ITOCHU Announces the Commencement of Commercialization of PROJECT TREE, the First Blockchain-based Natural Rubber Traceability and Sustainability Project in the World

December 1, 2021

ITOCHU Corporation (headquartered in Minato-ku, Tokyo; Keita Ishii, President & COO; hereinafter “ITOCHU”) announced today that ITOCHU began commercialization of the PROJECT TREE for the traceability and sustainability of natural rubber (hereinafter "the Project"), using the value chain of its subsidiary PT. Aneka Bumi Pratama (headquartered in South Sumatra, Indonesia; Hisashi Yajima, President Director, hereinafter "ABP"), a natural rubber processing company, and tire wholesaler and retailer EUROPEAN TYRE ENTERPRISE LIMITED (headquartered in Letchworth, U.K., Shinjiro Tanaka, CEO; hereinafter "ETEL"). As the first step of the project, ITOCHU will begin distribution in the UK market in December in cooperation with Pirelli UK (a wholly owned subsidiary of Pirelli S.p.a whose Headquarter is in Milan, Italy), a globally recognized tire manufacturer.
Global leading tire manufacturer Hankook Tire & Technology Co., Ltd. (headquartered in Gyeonggi-do, Korea; Sooil Lee, CEO) also plan to participate the project going forward.

Natural rubber is a natural resource that is vital in daily life. The production of tires accounts for about 70% of global natural rubber consumption, but approximately 85% of global production relies on smallholders in Southeast Asia, mainly in Thailand and Indonesia. The demand for natural rubber is expected to continue to grow continuously because of worldwide motorization. Therefore, it is essential that we increasingly pay attention to issues such as deforestation, poverty and the violation of human rights in our business activities. All stakeholders in the supply chain, including smallholders, tire manufacturers, and distributors, are expected to participate in these efforts.

ITOCHU is actively involved in the natural rubber business through ABP, one of the largest Indonesian natural rubber processing companies and ETEL, one of the largest retail and wholesale tire sale company in Europe. The Project is to fully leverage the global value chain that ITOCHU is able to assemble as a SOGO SHOSHA The Project uses a blockchain-based traceability system developed by ITOCHU Techno-Solutions Corporation (headquartered in Minato-ku, Tokyo: Ichiro Tsuge, President & CEO; hereinafter "CTC"). This is the first attempt to establish traceability using blockchain in the natural rubber industry.

ABP uses a smartphone app linked to the system in its procurement of natural rubber raw materials. The app records information such as the date and the location of transactions using blockchain technology. Such information is shown on the map with protected forests that are the habitats of many wildlife species. Then, the raw materials are stored apart from other materials and processed within the ABP factory. They are sold to tire manufacturers as natural rubber with traceability information secured by blockchain. The incentives to the upstream supply chain stakeholders who cooperate to record their transactions will be funded by part of the sales of PROJECT TREE supported tires. Smallholders who do not have a smartphone or bank account can be provided with farm tools, fertilizers, and/or training to increase productivity and awareness of Good Agricultural Practices. In addition, ITOCHU will sequentially execute improvement plans based on the results of its supply chain risk assessments. These assessments were carried out with the support of Proforest Southeast Asia and SNV Indonesia.

One of the aims of the PROJECT TREE is to involve all of the natural rubber stakeholders, including processing companies, tire manufacturers and wholesalers/retailers, automobile manufacturers and consumers beyond the ITOCHU Group's value chain. The tire products manufactured through PROJECT TREE will be progressively distributed in overseas markets while marketing activities will start in Europe where people tend to have greater environmental awareness. PROJECT TREE is expected to contribute to the CSR policy goals of ITOCHU and to the goals of the other participating members of the Global Platform for Sustainable Natural Rubber (GPSNR), a recently established global platform for the production of sustainable natural rubber of which ITOCHU is founding member.

Statements from Project members

Pirelli UK (cooperating tire manufacturer)
Pirelli UK has joined forces with ETEL to work on the sale of PROJECT TREE supporting Tyres, with particular appreciation of its innovative block chain and traceability approach to the supply of natural rubber.
This is indeed an important step forward towards more transparency in the natural rubber supply chain and, at the same time, a key instrument to allow the implementation of sustainability actions in the areas of rubber origin.
For several years, Pirelli has adopted a policy for the sustainable management of natural rubber and is engaged in activities, within different perimeters, to support natural rubber sustainability initiatives, as in the case of the project joined by Pirelli UK.

Hankook Tire & Technology Co., Ltd. (cooperating tire manufacturer) / Sooil Lee, President and CEO of Hankook Tire & Technology.
“As the demand for natural rubber is expected to continue to grow, all stakeholders in the supply chain, including smallholders, tire manufacturers, and end-users, are expected to fulfill their responsibilities, Hankook Tire, with sustainability being one of the business priorities, will definitely take the lead in fostering sustainability in procurement of raw materials to create the better world to live in.”

Industry group and cooperating NGOs
- Stefano Savi, Director of GPSNR
"Enhancing traceability and transparency is crucial in our goal of a fair, equitable and sustainable natural rubber supply chain. PROJECT TREE’s work in developing a holistic traceability system is a commendable effort towards this larger goal. This, along with efforts by other GPSNR members, has the potential to positively and systemically transform the supply chain."
- Langlang Tata Buana, Principal Project Manager of Proforest
Our work across all commodities, including rubber, is driven by the vision of agricultural commodity production that is positive for the people living and relying on the landscape, and the environment and climate. Our experience on the ground working with smallholders means that we can provide support in mitigating human rights and environmental risks, as well as advising on implementation of better management practices through training and capacity building. PROJECT TREE is an example of where we bring our expertise from the Responsible Sourcing from Smallholders (RSS) program to partner and collaborate with key stakeholders.
- Rizki Pandu Permana, Country Director SNV Indonesia
SNV supports all efforts of sustainability practice from the actors in the natural rubber sector. As initiated by PROJECT TREE, traceability is one of the means to achieve the sustainability goal and enhance transparency in the supply chain. We are happy to see that PROJECT TREE will combine the traceability system with full support to the smallholders under Responsible Sourcing from Smallholder (RSS) framework. The combination is essential to ensure the rubber is produced responsibly (from no-deforestation sources), smallholders’ productivity and quality are increased, and relationship with all actors in the supply chain is well maintained. Finally, the system should also improve smallholders’ welfare in the supply chain.

DBS Bank Ltd. / Abdul Raof Latiff, Group Head of Digital Ecosystems & Partnerships and Malaysia Country Head (financing and cooperating bank)
“With sustainability as one of the key tenets of DBS, we are committed to supporting like-minded companies such as ITOCHU in advancing their ESG agendas. The PROJECT TREE initiative is a critical and necessary step to transition the rubber industry towards more sustainable practices that yield both positive environmental and societal benefits. We look forward to supporting all participants in the rubber ecosystem as they forge ahead in their sustainability transition collectively. This will enable the industry to achieve supply chains that are not only efficient, but also climate-aligned and supportive of the communities they operate in, building towards a more inclusive and sustainable tomorrow.”

CTC / Junji Hirooka, Managing Executive Officer & COO, Distribution Group & COO, Global Business Group
" ITOCHU Techno-Solutions Corporation (CTC) has identified material issues involving three SDG-related challenges and that have led us to act in accordance with our corporate mission statement; “Leveraging IT’s potential to change the future for the Global Good.” PROJECT TREE is a project which is perfectly aligned with one of our Group’s tenets "Provide trusted IT services”, and we will leverage advanced technology to contribute to sustainability throughout the value chain. "

HeveaConnect / Gerald Tan, CEO of HeveaConnect
“HeveaConnect and ITOCHU share the same belief that improving the livelihoods of rubber smallholders is key to moving towards a truly sustainable natural rubber industry. The smallholders are now incentivised to provide more data about their production process, which increases transparency in the natural rubber supply chain. This is also very timely in light of the increased demand for sustainable natural rubber driven by regulatory requirements throughout the world. By coupling PROJECT TREE traceability data with the physical rubber in our factory management system to create data-backed rubber, ITOCHU allows greater visibility on the origins of the natural rubber their customers purchase via the HeveaConnect Platform. We are very excited to partner with ITOCHU on improving transparency in the natural rubber supply chain through PROJECT TREE and the HeveaConnect Platform.”

ITOCHU's Brand-new Deal 2023, its medium-term management plan, includes "business transformation through the incorporation of consumer needs into products" and "continued contribution to/efforts to achieve the SDGs" in its Basic Policies. ITOCHU will reinforce its natural rubber value chain and hope to contribute to the sustainability of the entire natural rubber industry through this Project.

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Training to increase productivity and awareness of Good Agricultural Practices