Insist on the domestic minimum wage for farmers

The natural rubber industry is powered by 6 million small-hold farmers (farmland ownership of approximately 2 hectares), most of them in remote regions of developing economies. These subsistence farmers fuel some of the largest and most profitable companies and sectors on earth – yet many of them earn less than 50% of their domestic minimum wage. There is deep pricing inequality within the natural rubber industry, and farmers are not being paid fairly for the product they produce. Demand for natural rubber is ever-growing due to urbanisation and innovation. These farmers need to work ever harder, while earning less and less for their work.

The supply chain needs to be disrupted to ensure that the lifeblood of the rubber industry does not run dry. We need to ensure that the profits of the companies that are buying natural rubber are flowing back to the farmers who supply it.

We need far greater transparency, equality and fairness of pricing in the rubber market – a truly sustainable rubber industry.

Factor production costs into the price of natural rubber

92% of the world’s natural rubber supply is produced by subsistence farmers, who support families and communities in the regions where rubber trees are grown. Natural rubber farming is a lifeblood industry to these communities, and if properly and sustainably managed, can give these regions the opportunity to grow and thrive. Instead, these communities and regions are suffering from unfair pricing of the rubber it supplies, and inequality in the supply chain it feeds. Without these farmers, the tyre industry would entirely cease to exist, yet for every tyre sold, 90% goes to the manufacturer. The farmer who produces the rubber gets just 1%.

Investment into the supply upstream is desperately needed. The lack of development in the industry is in part due to its archaic practices, unchanged since the formation of the modern industry in the 50’s. Farming best practices such as yield maximisation, budding technology and collection practices are commonplace in industrial plantations, but rarely available to smallholders. By investing in these techniques and supporting the development of the upstream supply, we would ensure a far more sustainable solution for both the farmers of rubber, and the industries they feed. We need to ensure the mobility companies who use natural rubber are driving social mobility and development in the communities who supply it.

INVEST IN INNOVATION AND DIGITISATION

The natural rubber industry today is virtually unchanged from the emergence of the modern industry in the 1950s. Its supply mechanics, pricing mechanisms and infrastructure are archaic by modern standards, and in dire need of disruption.

The status quo of the industry as it stands benefits the few, not the many, which is why it has remained the status quo for so long. There is a wealth of new technology that would positively disrupt the industry – from satellite imaging of plantation areas to tracking and traceability products, and blockchain applications for pricing.

The industry needs to invest in these technologies across the supply chain to ensure a truly ecological tyre being produced by a truly sustainable natural rubber industry. We need to disrupt to sustain.

SUPPORT A TRANSPARENT AND TRACEABLE SUPPLY CHAIN

The commodities markets make no differentiation between the high-quality natural rubber needed for tyres and low grade rubber supplied in vast quantities. This inefficiency, added to a lack of traceability and pricing transparency in spot markets, means that the price of high-grade rubber is consistently depressed. To make ends meet, subsistence farmers need increase the volumes of their crops at times of low prices – completely counter to how supply demand works in a properly functioning market. The result has enormous social and environmental impact – deforestation when prices are high, financial despair for farmers when prices are low.

There are no standards to measure or incentivize the production of sustainable natural rubber, and that urgently needs to change.

INCENTIVISE FARMERS TO FIGHT CLIMATE CHANGE

There is enormous carbon capture potential in the global rubber crop. The average rubber tree sequesters 150kg of carbon in its lifecycle. Globally, rubber plantations cover around 14 million hectares, with around 400 trees per hectare, each tree consuming 6kg of carbon a year. Annually, that adds up to 44 million tonnes of carbon sequestered by the global rubber crop each year. That carbon capture would be worth a potential $1.2 billion to farmers annually in carbon credits. Yet, that climate change potential goes unexploited. Current carbon credit market schemes and regulations encouraging carbon capture don’t recognise agricultural plantations.

Without compensation through credits, farmers are not incentivised to follow sustainable best practice, such as replanting and recycling of wood to ensure the carbon remains captured. If they were, not only would we see a significant rise in the environmental benefit of the global rubber crop, but farmers would be better compensated for their product, adding greater sustainability and pricing fairness to the whole industry.

ENCOURAGE SUSTAINABLE FARMING PRACTICES

The rubber supply chain is driven by an archaic, inefficient and imbalanced global futures market upon which an uncoordinated system of millions of small-hold farmers rely. The futures market – the very mechanism that is supposed to provide certainty to farmers on the volume of rubber crops to grow – is instead misleading them. Worse, at the artificially low prices created by an unfair pricing system, subsistence farmers have no choice but increase volume to make ends meet.

This leads to oversupply of rubber, continued depression of prices, and a devastating impact on natural habitats and forestland across Asia and Africa. Much of this environmental impact could be solved by a pricing system that pays farmers fairly for their product and a market that allows them to plant and produce sustainably.

That requires significant investment, technology and disruption to a long-established but broken system. The same challenge faces farmers of consumer products like chocolate and coffee, but where fairtrade has served to support farmers in those industries, natural rubber goes ignored and neglected.