How Green is your Chinese Supply Chain?

In 1987, as head of the U.N.'s World Commission on Environment and Development, Norwegian Prime Minister Gro Harlem Brundtland issued the world's first report that presented "Sustainability" as an appropriate objective for future global development. Titled, "Our Common Future," the document defined sustainable development as "development that meets the needs of the present without compromising the ability of future generations to meet their own needs." Although the report gained international acclaim, its concerns apparently fell on deaf ears.  Unfortunately, according to the  Ecological Footprint Sustainability Measure, in 2007, consumption and production levels were still 25 percent higher than the planet's then carrying capacity.       

Renewed Efforts to Address Sustainable Supply Chains

In December 2015, in light of the continuing erosion of climate and environmental assets, the world again embraced a global effort to reduce carbon emissions. By signing the Paris Climate Accord, more than 195 countries committed to reduce their national greenhouse gas (GHG) emissions. In September 2016, U.S. President Barrack Obama and China's President Xi Jinping stood together as they signed their country's ratification papers. By doing so, China demonstrated is firm commitment to reduce the GHG's generated by its vast manufacturing sector.   

Chinese Action Not a Moment Too Soon

Today, China is home to the majority of global GHG emissions; the immense network of supply chains within its borders account for up to 80 percent of product lifecycle emissions. Combined with China's other industrial outputs, those emissions total 25 percent of planetary pollutants. Consequently, when international companies get serious about reducing their GHG emissions, they focus their efforts on their activities in China.

Managing Environmental Concerns in your Chinese Supply Chain

In my close to 2 decades working in Asia and China I have visited hundreds of factories, and helped a good portion of those clean up their practices. Over time, I was able to separate environmental concerns into three distinct categories so that my clients could easily divide their "sustainability" project into manageable segments: resource efficiency; pollution, and impact on health.    

Resource Efficiency

Protecting and conserving resources are critical components of sustainable business practices. In many Chinese factories, there is no sense that resources aren't consumable, so there are often only basic processes in place to manage them more efficiently. In locations where energy is more plentiful, warehouse engines might sit idling while waiting for the next production run to begin. Other companies might use the waste product from one project as a resource material for another. In their mind, they are "saving resources," but in reality, they might be contaminating the second product with substandard parts.

Polluting Practices

China's industrial complex grew much faster than its infrastructure. Consequently, managing pollutants is one of the most challenging aspects of "cleaning" the practices of a Chinese supplier. In many of the more provincial towns, there is still an insufficient municipal waste management system in place, and many of the local facilities continue to manage their waste as they always have – by burning it on the side of the road, by dumping it in nearby forests, or piping it into nearby lakes or rivers. Even when there does appear to be an appropriate receptacle for refuse, it is prudent to inquire what happens to the materials that are placed there. Sometimes they are simply set ablaze, and whatever pollutants that aren't dumped in the creek are dispelled into the atmosphere, instead.

Impact on Health  

Sustainability also requires adherence to national and international product standards. Products that are aimed at vulnerable populations like children are frequently held to higher standards to safeguard the health of those intended users.  When upholding those standards impacts the facility's economics, however, switches sometimes occur to keep costs down. Not only does swapping a quality part for a substandard part violate contract terms, but it can also result in severe injuries to the eventual product's end users. There have been several recalls in recent years when products such as children's crayons have been found to contain toxins – for example Asbestos.

Helping a Chinese factory balance its environmental requirements with profitability is as much an art as it is a science. In my close to 2 decades as a consultant working with Asia, I've worked with hundreds of factories to improve their sustainability practices. I've written more on this topic in my Huffington Post blog, which you can find here. In my book, you can learn how to avoid some of the pitfalls that can occur when buying in these markets.

You can also take your own quick ethical risk assessment here.  (Estimated 4 minutes duration, and with an instant result via email).

For assistance to evaluate the sustainability practices of the participants in your supply chain you are welcome to contact me directly. I can be reached at (+61) 413 089 020 or via email: [email protected]