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How Michelin put the bounce back into its rubber farms

Sun, 17th Dec 2006

SUSTAINABILITY, like social responsibility, is a much-abused term, often more about public relations than substance. But Michelin's Brazilian Ouro Verde ('green gold') project shows that that doesn't have to be the case.

In 1999, the French tyre company's rubber plantation near Salvador in the state of Bahia seemed to be in unstoppable decline. The price of rubber was falling. So was the yield of the 9,000 hectare estate as its 2.5 million trees reached the end of their productive lives. Worse, the plantation was affected by a leaf blight, Microcyclus ulei , which devastates seedlings, making regeneration, already uneconomic, even more problematic.

The obvious thing was to sell the estate to someone who could use it better. And this was what the company did - but not in the way you might expect.

Most sales of this kind are about exit from responsibility. Ouro Verde was the reverse. When Michelin was considering its options, says Lionel Barre, the ebullient Frenchman in charge, the company found itself looking at a puzzle with a number of oddly shaped pieces.

First, although Brazil provides only a fraction of its requirements, Michelin needed more rubber. Natural rubber is an essential ingredient in tyres of all kinds. They consume 70 per cent of the world's output (one large tyre for an earthmover uses the annual production of five rubber trees), and demand, largely fuelled by growth in China, is steadily growing.

Although microcyclus is currently confined to South America, where the rubber tree originated, it will almost certainly one day spread to Asia, where 90 per cent of today's crop is grown. Apart from the tyre manufacturers, 30 million people depend on rubber, many of them growing it in small family-owned plantations. Developing blight-resistant strains of Hevea brasiliensis , the rubber tree, was crucial for the industry's future. And that, after 10 years' painstaking work, was what Michelin's Bahia labs, alone in the world, were on the brink of achieving.

Then there was the forest. Everyone knows about the Amazon rainforest, but the situation of Brazil's Atlantic rainforest, running sporadically down the coast from Salvador to Rio, is even more dire. Just 5 per cent of the original coverage is left, and 3,000 hectares of that, 3 per cent of the total, belonged to Michelin. But this was enough to provide a home for several endangered animal and bird species as well as a comprehensive repository of the habitat's fabulous plant diversity.

Finally, there were the people. Many of the plantation's 250 workers had been with the company for many years. Just 25 per cent of adults in this part of Brazil have formal jobs, and even a few jobs, says Barre, would be too many to lose.

Rearranging the pieces wasn't easy. But they finally locked together in a model public-private partnership. Michelin retained responsibility for the infrastructure, including an upgraded processing plant, labs and nursery, and sold the bulk of the plantation operations - not as a block, but in 400-hectare parcels - to 12 of its Brazilian managers.

To attract low-interest development financing for the purchase, it devised long-term business plans for the new enterprises based on replanting with resistant seedlings raised in the nurseries - combined, crucially, with rows of cocoa trees to provide financial and ecological diversity and quicker initial returns. 'I haven't bought the farm - I've bought the project,' says a new owner.

As part of the project, a new village, with medical centre and school, is being built to house the tappers and their families, financed by a federal loan organisation and managed by Michelin and the municipal council. The Michelin research unit is also providing resistant seedlings and technical assistance for replanting small neighbouring farms.

So far, after just two years, Ouro Verde's results are beating all expectations. The new owners have created 250 secure jobs (tapping is year-round manual work that can't be mechanised) in an area of poverty and high unemployment. The financial results of the co-operative that unites the 12 growers are ahead of schedule, and it is drawing up plans to build a processing plant for the burgeoning cocoa crop, keeping more added value in the production area. The rainforest is being protected and actively developed into a network of corridors connecting existing forest areas.

Michelin gets more rubber (although producers are also free to sell to others). Natural rubber, of course, is a sustainable resource, unlike oil-based synthetic varieties. The trees absorb carbon, shelter wildlife and play a useful role in the forest environment. Michelin also gains in legitimacy, and satisfaction, by proving it can benefit all stakeholders - customers, workers, suppliers and society - as it benefits itself: a living reproof to the impersonal numbers-driven transactions of today's finance capitalism.

Michelin's Brazil operations are, says Barre, a profit centre like any other but, by taking a broader view, 'we grow, and the community grows with us'.

The Observer, 17 December 2006


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