The Power of Information Disclosure in Greening China’s Supply Chain

Presented by Bai Hui, the Institute of Public and Environmental Affairs (IPE) Project Officer, Green Supply Chain

Bai Hui of the Institute of Public and Environmental Affairs, China, gave an overview of the groundbreaking work the NGO has carried out since 2006 to increase transparency around environmental issues in China, and the resulting impact on the management of environmental compliance in global supply chains.

Highlights:

• The main obstacles on the way to environmental compliance in China

• Cooperation between global brands and the IPE’s landmark transparency initiatives

• Further options for multi-stakeholder collaboration to green China’s supply chains

Until recently, for Chinese enterprises, the cost of violations has been lower than the cost of compliance. However, the enforcement and policy environment favors greener supply chains, and strengthening supervision increases the cost of non-compliance (including with the aid of the 2018 Environmental Protection Tax Law). To increase the effectiveness of enforcement in environmental compliance, the IPE set out to tackle the lack of motivation to go green, which, in their opinion, is the biggest barrier to pollution control in China.

Blue Map Database and App

IPE’s Blue Map database, established in 2016, collates data from environmental protection, water resources, land, marine, housing, development, industry and weather agencies, including such sources as corporate environmental supervision information, officially confirmed petitions and complaints, enterprise real-time emissions data, as well as enterprise feedback and corrective actions. To assist public participation in the Blue Map database, the Blue Map mobile app was launched in 2014, allowing users to report industrial polluters in order to hold them accountable.

To leverage information disclosure for pollution reduction, IPE, together with 20 environmental organizations, founded the Green Choice Alliance, with the goal to encourage consumers to use their purchasing power to influence corporations, and corporations, in turn, to green their supply chains. Then, in 2014, together with the NRDC (USA), the IPE launched the Corporate Information Transparency Index, the first quantitative evaluation system for supply chains in China.

The Corporate Information Transparency Index and Green Supply Chain Map

The CITI is based on public information, from such sources as government compliance data, confirmed orders and 3rd party environmental audits, and allows to dynamically assess the environmental performance of brands’ supply chains in China. Using a progressive step-by-step structure, the CITI covers five areas:

• Responsiveness and transparency

• Compliance and corrective actions

• Extending green supply chain practices

• Energy conservation and emission reduction

• Performance disclosure

As of 2018, the CITI covers 267 brands, which increasingly incorporate supply chain environmental management into their sourcing standards and drive their suppliers to improve. In addition to disclosing information about violations and corrective actions, the CITI provides suppliers with a roadmap towards greener supply chains.

Furthermore, compliance efforts are being extended past brands’ direct suppliers, to address potential business risks that may arise beyond tier 1 of supply chains. Brands push their suppliers to screen facilities further upstream, including sewage treatment plants, dyeing factories, hazardous water treatment plants, etc.

While the CITI does not automatically disclose the full names of suppliers to specific brands, brands can choose to showcase their commitment to supply chain transparency and environmental management by joining the Green Supply Chain Map, which openly links brands’ supplier lists to publicly available environmental data, including real-time data for air emissions and wastewater discharge. The map creates a channel for the participating brands’ suppliers to verify their environmental compliance, and for the consumers to incorporate brands’ environmental efforts into their purchasing decisions.

The Impact

• Dramatic increase in the transparency of China’s supply chains

• Active collaboration between all stakeholders, including brands, suppliers, NGOs, government and consumers

• Compliance and corrective action driven through multiple channels, and with increasing momentum