Shareholders warn child labour in chain "could cost millions"

Shareholders warn child labour in chain "could cost millions"

Hershey is facing scrutiny over the use of child labour in its supply chain after one of its shareholders filed a lawsuit contending the confectioner buys cocoa produced using child and forced labour.

The Louisiana Municipal Police Employees' Retirement System (LAMPERS), a shareholder in Hershey, hopes the litigation will force the company to open records that, it claimed, would show Hershey's cocoa procurement broke US child and slave labour laws.

"In seeking a court order compelling Hershey to make its corporate records open to shareholder inspection, LAMPERS maintains that the company's board has long known about the use of "tainted cocoa," yet has persisted in using ingredients from suppliers in West Africa, where illegal child labor practices are rampant, including the use of children under 10 to harvest cocoa in the field," the pension fund said in a statement.

The fund is represented by shareholder and corporate governance law firm Grant & Eisenhofer. The complaint was filed yesterday (1 November) at  Delaware's Chancery Court.

A spokesperson for Hershey declined to comment on the pending litigation. However, the company was quick to emphasise its commitment to using ethically sourced cocoa.

"The Hershey Company takes its commitment to responsible sourcing very seriously and has been supporting cocoa-growing communities for more than 50 years. We have been involved in on-the-ground programs, working with public and private partners, to help eliminate inappropriate labor practices in cocoa communities," the spokesperson insisted.

In January, Hershey announced it would spend US$10m on cocoa sustainability programmes in west Africa. Last month the company made a commitment to source 100% third-party certified cocoa by 2020.

Nevertheless, the shareholder group maintains Hershey's failure to take quick and effective action to eliminate the use of child and slave labour in its supply chain has "resulted in an erosion of the company's reputation".

"This past August, a group of 65 retailers sent a letter to Hershey's board voicing concerns over the company's inadequate efforts to address child and slave labour practices within their supply chain. Shareholders contend that Hershey's conduct is beginning to harm its business relationships, which could ultimately cost the company millions in profits," LAMPERS warned. 

The use of child labour in cocoa production is an industry-wide issue that has gained increasing attention of late.

Earlier this month, Mars warned that it will cost "billions of dollars" to create a sustainable supply chain, one that is not reliant on child labour.

Insisting that the industry must work together to achieve this end, Mars revealed that it spent $30m on "cocoa sustainability" in 2011. The company said it has reached its 2011 goal of buying 10% of cocoa from sources that are certified sustainable and added that it will exceed its 2012 goal of 20%.

Meanwhile, chocolate major Nestle has also invested heavily in developing a sustainable cocoa supply. The firm aims to source 15% of its cocoa from sources included in the Nestle Cocoa Plan by next year. The scheme provides farming communities with support to develop sustainable cocoa farming and includes provisions for funding school openings as well as teacher training, adult literacy and community-based child labour awareness programmes.

As well as scaling up the Nestle Cocoa Plan, the company emphasised it is working with the Fair Labor Association to help ensure a flow of sustainable cocoa in Côte d'Ivoire. The company is in the process of drawing up a supplier code that will be distributed to 25,000 farmers in Côte d'Ivoire.

In June, a probe set up by Nestle and the Fair Labor Association found the use of child labour in the Kit Kat company's supply chain.

The investigation found "multiple serious violations" of Nestlé's supplier code, with child labour "the primary cause for concern".