The region is losing forest faster than anywhere else on earth as the area is converted to animal pasture to meet global demand for beef and leather, according to researchers.
A report by environmental investigation group Earthsight claims slaughterhouses buying cattle from these ranches were found to be selling cow hides to tanneries supplying some of Europe’s biggest car companies.
None of Europe’s 10 largest manufacturers of cars with leather interiors was able to fully trace the origins of the leather it was using, the report said, prompting researchers to say their findings were the “tip of the iceberg”.
The report, called Grand Theft Chaco, says cattle ranchers in the Chaco region illegally cleared land inhabited by the Ayoreo Totobiegosode tribe, the only indigenous people living in voluntary isolation anywhere in the Americas outside the Amazon.
The Chaco is also home to hundreds of species of birds, reptiles and mammals, including jaguars, giant anteaters, ocelot and pumas.
Undercover researchers held meetings with tannery bosses, government whistleblowers and indigenous activists, and visited remote ranches and examined records to discover how the forests of the Gran Chaco are being destroyed.
Earthsight estimates land the size of a football pitch was cleared every two minutes last year in the Paraguayan Chaco.
Executives at one of Paraguay’s biggest tanneries, which sources cattle from illicitly cleared forest, told the researchers their leather is used by Jaguar Land Rover, including for its Range Rover Evoque series.
The report says BMW admitted sourcing hides from two slaughterhouses that also were found to have bought cows from ranches illegally stripping the Totobiegosode forest.
Paraguay exports around 50,000 tonnes of partially tanned leather each year, of which almost two-thirds are imported into the EU, where tannery firms sell the finished leather to car manufacturers.
The car industry, which uses up to 60 million cow hides each year, also buys much of its leather from the Brazilian Amazon, where illegal forest clearances are widespread.
Raising cattle is the world’s leading cause of tropical forests destruction, and the leather industry lags way behind steps being taken by other sectors involved in deforestation, such as palm oil and cocoa, the document says.
Watchdogs including the UN have repeatedly condemned destruction in the past two decades of the Chaco region, which has been inhabited for centuries by semi-nomadic tribes.
In February 2018, clearance of the Totobiegosode was ruled illegal, but between April 2018 and July 2020, more than 2,600 hectares were illegally bulldozed, Earthsight found.
The car company supply chain is just the “very dirty tip of a much larger iceberg” of deforestation and “human rights abuse risks” in leather supply chains, the report warns.
Sam Lawson, director at Earthsight, said: “No car owner is going to feel comfortable in their plush leather seat knowing that the last forest refuge of an uncontacted tribe was illegally cleared to make it.”
Earthsight says EU and UK leaders should force companies to ensure supply chains do not involve such damaging practices.
The report also says influential lobby groups claiming to represent the interests of automotive and other industries have lobbied EU chiefs to halt such legislation and dilute environmental requirements that could be asked of companies.
The EU and UK account for 10 per cent of global deforestation from commodities, importing about €6bn (£5.5bn) of soya, beef, leather and palm oil from land illegally cleared. Italy and Germany are the top two consumers.
A Jaguar Land Rover spokesperson said the company took immediate action to investigate, adding that it tracked the supply chain back to the slaughterhouse, and “we have not as yet found evidence to verify Earthsight’s claim that the individual ranch has been illegally cleared, nor that its hides are in our supply chain.
“We continue our drive for further transparency and, in this case, the leather supplier in Europe verifies with each raw material supplier that no rural property that directly supplies it is involved in illegal deforestation.
“All Paraguayan companies selling hide to the leather supplier are members of the Paraguayan round table of sustainable beef and are committed to upholding the best environmental practices, as well as respecting Paraguay’s strict legislation to protect its natural resources.”
A BMW spokeswoman said the company planned to drop raw leather goods from South America in the medium term, adding: “The tanneries used by our supplier in Paraguay have either been certified as gold-rated by the leather working group or have been secured by the Paraguayan ministry of industry and trade in terms of environmental and social standards, resource efficiency and material traceability.
“We have contacted our suppliers and we are not currently aware of any breaches of our environmental and social standards in these supply chains.”
The UK government is currently holding a consultation over a possible new law banning the import of commodities linked to illegal deforestation.