In October 2012, a study was published on the costs and benefits of cocoa certification. It was compiled by KPMG, and commissioned by the International Cocoa Organization. The study maintains that while the share of certified cocoa has risen since 2009 from 3 to 6% of total cocoa production, on the basis of current commitments cocoa certification is on the verge of becoming mainstream (see Agritrade article ‘Trends in cocoa production’, forthcoming).

The report analyses the costs and benefits at farm level in Ghana and Côte d’Ivoire under Fairtrade, Rainforest Alliance and UTZ certification schemes. It notes the similarity of objectives across these schemes (fostering sustainable practices and improving farmers’ livelihoods), but also notes differences across these schemes ‘in the way they structure their premium, [and] required fees, certified content required for using the label’. Some chains use ‘mass balance’ systems for certification, while others use ‘certified content required in final product systems’, which requires ‘full segregation of its products through the value chain’ (e.g. Rainforest Alliance). According to the study, ‘these differences in requirements can have a direct impact on the costs and benefits at farm level,’ and they also affect the attractiveness of different schemes to other actors in the value chain.

Overall, with premiums under other schemes being determined by the market, Fairtrade certification generates the greatest net benefits to farmers, with its minimum price (US$2,000/tonne) and set-price premiums (US$200/tonne). The report concludes that over a 6-year period the average certified cooperative in Côte d’Ivoire has earned US$114/ton in terms of net benefits from the premiums (with this falling to US$84/ton if the costs and benefits of productivity increases are excluded), and in Ghana US$382/ton (with this falling to US $38/ton if the costs and benefits of productivity increases are excluded). The differences in benefits at country level were attributed to wider policy initiatives, notably differences in inputs costs (due to fertiliser subsidises in Ghana) and farm-gate prices in Ghana and Côte d’Ivoire.

Table: Summary of cost and benefits by certification scheme

Source: Composite table from Tables 6, 7, 8, Figures 17–22, KPMG, ‘Study on the costs, advantages and disadvantages of cocoa certification’, October 2012

The report identified a number of disadvantages of certification, including additional investment requirements, greater administrative capacity requirements, and increased costs of certification and sometimes labour. Particular problems were faced by very small farmers (with less than 1.5 ha), with high costs of certification being faced in the first years. Certification schemes were not felt to adequately address issues of gender inequality, child labour and a ‘lack of democratic control in cooperatives’, including over the equitable distribution of premiums.

The study also identified a need for independent research into the following areas:

• attribution of costs and benefits along the supply chain;
• the distribution of premiums on the ground;
• the impact of farm size on net benefits;
• yield improvements per scheme;
• the pros and cons of multiple certification;
• the impact of price volatility on the net benefit of certification;
• the impact of certification on gender inequality and child labour.