WILMINGTON, Del. (CN) - The Hershey Co. refuses to release records that could show whether it complied with its promise to stop using child labor and forced labor to harvest chocolate in Africa, a shareholder claims in court.
Louisiana Municipal Police Employees' Retirement System, which owns 1,800 Hershey shares, sued The Hershey Co. in Chancery Court.
It claims Hershey refuses to disclose the names of its cocoa suppliers, most of which are based in West African countries that use unlawful child labor and forced labor.
"For more than a decade, Hershey has acknowledged the systemic evils of child and forced labor in the cocoa industries of Ghana and the Ivory Coast and pledged action to eliminate it," the complaint states. "Notwithstanding this public pledge, Hershey, which by its own account controls 42 percent of the market for chocolate products in the United States, has knowingly failed to fulfill its promises. Instead, Hershey has continued to produce and sell chocolate that is the fruit of child and forced labor. If the company has knowingly supported or exploited the use of child or forced labor in Ghana or the Ivory Coast, Hershey itself has acted unlawfully or aided and abetted unlawful conduct. But moreover, Hershey has placed its brand and reputation at risk. Accordingly, there is a reasonable basis to investigate whether the board has permitted Hershey to act in an ultra vires
manner in breach of the board's fiduciary duties to the company and its shareholders.
"In 1894, the famed philanthropist Milton Hershey founded the candy company and infused his personal values and vision into the culture of the company. On a hill overlooking his chocolate factory in what is now Hershey, Pennsylvania, Milton Hershey founded the Hershey Industrial School for Orphans in 1909. With its proximity to the chocolate factory, this school serves as a reminder of the company's ideals and its commitment to the children who consume its candy in large quantities. Today, the company touts Milton Hershey's legacy as evidence that it strives to champion the rights of underprivileged children. ...
"Unfortunately, Hershey's purported commitment to children does not extend beyond the borders of the United States. For well over a decade, Hershey has turned a blind eye to the abusive child labor practices in the West African countries that supply Hershey with the majority of its cocoa and cocoa-derived products, which Hershey describes as its 'most important commodity.' ... By producing chocolate at its Pennsylvania factory that is the product of child and forced labor in West Africa, Hershey has flouted domestic and foreign law and placed at risk its century old brand and reputation.
"While Hershey refuses to divulge the names of its cocoa suppliers, the evidence is overwhelming that the company's cocoa comes from farms in Ghana and the Ivory Coast that are unlawfully using child labor. Hershey has admitted that its 'major sourcing countries' for cocoa include the Ivory Coast and Ghana, as well as other West African nations. ... Hershey also has acknowledged the existence of rampant abusive child labor practices in these countries, which violate foreign and domestic law. There are substantial grounds to believe, therefore, that Hershey's chocolate empire is built on a foundation of a West African child labor force."
Hershey, the largest producer of chocolate in North America, sells chocolate in 70 countries and reported more than $6.8 billion in sales this year, according to the complaint.
The pension fund says it asked to inspect Hershey's books and records in October, after analyzing news reports, documentaries, U.S. Department of Labor reports and the company's public statements, which suggested that Hershey may be using cocoa produced through child labor and forced labor.
It claims that Hershey, which purports to continue its founder's commitment to child and worker welfare, knowingly uses cocoa derived from child trafficking and labor.
Media reports on the "unlawful and disturbing labor practices" on West African cocoa farms began to circulate in 2001, attracting the attention of Congress, according to the complaint.
The pension fund claims Hershey was one of the chocolate companies that opposed an amendment requiring "slave-free" labeling for cocoa products, and promised to "eliminate the worst forms of child labor" in Ghana and the Ivory Coast.
Nevertheless, the plaintiff says, Hershey has done little to ensure that its chocolate is not produced by child labor, slave labor or human trafficking.
The U.S. Department of Labor in 2011 released a study that confirmed that nearly 2 million children, some of them under 10, worked illegally on West African cocoa farms, which supply cocoa to Hershey and other chocolate producers.
More than half of the children working on cocoa farms in Ghana and the Ivory Coast reported being injured while working, carrying heavy loads and using dangerous tools, according to the study cited in the complaint.
West Africa produces more than 70 percent of the world's cocoa beans, the main raw ingredient in chocolate.
The pension fund says that Hershey has admitted that it gets its cocoa from Ghana, the Ivory Coast, and other West African countries, though it refused to disclose the names of its direct suppliers.
It claims that Hershey's purported campaign against child labor and forced labor "is little more than a public relations exercise designed to stem the growing wave of outraged consumers and business partners."
According to the complaint, Whole Foods Markets last month abandoned Hershey's Scharffen Berger brand, due to concerns about supply chain child labor and human trafficking.
"During the pendency of what is now an admitted 15-year extension of its pledge to eliminate supply chain labor evils, Hershey has placed its brand and reputation at risk through its inability to guarantee its customers that its chocolate products are not tainted by conduct that is not only illegal, but also runs counter to the ethics and morals of a civilized society," the complaint states.
The pension fund says that Hershey lags far behind competitors such as Cadbury, which ensures that its products are certified child labor-free.
It claims that Hershey refused its request for transparency, and denied responsibility by claiming that it does not buy cocoa directly from farms using child labor.
It claims that Hershey improperly denied it access to records on the grounds that its request was based on "speculative assertions," though it has a reasonable belief that Hershey's products are linked to child trafficking and child labor.
"Instead of monitoring or determining how cocoa beans or cocoa products are produced, the company instead chooses to bury its head in the sand despite openly acknowledging that child labor and forced labor exist in West Africa, where the company purchases cocoa beans and cocoa products," the complaint states.
The pension fund wants access to Hershey's records.
It is represented by Michael Barry with Grant & Eisenhofer.
Hershey said in an email statement that it "has been supporting cocoa-growing communities for more than 50 years. We have been involved in on-the-ground programs, working with public and private partners, to help eliminate inappropriate labor practices in cocoa communities."
Hershey said in an October press statement that it would "source 100 percent certified cocoa for its global chocolate
product lines by 2020 and accelerate its programs to help eliminate child labor in the cocoa regions of West Africa."