Hello, welcome to this Nestlé conference call broadcast live on nestle.com. I'm Chris Hogg from Nestlé Corporate Communications. We've organized this call to discuss the report by the Fair Labor Association into our cocoa supply chain in Côte d'Ivoire. I'm joined by our Head of Operations, José Lopez, the man responsible for the company's supply chains, and the Fair Labor Association President and Chief Executive, Auret van Heerden. In a moment, he'll be giving us a summary of what the FLA experts found when they visited Côte d'Ivoire to map our supply chains. First, we're going to hear from José Lopez.
Let me take you through a short presentation and try to go through the process that has taken us to where we are today. First of all, we started our Nestlé Cocoa Plan 3 years ago, the aim there really was to focus on the farmers and the origin of our raw materials. We stated clearly that there were three key areas that we wanted to address. One is to help farmers, enable them to run their farms in a way that will make that activity sustainable. They have to be making a living with that activity. Very quickly after that, we decided to focus on the use of child labor, notorious in this practice of cocoa farming, of course. Also, we have, also with the experience of prior activities, seen the opportunity for getting access to a better quality cocoa.
In the end, achieving goals in all areas of our activities. It's very much aligned with our Creating Shared Value idea. We believe that on the long term, we have to create value for everyone in the supply chain if we are to create value for shareholders eventually. That value will come in many ways. Of course, trust and reputation from consumers, but also a better quality for our products, and eventually a sustainable farming chain, which will allow us to be in business and to do so competitively over time. In that regard, we looked for help because having been into this environment for a long time, we could see that by ourselves, we would not particularly deal with the child labor issue. We went and discussed with the Fair Labor Association about the opportunity. I think Auret will speak about that.
Very quickly, we identified that supply chain and cocoa farming and those activities are fairly complex. We decided to get together into an attempt to understand better what is happening, in terms of traceability and in terms of transparency. I mean, what is really this issue and how is that actually coming across our day-to-day activities? Very quickly, as soon as we start to map this out, we realized that there is many intermediaries in the supply chain. There are a number of participants, local people trying to regroup the supply from the farmers to cooperatives. Also intermediaries that actually go very deep into the country to look for small farms, sometimes extremely small, below even one hectare. They regroup the supply, and they kind of amalgamate all that into one supply chain.
With the help of the Fair Labor Association, we could see that a number of areas need to be improved. Actually, we identified 11 key recommendations or key areas of recommendation, and we have, as a result, decided to immediately take action and get moving in the right direction there. The other thing that I need to say here is that, as you go through this process, you understand that none of these areas in isolation will make a real impact. It is more the alignment of all of them and the simultaneity of all these activities that will deliver a result.
I think the 4 basic areas that come first to mind is, of course, that we have a supplier code, and it's typical of what happens in a company like ours, where you collect the data, you understand, you put a code down, and you say, "These are my requirements, and that's what we want you to respond to." That supplier code is not implementable as such in every environment where you operate. With FLA recommendation, we're going to have to look into improving the code, simplifying it, making it easier to understand by the participants. That's probably the number 1 priority on which we have started immediately. Then the monitoring of the activities. How do we then, as we get started, measure that the progress is being done? Again, there we have looked into what would be the key activities.
We might come back later on with Auret on this as well. Training has always been a very key part in this whole area. Good agricultural practices apply everywhere. In the area of cocoa, where the activity to cultivate cocoa is very often done through the father teaches the son, and then the family takes over, and then some other members come together. We kind of lose track of what are the key activities that will deliver safety, reliability, quality, and also productivity, so that again, the family can prosper with that activity, that economic activity. Training will be very important part of our activities there. Finally, I think importantly, we have said that many times. Alone, we really will get very little done. So how we strengthen the relationship with a different part of this partnership work that needs to take place.
From the farmer to the traders, to actually the companies that are involved in certification that help us with also traceability through their certification programs. Large non-governmental organizations, institutions. ILO is going to help us through some of their prescriptions and their initiatives as well. The World Cocoa Foundation, the International Cocoa Initiative, we work with them. Fairtrade, UTZ. Also with people like our suppliers. A trader like Olam is also, I think, seeking to work with FLA because we see that we can then establish one line of communication with a common goal that could take us where we want to be. What we are doing today here is a commitment to a more transparent system. We will continue to work with FLA and other partners.
Also we, I guess today through this event, want to send a sign that we want to continue to communicate on this. We believe also that not only the public or the media or our shareholders will have an interest in what we do, but obviously our employees have a very high interest to know how does Nestlé go about things like child labor in their supply chain. Regular reporting and information will be sent to the outside, and we will go step by step in strengthening everything that we have been doing. Clearly, I think the kind of first realization after getting the report and discussing with the Fair Labor Association people, the number of areas where we can make improvement are very numerous, and we will take those undertaking. We will invest more money into those activities.
We have already spent about $60 million in activities related to the Cocoa Plan, the Nestlé Cocoa Plan. We see that we're going to have to spend about $110 million from now to 2020, so for the 10 years, in order to achieve at least the plans that we see today. Those things might change with time. We will again, keep everybody aware of our thinking. Hopefully we are today starting something that will maybe inspire others in also go around and seek help and try to get results in that process.
José Lopez, thank you very much. Auret van Heerden from the FLA. This is a new partnership and this is a very big piece of research, a big report that your organization has come up with. What is new about this? What is different to what's been done before?
I think this is a very important piece of work, as you mentioned, for a number of reasons. Nestlé has been the first company to really step up to the plate and say, in addition to all of the other industry-wide or sector-wide initiatives that we're involved in, let's look at our supply chain in a lot of detail. Let's bring in an external set of eyes, an independent set of eyes, and get them to really trace that supply chain from headquarters down to farm level. Along the way, what we did was understand and assess the way Nestlé maintains its duty of care.
You have a supply code, and you need every actor in that procurement process to be aware of that code and equipped to live up to its expectations, and really to know what the deliverable is and what the metric is going to be for their performance. We were assessing as we go down the chain, how well their duty of care is maintained, and identifying areas where it could be enhanced or strengthened. Secondly, when we get in-country, we did a stakeholder map because there are a lot of people who have been working on this issue for 10 years now. We wanted to understand who they were and what they were doing, so that we could get an idea of the lie of the land.
Thirdly, we look at the actual farming activities, and we do a task and a risk map. We break down every task from clearing the ground to weeding and planting and tending the trees, and then harvesting, and finally drying and delivering the beans. We attach a risk to each one of those activities. If you are using a machete, is there a health and safety risk? If it is a child using a machete, what is the risk? We get that task and risk map in place. With those three documents, if you like, those three maps, we were able to build up a very comprehensive idea of how well these risks are being managed. On that basis, we could make recommendations to Nestlé for enhancing the management of that procurement process from a social responsibility perspective.
To be clear, you made 11 recommendations, all of which are being acted upon by Nestlé.
Right. In terms of recommendations, I think the most important realization for us was that this is a development problem. Child labor is not something you can audit away or inspect away, and it is not something which happens in one event. It is a process. We really have to understand the realities on the ground, the socioeconomic and cultural realities of those farmers in areas where there is very little administration, very little paperwork, very little infrastructure. We really think that you need to be able to change the socioeconomic conditions of the farmers, help them get better plants, better yields, better income, so that they can afford to do things without child labor. We then need to create access to schools so that once they can afford to send their kids to school, there is actually a school that they can go to.
Thirdly, we need to change a lot of attitudes. There are a lot of ingrained cultural perceptions which don't see this as a problem in the same way that we do, and we really need to work on those perceptions. There are three prongs to this strategy, and I think we need to work on all of them at the same time.
Okay. Auret and José, for the moment, thank you very much. We're going to open this up to questions. If you're on the call and you would like to ask a question or to make a comment, please press star one now. If you need to withdraw your request for any reason, press star two. We want to hear from as many people as possible, so please keep your contribution brief if you can. If you're following the webcast on nestle.com, you can also ask a question via email. Send your question to questions@nestle.com. That's questions@nestle.com, we'll do our best to get as many of those in as possible. We've already had a number of questions sent to this account from fans of our corporate Facebook page and from the Twitter account.
The first question, while we wait for a question from the call, let's go to one of the questions that came in to that email site. This came from the Inter-Parliamentary Union, from Akio Afuda, he asks, "Is there going to be any arrangement for us to work with the politicians in Côte d'Ivoire? Will this involve Ivorian government, Ivorian lawmakers?
I would like to answer generally about the way Nestlé operates in the countries where we have our activities. We always have relationship with the governments where we operate. We also clearly request from our representatives, the head of the Nestlé organization there, that they make every attempt to work with the local institutions and with the authorities to see how together we can help the whole economy, the socioeconomic situation of the country prosper. Typically, I've been a market head in places like Malaysia, you work with the World Business Council for Sustainable Development chapter, with the Chamber of Commerce. You work also directly with authorities, international trade, and so on. You all the time assess that capability that Nestlé could have in bringing further development to their own activities. We receive a very good collaboration from those governments where we operate.
As a matter of fact, I want to mention that just recently, I saw from the Ivory Coast Republic that they have started or at least expressed the intention to put in place a national action plan from 2012 to 2014 in order to fight against child labor and also the worst form of child labor and slavery, and so on. The fact that this plan is coming together, that we are working as well, that we have a whole range of partners into this process, indicates that we will be able to work closely. It is for the local organization to make those steps to approach the government and put our organization to their service in getting this progress done.
Auret, when your experts went to the Côte d'Ivoire and carried out this mapping exercise, they also conducted interviews with members of the government and people at that level, too.
Indeed. That was one of the stakeholders which we mapped, and we met a number of different ministries, and all the way up to the First Lady's office, because she has been very involved in this herself and is one of the prime movers, I think, in the government's new focus on this problem.
Okay. Let me just repeat in case you missed it. If you are on the line and you want to ask a question, you need to press star one, and then that will signal to the operator that you need to ask a question. I believe now we can talk to Anthony Fountain from the organization STOP THE TRAFFIK. Good afternoon, Anthony. Would you like to tell us your question?
There are two questions, first of all, I think it's really good that Nestlé have joined with the FLA in this. I think it's a good step forward in transparency. First of all, thank you to Nestlé for doing this. Actually, the report itself obviously confirms quite a few of the issues that we have been stating over the last years. The question I have is not necessarily about what is in the plan, but what really isn't in the plan. That, I think, requires quite a lot of work. 10 of the 11 suggested actions deal with the cocoa that's actually coming from The Nestlé Cocoa Plan itself, but that only covers about 15% of Nestlé's entire cocoa usage.
The question I really have is: what is the plan to actually hit the other 85%, which is actually where most of the problems are? Where is Nestlé going in the future, not just in the next one or two years, but what is the comprehensive solution for the next, let's say, 10 years or so and the whole supply chain? The FLA report clearly states that Nestlé, as the world's largest food company, has a tremendous possibility of impact. I fear that Nestlé could take their role as an ambitious leader within this sector more strongly by looking towards the future beyond the next two years or so.
I'm glad you take that question. I also want to say that The Nestlé Cocoa Plan has been announced only three years ago, but our activities in engaging with farmers, in developing direct procurement, in creating partnerships with many stakeholders have been going on for many, many years. Actually, I was reading somewhere that more than 20 years ago, we were in Venezuela doing similar activities with farmers there. I've been myself to Ecuador and seen our activities there with a demonstration farm where we can also help farmers through the necessary training on how to improve, again, quality, yield, and also how to enhance their living standard by helping them with alternative crops and so on.
We have been devoting quite an important amount of money also to microfinancing, helping people with many activities that require cash and that becomes a problem to them, like new equipment in the area of dairy farming, with biodigesters, protecting the environment. We source 10% of our cocoa from Ivory Coast, the rest coming from all sorts of countries around the world, particularly Latin America, but also in other parts of Africa. Why we have focused on Ivory Coast is because it has also felt to us it was probably the most pressing area, and the one that could give us the biggest impact from the point of view of creating a lighthouse. In other words, the view is like this.
I'm not sure if it would satisfy people, if you create a lighthouse in a place where things are quite difficult and where there are, as Auret was saying, cultural and developmental, as well as economic circumstances, a lack of infrastructure and so on, that lighthouse can be seen as something that you can scale up and you can replicate. Our intention is to continue what we already started many years ago, but to add to it, I would say, the alignment of all possible stakeholders. The one thing that is different maybe today in the way Nestlé is trying to address or to contribute to this issue of child labor, is that we are seeing the possibility to get many more people aligned in that process. From obviously the farmers themselves. We were working with the World Cocoa Foundation to build schools.
We have a plan to build 40 schools or to rebuild some of them, and so on. You can be here talking about child labor, but if there is no school where the kids can go, the thing is not going to work. You have to put that into place. We have said we're very, very pleased to hear that the First Lady in Ivory Coast is behind an action plan, which means that the politicians are going to take interest into this. We have heard from some of the trading houses that they want to go and see Orit and join the FLA because they see a benefit and a merit to that. We also, through this communication, hopefully tie in our consumers and our other stakeholders so that everybody understands that this is a long-term effort. The idea today is to scale up.
Yes, eventually the story is very simple. We do not want to have child labor in our supply chain. Today, we're just scratching the surface, and therefore we cannot be here saying, "You know what? I'm going to certify all my cocoa, so I'll be okay." Of course, we will need certification also to ensure that the activities are done in a durable way, in a sustainable way. It will be a trip. I just want to conclude to say, well, I welcome STOP THE TRAFFIK to also join in and see how together we can enhance this chain of events and help with the scaling up of those activities. Beyond Nestlé, we hopefully also are going to see that some of our competitors-- In the area of sustainability, in an area like child labor, there is no competitor. It doesn't.
There is work to do, and we all have to jump in and do it. That would be my answer. Now, we will give numbers. We have today already put in some deadlines because we want to be able. We agree that if you cannot measure it, you cannot improve it. We will put deadlines, and we will communicate them as we progress, and hopefully, we'll be in touch with our colleagues from STOP THE TRAFFIK in doing so.
All right. Anthony Fountain from STOP THE TRAFFIK also raised another issue, which is that there are two supply chains. There is The Nestlé Cocoa Plan supply chain, and then the other supply chain. What are the particular difficulties with trying to make an impact in that other supply chain?
Obviously, with the Cocoa Plan supply chain, you know who all of your partners are, and you have contracts in place with a lot of them, and you can actually hold them to those contracts, and you can specify exactly what the deliverables should be. With the standard supply chain as it's known, you don't know who those actors are. It's much more random, so it's obviously much more difficult to put a floor of standards and a floor of expectations and deliverables under that supply chain. I always ask when we discuss these issues internally, I always ask the colleagues who write the reports, "So what? You did a great report. So what? Convince me that this matters a damn." I think that's a valid question, and I think in a way that's the question Anthony's asking us.
What is actually going to change as a result of this report? My answer to that is that this was the essential starting point. We needed to map these things out, get an idea of what's going on out there, who's doing what, and most importantly, internally, we need to get installed very firmly, soundly installed in Nestlé, this responsibility at every level of the chain, so that every officer involved in procurement shares that responsibility. I would like to see a situation where their evaluations, their performance evaluations, and their compensation, and their bonuses depend on meeting these standards, so that it becomes something that every single person feels part of and partly responsible for. That sets Nestlé up to approach every subsequent harvest more prepared, more able to deal with this problem. I think what we've done now is we've laid the foundations.
From this year's harvest, the end of this year, 2012, we'll see a different approach, a qualitatively different approach to the harvest. Anthony, what I would hope to see then is a set of targets set each year for the number of co-ops that we know we actually have under the spotlight. They've been communicated with. They know what the expectations are. They're trained to live up to those expectations and the intermediaries all the way down to the farmer. That I know when I get to a farmer and ask him about the premiums, ask him about the requirements, ask him about child labor, he knows exactly what he's meant to do, and he's able to do it. That's how I would measure success. I am hoping that we can set a series of increasingly ambitious targets for the coverage of the plan.
Okay. I want to bring in another question from the phone line or comment. This is Leonie Blokhuis from the NGO Stop Child Labour. Good afternoon.
Hello. Thank you for this attention. I want to congratulate both Nestlé and FLA with this excellent research. I think this is well done, and I think it's good that for now, for the first time, we really get a better view of what is happening. Although there are several organizations already mentioning it for years, now also having it clear for the company. I think it's good. As Anthony already mentioned, what lacks is more concrete and specific responsibility and role of Nestlé. As you already mentioned, the Key Performance Indicators needs will be made up, and it will be more specific. What I do miss is that Nestlé sets itself the goal to eradicate child labor from the cocoa supply, which is very good. When do you want to have this achieved?
I do agree that it's something that a company individually cannot achieve, and that cooperation with other companies and other stakeholders is necessary. We do expect Nestlé now to be more proactive and take more initiative to get this going and to really make a change in the coming years. I would like to hear some more about that. What will Nestlé concretely do in the coming years, and what do they feel their responsibility and role to really get this going?
Yeah, let me mention two or three things that go in this direction. First of all, we have decided not to maybe take something. I was in Rio last week, in Rio+20 Sustainability Forum, I heard a lot of people saying, by 2020 we would be doing this, and we would be doing that. We kind of, hopefully, they go home happy about all these things they promised there. I like to think that for us, this is not the right way. We can sit here and say those things, what we like to think is that we have a base. We have our Cocoa Plan. We decided three years ago to actually open an R&D center, and that cost money to the company.
In this R&D center, we decided to bring technology which is not available in that country on how to replicate trees, the cocoa trees that are resistant to diseases and to drought and so on, by using embryogenesis. That allows for speedy replication of those trees. We are today already covering a large number of farms, bringing those plants that are actually given free of charge to the people. The farmers are very conservative. They will go step by step. They will try these new trees. They will see how it goes, and it takes about three years to get the first pod out of a cocoa tree. It will be a relatively lengthy process, but we've already distributed something like 1 million of those trees in the area there.
We kind of map an area that we can make significant improvement, then we start to set the targets. In 2012, we have two co-ops that have engaged already in this direction, and that's about 600 farmers that are coming together. Next year, we want to go from two to eight, and then we want to continue to bring more co-ops until the next step, which we have set in our targets in response to Auret's work, is by 2016, all the other co-ops that supply Nestlé will be under The Nestlé Cocoa Plan. One part that's very important on The Nestlé Cocoa Plan is that we buy direct. In other words, we gain traceability, but also we ensure stable income to the farmers, and we monitor the progress being done in the different work.
You see, the way we look at it is that we will be scaling up year by year. We see 2016 an important step for us, because we see that we will be able to have all our co-ops engaged in that program. If you say to me, "Does it mean that in 2016 there will be no child labor?" I think what we don't want to do is to exclude people. In other words, if I take a view that for me, the only thing that matters for Nestlé is to decide that I go through a process where I map the place, I take my co-ops, I bring an institution to do certification, and I can say, "That's it. I've done it. I have my certified cocoa." That is not the way we see this process.
We see this process as a process of scaling up and hopefully bring other people, other NGOs, other institutions, the government, and as I say, other people that are in the cocoa trading to join in and see that we can move forward. We'll do our whole work, but that is not enough. The child that cannot work in the farm that supplies Nestlé will go and work in the next farm. That's not the answer. I think people should also go to Ivory Coast and see how it works over there. Not only Orit and I have been, but many of our people. We have operations there. We have an R&D in Abidjan, where people are physically there doing their work and going into the fields every day. That's how we see things.
Of course, we can improve, and we will be listening to Orit's team to see how we will do that improvement.
Orit, people in José Lopez's position are often asked to give a guarantee that a product is child labor free. Can any company give that guarantee today?
Today, no. No company can. I agree with what José Lopez was saying, that it's probably right now superficial to give a date. To say 2020 or something like that would be, frankly, a bit of a guess. I think the important thing is to commit to the eradication of child labor with annual targets, measurable annual targets. We can then have a discussion about whether those targets are sufficiently ambitious and whether they're realistic. Let's measure them and report out and have full transparency. That would be a big step forward for this industry, to have annual targets and transparent reporting. Let the public and the consumers and the investors all judge whether that is sufficient progress. That's what I would like to see right now. Commitment to total eradication, commitment to annual targets, and transparent reporting.
Okay. Let's go to one of the questions that's come into questions@nestle.com. This comes from the Sanoma Media Finland. The question is, "I know this sounds tiring," Casey Heatonen says, "as you're just trying to tackle the problems of Côte d'Ivoire. Do you intend to take similar steps with other countries?
Yeah, definitely. As I said, we have in numerous countries. The concept that we use, we have about 1,000 agronomists around the world. These are people that work for Nestlé, or they're paid by Nestlé, but actually work with the farmers that supply the Nestlé supply chains. That also translate into something like 17,000 extensionists. These are generally young people, young agronomists, and then they start like this, and they visit the farmers. They discuss with them. They see also the reality of the field and so on. This is an activity that we do around the world and not only for cocoa. As I say, dairy is an area where we engage a lot with the communities. It's a very important activity also to ensure the proper quality and reliability of supply to our operations. In coffee, we are doing a lot of work.
I was in Colombia just recently, visiting the activities that we have in our Nespresso business under Ecolaboration. We have a AAA program where we also similarly go in this direction. In those areas, the issues of child labor are less, I would say, violent as they are in Ivory Coast. Infrastructure is a bit better. You can actually access in an easier manner, and there is also more schooling infrastructure and so on and so forth. Obviously, we're not going to stop in Ivory Coast, and I'd like to repeat that. I'm not sure that I'm making my point clear, but the idea is to create lighthouses. If you go to Colombia, the trip that I mentioned just earlier, and you were there, I was with the head of Federation of Coffee Growers of Colombia.
They do an incredible work also in creating prosperity and so on. When you go there, you start to see that those lighthouses are the source of inspiration for things that we know today and also a source of creativity for what else can we do? We don't have all the solutions. We have more a specification what the problem is more than any solution. This action plan by the government, how can we engage in that? This is very new. It just happened to me just a few weeks ago. Now we are looking into how our operations locally can get involved there and can see some progress at in the area of infrastructure or also, of course, teaching material and the development of teachers and so on and so forth. We're going to have to work in many, many areas.
This is not a one isolated issue inside the otherwise perfectly working society. It's one of the symbols of the needs for prosperity in those parts of the world. I don't have any other way to describe that.
To pick up on something that José Lopez just said there. This is not a perfect society. In your report, you talk about the particular difficulties in a country like the Côte d'Ivoire of actually contacting the people, finding the people that need help. There are particular difficulties in a country like that.
There are. The infrastructure is not great. Of course, it's been badly affected by the civil war. A lot of these areas are very inaccessible. You're talking about jurisdictions which are very, very weakly regulated or not regulated at all. There's still quite a lot of security issues. Our teams had to travel around with additional security. It's not easy to put the infrastructure in place. We really do rely on the private sector here, frankly, to come to the table and assume even some state functions really in terms of creating infrastructure and access to schooling and improving healthcare and some of the basics, even some certifications, some birth certificates for the kids. We're going to have to put a lot of that in place ourselves because we simply can't wait for government to be able to mount those efforts.
When you talk about involving the private sector, does that mean a top-down approach?
No. Clearly, a top-down approach wouldn't work, and we can't interdict child labor. We can't legislate a lot of these things away. We're going to have to work with local community groups who are in those areas already, who've been working there for a long time and have the trust and confidence of the local communities and make it a bottom-up effort.
Okay. Let's go to the phone lines again, because I know she's been waiting patiently for some time. Emma Thomasson from Reuters. Could you give us your question, Emma?
Hi. Actually, I just have a very minor technical question. In the FLA press release, you talk about Nestlé contribute or it's not quite clear. There's a mention of 10% of the cocoa that Nestlé sources from Ivory Coast. I just wanted to be clear whether that 10% is 10% of Nestlé's total cocoa use or 10% of the Ivorian cocoa crop. If it's not the latter, I'd be interested in knowing what proportion of the Ivorian cocoa crop does Nestlé buy.
Maybe I should answer that. Actually, the total cocoa crop is about 4 million tons around the world, and we buy about 10% of that. Also, the cocoa crop coming out of Ivory Coast is about 1.3, 1.4 million, and we happen to also buy about 10% of that. What I can tell you today is that from the cocoa we buy in Ivory Coast, already today we have close to 20% of that is procured directly and goes through all these best practices and also receives the necessary certification and so on and so forth. In terms of scale, you have the world crop at 4 million, the Ivory Coast crop at 1.3, 1.4 million tons. We buy 10% of the world and also 10% of the Ivorian cocoa, which is for us, about 130,000 tons from Ivory Coast.
Okay. There's a question that's coming from email about the total business impact, how this actually impacts our business in terms of extra costs. Also, will it just be extra costs, or do we expect to have extra productivity, extra revenue stream coming in as well?
For us, it would primarily be a cost. The idea is that this cost will come with more intangible benefits, reliability of supply, quality of the material, as well as hopefully an understanding and recognition by consumers of our efforts and the trust they can place in our products. Because at first, when you put an R&D center and you ask them to do replication of trees and so on, actually as I said, we donate those trees. We don't sell them or anything. Then we have our activities directly related to the direct procurement, because when you do direct procurement, you also have to commit to a slightly higher price than what you can find in the market, because you want also the farmers to see the advantage for them in working with us and so on.
That has a cost impact on our raw materials. As I say, we have already about CHF 60 million behind us. That's about CHF 15 per year in the last four years. The rhythm at which we will spend in the future will be, say between CHF 10 million and CHF 15 million every year. These are costs that we add, as I say, more for intangible benefits than for immediate impact on our profit and loss.
Looking at what we've done here, Auret, in terms of an initial piece of research, what is needed in terms of taking this partnership going forward? How will the FLA be contributing to this process of transparency that Nestlé is pursuing going forward from here?
For us, this is a movie. We're not just have taken a snapshot here. This is a movie that starts at the beginning of the crop cycle and goes all the way through to the harvest year after year after year, monitors the progress. We'll be filing regular reports. We'll be monitoring the implementation of the commitments that you've made. We'll be reporting those out publicly and conducting additional stakeholder engagements in order to ensure that we're having that dialogue with stakeholders about whether these are the right steps, whether they're working, whether there are other things which we should be looking at, that we're getting input from the people, all of the stakeholders involved.
We've got a question that was placed on our Facebook page. I think a response to some of the comments that you've been making today. A question from Martin Wagner asking, how long has Nestlé been using child labor?
For as long as we have been using cocoa, probably. I don't have a better answer than that. This is ancestral practices, not only in Ivory Coast. It was also the case in Europe, in many other crops and so on and so forth. Yeah, for as long as we have been using cocoa.
Auret, how important is it that the chocolate industry as a whole starts to acknowledge this problem? Obviously it is difficult for a company like Nestlé to come out and to speak publicly like this. There is a risk involved always.
There is. I think we need to recognize that Nestlé has taken a bold step here, a brave step in agreeing to take this on as a company and to go over and above the industry initiatives which already exist. As you were talking about lighthouses earlier, I hope that Nestlé's action does have a demonstration effect, that it does serve as some sort of a beacon for other companies as well, and that for the consumer and for the stakeholder, this poses the question, what is everyone else doing? That they communicate that concern and convey very clearly to other companies that they expect them to also take their individual responsibility while continuing to contribute to the other broader initiatives.
We're running out of time now. I want to give you both an opportunity to just sum up and give us a last word. Auret, perhaps you'd like to go first.
I would emphasize the developmental aspect of this, that this is a long-term effort. We need to boil it down, to break it down into some baby steps, some daily and weekly and monthly KPIs that we will track and report on. It's something which everybody needs to recognize is a long-term development goal. I'd also pick up the point that Mr. Lopez made earlier, that we don't want to just displace the child labor. We've seen this in other child labor efforts, where some kind of inspection authority has gone in or some focus has been placed on the child labor. Farmers or sweatshops have simply shoved the child labor out, and they've ended up in worse situations.
What we want to do here is engage with these farmers and work with them to develop them out of the situation that they're in right now and not just displace the problem and push them to another industry. Third and last point is that I think this really does depend on partnerships. You mentioned earlier that this is a very big problem. It's too big a problem for any single actor to take on. Government, companies, NGOs, local communities all need to work together in order to be able to take this on.
José Lopez, a last word from you.
I want to, going back to the early comments, to express that this is not just one initiative inside Nestlé. We have committed to a way of going about our operations and encapsulated that under our Creating Shared Value approach, which starts with a very high focus on compliance and understanding that to be in business in the long run, society has to thrive. We cannot just do that on ourselves. Also by focusing, it's very important that we focus, then we get some results, and that we can use that as lighthouses for other activities and other areas of concern. Today, our decision has been to focus on nutrition, on water, in Rio, we heard a lot about all of a sudden the world is becoming conscious of this huge problem of water and agriculture, food security, and sustainability in agriculture and so on.
We have also committed to a thing that we call rural development. It is very important that we all realize that if we are to continue to feed the world as we see economic and social development, particularly in the eastern part of the world, we need something like 500 million new farmers, smallholders, willing, able to participate in that development. How is that going to happen if companies take a detached view on that activity? If authorities and NGOs look at it from either interested or critical point of view. We all have to work together. This is just an effort of creating partnerships, creating a flawless activity, I like this notion of being in a movie that Orit describes. It's a process, we are starting, we will report, it is very good that people have interest in those things.
What we think we have to do is to work more on breaking the silos, because there is a lot of people out there trying to do the right thing. The authorities, the NGOs, ourselves, partners, traders. There is people with good intentions out there, often working in their own silo, trying to make things better. We need to break those silos. We need to focus on action, hopefully then find a way to scale up. Hopefully we will be sitting here in the future talking about the impact of this scaling-up process.
José Lopez, Nestlé Head of Operations, Orit Nanzer-Van Heerden from the Fair Labor Association. Thank you both of you very much. That's all we have time for. Thank you all of you for your questions and comments. If we haven't managed to answer a question emailed in during this call, we will attempt to get a response to you in the next few hours. Don't forget, you can get more detail about the Nestlé Cocoa Plan at thecocoaplan.com. Thank you for joining us on the call and online on nestle.com. Goodbye.