One more B for B2C: Biodiversity

A quick stop at the store: As you scan the shelves for your favourite chocolate, labels that signal sustainable cocoa farming, such as ‘Fairtrade’ and ‘Cocoa Life’, may catch your attention. There has been a measurable increase in sustainability claims on chocolate packaging. Companies are responding to the wishes of their customers, for whom sustainability is becoming an increasingly important issue. But the current price tags may also make your eyes widen, with global cocoa prices reaching an all-time high of USD 11,230 per tonne in 2024. Although the cocoa price is expected to lower slightly this year, it remains historically high.

So, what can really be considered the main price driver? Is it the move towards increased sustainability in cocoa production? The answer is not that simple as climate change is widely regarded the primary factor. Since climate change impacts nearly every aspect of life, it’s no surprise that its effects are felt even in the supermarket aisle. Extreme weather events in cocoa-producing regions, such as prolonged droughts, heavy rainfall and flooding, lead to lower yields, poorer quality or the complete destruction of harvests. In addition, cocoa trees in many areas are affected by disease. Experts agree that climate change will lead to a permanent deterioration in soil quality and, consequently, a permanent shortage of cocoa on the world market. However, supermarket customers do not necessarily need to fear the permanent loss of their favourite chocolate, as solutions are in sight. Although these cannot mitigate all impacts, they represent an important contribution to adapting cocoa growing to the changing climate.

A key factor is biodiversity and a shift away from monoculture farming. Monocultures – such as densely planted cocoa trees – are often established on land cleared from rainforests for profitable cocoa production. This practice removes trees that would naturally provide shade, support pollinators and help manage heavy rainfall through water absorption. Protecting and restoring forests can reduce crop failures in cocoa-producing regions and help stabilise global supply. As a result, biodiversity is gaining strategic importance for companies across the industry.

The EU has specifically addressed increasing deforestation and the loss of biodiversity by developing a Biodiversity Strategy. As part of this strategy, the EU Deforestation Regulation (EUDR) aims to ensure throughout the entire supply chain that products imported into the EU, traded on the EU market or exported from the EU, do not originate from areas deforested after the cut-off date of 31 December 2020. Like many other industries, the cocoa industry is significantly affected by the regulation. In addition to cocoa producers in countries of origin and importers, processing businesses such as manufacturers or patisseries are affected if they produce products primarily consisting of cocoa.

Besides the significant administrative burden and increased costs for companies importing and processing cocoa, the obligations of the EUDR can also have a negative impact on biodiversity. For example, cooperatives of small farmers are required to report the origin of cocoa down to the exact plot where it was grown. But local cooperatives, in particular, have recognised the importance of biodiversity for sustainable cocoa production and are increasingly relying on mixed crops of individual cocoa trees and other plants, making it very difficult to fulfil the stringent obligations of the EUDR. To this end, reliable customers – especially from the EU – are needed, as sustainable and biodiversity-friendly farming requires initial investment and a better understanding of what the EUDR demands.

The possibility of meeting EUDR reporting obligations also depends on the local infrastructure, such as internet access and the quality of internet connection, which varies widely around the world. Extensive reporting requirements and poor infrastructure often put local farming communities at risk of being displaced by large-scale cocoa farms. These industrial operations frequently expand on to land deforested before the EUDR cut-off date and tend to invest less in sustainable, biodiversity-friendly practices. As a result, the protection and promotion of biodiversity through EUDR obligations are under significant pressure.

This has far-reaching impacts, as the effects of climate change and associated crop losses will lead to lower supply and higher prices for consumers. Although meeting EUDR obligations on the one hand, and the promotion of local biodiversity efforts on the other, is a balancing act for companies, it is still advisable for companies to focus on biodiversity in the long run. Supermarket customers will thank them, at least when it comes to selecting their favourite chocolate with good conscience.