Supplying a greener industry

Disclosure of environmental records all the way down the production chain means multinationals can't turn a blind eye

Ma Jun
The Guardian, Tuesday 19 May 2009

Globalisation has powered economic growth in developing countries such as China. Global logistics, low domestic production costs, and strong consumer demand have let the country develop strong export-based manufacturing, making the country the workshop of the world. It fuels growth and helps pull millions out of poverty.
However, this massive export-oriented industry, along with the expansion of production to meet rising domestic demand, has taken a toll on the environment. While cheap products are exported to western countries, the waste is dumped mostly in China's backyard, contaminating its air, water, soil and seas. At present, about 60% of its fresh water is contaminated, and about half its major cities do not meet the country's modest air-quality standards.
As the public and some media started linking the black rivers with globalised sourcing, some multinational companies decided to integrate environmental standards into their sourcing policy, similar to their strategy to address labour issues a decade ago. But in the absence of a strong regulatory framework, along with the bewildering number and tiers of suppliers to track – and the technical complexity of pollution control – achieving responsible environmental supply chain management remains difficult, even at the basic legal compliance level.
But a solution, which is still much unnoticed, is emerging as environmental transparency expands in China. As part of the government's initiative to strengthen environmental enforcement, legal and policy measures have been established since 2003 to facilitate public participation. Evolving policy, alongside the increased capacity of environmental NGOs in China, and corporations' aspiration to achieve sustainability, have set the stage for broad public-private collaboration to tackle its pollution.
Capitalising on increased public disclosure of pollution monitoring data, in 2006, our organisation, the Institute of Public and Environmental Affairs (IPE), launched the China Water Pollution Map, through which the public can access thousands of environmental quality and infraction records released by various government agencies.
When people have access to these records, it puts extra pressure on companies on the list. Many chose to come to the IPE to explain what has gone wrong and how they are trying to fix it. We then input their statements, along with follow-up government monitoring data they chose to provide, side by side with the original records of violations so that people could have updated view of their performance. Companies also have the chance to remove their names from the list by going through an independent third party auditing process under the supervision of local NGOs. So far more than 20 such audits have been conducted.However, most of these companies are multinationals and they represent just a tiny proportion of thousands of violators. In order to expand the effect of transparency on those who are not sensitive to public attention, corporate users need to check their suppliers. We have developed a database of over 40,000 records of specific citations of companies violating emission standards and other environmental rules in China, from 2004 onward. Now companies such as GE, Wal-Mart, Nike and Esquel are using it to monitor the environmental compliance records of their suppliers.
While some responsible companies move quickly to use the new tool, it is no surprise for us to meet with resistance from those who don't seem to be ready to recognize that there might be major gaps in their management. For example, one of the world's leading outdoor footwear and accessories manufacturers based in America rejected our suggestion delivered through an American NGO for it just to check by itself the compliance status of its suppliers through the database. If it did, however, it might instantly find on the air pollution database one supplier listed by local governmental agencies as violators in five consecutive years and another one with three years of non compliance records in water pollution.China, like many developing countries, is facing a serious environmental challenge. If major companies sourcing in developing countries care only about price and quality, local suppliers will be lured to cut corners on environmental standards to win contracts. Such market practice is destructive as it will lead to a globalised "race down to the bottom".
However, the social progress made in China makes it possible for responsible firms to increase their environmental transparency and collaborate with multiple stakeholders, including the government, suppliers and NGOs, to green their supply chain in a more effective and efficient way. Greening the globalised manufacturing and sourcing will be the single biggest help multinationals could make to the tough pollution control in China and other developing countries.
Ma Jun is director of the Institute of Public and Environmental Affairs, www.ipe.org.cn. Read a longer version of this piece online and more comment and features in the China at the crossroads series at guardian.co.uk/china