Kirkland Signature Chocolate

Behind our famous chocolate is a story of global sustainability. Great chocolate starts with great cocoa beans — and the beans for Kirkland Signature’s^™ smooth, flavourful chocolate come from the world’s top grower, West Africa’s Ivory Coast. But we’re not only choosing the best beans for today, we’re also working to protect this precious harvest and support local communities for years to come.

Sassandra Cocoa Program Report Côte d’Ivoire

October 2009 – June 2023

SUSTAINABLE SOURCING

The Sassandra Program (“Program”) is a partnership that began with Costco, Blommer and Olam in October 2009, and is named after the Sassandra River in the southwest region of Côte d’Ivoire, the original location of the cooperatives from where we source our cocoa beans.

This Program is exclusive to Costco and designed to provide a quality product that is traceable, deforestation-free, and improves prosperity and livelihoods for the farmers/cooperative members. It has an active Child Labor Monitoring and Remediation System (CLMRS) and introduces additional practices that are respectful of the environment.

The Program has been audited annually since the 2013-14 season by independent 3rd party auditors: Intertek (2013 - 2021) and Control Union (2022) and Bureau Veritas (2023). For the 2022-23 cocoa season, the Program sourced from 15,342 farmers in 233 villages.

TRACEABILITY

The Ivorian regulatory body – Conseil du Café et Cacao (CCC) –mandates the implementation of a traceability system to ensure farmers are properly compensated. When the farmer sells their beans, they receive a receipt stating the weight, quality, and the price prescribed by the government. Program documents, processes, premiums, and social initiatives tracking are maintained by the cooperatives and audited annually by independent auditors hired by the Program.

The Program uses the Olam Farmer Information System (OFIS) platform to geolocate farms, and to gather details on cocoa farm productivity and farmers socioeconomics. The Program also maintains segregation of the Sassandra cocoa beans in the supply chain from the farm to the initial manufacturing process. To make the procurement process more efficient and traceable, the Program uses Digital Supplier Engagement (DSE), a platform for digitized cocoa-relevant transactions in the supply chain. Apart from physical traceability, DSE also enables Program partners to trace the rate of premium payment to farmers and coops.

By the end of June 2023, 97% of Program farms were polygon mapped. All, or a total of 15,342 farmers have been surveyed and registered in the OFIS platform.

CHILD PROTECTION

Costco is dedicated to preventing and remediating child labor wherever it is found in its supply chain. Unfortunately, child labor is a long-term systemic issue in cocoa and requires a multi-faceted approach focusing on continuous improvement and broadening awareness. It is vital to understand the many root causes including poverty, inequality, lack of available education and birth certificates, which are necessary for children to enroll in school in Côte d’Ivoire. The Program works to address these issues, described below and in the Gender Equity and Social Infrastructure sections.

Farmers are sensitized on the definitions and consequences of child labor and to fully respect the government and ILO regulations on compulsory education for ages 6 to 16, the Minimum Age of Employment, the Hazardous Tasks Framework, and the Worst Forms of Child Labor.

All 23 Program cooperatives in the 2022-23 season operated a Child Labor and Remediation System (CLMRS) - subsidized by the Program. By the end of June 2023, there were 191 trained and operational CLMRS members surveying and sensitizing farmers and inspecting farms. Since the 2019-20 season, 92% of Program farmer households, or 14,179 households, were surveyed digitally and 79% of Program farms have also been inspected.

It is important that farmers understand why aspects of child labor, such as carrying heavy loads, can be very detrimental to their children’s development. Households that were found to have instances or risk of child labor receive particular attention.

In the unfortunate case, where child labor is identified, remediation plans are developed, which are either being remediated on collective i.e., village level or individually remediated with the aim to provide tailor-made solutions. For example, if the child cannot go to school because they lack a birth certificate, then we work with local juridical and administrative authorities to get them the proper documentation. As an integral part of remediation, the Program also follows up with the children several months after initiating remediation to ensure its effectiveness. Most of these cases are children helping their own families, with no instances of forced labor confirmed to date.

Since the 2018-19 season, the CLMRS data collection has fully transitioned from a paper-based to a digital system. This improved efficiency and data quality. Information such as the number of children not attending school, reasons for not attending school, whether children find themselves in situations of child labor, and why children are working are captured. The CLMRS also allows cooperatives to create remediation plans on an online portal, which are then reviewed with the Program Partners.

We are working with the International Labor Organization (ILO) and the National Health Insurance Fund (CNAM) in Côte d’Ivoire on a pilot project that aims to extend Universal Health Coverage (CMU) to cocoa farmers to promote the health of farmers and reduce the vulnerability of households to external health shocks and thereby also reduce the need to resort to child labor as a coping mechanism. During the first year of the project (April 2022 to April 2023) a total of 141 farmers of which 5 women were supported to enroll and receive their national social security numbers and health insurance cards. Feedback provided from the farmers are both positive (health care at reduced cost) and negative (lack of medical staff understanding of the CMU usage). The pilot demonstrates an interesting model of collaboration between the private and public sector, providing the private sector with the opportunity to support farmers in a way that is embedded in the national system, whilst also helping farmers hold public entities like the CNAM accountable for the services they are responsible for delivering to farmers. We continue to build up on the outcomes of this project, we will work with the ILO and CNAM to explore sustainable models for scaling up.

GENDER EQUITY AND FINANCIAL RESILIENCE

We believe the education and support of women creates a multiplier effect that educates and improves the health and well-being of their families and communities.

Since August 2016, the Program has been working with local and international NGOs focusing on community development interventions. Namely, these are Caritas, Vert+, CARE International and SOCODEVI. The community development work has so far covered a total of 41 villages (with an approx. population of 145,000). By the end of June 2023, implementation is taking place in 26 villages.

• Community needs assessment and baseline data collected in 41 villages;
• Cumulatively 184 VSLAs have been established with 4,748 members who have saved cumulatively $ 1,009,399 and taken loans totaling to $ 926,946 to start or strengthen individual micro businesses;
• A total of 4,785 loans were taken to either start new microbusiness or grow existing ones. Most microbusinesses evolve around trading (80%); 13% are used for food crop planting; 2% for breeding and 5% for other businesses;
• 32 women-focused literacy centers supported to offer literacy courses to 708 participants;
• 17 Gender committees have held couple dialogues with 1,455 participants;
• 20 Child Protection Committees have been trained and are operational with 151 members;
• Formalization of 8 women groups with a total membership of 551. The groups were trained on good governance, financial literacy and best practices for food crops and poultry farming.

Community Infrastructure and Equipment

Other areas of focus for the Program are improving community infrastructure and farmer livelihoods. Financial awards for social infrastructure projects were granted annually to the cooperatives that demonstrated adherence and commitment to the Program, with the choice of the project decided by the combined membership of the cooperative.

Since the 2020-21 season we paused the infrastructure reward to focus on completing the many projects already in the pipeline. During that period, we completed 2 schools and one medical center. To ensure community infrastructure projects remain viable, they are coordinated and approved by the appropriate government ministries, and further supported by the cooperatives from a portion of their quality premiums.

The Program has supported community education since the beginning, including facilitating the building of ten schools, totaling 48 classrooms, serving 47 communities, and distributing over 11,000 school kits.

The cooperatives themselves have invested in the construction of 79 classrooms, the rehabilitation of 69 classrooms, constructed or rehabilitated 32 latrines, rehabilitated 1 school canteen, built/rehabbed 15 teacher housing units, constructed, or rehabbed 11 school offices. Further the cooperatives have distributed 3,453 school benches to schools in schools and almost 6,500 school kits to Program farming families.

To support community health, the Program has provided an ambulance that covers 150 km radius, 3 medical centers and 2 maternity wards providing general health care and more specifically pre-and post-natal care to approx. 16,000 families residing in 30 communities. Since Costco has facilitated the respective health infrastructures over 181,000 people have been consulted. These health infrastructures have also been a platform for the vaccination of over 323,000 infants and pregnant women for polio, measles, tuberculosis, yellow fever, mumps, and almost 14,000 babies have been delivered.

The cooperatives themselves have invested in the construction of 4 nurse/midwife housing units, constructed 2 medical centers and rehabilitated another one, and equipped 1 health center.

To support community infrastructure, the Program has facilitated the construction of 3 cooperative stores and 1 water pump that can be accessed by at least 100 families.

The cooperatives have invested in the repair and installation of 21 water pumps and distributed 1,315 water filters, as well as fertilizer, machetes, and boots to over 4,424 farmers.

FOREST CONSERVATION

In the 2022-23 season, we carried out a science-based Deforestation Risk Assessment and found that almost 100% of the farms in our supply chain have a Very Unlikely or Unlikely risk of deforestation. From biomass analyses we also concluded that around 40% of the farms we work with produce shade-grown cocoa.

To reduce the risk of deforestation and assist in regenerating farms, 1.1 million high-yielding cocoa seedlings have been distributed enabling 2,100 farmers to replant a total of 1,100 hectares of cocoa.

We are assisting our farmers in actively reforesting Côte d’Ivoire. To date, over 304,000 multi-purpose trees have been distributed.

The 2022-23 season saw the launch of RESTORE (Resilient Ecosystems and Sustainable Transformation of Rural Economies), a project bringing multiple stakeholders together to improve landscapes and livelihoods.

RESTORE is a 5-year project implemented by Rainforest Alliance and envisions that, by 2027, it will have established the technical capacity, policy implementation approaches and economic incentives to bring 1,743 families of cocoa growers living on an estimated of 5,626 ha of farmland, the Côte d’Ivoire government and the private sector together in a joint endeavor to secure improved livelihoods from cocoa farming, socially inclusive additional economic opportunities, increased tree cover and a scalable contribution to national and corporate emissions reduction targets.

PREMIUMS PAID FOR QUALITY

Of utmost importance is the promotion of good quality standards and parameters. To reward for best quality and standard compliance, Program farmers and cooperatives are paid a premium in addition to the fixed price set by the government.

Since inception, 70 solar dryers have been constructed to ensure homogeneous efficient drying of the cocoa beans.

Since the inception of the Program to June 2023, over $20.5 Million has been paid in farmer and cooperative premiums.

PROFESSIONAL TRAINING

More than 350 Cooperative Managers have attended five days of training in Best Management Practices, including budgeting, credit control and debt recovery, quality management, and traceability of product and its implications, as well as regeneration of tree stock.

In 2015 a new training Program in collaboration with International Finance Corporation (IFC) and SCOPEInsight was introduced among the cooperative network. Of the cooperatives supplying the program in 22-23, 21 (91%) cooperatives have completed the level “BASIC” where the cooperative management teams were trained and coached during 6 months on internal management, supply, external risks, leadership, operations, and sustainability activities.

The same 21 cooperatives are also currently undergoing the level “PRO”, which focuses on human resources and cooperative taxation. 84 management team members were coached for six months with the aim of supporting the cooperative into becoming professional and efficient business entities capable of obtaining independent commercial bank loans.

Overall, the SCOPEInsight BASIC level results show an increase of 35% when comparing the initial assessment with the final evaluation done with each of the Program cooperatives.

During the 2022-23 season, 89 Lead Farmers/Farmer Trainers were trained to improve their agronomic knowledge and facilitation skills.

Since inception, almost 8,700 farmers have been trained in Farmer Business School (FBS) to strengthen entrepreneurial skills.

Farmers have been trained in Occupational Health and Safety, ensuring best social practices both at the cooperative and farm level. In the 2022-23 season, 5,628 farmers have been sensitized on child labor as part of the CLMRS individual household visits.

FARM IMPROVEMENTS

Since the 2020-21 season the Program has moved away from conducting farmer training in Farmer Field School groups. Instead, the Program focuses on individual farmer coaching. A farmer is considered fully coached if they have been visited for an initial farm inspection succeeded by 3 follow-up visits. The coaching modules include pre- and post-harvest techniques, integrated pest management to improve yield and quality, and health and safety. Since we started individual farmer coaching in crop year 2017-18, cumulatively 9,016 farmers have been successfully coached.

Since the 2018-19 season the Program has hired agronomists to be based in each coop. In 2022-23, 23 agronomists are engaged at the cooperative level and trained in cocoa agronomy. The agronomists oversee the Community Service Groups (CSG) which are made up of individuals from the community aged 20 to 35 years old. In total there are 1,320 individuals who have been trained and equipped by the Program with a focus on providing pruning services to willing Program farmers. Since 2018-19, approximately 8,621 ha of cocoa farms were pruned.

The Community Service Groups also help plant shade trees for the Program and provide scarce professional labor to farmers e.g., for weeding, spraying service.

After establishing over 200 composting pits, we learned that the locally available organic matter is insufficient in quantity to maximize the use of compost pits. In response, we are now promoting alternative soil fertility measures to boost organic matter in the soil.

Since the 2022-23 season, 2 different agronomic trials were put in place with the objectives of finding alternative non-chemical solutions to pest and disease as well as developing sustainable fertilization practices for smallholder farmers by making compost from cocoa pod husks.

Trials on bio-pesticides have demonstrated the effectiveness of controlling mirids and black pod. A cost analysis with chemical products is ongoing.

Pod husk compost was initially applied in September 2022 and results are expected at the end of the 2022-23 season.

If pesticides are used, the Program aligns with the Rainforest Alliance criteria prohibiting the use of substances according to the SAN List for Pesticide Management.

FINANCING

To ensure the success of the Program it is essential to provide constant financial liquidity to cooperatives for the purpose of purchasing cocoa beans as well as the acquisition and maintenance of evacuation vehicles, trucks, motorcycles, laptops, and other essential equipment necessary to properly manage the cooperatives. Since inception, the Program has provided over US$183 million, which includes US$ 37 million in 2022-23, of interest-free loans to the cooperatives at the beginning of each season.