The cocoa farmers who work for Nestle (NSRGY) will receive a cash bonus if they keep their children in school and do not help their parents farm.
The beverage and confectionery company said farmers will receive cash payments via mobile transfer of a maximum of 500 Swiss francs ($543) a year, according to a Reuters article.
This new program is an effort by Nestle, which makes Kit Kat chocolate bars and Smarties confectionery, to buy its cocoa from a directly sourced supply chain that is traceable by 2025.
In West Africa, it is common and accepted to use child labor to procure cocoa beans. The chocolate manufacturers such as Nestle are facing increasing pressure from investors, government entities, and consumers to stop using children to farm for the beans or from illegal cocoa plantations in protected forests, which also occurs widely in the countries.
The cash bonus of 500 Swiss francs consists of 20-25% of a farmer's average annual income, Magdi Batato, head of operations at Nestle, told Reuters. After two years the cash payment will be lowered to 250 francs but will be given to all of Nestle's 160,000 cocoa farmers by 2030.
The farmers will receive the payments if they send their children to school, plant shade trees, prune cocoa trees, and farm other crops or add livestock for additional income.
IDH, The Sustainable Trade Initiative, along with other third parties will follow up and check that the farmers are following the rules and that their children are attending classes.
Nestle said it will increase its annual spending threefold on sustainable cocoa to of 1.3 billion Swiss francs ($1.41 billion) by 2030.
Nestle Chief Executive Officer Mark Schneider said during a webcast that a living income for the farmers and their families would be a long process.
At least 45% of the children whose parents are farms in the Ivory Coast and Ghana cocoa-growing areas used child labor, according to a recent survey conducted by the University of Chicago.
Ivory Coast's Prime Minister Patrick Achi said the new program with its cash incentive would be part of the process for companies and countries to meet the requirements made in due diligence legislation, especially the European Union.
Nestle said that in 2021 51% of the cocoa the company used was sourced directly and traceable, compared to only 46% in 2020. The confectionery company said by 2025 it is seeking to trace 100% of its cocoa back to specific farms.
The cocoa that came from farmers that received the cash payments will be used in Kit Kats and launched in 2023.
