Why supporting sustainable smallholders in rubber makes sense
This is an edited reproduction of a guest post written by our Managing Director Amb. Mohammed Belal for the International Rubber Study Group.
Smallholders are the backbone of the agricultural sector in commodity-dependent developing countries. They produce vital commodities for their communities and for export, including 85% of the world’s natural rubber.
Rubber’s global importance has been emphasised by the Covid pandemic and the huge rise in demand for personal protective equipment (PPE) such as gloves used by healthcare workers. More than 300 billion are now used each year – enough to fill the Empire State Building 25 times. But most are made from synthetic rubber and are disposed of in landfill, where they remain for hundreds of years.
As the Thomson Reuters Foundation recently reported, innovative businesses are beginning to address this issue by developing a surgical glove using natural rubber that can biodegrade 100 times faster than synthetic alternatives.
This opens the door to exciting commercial possibilities for natural rubber businesses in developing countries, where we invest. If they can prove their sustainable credentials they could become part of what is expected to be a $70 billion market by 2027.
At the Common Fund for Commodities (CFC) we have more than 30 years of experience investing in commodities businesses that enable farmers to both embrace sustainability and thrive economically. Our investments are designed to help agribusinesses that work with some of the poorest farmers grasp opportunities that might otherwise have been out of reach.
Smallholder rubber farmers share similar challenges to those growing other commodities. They are at the mercy of global prices, climate change is making each harvest increasingly challenging, they have a lack of access to training and resources, and they have little resilience to cope with extreme weather and blight.
In turn, this creates economic insecurity that leads to poverty. In response some farmers will simply give up and seek short-term profits elsewhere by, for example, supplying timber, others will seek to expand production by clearing more forest for rubber trees. This is bad news for all the companies that rely on a secure and sustainable rubber supply, and bad news for the planet.
But change is possible and there are solutions that benefit both producers and the brands that use their products. We’ve seen how investing in agribusinesses can drive sustainable farming practices and livelihoods. For example, our investment in Kennemer International in the Philippines is supporting a reforestation project involving 2,000 smallholder cocoa farmers. They are receiving training that will enable them to grow cocoa in a way that conserves the forest and the health of the soil that nourishes their crops. The initiative is also helping farmers access the international carbon credits market to open a new revenue stream.
All our investments target agribusinesses that have a wider purpose and contribute to some of the UN’s keys sustainable development goals, such as eradicating poverty (SDG 1), achieving zero hunger (SDG 2), addressing inequality (SDG 10) addressing climate action (SDG 13). Our current portfolio is benefitting almost half a million smallholders, raising annual incomes by thousands of dollars.
Focused support in the natural rubber sector can have a similar impact. For example, financing could enable viable agribusinesses to boost training schemes that teach smallholders how to create polycultures that encourage healthier ecosystems. Strengthening businesses that provide access to growing markets, and pay a fair price, also creates the certainty smallholders need to build more prosperous lives. In turn, this has a positive impact in the field. In the rubber sector, price certainty reduces the temptation to over-tap trees, which weakens them and makes them more susceptible to disease.
For international companies whose brands rely on rubber, engaging with agribusinesses that value sustainability is increasingly important. It’s both a moral imperative and a consumer expectation across all sectors that use the commodity, from surgical glove suppliers to tire manufacturers. Some of the biggest rubber buyers, such as Bridgestone and Michelin, have already committed to sourcing sustainable natural rubber.
The International Rubber Study Group (IRSG) plays an important role in promoting the benefits of natural rubber. In turn, we at the CFC can use our expertise – combined with the financial support of governments and the private sector – to help the poorest smallholders take advantage of rising demand for a sustainable commodity.