Nestle Audit Finds Child Labor Violations in Cocoa Supply

By Dermot Doherty and Stanley James – Jun 29, 2012 9:51 AM ET [from Bloomberg]

Nestle SA (NESN) needs to step up measures to combat child labor in the Ivory Coast cocoa industry, according to a study requested by the Swiss food company that found “numerous” violations of its internal work rules.

The maker of KitKat chocolate bars needs to improve internal monitoring to fight the practice as four-fifths of its cocoa comes from channels for which information on labor is opaque, the Fair Labor Association said in a report. Nestle plans new monitoring programs in two cooperatives this year and in 30 by 2016, with the FLA assessing progress, the Vevey, Switzerland-based company said in a response.

Nestle buys about a 10th of the global cocoa production and more than a third of that comes from the Ivory Coast, the world’s biggest producer. About 20 percent of the cocoa the chocolate maker gets from that country can be traced because it comes from Nestle’s sustainable-farming program, while the rest comes from the “standard” supply chain, which isn’t transparent, according to the report.

“Child labor is a more persistent problem than anybody believed,” FLA President Auret van Heerden said by phone. “What we’re talking about is changing the way companies in the industry do business, and Nestle has taken the first step.”

About 89 percent of Ivory Coast children were involved in growing cocoa, according to a 2008 government survey.

Foxconn Report

The FLA monitors and seeks to advance labor rights and improve conditions for workers. The group highlighted violations of Chinese labor laws earlier this year at Foxconn Technology Group, a maker of Apple Inc. iPads. Nestle requested the cocoa study when it became the first food company to join the FLA this year.

Nestle said it aims to increase the amount of cocoa it obtains from its sustainable farming program globally to 15 percent next year from 10 percent in 2012. The root causes of child labor in the cocoa industry include poverty and a lack of schools, Van Heerden said.

“The use of child labor in our cocoa supply goes against everything we stand for,” Jose Lopez, Nestle’s head of operations, said on a webcast. “You can be here talking about child labor but if there’s no school, it’s not going to work.”

Regulatory Steps

The report also recommends that the Ivory Coast government take regulatory steps to tackle child labor, introduce a registration system for those working in agriculture and step up monitoring. The FLA said its suggestions for Nestle are applicable to other companies in the industry. The world’s biggest chocolate companies include Kraft Foods Inc. (KFT), Mars Inc. and Hershey Co. (HSY)

Nestle needs to monitor all participants in its supply chain and set clearer labor standards, according to the report. The company should also bolster its supplier code and tighten contracts, while seeking to rescue child laborers through collaboration with local authorities and various organizations, the FLA said.

“No company sourcing cocoa from Cote d’Ivoire can guarantee that it doesn’t happen, but what we can promise is that tackling child labor is a top priority for our company,” Nestle’s Lopez said. Part of the problem, he said, is that “the child who cannot work in the farm that provides Nestle will work in the next farm.”

Children’s Tasks

The most common tasks carried out by children on cocoa farms are filling plastic bags for nurseries, breaking up pods and transporting plants, according to the FLA. Under local law, carrying heavy loads is one of the worst forms of child labor, and the use of machetes and knives to break pods is a hazardous task, according to non-government organizations in the Ivory Coast, the FLA said.

Nestle also said it’s involved in a project with the World Cocoa Foundation to build or refurbish 40 schools in the country within four years.

The group interviewed representatives from government and other bodies, as well as seven suppliers that provided Nestle with 79 percent of the beans and cocoa products the Swiss company bought from the Ivory Coast last year. The FLA talked to more than 500 people for the report.

“The complexity of child labor in the cocoa supply chain means solving the problem will take years,” Nestle said.