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Retailers wake up to deforestation risk — will Italy’s leather trade raise its game?

Amazon herd, photo: Anyur Mammadova

by Aynur Mammadova and André Vasconcelos


Amazon herd, photo: Anyur Mammadova
Amazon herd, photo: Anyur Mammadova

The recent forest fires in the Amazon have focused attention on the Brazilian cattle industry and its global supply chains. Leather is an important export commodity for Brazil, with an average annual turnover of US $ 2 billion, and Italy is the second biggest market for Brazilian leather exports, after What are the Italian leather industry’s links to deforestation? And what can leather companies do to ensure they are not contributing to the deforestation in the Amazon?China.

The most recent satellite data show that deforestation has sharply increased in Brazil, with the current forest fires in the Amazon highlighting the issue. It is also widely recognised that cattle ranching is the main driver of deforestation in the country. While demand for beef occupies headlines as the main culprit commodity, the role of bovine (adult cow) leather consumption is not discussed enough.

Some within the industry argue that leather is not a primary product of cattle ranching. The narrative that leather is a “waste product” is often used, perhaps as an excuse for the leather industry’s failure to acknowledge and act upon these important risks in its supply chain.

Wet-blue semi-processed leather, photo: Anyur Mammadova
Wet-blue semi-processed leather, photo: Anyur Mammadova

But this is changing. Some major global brands have taken the lead, announcing their concerns about what is happening in Brazil and its highly biodiverse ecosystems. VF Corporation officially announced a provisional ban on Brazilian leather until it could “…have the confidence and assurance that the materials used in [its] products do not contribute to environmental harm in the country.” Major fast fashion retailer H&M has also declared a similar ban on Brazilian leather.

And it is not just companies in the fashion industry that are sending a signal that the leather industry should move towards more sustainable sourcing. Car manufacturers BMW and Volkswagen have both also stated privately that sourcing sustainable leather is on their agenda. Furniture retailer IKEA is working on extending its in-house traceability system to ensure that it sources from farms without deforestation risk.

Why is there a risk?

Leather tanneries can usually trace their products from the slaughterhouse where the leather originates. In very rare cases, if required by their clients, they can make sure that their sourcing slaughterhouse also has a traceability system in place. But this seldom includes the start of the supply chain (i.e. the farms that mostly specialise in breeding). Even the most advanced slaughterhouse traceability systems only cover the farms that they source from directly, i.e. the farms which specialise in rapid fattening of animals ready for sale.

From there, hides are directly exported to other countries (as semi-processed leather) or sent to states further south for further processing and finishing before export. Brazil exports around 80% of its bovine hides and leather, while only around 20% of beef gets exported.

Aside from the difficulties of tracing leather supply chains, the regulatory environment is also a factor. Although Brazil has some of the most advanced laws regarding forest conservation and land management in Latin America, weak enforcement, changing baselines and the frequent pardoning of illegal activities creates a climate of impunity. This situation has got worse since the election of President Jair Bolsonaro whose rhetoric encourages more deforestation, and whose actions have resulted in weaker environmental protection, and the dismantling of environmental agencies.

Why Italy?

Italy is the second biggest import market of Brazilian bovine leather, after China, accounting for 27% of Brazilian exports (Figure 1). But much of the leather exported to China ends up in European and US markets as manufactured products, such as car seats, furniture, and clothing. Your purchased leather product could say Made in Italy, but the origin of the hides might not be Italy or even Europe.

Figure 1. Top 10 countries importing Brazilian bovine hides and leather, net weight in kg. Source: Calculated using customs declaration trade data between August 2017 and August 2018.
Figure 1. Top 10 countries importing Brazilian bovine hides and leather, net weight in kg. Source: Calculated using customs declaration trade data between August 2017 and August 2018.

The main raw materials used by the Italian tanning industry are adult cow hides, which account for 71% of Italy’s total production, and Brazil is the biggest source for the Italian industry. The Italian leather industry makes up around 65% of the European and 22% of global leather production.

Some 75% of Italian annual production is exported as finished leather, with Europe as the main destination (51%), followed by China, including Hong Kong (16%), and the US (14%).

In 2018 around 10% (US$ 15 million net value) of Italy’s imports of semi-processed leather came from the Amazon region, including the Amazonas state, which recently declared a state of emergency due to the spike in forest fires. Almost half of these (US$ 7 million in value) come from the state of Pará which has the highest level of annual deforestation according to Brazilian National Institute for Space Research (INPE) (Figure 2).

However, this doesn’t include leather that originated in the Amazon but was processed in the south of Brazil before being exported to Italy — a common route as most of the specialised tanneries are in that region. It is currently challenging to trace this supply chain due to a lack of transparency which makes it difficult to estimate the total extent of deforestation risk in the Brazilian-Italian leather trade.

Figure 2. Top 5 importers of semi-processed leather from the state of Pará, Brazil in 2018, in value $US, Comexstat database, 2019
Figure 2. Top 5 importers of semi-processed leather from the state of Pará, Brazil in 2018, in value $US, Comexstat database, 2019

Brazilian cow leather is generally considered most suitable for upholstery and furniture, and most of the tanneries serving these markets are clustered in the Veneto region (north-east of Italy). The majority of shipments from Brazil supply tanneries or logistics companies located here. As a result, major clients of these tanneries face a risk that they could be purchasing leather from deforested lands in the Amazon.

Actions Needed

When assessing the leather trade between Brazil and China, Global Canopy found that major companies involved in this trade were unlikely to be able to guarantee that their supply chains were deforestation-free. But this does not have to be the case for those in Brazilian-Italian trade.

China may have the power of market size, but Italy can also exercise power in this market by investing in supply chain development and engaging with the producers to encourage greater sustainability.

While boycotts are a crisis response to the critical events we are experiencing, they do not provide a long term solution, and can result in black market transactions. The European leather industry needs to be more proactive by acknowledging the existence of the deforestation risk, putting full traceability systems in place and sending out clear market signals that deforestation is not tolerated, and that sustainability is valued.

Aynur Mammadova is a PhD Candidate at the University of Padova in Italy. Her research topic focuses on analysing the deforestation risk in leather supply chains through conceptualization, discourse and trade data analysis. The focus of her research is Brazilian-Italian leather trade.

André Vasconcelos is a Latin America researcher at Global Canopy.