01 / DEFORESTATION-FREE COCOA SUPPLY CHAIN
ETC GROUP (ETG)
&Green is partnering with ETG to support the transition of the cocoa sector into deforestation-free and inclusive supply chains. ETG is committed to sourcing cocoa from traceable and NDPE-compliant supply chains in Ivory Coast by 2025. This will be achieved by implementing a landscape-based supply chain management approach to drive impact on land and people.
Project summary
| COUNTRY | Ivory Coast |
| INVESTEE COMPANY | ETC Group (ETG) |
| SUPPLY CHAIN | Cocoa |
| TOTAL &GREEN INVESTMENT | USD 30 million |
| EFFECTIVE DATE | December 2023 |
| LOAN TERMS | 8-year tenor |
02 / blended finance
INVESTMENT RATIONALE
Through its investment into ETG, &Green aims to support the adoption of a landscape-based approach to manage supply chain impacts and risks associated with cocoa production, to ultimately eliminate deforestation, while protecting existing forests and biodiversity, through the inclusion smallholder cocoa farming communities in Ivory Coast.
Ivory Coast is the largest producer of cocoa beans (followed by Ghana). Cocoa production is dominated by smallholder farmers and plays a key role for communities’ livelihoods. At the same time, agriculture contributes to 62% of deforestation in the country, of which 38% is driven by cocoa production.
ETG’ commitments have been detailed in two documents developed together with &Green: The Landscape Protection Plan (LPP) and the Environmental and Social Action Plan (ESAP). ETG’s commitments will drive the transformation of its sourcing practices as well as of its local traders from whom ETG buys cocoa, and, by implication, the livelihoods and practices of cocoa smallholder communities.
To secure a 100% traceable, NDPE-compliant and inclusive cocoa supply chain, ETG will establish a framework for designing landscape-based interventions to address NDPE-related risks in sourcing regions where they are the highest. After selecting its high-risk sourcing landscapes, ETG will develop tailored sustainability programs, and set outcome and impact targets to demonstrate tangible impact on land use.
03 / the action plan
ENVIRONMENTAL RETURN & SOCIAL INCLUSION
ETG is committed to achieve a deforestation-free cocoa supply chain in Ivory Coast by 2025.
With the support of &Green’s loan, ETG aims to enable the protection of forest and biodiversity as well as the sustainable intensification of degraded lands in the cocoa producing landscapes it sources from.
The Landscape Protection Plan (LPP) describes ETG’ landscape and the context of its operations in Ivory Coast, providing an overview of the strategies needed to achieve the expected environmental and social (E&S) impacts over the loan term.
In line with &Green’s impact framework, ETG’s environmental and social targets include:
(i) protection and restoration of forests located in ETG’s sourcing landscapes.
(ii) indirect climate benefits through (a) forest-related interventions particularly where forest degradation and deforestation are the highest and through (b) sustainable production practices such agro-forestry.
(iii) improved and increased traceability of cocoa supply chain bought directly or indirectly from cocoa cooperatives.
(iv) services provided to cocoa suppliers and cocoa farming communities to support forest protection, stop deforestation, promote sustainable farming practices, eradicate child labor, etc.
(v) a blueprint for a landscape-based supply chain management approach.
(vi) a management system compliant with IFC Performance Standards (PS).
The Environmental and Social Action Plan (ESAP), a contractually binding document, sets specific targets for the on-the-ground implementation of strategies, as well as performance indicators for the E&S impacts.
* NDPE stands for No Deforestation, No development of Peatlands, and No Exploitation and is a policy commonly used to ensure sustainable operations.
ENVIRONMENTAL RETURN
By establishing landscape-based approach, ETG’s scope of work will go beyond the cocoa smallholder farm and include forested areas that are at risk of being deforested. Specific interventions to eliminate deforestation, protect and restore forest will be carried out in collaboration with farming communities. These will be defined on a case-by-case basis, based on the realities of each sourcing landscape ETG is active in.
To support the continuous improvement of cocoa farming practices across its supply chain, ETG will provide community based and individual coaching sessions. This will translate into advancing the sustainable intensification of cocoa farmlands.
In turn both interventions on forests and on farming practices are expected to translate into climate benefits (Co2 sequestration).
Quantified targets associated with the land-use impact of ETG are to be defined in 2025, based on &Green’s impact framework, after the development of landscape-based programs.
SOCIAL INCLUSION
ETG will support smallholder farmers supplying them as well as more broadly the farming communities that are present in their sourcing landscapes.
The support expected by ETG relates to the company’s existing farmer extension services (i.e. such as certification support, agroforestry training and input provision, creation of women’s savings associations, etc.). Interventions associated with each sourcing landscapes to support specific needs of the farming communities residing in these will also be designed on a need-basis by ETG.
Quantified targets associated with ETG’s impact on people are to be defined in 2025, based on &Green’s impact framework, after the development of landscape-based programs.
04 / ASSESSING RISKS
ENVIRONMENTAL & SOCIAL RISK ASSESSMENT
SAIL applied the Fund’s due diligence protocols and requirements during the investment process to ensure the viability of the investment and the alignment with &Green’s mission.
Due to the nature of ETG’s business (multi -country and -business operations), &Green environmental and social requirements were applied at different levels of the conglomerate to ensure alignment of the group with the overall mission of the Fund. More focused assessments were commissioned to review ETG’s cocoa sourcing operations in Ivory Coast since the partnership with &Green is specifically focused on transforming the cocoa supply chain.
A limited scope ESIA and a supply chain assessment following &Green’s Forest & Biodiversity Framework were performed by an external expert—IBIS, to assess the impacts associated to ETG’s cocoa sourcing activities. IBIS conducted an external factor review, (i.e. analysis of publicly available data) on ETG’s Ivorian operations to confirm that there are no reputational risk associated with these operations. Additionally, ETG’s cocoa operations in Ivory Coast have been assessed against the IFC PS.
A visit of ETG’s operations in Ivory Coast was carried out by both IBIS and SAIL’s teams, which included interviews with cocoa farmers, cooperatives staff, sub-contracting partners and ETG’s personnel. Lastly, SAIL had multiple engagements with ETG’s sustainability team to develop the E&S Action Plan and this Landscape Protection Plan.
