Jane: [00:00:01] Welcome to the LSEG Sustainable Growth Podcast. I'm your host, Jane Goodland, and I have the absolute pleasure of talking to a range of experts about the issues that sit right in the middle of sustainability and finance. So, it's great to be back after a short summer break. And what a way to come back. This week, we're talking to Richard Scobey, who is executive director of Traffic. Now, this is an internationally recognised thought leader and advisor to governments around the world focused on tackling the illegal trade in wild species. This is a massive problem globally. So, let's find out more from Richard. Well, hello, Richard, and thank you so much for joining the LSEG Sustainable Growth podcast. It's fabulous to have you here. Now, I have got so much to ask you. I don't know if we're going to be able to pack it all in, but let's start before we get really deep into the topic of the day. I know that you have had a really interesting career and you've been at Traffic since, what, a couple of years? But before that you were with the World Bank for a long, long time. So, I'm curious to know what's led you to this point in your career now?
Richard: [00:01:06] Jane, it is great to be with you. I'm a big fan of the podcast series.
Jane: [00:01:11] Thank you.
Richard: [00:01:12] We need to have more corporate discussion about key sustainability issues. For my own journey, when I graduated from university, I did a Peace Corps assignment in Malawi, in Southern Africa, which really changed my life. I fell in love with Africa, international development and agriculture and environment issues. So, after that I went back to the US for a business school degree and thereafter worked for a few years for HSBC in Africa doing agribusiness deals. And then I moved to the World Bank, where I actually stayed for almost 30 years, worked in a variety of sectors, but half the time on agriculture and environment, which really have always been my passion, mainly with a focus on Africa and Asia. Then later in my career in the World Bank, I was promoted into a variety of different internal corporate positions, which I of course hated and wanted to get back to actually doing something meaningful and fun on the ground. So, I left the World Bank and became the president of the World Cocoa Foundation, which is a private foundation funded by cocoa and chocolate companies to support the sustainability of chocolate and the cocoa supply chain. And I did that for almost five years and was very happily tackling complicated issues related to child labour and the supply chain, deforestation and a living income for farmers and eating a lot of very good chocolate.
Jane: [00:02:53] Well, I was going to ask, was there some benefits with that role? And it seems they were.
Richard: [00:02:59] Who knew? Fine. Chocolate is akin to wine. The real connoisseurs and everyone in the industry can tell the difference between beans and how it's prepared and the level of sugar and what kind of cream you use. So, I learned a lot.
Jane: [00:03:15] Yeah, sounds great.
Richard: [00:03:16] After that, towards the end of my fifth year, I got a call from an executive search firm that said Traffic, a group that was established almost 50 years ago by WWF and IUCN was looking for a new executive director. And I said to the head-hunter that it really was too soon for me to leave the World Cocoa Foundation because I still had some unfinished business. But I was always attracted to getting back to an environmental organisation. I was very keen to move with the family to the United Kingdom. And Traffic was a great organisation that I knew from before. So, head-hunters once they smell some blood in the water, they go after you. And then I've been happily here now approaching two years.
Jane: [00:04:05] And you're based up in Cambridge, right? In the UK?
Richard: [00:04:08] Exactly. We're part of a consortium of environmental groups that work in the same space, the David Attenborough Building, which is called the Cambridge Conservation Initiative. It brings together medium-sized organisations like Traffic, with larger groups like Flora and Fauna International, WCS, the Wildlife Conservation Society, the Royal Society for Protection of Birds, Birdlife, and other big groups. So really good synergy to have these different environmental organisations working together.
Jane: [00:04:43] Yeah, I mean, it sounds fabulous. And exactly the right environment within which to be doing what you guys do at Traffic. So, let's dig into that. So, we're here talking today about tackling illegal trade in wild species. I guess what I'm curious to know and I'm sure those listening will be interested too, is how big is this trade? When we say that, when we talk about the illegal trade in wild species, what do we actually mean and how big is it?
Richard: [00:05:14] The market for wild species is huge and it really has two distinct parts. Like any commodity market, there's a legal section which is governed by international and national standards and regulations. And then unfortunately there's a very large, illegal and unsustainable part. Let's first start with the legal market, because that's what most of us encounter every day. When you wake up and use toothpaste or put on your cosmetics or have breakfast or sit in a chair, you're coming into regular contact with wild species. Typically, the biggest important sectors of wild species use are food, cosmetics, medicine, furniture, fashion. This is a very important market throughout the world in terms of generating income and livelihoods for hundreds of millions of the world's poor. Obviously, these nature markets, if they're properly managed, also provide essential ecosystem services that really benefit the climate, biodiversity, and the sustainability of natural capitals. That legal market is huge. It amounts to about $200 billion per year. And probably the biggest subsets are around wild animals, fish, trees, plants, and birds. The legal market is a massive market for Refinitiv clients and the European Union. For example, the fish sector alone, Norway is the world's second largest exporter and Spain is the third largest importer in the world. Likewise, furniture, Germany is the third largest exporter. Italy is second largest importer.
Jane: [00:07:13] So huge legal market. But of course, as with often different sectors, there's a dark side. So how big is the illegal side of the market? And what I'm really curious about is what's happening to the money generated through this illegal trade and what is being traded?
Richard: [00:07:30] The illegal trade in logging fishing and wildlife products in particular is estimated around $50 billion to $200 billion per year. That's the financial value of the trade itself. The problem is that the damage that's created by the illegal trade is not just the unsustainable use of certain wild species. It has knock on effects in the indirect environmental costs. So, for example, the World Bank estimates that if you add the indirect environmental impacts and losses related to coastal resources, ecosystem services, climate regulation, all of those costs would add a staggering £1 trillion to $2 trillion. So, the $50 billion to $200 billion per year of financial loss is huge and bad enough. But then when you add on the environmental impacts, we're talking serious damage to financial and environmental systems.
Jane: [00:08:41] Yeah, no, that's really clear. Thanks. And in terms of where the money generated from this part, this illegal activity, where does it go? I mean, obviously quiet difficult to say categorically because it's illegal activity. But is this linked to financial crime? And how big is this relative to other illegal trading activity? Because I'm sure I heard that it's kind of ranked pretty highly compared to some of the other big, big legal trades.
Richard: [00:09:11] Yeah, it's always a surprise to hear that illegal wildlife trade is actually a top criminal activity in the world. It ranks fourth worldwide, really, after drugs, counterfeit goods, and human trafficking. People often ask me why I went from a happy cocoa and chocolate supply chain to an illegal wildlife supply chain because they're so different. And what's interesting is that they're actually identical. I mean, their commodity supply chains, which have producers, then intermediate buyers and then wholesalers and then manufacturers and retailers and all of us are part of that supply chain. You and I no doubt have inadvertently bought cosmetics or medicinal goods which were not subject to certification or sustainable harvesting and therefore likely had illegally traded elements in it. So, it looks and quacks like every other supply chain. It does, as I said, create very unfortunate spinoff consequences that other supply chains don't have. I mean, particularly the threat to biodiversity and the losses of species which fuels extinction rates and all of that creates environmental losses that directly hurt communities and countries. So, it's been very encouraging to see financial markets in particular and corporate rating groups begin to factor in illegal wildlife trade the way they do plastic pollution, carbon footprints and other kinds of adverse environmental impacts. So, for example, I think you've talked before on the podcast about important new ESG reporting mechanisms like the Task Force on Nature related financial disclosures. So, Traffic has been very active in working with a lot of those platforms to make sure that the illegal wildlife trade is properly monitored and tracked, because a lot of the private sector companies that end up involved indirectly don't know that they're involved. There are a lot of bad guys out there who are making money, and there's a whole enforcement framework to go after the bad guys. But it's really the unsustainable and inadvertent illegal wildlife trade that is the biggest share of the market that we need to stop.
Jane: [00:11:57] Yeah. And I think you touched on a really interesting point, is this the not knowing? I should imagine that actually, there's lots of organisations with very complex long supply chains who probably aren't aware of that in their supply chain and probably would be quite shocked and disturbed if it was uncovered. So maybe more needs to be done to really be able to identify where some of the hotspots are and where the risks manifest. One of the interesting things that I'd like to talk about is the link between the illegal trade in wild species and corruption and, wondering kind of how those two are connected. And is that something that you look into or to what extent should we be thinking about these things as connected activities?
Richard: [00:12:42] Some of the most interesting work on illegal wildlife trade right now is demonstrating the convergence of illegal wildlife trade with other criminal acts like drugs or terrorism or counterfeit goods. And really, like any illicit flow, corruption is endemic at every stage of the supply chain as the traders need to pay bribes to move their product through the value chain. I mean, we think illegal wildlife trade is particularly susceptible to convergence with corruption because so many of the actors are facilitating false documentation through corrupt payoffs that make the illegal consignments appear legitimate. And unfortunately, this is exacerbated by the fact that the penalties for illegal wildlife trade, if you're caught, are really much lower than other crime types. So, you're absolutely right that corruption is inextricably linked with illegal wildlife trade, which is why traffic and many of our partners are increasingly developing risk profiles for different supply chains that'll help educate governments and watchdog groups and local communities about the most likely corruption points.
Jane: [00:14:12] And then in terms of, you talked about the consequences, if caught in the act, if you like, are all countries similarly quite, I'm not going to say lenient, but other penalties kind of universally quite low relative to other criminal activity. So, for example, if you compare, drug trafficking versus wildlife species, is that universally, globally going to be less of a penalty?
Richard: [00:14:37] Your instinct is absolutely spot on that the value of the penalty is relatively low compared to the value of the final product. And that's not necessarily true in other forms of criminal activity like drugs and counterfeit goods and certainly human trafficking where the penalties of getting caught are massive. So, a lot of the illegal traders proceed building into their business model that they'll be caught and have to pay some penalties. What's encouraging is that increasingly around the world, the police and the national investigative agencies and the financial crime units are getting more switched on about the cost and extent of illegal wildlife trade. So, they are beginning to provide more enforcement. But, Jane, it's tough because some of the goods, there are so many species and the sheer volume of wild plants, of wild animal products is so massive that it is hard for customs or enforcement agencies to properly detect them. And then if you do detect them, is this little piece of shard in a suitcase, is that an illegally poached ivory? Is it an element of sustainably harvested ivory that's from a legal stockpile, or is it just a white plastic that's meant to look like carved ivory?
Jane: [00:16:23] I mean, that's a really good example of illustrating how difficult it is. Why is it so difficult to stop? Most people would say that they don't want it in their supply chain. They don't want to be the recipient of illegally traded wild species. So why is it so hard then? And presumably that's why an organisation like yours exists. So, tell me, why so hard?
Richard: [00:16:46] I think the first factor is the limited government capacity to detect and enforce illegal wildlife trade and the relative prioritisation. Again, when you're looking at a hard to prove chain of events with a fairly complicated supply chain, it's harder to prosecute and detect the illegal wildlife trade than it is a cache of drugs or human trafficking. So, the first problem is just limited government capacity and the understandably lower prioritisation that they give it. The second factor is what we just chatted about. The sheer volume and the variety of species involved makes it very difficult to monitor and enforce. You really do need specialised equipment and extensive training for law enforcement and customs officials to identify the difference between the legal shipments and the illegal shipments. And then I think the third and final factor is these are clever traffickers. They're constantly adapting their trade routes and how they smuggle illegal contraband. We find that the trade routes adjust very quickly when a government steps in with enforced regulations. Give one example China in December of 2017 introduced a complete ivory trade ban, which is really fantastic because the Asian market and China in particular has always valued carved ivory ornaments. All that happened when China enforced the trade ban was to move the trading underground and through different networks. So, whereas it used to be legal to ship ivory from Lagos to Hong Kong directly into China, the traffickers then needed to develop much more complicated and lengthy routes which went from Port of Lagos into Singapore, then to South Korea, then over land into China. Likewise, traffickers have been smart about moving the trade to more underground and nefarious marketplaces, and particularly on online markets. We've seen an explosion of online marketing on a variety of platforms, including eBay, TikTok, Alibaba, all the ones that you're familiar with.
Jane: [00:19:26] Yeah, actually, I just remembered seeing a news story recently about some monkeys being smuggled in a rucksack, and just that, the footage was really quite shocking. Obviously, a rucksack is one way to smuggle monkeys, but there's shipping, all sorts of different ways to get these wild species around, dead or alive. So, it's really, really quite sobering, really when you think about all of this going on and how hard it is, which is why I want to know about what you guys are doing, because I think we've covered the bad news almost. I think, I'd be keen to now hear some good news about what's being done and, what your organisation's involved with and, really let there be some good news to this maybe.
Richard: [00:20:18] There is good news on a variety of fronts. I think one of the most important developments is in December of 2022, the global community came together in Montreal to establish and adopt a new global biodiversity framework, which sets out a series of very concrete targets for all countries who are signatories to the GBF, which is almost everyone, to comply with. And there really was exceedingly strong private sector support for the targets and the global biodiversity framework. Second piece of good news is that the international community is also providing increased funding and resources to deliver on some of these goals and commitments. There's a very important financing platform called GEF, the Global Environmental Facility, which just had a record replenishment to mobilise billions of dollars more to invest in a broad range of environmental sustainability areas of which illegal wildlife trade is getting increased attention. So, I think the responsibility and the opportunity is for organisations like Traffic to start building stronger alliances and partnerships with the private sector, with other environmental organisations, with important marketing and trade groups. Like you're at the London Stock Exchange. It's so important that issues of sustainability, including what it means for illegal wildlife trade and promoting legal and sustainable wildlife trade, mean for your members. So that's why Traffic is reaching out and focusing a lot on the finance sector to scale up training and partnerships and capacity building so that banks are better equipped to identify and report out suspicious financial transactions. And that's why we're working with some of the standard setting groups on the standardisation of metrics and disclosure requirements for nature related financial risks like the volume of illegal wildlife trade.
Jane: [00:23:37] And I think it's quite interesting, isn't it, when you say, you know how big the legal market is and how much the illegal one. So, I guess over time as we try to move some of that, what was it, $23 billion in the illegal side over to the legal side. That's the direction of travel that we need to go in. It's about making sure that this is sustainable and isn't creating spin off costs and impacts to the ecosystem services that we've talked about. I was interested in two key areas that you work on at your organization, which is around supply chains and try to really develop responsible supply chains. And I'm just guessing what, what examples of things can you do? Because I think private companies are starting to get to grips with their supply chains in the context of climate. And I know that lots and lots of companies are trying to ensure that they have a better understanding of their emissions from their scope three emissions, which is going down, their supply chains, etc. So, what are you guys doing to help companies think about this in the context of their supply chain?
Richard: [00:23:45] Give one small boutique example and I'm going to test your biblical knowledge. Jane, Frankincense, What do you know about frankincense?
Jane: [00:23:54] Um, friends with myrrh.
Richard: [00:23:58] The three kings or something, brought the gifts of frankincense, is one of the world's oldest commodities which is a very important ingredient in incense. The largest consumer of this commodity are churches and mosques around the world. It's a wild plant, really a wild tree, which is grown primarily in the Horn of Africa by two or three very poor countries. And the species is being destroyed by unsustainable production techniques and overharvesting. So, an example of what Traffic wants to do to demonstrate how you turn around and take an extinction risk on a supply chain basis is to build a global public private partnership of the communities who harvest frankincense of the Horn of Africa governments that are responsible for regulating the product, the traders who buy it and sell it, and then the main end use consumers, the churches and mosques around the world, with financing from international banks and international financial institutions. We want to put in place an action plan that ensures sustainable harvesting, appropriate levels of investment commitment to only by certified frankincense by churches. So, it's sort of an example of how you go from communities growing the product to end users using the product with everybody crowded in with a set of actions and commitments to make sure each of us at every stage of the supply chain are doing our thing. That's an easy example. What's much harder is when you look at fisheries and timber because these are massively complicated supply chains that involve hundreds of countries, thousands of species. So, what we're really focusing on with the larger, more complicated supply chains is about traceability, standard setting financial reporting, making sure that a furniture supply company like Ikea knows where they're buying wood, is buying wood off of a set of species that are monitored as sustainably yield harvest, and that the consumers are aware and doing their share to use their consumer power.
Jane: [00:26:35] Well, it sounds like you've got your work cut out for you, for sure. And all I can say is thank goodness for organisations like Traffic because what you're doing is so incredibly important and valuable. And so, that's a big thank you from me. And I'm sure others listening would also like to share thanks and what you do because it's so important and vital and it's really one of those areas where I think it's easy for people to put it into the ‘too hard bucket’. And so, thank you for doing the things which are in the too hard bucket. We're out of time, I'm afraid today. I've loved talking to you and we could go on as ever, but maybe you'll come back again in the future and tell us what you've been up to. But for now, thank you so very much indeed, and see you again soon.
Richard: [00:27:23] Thank you, Jane.
Jane: [00:27:26] So that's it for this week's episode of the Sustainable Growth Podcast, which I hope you found as and thought provoking, as I did. If you want to find out more then you can visit traffic.org. Thanks for listening and if you're not already following us then please do. And don't forget to rate us on Spotify, Apple Podcasts, or any other platform. If you've got questions, comments, or someone you'd like us to talk to, then do get in touch by email at fmt@lseg.com - So that's all from me for today. But I do hope you'll join us for another episode very soon.
