Choco4Peace

Choco4Peace is a social enterprise headquartered in Montreal that works with ex-cocaine producers and war victims (women, Indigenous, youth and other at-risk people) who have made the transition to growing chocolate-producing cacao. We support them with access to markets, innovative finance and disruptive technology. We use this technology to trace not only the origin of the cacao as it moves through the value chain, but also the socioeconomic and environmental impacts of production, consumption, and investment. The project, if scaled on a global level, could drastically change the way agriculture works and consumption habits as it can be adapted to any crop in any geography. 

There are approximately 450 million smallholder farmers around the world. The agricultural sector consists mostly of small farmers living in remote areas lacking access to programs and technology that would facilitate economic assistance in a timely manner. Many families are going hungry, falling into poverty, and looking for alternative, often undesirable sources of income as a result. In Colombia, illicit activities have led to a vicious cycle of violence, increasing inequality, and ecological destruction. The Colombian government has identified cacao as a key crop in the peacebuilding process. An estimated 5 million farming households depend on cocoa as a cash crop, and 70% of cocoa is produced by smallholders living on less than USD 2 per day. This is mainly due to a lack of access to markets and fair prices, education, technology and finance, enhanced by the lack of a robust governance and policy framework. Colombian farmers face the dilemma of choosing between farming legal crops like cacao in poverty, or returning to cocaine production or other illegal activities in order to survive. In Tumaco, in the district of Nariño, where our pilot program is located, 80% of farmers live below the poverty line and 74% are unemployed.

We equip farmers with a custom smartphone suited to their literacy level, allowing them to establish:

• relevant, timely agronomic information

• simple automated bookkeeping

• effective communication with buyers

• access to banking, insurance and market information

We pay farmers a living income for their cacao, which we transform into smart, premium chocolate products for sale on the international market. The phones are powered by a blockchain platform that records transactions in the supply chain. This technology allows us to trace not only the cacao from its origin to the finished product, but also the socioeconomic and environmental impacts of production, consumption, and investment. This has several positive consequences:

• cooperatives can record, through IoT technology, cacao quality and provenance.

• the buyer has access to key inventory information and to a digital story adding value to their product.

• consumers can make educated decisions about their consumption habits as well as the social and environmental impacts they have.

Finally, we are laying the groundwork for future opportunities where business services, such as banks, can reach farmers to finance their working capital need of $5,000 per farmer, representing an aggregated financing gap of $215 million per year for Colombian cacao producers.

Context

Cocaine production and trafficking has destabilized the entire American region. It comes with incredible violence, which is one reason why so many migrants from countries affected by the trade travel North to seek asylum in the United States.

In 2016, the government of Colombia negotiated a peace deal with the Revolutionary Armed Forces of Colombia (FARC), ending over 50 years of civil war. The Colombian conflict killed over 220,000 people and displaced over 5 million. This effort was awarded the Nobel Peace Prize in 2016. The peace agreement contains provisions to formalise land ownership for peasants, with a crop substitution program to help them switch coca crops for legal alternatives such as coffee and cacao.

Despite a formal peace, conflict persists in many areas of the country. During the conflict, illegal armed groups coerced farmers to produce coca (the base ingredient in cocaine) and would tax harvests, funneling the proceeds into their war chests.

In the intervening period, the vacuum left by the FARC had been filled by a myriad of other armed groups, from dissident left-wing rebels who chose not to lay down their rifles to right wing militias originally set up to fight the FARC.  FARC members took up arms again in August 2019, and the Covid-19 pandemic worsened the situation considerably. These factions have pressured coca farmers to steer clear of the peace process’s crop substitution program, often at the barrel of a gun, and targeted regional activists who campaign in favour of the peace process’s provisions. 

Beyond the additional logistical and governance challenges, the peace process will require the blending of public and private capital in order to succeed.

How we know who are target population is and what they need

At the outset of this work, we conducted a UN-funded research study with over 100 stakeholders including SMEs, financial institutions, second floor banks, NGOs, academic institutions, and private companies, to better understand the barriers for small farmers in accessing finance. The results of this study suggested that the major barriers - and points of leverage - were around lack of access to socioeconomic services such as education, technology, and finance. This led to the founding of Choco4Peace. 

With the support of the anti-narcotics special forces of Colombia, we proceeded to conduct fieldwork among established Colombian cacao grower cooperatives in post-conflict regions. In collaboration with our existing network of capacity-building NGOs, we conducted a baseline impact assessment of the pilot group of 100 small cacao farmers, against which to measure progress. We spent two years raising awareness of the proven business model and technology, demonstrating that poverty reduction, saving the planet and creating prosperity are measurable impacts with economic value.

We have learned that there are many efforts from NGOs and the international community to support Colombian cacao producers to escape poverty and illegal activities. However, their efforts are mostly focused on increasing the quality and yield of cacao production, resulting in producers that remain untechnified and without access to the markets, technology, and finance they need to change. Our approachaims to change that.

Fino de aroma cacao is grown by approximately 65,000 families in Colombia, with 90% of production done by smallholders. Currently, the export potential is marginal, as it is only accounted for by the few producers that are able to fulfill certification requirements.

In recent years, however, global demand for fino de aroma cacao has undergone explosive growth, as consumer preferences are shifting towards higher quality cacao products. As a result, a niche market has developed in which buyers interact directly with producers (or at least with fewer middlemen in the value chain) to maintain long-term relationships. Segmentation of the cacao market ensures trust and traceability in order to encourage the proliferation of these relationships and sustainable practices. 

Much of this increasing demand comes from “bean-to-bar” businesses that focus more on quality and ethical behaviour, and therefore may be able to offer Colombian fino de aroma cacao entrepreneurs a better price for the commodity. We work to connect farmers to these markets hungry for their cacao, and ensure they get paid a living income at the farm gate. Increased family income means better outcomes for women, quality employment, sustainable supply chains, and the environment. And if farmers can earn a dignified income producing legal crops, it should mean they don’t have to return to illegal activity - such as producing cocaine or joining an illegal armed group - in order to survive.

By supporting farmers in accessing socioeconomic services they need, they can walk away from illegal activity, restore the natural resources on which they depend, build peace and resilience in their communities, and build lives with dignity. Digitalization and technology have the potential to be the tipping point for their success. Enabling farmers to access a digital platform with vital services for any business person is an effective way to reduce poverty, improve collaborations, and make supply chains more transparent and efficient. This electronic ecosystem provides first mile rural communities with essential services, improving cost & time efficiency.

The 1st phase is being implemented in the Tumaco region of Colombia as a pilot. We have selected 100 farming families who are war victims and ex-coca producers as test users, providing market access to prevent armed conflicts and cocaine production. Additionally we have conducted fieldwork and signed agreements with 7 cacao cooperatives in 5 regions of the country representing over 1,000 farmers. We’re also partnering with cooperatives in 3 other regions, and with Fedecacao, the Colombian Federation of cacao producers which aggregates ~65K farmers, to bring the project nationally, and internationally in the future.

Most of global chocolate consumption is done through a system that prioritizes paying the lowest commodity price possible, which has kept millions of farmers in poverty and has led to negative socioeconomic and environmental outcomes, such as 2.4m child slaves in West Africa, deforestation, and the production of cocaine. The focus of NGOS in this sector is usually on increasing quality and yield, neglecting access to markets and finance. We use chocolate and disruptive technology tools to educate consumers, create business transparency and bring producers into an inclusive digital economy.

While our focus is on Colombia in the short term, we plan to expand operations to other cacao-producing territories also experiencing conflict in the long term to replicate the model (e.g. Venezuela, Peru). Many organizations have struggled for a long time to de-risk smallholder agriculture investment. By digitalizing farmers at their natural points of aggregation (such as co-ops) and blending risk with other stakeholders in the ecosystem (e.g. buyers, insurance companies, NGOs, and the government), we can mitigate investment risk and mobilize capital down to the bottom of the pyramid.

Phase 1: Tumaco Association with 100 producers

Phase 2: 12 months - 1,000 producers

Phase 3: 24 months - 10,000 producers

Phase 4: 48 months - 70,000 producers

Our pilot project focuses on 100 farming families in the community of Tumaco in Colombia, with a specific focus on women and indigenous producers. We have signed expressions of interest from 1000 farmers from 7 cacao growing cooperatives in 5 regions of Colombia. Our objective is to scale to 1000 farmers within our second year, and to 60,000 farmers by year five. Beyond that, we are also exploring the potential to replicate our model in other cacao-producing Latin American countries experiencing armed conflicts (e.g. El Salvador, Honduras, Venezuela, Mexico).

• Number of farmers receiving a digital cryptographic identification

• Increasing income from cacao farming for cacao farming families by up to 50%

• Quantity of Colombian cacao exported

• Value of cacao sales

• Number of farming families receiving investment

• Volume of investment deployed into cacao cooperatives as a result of digitalization

• Number of farmers accessing a new agricultural insurance product

• Number of farmers obtaining new agricultural inputs (e.g. fertilizer, irrigation systems)

• Number of farmers receiving financial literacy training

• Number of new cacao trees planted and tracked using IoT sensors

• Number of hectares of agricultural land brought under agroforestry systems

Two team members work full time, with a team of 21 part-time contributors working pro-bono. We have roughly ten advisors, specialized in cacao/chocolate, technology, trade, finance, agriculture, and economic development. We have also benefited from the research of over 200 student researchers from seven universities across North America.

CEO Sergio’s unique profile, a combination of negotiation, project management and impact investments, is perfectly suited. His strategic analysis and international relations experience with various stakeholders, in emerging markets like Africa and Latin America, bring significant insight and depth of cultural knowledge to C4P.

As a Colombian living abroad, he witnessed from an early age the consequences of social injustice, poverty and war. Growing up, he believed in creating socioeconomic change and decided that a strong academic background was the key to fulfilling his dream.

Trying to close the financial gap in the agricultural industry has strengthened his ability to develop relationships as well as to improve negotiation skills with public and private organisations and governments.

Members of his team include the co-founders : 

• Matt Whiteman, partnership and growth director, manages relationships and projects with international partners. Background in International Development, Human Geography, and Ethics. 

• Santiago Diaz, supply chain and logistics director, in charge of cacao and chocolate quality control procedures in Colombia. Background in International Negotiation and Management, and Market Strategy. 

• Juliana Diaz, communications and marketing director, in charge of advertising, sales promotion, website and social media tactics. Background in Industrial Design and Corporate Communications Management.

Our network of advisors, collaborators and volunteers spread across 11 countries works towards the same purpose: create dignity and build resilience in ecosystems and the communities that depend on agriculture technology and investments. It’s not about chocolate, it's a movement.

From an HR standpoint, Choco4Peace is an equal opportunity employer. We particularly welcome and encourage applications from Indigenous Peoples, women, the LGBTQ+ community, mature workers, people with disabilities and people from different cultural backgrounds.

We are committed to an inclusive environment where people feel comfortable to be themselves. We want our people to feel that all voices are heard, all cultures respected, and those various perspectives are not only welcome – they are essential to our success. We treat each other fairly and with dignity regardless of race, gender, nationality, ethnic origin, religion, age, sexual orientation or anything else that makes us different.

Three of the four founders are from the Latinx community, and one is a woman. Among our staff, we have 11 countries represented. We produce our chocolate products in a factory owned and operated by women. When implementing our platform, we give priority to cacao producers who are women, youth, and who belong to an Indigenous community.

We work with the Path to Career Success program, which provides skills training for women in Ontario struggling with job loss in the service sector.

We are also exploring a partnership to provide career path opportunities for neurodivergent youth through internships.

There are two broad categories of farmers we look to support. The first are those who are already producing cacao, who now need access to markets and finance in order to improve their income. This is the “accelerator” component of our model. The second group is those farmers who have volunteered to remove their coca crops and transition to legal crops like cacao. This is the “incubator” component of our model.

 
Partnering with MIT and its partners will enable Choco4Peace to begin the process of delivering the solution by providing cocoa farmers with the necessary amount of smartphones that include the blockchain system. This will allow them to access the socio-economic services they need in order to improve their income.

We are exploring relationships with our first retailers and distributors now. Because our company is focused on solving a complex international development problem, our traction to date has focused more on our media appearances around the movement we are building. We need support in launching our sales efforts, and connecting to organizations with an explicit corporate social responsibility mandate. We would love to benefit from connections to investors looking for opportunities in agriculture and technology in Colombia. We would also love some support in assessing our approach to impact measurement aligned to the UN SDGs.

Future Planet Capital - we would love to explore a collaboration around funding our initiative

KSF Impact - we would love to explore a collaboration around funding our initiative

Olam International - as one of the largest traders of cacao in the world, we could greatly benefit from a connection here.

Gender Equality is the 5th Sustainable Development Goal and one of the goals that Choco4Peace focuses on. Supporting this fundamental human right is absolutely necessary as the foundation for a peaceful, prosperous and sustainable world. By our 3rd year, we expect 39% of our cacao suppliers to be female producers. The Innovation for Women Prize will support us in reaching that goal and beyond.

Investment in agriculture now demands solutions that can mitigate the impact of cultivation on nature and biodiversity. Contrary to SMEs in an urban setting, agriculture takes place in rural and remote areas where nature and biodiversity are also at risk. 

Projects are hard to scale up because most of the activities related to financing, monitoring and mitigating impact is human-capital-intensive. What is required is a process (AI / Machine Learning) that can analyze (1) satellite images on type of cultivation and local infrastructure; (2) collect data on weather, crops, and expected production per acre; (3) analyze data collected from sensors and farmers (i.e. soil data, recording on biodiversity, other local information).

Analysis of the above-mentioned data would allow for any financial service providers to lend directly to any agricultural project while mitigating impact on nature / biodiversity.

It’s not impossible to do it now but it’s unsustainable. The administrative cost of performing the necessary due diligence (e.g. traveling for 12 hours to reach a farm) makes investing in agriculture unattractive. The additional cost affects the financial sustainability of smallholder farmers. It’s also extremely costly and impossible to scale up without technology solutions.

The AI for Humanity Prize will support Choco4Peace and its partners in this aspect of the project.

The GSR Prize will support Choco4Peace in developing it's DIEN platform that uses blockchain technology to provide the necessary tools, services and resources for the farmers. 

This proven business model and technology shows that poverty reduction, saving the planet and creating prosperity are measurable impacts with economic value, and can not only be scaled nationally, but also can be replicated in other regions where cacao farmers live in poverty and present similar challenges. Choco4Peace seeks to transform the Colombian cacao sector. This enables farmers to lift themselves out of poverty, build peace in their communities by walking away from illegal activity, and to build lives with dignity.