Living income
Most cocoa farmers have a very low income. The members of the Swiss Platform for Sustainable Cocoa support farmers in increasing their income, among other things through higher cocoa prices, better crop yields or in diversifying their income.
What is it about?
For many cocoa farmers, the money they earn from growing cocoa is barely enough to survive. Therefore, agricultural land is often expanded uncontrollably in order to increase the yield of the often small cultivated areas. In addition, cocoa farmers often cannot afford to pay additional workers or to cover the costs of schooling for their children. For this reason, in many families the children have to help intensively with the cocoa cultivation – often at the expense of their education and physical and mental health. Many of the challenges in the cocoa sector can thus be traced back to the poverty of cocoa farmers.
The concept of living income
A living income for cocoa farmers is central to the sustainable development of the cocoa sector. The concept of living income refers to the annual net income required by a household to provide an adequate standard of living for all members of the household in the respective place of residence.
The following aspects are included in the calculation of a living income: the location-specific living expenses for food, water, housing, education, health care, transport, clothing and other essential needs, including reserves for unexpected events. These expenses are set against the net income of the farm and additional sources of income on and off the farm. If the expenses are equal, the income is considered to be a living income. If the expenses are higher than the income, there is an income gap (see graph below).
What it takes to achieve a living income
The following parameters are relevant for achieving a living income: (1) price, (2) increasing yield, (3) reducing production costs, (4) income diversification and (5) improving framework conditions and local governance. To achieve a long-term impact, close cooperation between all actors along the cocoa value chain is necessary. In Côte d'Ivoire and Ghana, for example, cocoa cultivation is regulated by the state. This means that state institutions control the quality of cocoa as well as the price of cocoa. In order to achieve a higher income for cocoa farmers, companies cannot simply pay a higher price for cocoa in these countries. Instead, efforts are needed to diversify income or increase yields, for example. In other cocoa-growing countries such as Madagascar, Ecuador or Peru, companies can pay a higher price directly to cocoa farmers. In both cases, transparency and traceability are key to ensuring that any activities are as targeted as possible.
The difference to traditional poverty indicators
A living income goes a step further than traditional poverty indicators such as national poverty lines. These focus primarily on basic needs and survival, but not on the different regions and commodity sectors. Moreover, they are sometimes outdated or do not take into account the current rate of inflation (see graph below on the situation in Ghana).
Within the framework of so-called benchmark studies, reference values for a living income are calculated that reflect the differentiated local living conditions as best as possible. They take into account, for example, differences between urban, peri-urban and rural living costs. These reference values can be used by relevant actors to calculate the income gaps of producers in their own supply chain. Another possibility for reference values are the prices published by standard-setting organisations such as Fairtrade Max Havelaar. These reflect how high the price for an agricultural commodity must be in a certain region in order to provide farmers with a living income.
How to Measure Living Income Components
To best understand the household incomes of farmers, related concepts are supported by evidence using diverse methodologies. The Cocoa Household Income Study (CHIS) was developed by the sector-wide Alliance on Living Income (ALICO) to create a harmonised approach to assessing the living income status of households. IDH’s Income Measurement Tool is based on the CHIS, while DIASCA proposes alternative indicators and methodological guidance to assess household incomes and production costs.
The Living Income Benchmark (LIB) provides reference values for a living income, calculated to reflect local living conditions as accurately as possible. These benchmarks can take into account differences in living costs between urban, peri-urban, and rural areas. When comparing income data with the LIB, these reference values can be used to calculate the income gaps of producers within their own supply chains. Another potential source of reference values is the prices published by standard-setting organisations such as Fairtrade Max Havelaar: the Living Income Reference Prices (LIRP). These prices indicate how high the price for an agricultural commodity must be in a specific region to provide farmers with a living income.
The Swiss Platform for Sustainable Cocoa is a proactive collaborator with the Alliance on Living Income, established as a result of the 2018 Berlin Declaration. Thus, we have been largely involved in the development and implementation of the Cocoa Household Income Study methodology. In 2024, a Joint Cocoa Household Income Study was conducted with the Ghana Cocoa Board (COCOBOD) for Ghana and with the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) in Ivory Coast.
The goals of the Cocoa Platform according to the Roadmap 2030
Members of the Cocoa Platform have jointly set the following targets by 2030 in the area of living income:
- All members are active in at least two areas critical to achieve a living income: (1) price, (2) increasing yield, (3) reducing production costs, (4) income diversification, and (5) improving enabling environments and local governance.
- Supply chain partners jointly contribute to a living income by rewarding cocoa farmers and their families for their performance in terms of sustainability and quality.
- The Cocoa Platform conducts an impact assessment to measure household incomes.
Selected projects in the area of living income
Various members of the Cocoa Platform are implementing projects for a livelihood-securing income. These projects received a contribution from the State Secretariat for Economic Affairs SECO thanks to the mediation of the Coordination Office.
“Akuafoo Nkoosoo” (“Farmers’ Success”)
The “Akuafoo Nkoosoo” project, implemented by Barry Callebaut, aimed at rejuvenating cocoa farms and promoted income diversification and the use of climate-friendly cookstoves. This led to an improvement of the livelihoods of 3’000 Ghanaian farming households. Learn more about the project
A holistic approach to improving cocoa farmer livelihoods in Ghana
The project aims at improving the resilience of farming households in Ghana through applying a holistic approach. A variety of activities are implemented to sustainably increase production and diversify farmer income sources, tailored to individual farmers’ needs. Learn more about the project
Improve livelihoods of indigenous organic and Fairtrade farmers
In this three-year project carried out by Chocolat Stella Bernrain and APPTA, farmers learned how to produce bio-fertilizers and propagate disease-tolerant cocoa varieties. The aim was to increase productivity of the cocoa harvest for the coming decades and thereby improve the livelihoods of these indigenous organic and Fairtrade farmers. Learn more about the project
Village Cocoa Competence Centers
With this project in Côte d’Ivoire, CABOZ and its partners introduced two village-based competence centers. The centers now serve as post-harvest processing facilities, produce and distribute high quality cocoa and shade tree seedlings, offer training and consultancy services, provide access to saving schemes, and sell agricultural tools and inputs. Learn more about the project
Salama Mateza
With the Salama Mateza project, Max Felchlin AG connects 880 cocoa farmers and their families to comprehensive health coverage. This is to ensure their access to quality essential health services and protect them from medical impoverishment by reducing out-of-pocket expenses for healthcare. Learn more about the project
Working group
At the European level, there is a working group on the topic of living income. By sharing expertise and experiences and developing common approaches, the working group supports participants in turning their respective objectives to achieve a living income for cocoa farmers and their families into concrete actions. Learn more about the working groups