EUDR Impact / State of Leather 2024 / PART IV Commentary

Spotlight: State of Leather 2024

Leather Has No Direct Deforestation Link, but Will Need to Work Hard on Traceability Systems

The problem of deforestation is extended to leather only by ‘proxy’. The entire industry—the world across—has just about a year in not only to put in place traceability systems that work and are cheap, but also to shed off the deforestation tag. texfash tries to unravel the threads.

Subir Ghosh

24 October 2024

7 minutes

Long Story, Cut Short

What the leather industry has to deal with is the assertion that it drives deforestation since the sector allegedly creates an artificial cattle industry which in turn drives deforestation through expansion of grazing land meant for livestock.
Main barriers to implementation of leather traceability system up to birth farm of cattle are the by-product/waste nature of cattle hides and skins, fragmented nature of supply chain and costs involved in setting up such systems.
Most stakeholders believe that leather traceability systems should be developed using information from existing meat traceability systems, but raw hides and skins would need their own systems.

In the past, cattle pasture mostly expanded into the savannahs or grasslands of southern Brazil, with low deforestation rates; however,the spread of cattle grazing northward drove large-scale deforestation. Factors favouring this development include (i) the extensive nature and (ii) low productivity of tropical grazing beef production.

Cattle Grazing In the past, cattle pasture mostly expanded into the savannahs or grasslands of southern Brazil, with low deforestation rates; however,the spread of cattle grazing northward drove large-scale deforestation. Factors favouring this development include (i) the extensive nature and (ii) low productivity of tropical grazing beef production. Freddie Addery / Unsplash

The EU Deforestation Regulation, or EUDR for short, has been described as one of the most far-reaching laws ever to be enacted. Technically, of course, it is not law yet. On 16 October, the European Council postponed the extend the application timeline by 12 months.

The intention behind the EUDR is noble; no one can argue against it. The Regulation aims to ensure that "a set of key goods placed on the European Union (EU) market will no longer contribute to deforestation and forest degradation in the EU and elsewhere in the world."

That would seem fair enough. But the goods in question "includes products made from cattle, wood, cocoa, soy, palm oil, coffee, rubber, and some of their derived products." This is where it gets complicated since leather (our subject matter) would be such a derived product.

For the meat industry, existing traceability systems track carcasses. However, this traceability element usually disappears into thin air at the slaughterhouse level. The result is that it becomes more difficult for the leather industry to trace back the hides.

But that is not the contention at hand. What the leather industry has to deal with at the same time is the assertion that it drives deforestation since the sector allegedly creates an artificial cattle industry which in turn drives deforestation through expansion of grazing land meant for livestock.

That is an allegation the leather industry has had to grapple with, and now the onus is on the leather industry to prove that there is indeed no connection, certainly not direct.

Subir Ghosh

SUBIR GHOSH is a Kolkata-based independent journalist-writer-researcher who writes about environment, corruption, crony capitalism, conflict, wildlife, and cinema. He is the author of two books, and has co-authored two more with others. He writes, edits, reports and designs. He is also a professionally trained and qualified photographer.

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Although the most serious threat is posed by agriculture, deforestation, and the associated devastating habitat destruction for livestock production, is identified as a threat and a major factor in the extinction of vertebrates. Moreover, the loss of plant biodiversity is also a consequence.

Biodiversity Loss Although the most serious threat is posed by agriculture, deforestation, and the associated devastating habitat destruction for livestock production, biodiversity loss is identified as a threat and a major factor in the extinction of vertebrates. Moreover, the loss of plant biodiversity is also a consequence. Boudewijn Huysmans / Unsplash

Diving deep into the evidence

In June this year, UNIC-Italian Tanneries and COTANCE-The European Tanning Industry published the findings of a study titled Socio-economic and environmental analysis of the effects of Regulation 2023/1115/EU on the European leather sector. It was conducted by six scientists at the Sant'Anna School of Advanced Studies of the University of Pisa. The study is exhaustive and needs to be not just examined closely, but also disseminated as widely as possible.

The task of the researchers was clear: to look at the possible effects that the listing of leather on the scope of the EUDR would have on the leather trade and industry. The scientists, besides examining the socio-economic impact and analysing environmental impact of the Regulation, also probed deep into the connection between leather and deforestation.

They sifted through published scientific and academic literature on the subject and found that none of the studies scrutinised denied the connection between cattle raising and deforestation. At the same time, when it came to a connection between leather and deforestation there was no direct link. If at all, some literature tried to establish a link between leather industry exports and the profit that slaughterhouses make by selling hides to the industry. The researchers wrote: "On one point there seems to be convergence though, as most studies agree that reductions of the leather market generate an increase in the number of raw hides sent to landfill disposal. The majority of documents and authors support the classification of hides as by-products of cattle."

The researchers delved into the subject of traceability. They found from the interviews they conducted that "only a limited number of larger companies with a vertically integrated production system would be able to trace the entire supply chain up to the animals’ birth farm(s), while most tanneries would be able to trace back goods to the slaughterhouse. The main barriers to the implementation of a leather traceability system up to the birth farm of cattle are the by-product/waste nature of cattle hides and skins, the complexity and fragmented nature of the supply chain and the costs involved in setting up such systems."

They delved through volumes of both findings of academic publications as well as grey literature [Grey literature means materials and research produced by organisations outside of the traditional commercial or academic publishing.] They found two important things: first, no study denied the connection between cattle raising and deforestation and other negative environmental impacts; and authors by and large recognised that meat production and not raw hides production is the main driver of cattle raising. There are scores of studies hinting at an indirect link, but then "no author provided data or quantitative analysis to support the hypothesis of a link, and some authors even state that the problem of deforestation is extended to leather only by ‘proxy’."

There was no consensus among those who were interviewed by the scientists in the course of the research project. "As expected, while leather trade associations, manufacturers, farm and academic leather experts bolster the first position (no relationship between the two), NGOs, policymakers and academic biodiversity and deforestation experts shore up the second one. Different reasons and explanations are provided for supporting the two points of views. Interestingly, among these, the economic factor is used by both groups for supporting their thesis."

Yet, they agreed on one thing: the current version of the EUDR will not be able to produce positive effects for the EU. One NGO representative even admitted that the leather industry alone would not be able to counteract deforestation because “leather demand does not affect beef demand and there will always be beef production.” So, where does it leave the argument?

Big players of the leather sector would obviously want traceability. especially with fashion brands imploring for such systems to be in place. Yet, what can be expounded through theory cannot necessarily be implemented on the ground. Linking each animal to a farm, and then linking each hide to such an animal is easier said than done. Beyond a stretch, the chain does not work as one.

Despite differing views on the relationship between leather production and deforestation, there is a consensus that the leather industry must adopt more sustainable practices in addition to those already adopted. By selecting slaughterhouses that adhere to sustainability standards, leather companies could help mitigate deforestation.

Clean Standards Despite differing views on the relationship between leather production and deforestation, there is a consensus that the leather industry must adopt more sustainable practices in addition to those already adopted. By selecting slaughterhouses that adhere to sustainability standards, leather companies could help mitigate deforestation. IAN / pexels

Tracing it to the source

Any link between the leather industry and deforestation can be established if a problem product can be traced to the source that necessarily needs to be problematic in the first place.

And, this is where it gets more complex.

Most stakeholders believe that "only a limited number of larger companies with a vertically integrated production system manage to trace the entire supply chain all the way up to the farm, while the majority of tanneries are able to trace it back to the slaughterhouse."

So, what holds back matters? The main barriers to the development of a full-coverage leather traceability system, the researchers found, are the “complexity and fragmented nature of the supply chain and the costs involved in setting up such systems.”

Big players of the leather sector would obviously want traceability. especially with fashion brands imploring for such systems to be in place. Yet, what can be expounded through theory cannot necessarily be implemented on the ground. Linking each animal to a farm, and then linking each hide to such an animal is easier said than done. Beyond a stretch, the chain does not work as one.

Hides are usually identified by the ear tags of the cattle that land up at the slaughterhouses. But, this system is in place in only a few countries, and moreover these ear tags are almost always placed not at the time of birth but when they are headed for the EU market. Besides, the hides that the traders procure from the slaughterhouses would have already undergone a corrosive preservation process (mostly through the use of salt), and those would now become impossible to track or identify.

That’s where the traceability, as it stands, comes to the end of the tether.

So, can systems get better than this? The Sant'Anna report says, "A major barrier to the implementation of a full-coverage traceability system is the need to create hide identification systems and specific databases, with investments in technological innovation. Therefore, in addition to the complexity of the supply chain, the majority of the respondents highlighted to the costs associated with the design and implementation of these systems and databases."

However, as a farm expert told the researchers: "Traceability to the slaughterhouse is possible, but tracing back to the farmers becomes very difficult if not almost impossible. Therefore, yes, the leather industry will benefit a lot from a system that tracks meat, but they still have to invest a lot of money in the technology to track hides and skins separately from slaughterhouses to tanneries."

There is a reason why the drive stops here. Farmers are not obliged and cannot be expected to share information about their suppliers. An NGO representative remarked: “Farmers need incentives to do this extra work, so that they see a value on traceability (i.e. we need to pay them for traceability), for example by giving them extra money, access to better lines of credit, etc.”

An illustration came from a manufacturer based in the EU who already has a supply chain traceability system in place: “This system has increased the cost of leather by at least €3 per square metre of raw hide. The implementation of this system will require the active involvement of breeders and slaughterhouses who will have to collect and provide information and data to the tanneries.”

Not only does it become cumbersome and close to impossible to implement on the ground, all this would come with a price tag. “The introduction of a premium price to be paid to farmers and slaughterhouses for their efforts was considered, although it was not supported by all respondents. Consumers or the fashion industry would have to bear these additional costs, but would they be willing to do so?” There is no indication that brands, or even consumers, want to pay extra.

Most stakeholders believe that leather traceability systems should be developed using information from existing meat traceability systems, but raw hides and skins would need their own systems. Just one system would work if only both the meat and the leather came from the same source. But that’s not how it works: there are different countries, different farms, different suppliers.

Racing against time

All industries and sectors directly or indirectly affected by the EUDR have been allowed a breathing space by the European Council. But time always runs faster than you expect it to.

The leather industry in Europe is likely to be hit at the onset, with smaller players being the first to feel the pinch and then the proverbial squeeze of depleting revenues. Exports may get diverted initially more to Asia, but sooner or later they too would have to come to terms with disconcerting realities since the European market—all said and done—is an attractive one.

The entire industry—the world across—has just about a year in not only to put in place traceability systems that work and are cheap, but also to shed off the deforestation tag.