In this Project, potential adverse E&S impacts arise at the level of suppliers. Identified suppliers are traders and processors of natural rubber. Several trading companies are subsidiaries of companies active in rubber processing and production of various rubber products. As traders and/or processors suppliers have well established supply chains through which they source natural and/or processed rubber.
While all Performance Standards (PS) are applicable to this investment, IFC’s due diligence indicates that the investment may have impacts that must be managed in a manner consistent with the following Performance Standards:
PS1 Assessment and Management of Environmental and Social Risks and Impacts
PS2 Labor and Working Conditions
PS3 Resource Efficiency and Pollution Prevention

Based upon information received by IFC, the Project is not expected to have impacts associated with the following Performance Standards:

PS4 Community Health, Safety and Security: - those suppliers solely engaged in trading operations do not generate such impacts and processing operations are generally located in appropriately demarcated areas. Inadvertent encroachment or access to operations by members of local communities, where they may exist, is prevented;

PS5 Land Acquisition and Involuntary Resettlement: trading operations do not generate such impacts and processing operations are deemed to already be established, i.e. there are no issues associated with land acquisition;

PS6 Biodiversity Conservation and Sustainable Management of Living Natural Resources – this PS does not apply for the reasons described in the following sections (i.e. rubber production in Indonesia is not reported to be characterized by land expansion, and the vast majority of producers are small holders utilizing an agroforestry approach to production).

PS7 Indigenous Peoples does not apply as, based upon an understanding of supply chain operations, established processing plants do not adversely impact such communities; and,
PS8 Cultural Heritage does not apply to established processing operations.

This is considered to be an E&S Category B Project.
The most common potential E&S risks associated with production of natural rubber include labor management and working conditions, chemical use and disposal, and conversion of natural/critical habitats. The common E&S risks associated with rubber processing include labor and working conditions (including OHS) and management of effluents. Risks associated with production of natural rubber are manageable although the supply chain for Indonesian rubber is fragmented and has many layers of consolidation, as further described below. Where risks are encountered in processing, they are both manageable and site specific.

Of the three major producers of natural rubber in SE Asia (i.e., Thailand, Malaysia and Indonesia), Indonesia has the largest area under cultivation but only ranks second (to Thailand) in production. In Indonesia the majority of rubber (around 80-85%) is produced by smallholders; concurring with IFC’s understanding of the rubber supply chain in Indonesia, Goodyear Asia reports that 80% of its ultimate supplier base in Indonesia comprises smallholders. Through the supply chain these smallholders supply rubber to processors (generally Indonesian companies located in Jambi and Palembang, Sumatra as well as in Kalimantan).
Smallholders produce rubber in what are characterized as agroforestry systems combining forest re-growth with planted rubber. In such systems land may have been cleared for cultivation of annual subsistence crops and then planted with rubber. Beyond such replanting there is little to no new expansion of land dedicated to rubber trees. Low levels of maintenance allow for secondary growth of forest while the rubber plantation develops. The combination of these practices with the lack of expansion to new areas promotes a characterization of primary rubber production in Indonesia as being bereft of significant biodiversity risk. Established large scale rubber plantations (typically associated with processing facilities) are also present.
The supply chain associated with bringing rubber to market is extended and in a majority of cases may involve smallholders selling rubber to collectors/aggregators who bring the raw product to processing facilities; these then sell to traders/brokers who in turn sell natural rubber onto the international market. Some traders/brokers are entirely separate to processors (i.e. they act solely as spot traders) and some are known to be subsidiaries of the same company or entity and are therefore vertically integrated. In determining applicable requirements to be made of IFC’s clients, and to ensure consistency of practice, the different nature of these relationships has been taken into consideration. PS2 requirements apply to all clients (in particular whether child labor, forced labor and/or significant OHS risks exist among suppliers). PS3 requirements apply to the processing facilities of the allied trader/processing entities and are managed through application of the Goodyear Supplier Code of Conduct (described in more detail below).

PS1: Social and Environmental Assessment and Management System
Given its heavy reliance on supply contracts with selected traders, Goodyear has developed and, through its contracts, seeks to ensure that Suppliers adhere to an established Supplier Code of Conduct. The code of conduct requires full compliance with applicable national laws and regulations, addresses labor management and working conditions including use of child labor, compensation and working hours, discrimination, forced labor, freedom of association and matters of health and safety and environment.
The code of conduct does include provision for compliance verification. IFC understands, however, that this practice is not yet fully implemented. Goodyear reports that they are developing a system that asks Suppliers to self certify compliance to the Supplier Code of Conduct and that this registration will be monitored by Goodyear.

Goodyear has developed, and makes reference to, in the Supplier Code of Conduct, a means for individuals to report violations confidentially, including anonymously, of the Supplier Code of Conduct. The system can be accessed from anywhere Goodyear suppliers do business, via a public web address (http://www.tnwinc.com/Reportline/Goodyear) or through the Goodyear Integrity Hotline at 1-888-GY-HOTLINE (1-888-494-6854).

None, because locally affected communities are not yet known.