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By Huileng Tan SINGAPORE — The Singapore-based International Rubber Study Group is embarking on an ambitious initiative to draw up a plan for the industry, much like what the Roundtable on Sustainable Palm Oil did in the tropical oil seed industry. Courtesy of Lekshmi Nair Senior economist and statistician Lekshmi Nair, of the International Rubber Study Group, says what is needed “is commitment from all players in the supply chain” to end up with a sustainability plan. An overwhelming 85% of rubber production comes from small growers. That has meant that the fragmented industry has never come together to agree on a common set of sustainability standards. Natural rubber is a major tropical cash crop valued at more than US$30 billion annually. It has a long history of being cultivated for commercial uses. A boom in the last decade sent prices to record highs and spurred rapid new plantings outside of the traditional producing countries of Thailand, Indonesia and Malaysia, which account for over two-thirds of the world’s natural rubber supply. With burgeoning demand from China fueling rapid planting in these new areas – such as Cambodia and Laos — environmentalists and scientists are increasingly voicing concern about the environmental impact of rubber plantations. While rubber trees are deemed to be green, because they absorb carbon, large tracts of planting will lead to habitat loss for birds, elephants, tigers and other wildlife in the region, and also disrupt water movement, they argue. Set up in 1944, the International Rubber Study Group is made up of more than 30-member governments, as well as producer groups and consumers such as tire companies. Now its members are trying to give it a new, important mission of trying to balance its commercial success while not being overly destructive of the environment. The Roundtable on Sustainable Palm Oil was formed in 2004 in response to pressure from social and environmental groups to develop global standards for the entire palm oil supply chain. Plantation firms, such as Sime Darby Bhd and IOI Corporation Bhd, with estates larger than the city-state of Singapore, were first to adopt the standards and now account for the bulk of 8.2 million tons of eco-friendly palm oil produced annually. A key figure at the rubber study group’s sustainable project is senior economist and statistician Lekshmi Nair.  She spoke to The Wall Street Journal about what the organization envisions for the industry. Excerpts follow: The Wall Street Journal : You are setting up a sustainable natural rubber action plan. Define sustainability. Lekshmi Nair: The definition of sustainability varies from different stakeholders, but, in general, sustainability means ensuring continuity of raw material so that it’s not disturbed. The mission of the sustainability initiative in rubber is to promote the economic, environmental and social sustainability in the production and use through dialogue and cooperation with all stakeholders along the supply chain. Now, there is an imbalance in that 85% of natural rubber production is coming straight from small growers while 70% of the consumers are from the tire sector. So we need commitment from both sides [in the form of a memorandum]. For the producers, natural rubber has the potential to generate a number of positive environmental benefits. Sustainability initiatives in rubber have positive impacts on the development policies of the producer economies. Promotion of sustainable production can enhance producers’ market entry and competitiveness in the growing new markets for sustainable products. For the consumers, the tire industry is by far the largest end-use market for natural rubber, with tire producers purchasing around 70% of total natural rubber placed on the global market. About 85% of natural rubber is produced by smallholders, whose decision to plant new trees and tap depends on opportunity cost. [Corporate Social Responsibility] is scaling up to include social as well as environment standards, with application of sustainability principles with regard to resource efficiency or purchase of raw materials [rubber]. So what we needed is commitment from all players in the supply chain to achieve objectives in this initiative in natural rubber. From the producer end, we have to take care of resource efficiency and the purchase of raw materials. This productivity in turn will ensure income for the small growers. For all major consumers, CSR is an issue. From the CSR point of view, the raw material that they are procuring must be shown to be sustainable, and one aspect of this is in its production. What are some of the sustainability criteria you are looking at? Other than improving productivity, we want to ensure natural rubber quality. Improving quality ensures enhancing productivity that certainly will increase income of predominantly small growers. If we looking at the emerging producing countries or African countries, you can see that the rubber they produce is filled with a lot of with impurities. In fact, you can say 50% is filled with sand or wood particles. Latex is collected in a cup attached to trees. So what small growers do is to collect the lumps and throw them to the ground, So contaminants will stick them. However, if small growers take some initiative to avoid these practices, they can avoid impurities at an early stage, which will save a lot of energy during processing. So it’s also beneficial from an environmental point of view. Bad quality rubber will require more energy for cleaning and will also produce more waste. Waste reduction can at start at the production stage. Natural rubber is known as a green product as the trees absorb carbon dioxide. What impact does large-scale cultivation of rubber as a cash crop have? Because of the demand for natural rubber, there is a lot of large-scale investment in emerging countries. One issue involves the use of forested versus degraded land. We encourage using degraded forest, and this initiative encourages this type of cultivation versus cutting down forested land. A comprehensive range of social issues, like land use shift, tenure rights, food security, are also within the? broader impact on large-scale investments. Also, when land is given for rubber cultivation, investors have to ensure food security for residents in the area first before they can cultivate a non-food crop like rubber. We need to ensure a balance between the two crops. First, we need to get commitment from all supply chain stakeholders so that the sustainability efforts become voluntary standards. Natural rubber is a commodity with a long history of being cultivated for profit. What took the industry so long to come up with these standards, which you are drawing up? Many of the established rubber growing countries do have initiatives and framework for enhancing small grower productivity through some form of sustainability efforts. But our project will involve multiple stakeholders, including governments and private individuals. At this stage, no civil society organizations [non-governmental organizations] are involved. We know there are some issues surrounding rubber, such as land rights and environmental issues. What is the state of the rubber industry now? Historically you’re looking at rubber as a colonial crop. It started as an organized plantation crop before government land ownership restrictions [to prevent individuals from accumulating too much land] saw it shift to being a small-holder crop. So that’s where the rubber is coming from now, and we need to reach out to these small growers. Other than CSR standards and image, what’s in it for consumers, like major tire makers and small holders? For commodities, there’s a boom and bust cycle. During the bust cycle, growers are withdrawing from this crop. But at the same time for consumers, they want need to keep the production line going, so they need to have an ensured quantity of rubber. Here, we need the consumers’ commitment to encourage small growers to stay with the cultivation of this crop. Sustainable prices are a concern for both producers and consumers. If the price is not sustainable, consumers may find it difficult to get their assured quantity from the producers because nobody can force the small growers to produce. They can do something else. Why not? There’s an opportunity for everybody and they are businessmen. What’s the next stage in the project? We hope to get all stakeholders commitment to this initiative [to sign a memorandum] by the next World Rubber Summit [likely in May of 2014 and held in Singapore] to get their commitment to certain standards. We hope to eventually get into a voluntary certification for sustainable natural rubber. Continue reading →