“Broad partnerships are the key to solving broad challenges” – Ban Ki-moon
Following two years of record global prices, producers have been increasingly concerned over recent declines in export earnings from rubber and rubber finished products.
Given that the majority of Sri Lanka’s rubber production comes from smallholder farmers, the impact on livelihoods if these trends hold will be felt most severely at the grassroots of the Sri Lankan economy.
Parallel to these external factors, Sri Lankan rubber producers also face systemic domestic challenges as a result of low productivity and total production capacity. By now, the reasons for this drop are well known: lack of fertilizer, and increased incidents of pest and fungal outbreaks over the past year.
Labour shortages have also eroded production capacity as more smallholder rubber farmers abandon their plantations in search of more financially viable options. Some have even chosen to sell their properties for land development. This has resulted in a loss of productive rubber trees, and environmental damage caused by the loss of eco-system services provided by these plantations.
Meanwhile, from a value-addition perspective, cost of production has increased significantly, primarily owing to unprecedented spikes in energy, transport and logistics costs. In the national pursuit for solutions to these serious challenges, our experience is proving that Environmental, Social and Governance (ESG) standards have a vital role to play.
Dipped Products PLC, which makes up the Hand Protection Sector of the Hayleys Group, has been on the frontlines of the effort to optimize industry performance, increase domestic production and value addition.
Following the launch and ongoing adoption of the Hayleys Lifecode, the ESG framework of our parent company and flowing from our long-running partnership with Sri Lanka’s smallholder rubber farmers through the DPL Firstlight initiative, we believe our unique smallholder-first supply chain model could potentially hold the key to building greater economic resilience from the grassroots up.
Smallholders are essential for ESG
At its most fundamental, the Hayleys Lifecode is aligned to the essential goals of building risk resilience and establishing a common framework for sustainable value creation across stakeholder groups.
The values of ESG are embodied in DPL Firstlight. At its core, the programme was designed to serve as a powerful mechanism for disintermediation and vertical integration of rubber supply chains, and as an enabler of rural empowerment. We started off with the establishment of direct purchasing of rubber latex from smallholder farmers at a fair and guaranteed price.
This is particularly relevant for Sri Lanka’s smallholder rubber farmers, who collectively account for an estimated 65% of Sri Lanka’s total rubber production. Unfortunately, at present, only a fraction of what they produce is subject to value-addition.
By contrast, DPL Firstlight has enabled us to harness 98% of our total rubber requirement from 6,800 smallholder rubber farmers across 8 districts. This amounts to 12% of Sri Lanka’s total rubber production.
In this manner, we are integrating Sri Lanka’s smallholder rubber farmers more directly into global value chains, generating stable, sustainable value for our partner farmers, and their communities while optimizing one of the key raw material inputs: latex rubber.
Measurable, sustainable progress
When we first commenced the programme almost a decade ago, we linked up with just 10 farmers. The number continues to grow, and with it, the opportunities for more Sri Lankan smallholder rubber farmers to gain access to a market for their produce that is built on principles of fair-trade.
We believe that this model has the potential to and build resilience and exponentially enhance livelihoods at the grassroots of the Sri Lankan economy.
In addition to purchasing rubber through direct forward-buying contracts, we were able to leverage synergies within the Hayleys Group to distribute fertilizer free-of-cost and rubber saplings at subsidized rates. Previously, these measures helped eased the cost of production for rubber farmers, while simultaneously increasing their productivity and profit. We hope to explore similar opportunities in future.
Moving forward, the most exciting frontier for Firstlight is in strengthening productivity optimization through knowledge and technology transfer. Already we have provided them with extensive training in order to improve the ability of smallholders to sustain and enhance the productivity of their plots, while helping to introduce new technologies like rain guards which can increase productivity by 10%.
Over the medium-long term, Firstlight will continue to evolve by serving as a channel to bring precision agriculture, and other international best practices into the rubber smallholder sector. This can further improve yields and increase earnings in a stable and sustainable manner.
The value we drive from these initiatives have enabled us to focus on what we do best: product innovation.
Most recent among them has been our Xtralite Prime Ultra HC (Eco) range, which incorporates recycled PET yarn. Each pair of gloves contains approximately 25% of recycled PET, equivalent to approximately 1 PET bottle. They have a significantly lower carbon footprint than nylon, polyester and cotton, while still providing optimal protection, dexterity and durability for a range of industrial applications.
We are also equipping ourselves with the tools to continuously optimize consumption of key inputs. These programmes take many forms, including investments into energy efficient infrastructure, machinery and equipment, and a new LEED certified facility that is expected to come online by the end of 2022.
When leveraged in this manner, ESG has the potential to create true social enterprises that have the potential to shift our society onto a fairer and more sustainable trajectory. They do this by establishing and enforcing the mechanisms necessary to create real positive impacts at the grassroots of the Sri Lankan economy, while linking global value chains to a model that are fundamentally aligned to United Nations Sustainable Development Goals. The collective impact of these innovations represents the true essence of ESG, and the Hayleys Lifecode.
By Dipped Products Managing Director, Andrew Ng