Assessing payment for environmental services models for progress towards sustainably produced cocoa
With sustainability becoming a key part of how chocolatiers market their products globally, major companies and state actors are increasingly committing to eliminating deforestation from cocoa supply chains. In tropical forest countries, small-scale producers contribute a large share of the cocoa traded globally.
Smallholder farmers – central to the transition towards sustainable production – struggle however to invest in sustainable practices when they live below the poverty line and have limited access to finance. For this reason, some large companies that have committed to eliminate deforestation from their cocoa supply chains are encouraging smallholders and communities to implement sustainable practices in exchange for technical and financial support.
The Facility has deep experience with designing and testing payment for environmental services (PES) approaches for smallholder sustainable cocoa production and forest restoration. In 2020 we used this experience to do a stocktake of PES experiences in Côte d’Ivoire, conducted in cooperation with Ivorian Forest and Environment ministries.
Our assessment confirmed that incentive mechanisms are important for covering the initial investment costs of shifting to sustainable production. For change to happen at scale, it is essential to ensure that these initiatives not only support the initial costs of agroforestry and replantation, but also provide solid income diversification opportunities.
Nonetheless, our conclusion is that PES approaches should be viewed as a means and not an end. In some cases, similar results can be achieved without financial incentives through actions such as legal reform, higher or less volatile commodity prices, or developing timber or non-timber forest product value chains.
To strengthen analysis of the economic viability of cocoa agroforestry systems, the ‘1 for 20 Partnership’ – which aims to scale up financing for sustainable agricultural production in Côte d’Ivoire – collected additional data. These insights were shared with cocoa and forest stakeholders. In addition, we worked closely with Cargill, a major cocoa trader, and the PUR Projet, a French social enterprise, to assess revenue impact of agroforestry on smallholders.