Supply Chain News Bites - Only from SCDigest
 

-September 6, 2007

 
 

Global Sourcing and The Green Supply Chain: Will Environmental Groups Target Western Companies over Pollution Issues in Chinese Manufacturing?

 
 

Will We Switch in Focus from Sweatshops to Green Issues? The Heavy Environmental Price of Chinese Apparel Manufacturing

 
 

By SCDigest Editorial Staff

 
 

For many years, labor and other groups have put pressure on Western companies for using offshore suppliers that paid very low wages, ran alleged “sweatshops,” or otherwise abused 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 Nov. 2006, Nike announced it was ending its relationship with a Pakistani supplier of soccer balls over alleged violations of its labor policies. (See Nike Ends Orders With Soccer Ball Manufacturer.)

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, reported this week on the huge pollution problems associated with China’s textile and apparel production, which are placing a large toll on the environment there. Currently, there is little regulation on the industry in China, and the country has seen a huge surge in its apparel and textile manufacturing exports after tariff protections and quotas were dropped in 2005.

"After labor issues, the environment is the new frontier," the WSJ quotes Daryl Brown, vice president for ethics and compliance at Liz Claiborne Inc. as saying. "We certainly don't want to be associated with a company that's polluting the waters,” he added.

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 the company’s 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.

Nike, in fact, told the Wall Street Journal it did some environmental monitoring of the company, but that testing involved having Fuan Textiles send water samples to the testing facility, making it easy to provide false samples.

The issue of supplier environmental friendliness, especially in China, almost certainly will become higher profile over the coming months. Buyers can also expect the Chinese government to crack down to avoid the bad PR, especially before the 2008 Summer Olympics in Beijing. But this will add cost to Chinese apparel and textile goods, and 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. (See Mattel Incident Shows Companies Can't Go On the Cheap when Sourcing from China, Must Take Proactive Control of Entire Supply Chain .)

"Prices in the U.S. are artificially low," says Andy Xie, former chief economist for Morgan Stanley Asia and now independent analyst. "You're not paying the costs of pollution, and that is why China is an environmental catastrophe."

 
     
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