Innovative Premium Mechanism Drives Sustainable Agroforestry Transformation in Cocoa Supply Chain
To scale up its agroforestry activities for smallholder cocoa farmers, Ecookim partnered with IDH’s ISLA program and the LDN Technical Assistance Facility* in 2022, in order to facilitate the transition of 22 of its cooperatives towards a more sustainable cocoa production model. As the project is approaching the end, the parties involved decided to look for alternative solutions to keep financing agroforestry transition and scale up the impacts already achieved.
In the pursuit of a solution
A market mechanism would be the ideal solution, engaging private sector partners and final cocoa buyers into value chain transformation. In addition, it could bring independence from grant funding and flexibility in negotiation between Ecookim and its buyers.
IDH’s team worked together with Walter Matter, a coffee and cocoa merchant, Ecookim and its main implementation partner, FOA, to create a premium mechanism that could pre-finance agroforestry transition. To calculate the ideal value of premiums, FOA and Ecookim presented a budget on how much a year of agroforestry implementation would cost, and the parties embarked on a quest to find a chocolate company that is willing to pay such additional amount to support the transition to more resilient cocoa production systems.
Collaborating with Storck
Storck, one of the largest confectionary manufacturers, joined as a project partner and committed to paying an additional premium above the market price for cocoa beans sourced from one of Ecookim’s cooperatives. By acquiring cocoa produced sustainably and rewarding it with an added price premium, Storck aimed to incentivize and finance the implementation of agroforestry and reforestation activities by Ecookim. In exchange, Ecookim agreed to provide progress reports against its KPI deliverables and with concrete results from its activities. Ultimately, the premium resulted in an additional 53 EUR per metric ton of cocoa beans purchased in 2023.
A Year of Success and Growth in the Storck-Ecookim Partnership
The program's first year was enriching for the parties involved, and Storck decided to extend the premium payments for 2024, also increasing the volumes supplied from Ecookim, as a demonstration of trust in the partnership.
As a result, Ecookim will be able to expand its agroforestry activities to other cooperatives out of IDH’s initial scope of work, supporting climate resilience for cocoa farmers, the acquisition of land tiles, and even including a component of payment for ecosystem services, that serve as a reward for farmers for their commitment to this partnership.
As IDH, we are happy to witness buyers making investments in the transformation of their value chains towards greater sustainability and embracing innovative strategies, such as offering premiums for agroforestry. These premiums are not tied to a specific certification program or code of conduct but go directly to finance implementation on the ground. We anticipate a growing number of buyers endorsing these initiatives, not only within the cocoa sector but also across various supply chains.
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*For more information on LDN Technical Assistance Facility
More on the Ecookim Project in this news article
