Alliance
Moving towards a Deforestation-free Cacao and Chocolate Value Chain with Low Greenhouse Gas Emissions
CURRENT STATUS, OPPORTUNITIES AND AN ACTION PLAN FOR THE UCAYALI REGION The Alliance of Bioversity International and the International Center for Tropical Agriculture (CIAT) delivers research-based solutions that address the global crises of malnutrition, climate change, biodiversity loss, and environmental degradation. The Alliance focuses on the nexus of agriculture, environment, and nutrition. We work with local, national, and multinational partners across Africa, Asia, and Latin America and the Caribbean, and with the public and private sectors and civil society. With novel partnerships, the Alliance generates evidence and mainstreams innovations to transform food systems and landscapes so that they sustain the planet, drive prosperity, and nourish people in a climate crisis. The Alliance is part of CGIAR, the world’s largest agricultural research and innovation partnership for a food-secure future dedicated to reducing poverty, enhancing food and nutrition security, and improving natural resources. www.bioversityinternational.org www.ciat.cgiar.org www.cgiar.org
Moving towards a Deforestation-free Cacao and Chocolate Value Chain with Low Greenhouse Gas Emissions
CURRENT STATUS, OPPORTUNITIES AND AN ACTION PLAN FOR THE UCAYALI REGION
Yovita Ivanova, María Claudia Tristán, Miguel Romero, Andrés Charry, Sebastián Lema, José Sánchez Choy, Andrés Vélez, Augusto Castro and Marcela Quintero Alliance of Bioversity International and CIAT Regional Centre for Latin America and the Caribbean Km 17 Recta Cali-Palmira. C.P. 763537 A.A. 6713, Cali, Colombia Call: +57 4450000 Email: [email protected] Website: www.ciat.cgiar.org PROJECT: BUSINESS MODELS TO ADDRESS THE DRIVERS OF DEFORESTATION IN PERU CIAT Publication no. 502 November 2020 SUSTAINABLE AMAZON BUSINESSES (SAB)
Authors: Ivanova Y; Tristán M; Romero M; Charry A; Lema S; Choy J; Vélez A; Castro-Núñez; Quintero M. 2020. Moving towards a deforestation-free cacao and chocolate value chain with low greenhouse gas emissions. CIAT Publication No. 502. International Leading Entity: Center for Tropical Agriculture (CIAT). Cali, Colombia. 136 p. Alliance of Bioversity International and the International Center for Tropical Agriculture (ABC) Collaborators: Matthias Jaegger, Jhon Jairo Hurtado, Juan Pablo Castro, Simon Koenig National Political Partners: Ministry of the Environment (MINAM), Ministry of Agriculture and Irrigation (MINAGRI), Cover Photos: Sean Mattson © CIAT - Neil Palmer © CIAT - © BMU project Regional Government of Ucayali (GOREU) Internal photo credits: © CIAT - © BMU project. Some Rights Reserved. This work is licensed under a Creative Commons Attribution Non-Commercial 4.0 International License (CC-BY-NC) Subcontractor: https://creativecommons.org/licenses/by-nc/4.0/ Photos available Flickr https://www.flickr.com/photos/131075783@N02/ Climate Focus (CF) https://www.flickr.com/photos/ciat/ Donor organization: German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety Copyright © CIAT 2020. Some rights reserved. (BMU) Period of implementation: CIAT encourages the wide distribution of its printed and electronic publications so that the public obtains the maximum benefit from them. Therefore, in August 2018–July 2021 most cases, colleagues working in research and development should not feel restricted in their use of this material. CIAT materials for non-commercial Geographic scope of the intervention: purposes. However, the Center prohibits modification of these materials and expects to receive credits for their use. Although CIAT produces its publications with great care, it does not guarantee that they are accurate or that the information is complete. Ucayali Region, Peru Abbreviations and acronyms
ABC Alliance of Bioversity International-CIAT GOREU Ucayali Regional Government
AFS Agroforestry Systems GRDES Regional Economic and Social Development Authority
BMU German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety IKI International Climate Initiative
BPP Permanent Production Forests JDI Joint Declaration of Intent
CC Climate Change LULUCF Land-use and land-use Changes and Forest
CCC Central Committee for the Future Development of Curimaná MINAGRI Ministry of Agriculture and Irrigation
CF Climate Focus MINAM Ministry of the Environment
CITE Center for Productive Innovation and Technology Transfer MRV Monitoring, Reporting and Verification MTRCC Regional Technical Committee for Cacao and Chocolate CO2eq Carbon Dioxide Equivalent DGA General Directorate for Agriculture NDC Nationally Determined Contributions
DGCCD General Directorate for Climate Change and Desertification NGO Non-governmental Organization
DGPA General Directorate for Agricultural Policies PO Producer Organization
DRAU Regional Sectoral Directorate for Agriculture in Ucayali PPP Public-Private Alliance
ENBCC Ecological-Economic Zoning REDD+ Reducing Emissions from Deforestation and Forest Degradation
ENCC National Climate Change Strategy SAB Sustainable Amazon Businesses
FZ Forest Zoning SERFOR National Forest and Wildlife Service GHG Greenhouse Gas SME Small and Medium-sized Enterprises GOLO Local Governments Acknowledgments Foreword
This document was prepared by the International Center for Tropical Agriculture (CIAT, in On behalf of the Regional Government of Ucayali, I express our appreciation and gratitude Spanish) as part of the Alliance of Bioversity International and CIAT, under the leadership to sectoral stakeholders, public institutions, private companies, non-governmental of the Multifunctional Landscapes Area, and in collaboration with the Climate Focus organizations, and international cooperation agencies, who responded to the joint invitation international advisory company. The development of this report was made possible by of the Alliance of Bioversity International and CIAT, the Ministry of the Environment the valuable contribution of all the multi-stakeholder platform actors, as established (MINAM), and the Ministry of Agriculture and Irrigation (MINAGRI), to discuss, prepare, and within the framework of the “Business Models to Address Drivers of Deforestation in issue this strategy document. The information and actions included in this text represent a Peru” or Sustainable Amazon Businesses (SAB), funded by the International Climate valuable opportunity to reinforce our commitment towards the sustainable development Initiative of the German Federal Ministry for the Environment, Nature Conservation and of the Amazon, and to redesign business models and institutional structures in favor of the Nuclear Safety. conservation of our forests, the recovery of degraded areas, and the generation of income for the farmers in our region. The Ucayali Regional Government (GOREU, its Spanish initials) and the Regional Technical Committee for Cacao and Chocolate (MTRCC, in Spanish) provided strategic support and We are facing a series of major social and environmental challenges we cannot ignore; guidance in the design and validation stages of this document. Our gratitude extends however, our region has great potential and opportunities for development, and it will be especially to the Central Committee for the Future Development of Curimaná and the only through an interinstitutional coordination and collective efforts that we will Colpa de Loros Agricultural Cooperative for Flavor Cocoa, who shared with us their be able to reach the commitment we have with our future generations to leave a inspiring stories and vision for the sector. world better than the one we received. It depends on us whether the efforts of the IKI project “Business Models to Address We thank the Ministry of the Environment, especially the General Directorate Drivers of Deforestation in Peru” and other projects operating in our region for Climate Change and Desertification (DGCCD, in Spanish); the Ministry will help build a concerted vision for the development of the cacao and of Agriculture and Irrigation (MINAGRI, in Spanish), particularly chocolate chain, a sector that fills us with pride and represents one of the General Directorate for Agricultural Policies and the General the flagship products of our region. In this sense, we reiterate our Directorate for Agriculture (DGPA, in Spanish); and the National gratitude to the stakeholders who took part in this process with Forest and Wildlife Service for their valuable contribution and a proactive attitude, commitment, and responsibility. This is support during this process. a first step; therefore, we invite you to continue participating We would also like to thank all the organizations and with the same or increased willingness in future spaces to stakeholders interviewed and consulted in Ucayali for be developed, which will strengthen the cacao sector and offering their valuable comments and recommendations. allow us to position ourselves as a region consolidating its presence in differentiated markets, both nationally and internationally, in a competitive, inclusive, and sustainable manner, generating better incomes and wellbeing for its stakeholders through partnering and institutional articulation, contributing to the conservation of forests and the environment.
iii iv Executive Summary
The report entitled “Towards a Deforestation-free Cacao and Chocolate Value Chain with Low integrated approach to the sustainability of the agricultural and environmental sectors. Greenhouse Gas Emissions: Current status, opportunities with a value chain approach, and action This report provides up-to-date information on the cacao and chocolate value chain, plan for the Ucayali region” offers an input for the development of a deforestation-free cacao and can be useful for national and regional governments, industry, producers, non- value chain with low greenhouse gas emissions in the Ucayali region. The document has been governmental organizations, and international cooperation agencies currently working prepared within the framework of the Sustainable Amazon Businesses (SAB) project, led by CIAT towards a value chain that contributes to the sustainable development of agriculture in the as part of the Alliance of Bioversity International and CIAT, in coordination with the Ministry Peruvian Amazon. For the preparation of this document, designed and agreed upon with of the Environment (MINAM) and the Ministry of Agriculture and Irrigation (MINAGRI) of key stakeholders in the sector, the project has signed a cooperation framework agreement Peru, and in partnership with the Climate Focus (CF) international advisory company. This with the Ucayali Regional Government (GOREU). Through this cooperation, the articulation project is part of the International Climate Initiative (IKI), supported by the German Federal of this document with the most relevant territorial development, planning, and productive Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU, its German instruments in the region was verified. In addition, specific elements of this document are acronym). This plan aims to contribute to the efforts of the Ucayali Regional Government expected to help achieving the objectives outlined in the main public policy instruments (GOREU, its Spanish acronym) to reduce GHG emissions from the agricultural sector due of the Ucayali region, such as: the Regional Plan for Concerted Development (PDRC, in to land-use and land-use change (LULUC) in the Peruvian Amazon, in agreement with the Spanish), the Regional Climate Change Strategy (ERCC, in Spanish), and the Low- international commitments of the Peruvian Government to mitigate climate change. emissions Rural Development Strategy (ERBE, in Spanish). The document offers an innovative and novel plan to contribute to the In this regard, the SAB project aims to provide support in the design and environmental sustainability of the cacao and chocolate value chain, developed implementation of a pilot business model for the cacao and chocolate from the perspective of conserving forests and recovering degraded value chain to materialize several elements of this report and to harness ecosystems, and with solutions provided by value chain stakeholders. the emerging financial and market opportunities for deforestation- The plan contributes to the efforts by the Peruvian Government free products with low GHG emissions. The business model and to comply with the Nationally Determined Contributions (NDCs) its subsequent conversion into an investment model are assumed at the Conference of the Parties—COP21—and the expected to be replicated and scaled out at the national agreement among the Governments of Norway, Germany, and level, and also to contribute international benchmarking Peru—Joint Declaration of Intent (JDI)—two commitments deforestation-free business models. Additionally, these targeting the reduction of GHG emissions. Furthermore, models are expected to serve as the foundation to generate the idea is to encourage the development of national public policies that contribute to the sustainability of the plans, policies, and programs in pursuit of the Sustainable sector. Development Goals (SDGs) and the 2030 Agenda, which recognize that agriculture and climate change cannot be considered separately, stressing the need for a coherent and
v vi KEY MESSAGES
In the worst-case scenario, where a change from forest to cacao cultivation occurs, From the analysis of the spatial the emissions per kilogram could reach up to 24.69 kg CO2eq in traditional production relationship between deforestation systems, 22.07 kg CO2eq in organic cacao production systems, and 13.71 kg CO2eq in and cacao farming semi-tech production systems.
Spatially explicit analyses for districts in the Ucayali region show geographically Crop management practices to reduce emissions should be oriented towards the disperse associations between deforestation and the production of agricultural reduction of emissions from land-use change and a rational use of fertilizers. commodities, including cacao. While these results do not attempt to attribute Cacao agroforestry systems (AFS) play a major role in climate change mitigation, because causality, they do show the coexistence of deforestation and cacao farming they are an alternative to reduce pressure over forests and mitigate climate change, processes within the same territory; therefore, it justifies the need and opportunity besides being an option for reforestation and recovery of degraded agricultural lands. to work with the cacao sector to improve their environmental contribution to the region, through their willingness to join efforts to reduce deforestation and GHG emissions. From the analysis of costs and its implications on forest conservation From the analysis of GHG emissions and sustainable land management practices We found that when considering all costs (including opportunity costs), the benefit/cost ratio of traditional production systems might be inefficient in the region. While it is possible to improve GHG emissions from LULUC represent nearly 50% of total yields, no corrections to profitability have been obtained from emissions in Peru. Agriculture ranks third with 15% of total these systems; production intensification on its own is not emissions. The carbon footprint allows the quantification enough to reduce pressure on forests and generate sufficient of emissions associated to a production process and the income to households, since higher productivity per hectare identification of critical points with the purpose of designing does not necessarily translate into higher income in some adequate mitigation practices. households (see comparison between Types 1 and 3 in section 4.3). According to the types of production systems in Ucayali, producing To ensure improvements in livelihoods, it is necessary to identify one kilogram of dried cacao beans generates 0.17 kg CO eq in traditional 2 economically optimum fertilization levels, as well as the most cost- production systems, 0.93 kg CO eq in organic cacao systems, and 2.26 kg 2 efficient inputs for the region, according to soil features. It was noted CO eq in semi-tech production systems. The differences are attributed to 2 that no farmer in any of the production system types had reported carrying yield per hectare and input use intensity. out soil or leaf analyses, a marginal cost that could represent major savings While the emissions per kilogram in traditional cacao production systems are lower, from an optimized use of inputs. so are yields, which shows inefficiency in land-use. In a context of pressure on natural Product diversification in the farm is in turn recommended to mitigate market areas, the traditional system is considered the most prone to increase its area to meet and phytosanitary risks, as it is highly sensitive to price drops. The results show the demand of dried cacao beans. Should additional areas be forests, the carbon that when production or prices drop, the impact on household income affects crop footprint indicator for land-use change would increase significantly, which highlights viability and household income disproportionately. the need to generate deforestation-free cacao business models. vii viii It is also necessary to include complementary activities to improve cash flow in At the meso level, different institutions and agencies provide services to links in the first productive years. During years 4 and 5, plantain production disappears the chain, so there is an opportunity for technical assistance providers engaged and cacao production is not enough to cover maintenance costs, thus deterring in improving production systems to promote this along with forest conservation. the implementation of good practices and fertilization, which affects future Similarly, those providing financial services can fund business plans that include production. commitments to forest conservation and recovery or reduction of land degradation. Finally, it is important to take land opportunity costs into consideration to ascertain At the macro level, Peru has different policies, laws, instruments, and public the long-term sustainability of the crop. Should more profitable and land-use administration tools to promote value chains where competitiveness and forest efficient agricultural alternatives arise, cacao production could become conservation can go together. The Ucayali region policy is also aligned with unattractive for producers in the region. this development proposal; therefore, there are enabling macroeconomic conditions for a deforestation-free value chain. From the analysis of value chain mapping From the development of a deforestation-free The deforestation-free value chain analysis allows the business model identification of contributions and efforts by different stakeholders to achieve a cacao and chocolate value chain that The development of a deforestation-free business model aims contributes to the conservation of forests and the reduction of to grant added value to cacao production contributing to forest emissions in the different links to produce cacao and chocolate. conservation and the reduction of GHG emissions. This entails At the micro level, direct actors engaged throughout the chain, the articulation of all stakeholders engaged in the value chain, from primary production to final consumption of chocolate and ranging from producer to final consumer, including vendors and other by-products, might play a role in reducing GHG. The main investors. Therefore, all stakeholders will have access to information, contribution towards GHG reduction from deforestation is the incentives, and the necessary tools to achieve a deforestation-free establishment of cacao plantations in areas suitable for agriculture, cacao production and consumption. which do not have forest cover, if such lands comply with the technical A fundamental aspect to develop a deforestation-free business model is conditions (according to their main capacity for use). For its part, only one having a system to monitor deforestation in forests and product traceability company stands out in the local transformation link operating under the “bean-to- (MRV). On the one hand, it should verify that cacao plantations have not generated bar” logic, ensuring all field processes are aligned with forest conservation, creating deforestation, and at the same time, it should ensure product traceability, from deforestation-free chocolates and other by-products. While this approach has not plantation to final consumer. been adopted by all those involved in transformation, it provides an opportunity to be scaled out. At the moment, it is necessary to strengthen national demand for these products. ix x Table of Contents
ABBREVIATIONS AND ACRONYMS...... I 3. DEVELOPMENT CONTEXT OF THE 5.2. Options for GHG-reduction Measures 9. ANNEXES...... 101 CACAO-GROWING SECTOR IN THE in Cacao Production Systems...... 64 ACKNOWLEDGMENTS...... III 9.1. Methodology for the Analysis UCAYALI REGION...... 27 of Costs and GHG Emissions...... 101 5.3. Opportunities and Contributions FOREWORD...... IV 3.1. The Cacao-growing Sector in Ucayali...... 28 of the Cacao and Chocolate 9.2. Graphs for the Sensitivity Analysis EXECUTIVE SUMMARY...... V 3.2. The Cacao Value Chain Map in Ucayali...... 31 Value Chain Stakeholders...... 68 of Cacao Production Systems...... 102 6. DEFORESTATION-FREE 9.3. Comparative Analysis of Certification KEY MESSAGES...... VII 4. DIAGNOSIS OF THE CURRENT STATE BUSINESS MODEL...... 75 Schemes: Socio-environmental OF THE VALUE CHAIN...... 37 Components...... 104 1. INTRODUCTION...... 3 6.1 Outline of the Deforestation-free 4.1. Deforestation and its Relation to Business Model...... 76 9.4. Methodological Tool: Business Canvas 1.1. Background...... 4 Agricultural Commodities in the Peruvian 6.2. Successful Cases Study to Build a Deforestation-free 1.2. Objectives and Methodology...... 10 Amazon: Maps and Analyses...... 38 of Business Models...... 80 Business Model...... 109 4.2. Analysis of GHG-emissions in the 1.3. Conceptual Framework: Value chains 9.5. Mapping the Potential Financiers Production of Cacao Beans...... 44 contributing to the conservation of forests 7. ACTION PLAN TO REDUCE DEFORESTATION for a Deforestation-free Value Chain...... 110 and the reduction of ghg emissions...... 12 4.3. Analysis of Cacao Production AND GREENHOUSE GAS (GHG) EMISSIONS Costs and its Implications 9.6. Identification of Success Cases from IN THE CACAO AND CHOCOLATE VALUE Deforestation-free Business Models...... 112 2. LEGAL FRAMEWORK...... 17 for Conservation...... 49 CHAIN IN THE UCAYALI REGION...... 87 9.7. List of Cacao and Chocolate Value Chain 2.1 National Context...... 18 5. OPPORTUNITIES IN THE CACAO 7.1 Purpose and Inputs for the Action Plan...... 88 Stakeholders in Ucayali...... 113 2.2. Contexto regional...... 24 VALUE CHAIN FOR ITS CONVERSION 7.2. Framework of activities...... 92 INTO ADEFORESTATION-FREE CHAIN WITH LOW GHG EMISSIONS...... 61 8. REFERENCES...... 98 5.1. Opportunities in the Current Land-use Scenarios...... 62 List of tables
TABLA 1 Licenses for wildlife and forest management 20 FIGURA 6 Map of the cacao and chocolate value chain in the Ucayali region. 35 a) Peruvian Amazon, b) Deforested area from 2001 to 2006 within the Peruvian Amazon TABLA 2 Area planted with cocoa in the Ucayali region by provinces and districts in 2016 30 FIGURA 7 39 by region, c) Deforestation at the district level from 2013 to 2016 Correlations between deforested area and average area cultivated with cacao, coffee, and oil TABLA 3 41 Spatial associations between deforestation and (a) area under cacao cultivation, (b) area palm from 2013 to 2016, and the number of livestock in 2016. FIGURA 8 under coffee cultivation, (c) area under oil palm cultivation, and (d) number of bovine 43 TABLA 4 Characterization of representative production systems in the Ucayali region 44 livestock
TABLA 5 5 Cacao carbon footprint in three production systems in the Ucayali region 47 FIGURA 9 Diagram of the cacao cultivation stage 45 Cacao carbon footprint in three production systems in the Ucayali region, including GHG TABLA 6 49 FIGURA 10 Cacao carbon footprint in three production systems in the Ucayali region 46 emissions from land-use change Cacao carbon footprint in three production systems in the Ucayali region, including GHG FIGURA 11 48 TABLA 7 Revenues and production costs of cacao in Ucayali by type in Peruvian soles 54 emissions from land-use change Gross profit in cacao production by type TABLA 8 Financial indicators of cacao production by type 58 FIGURA 12 58 (scenarios without credit for working capital) TABLA 9 Financial indicators of cacao production by type, excluding the opportunity cost of land 58 Potential interventions to reduce GHG emissions and conserve forests in landscapes in FIGURA 13 Ucayali where there are forests and cacao production systems, in accordance with the 63 TABLA 10 Practices to reduce GHG emissions on regularized farms with adequate agricultural suitability 70 Peruvian legal context. Opportunities and contribution of chain links at the micro level, towards the conservation TABLA 11 Stakeholders linked to a deforestation-free business model with low GHG emissions 79 FIGURA 14 68 of forests and the reduction of GHG. Contribution of macro-level stakeholders to the conservation of forests and the FIGURA 15 72 reduction of GHG List of figures FIGURA 16 Contribución de actores del nivel macro a la conservación de bosques y reducción de GEI 73 FIGURA 17 General outline of the deforestation-free business model 77
FIGURE 1 Trifecta: REDD+, private sector commitments and sustainable jurisdictions. 6 FIGURA 18 Outline of the business model 81
FIGURA 2 SAB Project’s Theory of Change 8 FIGURA 19 Value proposition for producers, investors, and buyers 83 Methodological steps to develop a strategy for a deforestation-free FIGURA 3 11 FIGURA 20 Challenges and opportunities of the business model 83 value chain with low GHG emissions. Multi-stakeholder platform for the cacao and chocolate value chain FIGURA 4 Implications for the design of a deforestation-free value chain 13 FIGURA 21 90 (Pucallpa, November 2019) FIGURA 5 Cacao production (kg), harvested area (ha) and yield (kg/ha) in the Ucayali region. 29 FIGURA 22 Multi-stakeholder platform for the cacao and chocolate value chain (Pucallpa, July 2019) 115 MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE VALUE CHAIN WITH LOW GREENHOUSE GAS EMISSIONS
CHAPTER 01 INTRODUCTION
© Neil Palmer / @CIAT Flicker 2 3 VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE of 15 years (2001–2015), more than 71.76 million hectares and forest degradation, as well as to increase of land were deforested to produce commodities4. The afforestation and reforestation worldwide, by 20208. development challenge is to find a way to increase the A specific tool based on such initiatives is the contribution of the production of such commodities to Reducing Emissions from Deforestation and Forest the economy, while reducing negative externalities in Degradation (REDD+) mechanism, which encourages terms of environmental degradation, deforestation, countries to increase their—measurable, reportable and their associated GHG emissions and loss of and verifiable—actions to reduce emissions from biodiversity. deforestation as well as forest degradation through To promote more sustainable agriculture and forest conservation and the implementation of sustainable activities, over the last years, several initiatives have emerged from various sectors of society throughout the world, indicating that this is a cross-cutting 1. The Fifth Assessment Report of the Intergovernmental Panel on Cli- issue. At the public level, it is worth mentioning the mate Change. Available at: https://archive.ipcc.ch/home_languag- new trade regulations of the European Parliament es_main_spanish.shtml governing imports of deforestation-free products5; 2. https://www.iucn.org/es/regiones/am%C3%A9rica-del-sur/ and at the private level, the commitment of various nuestro-trabajo/cambio-clim%C3%A1tico-en-am%C3%A9r- multinational companies to eliminate deforestation ica-del-sur/bosques-y-cambio-clim%C3%A1tico/deforestac- INTRODUCTION from their supply chain6. The companies that signed i%C3%B3n-y-degradaci%C3%B3n such pledges are premised on the very high legal 3. FAO. 2016. El Estado de los bosques del mundo 2016. Los bosques y la agri- and reputational cost of being associated to issues cultura: desafíos y oportunidades en relación con el uso de la tierra. Rome. pertaining deforestation. However, this challenge may Available at: http://www.fao.org/3/a-i5588s.pdf be turned into an opportunity by creating additional 4. GCF Task Force: https://gcftaskforce.exposure.co/atacando-la-de- benefits, such as a good and steady supply of raw forestacion-por-commodities-es-hora-de-ponerse-aburridos#! 1.1. Background material, while conserving forests. Likewise, these new 5. See, for example, the EU draft of the Action Plan to Conserve and policy and international market trends have given rise Protect the World’s Forests. Available at: https://eur-lex.europa.eu/ legal-content/ES/TXT/DOC/?uri=CELEX:52019DC0352&from=ES The Fifth Assessment Report of the Intergovernmental Panel on Climate Change points to public-private partnerships (PPP), which provide 6. See, for example, the following initiatives- Cargill: https:// out that global average surface temperature has been 0.85 degrees Celsius (°C), which has wide multi-stakeholder platforms to discuss, design, www.cargill.com/doc/1432136544290/cargill-policy-on-forests. caused sea levels to rise due to thaws and thermal expansion1. It also indicates that glacial and implement actions, as well as to mobilize resources pdf , Ferrero: https://www.ferrero.com/group-news/Ferre- to promote sustainable agriculture7. ice extent has been reduced and the concentration of greenhouse gases has increased. ro%E2%80%99s-dedication-to-a-deforestation-free-Glob- Consequently, there has been an intensification of events such as droughts, floods, and heat All the aforementioned initiatives are consistent with al-Cocoa-Supply-Chain, McDonald’s: https://corporate. waves, affecting water availability, production, and food quality, favoring the spread of pests the most important international commitments and mcdonalds.com/content/dam/gwscorp/scale-for-good/McDon- and diseases, generating the loss of cultivated area, reducing productivity, and increasing aldsCommitmentOnForests.pdf) agreements related to climate change, including: (1) animal mortality, which is reflected in declining household incomes, compromising food The Paris Agreement on Climate Change, which states 7. See, for example, the following initiatives: New York Declaration of Forests (NYDF): https://nydfglobalplatform.org/, Tropical Forest and nutritional security, particularly of rural societies. Climate change impact on resources that forests are essential to solve the climate change Alliance (TFA) https://www.tropicalforestalliance.org/, We Mean or commodities influences prices, supply chains, marketing, investment, and even political problem and (2) the United Nations (UN) 2030 Agenda relations, which harms economic growth in the country. Business Coalition: https://www.wemeanbusinesscoalition.org/, for Sustainable Development, where reducing forest Global Consumer Forum (GCF): https://www.theconsumergoods- According to the International Union for the Conservation of Nature (IUCN), 15% of global loss and degradation represents a priority reflected in forum.com/ 2 GHG emissions come from land-use and land-use change (LULUC) . The main factor for many of the 17 sustainable development goals (SDGs), 8. See UN Goal N15: Promote sustainable use of terrestrial ecosystems, com- land-use and land-use change is deforestation; over 70% of deforestation is caused by the specifically Goal 15, target 2, addressing the sustainable bat desertification, and halt and reverse land degradation and halt biodi- expansion of agriculture, mainly to produce commodities3. Across the globe, over a period management of all types of forests to stop deforestation versity loss. Available at: http://onu.org.pe/ods-15/ 4 5 VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE management practices . In recent years, the REDD+ mechanisms, the private sector’s commitments to deforestation- In turn, the country submitted its Nationally supply chain. The productive chains of the agricultural free products, and the quest for the sustainability of jurisdictions (Figure 1) have been positioned as components Determined Contributions (NDCs)11 in September sector have entered a new stage in a different global with considerable potential to reduce deforestation from agricultural commodities at a scale and level with a long- 2015, indicating that it will reduce 30% (89.4 million context that entails finding the mechanisms for a
term impact. tons of CO2eq) of the GHG emissions projected for deforestation-free economic growth and breaking
year 2030, from which 20% (59 million tons of CO2eq) the paradigm that the two concepts, agriculture and will be implemented with public and private domestic forestry, are mutually exclusive. Figure 1. Trifecta: REDD+, private sector commitments and sustainable jurisdictions. resources, and 10% (30.4 million tons of CO eq) is a 2 Additionally, the need of Amazon jurisdictions to orient proposal conditioned by the availability of external their production towards the reduction and elimination 12 funding and favorable conditions . of deforestation has launched several policy initiatives, such as: (1) the international platform of the Governors’ REDD+ The Peruvian Government has identified 62 mitigation Climate and Forest Task Force (GCF-TF), which gathers 29 PROGRAMS measures to be implemented by 2030 in 5 priority provinces, states, and regions of the United States, Brazil, areas, where actions in the land-use, land-use change (LULUCF) sector represent 70% of the country’s mitigation target13. Regarding mitigation measures for permanent crops grown in the Amazon, which are TRIFECTA relevant to the subject of this plan, it is expected that: JURISDICTION 11. Intended Nationally Determined Contributions (INDC) are a commitment of the international community to reduce GHG PRIVATE “Through the promotion of partnering, the access to JURISDICTIONAL emissions, in accordance with UNFCCC, and not to exceed 2° C of SECTOR APPROACHES and use of organic fertilizer and inputs, along with the global temperature. COMMITMENTS 14 development of technological skills” it may be possible 12. Baseline 2010: 170.6 million tons of CO2eq, Baseline to 2030 (BAU):
to reduce GHGs and also create additional values, such as: 298.3 million tons of CO2eq “reducing pollution, improving household incomes, and 13. It should also be mentioned that at COP 25 in December 2019, in using technology on crop production” 15, among others. Madrid, the country announced an increase in its commitments to reduce GHGs from 30% to 35% by 2030, adding the private sector. 14. Presentation: La Gestión Integral del Cambio Climático Por un Perú en Ac- Source: Umunay, P.; Lujan, B.; Meyer, C.; Cobián, J. Trifecta of Success for Reducing Commodity-Driven Deforestation: Assessing the Intersection of REDD+ Programs, Jurisdictional Approaches, and Private To be able to revert the process of increasing GHGs Sector Commitments. Forests 2018, 9, 609. from LULUCF, the country promotes the sustainable ción frente al Cambio Climático, MINAM-Dirección General de Cambio Cli- development of the agricultural and forestry sectors, mático y Desertificación Octubre, 2019 [Comprehensive Climate Chan- ge Management for a Peru Addressing Climate Change, MINAM, Peru’s GHG emissions are not significant and they adopting important measures in the value chain, to 9. The original REDD+ (Reducing Emissions from Deforestation and represent less than 1% worldwide. However, in 2011, General Directorate for Climate Change and Desertification. Octo- forest Degradation) concept was established in 2007 by the mem- increase productivity on already deforested land, ber 2019] the Peruvian Government reiterated before the and achieve a deforestation-free production under ber States of the UNFCCC Conference of the Parties (COP) and re- 15. Idem Executive Secretary of the United Nations Framework ferred to mechanisms to reduce deforestation and forest degra- a socially viable economic model. It is a very complex 16. The pillars of green growth include: Convention on Climate Change (UNFCCC) its strong dation in developing countries, through payments to reduce GHG approach, but it also has great potential for the y Higher productivity and efficiency in the use of the natural capital commitment to strengthen collective actions to emissions from developed countries. Since then, in practice, the development of products in agricultural frontier areas to minimize the environmental pressure over natural resources mitigate climate change by developing a sustainable, concept has evolved towards one with multiple and broader objec- that need to conserve their forests, by strengthening y Innovations in technologies, policies, and enabling conditions that low-carbon growth economy, for which it committed tives. all links in the chain, and by adapting stakeholder create new opportunities and solve environmental problems, such to implement the following voluntary action regarding 10. In the specific case of Peru, the main source of GHG emissions is capacities to the requirements of the new green as deforestation Land Use, Land-Use Change and Forestry—LULUCF—(51%), mostly this document: 16 attributable to deforestation (92%). economic growth model . Deforestation is both an y The creation of new markets and encouraging a demand for green environmental and economic problem, thus solutions technologies, goods, and services, thus promoting new job oppor- “Over a ten year period, reduce 47% of its emissions by should be the result of the analysis of avoided costs tunities and prosperity controlling deforestation, to reach a zero net deforestation and additional benefits generated by greening “ ” the 10 6 rate, thus contributing to global mitigation efforts” . 7 VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE Nigeria, Indonesia, Ivory Coast, and Mexico17; and (2) the SAB), led by CIAT, as part of the Alliance of Bioversity Project goals include: (1) two participatory value The work is carried out with medium-sized and small Public-Private Partnership (PPP) for a Low-carbon Rural International and CIAT, in coordination with MINAM chain strategies with a shared vision agreed upon organized producers from the Ucayali region, through Development to achieve Sustainable Jurisdictions in the and MINAGRI of Peru, and in partnership with the by all stakeholders in the chain, focused on meeting commercial partners in the oil palm and cacao value Peruvian Amazon, which is based on the commitment Climate Focus (CF) international advisory company. deforestation-free and verifiable emission reduction chains19. The analyses, data, and information generated of the Ministry of the Environment (MINAM) and the The project is part of the International Climate Initiative commitments. Additionally, it includes moving from as part of this plan, as well as interventions planned Ministry of Agriculture and Irrigation (MINAGRI) to (IKI) supported by the German Federal Ministry for strategy to practice, and thus the project also seeks (2) within the framework of the business models, are promote deforestation-free value chains. The PPP is the Environment, Nature Conservation and Nuclear the implementation of two pilot business models with expected to contribute to environmental sustainability a multi-stakeholder space (37 institutions, including Safety (BMU). At the same time, it is set within the commercial partnerships in the area, for cacao and oil by curbing deforestation and reducing GHG emissions ministries, regional governments, local governments, framework of the Joint Declaration of Intent (JDI)18 palm, to show the actions of such business models are in Ucayali. private companies, producer associations, and civil to meet the country’s NDC goals related to the economically profitable, ready for investment, and society organizations) seeking to promote sustainable reduction of deforestation and GHG emissions from socially inclusive. Business models include sustainable jurisdictions and deforestation-free supply chains in Peru. the agricultural sector. The project uses a value chain, management practices previously agreed upon with This report was prepared within the framework of the territorial approach with low carbon emissions to chain stakeholders to reduce GHGs. The project’s “Business Models to Address Drivers of Deforestation align commitments with a vision of zero deforestation vision is to turn this business models into a blue print in Peru” project (Sustainable Amazonian Businesses – that reconciles sustainable and competitive uses with for other productive partnerships, not only in other national mitigation commitments (Figure 2). regions of Peru, but also in other Amazonian countries, to demonstrate that the strategies and businesses to Figure 2. Project’s Theory of Change reduce deforestation and GHG emissions exist and they are viable and replicable. 18. The cooperation to reduce greenhouse gas emissions from lower emissions from deforestation and forest degradation (REDD+) The activities proposed within the project framework and to promote sustainable development in Peru, under the Joint Value chains evaluated, prioritized, Deforestation-free and are described below: Declaration of Intent (JDI), is a voluntary cooperation agreement and adjusted with stakeholders low-carbon business models signed by the Governments of Peru, Norway, and Germany to redu- and the Government to improve competitiveness implemented along with scaled-out and achieve deforestation reduction goals and 1 2 investment cases ce the greenhouse gas emissions produced by forest degradation low- carbon development IMPACT Analysis of the specific context of scenarios and deforestation in Peru. It was signed in September 2014 to be in Contribute to for forest conservation and restoration of effect until 2020, and it includes actions to conserve forests in the Peruvian Amazon. The Joint Declaration of Intent (JDI) pursues the deforestation-free degraded areas land-use in the Peruvian following objectives: Amazon and conservation y To contribute to the significant reduction of GHG emissions of its biodiversity Analysis of the competitiveness of value chains from deforestation and forest degradation in Peru y ●To contribute to the goal of zero net emissions from the land- Productive partnerships between producer Assessment of greenhouse gas emissions Relevant value chain stakeholders use, land-use change and forestry category by 2021, in addition organizations and private sector companies 3 4 with enhanced capabilities to achieve (GHG) across value chains to the national target of reducing deforestation by 50% that lead to deforestation-free and low-carbon deforestation-free and business models designed with stakeholders low-emissions goals Design of sustainable business models with a y ●To contribute to the sustainable development of the agricultu- deforestation-free approach ral and forestry sector, as well as to an environmentally sound mining in Peru Development of business model For further information, see: https://cdn.www.gob.pe/uploads/do- OUTCOME: Value chain strategies with a deforestation-free and low-emissions approach, developed in a participatory manner, implementation plans cument/file/12001/cartilla_dci.pdf piloted through sustainable business models, and ready to be scaled-out in Peru. 19. These two crops are part of the group of permanent crops included Development of scaling-out and financing in the NDC measures for the agricultural sector. Cacao is also repor- Source: SAB Project strategies through investment models ted as a crop cultivated in agroforestry systems (AFS).
17. At the sub-national level, six regions of the Peruvian Amazon have signed the Rio Branco Declaration, the main document of engagement of the
8 GFC Task Force, which sets the intention of reducing 80% of GHGs with adequate funding https://gcftaskforce.exposure.co/atacando-la-defores- 9 tacion-por-commodities-es-hora-de-ponerse-aburridos#! VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE information about the aforementioned aspects and 1.2. Objectives and the integration of platforms with stakeholders to build Methodology trust and undertake participatory planning of actions to promote forest conservation in the Ucayali region,
The objective of this report, entitled “Towards a as well as the economic sustainability of stakeholders Socialization of results 6 Deforestation-free Cacao and Chocolate Value Chain in the value chain. The work carried out was Socialization of final agreed results, actions between key and next actors steps of Strengthening for capacities strategy implementation Definition of the way are in which results with to be integrated and local regional plans government plan to pilot Work some of the lines the action through business model with Low Greenhouse Gas Emissions: Current status, geographically limited to the department of Ucayali, opportunities with a value chain approach, and action plan” focusing on the major producing areas, mainly those is to have a comprehensive management instrument surrounding the productive corridor at the Federico co-designed with key stakeholders in the value Basadre Highway, along the provinces of Padre Abad chain at the national and regional level, to guide and and Coronel Portillo.
facilitate the development of a deforestation-free This document follows a structure consistent with the Second multi-stakeholder platform Presentation and Presentation of findings validation Socialization and of the new validation vision proposal Co-design of sectoral action plan that is free deforestation in GHG and low emissions Preliminary of identification commercial to pilot alliances actions and strategies and low-GHG value chain in the Ucayali region. approach developed, starting with the presentation 5 The impact expected includes: of the results obtained from the different analyses performed, which were used as an input to design the Reducing deforestation in the Peruvian strategy for a deforestation-free cacao value chain. Amazon by strengthening the capacities Such analyses include: (1) analysis of the link between of the sector to reduce GHG emissions, commodities and deforestation in Peru, (2) mapping Compilation of complementary information mainly those generated by deforestation and analysis of stakeholders and links comprising Collection and Collection of analysis complementary information Checking the value chain vision - and Development assessment of proposal preliminary of possible Survey a actions to achieve free deforestation in GHG and low value emissions 4 the regional cacao value chain, (3) analysis of the governments, and local (regional actors and potential key with current Integration service providers, financial entities, buyers, authorities, and agricultural environmental etc.) centers, research NGOs, Improving the wellbeing of farmers competitiveness of the value chain, and (4) estimation involved in the cacao and chocolate of GHG emissions to produce dried cacao beans. value chain. Subsequently, the document addresses the results of the analyses and participatory development of To carry out this work, the SAB project has developed the deforestation-free and low-emissions strategy First MultiStakeholder Platform
and applied an approach that combines methodologies value chain and and deforestation, possible solutions for building a value chain that is deforestation free free building a value chain that is deforestation for in GHG emissions and low Presentation and Presentation of validation findings preliminary Exercises participatory: the between • Relationship link by analysis • SWOT for the cacao and chocolate value chain in the 3 and tools from multiple disciplines, including land-use Ucayali region in Peru. Every analysis and activity based on refinement Analysis new findings. and land-cover analyses, characterization of value performed had specific methodologies and tools, chains and competitiveness analyses, GHG emissions including documentary review, interviews, focus analyses in the chain’s production link, financial groups, geographical analyses, and multi-stakeholder analyses and assessments of the legal framework, workshops, among others, which are described in and the development and facilitation of participatory detail in their corresponding chapters and the Annex Compilation and analysis of information analysis analysis costs production the value chain from with the value relationship chain: causes and opportunities legal and barriers, framework regulatory planning and management 2 strategic planning, among others. This is the result of section. In this case, the SAB project acts as a generator synthesis Collection, of and analysis primary and secondary information • Mapping and value chain and actors of Types • GHG emissions of • Analysis and its • Deforestation opportunities and • Market land for • Public instruments missions Exploratory and project presentation the experience acquired by CIAT and Climate Focus of neutral evidence to ensure stakeholders have for over two decades in Latin America, Africa, and access to objective information, and are able to openly Southeast Asia. discuss the options available to identify actions within The process and methodologies implemented seek the value chain contributing to forest conservation by maintaining or improving the competitiveness of the to reorient the development of productive chains to a strategy steps to develop for Methodological a deforestation-free with emissions. low GHG chain value Production, transfer and feedback and feedback transfer Capacity building: Production, in the actors with key of findings and knowledge chain value value chain. Definition of value chains of and areas intervention integrate the concepts and approaches of inclusive, and deforestation between commodities agricultural value chains the art of of Review, synthesis and Review, of secondary analysis information • Spatial relationship state of • Quick assessment missions Exploratory and project presentation and Identification prioritization of value of chains and areas intervention 1 Methodological steps deforestation-free, and low-emissions value chains. The activities and analyses were performed in 2019, Figure 3. 11
10 SAB Project. Source: This is based on the generation and transfer of according to the following structure (Figure 3): VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE and international level about the implementation of Below is a table showing the comparison between the value chain model and the deforestation-free, low-emissions 1.3. Conceptual good practices associated to the sustainable use and value chain model. framework: conservation of biodiversity, as well as the equitable distribution of environmental and economic benefits value chains among the participants in the value chain. Figure 4. Implications for the design of a deforestation-free value chain contributing However, a new challenge emerges to create a value chain concept targeting specifically to add METHODOLOGICAL TRADITIONAL VALUE CHAIN VALUE CHAIN FOR FOREST to the conservation environmental value as a result of deforestation-free STEPS CONSERVATION of forests and activities, identified by stakeholders across the chain, assuming they have the potential to influence, directly or indirectly, forest conservation and contribute to the reduction Income and Forest conservation and reduce GHG emissions from the land-use sector. A competitiveness biodiversity maintaining competitiveness or improving it of GHG emissions deforestation-free value chain with low GHG emissions OBJETIVE incorporates different innovations and interventions Considering the negative environmental impacts of that stakeholders, at the micro, meso, and macro level, the development model and productive use of land should implement across the chain to be more effective in several parts of the Amazon region, along with the in terms of environmental benefits, without detriment Producers Other actors in the value chain impacts in terms of GHG emissions, loss of biodiversity to economic benefits. Such interventions include together with consumers and land degradation, there is a growing trend towards sustainable management and administration practices META GROUP exploring new conceptual frameworks and territorial throughout the whole chain, from primary production development models, where economic growth and to final consumer. the environment are mutually supportive and not an There are a number of new assumptions in a obstacle for each other. These new concepts are the Potential to reduce emissions deforestation-free value chain: Market potential and from deforestation and restore basis for different “innovative formulas” for economic poverty reduction degraded areas throughout the and environmental integration, which operate VALUE CHAIN value chain SELECTION mainly through the introduction of new production, Addressing the deforestation issue also means commercialization, and consumption patterns. All contributing to sustainable rural development these new models are relevant, especially for the of the Amazon economies of developing countries, since they—and Standard Analysis + Emissions Standard analysis (mapping, Expanding the predetermined notion that throughout the value chain, type their agricultural sector in particular—are mostly land borders, competitiveness) of value chain relationship with a contribution can only be made within the based on the commercialization of raw materials, which VALUE CHAIN deforestation in turn increases the usage rate of natural resources. producer-buyer relationship, but also taking into ANALYSIS consideration other chain actors and enabling The value chain concept seeks environmental factors complementarity and integrity. It was initially introduced Actions (technological, economic, financial, as part of the various strategies to lift small producers other) in different links that promote or Improving the competitiveness of the value Market access and increase encourage forest conservation and reduction out of poverty in developing countries, primarily in the chain may or may not reduce deforestation in productivity of GHG emissions, market access and differentiated incentives agricultural sector. This is a concept that targets the STRATEGIES / strengthening of the productive chain by adding value The value added to the chain by forest INTERVENTIONS to each link and seeking to balance opportunities and conservation should be measured both through risks for all stakeholders. Currently, there are different a cost-benefit analysis and an assessment of the Source: SAB Project 12 and numerous successful case studies at the national resources and ecosystem services from forests 13 VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE Taking into account the implications on the design of a deforestation-free value chain with low GHG emissions (Figure 4), below is a description of four pillars, which are a key input for the development of the Deforestation-free and Low-emissions Strategy for the Cacao and Chocolate Value Chain in the Ucayali Region in Peru:
The link between deforestation and agricultural commodities in the Peruvian Amazon Value chain analysis
When thinking about value chain strategies to achieve zero deforestation within the framework The purpose of the value chain analysis is understanding the level of current income to be able of Peru’s commitments to climate change mitigation, the first question that arises is to what to explore the possibilities for its improvement, the distribution of economic benefits among extent is deforestation associated to production in the four prioritized chains to fulfill those links, and the importance of natural resource conservation for stakeholders, among others. commitments, including cacao20. To provide an answer, correlation and spatial association This information can be used to promote a process of change towards the improvement of analyses were carried out. While such analyses do not attempt to attribute causality, they do value chains, in search for an increased value (in this case, environmental value), and to provide help us understand where and how deforestation coincides in the same territory with the value information on the sector to private companies and public agencies interested in supporting this chains prioritized by Peru, and thus, we are able to explore the context to discuss the actions that improvement process (Springer-Heinze, 2007) could be promoted along the chain to conserve forests. The value chain analysis provides an overall perspective and a good understanding of a specific socio-economic reality. Nevertheless, the value chain analysis is not an end, since its results inform decision-making processes by both public and private sector promoters across the chain. Characterization and possibilities to reduce This way, private companies can use those results to set a shared vision of change and agree GHG emissions from LULUCF in the value chain upon self-improvement strategies, the same as public agencies and development programs to implement chain-building projects and plan supporting actions. In turn, such analyses may be used to generate impact indicators and to monitor chain-building projects. According to the Intergovernmental Panel on Climate Change (IPCC) and the Food and Agriculture Organization of the United Nations (FAO)21, mitigation is a human intervention targeted at Since the value chain analysis is closely linked to its improvement and promotion process, the reducing GHG emissions from the sources or enhancing carbon sequestration by sinks. In the information used in the analysis must reflect the current situation as accurately as possible case of the agricultural sector and commodity value chains, the options that could be explored (Springer-Heinze, 2007). to reduce emissions include:
y Reducing emissions from land-use changes and productive land management and use
y Increasing land carbon stocks through sequestration and storage in soils, biomass, and wood products
y Reducing emissions from energy production by the replacement of fossil fuels with biomass
y Increasing production without a proportional increase in emissions reduces their intensity
(i.e., GHG emissions per unit of product) 20. These value chains have been prioritized in the Joint Declaration of Intent among the Governments of Peru, Norway, and Germany. y Reducing GHG emissions through the reduction of losses and food waste, as well as wood recycling 21. IPCC (2014). Climate Change 2014: Mitigation of Climate Change. Working Group III Contribution to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change https://www.ipcc.ch/site/assets/uploads/2018/02/ipcc_wg3_ 14 ar5_full.pdf 15 MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE VALUE CHAIN WITH LOW GREENHOUSE GAS EMISSIONS
CHAPTER 02 LEGAL FRAMEWORK
© Neil Palmer / CIAT Flicker 16 17 VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE Furthermore, the report has a multi-sectoral approach An additional policy management system directly related mainly to national environmental and related to this report is the National Forest agricultural policies. In terms of the environmental Conservation Program to Mitigate Climate Change context, the actions identified in this document are (PNCBMCC, its Spanish initials)27, managed by included in the following policy documents: MINAM and designed to “identify and map the areas for forest conservation, promote the development Law No. 30754 – Framework Law on Climate of sustainable forest-based production systems Change, passed on April 17, 201822, as well that generate income for local populations, and as its corresponding and recently approved strengthen forest conservation capacities of regional Regulations to the Law23 and local governments, members of the farming and native communities, among others”. Additionally, National Government Policy – DS No. 056- REDD+ mechanisms are being implemented in Peru 02 24 2018-PCM , Third Line of Action: Equitable, under Ministerial Resolution No. 187-2016-MINAM, Competitive, and Sustainable Economic in accordance with ENBCC and other policies and Growth regulations with an impact on the reduction of GHG emissions. The National Climate Change Strategy (ENCC, LEGAL FRAMEWORK its Spanish initials)25 is a guiding document for all policies and activities related to climate change being implemented in Peru, with specific targets to reduce forest emissions
The National Forest and Climate Change Strategy 26 2.1. National Context (ENBCC, its Spanish initials) contains the elements 22. Framework Law on Climate Change. Available at: https://busque- that allow for the operation of the new guidelines das.elperuano.pe/normaslegales/ley-marco-sobre-cambio-clima- This report falls within the framework of the country’s main objectives and international offered by the ENCC and green growth of the LULUCF tico-ley-n-30754-1638161-1/ commitments to achieve their climate change mitigation targets through the reduction of sector, through the conservation of forests and the 23. Regulations to the Framework Law on Climate Change. Availa- deforestation and a low-emissions development. Such commitments include mainly: promotion of ventures and markets for eco-innovative ble at: http://www.minam.gob.pe/cambioclimatico/wp-content/ environmental goods and services that reduce GHG uploads/sites/127/2018/09/Documento-de-avance-con-fecha-30- emissions and climate change vulnerability. de-agosto.pdf Sustainable Development Goals The aforementioned policy documents contribute 24. National Government Policy. Available at: https://www.gob.pe/ins- to the country’s goal of fulfilling its commitment titucion/pcm/normas-legales/3102-056-2018-pcm to reduce 35% of its GHG emissions by 2030. The 25. The National Climate Change Strategy (ENCC). Available at: http:// documents state that “integrated climate change www.minam.gob.pe/wp-content/uploads/2015/09/ENCC-FINAL- Nationally Determined Contributions 250915-web.pdf under the Paris Agreement management instruments are mandatory” and appoint the roles and responsibilities of the different sectors 26. The National Forest and Climate Change Strategy (ENBCC) Availa- and levels of government that should operate across ble at: http://www.bosques.gob.pe/estrategia-nacional the country. 27. MINAM, National Forest Conservation Program to Mitigate Climate Change (PNCBMCC). http://www.bosques.gob.pe/ Joint Declaration of Intent among the Governments of Peru, Norway, and Germany 18 19 VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE Land ownership and management in Peru Regarding the Ministry of Agriculture and Irrigation, the protection and sustainable use of renewable natural it has nationwide authority over: a) Agricultural and resources under its scope. pasture lands, forest lands and uncultivated lands To understand deforestation dynamics, a major factor suitability for the sustainable production of clean crops In this regard, the owners and/or proponents of suitable for agriculture; b) Forest resources and their to take into consideration is the lack of clarity over land (a), permanent crops (c), pastures (p), and forestry investment projects and activities within the scope utilization; c) Flora and fauna; d) Water resources; e) ownership. Forty-six percent (51,980 ha) of the 113,000 production (f). Lands failing to meet these conditions of the agricultural sector are required to submit the Agricultural infrastructure; f) Irrigation and water use hectares deforested each year occur in lands classified are considered protection lands (x). In accordance with following environmental management instruments32, in agriculture; g) Crop and animal farming; h) Health, as forests without any granted rights: Another 12% of the Land Classification Regulation based on their Main as appropriate: research, extension, technology transfer, and other deforestation takes place in Permanent Production Capacity for Use, approved by Supreme Decree 017- services associated to agricultural activities. The National Forests (BPP, in Spanish), without any concessions 2009-AG30., the latter two classifications (f and x) are Agricultural Policy (PNA, in Spanish) was approved by granted28. The land ownership process of rural plots in not titled. The Forest and Wildlife Law (Law No. 29763) Supreme Decree No. 002-2016-MINAGRI. The specific the Peruvian Amazon has been governed by LD 1089 forbids land-use change in areas suitable for forestry objectives of the PNA include increasing agricultural and its corresponding regulation, which lays down the and protection lands. It is possible to proceed with competitiveness and integration into markets, with an criteria to issue the title for a plot of land29. land-use change on areas suitable for agriculture, only emphasis on smallholders, and sustainably managing if they are titled and have an authorization for land-use The soil classification system allows grouping lands the natural resources and biological diversity within the change issued by the regional forestry authority, to according to their maximum suitability, i.e., lands with scope of the agricultural sector. similar features and properties regarding their natural ensure the change will proceed according to a plan. The Environmental Management Regulations for the Agricultural Sector, approved by Supreme Decree No. 31 Table 1. Licenses for wildlife and forest management 019-2012-AG , published in the official newspaper El “ Peruano” on November 14, 2012, aims to promote and FOREST WILDLIFE regulate environmental management of activities within the scope of the agricultural sector, pursuant to Article 4 Timber of Legislative Decree No. 997 – Law on the Organization © Vía Marketing Non-timber forest products and Functions of the Ministry of Agriculture, modified by Law No. 30048 and the Regulations to the Organization Concessions Wildlife concessions Ecotourism and Functions, approved by Supreme Decree No. Conservation 008-2014-MINAGRI, as well as the conservation and 28. Source: MINAM, PNCB, REDD+ Project Plantations sustainable use of renewable natural resources, water, soil, flora, and fauna, within the scope of the agricultural 29. Legislative Decree which lays down the Temporary Extraordinary Private plots Private Plots Regime to Formalize and Issue an Ownership Title for Rural Plots sector. In addition, it regulates environmental Permits Farming communities Permits Farming communities and (06/28/2008). Available at: http://www2.congreso.gob.pe/sicr/cen- management instruments, procedures, measures, and and Native communities Native communities docbib/con2_uibd.nsf/B07FE3C54C126F76052575C2007F931A/$- other specific aspects for activities within the scope of Wildlife farming FILE/D.Leg.1089_Reg_Temp_Formaliz_Titul_Predios_Rurales.pdf the agricultural sector. Zoos 30. https://www.serfor.gob.pe/pdf/normatividad/2009/decresup/ Authorizations Non-forest plant associations Authorizations The Environmental Management Instruments for DS%20N%C3%82%C2%BA%20017-2009-AG(Reglamento%20 Rescue centers the Agricultural Sector are mechanisms to guide the de%20Clasif%20%20de%20Tierras).pdf Conservation centers implementation and enforcement of the National 31. Decreto Supremo No. 019-2012-AG, available at:: https://www. For agroforestry systems Assignment Environmental Policy and the Agricultural Policy, with minagri.gob.pe/portal/74-marco-legal/decreto-supremo/decre- contracts in use For residual forests the purpose of preventing, controlling, and mitigating tos-supremos/8244-decreto-supremo-n019-2012-ag the environmental impact of investment projects and 32. Source: General Directorate for Agricultural Environmental Affairs Local forests In state-owned free areas activities associated to the agricultural sector, ensuring of the Ministry of Agriculture and Irrigation. 20 Source: National Forest and Wildlife Service (SERFOR). 21 VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE
© Neil Palmer / CIAT
and information related to the management of forests and wildlife, through Titles II to VI. Through Titles VII to Semi-detailed Environmental Impact Environmental Statement for Ongoing XXVIII, they also seek to regulate and promote the management of Forest Heritage and Wildlife, regarding: Assessment (EIA-sd): Applicable to Activities (DAAC, in Spanish) or Environmental investment projects that could have Compliance and Management Program (PAMA, moderate negative environmental impacts in Spanish): For ongoing activities, and consistent Forest ecosystems and other wild vegetation Forest operations and related activities are also with the scale and negative impact the activity ecosystems considered, except for agroforestry activities, in Environmental Management Report might have on the environment or renewable accordance with provisions laid down by the law. Forest resources, regardless of their location in (IGA, in Spanish): For investment projects natural resources (water, soil, flora, and fauna) the country, except for planted forests, which Cacao, in particular, can grow under an agroforestry beyond the scope of the National are governed by their own regulation system (AFS). According to the Regulations for Planted Environmental Impact Assessment System, Closure and/or Abandonment Plan: For Forest and Agroforestry System Management, i.e., those not listed in Annex II of the investment projects and/or activities, Forest and other wild vegetation ecosystem approved by Supreme Decree No. 020-2015-MINAGRI34, Regulations to the SEIA Law and its updates with the purpose of ensuring no negative services, in accordance with the provisions on the Regional Forest and Wildlife Authority (ARFF, environmental impacts persist after closure the subject in Spanish) can grant natural persons assignment Forest biological diversity, including their Regulations to Forest Management, approved by Supreme Decree No. 018-2015 – MINAGRI33 on September 29, associated genetic resources 2015. The purpose of these regulations is governing the institutional structure, planning, zoning, arrangement, Forest and other wild vegetation ecosystem 34. DS No. 020-2015-MINAGRI, available at: https://www.minagri. gob.pe/portal/decreto-supremo/ds-2015/13919-decreto-supremo- landscapes, provided that they are used for n-020-2015-minagri economic purposes 22 23 33. Available at: https://www.minagri.gob.pe/portal/decreto-supremo/ds-2015/13917-decreto-supremo-n-018-2015-minagri VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE contracts in use for agroforestry systems in public lands, instrument to face climate change. This strategy with the purpose of recovering ecosystem goods and provides guidance and facilitates regional actions to services. Promoting planted forests and agroforestry reduce GHG emissions associated to land-use change systems is declared a matter of national interest; from deforestation; it is aligned with the ENCC and considerations are set forth for the establishment of contributes to the implementation of NDCs in the plantations, their management and the transport, Ucayali region. transformation and commercialization of products. The Ucayali region has an Ecological-Economic Zoning (EEZ) approved by Regional Bylaws OR No. 2.2. Regional Context 015-2017-GRU-CR in Ucayali35. The aim of this public policy instrument is to provide guidance for the The Political Constitution of Peru and the international formulation, approval, and application of national, treaties and commitments assumed by the Peruvian sectoral, and local policies on the sustainable use of State provide the framework for public policies to pursue natural resources and land, as well as an environmental sustainable development, encourage the intervention management in line with the features and potentials of local, regional, and national governments to leverage of ecosystems, environmental conservation, and the prevention, adaptation and mitigation measures for wellbeing of the population. Additionally, it provides the use and conservation of natural resources in areas technical information and the referential framework to vulnerable to disaster risks and climate change. In this promote and guide public and private investments. The regard, the Ucayali region has incorporated the climate document has identified 116,627 hectares of land (1.1% change dimension in its planning instruments. of Ucayali’s territory) suitable for permanent crops. Currently, the Forest Zoning (FZ) document for the The Ucayali Regional Government has a Regional Plan Ucayali region is being prepared to be able to determine for Concerted Development (PDRC, in Spanish) for © BMU PROJECT forest management units and to grant forest use rights. 2021, currently undergoing an update process, which is The FZ also seeks to promote more effectively public the main policy management instrument in the region, and private investments targeting multiple uses of along with the Institutional Strategic Plan (ISP). PDRC is forests and other ecosystems. a territorial, comprehensive instrument driving regional development and the participatory budget containing In addition to this land management instruments, the Cacao has been declared as a flagship product under Regional Bylaws OR No. 006-2012-GRU-CR. the agreements on the Development Vision as well Ucayali region features the following: as the medium- and long-term Strategic Objectives, Altogether, these strategies and planning instruments aim to improve institutional performance, increase The Ucayali Cacao Regional Competitiveness in line with sectoral and national plans. PDRC has coordination and connection between institutions and their policies, and improve enabling and governance Plan for 2019-2030 approved by Regional two components aligned with the development of conditions involving regional governments (GORE), plans from other sectors, and international cooperation on Bylaws OR No. 007-2019-GRU-CR and the a deforestation-free and low-emissions cacao and forests and climate change. However, it is clear that the lack of a formal regional framework to articulate the Regional Technical Committee for Cacao chocolate value chain: Component No. 4: Diversified cooperation efforts in the environmental and agricultural sectors poses a problem to ensure a portfolio approach (bylaws reference pending). Economy, Competitiveness, and Employment, and for the proper articulation of the different programs and projects being implemented and designed. Component No. 6: Environment, Biological Diversity, and Disaster Risk Management, stressing the importance of the environment in strategic planning, regarding land and conservation. 35. EEZ of the Ucayali region at the meso-zoning level. Available at: On the other hand, the Climate Change Regional https://busquedas.elperuano.pe/normaslegales/aprueban-la-zon- Strategy for 2022 is the comprehensive management ificacion-ecologica-y-economica-zee-de-la-r-ordenanza-no-015- 24 25 2017-gru-cr-1578040-1/ MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE VALUE CHAIN WITH LOW GREENHOUSE GAS EMISSIONS
CHAPTER 03 DEVELOPMENT CONTEXT OF THE CACAO-GROWING SECTOR IN THE UCAYALI REGION
© Neil Palmer / CIAT Flicker 26 27 VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE Figure 5. Cacao production (kg), harvested area (ha) and yield (kg/ha) in the Ucayali region
25000 1000
900
20000 800
700
15000 600 Production
500 Harvested area Kg/ha 10000 400 03 Area/Production Yield 300
5000 200 DEVELOPMENT CONTEXT OF THE 100 0 0
CACAO-GROWING SECTOR 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
IN THE UCAYALI REGION Source: SAB Project with data from MINAGRI 2019a37
3.1. The Cacao-growing sector Cacao is the second most important export crop in Padre Abad has over 2,000 ha of planted area, with the department, with US$2.7 million exported in Irazola, Padre Abad, and Curimaná reporting the in Ucayali 2017 (10% of exports), after the wood sector, which largest extensions. In Coronel Portillo, production is represents 81% of exports. In 2017, the main cacao concentrated in the districts of Campo Verde, Nueva The Ucayali region has a total land area of 102,410.55 km2, out of which 150,456.32 ha have exporting company was the Colpa de Loros Agricultural Requena, Masisea, and Callería. Over the past 10 years, soil and climate conditions suitable to grow cacao (Ucayali Regional Government, 201936). Cooperative for Flavor Cocoa, located in Neshuya, average producer prices in the region were below It currently ranks as the third largest cacao bean producer in the country, with 16,587 which records exports of US$2.5 million and a growth national average; however, the gap has been reduced tons harvested in 20,003 ha, out of 29,688 ha planted in Ucayali (MINAGRI, 2019a37). Both of 61%, compared to the previous year, followed by from 26% in 2014 to 3.9% in 2018, reaching S/5.83 per cacao production and the planted area have substantially increased during the last years, the Central Committee for the Future Development kilogram of dried cacao beans. especially between 2014 and 2017, where production and harvested area were quadrupled of Curimaná (CCC), with US$0.8 million. The main in the department (Figure 5). Nevertheless, yields per hectare have decreased from 945 to destinations of the cacao bean exports were The 36. Ucayali Regional Government. (2019). Plan de Competitividad del 781 kg/ha/year, falling below national average (827 kg/ha/year). Netherlands, with US$2.8 million and Italy, with US$0.8 Cacao Ucayali 2019-2029. Ucayali. million (MINCETUR, 201838). 37. MINAGRI. (2019a). Integrated Agricultural Statistical System [Data- Cacao can be found in the four provinces of the base]. http://siea.minagri.gob.pe/siea/ 38. MINCETUR. (2018). Reporte de comercio regional Ucayali - 2018. department; however, the planted area is concentrated Available at: https://www.mincetur.gob.pe/wp-content/uploads/ in the provinces of Padre Abad (70.4%) and Coronel documentos/comercio_exterior/estadisticas_y_publicaciones/es- Portillo (17.2%). Each one of the five districts in tadisticas/reporte_regional/RRC_Ucayali_2018_anual.pdf 28 29 Table 2. Area planted with cocoa in the Ucayali region by provinces and districts in 2016. 3.2. The Cacao Value VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE
PROVINCE DISTRICT AREA PLANTED (HA) TOTAL BY PROVINCE Chain Map
Padre Abad 4,380 in Ucayali Irazola 7,300 Padre Abad A, Von Humboldt 2,034 20,894.00 The value chain map is a simplified visual representation of the different stakeholders and the Neshuya 2,336 interactions taking place to bring a product from its Curimaná 4,844 initial stage to the final consumer, and it serves as a Callería 736 starting point to develop an improvement strategy, Masisea 960 because it allows the identification of trade relations Iparía 207 and product flows among stakeholders, as well as Coronel Portillo Yarinacocha 247 5,101.50 services rendered within the system (Springer-Heinze, 2007). Additionally, the stakeholder map offers the Manantay 55,5 possibility to explore what are the opportunities for Campo Verde 1,567 each chain actor to contribute to forest conservation Nueva Requena 1,329 and GHG reduction (for further details, see section 5.1) Raymondi 1,713 The map below groups stakeholders in three levels. Sepahua 1,439 The first level, or micro level, includes direct actors or Atalaya 3,667.00 Tuhuanía 463 value chain operators, who are engaged in production, Yurúa 52 transformation, distribution, and commercialization Purús Purús 25.5 25.50 of cacao and its by-products. These stakeholders have in common that they become product owners at some Source: Ucayali Regional Government, 201939 stage in the value chain. The second level, or meso level, includes public, private, or mixed-nature stakeholders who provide micro-level actors with support services to perform their duties, and they represent the According to the cacao competitiveness plan in proliferation of producer associations without an interests of one or several groups of value chain Ucayali, approximately 4,500 farmers grow cacao, and entrepreneurial vision and scalability goals, in addition actors. Finally, the third level, or macro level, includes the average number of hectares per producer is 5 ha; to the lack of working capital to collect cacao beans, as governmental institutions in charge of the design such figures highlight the importance of smallholders well as the strong presence of independent collectors and implementation of policies and the regulation of in the region. Furthermore, there are 28 organizations and large national companies, make it even more production, land, the environment, commerce, etc. and cooperatives in the sector. However, there is a difficult to strengthen the partnership culture. This level comprises ministries, local and regional weak partnership culture, as a result of historical and governments, and other state and supranational reputational problems that have reduced confidence institutions (Springer-Heinze, 2017). It is common in leaders; there is also a lack of leaders and qualified 39. Plan de Competitividad de la cadena de cacao y chocolate 2020 – for some stakeholders to participate in several chain individuals to develop structures to respond to 2030 región Ucayali. links, and at different levels, as is the case of producer the needs and characteristics of smallholders. The associations or agribusiness companies, which provide technical assistance services, training for producers,
30 © Neil Palmer / CIAT 31 VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE and access to capital, among others, in addition to management, post-harvest processes (when they are conditions; producers are not used to fertilize, and this Besides the cooperatives from the department, this collecting, transforming, and commercializing cacao performed by the producers themselves) and cacao is the first cost saved when cacao bean prices drop (the link includes cooperatives located in other regions, and its by-products. bean commercialization activities. frequency of fertilizer application is reduced); and the like Huánuco and San Martín, but which buy cacao presence of pests and diseases, among others. Some of The following links were identified in the Ucayali cacao Depending on the source, it is estimated that the from producers in Ucayali, such as Naranjillo, the the non-agronomic challenges facing cacao production value chain at the micro level: department has between 4,500 and 9,625 Agricultural Alto Huallaga Cacao Agro-industrial Cooperative, the include: difficult access to differentiated markets; Units (AU) for cacao production (Ucayali Regional Divisoria Cooperative, and the Saposoa Agricultural limited access to cacao processing centers (this would 45 Government, 2019; MINAGRI, 2018). Regarding farm Cooperative (COPASA) with a collection center in San improve cacao bean quality by homogenizing the size, an estimated 85% of producers has 5 hectares or Alejandro, Ucayali. fermentation and drying process); limited technical less, while only 5% have plots with 20 or more hectares Additionally, some cooperatives sell certified cacao assistance; limited road access (problems to get (Ucayali Regional Government, 2019). beans (organic and/or fair trade, among others). To production to markets and inputs to the farm); limited Plant material and input supply: this includes the this end, the cooperatives have developed internal It is estimated that only 23% of cacao producers are access to financing; lack of knowledge about investing stakeholders providing the necessary inputs and control systems to ensure compliance with certification registered in some association or cooperative, and in production. services to sow and grow cacao. While these actors the rest sell their dried cacao beans or in the pulp standards, and also to facilitate the certification of do not manipulate directly cacao beans, they were independently to different buyers in the region. While their members. Only the Colpa de Loros Cooperative, included in the analysis, because this is where the partnership culture is promoted by the Peruvian commercializing fine flavor cocoa, manages the post- chain starts. Government and institutions providing support to the harvest process in a centralized manner. Its members arrive to the processing centers with their cacao beans Plant material comes from local nurseries, which also cacao value chain, producer organizations face a serious on the pulp, and the cooperative itself carries out the sell seeds, stems with buds, and clonal cuttings. The challenge concerning organizational sustainability. Collection: this includes the reception, selection and fermentation process in wooden boxes and dries the top-sellers are CCN51 clonal cuttings and they are Producer organizations are created mainly to collect centralized handling of dried cacao beans or in the pulp, cacao beans (manually and using driers), to be able to concentrated in a nursery in the Irazola district of the dried cacao beans and sell the product as a group, in packaging, and subsequent commercialization. In the standardize quality. Padre Abad province. On the other hand, agricultural addition to being able to access programs and projects case of collecting cacao beans in the pulp, it also includes inputs are mainly distributed in agricultural stores in the offered by the State. However, factors, such as the lack centralized fermentation and drying activities. This link populated centers, where the most sold inputs include of transparency in organizational management and comprises cooperatives and associations that buy cacao conventional and organic fertilizers, foliar fertilizers, difficulties to access technical assistance services and beans, independent collectors for the local or export herbicides, fungicides, and insecticides, among others. financial advice, weaken the organizations. markets, and agents from the main national companies. Transformation: the main purpose here is transforming Three brands of agricultural inputs stand out, as they As stated in the Regional Competitiveness Plan An estimated 30% of cacao beans is commercialized cacao beans into chocolate or its by-products (liquor, have managed to position themselves in the organic (GOREU, 2019), 5% of producers currently have through 25 associations and cooperatives that currently cocoa butter, powder, paste, nibs, sub-products, etc.), and controlled-release fertilizer market. Their main agroforestry systems (AFS) in place, 5% of plots have an operate in the department, while the rest of beans which are sold to final or intermediate consumers, both customers are producer cooperatives and the Peru organic certification, and 95% of producers generate are traded through independent collectors who serve nationally and internationally. This link comprises local Cacao Alliance and DEVIDA programs. The use of incomes below S/1,000 a month, which places them collection routes or have collection centers in municipal artisanal and small processors, including cooperatives conventional inputs is more extensive than the use of below the 2018 Minimum Vital Wage (S/930 a month). capitals, or the beans are ultimately taken by producers to and small and medium-sized enterprises (SMEs), apart organic fertilizers; however, the latter is on the rise. According to the interviews and work sessions with regional collection centers of large exporting companies, local stakeholders, cacao farms usually have diversified mainly Machu Picchu Foods S.A.C40, Romex41, Sumaqao 40. See Machu Picchu website http://www.mpf.com.pe/ systems, with areas growing plantain, maize, beans, S.A.C., and Amazonas Trading42. Most cooperatives 41. See Romex website http://romex.pe/ and other crops that bring forth bread. In addition, located in the department collect dried cacao beans and in some cases, they have secondary or primary forest there are just two that have centralized post-harvest 42. See Amazonas Trading website http://www.amazonastrading.com/ Primary production: this refers to the actors and areas in conservation. units. Afterwards, the associations and cooperatives sell pg-26925-7-68718/pagina/welcome.html roles performed at the farm level to produce and their cacao beans directly to foreign customers or clients 43. See National Chocolate Company website http://www.chocolates. Some of the main agricultural challenges facing cacao commercialize cacao in the pulp or as dried cacao in Peru, which include the aforementioned companies com.pe/es/home production are the absence of good quality plant beans. This link includes mainly farm administration and the National Chocolate Company (CNCH)43 and Casa 44. See Casa Luker website https://casaluker.com/ 32 material, besides having adequate climate and soil 33 and management activities, crop establishment and Luker44, among others. 45. Operational until February 2020 VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE from the large industry, with locations usually outside the department. The large companies with industrial activities that buy products industries chocolate International International consumers of of consumers Consumers of of Consumers
Consumption: in this link we include final national mills, Importers, regional cacao beans include Cafetalera Amazónica, and international CONSUMPTION Consumers of by- of Consumers confectionery and confectionery chocolate products Machu Picchu, Amazonas Trading, Sumaqao, Romex, consumers of chocolates and confectionery, and the Naranjillo, and CNCH. The local small and artisanal intermediary consumers of by-products, as well as industries include Pasión y Chocolate, JJ Montes, international chocolate, cacao-bean, and by-product and some cooperatives and associations, such as the importers. Due to the scope of the project, this study
Fine Flavor Cacao Cooperative, COCEPASA, Campos does not look deeply into stakeholders, flows, and Retailers
Verdes, women entrepreneurs from Flor de Boquerón, products of the value chain, once the product has entered the international market. ASCAH, Nuevo Ucayali, the Entrepreneurs from Caribe Large WHOLESALERS AND RETAILERS wholesalers agribusiness Uchunya, San Juan Bautista Agricultural Cooperative, Own channels and the Association from Caserío Las Mercedes Curimaná. Their sub-products are sold at the local level and in small batches. EXPORT Exporting Exporting cooperatives companies of cacao beans and processed products Export: this includes all activities related to transport, logistics, and commercialization of cacao beans and by-products to companies abroad. In many cases, the stakeholders in this link correspond to stakeholders in the Collection and Transformation links; however, Large processors a distinction is made due to the differences among processors
processes and commercialization channels used. Artisanal and small TRANSFORMATION Producer organizations that currently report exports include Colpa de Loros, Central Committee for the Future Development of Curimaná, and the Saposoa Agricultural Cooperative from San Alejandro46, while the rest of the cacao beans are exported by the large others) centers collectors
companies mentioned above. Independent Cooperatives (Machu Picchu, (Machu Picchu, Agribusiness and COLLECTION Amazonas, Romex, Romex, Amazonas, exporters collection collection exporters Sumaqao, Ecoandino, Ecoandino, Sumaqao, (-30% of cacao beans) (-30% of
© Sean Mattson / CIAT
Wholesalers and retailers: this link includes all the
entities in charge of buying and redistributing finished Ucayali the region. in cacao of the chocolate Map chain value and
products (chocolates, coatings, and confectionery) Cacao beans in the pulp Dried cacao beans Semi-manufactured Chocolate >3 Ha: 8% Producers: PRIMARY 4,500-9,625 1-3 Ha: 25% Figure 6. Individual: 77% Up to 1 Ha: 66% cacao (national) PRODUCTION to retailers or directly to the final consumer in the 46. Operational until February 2020 in the Ucayali region Associated: 23% 34 of area Per harvested 35
national market. SAB Project Source: MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE VALUE CHAIN WITH LOW GREENHOUSE GAS EMISSIONS
CHAPTER 04 DIAGNOSIS OF THE CURRENT STATE OF THE VALUE CHAIN
© Neil Palmer / CIAT Flicker 36 37 VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE Figure 7. a) Peruvian Amazon, b) Deforested area from 2001 to 2006 within the Peruvian Amazon by region, c) Deforestation at the district level from 2013 to 2016
a c
Amazonas Loreto Piura Cajamarca
San Martín 04 La Libertad Huánuco Ucayali
Junín Madre de Huancavelica Dios DIAGNOSIS OF THE CURRENT STATE Cusco Ayacucho OF THE VALUE CHAIN Puno
Amazonía del Perú Área deforestada (%)
0 300 600 0 300 600 Kilometros Kilometros
4.1. Deforestation and its relation b to agricultural commodities 150,000 in the peruvian amazon: San Martín 125,000 Loreto Maps and analyses 100,000 Ucayali 75,000 Huánuco According to data from MINAM (2018), deforestation rates in the Peruvian Amazon were 50,000 Madre de Dios
Área deforestada (ha) Junín nearly doubled between 2001 and 2016 (Figure 7b). However, deforestation has not Amazonas 25,000 Pasco occurred evenly. Over that period, more than half the deforested area was located in the Cusco departments of San Martín, Loreto, Ucayali, and Huánuco. It is worth mentioning that, 0 Other 2011 2015 2016 2012 2013 2010 2014 2001 2005 2002 2003 2006 2007 2008 2009 while San Martín showed the highest deforestation rates between 2001 and 2011, Ucayali 2004 and Loreto showed the highest in the last years. Source: Castro-Nuñez, Bax, Ganzenmuller & Francesconi, 202047.
47. Castro-Nunez, A., Bax, V., Ganzenmuller, R. and Francesconi, W. (2020). Emerging scenarios on the role of supply chain initiatives in reducing 38 39 deforestation: evidence from Peru. Manuscript submitted for publication Table 3. Correlations between deforested area and average area cultivated with cacao, coffee, and oil palm from 2013 to 2016, and the VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE number of livestock in 201648.
DISTRICTS (#) CACAO COFFEE OIL PALM CATTLE
Amazon 83 0.37 0.57 NA 0.27
Ayacucho 7 no sig. no sig. NA not sig.
Cajamarca 19 no sig. 0.82 NA 0.57
Cusco 18 0.52 not sig. NA not sig.
Huancavelica 4 NA NA NA NA
Huánuco 25 0.64 no sig. 0.45 no sig.
Junín 27 0.60 0.72 NA no sig.
© Neil Palmer / CIAT La Libertad 3 NA NA NA NA
Loreto 47 no sig. no sig. 0.37 0.56
Madre de Dios 10 0.83 no sig. NA no sig. Large differences are identified in the deforested coefficients between the deforested area and the four area at the district level (Figure 7c). Most areas in value chains, and also between regions. Deforestation Pasco 10 0.80 0.64 NA 0.66 northern Peru and the smallest regions in the south and areas under cacao cultivation have a positive Piura 5 NA no sig. NA no sig. show low deforestation rates. However, deforestation correlation in nine out of the 15 regions analyzed. hotspots are identified in central Peru. The districts The highest correlations between deforestation and Puno 16 0.66 0.69 NA no sig.
showing the largest deforested area from 2013 to 2016 area under cacao cultivation were found in Madre de San Martín 77 0.60 0.49 0.37 0.27 were: Curimaná (Ucayali, 17,963 ha); Codo Del Pozuzo Dios (0.83), Pasco (0.80), and Ucayali (0.74). Despite (Huánuco, 16,802 ha); Inambari (Madre De Dios, having the lowest correlation coefficient nationwide, Ucayali 14 0.74 0.76 no sig. 0.72 16,397 ha); Irazola (Ucayali, 16,071 ha); and Puerto Inca deforestation and area under coffee cultivation have Source: Castro-Nunez, Bax, Ganzenmuller & Francesconi, 2020, prepared on the basis of MINAGRI (2018). District level data on cacao, coffee, palm oil and cattle production in Peru (unpublished dataset). Lima, (Huánuco, 15,920 ha). high positive correlations in eight departments, Peru, Ministry of Agriculture and Irrigation. The nationwide analysis of the correlation between including Cajamarca (0.82), Ucayali (0.76), and Junín deforested and cultivated areas of the four value (0.72). On the contrary, oil palm cultivation is limited To understand better where in the Peruvian Amazon selected products are highlighted in red (High-High). chains prioritized in Peru to reduce GHG emissions to just four departments, and only three of them show the production of the four commodities under study Districts with high deforestation value and low values from deforestation (cacao, coffee, oil palm, and a positive correlation with deforestation [Huánuco overlaps with high deforestation rates, the spatial for the selected products are indicated in pink (High- livestock) did not find high coefficients. The correlation (0.45), Loreto (0.37), and San Martín (0.37)]. Number of association at the district level was analyzed by Low); districts with low deforestation value and high coefficient between deforested area and area under livestock and deforested area are correlated in six out estimating the Morán Index, also known as Local cacao cultivation is the highest (0.49), followed by oil of 15 departments. The departments with the highest Indicators of Spatial Association (Anselin 1995)49 correlation coefficients are Ucayali (0.72), Pasco (0.66), palm (0.32). The coefficient for deforested area with 48. Las correlaciones se calcularon a nivel de departamento, teniendo Cajamarca (0.57), and Loreto (0.56). Three departments Figure 8a highlights the districts showing significant several bovine livestock was 0.23, and with area under en cuenta 365 distritos. Los departamentos donde la cadena de stand out in the correlation analysis. First of all, San local Morán indexes (p <0.05) for associations between coffee cultivation, 0.19. valor no reporta datos se indican como no aplicables (NA). Martín is the only department where deforested area deforestation and the selected products (cacao, coffee, 49. Anselin L. 1995. Local Indicators of Spatial Association - LISA. Geo- These correlations were also estimated for each region is correlated to the four prioritized value chains, and oil palm, and livestock). Specifically, districts showing graphical Analysis 27:93–115. Doi: 10.1111/j.1538-4632. 1995.tb00338.x 41 40 (Table 3). Large differences were found in the correlation secondly, Ucayali and Pasco. a high deforestation value and high values for the VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE Figure 8. Spatial associations between deforestation and a) area under cacao cultivation, b) area under coffee cultivation, c) area under oil palm cultivation, and (d) number of bovine animals50
a Deforested Land - Cocoa Area b Deforested Land - Coffee Area
© NathanRussell / CIAT
High -High High -High High - Low High - Low Low - High Low - High values for the selected products are indicated in light did not directly cause deforestation, but rather that Low - Low Low - Low Not-Significant Not-Significant blue (Low-High); and districts with low deforestation it replaced other land uses (such as illicit crops, and value and low values for the selected products are maize, for example) in certain parts of these districts. In c Deforested Land - Oil palm area d Deforested Land – Amount of cattle indicated in dark blue (Low-Low). Locations with non- these municipalities, further level of detail is needed to significant Morán indexes (p> 0.05) appear in gray. become acquainted with the location, actors involved, Figure 8 provides an overview of the spatial distribution reasons for cacao production, and land cover prior of associations between deforestation and cacao, to cacao plantations. Despite the fact that the way coffee, oil palm, and livestock. In addition, it identifies in which cacao plantations have been associated to the regions where these groups overlap. deforestation processes cannot be explained by these Figure 8a highlights the 122 districts with a significant results, they show the coexistence of both processes, Morán index for deforestation and area under cacao deforestation and cacao production, in these districts, cultivation. Out of these, 69 were classified as Low- and therefore they point out the relevance of working Low (69 districts) and 17 as (Low-High). The two with cacao value chain stakeholders to align efforts to groups show districts where cacao production is most reduce deforestation. Regarding High-High districts, High -High they are spatially distributed in three main blocks. The High -High High - Low likely not significantly associated to deforestation. High - Low Low - High The association between deforestation and cacao largest block expands from the south to the center of Low - High Low - Low Not-Significant Not-Significant production in the other two groups is not clear. The 14 the Peruvian Amazon, covering districts in Junín (5), Madre de Dios (2), Cusco (2), and Ucayali (2). The other districts classified as High-Low may indicate districts Source: Castro-Nuñez, Bax, Ganzenmuller & Francesconi, 2020 51. where cacao production is not a direct cause of two are located in central and northern Peru, and they cover districts in San Martín (8 districts), Huánuco (2), deforestation. While the 22 districts classified as High- 50. It is important to note that districts showing a high deforestation value surrounded by districts with high values for cultivation are colored red and Amazonas (1). The two districts in the department High may indicate districts where cacao production (High-High). Districts with high deforestation values surrounded by districts with low values for cultivation are colored pink (High-Low); districts is directly or indirectly associated to deforestation. of Ucayali are Raymondi and Sepahua, they are both with low deforestation values surrounded by districts with high values for cultivation are colored light blue (Low-High); and districts with low However, this would require additional studies to find located in the province of Atalaya. deforestation values surrounded by districts with low values for cultivation are colored dark blue (Low-Low). Districts with no spatial association are colored in gray. evidence of this causality. It might well be that cacao 51. Castro-Nunez, A., Bax, V., Ganzenmuller, R. and Francesconi, W. (2020). Emerging scenarios on the role of supply chain initiatives in reducing 42 43 deforestation: evidence from Peru. Manuscript submitted for publication. VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE communication) (ISO, 2006) and the PAS2050:2011 Site Preparation: it considers the activities as well as the activities undertaken from 4.2. Analysis of standard (Specification for the assessment of the life needed to prepare the soil for planting the establishment to the moment in which cycle greenhouse gas emissions of goods and services) GHG-emissions Establishment and Management: it trees start producing cacao pods (2 years) (British Standards Institutions, 2011). The latter considers all the activities carried out to plant Stage 3 – Production: it ranges from the in the Production provides specific requirements for the analysis of the cacao seedlings, which are conducted only first productive year to the moment in life cycle GHG of goods and services. The timeframe of Cacao Beans once throughout the life cycle of the product, which the crop ends its cycle (25 years) corresponds to year 2018. This means that the product’s GHG emissions from deforestation associated to life cycle will be assessed taking into consideration crop agriculture and livestock production have doubled management practices and the technology developed globally since 1961. It is estimated that emissions over this period. Figure 9. Diagram of the cacao cultivation stage generated by the land-use, land-use change, and Carbon footprint of the product forestry (LULUCF) sector represent the largest contribution to the total GHG emissions in Peru, Based on the typical farm methodology, three GHG EMISSIONS PESTICIDES representing 51%, from which the main source of production scheme categories were defined for the region. The main criteria for the classification include emissions is the conversion of forests into pastures, FERTILIZERS contributing 92% of emissions. Agriculture is the third the type of management, input use intensity, and INORGANIC WASTE sector, with 15% of total emissions in the country, average yield once production stability was reached WATER (Table 4). SOIL where agricultural soil management generates 47% MACHINERY NURSERY ORGANIC WASTE PREPARATION BAGS of the emissions from the sector, followed by enteric Land-use change
fermentation, which generates 41% (INGEI 2012). Table 4. Classification of representative production systems SEEDS GHG EMISSIONS in the Ucayali region The estimation of GHG emissions makes it possible TRANSPORT to measure the impact of human activities on the MANAGEMENT TRADITIONAL ORGANIC HIGH-TECH atmosphere and to generate the information needed Input use intensity None-Low Medium-High High to reduce global pollution levels. These estimates are Type of fertilizer Synthetic Organic Synthetic SEEDLINGS made on the basis of environmental indicators, such as Average planted 5 3 10 carbon footprint, which is used to measure the impact area (ha) of an activity on global warming. The evaluation of this impact indicator across a value chain allows critical Yield (kg/ha) 700 800 1,500 points for higher emissions to be identified and thus Source: SAB Project INORGANIC WASTE develop different practices to reduce emissions. For FERTILIZERS this strategy, the evaluation of carbon footprint with Based on the identification of production cycle PESTICIDES ORGANIC WASTE a Life Cycle Analysis approach has focused on the activities, three management stages52 were identified ESTABLISHMENT production stage by quantifying GHG emissions in WATER MANAGEMENT across the three producers focus groups (Table 4 and System inputs cacao bean production in the Ucayali region. GHG EMISSIONS Figure 9): SW* system output MACHINERY PRODUCTION SW* re-entering into system To estimate carbon footprint (CF), we used standards Greenhouse gases TRANSPORT CACAO ISO 14067:2013 on the carbon footprint of products Product at cultivation stage 52. Esta información fue recopilada en grupos focales con productores (Greenhouse gases - Carbon footprint of products - * SW: Waste de las tres tipologías. Para más detalles sobre la metodología ver Requirements and guidelines for quantification and Anexo 10.2 Source: SAB Project
44 45 Carbon footprint without land-use change Table 5. Cacao carbon footprint in three production systems in the Ucayali region VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE CARBON FOOTPRINT (kg CO eq /kg cacao) Under a scenario in which cacao establishment took place 20 years after the deforestation process and no emissions CONCEPT 2 from land-use change are included, the production of each kilogram of dried cacao beans in the department of TRADITIONAL ORGANIC HIGH-TECH Use of machinery 0.0995 0.1317 0.0434 Ucayali generates some 0.17 kg CO2eq in traditional production systems, 0.93 kg CO2eq in organic cacao, and 2.26 kg Use of fertilizers 0.0004 0.4043 0.7657 CO2eq in semi-tech production systems (Figure 10). Processing 0.0641 0.0624 0.0651 Inorganic waste management 0.0025 0.0119 0.0063 Manufacture of inputs 0.0099 0.1273 1.1788 Figure 10. Cacao carbon footprint in three production systems in the Ucayali region Input transport 0.0016 0.1912 0.2077 TOTAL CF 0.1780 0.9287 2.2669
Source: Prepared by the authors TRADITIONAL ORGANIC
5,54% 0,91% 1,39% 20,58% 14,18% When comparing the three types of production production system, where the use of herbicides is systems, marked differences are evident in total GHG restricted, the emissions from the use of machinery for emissions per kilogram of dried cacao produced (Table weed control represent 14% of total emissions. In semi- 5). The differences among the types are mainly due tech systems, with an increased use of herbicides, the 36,03% 0,17 0,93 Use of machinery to input use intensity, represented by the emissions emissions from the use of machinery for weed control kg CO eq/Kg 13,71% kg CO eq/Kg 2 2 necessary for their manufacture, transport to plot, and is minimal. use in the field. 1,28% Use of fertilizers It becomes apparent that, despite the increased yield 55,89% 6,72% 43,53% Regarding the use of nitrogen fertilizers and soil obtained in a semi-tech system—twice the yield from 0,25% Inorganic waste management amendments, they generated the largest GHG traditional and organic systems—the use of inputs
emissions, with 0.76 CO2eq/kg of dried cacao in semi- for crop management is high, as well as the resulting
Input transport tech systems, and 0.40 CO2eq/kg of dried cacao in emissions, which are 2.5 times higher than in organic organic systems (Table 5). This corresponds to 30%– production, and close to 11 times higher than those SEMI-TECH Land-use change 40% of total emissions in each system. This category from traditional production systems. 9,16% 1,91% includes direct emissions at application and indirect 33,78% While the traditional system shows the lowest emissions due to volatilization and leaching processes Processing emissions per kilogram, this type of management of nitrogen compounds contained in synthetic and shows the lowest soil-use efficiency, requiring twice as organic fertilizers. In these two types, an increased Manufacture of inputs much land, in comparison to the semi-tech system, to 2,26 use of fertilizers leads to an increase of emissions produce 1,500 kg/ha. The foregoing has considerable kg CO eq/Kg associated to input transport, and in the case of the 2 implications in a context of pressure on natural areas, semi-tech type, an increase in emissions associated to since the traditional system is considered the most 2,87% the manufacture of synthetic fertilizers. prone to increase its area to meet the demand of dried 52,00% 0,28% In the traditional production system, where the use cacao. If the additional areas are forests, the carbon
Source: SAB Project of inputs such as herbicides is minimal, most of the footprint indicator of that cacao will be substantially emissions (56%) are associated to the use of fuels in increased as a result of this land-use change (from machinery for weed control. In the case of the organic forest to cacao), as shown below.
46 47 VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE Carbon footprint with land-use change Ucayali, the production of one kilogram of dried cacao Table 6. Cacao carbon footprint in three production systems in the Ucayali region, including GHG emissions from land-use change generates 24.69 kg CO eq in traditional production In the scenario where the establishment of cacao takes 2 systems, 22.07 kg CO eq in organic cacao systems, and CARBON FOOTPRINT (kg CO eq /kg cacao) place within a period of 20 years after deforestation has 2 CONCEPT 2 13.71 kg CO eq in semi-tech production systems. In TRADITIONAL ORGANIC HIGH-TECH occurred, it is necessary to include emissions from land- 2 this scenario, emissions from land-use change would Land-Use Change 24.51 21.14 11.43 use change. According to IPCC53, the carbon content in represent 99% of the total carbon footprint in the Use of machinery 0.0995 0.1317 0.0434 forests is released during a period of 20 years, therefore, traditional system, 96% in the organic system, and 83% Use of fertilizers 0.0004 0.4043 0.7657 such emissions should be divided by 20 to obtain the in the semi-tech system (Figure 11 and Table 6). Processing 0.0641 0.0624 0.0651 value of annual emissions. Inorganic waste management 0.0025 0.0119 0.0063 In a scenario where there is a direct change of forest 53. IPCC (Intergovernmental Panel on Climate Change). 2003. Good Input manufacturing 0.0099 0.1273 1.1788 cover to cacao, it is necessary to include the 20 years of Practice Guidance for Land Use, Land-Use Change and Forestry. Input transport 0.0016 0.1912 0.2077 emissions (or the total carbon content in the forest) in Institute for Global Environmental Strategies (IGES). 590 p. TOTAL CF 24.69 22.07 13.71 Disponible en: https://www.ipcc-nggip.iges.or.jp/public/gpglulucf/ the crop’s carbon accounting. Under these conditions, in gpglulucf_files/GPG_LULUCF_FULL.pdf Source: SAB Project
Figure 11. Cacao carbon footprint in three production systems in the Ucayali region, including GHG emissions from land-use change In this case, the differences among systems are determined by yield. With an increased number of kilograms produced in the semi-tech system, the carbon footprint from deforestation per one kilogram of dried cacao bean TRADITIONAL ORGANIC is lower.
0,58% 0,26% 0,40% 0,28% 0,87% 0,04% 1,83% 0,60% 0,01% 0,00% 0,05% 0,01% 4.3. Analysis of cacao production costs and its implications for 24,69 22,07 Use of machinery conservation kg CO2eq/Kg kg CO2eq/Kg Use of fertilizers To determine the viability and sustainability of the conservation and restoration strategies in producers plots, especially if they are linked to financing schemes, it is necessary to become acquainted with the current economic Inorganic waste management feasibility of the crop and to identify areas for improvement to optimize its financial performance, ensuring cash 99,28% 95,79% flows that bear the costs for the implementation of actions in a timely manner. To this end, regional production costs were estimated through participatory processes and workshops, based on the typical farm methodology Input transport SEMI-TECH (see Annex 9.2), in which three production system types were defined, representing three of the main production models in the region. These are the same types used in the carbon footprint analysis previously described. Land-use change 8,60% 1,52% 0,32% 0,05% The methodology used has several advantages, but it also has certain limitations, since its purpose is to simulate 0,48% 5,59% Processing cases of farms adjusted to the regional reality, and not necessarily to produce statistically representative figures. Therefore, it is worth emphasizing that the results shown here are not statistically representative and they should not be generalized; however, they do offer a realistic perspective of the operations and processes going on day after Manufacture of inputs 13,71 day in the field, and they allow us to observe the effects of changes to the parameters of the multiple activities kg CO eq/Kg 2 carried out in farms over time. In turn, we would like to point out that the types presented here are not necessarily the only types existing in the region, and both their features and costs will vary between farms, depending on their distance to urban centers, 48 83,46% 49 Source: Prepared by the authors VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE the intensity and efficiency in the implementation of Description of cacao production system types54 in the Ucayali region agronomic and non-agronomic practices, the use of resources, and producer prices. Moreover, it should also be mentioned that there are initiatives from producer organizations and cooperatives in the region that 5 ha have managed to develop inclusive and sustainable commercial relationships with their clients in Europe and other continents, in which they obtain producer Type 1. TRADITIONAL prices considerably higher than those used in the models presented here. In addition, they offer different financial, technical, social, and environmental services Producers with up to 5 hectares under cacao cultivation in the production representing important benefits for the community. stage, with plots of different ages (from 3 to over 7 years). However, such initiatives bring together less than a fifth of producer families in the department, thus They apply conventional agricultural management practices and obtain yields close to the their results and experiences do not reflect the status regional average (700 kg/ha), commercializing mainly dry cacao beans. They use mostly, but of most cacao producers in Ucayali. For this reason, not only, variety CCN51 and their household composition consists of five people, including three interested producers and stakeholders are invited to sons, who occasionally provide support with cultivation tasks. use the structure and information shared here to model Land use before cacao included pastures, coca, primary or secondary forests, which were their experiences and make relevant comparisons. replaced by a maize or bean crop cycle in parallel to the growth period of cacao seedlings in the Finally, the results presented may contain biases from nursery built by the family. Planting density includes 1,000–1,100 cacao plants per hectare (3 m the assumptions used to facilitate farm modeling. For x 3 m spacing), which were planted along with plantain as temporary shade during the first 2 3 instance: the results describe the case of a plantation years and some with native timber trees or fruit trees as permanent shade, which currently have that has reached the age in which production is been removed wholly or in part. stabilized (7 years) and they ignore possible climate At the production stage, the household uses 85 laborers per hectare, from which 74% correspond and phytosanitary effects on productivity that could to family labor. Agricultural inputs are not used; however, other inputs, such as gas, oil, and have had an impact on the differentiated use of bags, are used to carry out the cultivation work. It consists of four weed controls each year, one inputs over a particular year. The model allocates maintenance pruning, harvest operations, fermentation, drying, and manual control of pests an administrative cost equivalent to 5% of variable and diseases carried out constantly throughout the year, and varying their intensity, according costs, and an opportunity cost of land equivalent to to the crop cycle. The ownership of machinery and tools is limited, including a grass trimmer, the annual leasing price of a hectare in the area for small chainsaw, manual spray pump, and basic cultivation tools. an agricultural alternative with similar requirements. A scenario is included, which assumes financing of 40% of operational costs through commercial credits at a 27% annual effective rate. Crop establishment and management costs are allocated as fixed costs, deferred on a straight-line basis throughout the useful life of the plantation (25 years), and in the same way, income from temporary crops (plantain and maize) are deferred and added in the same periods. The models 54. The cacao production system types were defined upon the basis of the typical farm methodologies developed by Feuz & Skold (1990) and and the detailed description of the assumptions and Agribenchmark (2019). This required the use of geographic information and available statistics on production, yield, and area, in addition to consultations with local experts; this allowed us to identify the distinctive types of production systems in the region, which in turn represent a parameters used are available upon request. 50 © K4ValueChains/ La Alianza de Aprendizaje considerable portion of cacao production. 51 3 ha 10 ha
Type 2. ORGANIC Type 3. SEMI-TECH VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE
Producers with an average of 3 hectares under cacao cultivation in the Producers with an average of 10 hectares under cacao cultivation in the production stage, with plots of different ages (from 3 to over 7 years). production stage, with plots of different ages (from 3 to over 10 years). They apply organic fertilization and management practices and are members of associations with organic They undertake a more intensive management than what is usual in the region, including three fertilizer certifications. They obtain yields close to the regional average (800 kg/ha) and they commercialize their applications a year, using more than one ton of fertilizers per hectare per year. These producers are in cacao beans in the pulp and/or dried. They use mainly, but not only, variety CCN51 and their household turn entrepreneurs and hire nearly 70% of the labor for the cultivation of their crops, which add up to composition consists of five people, including three sons, who occasionally provide support with approximately 124 workers per hectare per year, obtaining yields of 1,500 kg/ha. They own fermentation cultivation tasks. and drying infrastructure, in addition to tools and equipment of better quality than the regional Land use before cacao included pastures, coca, primary or secondary forests, which were replaced by average. They grow mainly variety CCN51, they may or may not be members of an association and they maize or bean in parallel to the growth period of cacao seedlings in the nursery established by the family. commercialize mainly dried cacao beans. The final production system includes an average of 1,000–1,280 cacao plants, which were planted with Land use before cacao includes pastures, coca, primary or secondary forests, which were replaced by a nearly 600 plantain seedlings as temporary shade for 2 3 years, and some with native timber trees or fruit maize or bean crop cycle during the growth period of cacao seedlings in the nursery established in the trees in rows as permanent shade. Some plots are also partially surrounded by living barriers to prevent farm. The final production system includes an average 1,100 cacao plants, which were planted with nearly the contamination of the crops. 1,100 plantain seedlings as temporary shade during the first 2 3 years, and some with native timber trees They use 93 laborers per hectare per year, from which 74% correspond to family labor. They fertilize once or fruit trees as permanent shade, which have been removed wholly or in part. a year with guano, compost, and phosphate rock, in addition to the use of agricultural lime to manage In addition to the three fertilizer applications, these producers undertake tip-pruning and row-clearing soil pH and contaminated biological residues. These inputs represent close to 15% of the total cost. once a year, and constant manual control of pests and diseases. Additionally, they conduct three rounds Similar to Type 1, cultivation practices include four weed controls each year, one maintenance pruning, of weed control during the year, and three applications of agrochemicals to control pests and diseases. and harvest, fermentation, drying, and continuous manual control of pests and diseases throughout the The use of machinery and tools is limited, including the use of a grass trimmer, manual spray pump, and year, in addition to maintaining the micro-landfill for waste management, following the requirements basic cultivation tools. However, they have an amount larger than the other two types, since they have of certifying agencies. The use of machinery and tools is limited, including the use of a grass trimmer, more laborers working on the field. manual spray pump, and basic cultivation tools.
© Sean Mattson / CIAT © Neil Palmer / CIAT
52 53 Table 7. Revenues and production costs of cacao in Ucayali by type in Peruvian soles55 Cost analysis by type of production system VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE
TYPE 1 TYPE 2 TYPE 3 5 ha the area under cultivation needed to generate two NO CREDIT WITH CREDIT NO CREDIT WITH CREDIT NO CREDIT WITH CREDIT Type 1 - minimum wages, while a loss of 100 kg increases the Productivity (kg/ha): 700 700 800 800 1,500 1,500 Tradicional area required, and consequently the pressure on Total Revenues (S/) 4,340.0 4,340.0 5,200.0 5,200.0 9,300.0 9,300.0 forests, in 1.7 ha. This means that productivity losses The largest cost item in Type 1 is labor, representing have a disproportionate effect on household profits, Variable Costs: 72% of the total cost, followed by the cost of land and and thus, on their livelihoods, which in turn indicates Family labor 51.8% 50.2% 43.8% 42.0% 17.4% 16.2% administrative costs (Table 7). Most of these costs that interventions able to increase the productivity of Hired labor 19.1% 18.5% 15.3% 14.7% 40.7% 37.8% do not represent cash flow, as labor is mainly family farmers with lower yields could have a larger relative Inputs 4.6% 4.4% 17.6% 16.9% 23.4% 21.8% labor, and the cost of land does not represent cash Maintenance and repairs 0.4% 0.4% 2.8% 2.6% 1.0% 0.9% impact on reducing pressure over forests. expenditures, which could create a perception among Interest rate for operating capital 0.0% 3.1% 0.0% 4.3% 0.0% 6.7% Regional statistics and testimonies from the producers producers that they have a production cost lower than Input transport 0.5% 0.5% 3.0% 2.9% 0.2% 0.2% and experts consulted reveal that the plots in the the actual cost. Product transport 3.6% 3.5% 1.3% 1.3% 1.2% 1.1% department still have primary and secondary forests, Total Variable Costs (%) 80.0% 80.6% 83.9% 84.6% 83.9% 84.7% According to the cost structure presented here, the net thus there could be some potential to enter into forest profitability per hectare for this type is S/493 a year, conservation agreements with producers from this and adding back the opportunity costs (family labor, type, increasing the productivity in existing areas. Fixed Costs: administrative costs, and the cost of land) we have an The approach of interventions for this type should Contribution to establishment 14.5% 14.0% 10.2% 9.8% 11.2% 10.4% annual income of S/3,038 per hectare. Based on these and management costs focus on increasing productivity, optimizing labor and Deferred revenue from other results, a family would need 7.35–7.6 hectares under training costs, raising awareness, and implementing -11.9% -11.5% -10.9% -10.4% -7.4% -6.9% associated crops cacao cultivation to generate two minimum monthly and monitoring good production and environmental Depreciation of machinery and equipment 1.7% 1.7% 4.5% 4.3% 2.4% 2.2% wages (MMWs). practices. Land cost 10.4% 10.1% 6.7% 6.4% 4.9% 4.6% In light of the above, it may be concluded that: a) Technical assistance 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% around 572 laborers would be required per year to Public services 1.2% 1.2% 1.3% 1.3% 0.7% 0.6% 3 ha generate 2 MMWs, 70% of which may be provided by Taxes 0.0% 0.0% 0.0% 0.0% 0.1% 0.1% the family labor available, without having a substantial Type 2 - Administration Costs 4.0% 3.9% 4.2% 4.2% 4.2% 4.2% impact on cash flows, and b) while the required area Organic Total Fixed Costs (%) 20.0% 19.4% 16.1% 15.4% 16.1% 15.3% could be planted only with cacao, it is advised to manage different production systems besides cacao, Total Costs (S/) 3,846.6 3,969.1 5,964.1 6,230.7 8,132.1 8,751.3 The selling price for this type is 30 cents above the price to mitigate market and phytosanitary risks. Net profitability (S/) 493.4 370.9 ($764.1) (1,030.7) 1,167.9 548.7 of conventional cacao, and while there are associations Breakeven point (kg) 620 640 918 959 1,312 1,412 According to sensitivity analyses (see Annex 9.3), paying higher prices, the stakeholders consulted agree Breakeven point (Price S/) 5.5 5.67 7.50 7.79 5.40 5.80 Type 1 production systems are more sensitive to price on this value as the market standard for most of the Annual household income (S/) 3,038.2 2,915.7 2,500.6 2,247.3 3,327.8 2,738.1 changes than to changes in productivity. The foregoing productive population. Hectares to generate 2 minimum wages 7.35 7.66 8.93 9.93 6.71 8.15 indicates that strategies able to increase and/or reduce The largest cost item is labor, representing 59% of the * * Prices: conventional cacao = S/ 6.3/kg ; Organic cacao = S/ 6.5/kg producer price variability could have an important total cost, followed by the cost of inputs with 17%. effect on households by considerably reducing risk. It Source: SAB Project Due to the increased spending in labor and inputs, the was found that an increase of 100 kg in productivity production costs in this type of system could be up can reduce pressure on forests in 1.1 ha, by reducing
54 55 55. 3.2 Peruvian soles are 1 USD (currency exchange rate Peruvian sol/US$) VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE to 44% higher than the cost of traditional production According to the results obtained, if the crop cycle represent an important item, with close to 7% of total Financial Analysis (Table 7). does not produce yields over 950 kg, the organic model costs. To assess the economic feasibility of investments, is not the most advisable system to apply, from an In light of its structure of costs and incomes, the net Net profitability per hectare is S/1,168 a year. Adding the estimated cash flows were analyzed for the three economic perspective. Likewise, although systems profitability per hectare is negative, with S/764 a back the opportunity costs, an annual household production system types. As shown in Table 8 and with fine and flavor varieties may receive higher prices, year. Adding back the opportunity costs, an annual income of S/3,328 per hectare is observed. The Figure 12, credits for working capital at the current they also reveal a similar cost structure (Morales et al., household income of S/2,500 per hectare is observed. breakeven points for volume and price are 1,312 kg and interest rates affect substantially the profitability and 2015), thus requiring yields higher than the regional The breakeven points for volume and price are 918 kg S/5.4, respectively, reaching 1,412 kg and S/5.8 in case of financial viability of crops. Only producers from Type average to be profitable and to reduce pressure on and S/7.5. Based on these results, a household would taking out loans. Based on these results, a family would 3, in a scenario without credit, would generate an IRR forests. As in the previous case, diversification of farm need 8.9–9.9 ha under cacao cultivation to generate need 6.7–8.2 ha under cacao cultivation to generate higher than the discount rate used (10%), being able production is recommended to mitigate risks. Under two minimum monthly wages. However, we noticed two minimum monthly wages (MMWs). Despite nearly to repay the initial investment in 10 years. A Type 2 these parameters and considering the mean area of that producers from this type usually have around 3 doubling Type 1 productivity, higher relative inputs producer generates negative flows during most part plots in the department, the potential to enter into ha, which indicates that they are currently obtaining and labor costs make the profits generated by semi- of the lifespan of the plantation, and he is never able forest conservation agreements with producers from substantially lower incomes or that they are engaged in tech production systems not substantially higher than to repay the investment. Finally, due to the high cost this type is lower than with traditional producers. other economic activities to diversify and complement profits from traditional production, especially in case of inputs and labor, a Type 3 producer is only able to In case the figures shown are representative of a their income. It was found that the additional 30 cents of taking out loans. The experts consulted claim that generate a favorable benefit-cost ratio in case he does broad group of producers, it would be necessary to from the certification and a productivity 100 kg/ha at this fertilization level and using variety CCN51, it is not take out loans. promote strategies to improve prices, while focusing above the traditional system are not enough to cover possible to obtain higher productivity; therefore, the on increasing productivity, optimizing labor costs, If they do not have alternative sources to pay the loans the additional costs of organic production, which producers consulted are likely to have underestimated reducing input costs (either by producing manure in obtained for crop establishment, the operational costs is consistent with the testimonies of stakeholders their yields, or they are not implementing the optimum the farm, collective purchases, or other strategies), and of establishment and management during the first consulted in the region. management practices, or it might be that the years of the crop cycle make it unfeasible to finance the implementation of best production management production at their farms has been affected by climate, On the other hand, experts consulted think that, production systems from the three types, especially practices. It is important to point out that the rest pests, or diseases. given the fertilization level used in the model, the of environmental and social benefits resulting from when considering the repayment periods and local production in this type might be higher than reported, organic production (and fair trade) are not being taken Similar to Type 1, semi-tech systems were found to be interest rates. substantially exceeding traditional systems, in which more sensitive to changes in prices than to changes in into consideration in this assessment, and thus it would We included a scenario for financial analysis, in which no fertilizers are incorporated; however, there is not productivity (Annex 4) and consistent with other types, be necessary to estimate them and include them for a we excluded the opportunity cost of land, as it may enough evidence to verify this claim. As shown in the model is also more sensitive to productivity losses more holistic comparison. reflect the decision of smallholders to invest on lands Table 7, this production system only makes a profit than to profits. they have available, without any productive use and with prices higher than S/6.8 and productivities equal 10 ha Considering the characteristics of this production are difficult to rent, to which they may allocate an or exceeding 950 kg/ha, and therefore, increasing the Type 3 - system, an operational costs reduction approach is opportunity cost equal to zero (Table 9). In this case, we productivity, rising the purchase price, or reducing Semitecnificado advised, through the optimization of input use and see that Type 1 shows the best Internal Rate of Return labor and input costs become imperative to make this crop management, while working on quality to obtain (IRR), while Type 3 shows the highest Net Present a profitable activity. Similar to Type 1, the sensitivity price increases. It is important to remember that these Value (NPV), in case no loans are taken out, and the analysis reveals that increases in price or productivity The largest cost item is labor, representing 58% of producers have the largest financial capacity to expand repayment period is considerably reduced in both have a decreasing marginal return, which indicates the total cost, followed by the cost of inputs with their crops, and thus it is imperative to implement cases. The financial indicators of Type 2 are improved, that lower prices and productivity translate into 23.4% (table 7). Unlike the other two types, incomes effective traceability and monitoring schemes to but it is still unfeasible, given the prices and yields used. higher pressure on forests. We also found that a from temporary crops and maize sales are not able enter into forest conservation agreement with such 100-kg increase in productivity—feasible under the to cover the deferred cost of crop establishment and producers. fertilization level reported—reduces the area required management. Due to an increased investment on to generate 2 MMWs in 1.7 ha, which may be dedicated hired labor and inputs, working capital financial costs to conservation or other uses. 56 57 Table 8. Financial indicators of cacao production by type VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE
TYPE 1 TYPE 2 TYPE 3 FINANCIAL INDICATORS WITH CREDIT NO CREDIT WITH CREDIT NO CREDIT WITH CREDIT NO CREDIT Net present value (NPV) (2,683) (1,662) (9,949) (8,101) (4,376) 778 Internal rate of return (IRR) 4.0% 6.4% NN NN 4.2% 10.9% Cost – Benefit (C/B) 0.93 0.96 0.82 0.84 0.94 1.01 Repayment Period 17 14 26 26 17 10
Source: SAB Project
Table 9. Financial indicators of cacao production by type, excluding the opportunity cost of land
TYPE 1 TYPE 2 TYPE 3 FINANCIAL INDICATORS WITH CREDIT NO CREDIT WITH CREDIT NO CREDIT WITH CREDIT NO CREDIT Net present value (NPV) 1,118 2,209 (6,078.2) (4,229.9) (505) 4,649 Internal rate of return (IRR) 12.6% 14.8% NN NN 9.34% 15.73% Cost – Benefit (C/B) 1.03 1.07 0.88 0.91 0.99 1.07 Repayment Period 10 9 25 24 11 8
Source: SAB Project
Figure 12. Gross profit in cacao production by type (scenarios without credit for working capital)
5.000 4.000 3.000 2.000
PERUVIAN SOLES 1.000 0 (1.000) (2.000) 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 YEARS (3.000) (4.000) (5.000)
(6.000) Type 1 Type 2 Type 3
Source: SAB Project
58 © Evert Thomas / CIAT 59 MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE VALUE CHAIN WITH LOW GREENHOUSE GAS EMISSIONS
CHAPTER 05 OPPORTUNITIES IN THE CACAO VALUE CHAIN FOR ITS CONVERSION INTO A DEFORESTATION-FREE CHAIN WITH LOW GHG EMISSIONS © BMU PROJECT 60 61 VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE under systems that apply practices to improve crop’s performance and yield, but also maximize the amount of carbon stored within the production system, in a way such as to reduce GHG emissions additional to those avoided by halting deforestation. Under no circumstances this plan and the business models arising herein shall entail land use change. The following figure shows these options in the form of a decision tree (see Figure 13). Taking into account this legal context for land use in Peru, and considering the technical conditions (according to the land’s main capacity for use) and the legal status of land, below are described the opportunities detected to promote zero deforestation and emission reductions in the chain. Such opportunities are identified and grouped as follows: opportunities from different chain links, opportunities in the production system, and opportunities in the type of business model established.
Figure 13. Potential interventions in value chains and business models for contexts in which the link between 05 deforestation and agricultural commodities is ambiguous. OPPORTUNITIES IN THE CACAO VALUE CHAIN FOR ITS CONVERSION INTO A DEFORESTATION-FREE CHAIN WITH 2 LOW GHG EMISSIONS 1 3
5.1. Opportunities in the LANDSCAPES IN UCAYALI current land-use scenarios
56 Cacao is a crop with presence in districts with high deforestation rates , therefore, it is ALTERNATIVES TO PROMOTE WITH CHAIN SUITABILITY CURRENT USE SCENARIO STRATEGIES AND DEFORESTATION-FREE important to develop a deforestation-free cacao value chain strategy able to identify actions BUSINESS MODELS through the legal land-use provisions in force in Peru, to be implemented across the different links in the chain, which could make a contribution towards the conservation of forests and the reduction of GHGs. In this connection, this section proposes improvements in cacao 1 FOREST FOREST FOREST CONSERVATION production practices and other actions that could promote a value chain that contributes to the conservation of forests and the reduction of GHGs from its different links, in accordance CACAO AGROFORESTRY 2 RESTORATION to what Forest and Wildlife Law (Law No. 29763) stipulates, in terms of land-use aptitude FOREST OTHER USES FOREST CONSERVATION (see Section 2.1.1). It is of utmost importance that the opportunities identified in the value chain to contribute to forest conservation are in line with this legal framework. If the latter is taken into account in areas suitable for forestry, cacao is viable, provided that these are AGROFORESTRY CACAO areas that have already undergone land-use change and the crop is established under an 3 AGRICULTURE GOOD PRACTICES FOREST CONSERVATION agroforestry system. Within the scope of this document, it is suggested that cacao be grown
62 63 56. For further details, refer to Section 4.1 on the spatial association between crops and deforestation. Source: Prepared by the authors based on the Forest and Wildlife Law (Law No. 29763) and Castro-Nunez et al. (Under review). VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE Nationwide, it has been estimated that the 5.2. Options for GHG-reduction measures establishment of cacao plantations under agroforestry 57 in cacao production systems systems on grasslands and other land uses with moderate to high degradation, has the potential to mitigate close to 2,359 MT CO eq (MINAM, 2015). Crop management practices to reduce emissions are oriented towards lowering the impact on the most critical Promotion of cacao planting in new 2 points of the system or those with the highest emissions. According with the results from the carbon footprint areas on lands already deforested On such degraded lands, cacao facilitates the analysis (see Section 4.2), such crop management practices should be oriented towards the reduction of emissions In Peru, the emissions generated by the LULUCF sector development of practices that could restore some from land-use change, which may represent up to 99% of emissions in crops established on recently deforested represent the largest contribution to total emissions, features of the ecosystem and accelerate its recovery, areas. The second critical point is fertilizer management, since the peak of emissions in the primary production accounting for 51%, from which the main source of while generating increases in crop productivity. Some system is represented by the manufacture of inputs, followed by their use on the field and their transport. The emissions is the conversion of forests into pastures, of these practices include organic fertilization and potential practices to reduce emissions from the crop are presented below (Table 10). with 92% of emissions (INGEI, 2012). Consequently, the establishment of cover crops, which improve the biological, physical, and chemical conditions of the Table 10. Practices to reduce GHG emissions on regularized farms with adequate agricultural suitability. national policies address the control of deforestation as a key point in the regional agenda. soil, they are easy to implement, they increase yields and reduce the need for producers to expand into new REDUCTION Similarly, regional plans to increase cacao production PRACTICE COMPONENT REDUCTION POINT OTHER IMPACTS areas. POTENTIAL should focus on the establishment of plantations on already deforested and degraded areas, as long as Avoiding the deforestation of areas with Biodiversity Land-use change High they meet the formal tenure requirements, as well as high carbon stock Water balance Promotion of cacao planting in the technical conditions according to their suitability, new areas on lands already intervened to prevent the conversion of new primary forest areas Planting on deforested and degraded areas Land-use change High Restoration or regenerating areas. Regarding already deforested Introduction of agroforestry areas, the plantations should be established on cacao systems areas deforested prior to 2011, in order to have their production labeled as deforestation-free (according Cacao agroforestry systems (AFS) are a good option for Implementation of Incorporation of trees in the crop Mitigation Medium Biodiversity to MINAM, deforestation-free agricultural production reforestation and the recovery of degraded agricultural agroforestry systems refers to existing or new agricultural activities on lands, in addition to be a key element for landscape deforested areas that were occupied prior to 2011, connectivity (Arvelo et al., 2017). Moreover, AFS have Dosage management, source and type of being carried out by farmers and livestock owners an important role on climate change mitigation, as Medium fertilizers, time and place of application either individually, in association, as a cooperative, they reduce the pressure on forests. Depending on the Eutrophication Optimization of fertilizer Nitrification inhibitors High Manufacturing, transport, or in partnerships, preventing the loss of forest cover system and management, they can show high rates application and soil Air quality and use of fertilizers in the geographical location under their control, in of carbon accumulation and offset GHG emissions amendments Organic fertilizer Medium Pollution compliance with the legal framework in force), or prior (Montagnini et al., 2015). Introducing leguminous plants Medium to 2000, if the carbon footprint indicator is required Different scientific reports indicate that cacao as a by buyers in any of the deforestation-free business monoculture can store up to 67.3 tons of carbon per models. The establishment of new cacao areas on Increasing crop production hectare, with accumulation rates ranging between Cover crops Use of fertilizers Medium Water balance per unit area degraded land increases carbon stocks in the region; 1.7 and 2.5 tons of carbon/ha/year. When cacao is even more so, if these systems incorporate other established under large agroforestry arrangements, practices to increase carbon storage, such as planting carbon content might reach up to 131.1 ton carbon/ Source: Prepared by the authors under agroforestry systems, which in some scenarios ha, depending on the arrangement, the tree species could offset the CO emissions. 2 incorporated, and ecologic conditions (Callo-Concha 57. It should be considered that cacao plantations should be established on regularized lands suitable for agricultural use, or with assignment 64 65 contracts for use in agroforestry systems, in compliance with the Peruvian laws. VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE
et al., 2002; Alvarado, 2008; Ortiz et al., 2016; Cuellar et fold the total applied (Groenigen et al., 2011). agroforestry systems have shown that CH4 and N2O al., 2015; Díaz-Chuquizuta et al., 2016; Marín et al., 2016; Similarly, the application of new technologies, like emissions throughout the biodegradation process Pocamucha et al., 2016; Vela, 2014; Zavala et al., 2018). urease and nitrification inhibitors, could represent depend upon the type of composting system and the an option to reduce nitrogen losses in the form of time it takes to be produced. The transformation of fresh matter (cacao pod husk) into compost is around N2O. Previous reports indicate that nitrification inhibitors and polymer-coated fertilizers reduce N O 8.5 kg to 1 kg. When crop residues are left on the soil, 2 they can produce 0.2 kg CH and 0.004 kg N O, which emissions by 38% and 35%, respectively, compared to 4 2 is equivalent to 7.69 kg CO eq. The proper composting conventional nitrogen fertilizers (Akiyama et al., 2010). 2 of these residues produces 0.0034 kg CH and 0.0025 Optimization of fertilizer application It is important to consider that the action and potential 4 kg N O, representing 1.61 kg CO eq. (Ortiz et al., 2016). and soil amendments of these materials may vary, depending on soil and 2 2 climate conditions. Urease and nitrification inhibitors Agriculture is the third sector with the highest can reduce emissions up to 50% in dry climates, but emissions in Peru, accounting for 15% of the country’s in humid weather, they can vary widely (Millar et al, total, where the emissions from soil management 2014). In addition, soils with high leaching potential will represent 47% of the sector (INGEI 2014). This category obtain more benefits from this type of fertilizer than includes emissions caused by the use of fertilizers. It is poorly drained soils (Nelson et al., 2008). Use of cover crops estimated that, for each kilogram of nitrogen applied or noble weed In other production systems, such as irrigated maize, to the soil, the emissions reach up to 50 grams of N2O (Groenigen et al., 2011). the use of urea coated with a special polymer has been The implementation of cover crops is recommended tested, as it allows the slow release of nitrogen, which in the early years of the cacao crop, given the In the carbon footprint analysis, the use of fertilizers is controlled under specific humidity and temperature positive effects they generate, such as soil and water and soil amendments is the single process generating conditions. This practice reduced N O emissions conservation, apart from serving as natural pest the highest GHG emissions in organic and semi-tech 2 by 42% in comparison to traditional urea, and 14% and disease control. With the implementation of systems, without the influence of land-use change compared to a solution of urea and ammonium nitrate this practice, direct emissions from soil are reduced from deforestation. Management practices should (NH NO ). Stabilized urea (urea with added nitrification (as they substitute mineral nitrogen fertilizers) and focus on the implementation of alternatives to improve 4 3 inhibitors and ureases) reduced N O emissions by CO emissions from the manufacture and transport the efficiency of fertilization, such as fertilization 2 2 46% in comparison to conventional urea, and 21% in of mineral sources, and they also increase carbon management based on soil analysis, split application, comparison to urea-NH NO . Mixing some sources stock in the system. Studies report contributions use of slow-release coated products, incorporation 4 3 could reduce up to 61% N O emissions (Halvorson et from leguminous species in association over 50 kg N/ of nitrogen-fixing species, and the use of nitrification 2 al., 2014). ha, which would prevent the application of chemical inhibitors, among others. fertilizers and thus the emission of nearly 200 kg It has been shown that balanced nitrogen management CO2eq/ha (Domingo et al, 2014; Kaye and Quemada, practices and crop rotation reduce N2O emissions 2017). (Snyder et al., 2009; Adviento-Borbe et al., 2007). Such is the case of nitrogen split applications based on soil analyses. Excessive nitrogen applications have been Use of organic fertilizers found to increase exponentially N2O release into the atmosphere. Applications of up to 10 kg N/ha above There is potential to transform the husk of cacao pods plant’s nutritional requirements do not show significant (fruits) into organic fertilizers, which are compounds originating from the degradation of plant residues. differences in N2O emissions, while a surplus of up to Carbon footprint studies in conventional and 90 kg N/ha increase N2O emissions more than three- 66 © Neil Palmer/ CIAT 67 5.3. Opportunities and contributions VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE of the cacao and chocolate value chain stakeholders
Taking the Ucayali cacao and chocolate value chain map (shown in section 3.2) as starting point, we explored the contribution and opportunities of different stakeholders to promote and encourage a deforestation-free chain. To this end, we collected secondary information (national and regional legal framework and public policy instruments, among others) as well as primary information, mainly through semi-structured interviews with chain stakeholders who had been mapped. Figure 14 shows the micro level: direct actors of the value chain links, and the potential contributions they could do towards the development of a deforestation-free value chain with low emissions. In the first link, agricultural inputs and plant materials, the efforts could be directed towards innovation, commercialization, and promotion of slow- release nitrogen fertilizers and nitrification inhibitors. These actions would contribute to reduce GHG emissions.
© Ukaw Chocolates Figure 14. Opportunities and contribution of chain links at the micro level, towards the conservation of forests and the reduction of GHG.
MICRO-LEVEL
PRIMARY PRODUCTION: COLLECTION OF DRIED CACAO TRANSFORMATION: AGRICULTURAL INPUTS EXPORT: CONSUMPTION AND PLANTING MATERIAL INDIVIDUAL AND ASSOCIATED BEANS AND IN THE PULP: chocolate companies with exporting companies and PRODUCERS COOPERATIVES a sustainability approach cooperatives
• Commercializatoin of inputs with • Establishment of cacao on former • Post-harvest facilities • Purchaseof cacao beans with • Purchaseof cacao beans with • Growing international demand environmental certification coca and pasture areas environmental certification environmental certification for environmentally sustainable, • Traceability processes at products with low GHG emissions • Research on chemical compound • Soil analysis and split application cooperatives commercializing • Internal procedures to verify GAP • Traceability from deforestation-free areas Innovation certified cacao beans • Production of cacao beans with • Interest in ensuring the compliance • Local chocolate and confectionery • Innovation in products of natural environmental certification with forest protection and consumers who recognize the value origin agricultural waste management of a deforestation-free chain • Post-harvest protocols • Brand positioning as sustainable chocolate makers
Source: SAB Project
68 69 VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE The second link, primary production of cacao that collect certified beans. Currently, there are positioned the brand as a chocolate business with a (individual and associated producers), shows that the cooperatives working with UTZ-Rainforest Alliance58, sustainable approach. This model could be expanded main efforts should be a commitment to establish Bio Suisse, and Fairtrade certified beans. The Rainforest to other chocolate transforming companies. cacao plantations on former coca plantations and Alliance certification takes into consideration non- Reg arding the fif th link, expor t, it includes cooper atives pastures. Considering that the main source of deforestation in agricultural operations, besides the and exporting companies that could commercialize emissions in the production of cacao beans is land- ban on burns as a practice to clear the soil. While this certified cacao beans with environmental criteria use change (see Section 4.2 for further details), there certification takes into account different elements (e.g., deforestation-free) in international markets, is a great significance in the efforts by producers to achieve sustainability in the production of cacao which would entail the implementation of product to establish new cacao areas on lands suitable for beans, it is important to highlight the requirements traceability systems. Currently, there are only two agriculture (respecting their main capacity for use and related to non-deforestation and the reduction of cacao cooperatives exporting certified beans, they are formal tenure requirements), leaving aside practices GHG emissions. Cooperatives could also implement the Central Committee for the Future Development like logging, while respecting forest management post-harvest facilities, also known as processing of Curimaná and the Colpa de Loros Agricultural regulations (see Section 2.1 on Land Ownership and centers, where the process is centralized to ensure Cooperative for Flavor Cocoa. Finally, the opportunity Management). In this regard, new cacao productive bean quality, following efficient processes for waste to promote deforestation-free chocolate in the projects should only be established on lands that management. Currently, there are few cooperatives consumption link would mainly involve international meet the technical conditions and the formal tenure opting for centralizing this process, including the Colpa chocolate and confectionery consumers interested requirements. Additionally, at the primary production de Loros Agricultural Cooperative for Flavor Cocoa and in deforestation-free products. The willingness of stage, soil analysis helps identifying the nutritional the Central Committee for the Future Development of national consumers to purchase deforestation-free requirements to sustain the plantation and define the Curimaná. In light of this, the cooperatives could set chocolate still needs to be explored. necessary agricultural input package more efficiently. in a traceability process to ensure they are collecting However, there is still an important gap to be filled deforestation-free cacao. The implementation of such At the meso level, there are various institutions and regarding the efficient use of agricultural inputs, a system would require incentives for cooperatives, agencies providing services to the cacao and chocolate mainly fertilizers, on the part of smallholders. The lack through prices or environmental incentives. value chain, mainly in the first four links. These are of financial resources by producers, little knowledge mostly public institutions that provide technical The fourth link, transformation, is represented by assistance, as well as institutional and commercial about the importance of performing soil nutritional chocolate companies. In the region, there is only one analyses, and poor technical assistance on good coordination to chain stakeholders. Figure 15 company, Pasión y Chocolate S.A., with a sustainability describes their main contributions to a deforestation- agricultural practices are leading to low productivity, approach in its operations. To this effect, they buy and thus, to a potential need for producers to expand free and low-emissions value chain. It should be certified cacao beans that meet environmental noted that such contributions are opportunities this current model into new areas. On the other hand, criteria, they have internal processes to verify the the certified cacao bean production that includes for other institutions pursuing the same goals to fulfillment of good agricultural practices, and they ensure the conservation of the Amazon forests, while environmental criteria, such as not expanding also have a strong interest in ensuring the protection production into forest areas, could help promote a maintaining the competitiveness of the cacao and of forests and agricultural waste management in the chocolate value chain. deforestation-free cacao. While regional production production of cacao beans. In addition, they have of certified cacao beans is still small, the international
market is increasingly requiring environmentally 58. Since 2018, UTZ and the Rainforest Alliance merged into a single sustainable raw materials. organization called “Rainforest Alliance”, creating a single global In the third link, collection of dried cacao beans or in certification standard for farmers and companies committed to responsible and efficient value chains. Available at: https://utz. the pulp, the contribution to develop a deforestation- org/wp-content/uploads/2017/06/Rainforest-Alliance-UTZ_Press_ free value chain could focus on the cooperatives Release_Spanish.pdf
70 © Neil Palmer / CIAT 71 VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE Figure 15. Contribution of meso-level stakeholders to the conservation of forests and the reduction of GHG Figure 16. Contribution of macro-level stakeholders to the conservation of forests and the reduction of GHG
MESO-LEVEL MACRO-LEVEL
` Promotion of cacao cultivation in areas suitable for agriculture MINISTRY OF MINISTRY OF THE FOREST AND WILDLIFE UCAYALI REGIONAL ALIANZA CACAO AGRICULTURE AND ` Technical assistance to increase productivity in current areas (no expansion) ENVIRONMENT NATIONAL AUTHORITY PERÚ IRRIGATION GOVERNMENT ` Promotion and assistance on composting of harvest residues to reduce methane emissions
• National Environmental • National Agricultural Policy • Forest and Wildlife • Ucayali Concerted ` Promotion and assistance on alternative development model Policy National Information Development Regional DEVIDA • National Family Farming System Plan 2011– 2021 (being ` Soil recovery by establishing cacao on former coca plantations • National Environmental Strategy updated) Management System • Forest and Wildlife Law • Cacao and Chocolate • Regional Climate Change • Climate Change (CC) National Plan (under • Forest Zoning (under Strategy 2019–2022 Framework Law development) development) ` Promotion and technical assistance to increase productivity in current areas • Ecological-Economic INSTITUTO NACIONAL • National CC Strategy • Land Classification • Sustainable, Inclusive, Zoning DE INNOVACIÓN ` Promoting of the use of organic fertilizers Regulation based on their and Competitive Forest AGRARIA • National Forest and CC Main Capacity for Use Development for the • Cacao Competitiveness ` Promoting and piloting agro-forestry systems Strategy Peruvian Amazon Program Plan in Ucayali 2019–2029 • Environmental (SERFOR – CAF) • National Forest Management Regulations Conservation Program to for the Agricultural Sector ` Trials with AMF fertilizers on degraded soils Mitigate Climate Change INSTITUTO DE INVESTIGACIONES DE LA ` Research on natural alternatives to manage cacao • Green Growth guidelines AMAZONÍA ` Promotion of the sustainable management of forests
Source: SAB Project PROGRAMA DE COMPENSACIONES PARA ` Co-financing of agricultural productive reconversion projects LA COMPETITIVIDAD – AGROIDEAS ` Ban on financing business plans on Permanent Production Forests (BPP)
PROCOMPITE ` Integration of environmental sustainability criteria into the selection process of business plans to be co- financed
Source: SAB Project
72 73 MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE VALUE CHAIN WITH LOW GREENHOUSE GAS EMISSIONS
CHAPTER 06 DEFORESTATION-FREE BUSINESS MODEL
© Sean Mattson / @CIAT Flicker 74 75 VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE the generation of added value for a deforestation- promote the conservation of forest (see Section 5.1) and free cacao production (see Annex 9.4). Taking the analysis of study cases for the implementation of the deforestation-free value chain as conceptual deforestation-free business models in other countries, framework (see Figure 4), this tool is a way to take it is possible to build a general outline of a business concept into practice. Additionally, international study model for the production of deforestation-free cacao. cases will be taken as inputs for the analysis, to be able Figure 17 shows a general outline proposal of a to identify successful practices for a cacao production deforestation-free cacao business model, where the that helps addressing drivers of deforestation. different stakeholders involved in the value chain are Therefore, based on the review of existing business identified, as well as their corresponding interactions, models for cacao production in the Ucayali region, the based on product, cash, and information flows, in 06 potential contributions from each chain stakeholder to addition to purchase contracts.
DEFORESTATION-FREE Figure 17. General outline of the deforestation-free business model Information Loan + insurance BUSINESS MODEL PRODUCERS Asistencia técnica Zero deforestation Technical Assistance Contratos de compra cero deforestación contracts Payment Fruit Info
IMPACT Investment INVESTOR INSURANCE COMPANY Loan The development of a deforestation-free business model has the purpose of granting Grant Technical added value to cacao production to contribute to forest conservation and the reduction of Assistance TECHNICAL Credit Return PUBLIC GHG emissions. Reaching this goal entails the alignment of all stakeholders engaged in the PRODUCER ofInvestment ASSISTANCE AND payment FINANCIERS ASSOCIATION value chain, ranging from producer to final consumer, along with vendors and investors. MONITORING Information INVESTMENT This would mean that all stakeholders would have access to information, incentives, and (TOOLS) VEHICLE Info
the necessary tools to ensure that cacao production and consumption is not causing Information INTERNATIONAL deforestation. COOPERATION purchase contracts Non-reimbursable Zero deforestation cooperation Collected fruit Payment Info 6.1. Outline of the Deforestation-free
Business Model POST-HARVEST CENTERS
Information Deforestation-free business models are a relatively recent concept, and thus, there is still TRADERS Product flow no consolidated methodology for its effective implementation. However, to develop $ flow Product a deforestation-free business model in the Ucayali region, it was suggested to apply the Information flow MANUFACTURERS Payment FINAL CONSUMER Business Model Canvas proposed by Alexander Osterwalder in 2010 and to adapt it to A Contracts Source: SAB Project
76 77 VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE The development of the deforestation-free model Table 11. Stakeholders linked to a deforestation-free business model with low GHG emissions centers on producer associations, through which it is possible to enter purchase contracts for deforestation- ROLE TO CONTRIBUTE TO A DEFORESTATION-FREE STAKEHOLDER ACTIVITY DESCRIPTION free products with their associates, as well as with BUSINESS MODEL WITH LOW GHG EMISSIONS traders and manufacturers. Likewise, through the associations, the technical assistance services may Hold legal tenure of the production area and the land should meet the technical conditions, according to their main capacity for use, Grow cacao, collect his product and take it to the producer be strengthened to improve crop yields and thus, Producer ensuring the cultivation is not carried out on forests. Perform soil association. discourage the expansion into new areas with natural analyses to identify nutritional needs and make an efficient use of forests. agricultural inputs (to reduce GHG emissions). Taking into account that one of the main challenges facing producers is the lack of adequate financing to Promote and demand fruits from deforestation-free plantations. carry out fertilization or crop renovation activities, Cooperative organization or private company bringing together producers from a certain area. Their main role is buying fruits Promote the adoption of standards or systems to verify the producer associations can manage the access to Producer from producers of the area for their subsequent collection and compliance with zero deforestation commitments. associations financial services, with preferential conditions for processing. Additionally, it provides technical assistance services those producers committed to offer a deforestation- and facilitates the access of its associates to financial services. Access markets offering an added value to deforestation-free products. free product. To be able to provide preferential financial services, it is necessary to combine public or international cooperation resources with private They should promote and demand that the product being processed and commercialized is a deforestation-free product, financial resources, in order to offer better financial Post-harvest centers / This refers to different stakeholders in charge of processing and which means that an added value is granted to deforestation-free Transporters / Traders / commercializing the product from the producer association to the conditions than the market, in terms of interest rates, products, traceability is ensured across the chain, from producer Manufacturers final consumer. installments, or grace periods. to final consumer, and that final consumers are informed that they are acquiring a deforestation-free product. An additional requirement to be able to offer and ensure
a deforestation-free product, is having a monitoring, The main role of technical assistance is improving the production report, and verification system (MRV) in place which, This could be provided by an independent entity or an in existing plantations, with the purpose of discouraging the Agricultural technical organization linked directly to the producer association, with the expansion of crops into new areas beyond the agricultural frontier. on the one hand, allows the verification that cacao assistance service purpose of improving the production capacities of cacao growers. Additionally, they provide technological packages to contribute to plantations have not generated deforestation, and the reduction of GHG emissions from the field. on the other, make it possible to maintain product traceability, from plantation to final consumer. This is an information system to, as the name suggests, The MRV system must provide all chain stakeholders with clear, Monitoring, reporting, and monitor, report, and verify that cacao production is carried out in accurate, and updated information on the impacts of cacao Table 11 describes in detail the role of each stakeholder verification (MRV) system deforestation-free areas. production on natural forests. linked to the cacao business model and their contribution to a deforestation-free business model. The final consumer should be an informed user that demands and Final consumer This is the last customer along the product value chain. recognizes the value of a deforestation-free product.
Their main role is not to finance cacao production associated to This refers to public, private, or international cooperation illicit deforestation activities, but to offer preferential financial Investors or financiers financial institutions that invest or offer financial services to the conditions to promote the cultivation of a deforestation-free different stakeholders linked to the product value chain. product.
78 © Vía Marketing Source: SAB Project 79 VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE techniques and the lack of technical resources, which Figure 18. Outline of the business model 6.2. Successful are considered one of the main causes of the large- cases study of scale expansion of cacao and regional deforestation (AATIF, 2019). Information Information business models PRODUCERS This study case emphasizes how the link to Wienco Technical assistance purchase agreement (agribusiness commercial intermediary which does Deforestation-free Payment Credit Fruit
The analysis of an international study case provides Info not buy cacao) was able to generate a transformational important inputs for the successful development of change throughout the cacao supply chain. It also a deforestation-free business model for the cacao Information highlights the importance of financial risk reduction value chain. The elements of analysis include the mechanisms and the provision of tailor-made technical Info methodology used to select the study case, the Investment KFW assistance as instruments to stimulate the interest of RAINFOREST WIENCO ALLIANCE Technical Credit general description of the business model selected assistance AGRICULTURE DEUTSCHE private investors to engage in the project (Convergence, COCOA Return of BANK along with its stakeholders and their corresponding investment 2015). ABRAPOPA Payment AATIF UTZ Information AFRICA AGRICULTURE AND BMU roles, the value proposition, and the challenges and FEDERAL MINISTRY OF THE CERTIFIED TRADE INVESTMENT FUND ENVIRONMENT, NATURE CONSERVATION opportunities identified. The lessons learned and As shown in Figure 18, the business model is based Agreement Information AND NUCLEAR SAFETY potential success factors to develop deforestation-free on the agricultural technical assistance service and CERTIFICATIONS COOPERATIVES INVESTMENT FUNDS INVESTORS financing provided by the Cocoa Abrabopa Association,
business models are also included. purchase agreement Deforestation-free Collected fruit Information
through tailor-made assistance and financing Payment To select the study case, an initial pre-selection of seven packages for the purchase of agricultural inputs for deforestation-free business models in the coffee, producers. The cooperative provides its services to cacao, and oil palm value chains was carried out (see 9,000 associates, who own 30,000 ha of cacao. As Annex 9.6). Based on the seven study cases identified, POST-HARVEST CENTERS a result of the beneficial effects of the project, the the case of Ghana was selected, as it was a combined associated producers increased their yields in 100%, Information financial model (blended finance), which allowed TRADERS compared to non beneficiaries of the project. This way, for a 100%-increase in smallholder productivity, the expansion of cacao plantations was discouraged, Product while enabling the incorporation of deforestation- MANUFACTURERS FINAL CONSUMER reducing in turn the pressure on forests (AATIF, 2020), Payment free practices. This in turn is in line with the project in line with Ghana’s national REDD+ strategy (Republic goal seeking to reduce deforestation and increase of Ghana, Forestry Commission, GhREDD+, & Forest Source: SAB Project productivity. Carbon Partnership, 2016). The financial instrument developed for the project Study case on deforestation- was a risk capital fund that combined resources from free cacao in Ghana KfW, Deutsche Bank, and the German Government to Apart from the improvements in productivity, the was being implemented, such as the expansion of attract private investors. The resources were allocated project also promoted the use of climate-smart the agricultural frontier, increase of logging activities The study case on deforestation-free cacao in Ghana through a 20 million dollar credit granted by the Africa practices for cacao, and the adoption of the Rainforest and coal production, forest fires, development illustrates how can public financial securities be used Agriculture and Trade Investment Fund to Wienco, Alliance and UTZ certificates by cacao growers. It has of infrastructure and mining (Forest Carbon to attract commercial bank investments towards an the subsidiary of the Cocoa Abrabopa Association. To not been possible to quantify the direct impacts of Partnership, Forestry Commission, & GhREDD+, agricultural value chain, by incentivizing sustainable reduce the default risk and exposure of the cooperative this project in terms of deforestation reduction, since 2015), which led to increased deforestation. production, while protecting forests within supply to risk, farmers were required to contribute an initial other external factors took place at the same time it chains. The project goal was to address low productivity payment equal to 30% of inputs. in cacao, as a result of inefficient management
80 81 Value proposition VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE Figure 19 shows the value proposition for producers, investors, and buyers linked to the study case in Ghana.
Figure 19. Value proposition for producers, investors, and buyers
PRODUCERS AND INVESTORS BUYERS COOPERATIVES
Financial and in-kind support for 9,000 Use of public and private resources Certified product producer associated to the cooperative as investment capital Improvement of product quality Technical assistance Use of financial securities and spreading Mitigation of reputational risks risk to attract different kinds of investors Tailor-made technical assistance packages for Secured product volume increase producers Link to an agribusiness commercial Climate-smart agriculture intermediary which does not buy cacao Business training Promotion of sustainable production and 100% productivity increase forest protection Successful UTZ and © Vía Marketing Rainforest alliance certification
Source: SAB Project Stakeholders involved Challenges and opportunities Wienco: it is a trading company of agricultural this was the entity granting the loan used by Wienco products (rice, maize, and cotton), which is also a to finance producer support activities. It was a US Figure 20 summarizes the challenges identified for the study case with the corresponding opportunities for each provider of agricultural inputs and financial services 20-million-dollar loan for a term of five years to finance one of them. for agriculture (Wienco Ghana Limited - Commodity the purchase of agricultural inputs of Cocoa Abrabopa associates (AATIF, 2020). Trading Company, 2020). Figure 20. Challenges and opportunities of the business model Cocoa Abrabopa: it is an association of cacao growers Investors: the business model combined different (subsidiary of Wienco). The services provided to its types of investors with different levels of risk, with associates include agricultural extension, advise on the purpose of spreading the risk and attract different sustainable cacao production certifications (UTZ), types of investors (Figure 19). The loan was structured CHALLENGES OPPORTUNITIES tailor-made agricultural input and financing packages, in several “seniority tranches”, in which the first loss professionalization of cacao producers, access to funds (share c) were public resources from the German pension systems for cacao producers, and promotion Federal Ministry of Economic Cooperation and Farmers do not meet the requirements to get credit Bankization of small agricultural producers and use of micro-finance to expand credit grant of climate-smart practices (Cocoa Abrabopa, 2020). Development; the second loss funds (share b) were Fall in international prices of cacao purchase allocated by KfW (the German Development Bank), Identify specific market spaces of lower price volatility of cacao África Agriculture and Trade Investment Fund: it Risk of climate variability and Deutsche Bank (a German commercial bank), is a public-private fund to promote investments in Develop agro-climatic insurances while the lower risk funds (share a) were allocated by the agricultural value chain. For the business model, private investors (Convergence, 2015). Source: SAB Project 82 83 Lessons learned and potential success factors VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE
Below are the lessons learned for the study case:
Articulation of the goals of all chain stakeholders through constant dialog and feedback
Spreading investors’ risk through the combination of public and private resources and the use of financial securities
Combination of technical assistance and financing through the creation of tailor-made technical assistance and financing packages for producers
Incorporation of environmental criteria into the business model using environmental certifications that promote the adoption of climate-smart practices and contribute to control deforestation
Counting on an updated, reliable, and available information system
84 © Ukaw Chocolates 85 MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE VALUE CHAIN WITH LOW GREENHOUSE GAS EMISSIONS
CHAPTER 07 ACTION PLAN TO REDUCE DEFORESTATION AND GREENHOUSE GAS (GHG) EMISSIONS IN THE CACAO AND CHOCOLATE VALUE CHAIN IN THE UCAYALI REGION © Neil Palmer / @CIAT Flicker 86 87 VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE 07 “By year 2030, Ucayali is an Amazon region that preserves ACTION PLAN TO REDUCE its forests through different conservation mechanisms, such as natural areas, conservation concessions, and indigenous DEFORESTATION AND GREENHOUSE GAS reservations, among other initiatives, while promoting the resilience of these natural spaces through the sustainable (GHG) EMISSIONS IN THE CACAO production of its forests, contributing to the national commitment to reduce GHG emissions associated to the AND CHOCOLATE VALUE CHAIN LULUCF sector, reducing the vulnerabilities of biodiversity, forest landscapes, as well as indigenous, non-indigenous, IN THE UCAYALI REGION and rural populations with links to the forest, which depend on its ecosystem services”. Also with the sectoral competitiveness plan, where chain stakeholders have proposed the incorporation of environmental issues, 7.1. Purpose and inputs as part of a revised vision under the SAB project framework, as follows: “By 2030, the cacao value chain for the action plan in Ucayali consolidates its participation in differentiated markets at the national and international level, in a The purpose of this action plan is to support GOREU in its commitment to reduce competitive, inclusive, and sustainable manner. It generates GHG emissions from deforestation in the agricultural sector, and thus contribute to better incomes, improves the wellbeing of its stakeholders the economic greening of the region, by strengthening and improving the cacao and by strengthening the partnership culture and institutional chocolate value chain. The plan also seeks to create the conditions to increase the articulation, and it contributes to the conservation of forests efficiency of soil sustainable management to improve and increase land productivity, and the environment”. reduce production costs by raising the profitability of producers, optimize the cost- benefit ratio for companies, generate enabling conditions to invest in the development of the value chain, and ensure better articulation of different chain stakeholders. Through all these actions, the action plan is expected to contribute to reduce emissions from deforestation and other cacao cultivation practices. This plan is based on and articulated with strategic public policy instruments and the development vision for the region, which is stated in the Regional Climate Change 88 Strategy and reads as follows: © Neil Palmer / CIAT 89 VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE The inputs to develop the action plan included the results of the sectoral multi-stakeholder platform workshops, interviews to key stakeholders from the public and private sector, strategic planning meetings with experts, and the regional public policy instruments. The sectoral multi-stakeholder platform (Figure 21) has been of utmost importance, as it gathers representatives from different chain links, from primary cacao production, through chocolate and by-product transformation, in addition to stakeholders providing different services across the chain, both from the public and private sector, to distributors and traders.
Figure 21. Multi-stakeholder platform for the cacao and chocolate value chain (Pucallpa, November 2019)
Source: SAB Project
The platform has entailed the creation of a plural space to discuss and channel efforts towards a deforestation- free cacao and chocolate value chain with low GHG emissions. Therefore, this plan has been jointly designed by facilitating the adoption process by the cacao and chocolate value chain stakeholders.
90 © Neil Palmer/ CIAT 91 Annual Annual Annual PROJECTED PROJECTED TIMEFRAME PROJECTED PROJECTED TIMEFRAME Continuous Continuous Continuous Continuous Continuous
INIA PNIA PNIA MINAM SINEACE Concytec Concytec Rabobank BBVA, BCP BBVA, Committee Committee RABOBANK. Universities Universities Universities PARTNERS Innóvate Perú Innóvate Innóvate Perú Innóvate PARTNERS DRAU, ACP, LOCAL LOCAL ACP, DRAU, Cajas Municipales, Regional Technical Technical Regional Regional Technical Technical Regional Financial operators MINAGRI-DGFA (ask) MINAGRI-DGFA GOVERNMENTS, OPAs. GOVERNMENTS,
INIA INIA CITE DRAU Cacao GOREU Produce DIREPRO (GOREU) ENTITY PRODUCE PRODUCE DIREPROU DIREPROU Companies ENTITIES Universities Committee for GOREU, DEVIDA GOREU, ARAU, Regional ARAU, Forest Authority Forest RESPONSIBLE RESPONSIBLE Regional Technical Technical Regional GOREU-Fondesam, GOREU-Fondesam, year year year year GOAL GOAL per year financed 5 projects 5 projects workshops of producers producers of stakeholders and approved 50 per year, % 50 per year, with access to with key chainwith key 4 trainings per 4 trainings 3 informational 1 workshop per1 workshop 2 workshops per2 workshops approved credits approved 50 people trained 50 people trained 2 agreements per 2 agreements 2 plans completed
funds. programs workshops workshops INDICATOR INDICATOR through virtual through to disseminate plans prepared No. of business of No. of projects and projects of advanced skills research centers research No. of innovation of No. projects in cacao projects No. of workshops of No. innovation funds. innovation in the formulation public and private No. of agreements agreements of No. business plans for and universities orand universities funds and contests No. of informational of No. No. of trainings held trainings of No. between companiesbetween financed with public No. of dissemination of No. No. of people trained people trained of No. No. of people trained people trained of No. No. of specialists with of No. operational cooperation cooperation ACTIVITIES ACTIVITIES generating value generating financing with an Development, andDevelopment, Innovation (R+D+i) Innovation financing, and from and from financing, program to harness program funds for small and small funds for for the improvement the improvement for of infrastructure and infrastructure of Inform of options for options of Inform equipment for existing for equipment Virtual “online” training Virtual “online” training Preparation of business of Preparation to attract public-private to attract Research, Technological Technological Research, plans which will provide provide plans which will environmental approach environmental Integration of academia/ of Integration Integration of innovation of Integration pilot facilities to become facilities pilot on environmental issues, issues, on environmental research with companies research public policy instrumentspublic policy medium-sized companies the Promotion of Scientific of the Promotion resources oriented towards towards oriented resources Training of trainers program program trainers of Training Dissemination of the Law for the Law Dissemination of Framework of activities of Framework approach BOTTLENECKS BOTTLENECKS
sub-products environmental environmental Limited human services with an subjects regarding subjects regarding access to financial the development of the development resources trained in trained resources cacao products and cacao products Limited innovation in Limited innovation 2. 7.
92 Actions for for Actions for Actions organizational organizational organizational the production the production the production and institutional and institutional and promotion of and promotion of and promotion strengthening regarding regarding strengthening regarding strengthening deforestation-free cacao deforestation-free cacao deforestation-free 4 years 5 years 5 years 2 years PROJECTED PROJECTED PROJECTED PROJECTED 6 months TIMEFRAME TIMEFRAME Continuous Continuous Continuous
CIAT CIAT UNU DRAU UNIA ICRAF DEVIDA SERFOR SENASA SERFOR SERFOR MINAM DEVIDA for Cacao for SERFOR MINAGRI. CIAT - SAB CIAT CIAT - SAB CIAT PARTNERS PARTNERS GOREU/GRDE Private sector Cacao Alliance MUNICIPALITIES Local governments Local governments Local governments Producer organizations Producer Producer organizations Producer Producer organizations Producer TERRITORIAL AUTHORITY TERRITORIAL PRODUCER ORGANIZATIONS Cacao producer organizations Cacao producer Regional Technical Committee Technical Regional
INIA IIAP INIA INIA ARAU DRAU DRAU GRFFS GOREU DRAU DRAU SERFOR GRFFS DGOTA SERFOR SERFOR MINAGRI Bioversity Producer Producer Producers ENTITIES ENTITIES GOREU/GRDE organizations RESPONSIBLE RESPONSIBLE year 4 AFS GOAL GOAL 1 forest 1 forest practices verification have signedhave plots per year plots agreements. conservation workshops perworkshops arrangements with seedlings analysis of the of analysis 2 dissemination system for the for system monitoring and in conservation 25% of producers producers 25% of best agroforestry best agroforestry 20% of producers producers 20% of georeference their georeference At least 3,000 haAt 1 Systematization adapted to climate adapted 30% of producers producers 30% of cacao value chain plots climate evaluated workshops INDICATOR INDICATOR agreements. conservation arrangements arrangements implemented % of producers producers % of Monitoring and % of producers who have signed No. of restored or restored of No. No. of agroforestry agroforestry of No. No. of hectares in conservation with georeferencing their georeferencing No. of systematized of No. No. of dissemination of No. % of producers with producers % of verification systemverification reforested hectares reforested seedlings adapted toseedlings adapted monitoring systems. agroforestry practices agroforestry chain zones standards conditions) each producer ACTIVITIES ACTIVITIES micro-regions Compilation and dissemination of the regulations on the regulations cacao producers Reforestation and Reforestation Systematization ofSystematization Georeferencing and Georeferencing (adapted to climate(adapted smart cacao projects smart cacao projects agroforestry practices agroforestry independent producers, producers, independent Promote conservation Promote adapted to the different to the different adapted agreements in farms of in farms agreements owned by associated and by owned Development of climate- of Development different agroecological agroecological different Development of a forest a forest of Development restoration projects with projects restoration Evaluation of species andEvaluation of physical diagnosis of plots diagnosis of physical environmental and forestry and forestry environmental agroforestry arrangements arrangements agroforestry native species selected innative including the forest areas of areas including the forest system for the cacao value for system monitoring and verification conditions production Promote the Promote BOTTLENECKS BOTTLENECKS and conditions to comply with to comply linked to cacaolinked adapted to localadapted implementation ofimplementation There is no forest is no forest There forestry standards forestry environmental and environmental weather conditions weather Increasing extreme extreme Increasing Limited knowledge monitoring system mitigation measures. mitigation measures. Existence of different different Existence of agroforestry practices practices agroforestry
94 practices to improve to improve practices to improve practices Actions to implement to implement Actions to implement Actions cacao production and and production cacao and production cacao reduce GHG emissions reduce GHG emissions reduce TIEMPO CUELLOS DE BOTELLA ACTIVIDADES INDICADOR META RESPONSABLES ALIADOS ESTIMADO
Definition/design of GOREU fertilization packages and No. of packages INIA sustainable intensification XX packages Regional Technical designed and IIAP 1 year for smallholders, oriented designed Committee validated MINAGRI. towards reducing GHG emissions Use of technological packages not adapted Actions to implement to the reality of the practices to improve area Input providers 5% of producers International cooperation Implementation of % of producers cacao production and fertilize according Local governments fertilization and sustainable fertilizing according DRAU reduce GHG emissions to a fertilization INIA intensification packages to a fertilization 4 years and sustainable Producer Cacao Alliance oriented towards reducing and sustainable intensification organization DEVIDA GHG emissions intensification model model CIAT, according to the business model
TIEMPO CUELLOS DE BOTELLA ACTIVIDADES INDICADOR META RESPONSABLES ALIADOS ESTIMADO
Development of Peru Cacao Alliance Increase in demand communication and GOREU/GRDE CIAT No. of communication for deforestation-free positioning plans for cacao 1 plan approved DRAU EII and public relations 3 years in Ucayali, emphasizing the and implemented Cacao Technical Cooperatives and products, but there is plans no local supply conservation of forests and Committee Committees absence of cadmium The media
Actions to improve the environment for GOREU/GRDE deforestation-free Absence of viability Viability study of 1 viability study MINAM No. of approved DRAU business models with studies of PES carbon markets (actual (cost/benefit) PromPerú and communicated Cacao Technical 1 year potential, advantages, and completed and Technical Cooperation low GHG emissions schemes, carbon documents Committee limitations) communicated World Bank markets CIAT
Absence of a shared vision and leadership to CIAT guide the development No. of plans 1 Plan Resource management to GOREU/GRDE Multi-stakeholder of the sector towards completed and completed and 6 months draft an action plan GOREU/GPP, CIAT Platform forest conservation communicated communicated and reduction of GHG emissions VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE INGEI (Instituto Nacional de Estadística y Geografía). 2012. Nelson KA; Scharf P; Bundy LG; Tracy P. 2008. Agricultural 8. Reference Inventario Nacional de Gases de Efecto Invernadero management of enhanced-efficiency fertilizers in the 2012. Ministerio de Ambiente (MIMAN). Perú. north-central United States. Crop Management. Doi: AATIF (Africa Agriculture and Trade Investment Fund). amazónicos. Revista Chapingo. Serie Ciencias Disponible en: https://infocarbono.minam.gob. 10.1094/CM‐2008‐0730‐03‐RV 2019. Increasing Income. Improving Food Security. Forestales y del Ambiente 8(2):101-106. pe/annios-inventarios-nacionales-gei/ingei-2012/ Ortiz O; Villamizar R; Naranjo C; Garcia R; Castañeda AATIF Annual Report 2018/19 (Consultado en junio de 2020) Convergence. 2015. Case Study: Africa Agriculture and MT. 2016. Carbon Footprint of the Colombian Cocoa (AATIF (Africa Agriculture and Trade Investment Fund). Trade Investment Fund (AATIF). Disponible en: International Standard Organisation. 2006. ISO 14040: Production. Engenharia Agrícola 36(2):260-270. (2020, 03 05). Retrieved from https://www.aatif.lu/ https://bit.ly/2FqTJM3 Environmental Management-Life Cycle Assessment- Osterwalder A. 2010. Business Model Generation: A home.html Principles and Framework. Disponible en: https://www. Cocoa Abrabopa. 2020. Cocoa Abrabopa: Cocoa for a better Handbook for Visionaries, Game Changers, and iso.org/obp/ui/#iso:std:iso:14040:ed-2:v1:en AATIF (Africa Agriculture and Trade Investment Fund). life. Disponible en: http://www.cocoabrabopa.org/ Challengers. John Wiley & Sons, Inc., Hoboken, New 2020. AATIF Impact Brief 03 - Wienco Ltd. - Cocoa cabrabopa/index.php (consultado en mayo de 2020) Kaye JP; Quemada M. 2017. Using cover crops to mitigate and Jersey. 288 p. outgrowers Scheme, Ghana. Disponible en: https:// adapt to climate change. Agronomy for Sustainable Cuellar J; Salazar E; Dietz J. 2015. Patrón de cambios del Pocamucha V; Alegre J; Abregú L. 2016. Socioeconomic www.aatif.lu/impact-briefs.html Development 37(4). Doi:10.1007/s13593-016-0410-x carbono almacenado en el ecosistema debido al analysis and carbon stock in agroforestry systems Adviento-Borbe MAA; Haddix ML; Binder DL; Walters DT. cambio de uso del bosque tropical en la Cuenca de Marín M; Andrade H; Sandoval A. 2016. Fijación de carbono with cocoa (Theobroma cacao L.) in Huanuco. 2007. Soil greenhouse gas fluxes and global warming Aguaytía, Perú. Instituto Nacional de Innovación atmosférico en la biomasa total de sistemas de Ecología Aplicada, 15(2). potential in four high-yielding maize systems. Global Agraría (INIA). Lima, Perú. 133 p. producción de cacao en el departamento del Tolima, Republic of Ghana, Forestry Comission, GhREDD+, &Forest Change Biol. 13:1972–1988. Colombia. Revista U.D.C.A Actualidad & Divulgación Díaz-Chuquizuta P; Tello-Salas C; Arevalo L; Fachin G. Carbon Partnership. (2016). Ghana REDD+ Strategy Científica 19(2):351-360. Doi: 10.31910/rudca.v19. Agribenchmark. 2019. Value and Approach - Relevance 2016. Carbono almacenado en cinco sistemas de n2.2016.8 Snyder CS; Bruulsema TW; Jensen TL; Fixen PE. 2009. farm analysis. Disponible en: http://www. uso de tierra, en la región San Martín Perú. Revista Review of greenhouse gas emissions from crop agribenchmark.org/agri-benchmark/value-and- Internacional de Desarrollo Regional Sustentable Millar N; Doll JE; Robertson GP. 2014. Management of production systems and fertilizer management approach.html 1(2):57-67. nitrogen fertilizer to reduce nitrous oxide ( O) N2 effects. Agriculture Ecosystems and Environment emissions from field crops. Climate Change and Akiyama H; Yan X; Yagi K. 2010. Evaluation of effectiveness Domingo J; de Miguel E; Hurtado B; Métayer N; Bochu J; 133(3-4)247-266. Agriculture Fact Sheet Series, MSU Extension Bulletin of enhance-efficiency fertilizers as mitigation options Pointereau P. 2014. Measures at farm level to reduce E3152. Springer-Heinze A. 2007. ValueLinks Manual: The for N O and NO emissions from agricultural soils: greenhouse gas emissions from EU agriculture. 2 methodology of value chain promotion. Meta-analysis. Global Change Biology 16:1837–1846. Notes - Policy Department B: Structural and Cohesion MINAM, 2018. Geobosques. Ministerio del Ambiente. Doi: 10.1111/j.1365-2486.2009.02031.x Policies. 108 p. 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Centro Agronómico Tropical de Investigación Una Sistema Agroforestal Con Theobroma Cacao En y Enseñanza (CATIE), Turrialba, Costa Rica. Editoral: El Campus De La Universidad Nacional De Ucayali - Arvelo M; González D; Maroto S. Delgado T. Montoya P. Forest Carbon Partnership; Forestry Commission; Centro para la Investigación en Sistemas Sostenibles Pucallpa-Perú. Revista TZHOECOEN 6(2):165-180. 2017. Manual Técnico del Cultivo de Cacao: Prácticas GhREDD+. 2015. Ghana National REDD+ Strategy. 102 de Producción Agropecuaria (CIPAV). Cali, Colombia. Latinoamericanas. Instituto Interamericano de p. Disponible en: http://extwprlegs1.fao.org/docs/pdf/ 454 p. Disponible en: http://www.cipav.org.co/sistagro/ Wienco Ghana Limited. 2020. - Commodity Trading Cooperación para la Agricultura (IICA), San José, gha178876.pdf SistemasAgroforestales.pdf CompanyR. Disponible en: https://wienco.com. Costa Rica. 165 p. (Consultada el mayo de 2020) Gobierno Regional de Ucayali. 2019. 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ANNEXES VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE
9.1. Methodology for the analysis of costs and ghg emissions
To collect data to estimate the costs and emissions from cacao production in the region, a set of tools developed by the Alliance of Bioversity and CIAT based on the typical farms methodology developed by Feuz & Skold (1990) and Agribenchmark (2019) was implemented. The definition of typical farms required the use of geographic information and available statistics for production, yield, and area, in addition to consultations with local experts; this allowed the identification of distinctive types of production systems in the region, which in turn represent a considerable portion of cacao production. Once the different types were defined, we engaged producers with characteristics of each type according to the following variables: yield, location, production area, technological level, and production system. Each group comprised 4–6 producers of both genders, who attended group workshops held using educational material and visual aids for 6–8 hours. By means of dialog and consensus, it was possible to determine the general features of a typical farm and labor available; fixed assets and typical infrastructure; land use prior to the crop and land- change activities; the different crop stages; activities performed from the moment in which land-use change took place to the production stage; the frequency and requirements of labor; inputs; machinery used in the new stages; the origin and destination of inputs and products; productivity levels and variations over time; sale prices of the different products obtained; and all the processes related to input and product transport, besides other contextual and macroeconomic variables. The information was systematized using tools developed in Microsoft Excel, on a template developed by the Alliance of Bioversity and CIAT, which allows for consistency and to make comparisons of the results between production systems and other industries. The parameters, inputs, and results were reviewed and validated with local experts, and then adjusted through consultations with the producers who participated in a review to detect inconsistencies or to validate the information. The methodologies, tools, and final results were communicated and made available to participating producers and interested local stakeholders.
100 © CIFOR 101 9.2. Graphs for the sensitivity analysis . SENSITIVITY ANALYSIS FOR NET PROFITABILITY – TYPE 2 VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE
PRODUCTION of cacao production systems 650 700 750 800 850 900 950 / PRICE 6.1 -1,570.7 -1,418.3 -1,251.2 -1,084.1 -917.0 -757.2 -590.1 SENSITIVITY ANALYSIS FOR NET PROFITABILITY – TYPE 1 6.2 -1,505.7 -1,348.3 -1,176.2 -1,004.1 -832.0 -667.2 -495.1 6.3 -1,440.7 -1,278.3 -1,101.2 -924.1 -747.0 -577.2 -400.1 PRODUCTION 6.4 -1,375.7 -1,208.3 -1,026.2 -844.1 -662.0 -487.2 -305.1 550 600 650 700 750 800 850 / PRICE 6.5 -1,310.7 -1,138.3 -951.2 -764.1 -577.0 -397.2 -210.1 5,8 -208.7 -67.4 83.1 213.4 362.1 503.5 648.5 6.6 -1,245.7 -1,068.3 -876.2 -684.1 -492.0 -307.2 -115.1 5,9 -153.7 -7.4 148.1 283.4 437.1 583.5 733.5 6.7 -1,180.7 -998.3 -801.2 -604.1 -407.0 -217.2 -20.1 6 -98.7 52.6 213.1 353.4 512.1 663.5 818.5 6.8 -1,115.7 -928.3 -726.2 -524.1 -322.0 -127.2 74.9 6,1 -43.7 112.6 278.1 423.4 587.1 743.5 903.5 6.9 -1,050.7 -858.3 -651.2 -444.1 -237.0 -37.2 169.9 6,2 11.3 172.6 343.1 493.4 662.1 823.5 988.5 6,3 66.3 232.6 408.1 563.4 737.1 903.5 1,073.5 6,4 121.3 292.6 473.1 633.4 812.1 983.5 1,158.5 SENSITIVITY ANALYSIS OF THE AREA NEEDED TO GENERATE 2 MMW (HA) - TYPE 2 6,5 176.3 352.6 538.1 703.4 887.1 1,063.5 1,243.5 6,6 231.3 412.6 603.1 773.4 962.1 1,143.5 1,328.5 PRODUCTION 650 700 750 800 850 900 950 / PRICE 6.1 16.1 13.6 11.7 10.2 9.1 8.2 7.5 SENSITIVITY ANALYSIS OF THE AREA NEEDED TO GENERATE 2 MMW (HA) - TYPE 1 6.2 15.4 13.0 11.2 9.9 8.8 8.0 7.3 6.3 14.8 12.5 10.8 9.5 8.5 7.7 7.0 PRODUCTION 550 600 650 700 750 800 850 6.4 14.2 12.0 10.4 9.2 8.3 7.5 6.8 / PRICE 6.5 13.6 11.6 10.1 8.9 8.0 7.3 6.6 5.8 11.2 9.9 8.9 8.1 7.4 6.8 6.3 6.6 13.1 11.2 9.8 8.6 7.8 7.1 6.5 5.9 10.9 9.7 8.7 7.9 7.2 6.7 6.2 6.7 12.6 10.8 9.4 8.4 7.5 6.9 6.3 6 10.6 9.4 8.5 7.7 7.1 6.5 6.0 6.8 12.1 10.4 9.2 8.1 7.3 6.7 6.1 6.1 10.3 9.2 8.3 7.5 6.9 6.4 5.9 6.9 11.7 10.1 8.9 7.9 7.1 6.5 6.0 6.2 10.1 9.0 8.1 7.3 6.7 6.2 5.8 6.3 9.8 8.8 7.9 7.2 6.6 6.1 5.7 6.4 9.6 8.5 7.7 7.0 6.4 6.0 5.5 SENSITIVITY ANALYSIS FOR NET PROFITABILITY – TYPE 3 6.5 9.4 8.4 7.5 6.9 6.3 5.8 5.4 6.6 9.2 8.2 7.4 6.7 6.2 5.7 5.3 PRODUCTION 1,200 1,300 1,400 1,500 1,600 1,700 1,800 / PRICE 5.8 -463.1 -125.6 230.3 567.9 916.4 1,257.6 1,606.2 5.9 -343.1 4.4 370.3 717.9 1,076.4 1,427.6 1,786.2 6 -223.1 134.4 510.3 867.9 1,236.4 1,597.6 1,966.2 6.1 -103.1 264.4 650.3 1,017.9 1,396.4 1,767.6 2,146.2 6.2 16.9 394.4 790.3 1,167.9 1,556.4 1,937.6 2,326.2 6.3 136.9 524.4 930.3 1,317.9 1,716.4 2,107.6 2,506.2 6.4 256.9 654.4 1,070.3 1,467.9 1,876.4 2,277.6 2,686.2 6.5 376.9 784.4 1,210.3 1,617.9 2,036.4 2,447.6 2,866.2 6.6 496.9 914.4 1,350.3 1,767.9 2,196.4 2,617.6 3,046.2 102 103 SENSITIVITY ANALYSIS OF THE AREA NEEDED TO GENERATE 2 MMW (HA) - TYPE 3 1. Environmental component VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE
PRODUCTION This component incorporates the requirements concerned with the efficient and sustainable use of natural 1,200 1,300 1,400 1,500 1,600 1,700 1,800 / PRICE resources and the implementation of good agricultural practices that prevent and help minimize the contamination 5.8 15.2 11.9 9.7 8.2 7.1 6.3 5.6 of water bodies and air, as well as soil degradation, in addition to the requirements to register, implement, and 5.9 14.1 11.1 9.1 7.8 6.7 6.0 5.3 monitor such efforts. In the same way, it comprises the requirements related to protecting biodiversity, managing 6 13.1 10.4 8.6 7.4 6.4 5.7 5.1 natural ecosystems, land-use changes and deforestation, as well as the responsible use of agrochemicals. 6.1 12.2 9.8 8.2 7.0 6.1 5.5 4.9 6.2 11.5 9.3 7.8 6.7 5.9 5.3 4.7 In this respect, the score for this component included the following sub-categories: i. Water; ii. Soil; iii. Energy, 6.3 10.8 8.8 7.4 6.4 5.6 5.0 4.6 climate change and greenhouse gases (GHG); iv. Liquid and solid waste management; v. Ecosystems, biodiversity, 6.4 10.2 8.4 7.1 6.2 5.4 4.9 4.4 and wildlife; vi. Packaging; and vii. Agrochemicals and products for post-harvest. Below is a summary of the main 6.5 9.7 8.0 6.8 5.9 5.2 4.7 4.2 findings: 6.6 9.2 7.6 6.5 5.7 5.0 4.5 4.1 Water: The strictest schemes regarding the use and care for water are RA and ISCC. To be certified under these schemes, farms and processing plants should have a water management plant focused on efficient and sustainable use, ensuring that water bodies are not contaminated with chemical or fertilizer residues. 9.3. Comparative analysis of certification It is important to point out that ISCC is more specific regarding the practices to be implemented. Although FFL does not mention a water management plan, one of its principles is to make a rational and schemes: socio-environmental components minimal use of water through adequate practices, and to be acquainted with the sources and quality of the water used. USDA Organic does not refer to a water management plan; however, it indicates that natural To provide information on the characteristics and differences of the most prominent certification schemes in resources (water and soil) should be conserved and even improved, not to mention the specific measures the cacao sector, a comparative analysis was conducted, which included the following international certification through which this goal must be met. schemes with sustainability components and organic production schemes: Soil: All schemes have similar requirements, agreeing that productive units should implement good agricultural practices to ensure the quality of soil and to prevent its pollution, erosion, and compaction. y RRA (Rainforest Alliance) Similarly, they all agree that soil fertility should be monitored periodically to identify fragile and problem y FFL (Fair for Life) soils and adopt protection or restoration measures. y ISCC (International Sustainability and Carbon Certification) Electricity:: RA has the most comprehensive criteria, as it requires the unit to be certified to have an energy y USDA Organic efficiency plan to be monitored periodically, and to incorporate minimum consumption requirements (which are also referred to by FFL and ISCC). All schemes require energy consumption to be monitored and For the analysis, a review of the principles and criteria of each scheme was carried out59 and a qualitative score was to reduce their dependence on non-renewable sources. Regarding the latter aspect, FFL could be considered assigned, according to the content and strictness for each criteria and principle. more relaxed than the rest, as this requirement is not mandatory, but rather a bonus. USDA Organic is the The analysis focused on evaluating two components: 1. Environmental component; and 2. Conditions and wellbeing only scheme that does not have any guidance on the use of electricity. of laborers. Each component was divided in topics and, depending on the detail in which each scheme addresses Additionally, it was found that all schemes, except for USDA Organic, require that some efforts to reduce them and its strictness, it was rated as: High, Medium, Low, and NA (not applicable) when the certification scheme GHG emissions are carried out in advance. did not make specific reference to the topic under evaluation. Here is a synthesis of our main findings: Waste management: The management of crop waste should be aligned with good agricultural and environmental practices, and they should not represent a risk for human health or the ecosystems. RA and ISCC schemes are strict regarding wastewater not being discharged on aquatic ecosystems or very sandy soils. The FFL scheme is more relaxed regarding the discharge of wastewater on water bodies; this practice is allowed if it does not contribute to the degradation of their physical or chemical features. 59. Roundtable on Sustainable Palm Oil: Principios y criterios para la producción de palma sostenible; Rainforest Alliance, norma para agricultura sostenible para producción agrícola y ganadera de fincas y grupos de productores; Fair For Life: Estándar para la certificación de comercio justo y 104 105 cadenas de suministro responsables; Requisitos de sostenibilidad ISCC 202 y USDA Organic Standars 7 CFR 205. VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE To get the RA and ISCC certifications, the production unit must have infrastructure to collect and treat ISCC considers not only primary forests, but also sparsely forested areas, prairies, wetlands, and other areas wastewater; in the case of FFL, there should be at least a transition plan to build it. The USDA Organic designated by law or the corresponding authorities, for the protection of rare, threatened or endangered scheme could be considered as less strict in this aspect, since their requirements are general and refer to species or ecosystems. Under this scheme, it is forbidden to have changed the status of those ecosystems having limits and clearly defined buffer areas, and a ban on the use of septic sludge. after January 1, 2008. Regarding solid waste, all schemes, except for USDA Organic, require the production unit to have an Some other areas of environmental interest that schemes seek to protect are peatland areas of high integrated solid waste management plan that allows for its categorization and, in accordance to the latter, conservation value (HCV), and areas with high carbon stocks (HCS). It is noteworthy that the requirements the management process to be followed (recycling, composting, elimination, among others). FFL, RA, and of the USDA Organic scheme do not set explicit rules regarding deforestation and destruction of ecosystems. ICSS certifications allow burning solid waste, only if the unit has waste incinerators designed for the specific Burns: Burns to prepare land for planting or replanting are strictly forbidden under all schemes. Yet, FFL type of waste, subject to the corresponding legislation and with a minimal impact on the environment and could be considered more relaxed in this regard, as the method may be taken into consideration when they human health. In the case of USDA Organic, burns are only allowed in plots if their purpose is to suppress are small and controlled burns. On the other hand, RA and ISCC schemes state that producers should only the spread of diseases or stimulate the germination of seeds, but not for waste management. resort to burns to control pests. Ecosystems, biodiversity, and wildlife: This is one of the main pillars of the certification schemes analyzed. Agrochemicals and products for post-harvest: Each scheme provides a list of forbidden agrochemicals for All schemes—except for USDA Organic—require the production unit to have a diagnostic identifying production. FFL and RA have their own lists, while ISCC requires compliance with the Rotterdam Convention natural ecosystems, rare, threatened, or endangered species to be protected and, additionally, there and the Stockholm Convention. USDA Organic restricts the use of synthetic substances, non-agricultural should be evidence that agricultural operations will not affect them negatively. RA and ISCC go beyond the substances, and non-organic agricultural substances, among others. All the authorized inputs should be diagnostic, since they require an environmental impact assessment prior to an initiative to establish new included in the United States’ National List of Synthetic Substances Used for Organic Crop Production. areas for cultivation or expanding the farm’s infrastructure. This scheme requires that no forbidden substances have been applied in the last three years, i.e., from the Invasive species: Introducing invasive species is strictly forbidden under the RA and FFL schemes, while moment they submit a request for certification. ISCC allows it, only if they are already established in the region or country, and if there is a management Each farm should keep detailed record of the inputs used; these substances should be stored safely, according plan to include their monitoring. USDA Organic does not make any reference to this aspect. to the best practices recognized. For ISCC, the containers should be reused, recycled, or discarded in an Propagation material: The use of genetically modified propagation material is strictly forbidden by FFL, environmentally responsible way, while FFL and RA require that agrochemical containers be returned to RA, and USDA Organic, while ISCC considers the possibility of using it, provided that traceability and proper the provider. USDA Organic forbids that packages, containers, and/or bins containing synthetic pesticides, labeling are ensured. preservatives, or fungicides be used in the preparation of an agricultural product. Deforestation and degradation of ecosystems: All schemes address this point differently. All of them For RA and ISCC, the neighboring communities should be notified if an application of risky agrochemicals establish different reference dates for land-use change, which determine if the unit to be certified may or was performed. ISCC only states that the population should be notified (populations less than 500 meters may not access the scheme. This far from the plot), while FFL and USDA Organic do not make any reference to this measure. In the FFL, lands (primary and secondary forests) which have been deforested by agriculture over ten years All schemes, except for USDA Organic, require an integrated pest management (IPM) plan, trained before requesting the certification may be granted access to it, provided that efforts have been made to personnel, and periodic implementation. Similarly, they require a record with further information about repair the damage done and measures have been adopted to prevent recurrence. In contrast to this, RA pests and the methods and materials used to control them. considers a shorter grace period (5 years before the initial request for certification) and requires that no RA includes specifications regarding the use of fire with crop protection purposes, which is allowed only forests have been destroyed after January 1, 2014. It should be noted that this scheme refers to forests in in cases where there are no efficient methods or if the environmental impact is lower in comparison to general, without making a distinction between primary and secondary. alternative processes.
106 107 Considerations regarding the environmental component 9.4. Methodological tool: business canvas model to VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE In case the production unit does not meet all the criteria of the different certification schemes, a partial compliance build a deforestation-free business model is allowed, provided it has a transition plan oriented towards full compliance. The criteria of each scheme include different levels of stringency and specificity on the issue; such heterogeneity can make it difficult to compare the different standards and generate discussions about their appropriateness. 8. KEY 7. KEY 2. VALUE 4. RELATIONSHIPS 1. CLIENTS Based on the analysis, it was found that RA and ISCC are the most stringent schemes, as they address the different PARTNERS ACTIVITIES PROPOSITION WITH CLIENTS topics in a more rigorous and specific manner. Even though the mission of the FFL scheme revolves around comply- ing with the principles of fair trade, it also has an important environmental component. Do you think having a What key activities are deforestation-free product can required to be able to offer a help retain current clients? The USDA Organic scheme is not as explicit in some areas of the environmental component, compared to the other deforestation-free product? How? standards, for instance: energy consumption, liquid and solid waste management, deforestation and conservation What is the viability (time) to Are your clients interested How can the relationship undertake these activities? Do you think having a in buying deforestation-free of ecosystems, among others. Additionally, this scheme does not consider the component of labor conditions and with current partners can be deforestation-free product can products? wellbeing of laborers, unlike the other schemes, which are governed by ILO conventions and recommendations. improved to be able to offer a Are there activities that should Does my product currently help gain new clients? How? deforestation-free product? be entrusted to partners? offer some deforestation-free If yes, what kind of added value for my clients? requirements do your current What new partners are clients have to verify that it is If yes, how can this required to be able to offer a a deforestation-free product? 2. Wellbeing and labor conditions component deforestation-free product? 6. KEY RESOURCES deforestation-free added value 3. SALES CHANNELS be measured or verified? Have you identified new Do current investors/financiers potential clients that take into How could I improve the It considers the obligations of the employer towards his employees and covers criteria related to: offer some kind of benefit for consideration deforestation- deforestation-free added value deforestation-free products? What are the key (human, Does the current transport free criteria to purchase your in my product? physical, natural, financial, and distribution system products? y Prohibition of abusive conducts by the employer (forced labor, debt bondage, discrimination, human Have new potential financiers social, and intellectual) of our product allow us to How can improvements in the trafficking, and sexual abuse, among others) or investors been identified, resources missing to be able guarantee the traceability of a If yes, what kind of added value of my product be which offer benefits for to offer a deforestation-free deforestation-free product? requirements do the potential deforestation-free products? measured or verified? y The right of a worker to receive clear information about his/her labor conditions (position to hold, activities product? new clients have to verify How can we improve our sales that it is a deforestation-free to perform, salary, payment scheme and frequency) Can some key resources be channels to guarantee the product? provided more efficiently by traceability of a deforestation- y Worker’s freedom to associate partners? free product?
y Limits on working hours (daily or weekly), overtime, rest and meal breaks
y Occupational safety 9. COST STRUCTURE 5. SOURCES OF INCOME Variation in the cost structure to be able to offer a deforestation- y Workplace injuries and illnesses free product Can a deforestation-free product contribute to increase your income?
y Rights of pregnant laborers • Additional costs Can a deforestation-free product contribute to diversify your sources of income? • Cost reduction Can a deforestation-free product be sold at a competitive price? y Minimum working age
These criteria were divided in six topics: i. General rights of workers; ii. Hourly work intensity; iii. Salaries; iv. Provision of housing for workers; v. Workers’ safety and health; and vi. Labor conditions for young workers. Since most of the schemes under analysis are based on the conventions and recommendations of the International Labour Organization (ILO) regarding this component, it was found that their criteria vary only slightly from one to another, and they are subject to the legislation of every country. It should be mentioned that USDA Organic does
108 not include this component among its criteria. 109 9.5. Mapping the potential financiers VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE for a deforestation-free value chain
GENERAL INFORMATION GENERAL INFORMATION NATURE OF NATURE OF INVESTOR MISSION / GOALS / EXPECTED IMPACT INVESTOR MISSION / GOALS / EXPECTED IMPACT THE ENTITY THE ENTITY
They invest to support smallholders through access to financial services and capacity-building for cooperatives, Root Capital seeks to improve the quality of life of rural producers by connecting them with the formal economy. Oikocredit Private They invest in the growth of agricultural companies that can generate a positive change in their communities. producers, processors, and distributors. Root Capital Private Such companies buy products like coffee, cacao, or basic grains from thousands of small agricultural producers. In addition, they link their members to markets and help them improve their agricultural practices. The &Green Fund seeks to prove that inclusive, sustainable, and deforestation-free finance can be commercially viable and replicable, strengthening the rural development paradigm that protects forests and Althelia is an asset manager with an investment approach focused on impact, which aligns financial returns promotes highly productive agriculture. It also seeks to facilitate investments from conventional investors by Althelia - Mirova Private with a measurable environmental and social impact. reducing risk.
&Green Fund Private Target clients Grassroots Business Fund is a non-profit organization based in Washington, with offices in Kenya, Peru, and 1. Value chain companies that source directly from farmers India. Its mission is creating and supporting high-impact companies that provide sustainable economic Grassroots Business Fund Private opportunities to thousands of people at the base of the economic pyramid. They seek to invest in companies 2. Medium-sized and large plantations seeking long-term capital to grow at a stage of growth. 3. Financial institutions serving or that could have an influence on farmers 4. Service providers in the value chains that could have a direct influence on producer behavior The EcoEnterprises Fund offers growth capital and strategic guidance for innovative companies generating an Eco.enterprises Privada impact, with the purpose of scaling out and optimizing their financial, environmental, and social performance. They invest in large-scale projects that allow farmers to produce more and better, as a result of applying sustainable agricultural practices. They strengthen the link between household farms and the supply chains of companies. Their investors commit to buy the commodities produced by these projects for 10 years. In It offers credits and insurances for the agricultural sector, focusing on smallholders. Thus, it provides financing Livelihood Funds addition, the projects benefit society, through biodiversity conservation, water resources management, and for working capital, crop management, collection and commercialization of products, increasing productivity Private Agrobanco Public for Family Farming CO sequestration. and inserting rural smallholders into the financial system. These credits may be granted to individuals or 2 associations. The return on L3F investments depends on the tangible social, economic, and environmental results of the projects. Funding mechanisms promoted by the Ministry of Agriculture and Irrigation (MINAGRI), offering non- reimbursable resources to support farmers in four lines of work: 1) adoption of technology, 2) improvement of Agroideas Public business management, 3) support to productive reconversion, and 4) promotion of partnership culture among The purpose of the Abaco Cooperative is to contribute and improve the wellbeing of its members, employees, duly organized small and medium-sized agricultural, livestock, and/or forest producers. Abaco Private and communities, with flexible and customized financial solutions, working for the common good,and focusing on sustainable development.
12Tree is a pioneer in the implementation of sustainable forestry and agroforestry projects at a large scale for institutional investors. They promote business and consumption practices that contribute to biodiversity conservation, sustainable use of natural resources, climate change mitigation and adaptation to its effects. Its long-term goal is creating new forestry and agroforestry areas in Central and South America, which render a Ecobusiness Private 12Tree Private sustainable profitability for investors and provide ecological and social benefits at the local level. They invest in activities that preserve nature and promote biodiversity, generating both financial and With the purpose of mitigating risks, they support and control the implementation of resources in the operation. environmental returns. They buy land to establish plantations or buy already established plantations, with the aim of establishing anchor projects in the regions.
Rabobank is present in Peru through the Rabobank Foundation. It is focused on financing agricultural cooperatives at “the missing middle” to improve the life conditions of smallholders. Through Rabo Rural Fund, Rabobank Private it provides loans to cacao cooperatives in Huánuco for working capital targeted at exports, at a competitive rate.
110 111 VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE 9.6. List of successful business models NAME LOCATION VALUE CHAIN CHARACTERISTICS • Project activities are in line with the RSPO and zero that are deforestation free deforestation certification requirements. Renewal of oil palm plantations Indonesia Oil Palm • The project prevents deforestation by increasing the NAME LOCATION VALUE CHAIN CHARACTERISTICS productivity of farmers and the yield of the existing plantations, which reduces the incentive to expand the crop into new lands. • A total of US$140 million was paid out in short-term loans to 115 coffee companies, reaching over 100,000 smallholders • The main goal of this training is helping farmers to comply from five countries. with certification plans; therefore, it includes topics such as Channeling finances from the the preservation of biodiversity and planting shade trees. private sector to smallholders Central America (Guatemala, • Farmers adopted climate-smart practices regarding soil, water, Coffee SDM: Cargill Cacao and Chocolate Costa de Marfil Cacao through the Coffee Farmer Honduras, Mexico, Nicaragua, Peru) and biodiversity. • - The certification goals of the program will reduce Resilience Initiative • Long-term loans totaling US$9 million were provided for re- deforestation if the compliance with a certain standard newing plantations to 1,300 smallholders. requires a commitment to reduce deforestation. • There are 3,500 ha of land undergoing renovation. • Its general objective is the conservation of 570,000 ha of natural forests in Madre de Dios • The program is expected to prevent the emission of over 4.5 Impact investment to support million tons CO eq by 2020 9.7. List of cacao and chocolate value the agroforestry activities of Peru – Tambopata-Bahuaja REDD+ 2 Cacao smallholders in the Tambopata- Project • Recovery of 4,000 ha of degraded lands in buffer areas, chain stakeholders in Ucayali Bahuaja REDD+ Project regenerating them for the sustainable production of cacao (1,250 ha reached by 2017). NAME OF THE • It is anticipated that 1,100 smallholders will benefit from the INSTITUTION / ORGANIZATION certification program. REPRESENTATIVE • Financing and support in kind for over 9,000 smallholders 1 Malky Organic Fertilizers Manuel Rodríguez farming 30,000 ha of cacao plantations as of 2018. 2 Peru Cacao Alliance Cristian Chambilla • Producers practicing CEA improved their farm management Blended finance for the zero- 3 Peru Cacao Alliance Jorge Gordillo Ghana Cacao techniques, which allowed them to double their yields, deforestation cacao value chain compared to non-member producers. 4 AgroBanco Cesar Verastegui • Successful UTZ and Rainforest Alliance certification of CAA 5 AgroBanco Ciro Hidalgo farmers in the 2017/2018 season. • It Prevents the loss and degradation of hundreds of hectares of 6 AgroIdeas Lex Villacorta forest habitat per year. The Nanga Lauk Community 7 Padre Abad High-tech Cacao Producers Association Luben Mejía Forest and the Sustainable • It supports the conservation of critically endangered species. It Indonesia Oil Palm 8 Pimental Organic Producers Association Silverio Trejo Commodities Conservation secures the ancient tropical rainforest. Mechanism • It introduces new livelihood opportunities through forest 9 Association for Research and Integral Development José Chero Colán products and supports ecotourism. 10 Association for Research and Integral Development Pio Santiago • Borrowers must adhere to the sustainability management guidelines based on standard certification criteria. If a 11 National Forest and Wildlife Authority Belmira Carrera certain certification standard requires the use of agroforestry Rust Renewal Nicaragua Coffee 12 National Forest and Wildlife Authority – Ucayali Regional Office Luis Saavedra techniques, agroforestry becomes one aspect of the project. Certification standards considered in this project include UTZ, 13 National Forest and Wildlife Authority – Forest and Wildlife Management Directorate Carla Limas Cagna Starbucks, Fair Trade, and 4Cs.
112 113 VALUE CHAIN WITH LOW GREENHOUSE EMISSIONS GAS MOVING TOWARDS A DEFORESTATION-FREE CACAO AND CHOCOLATE NAME OF THE Figure 22. Multi-stakeholder platform for the cacao and chocolate value chain (Pucallpa, July 2019) INSTITUTION / ORGANIZATION REPRESENTATIVE 14 Ucayali Regional Environmental Authority Miguel Sánchez 15 Central Committee for the Future Development of Curimaná Wilson Molina Salinas 16 Central Committee for the Future Development of Curimaná Carlos Lenin Pérez 17 Colpa de Loros Agricultural Cooperative for Flavor Cocoa Ernesto Parra 18 Saposoa Agricultural Cooperative Maritza Trujillo 19 Regional Directorate for Agriculture in Ucayali Jerson Gonzáles 20 Regional Directorate for Agriculture in Ucayali Carlos Álvarez 21 Earth Innovation Institute Patricia Seijas 22 Ecocert Perú Pierre Neyra 23 Ucayali Regional Government – Economic Development Regional Management Iván Abensur 24 Ucayali Regional Government – Economic Development Regional Management Jimmy Lujan Mendieta 25 Ucayali Regional Government – Economic Development Regional Management Rafael de los Ríos 26 Ucayali Regional Government – Economic Development Regional Management Moises Romero Tovar 27 Ucayali Regional Government – Planning and Budgeting Regional Management Lisette Rengifo Rojas 28 Ucayali Regional Government – Planning and Budgeting Regional Management Lucila Lozano Saldaña 29 Ucayali Regional Government – Forest Regional Management Margot Gonzáles Source: SAB Project 30 Ucayali Regional Government – ProCompite Kristel Ayala 31 National Agricultural Innovation Institute Victor Vargas 32 Peruvian Amazon Research Institute Kristel Rojas 33 JM Ucayali Juan Montes 34 Ministry of Agriculture and Irrigation Carmen Rosa Chávez 35 Ministry of Agriculture and Irrigation – General Directorate for Agricultural Policies Irma Romero Rodríguez 36 Ministry of Agriculture and Irrigation – General Directorate for Agriculture Jorge Figueroa Rojas 37 Ministry of the Environment – General Directorate for Climate Change and Desertification Patricia Patrón 38 AIDESEP Regional Organization, Ucayali Withman Sánchez Hidalgo 39 United Nations Development Programme – “Sustainable Productive Landscapes” Project Cecilia Huamanchumo
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Alliance
Bioversity International and the International Center for Tropical The Americas Hub www.bioversityinternational.org Agriculture (CIAT) are part of CGIAR, a global research partnership www.ciat.cgiar.org for a food-secure future. Km 17, Recta Cali–Palmira CP 763537 www.cgiar.org Apartado Aéreo 6713 Bioversity International is the operating name of the International Plant Genetic Resources Institute (IPGRI) Cali, Colombia Tel. (+57) 2 4450000