It’s not easy, but some leading companies have found that the right incentives and collaborative efforts can help their suppliers achieve better environmental performance.
Given how much of the world’s manufacturing takes place in China and the damage it has wrought on that country’s environment, most analysts expect that multinational brands’ supply chains will face increasing scrutiny in the coming years. As nongovernmental organizations heighten their monitoring and the Chinese government enforces new laws to increase transparency and accountability, multinational corporations can expect growing pressure to run a clean supply chain.
For companies, the costs of ignoring problems can be considerable. For example, in August 2011, a consortium of five Chinese environmental NGOs focused attention on Apple, the beloved U.S. technology giant, for using Chinese suppliers with outstanding public pollution violations and ignoring the NGOs’ earlier entreaties to redress the problems.1 International headlines soon reported “Apple Attacked Over Pollution in China”2 and “Apple Cited as Adding to Pollution in China.”3 Within a month, Apple was in talks with the environmental organizations to clean up its — and its suppliers’ — act.
And NGOs no longer just scrutinize MNCs’ immediate suppliers. Greenpeace International in July 2011 singled out Nike, Adidas and other major brands for doing business with a big Chinese textile group found to be discharging toxins into a local river. It didn’t matter that Nike and Adidas sourced finished garments from the group’s cut and sew facilities, not from its fabric factories that most likely released the toxins.4
The Leading Question
How can multinational corporations encourage their Chinese suppliers to improve environmental performance?
- Auditing is not enough; provide incentives for identifying and addressing problems.
- Collaborate with nongovernmental groups and other buyers.
- Learn from your suppliers — and facilitate learning among them.
How can MNCs avoid such embarrassments? Even for high-profile companies like Nike and Adidas, which are ahead of industry peers in promoting environmental improvement in their supply chains, it may never be completely possible. But MNCs can minimize risks in China if they heed the sometimes painful lessons that these and other leading companies have learned in recent years about managing their Asian supply chains.