with cacao exporters were either canceled or modified in favor of the chocolate industry. Currently, the industry has rebounded, with sales returning to pre-pandemic levels and annual growth ranging between 2.5% to 3%.

How did the Ukrainian war affect the cocoa industry – and does the industry still suffer from these consequences?

Jaume: The war in Ukraine triggered market panic, leading to an initial rise in commodities prices. However, in the case of cacao, prices fell and quickly stabilized. Certain countries were more affected, particularly those exporting to Russian industries. Many major chocolate companies opted to suspend their sales in Russia, which resulted in reduced chocolate consumption and subsequently, decreased purchases from their suppliers. The situation has since stabilized as cocoa has found its place in the fastest-growing markets.

What happens if cocoa prices go down again?

Jaume: The price of cocoa will undoubtedly decrease at some point due to its cyclical nature. When prices drop, it discourages production, leading many farmers to switch to more profitable crops. This results in a global regulation of production. Price reductions disproportionately affect the producers, who currently receive between 3-7% of the value of a chocolate bar. Consequently, there is less investment in the field, perpetuating productivity levels that have remained stagnant for years on a global scale.

Small cacao farmers can generate additional income by diversifying their farms and implementing agroforestry systems. During periods of low international prices, it becomes increasingly essential for them to join cooperatives or associations. These groups can help mitigate price fluctuations by offering premium prices and guarantee policies.

In your opinion, what are the future trends for the cocoa market in Latin America?

Jaume conducting quality control procedures on-site.

Jaume: Cacao production is experiencing significant growth in Latin America. Countries such as Ecuador, Peru, Colombia, and the Dominican Republic rank among the top 10 cocoa-producing nations, with the Dominican Republic leading as the largest producer of organic cacao. Furthermore, Latin America has the potential to become a leader in sustainable cocoa production, a valuable opportunity in light of the current industry shift towards traceable and sustainable cacao sourcing.

Moreover, local markets are expanding due to the increasing presence of the upper and middle classes. Latin America's production of excellent fine flavor cocoa positions the continent as a robust supplier to the fine chocolate industry, offering substantial opportunities in the globally growing "Bean to Bar" market.

Despite the fact that many Latin Americans are migrating to the United States and Europe, there is a labor shortage. Salaries in Latin America are higher compared to Africa and Asia, resulting in reduced cost competitiveness. To address this issue, there is a pressing need to prioritize the production of high-quality goods that are both environmentally and socially sustainable.

Biological control with unexpected benefits in Tafilalet

The Tafilalet farm is located in the south of the Atlas Mountains, in the historical cradle of Medjool, situated at the border of the Draa Tafilalet and Oriental regions of Morocco. The region is known for its rich cultural heritage and unique biodiversity, concentrated in the regions’ various natural, as well as artificial, oases. The entire region, but especially these oases, represent an important wintering site for migratory birds [1].

Access to clean water is the key element for practicing agriculture in this region. This is secured through renewable groundwater that is continuously recharged with precipitation as well as snow melt from the Atlas Mountains. The Tafilalet farm has constructed two water basins that distribute water throughout the farm. While essential for irrigation, these open water basins are prone to algae blooms that can block filter systems and significantly reduce water quality. Conventional farming approaches would dictate controlling this problem with the application of chemicals. Tafilalet, however, chose an alternative biological control method: the introduction of cyprinid fishes, known in the region as carpe chinoise. The fish feed on the algae and thereby keep their population in check. In June 2020, an initial 2,000 fish were introduced and have flourished - coexisting happily in symbiosis with the algae in the water basins.

The introduction of the fish has moreover brought an unexpected side benefit to the farm. As the fish repopulate, they attract local birds all year-round and migratory birds during winter season, which feed on the fish and use the farm as a resting place and feeding station. Prominent representatives of migratory birds like sparrows as well as two endangered waterbird species, Tadorna ferruginea and Marmaronetta angustirostris, have been spotted on the farm.

To accelerate the desired effects on the local biodiversity and make the farm a more desirable location for local biodiversity, 8,000 additional fish are expected to be introduced in the coming years.

[1] Ramsar (2005): Oasis du Tafilalet. Available at: https://rsis.ramsar.org/ris/1483

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This article is an extract of the 2023 12Tree Sustainability Update Report. Download the report to learn more about our progress and key impact areas.

Our Impact: BIODIVERSITY

Protecting and enhancing biodiversity has implications far beyond the preservation of natural ecosystems and the regulation of ecosystem services. Biodiversity is also critical for ensuring human wellbeing, promoting global security, and spurring economic development.

As stated in the Science Based Targets Network initial guidance for business (2020), “...nature is the backbone of human well-being and the foundation for all economic activity. Without action to halt and reverse the loss of nature, projections of economic growth and visions for a better life are impossible.” In agricultural supply chains, biodiversity plays a crucial role in maintaining the productivity and resilience of agricultural systems, especially under multiple stresses caused by climate change.[1]

The first joint report by the IPCC and IPBES concluded that the world must tackle climate change and biodiversity loss together if either issue is to be successfully solved. Findings from the report show that actions to protect and enhance biodiversity largely come with co-benefits for tackling climate change. Whereas some interventions designed to mitigate climate change can be detrimental to biodiversity and nature if not correctly designed and managed.[2]

We are committed to protecting and enhancing biodiversity in the areas where we operate, and in partnership with other stakeholders. The biodiversity pillar of our sustainability strategy includes a range of initiatives and activities:

1. AVOIDANCE OF DEFORESTATION AND CONVERSION OF NATURAL ECOSYSTEMS. Through our Deforestation and Land Use Change Policy, responsible practices are conducted during land acquisition, land use planning and site development. Initial due diligence, impact assessments, and planning processes incorporate recognized and technically-sound approaches to assessing land tenure, identifying the conservation and community values of the land, evaluating the potential impacts of proposed land use activities, and designing plans to minimize negative impacts, mitigate unavoidable impacts, and generate positive impacts.
   

2. SUSTAINABLE LAND USE PRACTICES. Through biodiversity-friendly, regenerative agricultural approaches, we are developing more resilient production systems, thus mitigating risk all along the supply chain. We recognize this is critical for enabling the industry to move beyond business as usual, and towards more just and non-extractive supply chains.

3. HABITAT RESTORATION AND ENHANCEMENT. We recognize that protecting, restoring and enhancing habitats on our land and in the surrounding landscape in order to increase biodiversity requires collaboration with a range of stakeholders, including NGOs, governments, and local communities. We are committed to working with these groups to identify and implement solutions that protect and enhance biodiversity in the landscapes we work in.

These activities support our long-term efforts to meet emerging industry guidance, including the Climate, Community and Biodiversity standards, Accountability Framework, GHG-Protocol, the Science-Based Targets Initiative and its recently released Net Zero Standard and the Convention on Biological Diversity. These guidance frameworks have recently undergone major updates to integrate considerations relevant to biodiversity and ecosystem co-benefits. Our sustainability strategy, grounded in three pillars - climate, community, and biodiversity - is allowing us to get out ahead of these guidance’s prescriptions.

Last year, we had our first opportunity to test how well 12Tree’s corporate sustainability goals and monitoring framework align with the standards of Verra CCB Certification- internationally recognized as one of the most rigorous and progressive industry standards. Through the process of certifying Andean Cacao -one of the first agroforestry projects in the world undergoing Verra CCB certification- we learned that our biodiversity goals, indicators and monitoring systems are well aligned with the Verra CCB framework. This greatly facilitated the selection of appropriate and defensible methods to quantify the project’s biodiversity benefits in order to meet the standard’s requirements, while at the same time enabling the aggregation of biodiversity data from all of the projects in our portfolio in a meaningful way.

We recognize that protecting biodiversity is a complex and ongoing challenge, and we are committed to continuous improvement in this area. We look forward to working together with our stakeholders to protect and enhance biodiversity and create a more sustainable future for all.

[1] Science Based Target Network (2020): science-based targets for nature initial guidance for business. Available at: https://sciencebasedtargetsnetwork.org/wp-content/uploads/2020/11/Science-Based-Targets-for- Nature-Initial-Guidance-for-Business.pdf

[2] H.O. Pörtner et al. (2021): IPBES-IPCC co-sponsored workshop report on biodiversity and climate change. Available at: https://www.ipbes.net/sites/default/files/2021-06/20210609_workshop_report_embargo_3pm_ CEST_10_june_0.pdf

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This article is an extract of the 2023 12Tree Sustainability Update Report. Download the report to learn more about our progress and key impact areas.

Our Impact: COMMUNITY

Agricultural intensification has resulted in the rapid loss of natural habitats and increased disparities in social well-being. In many rural areas, the promise of employment opportunities and economic development has not lived up to the costs of land conversion and compromised ecosystem services.

Crops and raw materials produced in the world’s rural areas now feed and sustain an increasingly urbanized and globalized population. On the one hand, commodity agriculture has made food more affordable and accessible. On the other hand, the very principles that underlie commodity agriculture- efficiency, economies of scale, and cost minimization- are often associated with a “race to the bottom” where low prices are achieved at high environmental and social costs. Some of the obvious losers in this game are family farmers, who are forced to compete in a heavily distorted market with ever declining margins, or worse- abandon farming altogether. Similarly, agricultural workers have become an undervalued and expendable aspect of conventional farming, often laboring under difficult or dangerous conditions for low wages.

12Tree’s mission to de-commoditize agriculture is founded in the belief that agricultural workers, farmers, and rural communities are the foundation of global value chains and are essential for climate adaptation. By investing in resilient, sustainable farming systems, we provide local communities with dignified jobs, and local farmers with access to information and markets that allow them to continue to manage their farms and steward their land. By adapting our corporate vision to the specific context of each farm-and tracking our progress with on-going monitoring and well-defined metrics- we strive to achieve meaningful impacts on the well-being of workers, supplying farmers, and local communities.

In 2022, we strove to develop the policies, operational processes, and monitoring and reporting tools needed to ensure that our projects can be true drivers of positive social change. For example, to deepen our knowledge of the application of the High Conservation Value (HCV) approach - considered the international standard for safeguarding the rights of local communities, workers, and other stakeholders in land development projects - several team members participated in a licensed assessor certification course, enabling 12Tree to become officially recognized as a registered practitioner organization for the High Carbon Stock Approach and High Conservation Value Network (HCSA/HCVN). The ability to carry out HCV assessments is critical for our diligence and project development processes -ensuring that we consider the social value of the land in terms of ecosystem services, community needs, and cultural life- and will form the basis of operational strategies, such as shared resource management, capacity building, stakeholder engagement, and community investments.

Training and Certifying Skilled Workers in Chimelb

Finca Chimelb, located in Alta Verapaz, Guatemala, includes 2,500 hectares of cacao, coffee, plantain, rubber, and cardamom, and an additional 2,300 hectares of protected natural forest. The farm employs 400 workers, the majority from the Maya Q’eqchi indigenous communities surrounding the farm.

The region of Alta Verapaz has one of the highest rates of multidimensional poverty (80%) and food insecurity (65%) in Guatemala.2 3 In a remote and difficult to access region of the country, defined by smallholder agriculture, livelihoods can be particularly precarious. Educational attainment is low- with the average resident completing just 3-4 years of formal schooling- and access to professional or technical training is extremely limited.4 Many families rely on multiple sources of income to meet their basic needs, including managing small farms for subsistence and income while working as full time or seasonal laborers on large industrial plantations. Typical plantation jobs in the region provide low wages, few benefits, and minimal prospects for job mobility.

Finca Chimelb’s farm operator, has developed an innovative program to address the dual challenges of workers’ income and job mobility. Together with Intecap- a public institution dedicated to providing educational and professional training- our operator has developed a technical training program that certifies workers in agricultural activities such as pruning, harvesting, and processing. In the first phase of the program, Intecap carried out interviews and field observations to identify the different job profiles on the farm and create standards for the core skills related to each profile. In the second phase, all of the workers were evaluated with regard to these standards to identify which workers would benefit from additional training and capacity building. In February 2020, the first cohort of 120 workers successfully completed the program and received a certificate attesting to their competency in the skills related to their job profile. The impact of this program is three-fold. First, improved skills should enable workers to improve workplace safety and efficiency, in turn, reducing work-related risks and increasing productivity. Second, for a population hindered by a lack of access to education and professional development, the diplomas conferred are a meaningful indicator of technical capabilities that can support job mobility within Finca Chimelb, or in future job prospects. Third, the skills acquired by program participants will support them to manage their own farms more efficiently and with better awareness of how to incorporate climate resilient practices.

Finca Chimelb’s certification program is an excellent example of how 12Tree’s vision of positive community impact and capacity building can be achieved by collaborating with well-aligned partners to support farm workers’ needs.

HIGH CARBON STOCK is a methodology that distinguishes forest areas with high carbon and biodiversity values that should be protected, from degraded lands that are more apt for development.

HIGH CONSERVATION VALUE areas are defined as natural habitats of outstanding biological, ecological, social, or cultural values at the national, regional, or global level. (HCV Network, 2023)

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This article is an extract of the 2023 12Tree Sustainability Update Report. Download the report to learn more about our progress and key impact areas.

Our Impact: CLIMATE

Conventional approaches to agriculture continue to act as major contributors to our climate crisis. Unsustainable land use activities and degradative agricultural practices have considerably altered our terrestrial ecosystems and now play a key role in the global climate system. It is estimated that agrifood systems emit a one-third of total anthropogenic greenhouse gas (GHG) emissions.[1]

12Tree is actively working to reverse these trends and to change agriculture from being a culprit of the climate crisis to being part of the solution. As leaders in the field of regenerative agriculture, we have been able to successfully establish climate-resilient, biodiverse, and productive farming systems that use fewer inputs than conventional farms, while actively sequestering carbon from the atmosphere and creating safe and fair employment opportunities. By understanding the emission sources of the past, we are now implementing innovative ways to further decarbonize and reduce emissions within the value chains in which we work.

To that end, in 2022, we continued to embed our Deforestation and Land Use Change Policy (LUCP)[2] into our company’s processes and on-farm operations, beginning with a retroactive assessment of all our existing assets to ensure their compliance with the LUCP. Relatedly, we conducted a GHG inventory baseline study of all our assets with South Pole with the goal of devising a roadmap to lower our overall emissions and to put in place a corporate climate commitment in the near future. Last year, we also began the rigorous process of certifying five of our farms (Andean Cacao, Chimelb, La Paz, Ambrosia, and Cuango) for Verra Certified Carbon Credits[3] that meet the additional CCB Standard.[4]

Pioneering MRV systems needed for land‑based Scope 3 removals

The GHC Protocol establishes the comprehensive global standardized frameworks to measure and manage GHG emissions from private and public sector operations, value chains and mitigation actions. For the first time in its history, the protocol has finally published its land sector and removals guidance, explaining how companies should account for and report GHG emissions and removals from land management, land use change, and biogenic products in GHG inventories, building on the Corporate Standard and Scope 3 Standard. Two critical requirements from this guidance will dictate how emissions and removals will be monitored, tracked, and reported on for the agricultural and food sectors moving forward, those of traceability and the need for primary data. Companies will only be able to account for and report removals within their GHG inventories if they have:

1. “TRACEABILITY: throughout the full CO2 removals pathway, including to the sink (where CO2 is transferred from the atmosphere to non-atmospheric pools), to the carbon pools where the carbon is stored, and to any intermediate processes if relevant.”
   

2. “PRIMARY DATA: empirical data specific to the sinks and pools where carbon is stored in the reporting company’s operations or value chain.”

Through our existing projects and pilot initiatives, 12Tree has already begun designing and implementing such Monitoring Reporting and Verification (MRV) systems with these precise characteristics and requirements in place, while also still actively contributing to the final phase of the GHG guidance. While some concerns regarding permanence still need to be ironed out, 12Tree is poised to become one of the first companies in the world that will be able to offer its clients the necessary MRV systems required for including land-based removals within Scope 3 corporate inventories (“insetting”), in addition to those for more traditional carbon offsets.

Combining this expert knowledge with ongoing monitoring and evaluation of the co-benefit that our regenerative agricultural approach brings to local communities and biodiversity. We believe we can provide a truly unique opportunity for clients that want to invest and to enact Nature Based Solutions in a comprehensive, holistic, and sustainable fashion.

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[1] FAO (2022): Greenhouse gas emissions from agri-food systems – Global, regional and country trends, 2000–2020. FAOSTAT Analytical Brief No. 50. Rome. Available online: https://www.fao.org/3/cc2672en/cc2672en.pdf

[2] DEFORESTATION AND LAND USE CHANGE POLICY (LUCP) is 12Tree’s corporate commitment that sets rigorous and clear definitions of what types of vegetation we and our operating partners can and cannot clear. Using established definitions for protected vegetation types, such as HCV or HCS, and by committing to a Gross Zero Deforestation approach, meaning we do not allow deforested land to be compensated with additional forest planting, our commitment will maximize the number of forests we can protect.

[3] THE VERIFIED CARBON STANDARD Program is the world’s most widely used GHG crediting program. It is a mechanism for awarding carbon credits to projects that reduce or avoid GHG emissions. (VCS, 2023)

[4] THE CLIMATE, COMMUNITY AND BIODIVERSITY (CCB) Standard identifies land management projects that deliver net positive benefits for climate change mitigation, for local communities and for biodiversity. (CCB, 2023)

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This article is an extract of the 2023 12Tree Sustainability Update Report. Download the report to learn more about our progress and key impact areas.

Small farmers, big impact

Five of every six farms in the world are small - less than two hectares - and family run operations.

Yet a recent study by the Food and Agriculture Organization of the United Nations shows that these approximately 500 million smallholder farmers manage 12% of the world’s farmland and produce approximately 35% of the world’s food40. Many of these farms are located in the rural tropics, in areas that are critical for the protection of biodiversity and carbon-rich forests, as well as the preservation of nature-based livelihoods and cultural values. For these reasons, it is incredibly important to ensure that smallholder farmers can earn viable livelihoods through their farming, and without expanding their farms by cutting or burning remaining forests (1). But the challenges facing smallholders are manifold: small volumes and low productivity; lack of production technology, knowledge, and training; missing or limited markets; and inefficient, sometimes exploitative supply chains (2). Generally, the more rural and inaccessible the farm is, the more difficult it is for the farmer to make ends meet from their farm.

Part of 12Tree’s mission is to meaningfully incorporate smallholder farmers into our production models to ensure that local farmers and rural communities thrive right alongside us. This “nucleus plasma” approach envisions 12Tree’s central farm and processing facilities as a point of access for surrounding farmers to be folded into an inclusive, beneficial sourcing model. Aspects of our model include:

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1. RELIABLE LONG-TERM OFFTAKE AGREEMENTS with transparent and fair pricing;

2. ACCESS TO HIGHER-VALUE AND NICHE MARKETS, including through certification;

3. KNOWLEDGE TRANSFER AND CAPACITY BUILDING for farming practices, land and resource

management, and environmental protection;

4. ACCESS TO TECHNOLOGY including tools, machinery, and inputs for farming and processing;

5. SUPPORT FOR FARMER ORGANIZATION and a platform for inclusive dialog; and,

6. IMPROVED ECONOMIC RESILIENCE through income diversification and benefit sharing opportunities.

While these core tenets are central to our sourcing model, our various “smallholder programs” are tailored to each farm’s unique context, considering aspects like local demographics, environment, and crop. Take, for example, 12Tree’s smallholder project at the Chimelb farm in Guatemala. The “CarCao Forest Project” launched as a five-year partnership between 12Tree and Heifer International aims to support 500 families in 20 communities to achieve a “living income” through improved agroforestry value chains for cacao and cardamom. Benefitting from the expertise and experience of participating stakeholders -including local and national governments, non-profits, and Chimelb’s own farm operations company- CarCao Forest has been developed using a bottom-up approach. Heifer International’s strength in community organization an local capacity development makes them the perfect partner to compliment 12Tree’s strength in agroforestry and marketing. In spite of the global pandemic, in 2021, the project reached 116 families in five indigenous communities neighboring Chimelb, and established five community nurseries nurturing more than 75,000 plants of cacao, cardamom, black pepper, mahogany, cedar, and other tree species.

While sharing the same core vision, 12Tree’s smallholder program by Andean Cacao in Colombia has an entirely different design and structure. The “Origen Boyaca” program was launched in 2016 as a jointventure model in which Andean Cacao partnered with smallholder farmer associations in Colombia’s Boyaca region to source, process, and sell high-quality cacao. This innovative model leverages strategic partnerships and a corporate off-take agreement to situate farmers are shareholder, mutually invested in and dedicated to the business’ success. Grant funding has enabled farmer associations to enter into the venture without risk, and also providing resources and expertise for key sustainability activities relating to gender, living income, and environment, amongst others. Likewise, through the development of a strong relationship with Mars, Andean Cacao was able to secure a long-term offtake agreement that shelters farmers from market price shocks and provides with them stable and clear product specifications. Origen Boyaca focuses on building the organizational capacity and farming skills of participating farmers through ongoing trainings and technical assistance: in 2021, 337 received technical assistance, while 41 ha were grafted and 22 ha were planted with improved varietals. With exceptional traceability and quality control systems in place, the venture purchased more than 50 tons from smallholder farmers, earning them awards by GoodNow Farms and the honor of representing Colombia at the Salon du Chocolat. While incredibly different, both programs achieve meaningful social impact through inclusive models that put farmer well-being at the fore. Focusing on capacity development and quality production destined for high-value markets, these programs are benefitting farmers now, and paving the way for their future.

WATCH OUR COMMUNITY VIDEO

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This article is an extract of the 2022 12Tree Sustainability Report. Download the report to learn more about our regenerative approach to farming illustrated in several farm case studies, articles and partner interviews.

References:

(1) Lawder, S., Sánchez, M.V., & Bertini, R. (2021). Which farms feed the world and has farmland become more concentrated? World Development. Vol. 142.

(2) Godar, J. et al. (2011). Who is responsable for deforestation in the Amazon? A spatially explicit analysis along the Trasamazon Highway in Brazil. Forest Ecology and Management, Vol. 267.

Bridging the gap towards living wages

At the core of 12Tree’s approach to community is our commitment to providing good and fair jobs to all of our employees.

At the most basic level, this commitment ensures fair and inclusive hiring practices and salaries that are above minimum wage with health and pension benefits. But our ambition goes far beyond this: we aim for all workers to earn a dignified livelihood, one in which workers are able to support their families and comfortably meet their daily needs, with sufficient savings to overcome urgent and unexpected setbacks without falling into debt.

At the international level, movements are underway to ensure that workers across industries- from manufacturing, to textile, to agriculture- are paid wages commiserate with their efforts and sufficient to live dignified lives. One concept that has emerged is the “Living Wage,” an alternative measure of basic needs that goes beyond nationally determined minimum wage or poverty lines, and instead analyzes the costs of geographically specific expenditures (food, childcare and schooling, health, housing, transportation, etc.) in order to identify the true costs of living, and therefore the salary needed to satisfy that cost. In agriculture, certification entities such as Rainforest Alliance/UTZ and FairTrade have incorporated the living wage into their certification programs, while industry leaders such as Mars Wrigley and UniLever are building the concept into their global sourcing strategies.

In 2021, 12Tree piloted its first Living Wage study at our Platanera Rio Sixaola (PRS) farm in Costa Rica. The PRS farm and project management team, led by a visiting researcher from Yale, collected and analyzed data about the salaries and bonuses earned by workers. They calculated the workers expenditures on basic needs and goods, and also took into consideration where PRS’s company benefits -such as medical coverage, pension, meals, savings, severances, etc.- help reduce workers’ cost of living. The study not only helped PRS to understand the gap between the wages earned by some workers and the “living wage”, but it also provided insights into the economic challenges faced by workers, and how the farm can help to mitigate those costs. For example, some of the key insights included:

1. FOOD COSTS are inordinately high in the region: workers spend 22-44% of household income on food;

2. COMBINING PAYMENT STRUCTURES (hourly, pay-per-piece) can maximize efficiencies and result in higher earnings for workers in the banana packaging facilities;

3. THE SEVERANCE PAYMENT is relied on when larger sums of cash are required due to the lack of savings or credit options.

The Living Wage study results were shared with farm managers and worker representatives to facilitate a discussion about how PRS can help to bridge the gap between the current and wages and the living wage by generating better earnings and reducing costs. Several strategies have been developed for the long term, but those currently underway include: piloting new payment structures for banana packers; creating a subsidized staple foods agreement with local grocery stores; and a weekly nutritious meals program for workers’ children.

In addition to the insights used at the farm level, 12Tree used its experience as an early tester of the Living Wage methodology to provide feedback and recommendations to the developers of the methodology Sustainable Trade Initiative (IDH) to help strengthen the methodology and tools. We are currently carrying out a second Living Wage and Living Income study at Andean Cacao using a complementary methodology to provide us, and the broader industry- with additional insights to continue improving this important approach.

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This article is an extract of the 2022 12Tree Sustainability Report. Download the report to learn more about our regenerative approach to farming illustrated in several farm case studies, articles and partner interviews.

Our Community

#WEVALUEPEOPLE

The commodification of agriculture and food chains has transformed our society.

Crops and raw materials generally produced in the world’s rural areas now feed and sustain an increasingly urbanized and globalized population. On the one hand, commodity agriculture has made food more affordable and accessible. On the other hand, the very principles that underlie commodity agriculture- efficiency, economies of scale, and cost minimization- are often associated with a sort of “race to the bottom” where low prices are achieved at high environmental and social costs (1). Some of the obvious losers in this game are the small farmers, forced to compete in a heavily distorted market with ever declining margins, or abandon farming altogether (2). Similarly, agricultural workers have become an undervalued and expendable cog in the machine, often toiling under difficult or dangerous conditions for meager wages (3).

12Tree’s mission to de-commodify agriculture is founded in the belief that agricultural workers, farmers, and rural communities are the necessary foundation of global value chains and essential for climate adaptation. Intimately connected with the landscapes in which we produce and source our products, these rural communities are truly stewards of the land. Under their watchful care, ecosystems will be protected and restored. Moreover, the empowerment of local farmers is critical for achieving the Sustainable Development Goals of eradicating poverty (SDG1), abolishing hunger (SDG2), and sustainable production patterns (SDG12).

Starting with the initial conception and design of our farms, and continuously integrated into our on-going operational decisions, 12Tree seeks to maximize positive social impact in ways that are monitorable and measurable. At the foundation of our projects are good jobs, healthy working environments, and beneficial sourcing programs. This includes inclusive hiring processes and reliable contracts that provide fair salaries and benefits; safe, sanitary, and welcoming working environments that exceed the highest industry standards; and transparent, reliable, abovemarket offtake agreements with smallholder farmers.

Over and above this foundation, our focus on developing human capital leads us to invest in worker training to improve existing skills and knowledge and foster new areas of expertise. Local empowerment includes investing in basic community needs and working with communities to identify and address underlying structural issues. Finally, de-commoditize agricultural sourcing means creating mutually beneficial partnerships by: facilitating farmer organization and transparent communication; improving access to information, inputs and markets; and benefits sharing.

WATCH OUR COMMUNITY VIDEO

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This article is an extract of the 2022 12Tree Sustainability Report. Download the report to learn more about our regenerative approach to farming illustrated in several farm case studies, articles and partner interviews.

References:

(1) United Nations (2011). The Global Food Crises. Available at: https://www.un.org/esa/socdev/rwss/docs/2011/chapter4.pdf

(2) De Schutter, O., Building Resilience: a Human Rights Framework for World Food and Nutrition Security, UN, 2008.
(3) Wilkinson, J. (2011). From fair trade to responsible: social movements and the qualification of agrofood markets. Environment and Planning A-43 (2011), pp. 2012-2026

Platanera Rio Sixaola: Measuring impact in aquatic ecosystems with bioindicators

If we are to truly transition to sustainable food and farming systems, we need to measure our impact.

Rivers are ecosystems that are strongly influenced by their surroundings, and river ecologists have long recognized that rivers and streams are influenced by the landscapes through which they flow. Thus, one way of measuring the impact that our operations are having in the environment is by looking at the ecological health of the rivers and streams that flow through our farms.

Unlike physicochemical analyses, which reflect the condition of the water at the time of sampling (similar to a photograph), biological indicators like fish assemblage, macroinvertebrate benthic community, and condition of the physical habitat, respond to longer term environmental conditions integrating ecological information over time.

Sixaola River flowing through the PRS farm

The Sand Box River is a tributary of the Sixaola River basin and flows through the western edge of our farm Platanera Rio Sixaola in Costa Rica. This river is in a hotspot of endemism for freshwater fish in the country, so its management is critical for the conservation of the unique aquatic biodiversity of the country. As responsible stewards of the land, we deeply care about how our practices are influencing this important river. Monitoring and interpreting bioindicators require scientific expertise and skills, so we partnered with the River Biomonitoring Program of the ANAI Association from Costa Rica to conduct a relevant study.

They found out that the river is habitat for five freshwater species endemic to the South Caribbean, all listed as Endangered, according to IUCN’s Red List (2020). Furthermore, they Identified the presence of four species that need to migrate between fresh and brackish watersto complete their life cycle. The presence of migratory species indicate that rivers are freely connected to the sea and maintain good characteristics of habitat and forested riparian zones. Platanera Rio Sixaola is constantly working on Improving the water quality through sustainable agriculture practices and to minimize the disturbance of the area adjacent to the river as much as possible.

Watch our biodiversity video

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This article is an extract of the 2022 12Tree Sustainability Report. Download the report to learn more about our regenerative approach to farming illustrated in several farm case studies, articles and partner interviews.

Maquencal: From conventional monoculture to sustainable agroforestry

Maquencal is located in one of the world’s ecosystems with the highest priorities for conservation: the tropical dry forest.

Dry forests have been the preferred zones for agriculture and human settlement in Mesoamerica, the Caribbean, and South America and are amongst the most heavily utilized, perturbed, and least conserved of the large tropical ecosystems. With so little of its area intact and even less protected, the tropical dry forest ecosystem is currently one of the most threatened ecosystems in the world. In Colombia, 92% of its original cover has been lost and only 5% of what remains is under protection. This ecosystem is home to important species such as the cotton top-tamarin, an endemic Colombian primate, and the redlegged tinamou, a threatened species in the Caribbean region of Colombia.

When 12Tree acquired Maquencal in 2018, the farm was a cacao monoculture with low productivity levels and high pest incidence. To restore the productivity of the farm while providing habitat for biodiversity right from the start, the objective has been to rehabilitate the land in ways that enhance the richness of biodiversity, reduce greenhouse gas emissions, and enhance resilience to climate change. In short, moving from nature-negative to nature-positive farming.

Pollinators are an important element of crop associated biodiversity

To start, existing areas of naturally regenerated forest and gallery forests within the farm were protected and excluded from agricultural production. In terms of farm productivity, maintaining these habitats is key to boosting crop pollination and natural pest control because they provide food and nesting areas for pollinating and beneficial predatory insects. At the landscape level, these areas are extremely important for encouraging the movement of forest organisms (primates, mamals, birds, etc.) among the remaining patches of natural vegetation.

Recognizing the challenging weather and soil conditions of the site (a 4-month dry period, sandy soils with poor structure and organic matter content), it was necessary to redesign the agroecosystem so that it functioned on the basis of a new set of ecological processes. Nitrogenfixing cover crops native to the area were identified and are being planted below the canopy of the cacao trees to jumpstart natural processes of soil restoration. This reintroduction of diversity through cover crops provides a proactive approach to farm management: focusing on preventing problems before they occur, rather than trying to control them after they happen. Among the many other benefits, cover crops suppress weeds and thus reduce the need for herbicides, while at the same time helping to attract beneficial species and thereby reducing the need for pesticides and chemical inputs.

When analyzing the effect that these practices have at the landscape level, today Maquencal is a more biodiversity friendly agroecosystem in the sense that it facilitates interpatch migration. For example, this cacao plantation may not provide the appropriate habitat for a particular orchid species, but it does provide a habitat that will allow the movement of pollinating euglossine bees, effectively facilitating the mixing of genes between patches of appropriate habitat in the landscape.

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This article is an extract of the 2022 12Tree Sustainability Report. Download the report to learn more about our regenerative approach to farming illustrated in several farm case studies, articles and partner interviews.

Our Biodiversity

#WEVALUENATURE

Today, biodiversity and agriculture are at odds with one another in several ways.

About half of the world’s habitable land is used for agriculture and thus agriculture production is largely responsible for deforestation and the loss of other valuable habitats such as wetlands and grasslands. As a result, food production is responsible for the majority of global biodiversity loss - including as much as 70% of terrestrial biodiversity loss. At the same time food production highly depends on well-functioning ecosystems. Nature provides numerous ecosystem services - such as fertile soils, food, natural remedies, drinking water, and clean air – which in turn regulate the climate. If ecosystems or their components are damaged in the long term, the services provided by nature are at risk.

Despite this reality, only recently have science and industry begun to practically consider the role that large scale agriculture can play in restoring biodiversity. Prior approaches to integrate the two typically promoted conservation set-asides adjacent to agricultural and forestry developments. But the conservation paradigm that focuses on setting aside pristine forests while ignoring the agricultural landscape is a failed strategy in light of what is now conventional wisdom in ecology. Some habitats like tropical forests harbor great biodiversity, others, like agricultural systems, less. But in the fragmented landscapes that characterize almost all of the world’s terrestrial surface, those habitats that are biodiversity “poor,” may be extremely important as passageways for the habitats that are biodiversity “rich.” Given the fragmented nature of most tropical ecosystems, agricultural landscapes need to be an essential component of any conservation strategy. Transforming our agricultural systems into biodiverse agricultural landscapes is therefore key to reducing biodiversity loss, mitigating climate change, and ensuring human welfare as it relates to the most basic rights of clean air and water and nutritious food. Hence, our ability to achieve the SDGs will hinge on the protection and restoration of global biodiversity, from ending hunger (SDG 2), to clean water (SDG 6), to reduced inequality (SDG 10). But the process of transforming our food systems will require, as WWF eloquently puts it, a paradigm shift from intensive commodity production that tries to minimize the role of nature, to “farming with biodiversity to achieve nature- positive production at scale”.

Insect house at 12Tree farm Platanera Río Sixaola

12Tree’s farms are a living testament that large scale, profitable farming can be done in harmony with nature, and that regenerative agriculture can actively conserve and enhance biodiversity and other important ecosystem services. We have adopted a number of strategies to incrementally increase biodiversity on our farms. The most fundamental include practices like delineating and protecting conservation and restoration areas, and introducing multi-tiered, mixed varietals and crops into our productive systems.

12Tree’s farms are empirically proving that a collection of biological reserves in a sea of diverse agroecosystems managed regeneratively and with diverse vegetation cover is precisely the path forward for restoring global biodiversity through agriculture.

Watch our biodiversity video

DEFINITION: Agroecosystems are defined as communities of plants and animals interacting with their physical and chemical environments that have been modified by people to produce food, fibre, fuel and other products for human consumption and processing.

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This article is an extract of the 2022 12Tree Sustainability Report. Download the report to learn more about our regenerative approach to farming illustrated in several farm case studies, articles and partner interviews.