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.
From the fourth quarter of 2024 to the second quarter of 2025, we shall be reviewing the roadmap. Key target areas will remain unchanged, but we will set more ambitious specific targets in response to shifts such as cocoa pricing and yields, the evolving impacts of climate change, upcoming regulations and their effects, and other emerging factors.
Learn more about the Roadmap 2030
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.
Sankofa 2.0 Project
This project in Ghana aims to improve the livelihoods of cocoa farmers. It will also help them adapt to climate change. The project contributes to climate change mitigation through dynamic and food-based agroforestry farming methods that are widely considered best practices. Learn more about the project
Cocoa Diversity and Income Diversification in Dominican Cocoa Production
This project aims to nurture the rich biodiversity found in today’s cocoa agroforestry systems of the Dominican Republic and prevent any trend towards monoculture. Learn more about the project
The Akwaaba Project
Each year, more than 100 million people are pushed into extreme poverty because of health-related expenditures, many of them being smallholders in global supply chains. The Akwaaba project ensures access to healthcare for 1'600 cocoa farmers and their families in the Eastern Region of Ghana while collecting highly granular data to monitor the impact on human health and on the elimination of poverty and child labour. Learn more about the project