As an ice cream lover, I can see at least one benefit of climate change. Rising temperatures justify my nightly ritual: mint chocolate chip ice cream. At first glance, Ben & Jerry’s wins: warmer weather translates to increased ice cream demand. A Kepler Cheuvreux report suggests 1 degree Celsius corresponds to 5-10 percentage points of sales.[i]
Despite the potential sales lift, climate change should be a concern for Ben & Jerry’s and its cocoa supply chain. Many Ben & Jerry’s flavors require chocolate, and the changing environment poses a threat to cocoa suppliers’ production. Côte d’Ivoire and Ghana represent more than half of global production, but a 2013 study cited in Climatic Change suggests that 89.5% of land in the region will be less suitable for cocoa production by 2050.[ii]
In 2016, Ben & Jerry’s revealed the “Endangered Pints List,” highlighting flavors whose ingredients are affected by climate change. The first ingredient listed was cocoa with commentary about scientists predicting its production could drop 50% by 2050. [iii] While further diligence suggests this 50% decline may be a stretch, Ben & Jerry’s clearly knows climate change is hurting cocoa.[iv]
A cocoa shortage would likely correspond with higher prices. In this scenario, Ben & Jerry’s may choose to increase its pricing to account for the higher ingredient cost and maintain its margin structure; however, retailer and consumer demand could suffer because its ice cream is already considered expensive. Conversely, Ben & Jerry’s could maintain its pricing, but accepting lower margins would reduce free cash flow and likely disappoint its parent, Unilever.
Ben & Jerry’s Plans to Mitigate Climate Change…
Since its founding, Ben & Jerry’s has considered social mission equally important as product and economic missions. Not surprisingly, the company has long been fighting for “climate justice,” launching a carbon offsets program in 2002 and organizing an advocacy campaign in 2007.[v]
Over the short-term, Ben & Jerry’s has plans to continue pursuing climate change mitigation initiatives. On its website, consumers can sign a petition to “Join the Climate Movement” asking world leaders to transition to 100% clean energy by 2050. Ben & Jerry’s is expected to achieve 100% clean energy at its U.S. sites by 2020.[vi] Other initiatives for the next couple years include manure separation, reforestation and hydrocarbon refrigeration.[vii]
Ben & Jerry’s has not provided information on its medium-term plans. Given its social mission roots, Ben & Jerry’s could be expected to maintain its commitment to the environment.
… But Should Also Adapt to Realities…
While Ben & Jerry’s is admirable in its pursuit of mitigation, the company should simultaneously pursue an adaptation strategy. As Ben & Jerry’s is a single company, its initiatives are unlikely to materially reduce climate change’s impact on cocoa land suitability. Accordingly, the company should also institute policies that accommodate climate change.
In the near-term, Ben & Jerry’s should work with the farmers and governments of Côte d’Ivoire and Ghana. First, the company can partner with agricultural specialists to teach cocoa producers about sustainable practices. In Sustainability Science, François Ruf et al. claim “supply chain actors [e.g., Ben & Jerry’s] should help farmers in the technological and social adaptation process that is necessary for a stable, permanent farming economy.”[viii] With investment from Ben & Jerry’s, these specialists can demonstrate to the cocoa producers the benefits of pest control, less deciduous shade trades, and plant spacing.[ix][x] While Ben & Jerry’s would ideally have its distributors and retailers co-invest, they are unlikely to be incentivized because of cocoa pricing’s minimal impact on their more diversified product portfolios.
Additionally, Ben & Jerry’s has a history of being politically involved, evidenced by the aforementioned petition, and can take a similar strategy with local governments to encourage their support of cocoa production. While this government engagement should begin immediately, regulation may not occur until the medium-term; Ben & Jerry’s could lobby for tax credits for sustainable cocoa production investments.
Moreover, Ben & Jerry’s should explore product diversification over the coming decade. Ben & Jerry’s has many chocolate-less flavors, and the company could add more. Of course, other ingredients are going to face similar challenges, so the company should think about which ingredients are less susceptible to the perils of climate change.
Ben & Jerry’s plans to reduce its contributions to climate change, but should also pursue measures that accommodate the shifting environment. Both mitigation and adaptation could promote social responsibility, and such association would likely grow the brand and sales. Given the merits of both, how should the company determine the appropriate level of investment? Also, since rising temperatures can support ice cream demand, is there any point where such socially responsible initiatives should not be pursued?
[i] Erwan Créhalet, et al., “Demystifying Climate Effects,” Kepler Cheuvreux, 2013.
[ii] Peter Läderach et al., “Predicting the future climatic suitability for cocoa farming of the world’s leading producer countries, Ghana and Côte d’Ivoire,” Climatic Change, 119(3-4), 2013, p. 841-854.
[iii] Ben & Jerry’s Homemade, Inc., “Ben & Jerry’s Flavors We Could Lose to Climate Change,” http://www.benjerry.com/whats-new/2016/endangered-pints, accessed November 2017.
[iv] Martin Parry et al., Climate Change 2007: Impacts, Adaptation and Vulnerability, (New York: Cambridge University Press, 2007).
[vi] Ben & Jerry’s Homemade, Inc., “Join the Climate Movement,” http://www.benjerry.com/values/issues-we-care-about/climate-justice, accessed November 2017.
[vii] Ben & Jerry’s Homemade, Inc., “Ben & Jerry’s is Fighting Climate Change,” http://www.benjerry.com/values/issues-we-care-about/climate-justice/fighting-global-warming, accessed November 2017.
[viii] François Ruf et al., “Climate change, cocoa migrations and deforestation in West Africa: What does the past tell us about the future?,” Sustainability Science, 10(1), 2014, p.101-111.
[ix] Marius Wessel and P.M. Foluke Quist-Wessel, “Cocoa production in West Africa, a review and analysis of recent developments,” NJAS – Wageningen Journal of Life Sciences, 74-75, 2014, p.1-7.
[x] Peter Läderach et al., “Predicting the future climatic suitability for cocoa farming of the world’s leading producer countries, Ghana and Côte d’Ivoire,” Climatic Change, 119(3-4), 2013, p. 841-854.