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Hershey shareholders sue for child labor records
A child having a little chocolate on the day after Halloween isn't out of the ordinary. That same child eating chocolate made with cocoa other children were forced to pick at gunpoint is just a bit more disconcerting.


The Louisiana Municipal Police Employee's Retirement System, which owns shares in Hershey (HSY +0.29%), sued the company Thursday to prevent just such a scenario from unfolding. The pension fund's members want to access its corporate records to see if the company knowingly used cocoa harvested through unlawful or forced child labor by suppliers in the West African countries of Ghana and Ivory Coast.


"That one of the world’s leading confectioners -- whose primary market is children -- could exploit child laborers to meet its bottom line is an outrage," said Jay Eisenhofer, attorney for law firm Grant & Eisenhofer, who is representing the shareholders and filed the suit in Delaware Chancery Court. "Rather than open its records to scrutiny, Hershey over the past decade has thrown up multiple roadblocks to reasonable examination of its conduct regarding serious questions about illegal child slave labor and trafficking in its supply chain."


The complaint says that reports about the systemic use of child labor, forced labor and human trafficking on cocoa farms in West Africa caught the eye of the U.S. House of Representatives as early as 2001. The House passed a proposed amendment to the FDA and Related Agencies Appropriations Act that would require "slave-free" labeling for cocoa products.


Before that amendment could go to the Senate for a vote, the lawsuit notes that major cocoa producers -- including Hershey -- promised to solve the problem in-house without pressure from lawmakers. Those companies signed the Harkin-Engel Protocol to eliminate illegal child labor in high cocoa-producing countries in West Africa, but the lawsuit contends there is ample evidence that the companies failed to comply with its terms.


So why single out Hershey? For one, it's America's largest chocolate producer, with more than $6 billion in sales. For another, company founder Milton Hershey built his company's reputation on philanthropy and a commitment to consumers, community and children. Lastly, Hershey may have gotten off lightly if it wasn't for statements made by the company in early October.


Hershey said it planned to use 100% "certified cocoa" in its products by 2020. That certified cocoa is grown under the auspices of independent auditors according to international labor, environmental and farming standards. Though that cocoa currently accounts for less than 5% of the world's supply, Hershey said at the time that increasing it could have a big impact on a region in which 70% of the world's cocoa is grown.


"Consistent with Hershey’s values, we are directly addressing the economic and social issues that impact West Africa’s two million cocoa farmers and families," Hershey chief executive J.P. Bilbrey said in a press release.


The company already began using certified cocoa in its Bliss line of chocolates earlier this year, but not without pressure from an activist collective called Raise The Bar. But shareholders think something about that move stinks, and not with the faint chocolate scent that wafts through the streets of Hershey, Pa. The lawsuit claims that the protocol Hershey signed in 2001 required it and other chocolate makers to put in place industry-wide standards preventing the use of child labor by 2005.


Not only does Hershey's latest announcement move the bar, the complaint claims, but it ignores a 2011 study by completed Tulane University Law School through a grant from the U.S. Department of Labor that found a majority of cocoa farmers and related suppliers in Ghana and the Ivory Coast employing children are placing them in hazardous illegal work conditions. That same year, the complaint says, Hershey's Corporate Social Responsibility Report included Ghana and the Ivory Coast as "major sourcing countries."


"The fact that Hershey cannot commit to using 'certified' cocoa until 2020 -- 19 years after signing the Harkin-Engel Protocol -- is tantamount to an admission that it currently doesn’t use certified' cocoa, and is in violation of the law," Eisenhofer says.

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