In 2019, the Chinese Government announced the “Green Industries Guidance Catalogue” intended to establish the standards necessary for building a competitive industry in environmental goods and services, to export those standards abroad and harmonize differing standards for sustainability within the green industries in China [1]. This catalogue is split up into several sections such as:
It will be an important step in energizing Chinese sustainable industry goods and services sectors. As a reference to the estimated scale of this green market, China’s market for green goods and services is estimated at $1 trillion, the largest in the world, according to Goldman Sachs [2].
China and Sustainability – A Broader Picture
According to a study done by The Pew Charitable Trust, an independent non-profit organization, China “is emerging as the world’s clean energy powerhouse” due to its massive investments in low-carbon energy such as wind and solar power. For the past five years, environmentally friendly energy finance and investments grew from $2.5 billion to $34.6 billion and beyond that China also aims to spend 34% of its $586 billion stimulus package on green projects [3]. So while the Chinese government has an increased focus on green initiatives, hoping to encourage more investment within that area, there is however the fact that many small-and-medium sized enterprises don’t have the financial capacity to do so or are not incentivized enough to comply. This has led China to create a “National Green Development Fund”, the first of its kind in the ecological environment field, intended to ease the financial burden of going green.
Hanjiang Dafu and Putian Hanjiang Shoe Companies
An example of lack of incentive can be seen with the Hanjiang Dafu Shoe Company (Dafu Shoe) and the Putian Hanjiang Shoe Company (Hanjiang Shoe) both located in Fujian province, Putian City. The two companies employ over 3,000 employees to produce leather, synthetic shoes and boots which then were sold to Walmart.
When the Putian City Environmental Protection Bureau publicly announced that the air and wastewater pollution from their factories exceeded the legally allowable levels, the companies opted to pay the fines instead of installing the necessary clean-up equipment since it was cheaper. It wasn’t until Walmart, being a key buyer of theirs, intervened and warned that suppliers that were found to have violated environmental regulations and did not take corrective actions would not be purchased from that both companies started searching for methods to solve the issue [4].
The problem then is how to incentivize small-to-medium sized enterprises (regardless of the field) and provide guidelines and inspiration for them to follow. This is where Mars,Inc radical approach to green initiatives might become an inspiration or a case to study.
What can be learned from Mars,Inc ambitious green initiatives.
Mars, Incorporated (or Mars,Inc hereinafter) is an American manufacturer of confectionary, pet food, pre-packaged food and pet services (ranked 6th largest private company by Forbes)[5]. In 2017, Mars,Inc announced several green initiatives, in particular the “Sustainable in a Generation” (SiG) and later in 2019, the “Palm Positive Plan”.
The $1 billion Sustainable in a Generation is intended to: “curb our environmental impact, meaningfully improve lives in the workplaces, supply chains and communities where we work…” and Palm Positive Plan was created as one plan to enforce that, the goal being to establish a deforestation-free supply chain of palm oil. The company announced they had done just that in the Asia-Pacific partnership with United Plantations and Fuji Oil (UniFuji) in which they reduced operations in the area from 780 mills to just one. They have additional plans to radically simplify their supply chains by reducing its mills from 1,500 mills to less than a 100 by 2021 and to halve that by 2022 [7].
Since then, Mars,Inc has shared a few things to assist companies to turn more environmentally friendly [8], which can be separated into two parts:
Measuring Data:
1. Measure your carbon footprint by hard-data. After all, you can’t manage what you can’t measure.
2. Analyze the numbers in terms of greenhouse gas emission and other measurements like water use and human resources metrics. Once you have a clear idea about the entire value chain, incorporate the quantitative sustainability indicators into your business strategy.
3. Plan long term and extend the business plan timeframes. Instead of planning 3-5 years, plan for decades/generations.
Additional methods for supply chains/factories include:
1. Using satellite mapping to monitor land-use with third-party validation (through a partnership with Earth Equalizer/Aidenvironment) to take evidence-based action to simplify and select suppliers and mills it sources from.
2. The 1:1:1 model where a palm is grown at 1 plantation, processed through 1 mill and 1 refinery before reaching them.
3. Long term supplier contracts to grow more meaningful relationships (from 1 year to 10 years). Increased monitoring over suppliers with an evaluation program which will remove suppliers that are non-compliant with environmental laws.
4. Green energy sources or reduction of energy usage.
A manufacturing plant in Australia was fitted with LED-lights which decreased energy usage by 6% (which amounts the usage of 160 homes yearly energy-use) [9].
In the rice fields of Pakistan, more efficient and sustainable farming practices yielded a triple win: farmer income went up by 30%, water use down by 30% and cost savings for Mars,Inc of 30% [10]. Furthermore, in 2019, Mars Incorporated was the world’s leading confectionery company, with generated sales numbers of up to 18 billion U.S. dollars [11]. While the initial investment might be hard to overcome, there are several ways to help invements or support towards greater sustainability.
Sustainability Assistance
As an example of Chinese governmental support towards the cause, in May 2020 (in part due to Covid-19 economic difficulties), Chinese government established various forms of assistance to enterprises, from reducing taxes and fees, exempting tolls on highways, reducing cost of energy use and granting subsidized loans in order to stabilize and support industrial and supply chains[12]. And beyond the responses to the pandemic, the Chinese Government in 2019 introduced an extension of their NEV (New Energy Vehicle) subsidy until the end of 2022 in order to rejuvenate and support the automobile market in China [13].
As China continues its shift towards more sustainable and green markets, the governments regulations will almost certainly grow stricter and reward those enterprises that have invested the time and money towards future sustainability in their operations.
