Scaling living income: lessons from cocoa pricing policy

What can a cocoa pricing policy in Côte d’Ivoire and Ghana teach us about supporting living incomes? A recent learning event co-hosted by Evidensia, the Living Income Community of Practice (LICOP) and ISEAL drew on new research to explore lessons from the Living Income Differential, a US$400 per metric ton premium on cocoa exports.

Of the 500 million smallholder households worldwide, the vast majority do not earn a living income. Public policy is one part of the response, alongside voluntary and market-based approaches.

Lessons from the Living Income Differential

The first workshop in a three-part series focused on lessons from the Living Income Differential (LID) for practitioners using price policy to support living income. The LID was introduced by the governments of Côte d’Ivoire and Ghana following a sharp decline in global cocoa prices, with the aim of improving returns to cocoa farmers.

The discussion explored practical challenges highlighted by the LID for using price policy to support living income. These include the effects of commodity and futures markets on price interventions, the limits of premiums alone, and the role of complementary measures such as supply management and stabilisation mechanisms.

The session also considered lessons beyond Côte d’Ivoire and Ghana, including the need to involve more producing countries and the influence of regulation in consuming markets on purchasing practices.

Despite Côte d’Ivoire and Ghana accounting for the majority of the world’s cocoa production, their combined influence was not sufficient to overcome the incentives and motivations of other actors across the cocoa value chain.

The role of policy

Living income depends on prices, productivity, access to services, infrastructure and markets. Companies and sustainability systems can influence some of these conditions, but governments also shape many of them.

The report Components for creating living income policy initiatives: insights from three policy case studies, jointly commissioned by Evidensia, the Living Income Community of Practice (LICOP) and ISEAL, examines how living income policy initiatives have evolved in different contexts, what has shaped their development and what practitioners can learn from them.

Different policy approaches

The three case studies show different ways policy can influence living income.

In addition to the LID, the report looks at work to integrate living income into the EU Corporate Sustainability Due Diligence Directive (CSDDD) and at Vietnam’s coffee sector, where broader agricultural and economic policies have contributed to comparatively high smallholder incomes despite living income not being an explicit policy objective.

Taken together, these case studies shed light on effective public policy, a little-understood but essential enabler of progress towards living incomes.

The report asks what components are needed for living income practitioners to create coherent, harmonised initiatives that move farming households towards living incomes and some key recommendations emerge:

Understand the different roles government can play and use them to advance living incomes
Pay close attention to actors’ motivations and incentives and develop multi-pronged strategies that respond to them
Follow an inclusive, iterative process that allows the right mix of actions to evolve over time. Progress towards living incomes is rarely linear, it is organic, iterative and often messy.

The remaining learning events will explore the CSDDD and Vietnam case studies in more detail.

Find out more

Watch the learning event: Scaling living income: price differentials and the case of the Living Income Differential (LID)

Read:

The full report, Components for creating living income policy initiatives: insights from three policy case studies
The LID case study: Components for creating living income policy initiatives: the case of the Living Income Differential (LID)