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Is it possible to make an ethical chocolate bar that’s also affordable? Tim McCollum, the founder of the bean-to-bar chocolate brand Beyond Good, says the answer is yes – but you have to transform the way it’s made.

Beyond Good produces single-origin chocolate bars from cocoa sourced in Madagascar, an island nation off the eastern coast of Africa. Like other specialty chocolate brands, the company says it has sought to improve farmer livelihoods by curtailing the long chain of middlemen that typically participate in the trade of cocoa. Unlike most others, though, Beyond Good says it has managed to eliminate intermediaries altogether: the company buys its cocoa beans direct from local farmer co-ops and drives them to its manufacturing facility in Antananarivo, Madagascar’s capital.

McCollum says that transacting directly with farmers, coupled with the savings of manufacturing in a lower cost environment, means that Beyond Good can pay farmers a premium while selling its single-origin chocolate bars for $4 a piece, less than half the cost of a bar from US-based competitors like Dandelion and Ritual. That more modest price point has allowed Beyond Good to move beyond the Whole Foods chocolate shelf and sell its products at mainstream retailers like Costco and Albertsons.

Beyond Good is still small – the company works with about 100 farmers in Madagascar, and employs a staff of several dozen there. But if it’s operating as it says – the Guardian did not visit its facilities or employees in the country to independently confirm this – it offers one new way of thinking about chocolate production in an industry in desperate need of an overhaul. Despite decades of promised reforms from confectionary giants, the cocoa supply chain remains riddled with human rights and environmental abuses.

Known primarily for its exceptional vanilla crop, Madagascar is also home to an exquisitely flavorful species of cocoa ideal for use in expensive single-origin chocolate bars. Yet the local farmers, who labor at the end of a protracted chain of middlemen, make a pittance for their harvest. McCollum – who served in the Peace Corps in Madagascar in the late 1990s – believed that he could improve farmer incomes if, rather than buying through intermediaries and shipping cocoa to a distant processor, he set up a manufacturing facility locally. Processing the chocolate and manufacturing the bars at origin also creates dozens of well-paying local jobs in a region where few such opportunities exist.

“The only way to ensure that money is going into a farmer’s pocket is to buy directly from farmers,” McCollum said. “And that’s physically impossible if you’re manufacturing in the northern hemisphere.”

Modern reports of rampant human rights and environmental abuses within the chocolate industry emerged more than 20 years ago. Millions of farming families in the west African countries of Ivory Coast and Ghana – where the majority of the world’s commodity cocoa crop is grown – subsisted on less than $1 a day. Children were performing forced labor, wielding machetes and spraying toxic agrichemicals instead of attending school. And vast swaths of tropical forest were being clearcut to make room for more cocoa.

In 2000, chocolate processors and manufacturers formed the World Cocoa Foundation, tasked with leading the charge toward a fair, sustainable cocoa sector. Many companies vowed to enact their own internal reforms, too, funding a wide array of initiatives aimed at enhancing supply chain traceability, empowering women, preventing deforestation, and stamping out the worst forms of child labor.

Browsing the pages Nestlé devotes to its Cocoa Plan, Mars to Cocoa for Generations, Mondelēz to Cocoa Life, or Hershey’s to Cocoa For Good, it seems as if progress is well under way. In reality, though, industry watchdogs agree that little headway has been made on the path to a fair and sustainable cocoa sector.

According to the recent Cocoa Barometer report issued by the Voice Network, a leading consortium of NGOs and trade unions working on sustainability in cocoa, deforestation continues at an alarming rate in Ghana and Ivory Coast. Child labor is still widespread on cocoa farms, perhaps even more so than when it was first uncovered two decades ago. The driving factor behind both is that the vast majority of west African farmers earn well below a living income.

“Today, there’s more openness to the conversation between companies and governments, there’s a lot more funding available, a lot more data available,” said Antonie Fountain, the managing director of the Voice Network and the report’s co-author. “But farmers are still poor, children are still working, and trees are still being cut down.”

(Recent testing by Consumer Reports also showed that many popular dark chocolate bars, including Hershey’s, Godiva, Trader Joe’s, Lindt, Dove, Chocolove – and Beyond Good – were found to have high levels of lead or cadmium, metals that have been linked to some health problems. McCollum, of Beyond Good, said in an email: “Our products mentioned in the Consumer Reports article comply with quality and safety requirements of the US FDA and California’s Proposition 65.”)

For Bill Guyton, a founder and former president of the World Cocoa Foundation who now works as a senior adviser to the Fine Chocolate Industry Association, the cause of that persistent poverty is hardly mysterious. The price of cocoa today on the New York Mercantile Exchange is $2,400 a metric ton; it fluctuates a great deal, but the average price of cocoa has been $2,400 a ton for five decades. While chocolate bars have gotten more expensive, cocoa farmers have continued to be paid the same. In the 1970s, according to Fairtrade, the price of cocoa accounted for up to 50% of the value of a chocolate bar, but fell to 16% in the 1980s. Today, farmers receive about 6% of the value of every chocolate bar sold.

Guyton said that despite well-publicized investments by the industry in things like reforestation, rural health clinics and agricultural education for farmers, these have not led to transformative changes for west African cocoa farmers. Farmers, Guyton said, remain at the base of a complex chain of cocoa collectors, brokers, traders, processors and exporters. This chain often lacks transparency, which can lead to exploitation.

“In mainstream chocolate, you have a whole system set up that doesn’t want to change,” Guyton said. “You’ve got governments and large companies involved, and making changes to that system would require a new way of trading, and a new way of compensating farmers.”

People who seek out ethical alternatives might be disappointed to learn that, in some cases, even bars with virtuous branding are more closely tied into this supply chain than they may appear.

Tony’s Chocoloney identifies itself as a mission-driven chocolate company that aims to make cocoa production “100% slave-free”, and in its marketing materials, lambasts the industry as “dominated by a handful of chocolate giants that profit from keeping the cocoa purchasing price as low as possible”. But the company, which has official Fairtrade and B-corp certifications, relies on one of those giants – Barry Callebaut, one of the world’s largest chocolate processor – for manufacturing, a relationship that led to the brand being dropped in 2021 from Slave Free Chocolate’s list of ethical chocolate companies. It was the same year Barry Callebaut, along with Nestlé, Mars and Hershey, faced a lawsuit in the US brought by eight children claiming they were used as slave labor on cocoa plantations. (The supreme court ruled the companies could not be sued.)

Tony’s has responded to this criticism by saying that the company has “never found any cases of modern slavery in our chain” and that working with Barry Callebaut allows it to “further scale up our production”. Tony’s did not respond to the Guardian’s requests for comment.

Ray Major, a 40-plus-year veteran of the chocolate industry who currently directs cacao sourcing, sustainability and innovation for US chocolate manufacturer Scharffen Berger, says that consumers may also misunderstand the significance of fair trade certifications of chocolate packaging – such as Fair Trade USA, which is one of the longest-running certifying bodies, with a widely recognized logo. These do not promise a more direct, bean-to-bar supply chain. Fair Trade USA protects farmers with a minimum purchase price when the market falls below $2,400 a ton of cocoa, and indicates that farmer cooperatives have been paid a modest premium above cocoa’s market price (currently about 20% above the going rate for commodity cocoa). That premium may or may not ever reach individual farmers.

Fair Trade representatives also visit select cocoa farms to inspect for certain environmental and human rights criteria, but that process is not failsafe. The explosive growth of demand for certified beans in the past decade has left inspectors stretched thin. “Now you have hundreds of thousands of farmers producing fair trade beans, and the auditing staff that would be required would be tremendous,” Major said.

Vernaé Graham, senior manager of public relations for Fair Trade USA, said in an email that the group deposits premium payments into a community development fund run by farmers who “democratically decide what projects to invest those funds in to benefit the community”, and that it has agricultural production and trade standards to ensure that farmers and workers are receiving payment. She said the organization also conducts in-person inspection audits at a “statistically significant sample” that rotates each year.

As for Beyond Good? Antonie Fountain, of the Voice Network, sees direct trade models like this one as promising for growers of specialty cocoa in places like Madagascar or many parts of Latin America. But for the millions of west African farmers growing commodity cocoa, dismantling embedded supply chains in favor of direct trade and manufacturing at origin would be hard to envision.

For Fountain, the solution for lifting cocoa farmers out of poverty lies in better governance from both chocolate-consuming and cocoa-producing nations – things like improving supply management and putting in place regulations for the multinational corporations buying cocoa. Those companies should also pay higher prices to farms, and offer long-term contracts to provide farmers with financial security, he said.

“We’ve spent the past two decades talking about what the farmer needs to do differently,” Fountain said. “The farmer needs to stop using his children for labor, the farmer needs to treat women better, the farmer needs to grow other crops. The farmer isn’t the problem. The problem is the system he’s in. Let’s spend the next two decades talking about what governments and multinationals need to do differently.”