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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Summary Harvesting cocoa, an essential ingredient in chocolate, is a labor intensive task. Cocoa pods are opened with a machete, and the beans inside are removed and then dried to be turned into the cocoa that is used in the production of chocolate. Much of the world’s cocoa comes from countries in Africa like Ghana and the Ivory Coast, countries located near the equator where growing conditions are ideal. The labor intensive nature of harvesting the beans has led many producers to turn to children as a source of labor, and often to child slave labor. The public outcry over the situation has prompted some chocolate producers to turn to Fair Trade cooperatives for their cocoa. These groups of farmers have committed to eliminating the use of child labor especially child slave labor. In doing so, however, their cost of production has risen and so has the cost of their final product. Both large companies like Cadbury, Nestle, and Mars as well as smaller chocolate producers are willing to pay the higher prices in order to buy cocoa that has been more ethically produced. These companies use specially marked packaging for the products to clearly indicate to consumers their commitment to the eradication of child labor and child slave labor. Interestingly, the large chocolate producers also continue to purchase non-Fair Trade cocoa and offer little explanation for their strategy. In fact, both Fair Trade and non-Fair Trade products produced by the same company are often available side-by-side in store displays. One chocolate maker, Mars, does maintain that by 2020 it will only buy Fair Trade cocoa or other cocoa certified to be produced without child slave labor. Mars claims that as the only chocolate maker to work directly with Fair Trade, the Rainforest Alliance, and Utz International, the three main certifiers of cocoa, it is leading the cause to eliminate the use of child labor in the production of cocoa. Teaching Note This video is a good introduction to the general discussion of whether or not businesses are responsible for the actions of their suppliers. Discussion Questions 1. How effective are agreements like the Harkin-Engel Protocol? Do they do enough to correct the situation? Discuss and give your opinion. 2. If you were Nestle’s CEO, what would you do? Buy the more expensive Fair Trade cocoa, or continue to but the less expensive, less ethical cocoa? Discuss and give your opinion.

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