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Effect of CSR on Child Labour

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Abstract

Child labour is an issue that is detrimental to sustainable development of any society. The underlying cause of child labour has been identified as poverty. The cocoa sector where this practice has been reported to be widespread is the backbone of most economies in West Africa. Chocolate and other cocoa based products are in high demand and so consumers and manufacturers alike are implicated in fuelling this trade.

Corporate Social Responsibility is an important tool which if implemented and monitored properly could eventually lead to the elimination of child labour. This dissertation explores how industry with the support of the governments is engaging in programmes and projects as part of their CSR strategy in tackling child labour.

Chapter One

“We are the world’s children. We are victims of exploitation and abuse. We are street children. We are the victims and orphans of HIV/AIDS. We are denied good quality education and health care. We are victims of political, economic, cultural, religious and environmental discrimination. We are children whose voices are not being heard: it is time we are taken into account. We want a world fit for children, because a world fit for us is a world fit for everyone.”

(Statement from the Children’s Forum to the United Nations, May 2002).

Introduction

1.1 Definitions

A: The definition of child labour as derived from the United Nations Convention on the Rights of the child (CRC) stipulates that “children should be protected from economic exploitation and any work that is hazardous, interferes with schooling, or is harmful to their health and development”. The International Programme on the Elimination of Child Labour (IPEC) defines it as “as work that deprives children of their childhood, their potential and their dignity, and that is harmful to physical and mental development”. The International Labour Organisation (ILO) Convention 138, minimum age convention in 1973 which sets the minimum age for admission into employment and ILO Convention182 on the worst forms of child labour refers to child labour as: all work that is harmful and hazardous to a child's health, safety and development; taking into account the age of the child, the conditions under which the work takes place, and the time at which the work is done. The United Nations Children’s Fund (UNICEF) defines child labour as “work that exceeds a minimum number of hours, depending on the age of a child and on the type of work”.

B: According to the International Cocoa Organisation (ICCO), Cocoa Certification is the process of certifying that the commodity has passed the performance/quality assurance tests/qualification requirements stipulated in the regulations/code:

  • it complies with a set of regulations governing quality and minimum performance requirements:
  • product certified may be endorsed with a quality mark or display a certification mark:
  • it involves auditing, accredited certifying bodies, standards organisation, independent verification bodies and transactions costs.

C: The Fairtrade Labelling Organisation defines fair-trade as a trading partnership based on dialogue, transparency and respect that seeks greater equity in International trade

1.2 Background Information

The successful elimination of child labour in the world is almost certainly one of the most vital policy objectives of today. It is at the forefront of the objectives of the Millennium Development Goals (MDG) as adopted by all 198 United Nations Member States in September 2000 (Grimsrud, 2003). As part of broader efforts towards a sustainable solution to child labour, the ILO, UNICEF and the World Bank initiated the interagency Understanding Children’s Work (UCW) project in December 2000. This project, which is guided by the Oslo Agenda for Action unanimously adopted at the 1997 International Conference on Child labour, elaborated the priorities for the international community in the war against child labour. Through a variety of data collection, research, and assessment activities, the UCW project is broadly directed towards improving understanding of child labour, its causes and effects, how it can be measured and effective policies coupled with stronger international cooperation for the elimination of the practice.

The issue of the worst forms of child labour in the cocoa sector came into the public glare when a UK media network, Channel 4, in a documentary in September 2000 alleged the massive use of children as the labour force on Ivorian cocoa plantations. The backbone of plantation work is backbreaking labour, done using rudimentary tools under gruelling conditions. At the time it was alleged that 90% of cocoa farms in Côte d'Ivoire, which is the world's leading cocoa producer engaged child labour in their operations. The government of Côte d’Ivoire strongly refuted these allegations at the time but eventually admitted there was a problem in the use of child labour but not to the magnitude as alleged in the documentary (Afro News, September 2000).

In 2001, following the allegations of child labour in cocoa farms, U.S. Representative Eliot Engel and Senator Tom Harkin decided to adjoin a clause to the Trade and Development Act (TDA) proposing a federal system to certify and label chocolate products as "slave free". The cocoa industry successfully lobbied against this on the premise that the supply chain was too complex. A compromise was eventually reached. A protocol entitled "Protocol for the growing and processing of cocoa beans and their derivative products in a manner that complies with ILO Convention 182 concerning the prohibition and immediate action for the elimination of the worst forms of child labor", signed in September, 2001. Industry agreed to establish a task force made up of government, non-governmental organisations to work towards its elimination in cocoa plantations. A critical part of this agreement was the commitment to design and implement “standards of public certification” in all of West Africa by July 1st 2005. All cocoa from this area would be certified as free from child labour. The governments would also be required by the protocol to establish monitoring systems and also issue certificates which describe the current state of child labour and forced labour in the cocoa sub-sector and efforts being employed to improve on the situation where necessary.

Given the competing interests and values involved, child labour cannot be eradicated solely through domestic regulatory mechanisms and actions (Garcia and Jun, 2005). The inclusion of social responsibility and in particular avoidance of child labour in corporate strategies became inevitable for chocolate manufacturers to avoid the wrath of the public. A greater commitment to social responsibility on the part of corporations has been one solution put forth by some academics, government agencies, and development institutions to mitigate some of these negative impacts and help companies contribute more to socio-economic development in its broadest sense.

Can the industry live up to its CSR commitments in relation to the cocoa industry? The concept of CSR is not new. Steiner & Steiner (2006) trace its origins to the philanthropic work of John D. Rockfeller and Andrew Carnegie who gave away millions for social causes. The more contemporary understanding of CSR can be traced to Bowen (1954) who argued that managers have an ethical duty to take into consideration, broader social impacts of their decisions, and those corporations who act differently should not be seen as legitimate. In the elimination of child labour, the concerns include reducing and eliminating the use of persistent toxic pesticides and fungicides, preserving the value of cocoa agro forests, improving the social and economic status of the smallholder and labourers as well as maintaining a fair price for the commodity. These measures would ensure a sustainable production of the commodity and at same time increase household incomes and as a result reduce and eventually eliminate incidence of child labour.

1.3 The dissertation seeks to:

Highlight the steps taken by countries involved to tackle child labour;

Draw attention to country responses and responsiveness, to the initiatives employed by chocolate manufacturers.

Elaborate on the industry response in the wake of child labour allegations within the cocoa industry.

Identify CSR initiatives employed by chocolate manufacturers both individually and collectively to combat child labour.

The issue of child labour has been alleged in all the five cocoa producing countries of West Africa namely Côte d’Ivoire, Ghana, Nigeria, Togo and Cameroon. However, due to lack of available data, this study will be limited to two countries: Côte d’Ivoire which is the leading world cocoa producer and Ghana whose economy also largely depends on cocoa production and export.

The first chapter has provided the background information on child labour and the purpose of this study. The remainder of the dissertation is structured as follows:

Chapter two provides information on literature on the causes of child labour, corporate social responsibility as an essential tool to combat child labour, the link between the chocolate industry and child labour and the steps taken to eliminate the practice in the cocoa chain.

Chapter three discusses the methods use in carrying out the study.

Chapter four provides information on Côte d’Ivoire and Ghana, the two countries involved in the present study. It also outlines their contribution to the elimination of child labour.

Chapter five is a case study analysis of three chocolate manufacturing companies to get an insight into their CSR strategies. The case study will show the commitment and the strategy employed to approach the issue of child labour.

Chapter six draws upon the case study findings.

The final chapter will draw conclusions to support the hypothesis formulated in this study. Recommendations will also be formulated based on the results from the case study analysis.

Chapter Two

2.1 Literature Review

Introduction

In recent years, there has been a surge of empirical work on child labour as well as literature regarding the plight of children working as child labourers in cocoa plantations in West Africa.

The issue has attracted considerable policy and public attention over the last decade either due to self recognition or outcry from the public. Public interest in child labour seems to have been motivated by increased theoretical work and publicity by the press. Documentaries exposing the conditions to which the children are subjected aroused public awareness. The rise in interest could also be attributed to increased trade and globalization which have raised awareness about the pervasiveness of child labour and elevated concerns among rich country residents about their role in its perpetuation (Edmonds 2007).The unease about child labour as a human rights issue and its implication for the long term growth and development through its interaction with education is of great concern not just for individual countries but also for the international community. This practice is viewed as a threat to sustainable development in developing countries.

Articles published between 2001 and 2002 in the wake of the child labour accusations highlighted the immorality of the practice. The horrors experienced by the children who are sometimes trafficked and even sold off by their families. The treatment meted out to them is inhumane even as they work under unacceptable conditions (Edwards et al, 2001). Some of the children engage in activity that is physically damaging or even morally objectionable (Cigno 2004). It can also be said that objectionable forms of child work have an opportunity cost in terms of forgone education.

It can also bring immediate benefit to families who in this case will be the only means of survival. Child labour not only hampers the growth of human resources, it also reduces the individual’s education achievement as well as the effect and quality of the education system thereby continuing the poverty cycle (Rena, 2009). Udry 2003, further buttresses this fact by stating that the primary cost of child labour is the associated reduction in investment in the child’s human capital which occurs primarily because child labour interferes with schooling.

With conflicting reports on the extent of the practice, a research “Child labour in the Cocoa Sector of West Africa” (IITA, August 2002) revealed that the figures of children working was not as high as was initially thought but that the children worked under unacceptable conditions exposed to long work hours, pesticides and other hazardous spraying agents. In addition, the Financial Times, (Circulation 477, 476 of August 7, 2002) and Business Respect (Issue Number 37 of August 20, 2002) agreed with the conclusions. These findings go to buttress the earlier conclusions of a meeting of the UK Foreign and Commonwealth Minister of State with representatives of Côte d’Ivoire, Ghana and members of the cocoa and chocolate industry. (Anti-slavery news, May 4th 2001).

The successful elimination of this form of labour is one of the most urgent policy objectives of this decade (Busse et al, 2003). It has gradually developed from a matter of regional and national concern to one that would trigger International debates and global persuasion as well as policy intervention (Basu and Tzannatos (2003). Busse et al (2003) carried out an empirical study on the notion that multinationals invest in countries where the incidence of child labour is relatively high and, secondly, the concern that countries may gain an unfair comparative advantage in trade by using child labour. The results indicate that multinationals are highly sensitive with respect to the location of their subsidiaries and prefer countries with lower levels of child labour for fear of aggression from the public and international community.

Causes of Child Labour

Poverty is the major cause of child labour. In a landmark paper on "The Economics of Child Labor" published in the American Economic Review (1998), Basu and Van argue that the primary cause of child labour is parental poverty. Grootaert (1998) and Udry (2003) argue that poverty and child labour are mutually reinforcing: given that children of poor parents end up working and not attend school and the cycle of poverty continues. Kruger (2004) concludes that children only work when the family is unable to meet their basic needs and poorer children stand the greater risk of being withdrawn from school during production periods.

This is further accentuated by Kruger et al (2007) which states that increased parental wages and household level of income are associated with lower child labour and higher school attendance. Household poverty is a very powerful motive of child labour and working comes at the expense of schooling because the income is essential for survival (Strulik 2008). Edmonds and Schady (2008). Basu et al (2007) provide recent discussions on the extent to which child labour is influenced by the income among poor households to show that the strong causal relationship between poverty and child labour.

Increased trade and globalization might have contributed to the awareness of child labour but it could also be a reason as to why child labour is in demand. In trying to link globalization and child labour, Dinopoulous and Zhao (2006) cite Maskus (1997) two-sector specific factors model, in which child labour is modelled as a specific factor employed in the exportable sector and adult labour is modelled as the mobile factor. They conclude that trade liberalization raises the output of the exportable sector and increases the demand for child labour as well as child wage.

They also state that trade liberalization raises the price of unskilled-intensive goods as well as guarantees a market for goods produced using child labour and reduces the returns to education. This can clearly lead to an increase in the incidence of child labour. In analyzing the effects of trade openness in a dynamic model of child labour and debt bondage, Basu and Chau (2004) discovered that trade openness increases the short run supply of child labour but this does not affect the long run incidence of child labour.

In a 2005 study carried out by Neumayer and DeSoysa in which they used both Foreign Direct Investment and trade openness to explain child labour, they concluded that countries with higher levels of trade and FDI had lower incidences of child labour. Davies and Voy (2007) finds that there is no robust effect of either FDI or International trade on child labour. Using 1995 data for 145 countries, they find that FDI is negatively correlated with child labour but when controlling per capita income, the effect disappears. Even cost benefit analysis by Nielsen (1998), Canagarajah et al (1998), show that annual Gross Domestic Products (GDP) decreases by 1-2% due to the use of child labour.

Why then is child labour still being utilized if it is marginally less costly than adult labour? Levison et al 1996 suggest that it might be because children are less aware of their rights and more willing to take orders without complaining. Mehra-Kerpelman (1996), further explains that in households where parents are poor this is regarded as cheap labour that makes it possible to maintain the household budget.

Corporate Social Responsibility

CSR may be defined, consistent with McWilliams and Siegel (2001), as actions on the part of a firm that appear to advance the promotion of some social good beyond the immediate interests of the firm/shareholders and beyond legal requirements. While some scholars argue that CSR type programs and policies were originally adopted in the mid twentieth century to avoid criticisms of social and environmental misconduct (Gutierrez and Jones, 2005); Micklethwait and Woodridge (2005) argue that many more companies are viewing CSR as a way to reduce the negative social and environmental impacts their businesses have and to maximize the positive impact of their investment, particularly in developing countries (Blowfield, 2005).

There is a growing body of evidence which asserts that corporations can be profitable not only by protecting the interest of their shareholders but by also engaging in actions that will be beneficial to their stakeholders (Pohle and Hittner, 2008). Davis et al (2006) state that while CSR came into existence largely out of commitments by companies to their employees and to communities where they were located, all that has changed in that, corporations can now be held accountable for practices within their supply chain.

Amaeshi et al (2006) further states that CSR often makes multinationals uncomfortable as they are often challenged by the global reach of their supply chains and the possible irresponsible practices that could occur along these chains. The mere possibility of the existence of irresponsible practices puts firms under pressure to protect their brands even if it means assuming responsibilities for the practices of independent groups along their supply chain.

Some studies have shown that socially responsible firms will financially outperform rival firms by attracting socially responsible consumers (Bagnoli and Watts, 2003), and will eliminate any concerns from activists and pressure groups (Baron, 2001).

Well-known companies have already proven that they can differentiate their brands and reputations as well as their products and services if they take responsibility for the welfare of the societies and environment in which they operate. These companies are practicing CSR in a manner that generates significant returns to their business. CSR, though a major instrument to tackle child labour could have a limited effect on eliminating child labour if codes are not specific, strictly implemented and monitored, and combined with alternative arrangements (Kolk and Tulder, 2004).

In offering an institutional theory of CSR, Campbell (2007) argues that the relationship between basic economic conditions and corporate behaviour is linked by several institutional conditions: public and private regulation, the presence of NGO’s and other organisations that monitor corporate behaviour, institutionalized norms regarding appropriate behaviour, associative behaviour among corporations themselves, and organized dialogues among corporations and their stakeholders.

It is therefore not surprising that chocolate producers are encountering extensive pressure from consumers, community groups, government, non-governmental groups and other pressure groups to engage in CSR as a means to eradicating child labour (Morrison et al, 2006). From an economic perspective, companies would be expected to engage in such activities if the perceived benefits could exceed the associated costs which in this case could be a total boycott of their products. Some theories in CSR show that companies engage in “profit-maximizing” CSR based on anticipated benefits which might include reputation management (Baron, 2001), (McWilliams and Siegel, 2001). Davis et al 2006 argue that “CSR (understood as actions a company takes that are not legally mandated but are intended to have a positive impact on stakeholders, broadly construed) is challenged by the changing shape of the contemporary multinational corporation”.

Should large firms be involved in poverty alleviation instead of simply contributing to output and employment? (Hopkins 2003). The UK’s Department for International Development suggests that businesses have an important role to play in the economic growth of a country which is essential to reduce world poverty. This they can achieve through their own policies and practices. “By following socially responsible practices, the growth generated by the private sector will be more inclusive, equitable and poverty reducing” (www.csr.gov.uk). CSR by its very nature is development carried out by the private sector, and it perfectly compliments the development efforts of governments and other multilateral development institutions.

There is evidence to show that a firm cannot maximize value if it ignores the interest of its stakeholder (Jensen, 2001). This is further buttressed by the World Business Council for Sustainable Development publication "Making Good Business Sense”, Lord Holmes and Richard Watts, define Corporate Social Responsibility as “the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large". The recent concerns of how profit should be considered in a broader context of productivity and social responsibility and how corporations can better serve both their employees and surrounding society.

The European Coalition for Corporate Justice (ECCJ) at the Round Table Conference on Child Labour and Corporate Social Responsibility in May 2008 remarked that “recent progress on corporate accountability has been dominated by the development of voluntary initiatives”. These voluntary initiatives have not succeeded in preventing continued abuses of corporate power, because they do not provide strong enough incentives for compliance to offset the financial gains for non-compliance. They also fail to empower citizens and stakeholders to hold the companies accountable for their actions.

The OECD Guidelines for Multinational Enterprises (OECD, 2000) calls for multinationals to “contribute to the effective abolition of child labour and “contribute to the elimination of all forms of forced or compulsory labour”. Ignoring these guidelines could lead to damage in reputation (Orlitzky et al., 2003). “A good reputation enhances the value of everything an organisation does and says. A bad reputation devalues products and services and acts as a magnet that attracts further scorn” (Dowling, 2001). There are a number of challenges faced by states in the implementation of the OECD guidelines, but these are surmountable by strengthening the existing implementation system of the National Contact Points. However, there are positive growing trends movement arguing for more effective regulation of corporations relating to human rights at national and international levels (Cernic 2008).

Chocolate Industry Response To Tackle Child Labour

A: The link between chocolate and cocoa implicates the consumers in the encouragement of child labour (Raghavan et al 2001 article in the Knight Ridder Newspaper). This is further emphasized by the Ted Case Studies Number 664, 2002 which implicates the entire international economic community, the Ivorian government, farmers, the chocolate manufacturers and consumers who unknowingly buy chocolate in encouraging this practice (Samlanchith Chanthavong, 2002).

The cocoa and chocolate industries, in conjunction with the ILO, other non-governmental organisations, the United States (US) government agencies and the affected African governments signed a voluntary and non-legislative protocol. The Harkin-Engel Protocol 2001, signed by the World Cocoa Foundation and Cocoa Manufacturers Association was aimed at developing a “credible, mutually acceptable system of industry-wide global standards, along with independent monitoring and reporting, to identify and eliminate” the worst forms of child labour as defined by ILO Convention 182 and certification that cocoa used or related products is void of child labour.

ILO Press Release (ILO/01/32) of October 1, 2001 lauded this initiative and pledged to work in partnership with the cocoa industry to eliminate this form of labour. In 2001, with the establishment of the International Cocoa Initiative (ICI) whose main objective was to work towards responsible labour standards for cocoa growing, it was clear that the entire cocoa sector was ready to get involved and this proved their committed to the fight against child labour.

A general statement by the European Cocoa Association (ECA) on 19th April 2001, affirmed it was "fully committed to sustainable development in cocoa producing countries and does not tolerate practices such as slavery and child labour [and that it] remains fully committed to maintain pressure on the relevant authorities, and to pursue all avenues in order to eliminate such practices where they are proven to occur". In a further communiqué on August 2, 2001 the ECA was concerned about the allegations and the extent of the problem and decided to first update the information they had on the scale of the practice.

B: Despite general acceptance that child labour is harmful and in spite of international outcry and Accords aimed at its eradication, progress on lowering the incidence has been very slow. Child labour eradication is at the top of the agenda of the millennium development goals which hopes to achieve this by 2015. Rena 2009, states that the research on child labour represents a new area of knowledge for policymakers especially regarding education and poverty reduction programmes. It further states that increased opportunities and increased welfare reduces child labour. Industry enforcement can only be effective depending on the mode of enforcement. As many labour relationships are in informal settings within family enterprises, enforcement is often very difficult (Basu and Tzannatos (2003).

Krueger and Donohue (2002) conclude that an economically active child is less likely to receive education. If income gained by the economically active child is significant for the household, then the policy makers deciding whether or not to adopt child labour legislation would face important trade-offs between distorting private decisions and correcting potential inefficiencies arising from externalities.

Doepke and Zilibotti (2005) discuss the introduction of laws from an historic perspective. They suggest that child labour laws can be triggered by skill-biased technological change that induces parents to choose smaller families as occurred in the U.K. in the nineteenth century. Regulations were introduced only after the factory system which was preceded by a period of rising wage inequality, and coincided with rapidly declining fertility rates. On their part, Ceroni et al (2003) present their study as a two-stage game.

Firms decide on innovation and households decide on education. In equilibrium the presence of child labour depends on parameters related to technology, parents’ altruism and the diffusion of firm property. When child labour exists, it is as a result of either firms' reluctance to innovate or households' unwillingness to educate or both. Therefore, the elimination of child labour would largely depend crucially on its underlying cause. They conclude that, in some cases, while compulsory schooling laws or an outright ban on child labour are both welfare-reducing, a subsidy to innovation is the right tool to eliminate child labour and increase welfare.

Garcia and Jun (2005) consider that International trade sanctions are a logical avenue to confront child labour, by eliminating the commercial opportunities available for such goods. However, they state that it is not clear if domestic child labour sanctions would survive legal challenges under the World Trade Organisation (WTO) law as currently interpreted. For international trade law to serve as a viable strategy for the elimination of the practice there must first be a clear theoretical and doctrinal case for the WTO-consistency of domestic child labour-based sanctions. Basu and Van (1998), caution against the rush to exercise a legislative ban against child labour. They argue that this should only be put in place when there is clear reason to do so especially if, it would lead to a rise in adult wages which will adequately compensate the household of the poor children. If this is done otherwise, then it will only lead them to more extreme poverty.

Conclusion

Despite the global initiative, the incidence of child labour shows no sign of decline as it brings immediate benefit to some families buttressing the fact that the root cause is abject poverty (Cigno, 2004). International organisations as well as national development agencies are embracing and encouraging CSR in the hope that the private sector can play a lead role achieving developmental goals which include eradicating poverty, and developing the social infrastructure in the rural communities such as providing education and health improvements.

However, in a recent report published by the International Labour Organisation in 2006, it confirms that the challenge in the fight against child labour in the world continues to be daunting but there is evidence that a breakthrough was in the making. The report highlights that there is already evidence of encouraging reduction in child labour, especially its worst forms. The number of child labourers globally fell by 11 percent between 2002 and 2006. They are confident that with the combination of political will, resources and the right policy choices, this evil practice could definitely be put to an end.

Exasperating and discouraging for developing countries is the fact that exports remain severely hampered by massive domestic support and export subsidy programs in developed countries through high tariffs and the difficulties in the implementation of the tariff-quota system (Chaudhuri and Kumar, (2005). More damaging for the cocoa export market is the adoption of Directive 2000/36/EC by the European Union which allows chocolate manufacturers to replace cocoa butter with cheaper vegetable fats. This in itself threatens the domestic food security of cocoa producing countries and undermines their export potentials (High beam Research, 2003). This position is further highlighted by a report to the European Union by LMC international on the impact of Directive 2000/36/EC on producing countries. With the implementation of this Directive, importation of cocoa beans by the EU will decline significantly and this will adversely affect producing economies which are already hit by civil unrest, disease, droughts and decline in the household incomes. This will render the farming population much poorer than already are.

Current publications have focused on the successes and failures of the implementation of the Harkin-Engel Protocol. An International Programme on the Elimination of Child Labour (IPEC) publication of June 27, 2005 faulted the implementation of the West Africa Cocoa/Commercial Agriculture Program to Combat Hazardous and Exploitative Child labour (WAPAC). Child labour feeds chocolate trade (The Toronto Star, July 4, 2005) accuses the chocolate industry for lack of implementation of the agreement.

The latest Chocolate Company Scorecard published in February 2009 by the International labour rights forum (ILRF) ranks very low the level of implemention of the promises made by the major chocolate companies to end child labour and ensuring transparency in the supply chain will provide an overall perspective on progress of implementation procedure by individual companies.

2.2 Hypothesis

The aforementioned reviews establish the link between child labour and the chocolate industry and why it is their ethical and social responsibility to contribute to its elimination. The literature also traces the root cause of child labour and the negative effect it could have on a whole generation. It also introduces CSR and explains its importance in the elimination of child labour if properly implemented and monitored.

As a result it is only logical to hypothesize that:

H1: Countries in West Africa are introducing changes to eradicate child labour in the cocoa industry.

H2: Chocolate manufacturers are trying to make changes through their CSR strategies to eliminate child labour in their supply chain.

Chapter Three

3 Methodology

3.1 Introduction

The purpose of this chapter is to describe the method used to collect and analyse information in order to test the hypothesis based on the research objectives. The purpose of this study which is to show that the chocolate industry together with the support of governments and NGO’s is actually embarking on the elimination of child labour through its CSR programs. Using case study to test the hypothesis is judged appropriate. Yin (1994) defines a case study as “… an empirical enquiry that investigates a contemporary phenomenon within its real life context, when the boundaries between phenomenon and the context are not clearly evident, an in which the multiple source of evidence are used”.

Stake (1994) identifies three types of case studies: the intrinsic case study which is undertaken when the researcher wants to better understand a particular case; the instrumental case study is used when a particular instance is examined to provide insight into an issue or refinement of theory; the collective case study where researchers jointly study a number of case studies in order to inquire into the phenomenon or general condition.

The instrumental case study is better suited for the cases of my case study as represented by Company X, Y and Z especially as it is designed to highlight the CSR policies and programmes embarked upon. The strategy was to first introduce the International Cocoa Initiative which is an organisation funded by the companies within the cocoa industry to tackle child labour. The individual case studies which follow give a detail account of the individual positions of each company. The strategies are similar in nature so this can be multiplied across the industry. The results will provide a similar pattern for the industry which will confirm that chocolate manufacturers are making an effort to tackle child labour.

Data Collection

Data was gathered from a variety of primary and secondary sources. The primary data was collected from company websites and annual reports. The websites provided general information on the companies while the annual reports provided financial details while the sustainability reports provided policies on CSR as well as projects embarked upon. All information provided in the case studies was obtained through this method. After consideration of the complexity of the question at hand, it was imperative to find cases that were representative of most companies within the same line of business. As such, I decided on a geographical representation which will attempt to cover the major high chocolate consumption zones. The USA, Europe and the UK. Company X represents the UK, Y represents Europe and Z the USA.

The choice of country selection was done due to availability of data and the importance of the cocoa economy explaining the preference for Côte d’Ivoire and Ghana. Country websites and publications were assessed to get general information on the countries and their specific responses to child labour. It also provides information on projects initiated by industry and their level of implementation. This is very important because it gives credibility to information in the case studies. The information here can also be used to confirm the hypothesis formulated for this dissertation.

Various NGO websites such as the International Programme on the elimination of child labour (IPEC), Child rights information Network (CRIN) and the International Labour rights Forum (ILRF) were assessed to authenticate the programmes initiated by industry. These sites confirmed their existence and local NGO sites such as the Save life for all foundation and Hope for humanity in Ghana authenticated the existence of the programmes as they were part of the implementation. Similarly, CARITAS, Union des Villages Producteurs en Agro-Pastoral (UVPAP) AND Femme Action Developpement (FEMAD) in Côte d’Ivoire confirmed the programmes initiated in that country.

Secondary data was obtained from company reports, publications from the ILO, the World Bank, the ECA, the WCF, and studies published by researchers. Information provided by secondary sources and site visits were used to augment the literature review. The University of Birmingham library was used to search for books relating to child labour and CSR. Online resource sites such as the Wiley Interscience and Social Science Research Network (SSRN) provided a wide range of academic literature related to child labour in general, child labour in cocoa plantations and CSR. EBSCO and PROQUEST also were provided a wide selection of articles relating to the issues discussed.

3.3 Data Analysis

Following a compilation of all data, a qualitative analysis approach was adopted to analyse case studies and arrive at conclusion. The analysis is done more from an interpretivist point of view. The information is interpreted based on my professional experience which is in commodity organisations and also from multi contexts which include the academic literature provided as well as information from NGO sites, Newspaper articles etc.. The information in the case studies are further analysed against the information from the country information for similarities. The similarities confirm the legality of the programs and confirm the conviction of company to achieve the set goal.

Through this analysis, a number of conclusions were reached which confirm the hypothesis formulated. The conclusions are discussed in detail in Chapter 7.

Chapter Four

4.1 Country Response To Child Labour

Cocoa cultivation constitutes the major force behind the economies of most West African countries such as Côte d’Ivoire, Ghana, Cameroon and Nigeria and together they produce about 70% of the world’s total supply of cocoa. Cocoa production in West Africa is predominantly a smallholder activity and tends to be labour intensive. The farmers mostly cultivate the crop with labour of both family and non-family members. The aspect of using children at this level of production has attracted both national and international concerns.

Although the practice has long been regarded in many traditional communities as family arrangement in the child’s interest and closely related with value systems of social and economic life, concerns have been expressed mainly over the hazards the practice can pose on the children and the consequences of the activities on their physical, emotional, social and psychological health.

The Harkin/Engel Protocol also required the governments to establish monitoring systems and also issue certificates or reports, which describe the current state of child labour and efforts being made to improve the situation. It also called for the enhancement of the knowledge base on child labour in the sector. Ghana and Cote d’Ivoire have taken a lead in this initiative and both produced their first certification report in 2007.

The main issues that complicate the problem of child labour are illiteracy, ignorance, poverty, broken homes, death of parents, HIV/AIDS, unemployment, unpleasant cultural practices and gender inequalities. The high population growth has also resulted in the steady fall in living standards.

4.1.1 Cote D'Ivoire

Côte d’Ivoire is located along the West African coast. It is the world’s leading cocoa producer with an average of about 1.5 million tons per annum which amounts to about 40% of total world cocoa. About 70% of the population is engaged in some form of agricultural activity. Cocoa is produced on small farm holdings owned by families. Consequently the economy is highly sensitive to fluctuations in international prices of cocoa. Despite government effort to diversify the economy, it is still largely dependent on agriculture and related activities.

According to the Côte d’Ivoire National Institute of Statistics (2005), 42% of the children population in Côte d’Ivoire do not attend school, 22.2% engaged in economic activities. 10.4% of children between 5-7years worked without attending school. Of the 58% of working children engaged in agriculture 20% worked in cocoa farms. 8 out 10 economically active children engaged in activities classified as worst forms of child labour.

Response

Côte d’Ivoire set up a steering committee made up of technical ministries, managers from the coffee/cocoa sector and producers in 2007. A secretariat tasked with the responsibility of implementing the project on the system for monitoring child labour as part of the certification as prescribed by the Protocol.

It set up the “self help village” pack which essentially helps people to work their way out of poverty. Their main objectives were to:

Sensitize parents on the dangers of child labour and children working in hazardous conditions;

Sensitize parents to send their children to school;

Support the “all to school” policy by providing more primary schools and community education centers;

Build and equip health centers;

Develop income generating activities.

With funding from the ICI, community based dialogue and sensitization programmes started in June 2006.

4.1.2 Ghana

Ghana is located along West Africa and borders Côte d’Ivoire to the west. It is the world’s second largest cocoa producer 730 thousand tons per annum.

According to the Ghana child labour survey of 2003 by the Ghana Statistical Service 31% of Ghana’s population is made up of children between the ages of 5 and 17. 2.47 million Children aged 5 – 7 years were engaged in economic activities (39% of the estimated 6.36 million children within this age group). Half of rural children and one-fifth of urban children were economically active. 88% of working children were unpaid family workers while 5.9% were self employed. Nearly 20% of children (about 1.27million) engaged in activities classified as worst forms of child labour.

Response

Ghana took a major step towards certification in February 2006 when the Ministry of Manpower, Youth and Employment (MMYE) produced the national programme for the elimination of the worst forms of child labour in collaboration with the Ghana Cocoa Board and other partners. In their effort to survey practices within the cocoa sector to achieve a credible certification system, a research group from the University of Ghana carried out a demographic analysis of the Ghana cocoa sector.

Ghana has policies, legislation, programmes and activities in place which address child labour. Specifically, Ghana’s Constitution (1992) contains clauses on child care and protection; the Children’s Act (Act 560:1998) ensures children’s rights and protection; Human Trafficking Act of 2005. The Whistle Blower Bill mandating citizens to report crime of any sort. Also, government policies that have direct impact on the worst forms of child labour include the Ghana poverty reduction strategy; the sector wide education policy to ensure education for all by 2015 and the capitation grant (2005) which ensures free primary and junior secondary school education for all.

Direct involvement in the elimination of child labour started in 2004 with a consultative meeting with the ICI organized by the Ghana Cocoa Board where decisions were reached on action to be taken.

Work started in earnest with the withdrawal of 1,200 children from 52 communities and enrolled into school under the West African Cocoa and Commercial Agriculture Project (WACAP). The Sustainable Tree Crop Project was also established in 2003 to organize farmer field schools to help farmers to improve cocoa farming practices.

With funding from the ICI, community based dialogue and sensitization programmes were started in 2004.

Chapter Five

5 Case Study

Introduction

Companies X, Y and Z were chosen to test the hypothesis set for this dissertation because they are major players within the cocoa industry and their actions can be representative of the entire industry. Firstly, after considering the complexities involved in tackling child labour, they decided to act under the auspices of the International Cocoa Initiative (ICI). This group of companies also constitute the major buyers of cocoa beans from West Africa.

Given the fact that the companies involved in the cases for this study concert their effort under the ICI, part A would introduce their concerted efforts and part B will be on the individual efforts.

5.1 Part A

The International Cocoa Initiative (ICI)

The ICI is a unique partnership founded in 2002 between, non governmental organisations (NGO), labour unions, cocoa processors and the major chocolate manufacturers. Its main objective is to ensure that no child is exploited in the cocoa chain and eventually modify practices that will ultimately eliminate child and forced labour in the sector.

The ICI enumerates the main reasons for child labour as follows:

Poverty;

Lack of income and alternative forms of livelihood;

Lack of proper parental care and break-up of family;

Death of parent;

Lack of basic infrastructure;

Socio-cultural norms;

Lack of awareness of risks;

Poor education provision.

The ICI realizing the complexity of the situation has adopted a comprehensive programme which includes the following:

Exchanges at the national level to ensure appropriate and effective policies are in place;

Initiate capacity building for local partners and institutions;

Implement community based programmes to change practices;

Support social protection of victims of exploitation;

Documents lessons learned for replication.

The ICI activities include:

Sensitization of community through dialogue about the hazards children suffer while working in cocoa farms; community action planning; action plan implementation (funding, materials and labour force to implement action); monitoring and evaluation of projects.

Initiation of micro projects funded by the by the “micro project” fund. It matches resources raised by the community for improving schools, and other community initiatives aimed at tackling child labour. The communities take lead for the projects with the support of the ICI. Micro projects are assessed and managed by partners who are responsible for the proper implementation and management of the award which is usually under USD 5000.

Supporting key actors at the national level through training in designing and implementing relevant policies and programmes.

Organizing radio programmes in remote areas with very low literacy rate. For better understanding, programmes are broadcast in local languages.

Involving implementing partners such as NGO’s and community based organisations (CBOs) who play a prominent and visible role in the campaign.

Part B

Case Study

State of CSR Reporting For All Companies

“We’ve always appreciated that doing good is good for business: being responsible and being commercially successful go hand in hand”

“..recognize that our businesses have an influence on the livelihoods of many people around the world. We believe we have a responsibility to all our stakeholders – shareholders, customers, consumers, suppliers, growers, employees and the communities where we operate”.

“committed to making a difference in the communities where we live, work and do business..”

Independent CSR Auditing

Yes

No Mention

No Mention

5.2.1 Case Study 1

Company X

Company X is a confectionery and beverage company with headquarters in London. Their annual income for 2008 was ₤5,385million as against ₤4,699 million. Operating income for 2008 was ₤648million with a net income of ₤370million.

Highlights of CSR Report

Promotes responsible consumption.

Ensures ethical and sustainable sourcing by developing agriculture programmes.

Prioritize quality and safety.

Reduce carbon, water use and packaging.

Nurture and reward colleagues.

Invest in communities.

Company X recognises that its quest for a sustainable future for cocoa is beleaguered by many environmental and social challenges. As such, they are eager to ensure there is adequate investment for future supply and also making sure that the highest international labour standards are observed. Their ethical sourcing strategy is tailored to ensure its success.

With the emergence of allegations of child labour in cocoa farms in West Africa, Company X did not hesitate to condemn the practice and pledge support for its elimination. They hold the position that no child should be harmed in the growing process of any commodity. They further state that enforced child labour is unacceptable by them and they are actively committed to working in partnership with other industry members, Non Governmental Organisations (NGO’s), West African Governments and international organisations to tackle the child labour issues.

Constribution Towards Tackling Child Labour

Company X is committed to improving cocoa farmers’ incomes by introducing new sources of rural income. This is achieved by investing in community led development in partnership with local organisations, farmer organisations and the local communities.

They hope to invest £45million pounds over the next 10years to guarantee a reliable, long-term source of the right quality cocoa and also to improve livelihoods for cocoa farmers.

They hope to achieve the following:

Improve incomes by assisting farms to increase yield and produce top quality cocoa;

Introduce new sources of rural income through microfinancing and business support to initiate new rural businesses as well as introduce income streams to encourage diversification of activity;

Developing communities by helping them achieve their set goals and improve rural life by building wells for clean water; education by helping to build and equip schools and conserve the environment through biodiversity projects.

Company X has been actively involved in the development of the cocoa industry in Ghana, working with the local community to establish high cocoa growing standards and a positive presence in cocoa growing communities.

In March 2009, company X took steps that will result in the tripling of sales of cocoa under Fairtrade terms for farmers in Ghana, both increasing Fairtrade cocoa sales for existing certified farming groups as well as opening up new opportunities for thousands more farmers to benefit from the system.

5.2.2 Case Study 2

Company Y

Company Y is a multi-national cocoa processing and chocolate confectionery company integrating sourcing of cocoa beans and cocoa products based in Zurich, Switzerland and operates in 26 countries worldwide. Annual sales for the company in 2007/2008 increased by 17.3% to CHF 4.8billion. The company processed around 12% (440,000 tonnes) of global cocoa beans produced in same year. Operating profit was up by 5.3% to CHF 341.1million and net profit for the same period was up by 65.5% to CHF 205.5million.

Highlights of CSR Report

Committed to ensuring the safety and quality of products.

Safeguarding the environment.

Contributing to a sustainable cocoa supply chain by:

Working to empower cocoa farmers;

Working to ensure children are not harmed in cocoa farming;

Empowering employees.

Company Y is committed to ensuring the safety and quality of products, safeguarding the environment and contributing to a sustainable cocoa supply chain. Their main objective is to maintain a balance between economic growth, ecological balance and social progress. Although they get cocoa from intermediaries, it is in their interest to ensure that the cocoa they buy was not cultivated by child labour.

Company Y complies with the principles set forth in the Universal Declaration of Human Rights, strongly condemn forced labour, child labour and all practices that exploit children or expose them to harmful or hazardous conditions. For this company, child labour is a very unfortunate issue that threatens the credibility of the cocoa and chocolate industry. To tackle this complex issue which is attributed directly to poverty requires the concerted effort and commitment of governments and communities as well as industry players and civic organisations.

Contribution Towards Tackling Child Labour

In 2005, launched the Quality Partner initiative which cocoa farmer cooperatives. In 2008 approximately 40,000 farmers representing 47 partner cooperatives took part in the programme. The programme aims to:

provide farmers with training in better agricultural techniques that will result in better quality cocoa and increase yield;

train farmers on how to run their business and income;

improve healthcare services for farmers and their families;

sensitize farmers about labour issues and importance of schooling for their children.

Company Y is encouraging organic cocoa farming programs. Organic cocoa farming has had successes in Brazil and the Dominican Republic. As a result, it is being introduced in West Africa.

They are also engaging in planting new cocoa trees to replace old ones. Every tablet of chocolate sold stands for a newly planted cocoa tree.

They also support the WCF which engages in programmes to raise farmer incomes, encourage responsible, sustainable cocoa farming and strengthen communities. Finally, they also partner with the STCP which seeks to generate growth in rural income among tree crop farmers in an environmentally and socially responsible manner. This is achieve through innovations to enhance productivity, increase market efficiency, diversify farmer income and strengthen the institutional and policy environment.

Company Y offers a wide range of fair-trade certified cocoa and chocolate products.

5.2.3 Case Study 3

Company Z

Company Z is the largest chocolate manufacturer in North America with headquarters in Pennsylvania. Its income for 2008 was USD 82,155.000 compared to 54,343.000 in 2007.

Highlights of CSR Report

Community involvement and good corporate citizenship are integral part of their business model.

Have a supplier code of conduct for vendors and suppliers.

Invest in their communities.

Embark on CSR throughout the supply chain by building sustainable supply chains to benefit producers, growers, workers and the environment.

Committed to environmental stewardship locally and globally by encouraging farmer education on environmentally sound farming methods.

It recognizes that the sustainable future of cocoa production is under threat and the only solution is to work in collaboration with other industry players to eliminate child labour.

Contribution Towards Tackling Child Labour

Company Z is actively building sustainable supply chains that benefit producers, growers, the environment and other stakeholders to meet their expectations for responsible production. Through broad-based initiatives, they support economic, social and environmental sustainability for farmers and communities. Their vision is to ensure:

Transparent financial return for farms and communities;

The viability of effective farmer support organisations that facilitate communal selling, training and other services;

Improved productive farming practices, including better quality planting material and crop diversification;

Environmental awareness that emphasizes healthy soil, clean water and Intergrated Pest Management;

Healthy communities and farms that practice responsible, safe labour practices and opportunities for women and youth.

Other programmes engaged in include farmer organisation development and capacity building, community sensitization regarding responsible labour practices, and farmer skills training focused on productivity and income improvement. They also fund educational and healthcare projects. With grants from Company Z, the International Foundation for Education and Self-Help (IFESH) is training local teachers in Côte d’Ivoire and Ghana to expand access to education for young people. They are also funding a program run by the Family Health International to distribute mosquito nets and educate recipients on their use for the prevention of malaria.

Company Z is also committed to the STCP programme as well as the Farmer Field School Programme which helps small cocoa farmers raise their family incomes substantially and uphold good labour practices.

Part of the products produced by Company Z is fair-trade Certified.

Chapter Six

6.1 Discussion and Analysis

The cases of companies X, Y and Z shed light on the actions of the industry in the implementation of their CSR strategy to eliminate child labour. Information from the cases coupled with information from the countries support the argument that companies are changing their attitudes through their CSR strategies to tackle child labour. It also shows that governments are making positive contributions with the help of industry to eliminate the practice. The existing literature also point to the same conclusion.

In the literature presented, poverty was identified as the underlying cause of child labour and for its elimination to be sustainable, this had to be addressed. The case studies point to the fact that Company X is helping improve incomes by assisting farmers to increase yield and produce top quality cocoa. Company Y is doing the same by training farmers in better agricultural techniques that will result in increased and better yield. Improved planting material and crop diversification by Company Z will also increase yield as well as income. It can also be deduced from literature provide that with increase household income, most farmers will withdraw their children from the fields and send them to school.

Access to finance was also a hindrance to the farmers and this is being addressed by Company X by introducing micro financing schemes as well as helping the farmers to diversify to other cash crop which will enable them have income all year round instead of just waiting for the cocoa season. Also pests and diseases that affect cocoa do not affect other crop so the farmer does not loose their entire livelihood in case of outbreaks. Company Y provides training on how to manage their business and personal finances. This enables the farmers to engaging in savings and this will help them integrate their other needs such as sending their children to school and planning for the inevitable. A more transparent financial return for farmers proposed by Company Z will go a step further to enable them plan better.

Improving the quality of life of the farmers by giving them access to clean portable water and health services by Companies X, Y and Z reduces the incidence of sickness of the farmers. Even if they fall sick they have access to health care. This reduces the probability of dying from preventable diseases. One of the reasons why children work is because they have been orphaned and have to fend for themselves. Having access to health care reduces this trend and gives the children the opportunity to be in school while their parents worked.

All three companies provide funds to build farm schools, equip them and improve on those that are already in existence. The initiation of the “micro project” fund is very positive. The funds are used to improve schools, pay teachers and give out small loans to farmers among others. This is essential because it cuts out the bureaucracy of applying and justifying. It is available cash ready to fund projects as quickly as possible. This gives confidence to the farmers on what the industry is trying to do not only for the future of their children, the sustainability of the crop but also for the protection of the environment. This encourages the parents to send their children to school. With better funding the children do not have to pay much so the parents can afford it. Getting an education is essential to the development of any nation. A literate population would better understand the dangers of child labour and would not embark on it contrary to the understanding of an illiterate population.

Sensitization of the rural population on the dangers of child labour is vital to its elimination. Ensuring that the adults understand what harm they are doing to their children and themselves is important. All three companies fund this project through local and international NGO’s. In Ghana and Cote d’Ivoire, the project has been very successful because the programmes are carried out in the local languages either through radio broadcast or by locals who organise village meetings and interact with the locals. Understand the damage child labour could do to the future of their children and generations unborn are the key to encouraging its elimination. This strategy will lead to sustainable outcomes

The strategy of working more closely with local NGOs, community leaders, and local governments, on project design and execution enables companies to play a less paternalistic role in community development. The communities take greater ownership. Experience has shown that as owners of a project, communities and governments often have a more vested interest in ensuring the project’s success and sustainability. It is also true that when community members are involved in the design and implementation of a project, they stand a better chance to replicate the project on their own than whe


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