fashion: sustainability in leather

Sustainability in the leather supply chain 

Research for MVO Nederland June 2013

Research by: Marieke Gombault, Senior Manager Cleantech and Sustainability Adriana Begeer, Manager Supply Chain & Operations Regional Ernst & Young experts

Part one: The leather supply chain

China and Italy important players

The leather (goods) supply chain is a globalised one. Its dynamics are dictated by conditions such as the spread in the availability of animals, capital and cheap labor and different regulatory frameworks. Most important producing, processing, importing and exporting leather countries are located outside of Europe. The most relevant exception being Italy which is –after China- the world’s second producer, processor, importer and exporter of leather and leather goods.

Competition challenges European market

At European level access to raw materials, access to fair trading market conditions and the effects of the successful modernization of the European leather sector – which at times hurts the competitive position of more expensive European products - are the main challenges of the European Leather Industry. This trend is also seen in the Netherlands. Here, high cost of labor and more stringent environmental legislation have lead to a loss in competitiveness in relation to upcoming markets such as South Europe and Asia. The Netherlands presently counts two tanneries and three finishing plants. Even though the sector is small, the Dutch leather supply chain shows a rather international spread.

Dutch imports: Europe and Asia

The main types of hides and skins imported into the Netherlands are of Bovine (77%) and Sheep (15%) origin. The Netherlands import around 2.960.979 tons of hides and skins yearly. The main sources of bovine hides into the Netherlands are Germany (51)% and Belgium (20%). The main sources of sheep hides are: France (34%) and Switzerland (21%). The main types of leather imported into the Netherlands are of Bovine (84%) and Pig (10%) origin. The main suppliers of bovine leather for the Dutch market are Italy (38%) Germany (24%), Brazil (17%), and India (6). These countries mainly source their bovine hides in Europe. Top pig leather imports into the Netherlands originate from Asia, with China being the most important source (82%), followed by Taiwan (13%).

Looking at the origin of leather goods entering the Dutch market, we see China (70%), Germany (6%) and India (5%) predominate as countries of origin. China in its turn imports most of its leather from Brazil, United States and Argentina.

Part two: Sustainability issues in the leather supply chain

livestock to finished leather

The scope of the research was limited to the first two phases of the supply chain (see figure M1). The first phase covers the part of the supply chain from animal to raw hide or skin. The second phase covers the supply chain from raw hide or skin to leather.

Even though livestock is not reared for leather, this step is included because the issues in the livestock phase are severe and it is difficult to obtain sustainable leather from unsustainably reared livestock. In addition to the scope of the research, the leather product phase also encounters sustainability issues. So, it is important to include this phase in activities to make the supply chain (more) sustainable. The research shows that the sustainability issues that can occur in the supply chain can be severe and require attention. 

Livestock issues: deforestation, animal welfare, land use and climate change

Rearing livestock is an activity that comes with many sustainability risks. Important issues that occur only in the livestock phase include deforestation due to extensive cattle rearing and the increasing need for agricultural land to produce feed. This leads to resources scarcity, mainly of fertile land, which leads to unfair land acquisition and discrimination of small farmers and/or indigenous peoples. Animal welfare also remains a persistent issue. Climate change threats are also largest in the livestock phase. Land use change, methane released from enteric fermentation and manure and fertilizers used in feed production are some of the main causes of climate change. In the other phases of the supply chain, the main contribution to climate change is found in energy use for machines.

Pollution widespread and persistent

Pollution of air, water and soil may occur in all phases. In livestock rearing and slaughtering pollution occurs with organic contaminants. During tanning and finishing both organic and chemical contaminants cause pollution. The consequences of this contamination for flora, fauna and human health, is severe. Contamination affects groundwater and the availability of clean drinking water. Water use in slaughter, tanning and finishing can cause water availability problems in water scarce regions. However, contamination of available water sources seems a more substantial problem.

High risk in poor labour conditions

All phases of the supply chain can be considered as hazardous work with high health risk resulting from working with animals (livestock and slaughter), sharp tools (slaughter, tanning and finishing) and chemicals (tanning and finishing). Often workers are insufficiently protected and trained to ensure their health and safety.

Human rights issues can be a problem throughout the supply chain. Child labour, forms of forced or bonded labour, lack of freedom of association and bad working conditions may occur in all phases and are wide spread. Pressure from parties downstream in the supply chain, asking for low prices, short delivery timelines and switching to the cheapest option, adds to this problem.

Part three: Sustainability issues in ten countries

Local research shows that not all sustainability issues occur in all countries. In addition the good practices developed by local government or companies, also vary. Even in one region, like South America, the difference between Uruguay and Brazil is remarkable. For example: In Uruguay wages and labour conditions have gone up, resulting in better social circumstances, but also in a worse competitive position and a decline in the size of the sector, leading to unemployment. Brazil on the other hand still struggles with forced and bonded labour, child labour, bad working conditions and major deforestation problems. However, some issues, like child labour and pollution, seem a risk in nearly all of the countries investigated. The findings of the local research are presented in factsheets which are a good point of departure for companies that wish to assess the risk they might encounter when sourcing from suppliers in these countries.

Sustainable solutions

Throughout the research and in annex 2, a variety of sustainability initiatives and business solutions are presented. Also, every country factsheet includes a local CSR initiative. They show that a sustainable practice is possible. The sector is taking steps to regulate the use of chemicals, prevent pollution with cleaner production technologies or adopt labels that prove good social and environmental practices. Some companies even develop business models in line with the concept of circular economy.

In conclusion

The sector is confronted with substantial sustainability challenges in the supply chain. The good practices identified show that there are sustainable solutions. The challenge is to extrapolate these solutions to the entire supply chain, whilst maintaining a competitive advantage. This requires new sustainable business models from companies throughout the supply chain. This report can help companies and other organisations to get insight in the specific CSR risks in their supply chains. This insight is an essential first step in order to work towards a sustainable supply chain, together with supply chain partners and supporting organisations. We encourage companies to take this first step and work cooperatively towards identifying sustainable business models and creating a sustainable supply chain.