Supply Chain Digest: Will Environmental Groups Target Western Companies Over Pollution Issues in Chinese Manufacturing?
By SCDigest Editorial Staff
Through a special arrangement, what follows is an excerpt of a current article from Supply Chain Digest, presented here for discussion.
For many years, labor and other groups have put pressure on Western companies for using offshore suppliers paying low wages, running alleged “sweatshops,” or otherwise abusing developing nation’s labor standards.
These attacks have had some success, such as the on-going campaign targeting worker pay and conditions in Asian suppliers to Nike. This publicity seems to have certainly caused Nike to shift some of its policies and sourcing decisions over time. For example, in November 2006, Nike ending its relationship with a Pakistani supplier of soccer balls over alleged violations of its labor policies.
With the growing focus on green supply chains, interest groups may try similar strategies by targeting the environmental friendliness of a company’s offshore suppliers. In the past, labor groups often criticized a given country’s environmental standards, or cited the unfair cost advantages a country with more lax environmental controls would have, in pushing for tariff or other protectionist policies. But little has been done to specifically investigate or target the individual suppliers of U.S. or European companies.
That may change. The Wall Street Journal, for example, recently reported on the huge pollution problems associated with China’s textile and apparel production, which are placing a large toll on the environment there.
“After labor issues, the environment is the new frontier,” Daryl Brown, vice president for ethics and compliance at Liz Claiborne Inc., told the WSJ. “We certainly don’t want to be associated with a company that’s polluting the waters.”
The comments come after Chinese authorities raided the mill of Fuan Textiles in southern China, after local complaints about fouled waters around the plant. Chinese apparel and textile companies generally dump untreated water used in production directly into lakes and rivers.
Fabric from Fuan Textiles’ factories is used in apparel items produced by other Chinese manufacturers and ultimately sold by U.S. companies including Wal-Mart, Lands’ End, Nike, Liz Claiborne, The Gap, Target, and more – a virtual “who’s who” of retailers and apparel marketers. Companies will likely also have to increase their costs for environmental monitoring, just as they are likely to incur for better safety and quality monitoring coming out of the Mattel recall and other safety concerns about Chinese imports.
“Prices in the U.S. are artificially low,” said Andy Xie, former chief economist for Morgan Stanley Asia and now an independent analyst. “You’re not paying the costs of pollution, and that is why China is an environmental catastrophe.”
Discussion Questions: Do you see a green supply chain protest movement against Western companies becoming as pervasive as the anti-sweatshop movement? What factors would drive or impede any such movement? What steps should Western companies be taking to address such protests?
American companies who source goods in China and other countries with lax environmental standards would be smart to pay attention to this issue. It’s very much tied to the issues of labor conditions and product safety (the lead paint problems that may cost Mattel and U.S. toy retailers some serious sales this year). You can’t do global sourcing on a lowest-cost basis and then turn a blind eye to the negative consequences. More stringent quality control (and other inspection standards) needs to be the “lesson learned” here.
It’s interesting that while many decry our “imperialistic” efforts to export democracy to other countries, we seem to have no problem at all with efforts to export our beliefs about human rights and, most recently, environmental standards. I am definitely not an isolationist and support all of these efforts, but wonder how these inevitably mixed messages are being received internationally.
There are those who will argue that the military means sometimes used to export democracy are quite different than the “gentle” means used to export, for instance, human rights and environmental standards. These use economic means, like those used to cripple and eventually break up the Soviet Union. In the military option, lots of people get hurt very quickly. In the economic option, lots more people get hurt very slowly. It’s like the difference between a train wreck at regular speed and a train wreck in slow motion. It’s still a train wreck.
In this latest movement to impose our environmental standards on others, the politicians making the decisions will be torn between forcing more (and more environmentally-friendly) production back into their districts, and losing export business when China, for instance, retaliates.
The fashion world is on a fast track towards embracing sustainable design, organic apparel, and eco-friendly home products. Look at Patagonia’s focus on organic cotton, Linda Loudermilk’s Luxury Eco line, Wal-Mart’s Green store, and many, many others who are changing how the operate their business. Eco-stores, green design, and other movements are catching on quickly around the globe and are here to stay, not just a trend. The students entering the fashion workforce today are highly conscious and highly concerned about issues concerning pollution from textile plants, recyclable materials, and energy reduction. So those companies that refuse to be actively involved in how their manufacturing resources produce their products, will most certainly face criticism from activist groups. But what could be worse for them is the loss of sales from the powerful silent customer, who decides to buy from those companies who do care how products are produced. There are already many of these customers, particular amongst the current college age consumers, who are conscious of labels that read “Made with Organically Grown Cotton.”
Environmental issues can easily become a media focal point. U.S. companies would do well to examine their procedures and processes at this point in time and get prepared for the attention that will come in the future. Cleaning up the environmental problems will take longer but needs to begin.
There is no doubt that manufacturing practices in China are destroying the environment at an incredible rate. As a personal note, I recall being offered steamed fish while working very late at a factory in Dongguan province. I asked where the fish came from, and was told the river which runs behind the factory. Just that afternoon I had seen dyestuff and ink residue being dumped into the river. I declined. Unfortunately, the factory workers were eating that fish, and did so three times a week.
Are the conditions in China, Bangladesh and other areas deplorable? Absolutely. I have huge reservations in seeing the American public adopt developing country ecologies as a “cause celebre.” The sweatshop issue was easily translated into immediate empathy. The differences in emotional connectivity between 3rd world ecology pollution and child labor are enormous.
In addition, the US public is far from unanimous in its adoption of the entire Green message. How many articles in the past months have addressed the global warming “controversy”? No, at this moment, I do not see the American consumer connecting with the complex message inherent in relating China’s pollution to their quality of life. However, on the plus side of this issue is the inevitable progression of values in developing countries will gradually lead to taking action on their own behalf. Simply using Korea and Taiwan as examples will show that as a country moves through the development curve it begins to care about the environment and other “higher level” social goods. China is already beginning that transition, and will continue to do so over the coming years. The analyst quoted in the article got it right: US consumers have been enjoying artificially low prices, subsidized by the cost to the Chinese environment. At some point, China will be no longer be willing to absorb this price, and things will change.
I agree that this is an issue that will only continue to grow in importance. What could drive the timetable? Intense media coverage, for one, and restrictions on trade by the EU for another. And, let’s not forget consumer pushback.
Yes we will see more protests and fact finding in the area of green and sustainability. It has already started with Wal-Mart and the new scorecard that all 66,000 suppliers have to provide for packaging in 2008, including green house gas (GHG) information. Most major retailers and brand owners have or are developing Green/Sustainability programs. New sustainability VPs and directors are springing up across the value chain.
The reasons are many fold but the obvious ones are 1) Transparency – it is very easy for individuals to rally groups together for common causes like pollution and trade practice concerns in China, and 2) The Triple Bottom Line (TBL) of economics, environment and social positives or People, Planet and Profit as we call it at PTIS. This is just the right thing to do and when done right you make money, support people and help the planet. Just look at the Dow Jones Sustainability Index (DJSI)–it outperforms many indexes! We do live in a global society and need to think about local and global impacts. The pollution issue in China will get significantly worse before it gets better and the global supply chain leaders must think green for profit–because of transparency!
There are some real opportunities when you start to think through the TBL from a more integrated and systems approach–the winners will be the TBL thinkers and the losers will be the ones thinking only about cost! Times have changed, people are changing and individuals are making a bigger impact than ever before–so think integrated solutions and think People, Planet and Profit!
It’s only a matter of time before various special interest groups go after the environmental friendliness of Western companies’ supply chains. However, unless environmental pollution can be tied directly to human misery, it will not draw as much attention or will not have as much impact as “sweatshop” issues. For ordinary consumers, it is easy to visualize poor and pathetic working conditions but it is a little difficult to visualize effects of environmental pollution.
Frankly, I don’t think the Green movement is as strong in the U.S. as it is in Europe, particularly Germany.I think consumers would like to do the right thing and have the companies they buy from follow suit. But the truth is that people want what they want when they want it.
With the global supply chain so complex and convoluted, a company like Liz Claiborne may never really know where the textiles from their products are coming from or the environmental impact involved in their manufacture. If companies were so concerned, they would forgo offshoring and its bare-bones production costs and bring manufacturing back to the U.S. where it could be watched more closely. However, no one is that naive.
Now that I’ve established myself as the in-house curmudgeon, I do believe that companies can and should adopt Green policies. But first, let’s separate truth from fiction. In that regard, kudos to Tesco for handing over $50 million to the University of Manchester for the establishment of a Sustainable Consumption Institute to find out about the real environmental impact of products in the supply chain.
It isn’t easy to go green in China. Yes, the textile factory doesn’t have to pollute the waters. But how will it get its electricity? Chinese power plants burn coal, and China is legendary for its air pollution. Most of the mass market simply wants inexpensive goods, and overlooks the sustainability issues. A minority cares about sustainability, and an even smaller slice of those folks are willing to pay extra (a lot extra).
While there may be more environmental concern among consumers in Europe than the US, there are various American campaign names that spring to mind–Karen Silkwood? Erin Brockovitch? There have been several instances of pollution and contamination that effect people living near manufacturing plants that have had little regard for anything other than profit and doing things as cheaply as possible. Maybe, just maybe, one day some of the more restrictive governments in countries whose people are being used to produce all the cheap goods being sold in American shops will be able to influence manufacturers and get them to mend their evil ways. That covers both environmental crimes and crimes against humanity in the form of slave labour and unbearable working conditions. There is no way that any company based thousands of miles away will ever be able to have sufficient influence or be able to constantly supervise what is going on no matter how much they try to export their views. Only if or when the people who are doing those jobs because they have so little choice in how to earn a living are able to stand up and refuse to continue providing for rich employers and customers will anything seriously change. And that isn’t likely to happen in a hurry. I don’t believe that there is inaction because people are unaware or uncaring. Only because they do not yet see that they are able to create change. If environmentalists and consumers keep hammering away at the companies from whom they directly purchase cheap goods then maybe eventually their message of support will get through to the only people who really could make a difference.