Apple Tops List of Greenest Supply Chain in China, New Report States

sustainable supply chain

Apple is leading the green supply chain movement in China, according to a new report that evaluated more than 150 brands on their supply chain environmental management efforts and effectiveness.

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The Corporate Information Transparency Index (CITI), issued by the international nonprofit environmental organization National Resources Defence Council and Beijing-based nonprofit Institute of Public & Environmental Affairs, evaluated 167 brands on their supply chain environmental management in China using government-issued and public data on company suppliers from the last year. The report comes just before representatives from around the globe gather in Paris at the end of the month for the United Nations Climate Change Conference.

Adidas and H&M took second and third place for “greenest” supply chains in China on the CITI. Rounding out the top five companies are Levi’s and British retailer Marks & Spencer. Apple, which won overall first place on the CITI, also ranked first among the IT industry. The company outranked its competitors, gaining high points for its push for corrective actions in China, its data disclosure and transparency efforts as well as its centralized wastewater treatment — something no other IT company included in the evaluation has. Apple also recently announced that a 40-megawatt solar project was completed in the Sichuan Province in China, which the company says produces more electricity than its offices and stores in China use, making Apple’s operations in China carbon neutral.  

More About the CITI

The CITI gives points to companies based on “real challenges and multi-stakeholder participation in managing supply chains in China,” the report stated. The index identified the companies that are showing to be the most willing and capable of tackling the environmental problems in their supply chains, the report continued.

Environmental problems are a growing concern in China. Just this month, the country recorded it highest level of air pollution ever, levels that were more than 50 times higher the number the World Health organization deems safe. A recent study from the University of California, Berkeley, stated air pollution contributes to an estimated 1.6 million deaths each year in China.

To gain a better understanding of the environmental supply chain issues companies that operate in China face, we reached out to Spend Matters Vice President of Research Thomas Kase, who not only has lived in Asia but also spent considerable time there in the last year.

What are the challenges companies operating in China face to making their supply chains more sustainable and “greener”?

There is significant corruption in China. Take, for example, the recent port explosion in Tianjin and its underlying causes, where politically influential individuals manipulated business permits and ignored requirements for their own benefit with tragic consequences. China has a long history of such short-sighted “workarounds” where existing rules and regulations are ignored to meet immediate profit goals, whether personal or for business.

With that mindset in the country — and the elite, or anyone with sufficient resources, sending their families overseas to escape the pollution and other problems in China — it’s hard to be a good citizen among so many bad apples. The mainland Chinese are migrating to other countries to a far greater degree than other countries in the region not only for environmental reasons but also to avoid taxation and even arrests at home, as well as to provide their children with better educational opportunities and reduce their exposure to tainted food items.

All of the above suggests the Chinese have given up on their own efforts. This is clearly not the case with western multinational corporations, at least not from a policy point of view. But ultimately policies rely on people, and if the local Chinese staff has resigned itself to the current situation, there is a potentially a good deal of risk exposure. Companies should not only implement technology to track supply base progress but also to solicit third-party resources to run surprise audits and other checks to ensure that standards are actually adhered to — obviously applicable to any region, but in particular to China.

Are these challenges unique to China and Asia? Or are they the same regardless where companies operate?

It is true that several countries in the region have similar problems. Substantial corruption exists in most of the region, including in the Philippines, Indonesia, China, Vietnam, Myanmar, India and Thailand. And corruption goes beyond personal enrichment and deal making. It also means rules and regulations will be set aside, as we saw in China. Places like Singapore, Hong Kong and Japan are mature economies that do not require anywhere near the same level of oversight and precautions. Malaysia and Korea are somewhere in the middle — better than Italy, for example. (Transparency International’s Corruption Perceptions Index illustrates these differences nicely.)

It’s becoming increasingly important for companies to take more ownership and responsibility of the end-to-end-product lifecycle. But just how difficult is this? What are the roadblocks standing in the way of greater sustainability, better corporate social responsibility and an overall greener supply chain?

I think it is going to take far too long to rely on local governments to clean up themselves.  Western multinational corporations, and some Asian countries like Japan, can definitely change the game by playing hardball with the local suppliers. The current trend toward procure-to-pay (P2P) systems and supplier networks will probably help clean things up. It’s hard to remain in the shadows when all business activities are so visible and easily audited as they are in an e-procurement solution.

Countries like Singapore are heavily into corporate social responsibility (CSR) and green procurement. But as this year showed us, all their efforts to clean up their footprint were for naught when Indonesia started burning its plantations to clearcut for the next planting. It is almost laughable to think about the current U.S., EU and Singaporean efforts to eke out a little less carbon dioxide in their economies when Indonesia is on fire. The money and effort spent in the west would be far more effective if used to transform the way agriculture is done in Asia.  

Clearly, more co-operation across borders to focus regulatory and corporate efforts on addressing the weakest links in the supply chain would be ideal. And with CSR providers like EcoVadis becoming de facto standards in some industries, particularly in Europe, there is hope that market forces will drive change where governments have failed or are misallocating their efforts.

That might not have been the preferred answer, but I think the power of the purse is more transformational than the stick — which can be avoided with a golden handshake — and if the large multinational corporations in their respective verticals set their minimum standards and share the compliance data, perhaps via EcoVadis, riskmethods, Resilinc or similar solutions and platforms, we should see more transformation, and perhaps rapidly.

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