Woman processes natural rubber

Indonesia Continental makes rubber supply chain digitally traceable for the first time

Asia
GIZ
Classic

Corporate due diligence is closely tied to a transparent supply chain. However, due to the high number of middlemen, to date it has been difficult to ensure the sustainability of the natural rubber supply chain in Indonesia. Within the framework of the develoPPP-programme funded by the German Federal Ministry for Economic Cooperation and Development (Bundesministerium für wirtschaftliche Zusammenarbeit und Entwicklung, BMZ), the mobility supplier Continental and the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH established a digital traceability system that shows the flow of goods along the entire supply chain. By involving local processing companies and smallholder direct marketing, structures have been established to ensure transparency in the natural rubber supply chain. One of the benefits for smallholders is improved productivity and higher income.

400
smallholders trained in sustainable farming methods
250
farms included in a digital traceability system

There is a steady demand for natural rubber around the globe, especially from the tyre industry. One quarter of the world's natural rubber comes from Indonesia. However, the production of the raw material in this Asian country is often associated with serious ecological and social challenges. For example, there is a risk that large areas of forest will be cleared for the cultivation of natural rubber, because the low yields per unit area do not ensure a reliable income for the farmers. Natural rubber is often sourced from scattered, independent producers who live in remote areas. Most of them work without guidelines for sustainable rubber cultivation and it is difficult to reach them with advisory and training services. They supply their raw material to local traders who sell the rubber to processing companies. This means that the influence of the purchasing companies on the smallholders is limited. In addition, the companies are not in a position to measure the quantities of raw rubber delivered in relation to the production area in order to detect any discrepancies.

To ensure transparency in the supply chain, the project partners implemented the following measures, among others, in the pilot region in the district of Kapuas Hulu on Borneo between 2018 and 2020, with a total project volume of 400,000 euros:

  • Establishment of a digital traceability system from smallholder operations in Indonesia to further processing and tyre production in Germany.
  • Development of a catalogue of measures for environmentally and socially compatible rubber production with complete avoidance of deforestation.
  • Training of farmers in sustainable rubber growing practices, with the aim that they will subsequently pass on their knowledge.

As part of the project, Continental contributed its expertise in international supply chains as well as employee know-how. GIZ consulted with experts on the ground and liaised with local communities and decision-makers.

With the successfully established pilot project, we are jointly ensuring greater transparency and making a significant contribution to securing the livelihoods of the smallholders involved in the project.
Christian Kötz, Head of the Tyre Business Unit and Member of Continental's Executive Board
Lady cuts a tree
Farmers are trained in sustainable growing practices and better techniques, such as how to prune trees to extract as much rubber as possible. Copyright: GIZ/Canopy Indonesia, GIZ/Thomas Heinen
Digital tracking system for natural rubber
Production and the supply chain for rubber can be evaluated in detail using the digital traceability system. Copyright: GIZ/Canopy Indonesia, GIZ/Thomas Heinen

The digital traceability system makes it possible to include only sustainably managed producers in the supply chain. The valuable experience Continental is gaining in this project will allow the company to successively expand transparency within its natural rubber supply chains. Education and digitalisation can make important contributions to making supply chains sustainable. Together with its partners in Borneo, the premium tyre manufacturer is demonstrating that this can be achieved in the natural rubber sector. The increased product quality translated into a higher selling price of the rubber. This, as well as higher yields, contributes to improving the incomes of smallholders, and also reduces the pressure on the remaining natural forests.

DEVELOPMENT SUCCESSES

Catalogue of criteria for environmentally, economically and socially responsible rubber production

Training of 400 smallholders in sustainable rubber farming practices

Fair prices and long-term purchase contracts with local farmers

Business SUCCESSES

Increase transparency in the supply chain

Ensuring rubber quality through sustainable and traceable supply chains

develoPPP Classic

develoPPP Classic is aimed at medium-sized and large companies that want to invest sustainably in a developing or emerging country and expand their operational activities locally. Suitable projects receive technical and financial support of up to two million euros in public funding.

Continental AG

Continental develops pioneering technologies and services for the sustainable and connected mobility of people and their goods. Founded in 1871, the technology company offers safe, efficient, intelligent and affordable solutions for vehicles, machines, traffic and transport.

Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH

As a German federal enterprise, GIZ is has been a service provider in the field of international cooperation for sustainable development and international education work for more than 50 years. It supports the economic development and promotion of employment and develops strategies for sustainable business toegther together with the private sector.

Michael Radke Head of Advanced Purchasing & Supply Chain Sustainability Continental Reifen Deutschland GmbH
Arlett Laroy Project Manager, develoPPP Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH