Investors too, will need to explain their policies.
Sleeping tiger - the natural rubber supply chain
In this context, it can be viewed as fortunate that manufacturers of tyres, gloves, shoes, condoms, sealants and shock absorbers have escaped significant public scrutiny of their supply chains. All rely on natural rubber grown in the world’s rain forests.
Almost 85% of natural rubber is produced by approximately 6 million smallholder farmers, most of them in the equatorial regions of Southeast Asia.
The region’s warm and wet climate is the natural habitat of trees that produce a sap known as latex. This is obtained in a process known as tapping, where the bark of a tree is cut to allow the latex to pour into a cup. The farmers dry the latex to create rubber and then sell this to aggregators who sell it to distributors who pass it on to manufacturers such as Michelin, the world’s largest buyer of natural rubber.
The precarious living conditions of some of those who grow and harvest natural rubber makes a sharp contrast to the corporate identity of large manufacturers that rely on rubber as a raw material. Notably, the price farmers receive for rubber has shifted several hundred percent over the past decade. There was a price spike in 2011 caused by growing demand from China when many smallholder farmers cleared land to plant rubber producing trees, but prices fell back to a decade long low in 2018, caused by a combination of lower demand and oversupply. When prices reach such depths it can mean that many farmers struggle to pay rubber tappers a living wage. Studies have also revealed inadequate safety standards, discrimination, long working hours and, in some cases, the use of child labour in the harvesting of natural rubber.
Another issue in the supply chain is the land clearances that have taken place to meet global demand for natural rubber. While not on the scale caused by the palm oil industry it has reduced the size of rain forests which are known to be one of the world’s biggest carbon sinks. Such forests, which contain eight out of 10 species found on land, are also home to many endangered species such as tigers, orangutans and elephants.
The elevation of reputational risk around the natural rubber value chain has led many of the largest end users of the raw material to self-regulate. This has largely been driven by tyre manufacturers who as an industry consume over 70 per cent of all natural rubber in the world.
The process started in June 2016 when Michelin made a commitment to responsible natural rubber sourcing after an examination of its supply chain in conjunction with the WWF. The partnership is notable in that the WWF believes rubber can and should be produced without clearing natural forests.
In 2018 a group of the world’s leading tyre manufacturers (including Michelin), vehicle manufacturers (BMW and Ford), pressure groups such as the WWF and the Rainforest Alliance, rubber traders and processors created the Global Platform for Sustainable Natural Rubber (GPSNR). This organisation’s stated mission is “to lead improvements in the socioeconomic and environmental performance of the natural rubber value chain”. More explicitly it is seeking to harmonise standards to improve respect for human rights, prevent land-grabbing, protect biodiversity and water resources, improve yields, and increase supply chain transparency and traceability.