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<\/div>The Guidance is part of China\u2019s first efforts to establish global sustainability standards for commodities, and has drawn attention from both the world\u2019s rubber industry and NGOs. The story of its formation, as this article recounts, demonstrates its authors’ belief that sustainability standards can and should drive real supply chain transformation.
The comprehensive document includes practices that may be quite cutting-edge for Chinese firms, including on best practices for engaging with affected communities and protecting workers\u2019 rights, and on protecting biodiversity through fulfilling the zero-deforestation principle and ecosystem-friendly techniques.<\/p>\n\n\n\n
Although it has not yet been widely adopted, and the pandemic has hampered its roll-out, Sun is confident the Guidance has given a subtle push to sustainability efforts in the industry.<\/p>\n\n\n\n
Research-based international development<\/h2>\n\n\n\n
This may be a document on environmental and social sustainability, but the CCCMC initially started writing it to help Chinese firms investing in the natural rubber sector overseas to identify, avoid and manage risks, in order to protect their profits.<\/p>\n\n\n\n
Three factors have been pushing Chinese firms to invest in overseas rubber.<\/p>\n\n\n\n
First, China is the world\u2019s biggest consumer of natural rubber, accounting for 37% of global use, but can only produce domestically a small fraction of what it needs due to lack of suitable land. Since 2002, state-owned enterprises, such as the Guangdong-based Guangken and Hainan-based Haiken groups, have therefore been investing in overseas rubber plantations and processing plants.<\/p>\n\n\n\n
Second, at about the same time, the Chinese government started encouraging Chinese firms to invest in rubber planting in Laos and Myanmar, to encourage farmers there to move away from opium poppy planting.<\/p>\n\n\n\n
Finally, half of the raw natural rubber China uses goes into tyres: it is the world\u2019s biggest tyre maker, exporting 40% of its output. However, low prices have meant anti-dumping and anti-subsidy investigations and tariffs in the EU and US. That has pushed some Chinese tyre makers to set up factories in Southeast Asia to get around those barriers. Their investments have also funded plantations and processing plants to provide the raw material they need.<\/p>\n\n\n\n
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<\/div>Sun Lihui says the CCCMC first got involved because of the pricing issues, trying to take a whole-lifecycle view of tyre production to ensure prices were not unreasonably low. \u201cAt the time, we were looking at sustainability issues mainly in terms of investment risk, not because we were worried sustainability itself would become a barrier to trade,\u201d he said. But when China\u2019s large-scale rubber plantations attracted criticism from international media and NGOs over deforestation and other issues, the association decided to take a look. \u201cWe found that no work had been done in China on natural rubber sustainability.\u201d<\/p>\n\n\n\n
Around the same time, Zhang Junzuo started to look at the same problem. She is head of the China\u2013UK Collaboration on International Forest Investment and Trade (InFIT). That project was created in 2014 by China\u2019s State Forestry Administration and Ministry of Commerce alongside the UK\u2019s Department for International Development. Designed to reduce the impact of China\u2019s international trade on forests, from the start InFIT set-up a sub-project on natural rubber, and Zhang needed a local organisation to run it.<\/p>\n\n\n\n A tour of industry associations, research bodies and NGOs in the sector, in both Yunnan and Beijing, showed her that information was too scattered: \u201cThe growers don\u2019t understand processing, the processors don\u2019t understand growing, and the people who understand CSR [corporate social responsibility] don\u2019t understand rubber.\u201d In the end, an official with the Ministry of Commerce suggested she speak to the CCCMC. And there, she found Sun Lihui.<\/p>\n\n\n\n At the time, they both wanted to produce due diligence guidelines for Chinese firms making large investments in rubber plantations and processing overseas. The CCCMC had just produced CSR guidelines<\/a> for Chinese mining firms investing overseas as part of the Sino-German CSR Project, aiming to help Chinese miners act responsibly on labour rights, environmental issues and the avoidance of conflict minerals. Zhang recalls what Sun told her when they spoke on the phone: \u201cWriting guidelines is fine, but you can\u2019t leave it there.\u201d<\/p>\n\n\n\n To help ensure their guidelines didn\u2019t just get left on the shelf, Sun Lihui put together a cross-disciplinary team: plant scientists from the Chinese Academy of Sciences\u2019 Kunming Institute of Botany and the Chinese Academy of Tropical Agricultural Sciences; industry experts from the Beijing Rubber Industry Research and Design Institute and the Hainan Rubber Group; CSR specialists from Syntao and the China National Textile and Apparel Council; and specialists from Global Witness and Proforest, international NGOs working on sustainable commodity production. Since 2014, Global Witness has been working with the CCCMC, then part of the Ministry of Commerce, on due diligence for conflict minerals, under a partnership between the ministry and the OECD.<\/p>\n\n\n\n \u201cThe biggest problem at the time was that people who knew about natural rubber didn\u2019t know about CSR, and nobody who understood CSR knew anything about natural rubber. Our project put those two groups together to learn about each other\u2019s fields,\u201d explained Sun Lihui.<\/p>\n\n\n\n The process was one of \u201cbottom-up development\u201d said team member Xu Jianchu, who is a professor at the Kunming Institute of Botany and chief scientist at the World Agroforestry Centre. \u201cIt wasn\u2019t a case of sitting a bunch of experts down in Beijing and making all the decisions. We researched different players along the supply chain, gathered a wide range of case studies, considered all the risks, all the rights and responsibilities,\u201d he explained. The team spent two years travelling the world. They produced country reports on the natural rubber industry in Thailand, Myanmar, Laos and Cambodia, as well as several studies into the global natural rubber value chain and the overseas investments made by Chinese natural rubber firms. They realised that not only was there no existing sustainability guide for natural rubber they could refer to, there wasn\u2019t even any systematic research into the sector. So they decided to remove the word \u201cChina\u201d from the title of their document and simply produce \u201cGuidance for Sustainable Natural Rubber\u201d to be applied worldwide.<\/p>\n\n\n\n Based on their research, and with reference to documents such as the UN\u2019s 2030 Sustainable Development Agenda, the Convention on Biological Diversity, the UN Guiding Principles on Business and Human Rights, and the ISO 26000 Guidance on Social Responsibility, the team started to draft a framework for their guide. It was not an easy process, and the framework was restarted from scratch three times. At one point they realised they had been focusing only on live operations already up and running, and good risk-management practices required them to include pre-investment risk assessment and avoidance procedures.<\/p>\n\n\n\n The 40-page document contains plenty of content that is, for Chinese firms, quite new and advanced. It stresses that companies should, when planning a project, obtain \u201cfree, prior and informed consent\u201d from affected communities. It reminds firms to pay attention to land rights and respect the customary land tenure of local communities (rather than only rights formalised in official documents), and to avoid causing forced displacements. Companies should also \u201csupport the forming of unions in line with the law\u201d, and provide employees with fair remuneration and decent working conditions, taking into account and being supportive of their families and their social roles.<\/p>\n\n\n\n The Guidance also reminds of the economic risks of investment and the sensitivity of natural rubber prices to fluctuations on the financial markets. It notes the uncertainties arising from the delay between planting and production, which requires a cautious approach to investment to avoid losses, environmental damage and impacts on the livelihoods of cooperating farmers. It also points out investments should create jobs and help develop the local economy \u2013 particularly of smallholder farms.<\/p>\n\n\n\n On the environment, the Guidance requires firms to work to principles of biodiversity protection and zero-deforestation, with no plantations in areas of high conservation value or high carbon stock. It also encourages firms to consider intercropping, mixed cropping and relay cropping, or agroforestry, and for land clearance methods to suit the local conditions and soil type, in order to minimise pests and diseases, reduce soil erosion, and protect biodiversity.<\/p>\n\n\n\n \u201cThere\u2019s nothing else like this in the sector. We did countless research to make sure we understood the characteristics of the industry. We didn\u2019t just scribble down a few ideas,\u201d said Sun Lihui.<\/p>\n\n\n\n The Guidance is designed to be used by companies writing their own sustainability policies or doing supply chain due diligence, or for reference by regulators or financial institutions. But 40 pages of principles to follow doesn\u2019t tell people what they should actually do on the ground. So, the team then came up with a 100-page Implementation Manual, explaining the key points of the guidance, as well as a set of electronic forms referred to as \u201cassessment tools\u201d, which turns the Guidance into 254 quantified indices. Firms can use those to assess their own performance and see where improvements are needed.<\/p>\n\n\n\n The Guidance isn\u2019t specific to China, but has particular importance for a country that is fourth worldwide in terms of area of rubber plantations, fifth in terms of production, first in consumption, and produces 60% of the world\u2019s tyres. In 2016, as the Guidance was taking shape, Sun took the team on a tour of rubber and tyre makers in China, trying to encourage them to use the Guidance to set up their own sustainability policies and implement due diligence on environmental and social responsibility. The results were disappointing. \u201cThere was no pressure on them. They couldn\u2019t compare to the best, but were still better than the worst, and they saw no need to do anything. They might think the Guidance was great, but didn\u2019t act on it,\u201d said Sun.<\/p>\n\n\n\n He was also in close contact with international tyre makers: Michelin, Pirelli, Goodyear and Continental. So far, only Pirelli has taken up the offer and used the Guidance to update its own sustainable natural rubber policy<\/a> and implementation manual<\/a>. He thinks Pirelli got on board as it is Chinese-owned: ChemChina took a controlling stake in the company in 2015, and that makes the company\u2019s executives more receptive to Chinese initiatives.<\/p>\n\n\n\n In October 2017, the Guidance was officially published and made available to the industry worldwide. The following month, CSR Europe, the continent\u2019s biggest CSR network, invited Sun Lihui to participate in the launch of its Sustainable Natural Rubber Platform<\/a> in Paris, urging leading natural rubber growers, processors and traders, as well as tyre and vehicle makers, to work together to create an international organisation promoting sustainable rubber.<\/p>\n\n\n\n At the time, CSR Europe wanted to use its Drive Sustainability alliance, formed of nine car makers including BMW and Ford, to work on rubber sustainability. The initiative described the CCCMC as a natural partner as it was the developer of \u201cthe first comprehensive and risk-led guidance for the natural rubber sector.\u201d<\/p>\n\n\n\n Originally, Sun Lihui planned to follow the same route used in other sectors: get the major tyre and car makers together and use those downstream rubber users to drive change along the value chain as a whole. With that aim in mind, he went to speak to the Tyre Industry Project<\/a> (TIP), a sustainability network formed by 11 of the biggest tyre makers, operating under the auspices of the World Business Council For Sustainable Development. But Sun says one of the project\u2019s officials told him they didn\u2019t want to share a natural rubber sustainability platform with CSR Europe, as tyre makers did not see themselves as \u201csuppliers\u201d to the vehicle industry. Sun saw this as firms at different points of the supply chain having different interests. Tyre makers don\u2019t want to come under sustainability pressure from car makers \u2013 they want to be in charge of the sustainability standards themselves.<\/p>\n\n\n\n Later events seemed to confirm this view. A year after the meeting in Paris, the TIP launched<\/a> its own Global Platform for Sustainable Natural Rubber (GPSNR), with all 11 TIP members on board as founders, alongside some natural rubber growers, producers and traders, NGOs and three car makers.<\/p>\n\n\n\n Zhang Junzuo said that international NGOs couldn\u2019t understand why two sustainable rubber platforms were needed, and were worried it would confuse businesses and hamper the spread of sustainability. But in the following two years, the GPSNR was in close contact with the CCCMC, exploring a possible partnership. Its status as author of the Guidance for Sustainable Natural Rubber, and its influence within the Chinese tyre industry, made the CCCMC an attractive partner for the GPSNR as it tried to set up a membership-based sustainability platform. And both the GPSNR and the Guidance had received funding from the UK\u2019s Department for International Development, which had said it hoped to see GPSNR and CCCMC work together.<\/p>\n\n\n\n In 2020, the two parties drafted a memorandum of understanding (MoU), but it was never signed. The CCCMC felt GPSNR was not serious enough about cooperation. But GPSNR chair Stefano Savi said the organisation was just getting started, and that the secretariat was overworked and lacked capacity, so it opted to pause the process. He also dismissed the notion that the GPSNR is a product of competition between tyre and car makers. He pointed out that many car makers that are signed up to CSR Europe\u2019s Drive Sustainability alliance are also GPSNR members<\/a>, as, indeed, is Drive Sustainability itself. He said he hoped to continue cooperation with the CCCMC this year.<\/p>\n\n\n\n Regardless, after all these twists and turns, InFIT and the CCCMC ended their cooperation with CSR Europe, to avoid the two platforms competing with each other. They decided to \u201clet the Guidance make its own way.\u201d<\/p>\n\n\n\n This meant that the CCCMC had, for the time being, given up on the idea of setting up an international membership body along the lines of the Roundtable on Sustainable Palm Oil<\/a> or Roundtable on Responsible Soy<\/a>. It also meant promotion of the Guidance shifted further up the supply chain.<\/p>\n\n\n\n The first thing they did was cooperate with Singapore-headquartered Halcyon Agri, the world\u2019s biggest producer of natural rubber. In 2020, the CCCMC collaborated with international non-profit Proforest to assess the sustainability policies, processes and methods in Halcyon\u2019s huge Sudcam rubber plantation in the south of Cameroon. The CCCMC also took the opportunity to see how suitable the Guidance and implementation tools were for the rubber firms, in order to make further improvements.<\/p>\n\n\n\n According to a 2018 Greenpeace Africa report<\/a>, between 2011 and 2018 Sudcam was responsible for \u201cthe most devastating new forest clearance for industrial agriculture in the Congo basin\u201d, as well as issues with infringement of land rights and forced relocations. As part of its response<\/a> to that criticism, Halcyon followed up on the Proforest assessment by producing an action plan to improve sustainability. Meanwhile, after benchmarking it against Halcyon\u2019s own HeveaPro standard, Proforest suggested improvements to the Guidance.<\/p>\n\n\n\n Mooi See Tor, Proforest\u2019s deputy regional director for Southeast Asia, said that Proforest Africa had helped Halcyon improve its internal governance to try and obtain Forest Sustainability Council certification, and that the Guidance could act as a link in that process by improving corporate due diligence. Zhang Junzuo said that CCCMC is in touch with Halcyon about applying the Guidance across the group\u2019s operations, not just in Cameroon.<\/p>\n\n\n\n Meanwhile, they are also looking at smallholders. Talking with representatives from Southeast Asia at the 2019 Global Rubber Conference showed Sun Lihui and Zhang Junzuo that they should work with the smallholders of the Mekong basin, in particular those in Laos, Cambodia and Myanmar, three countries which came late to rubber-growing. The Mekong nations are the main source of raw natural rubber for the Chinese industry, with 80\u201390% coming from smallholders. Growing techniques in those three countries lag behind Thailand and Vietnam. This causes a range of environmental issues and reduces the quality of the product they supply, which in turn makes it harder for the Chinese buyers to improve the quality of their tyres.<\/p>\n\n\n\n In 2021, the CCCMC launched an initiative promoting sustainability in natural rubber value chains in the Mekong region, with industry associations from Laos, Cambodia and Myanmar invited to participate. In a MoU, the CCCMC and the Myanmar Rubber Planters and Producers Association agreed to produce a sustainable agriculture and production standard for smallholders; and to improve sustainability of natural rubber growing by issuing an implementation guide, setting up demonstration farms and offering training.<\/p>\n\n\n\nIt wasn\u2019t a case of sitting a bunch of experts down in Beijing and making all the decisions. We researched different players along the supply chain.<\/blockquote>Xu Jianchu, Kunming Institute of Botany and chief scientist at the World Agroforestry Centre<\/cite><\/div><\/div>\n\n\n\n
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<\/div>A road less travelled<\/h2>\n\n\n\n
There was no pressure on [rubber and tyre makers]. They might think the Guidance was great, but didn\u2019t act on it.<\/blockquote>Sun Lihui, China Chamber of Commerce of Metals, Minerals & Chemicals Importers & Exporters<\/cite><\/div><\/div>\n\n\n\n
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