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The Living Income Model sets the Living Income Reference Price (LIRP) for cocoa in Ghana & Côte d’Ivoire.

Extreme poverty, the direct result of the unequally divided cocoa chain, is the root cause of forced labor, child labor and deforestation. So, to solve those problems, paying a higher price for cocoa, more specifically a living income, is a good place to start (although all 5 Sourcing Principles are necessary, of course). To pay a living income, you first have to figure out what a living income is. And that's exactly what Fairtrade and Tony’s Chocolonely did with their shared living income model!

Fairtrade and Tony’s Chocolonely share their vision on living income and use the same model for calculating the cocoa price that enables farmers to earn a living income. The Living Income Model, developed by Fairtrade, calculates the LIRP. The model reflects a holistic view where productivity increases, income diversification and paying a higher price are all needed to get farmers to a living income. We call upon all chocolate companies to make a living income the norm and to start using this model.

The living income model has a holistic view where increased productivity, income diversification and paying a higher price are needed to get farmers to a living income. This is a shared responsibility from the cocoa market players, cooperatives and farmers.

So, ehm, speaking of the living income model, what is it exactly? Let's dig in..

(see: Fairtrade Living Income Reference Prices for cocoa)

Our Living Income Model calculates the Living Income Reference Price for cocoa in Ghana and Côte d’Ivoire. In Ghana a farmer receive $ 2.10 per kg cocoa and in Côte d’Ivoire $ 2.20.

Break It Down Now

Costs of Living

The costs of living are taken from the living income benchmarks for Ghana and Cote d’Ivoire as set by the living income community of practice (LICOP) which is supported by GIZ/ ISEAL alliance and Sustainable Foodlab. In other words, a pretty respectable source of info.

Costs of Farming

The costs of farming are calculated from local costs for inputs and hired labor (beyond household labor) and fixed costs for materials and logistics.

Productive Farm Size

The productive farm size is based on a viable farm size that can absorb the available family labor, taking into account reductions for cocoa rejuvenation to be fair. The calculation of required labor per hectare is based on a study from New Foresight.

Achievable Yield

The realistically achievable yield is set based on use of resources and good agronomical practices.

Other Income

Other income generated by the farming household through food production, sales of other crops and services is set at 25% of the cost of living

Each year, Tony’s calculates and pays the additional premium that enables cocoa farmers to earn a living income. Paying a higher price is part of Tony’s 5 Sourcing Principles. To strengthen farmer organizations, in 2022/23 we invested an additional €676 (Côte d’Ivoire) and €299 (Ghana) per metric ton of cocoa in cooperatives.

For cocoa season 2022/23, the higher price is calculated as follows:

There you have it, you're now a living income reference price afficianado! But keep in mind that to solve the problems in the cocoa industry, we need to do more than just pay a higher price for cocoa. All of our 5 Sourcing Principles play a critical role in creating a more equally divided supply chain. And it'll take more than just Tony's addressing the problems in the cocoa industry to change it as a whole. Which is why we call on all chocolate companies to make a living income the norm and to adopt this model.

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