Chinese suppliers can improve their business performance by adopting high environmental standards, according to a new working paper by the World Resources Institute (WRI) and the Institute of Public and Environmental Affairs (IPE). The paper, “Greening Supply Chains in China,” highlights the experiences of five companies in China that have worked to improve their environmental performance.
“China-based suppliers can be effective and innovative in addressing their environmental impacts,” said Ma Jun, Director of IPE and co-author of the report. “But to help these firms become responsible manufacturers, key stakeholders— especially buyers— need to demonstrate that sound environmental practices are valued.”
Many suppliers in China are now required to meet certain sustainability criteria by multinational buyers who have adopted “green supply chain” strategies. Firms that are unable to meet such environmental requirements may be restricted from doing business with their buyers. The impact of these “green supply chain” initiatives is likely to be particularly large on Chinese industry because of China’s role as “the world’s factory” and leading global exporter— accounting for much as 10 percent of the world’s total exports.
“Chinese suppliers must find ways to improve their environmental performance because it is increasingly crucial for the survival of their businesses,” said Ray Cheung, a consultant to WRI and co-author of the report. “Firms that adopt best practices in sustainability will have a competitive advantage over companies that fail to minimize their impact on the environment.”
The report’s case studies detail management processes that the companies used to identify and implement environmental improvements in a transparent manner. One common feature of all five companies is that previous environmental violations led them to work with key stakeholders, such as nongovernmental organizations (NGOs), government agencies and their buyers, to make improvements.
The environmental issues and industries highlighted in the report are:
• Industrial wastewater and energy consumption in the garment industry;
• Industrial wastewater and sanitary waste in the shoe industry;
• Industrial wastewater, biological and chemical waste in the consumer goods industry;
• Air pollution in the leather tannery; and
• Industrial wastewater, and solid and heavy metal waste in the electroplating industry.
The five companies were selected and reviewed by the independent Green Choice Alliance (GCA), a consortium of Chinese environmental experts and NGOs. The GCA represents local community members in an independent effort to assist multinational buyers in tracking the compliance records of their Chinese suppliers, and facilitating corrective actions and public disclosure.
“China’s drive to increase environmental transparency provides a unique opportunity to identify violations and misconduct in globalized manufacturing and supply chains,” said IPE’s Ma Jun. “It also sets the stage for more participatory environmental governance in which corporations collaborate with NGOs and communities to reduce pollution and promote long-term sustainable growth.”
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