Archives For pollution

How do we take this public health crisis, the loss of life, our paralyzed economies, and apply what we are learning to our equally urgent climate emergency?

The immediate crisis is painfully tangible. But that doesn’t make the profound, longer-term transformational shifts that are needed to protect our planet any less relevant to us, our economies or our financial markets.

These will just take a little longer to be seen and felt.

Three months ago, the threats of pandemic and our climate change emergency were similar. Both were problems scientists warned about but didn’t look to be happening anytime soon. They were problems for some future year and our governments did little to prepare, or were in the process of reversing protection and preparedness

Then, when the COVID-19 Pandemic started, many Governments didn’t want to take action that would damage the economy so were slow responding, allowing the virus to spread to a point where now, as I write, over 1,300,000 million people have fallen victim, at least one-third of the world’s population is in lockdown and the Pandemic is everywhere a first priority.

But what of that other, ‘future” problem, Climate Change? Might our governments, chastened by one ‘future” problem becoming a “now” problem turn their attention to Climate Change once COVID-19 is beaten? Let’s hope so because Climate Change is a far more difficult problem than the Pandemic and likely to have far more impact on humanity.

So what lessons can we learn from the pandemic that are relevant to climate? The first is that we were woefully unprepared. Despite warnings from the medical community, from scientists, expert opinion was suspect, ‘big government’ was bad and that meant it was easier to ignore.

Likewise, we are largely ignoring the warnings about climate. Science has shown that global GHG emissions must decline by about 45% from 2010 levels by 2030. They must be at net zero by mid-century if the world is to prevent catastrophic global warming. Yet we have not been able to stimulate significant global action to this end.

The Paris Agreement in 2015, the Sustainable Development Goals and agenda to alleviate poverty and protect our planet, looked like the beginning of global collective action but not enough has happened since. Governments have translated their Paris Agreement commitments into nationally determined contributions that aim to reduce emissions. But if these are, indeed, to limit global warming to 1.5°C by 2050 as they must, they would have to be five times more ambitious.

Yet the voices of courageous climate youth activists such as Greta Thunberg are drowned out by inexpert climate-denier opinion across mainstream and social media channels that allow many of our politicians, to ignore what we can plainly see in weather events, migration and other systemic shifts as we move beyond our planetary boundaries.

And how can we get around the structural political problem that politicians exist and get re-elected, where there are elections, in the short run, the time period of a pandemic, while climate change is a long-term phenomenon, albeit increasingly experienced in the short run?

The second lesson is that we have ignored the warnings. For years the wildlife markets in China and elsewhere had been seen as repositories for disease, yet the trade has continued. It’s easier to maintain status quo than act against entrenched interests. We continue to destroy our remaining forests, reducing habitat for wildlife, pushing animals and humans ever closer, and at the same time impacting our climate by reducing watershed protection, eliminating our carbon sinks. Stressed climate, habitats and animals lead to drought and disease. Yet we have failed to act, again preferring not to regulate or legislate protection.

The third lesson has to be the spectacular speed of transmission and impact on our economies of the pandemic in our globalized, hyperconnected world. There are no barriers to pathogens or to the economic consequences of our global shutdown. We are much more vulnerable than we ever imagined.

We can extrapolate to a world where GHG emissions are not curbed, where we keep burning fossil fuels, and warming is not kept within the 1.5 degrees above pre-industrial levels that the IPCC has warned is manageable. Indeed, we are on a trajectory currently toward a potentially catastrophic 4 or 5 degrees of warming.

We assume that we will continue living as we do, consuming as we have, but we cannot without suffering the consequences. We know from the IPCC and other scientists that we have a decade to shift our global economy or we will reach a point of no return in terms of our climatic shifts.

Perhaps our current taste of swift change will show us all that we cannot take anything for granted, that although many of us haven’t experienced anything like this moment in our lifetimes, others have experienced devastating war or disease. History is replete with sudden shifts and we are not immune.

Unchecked GHG emissions will, in the not so distant future, start to have far more permanent and disastrous impacts on all of us than the current COVID 19 pandemic but unlike a disease that swiftly slips into our communities, keeps us from jobs and kills our vulnerable and then, recedes in a year or two, impacts of our changing climate will be longer in coming and irreversible, at least in our lifetimes. There will be no vaccine for climate change other than worldwide, radical policy change today.

The positive that we should take from our current moment is that there can be swift change. The Chinese government has announced a ban on the wildlife trade, people have stayed home to protect the more vulnerable from disease and companies have encouraged work from home arrangements that will help slow the spread. Governments have rolled out stimulus packages to protect workers and companies. Policy makers and scientists are working collectively to gather data, model the spread of the pandemic, push for new drugs, vaccines and formulate appropriate responses.

The pandemic has kept us at home, slowed our pace, kept us from any travel that wasn’t absolutely necessary. It has made us conscious of unnecessary buying, of hoarding. We have been shamed, at least in Hong Kong, for not wearing masks, for leaving our homes when quarantined, for acting against the public good.

We must not think that, once the pandemic fades, we can return to old consumption patterns. Rather let’s consider what is necessary in our lives and how we help reshape a society that is less consumptive, more centered, innovative and collective, one that no longer taxes our planet and its biodiversity.

We must think about how we invest to promote sustainability, how our supply chains will produce to protect, not encourage, destruction of our important forests and biodiversity, and promote worker rights. It is to our governments that we look in a time of crisis and it is up to our elected officials also to act to protect us not only from this pandemic but also from our climate tragedy.

The collective response to the pandemic has been swift, perhaps not swift enough, but hopefully the four months since December when the coronavirus was first identified in Wuhan has been sufficiently dramatic and impactful to show that we can act locally and globally to stem another existential challenge: Our climate emergency

Please watch, this great video from Hong Kong’s Clean Air Network. It really says it all.

  • Hong Kong University of Science and Technology/Civic Exchange research has shown that 53 percent of the time, the pollution that affects us most in HK is from transport – trucks, buses and ships
  • Last March the government introduced retirement schemes for old Commercial Diesel Vehicles as well as selective catalytic converters for taxis and mini-buses
  • And last year, data did show that HK’s air improved slightly
  • More good news: The government recently tabled regulation in Legco that mandates ships switch to cleaner from bunker fuel while at berth
  • But measures to improve our air have been largely offset by the huge increase in private car ownership in recent years as well as the massive development initiatives that are being undertaken
  • The Hedley Environmental Index estimates that in 2014, air pollution caused 2,616 premature deaths, 32.657 billion in lost dollars, 174,926 hospitalizations, and 4.253 million doctor visits
  • The so-called “end of pipe” solutions the government has introduced are certainly a beginning but inadequate alone
  • Hong Kong needs to follow Singapore and European cities in establishing low emission zones, pedestrian zones, electronic road pricing and intelligent transport solutions
  • We urgently need a smarter, cleaner city. This is within our reach.

Many brands that say they are producing sustainable product are in reality greenwashing their textile production in China, according to the latest report from five environmental NGOs in China.

“Sustainable Apparel’s Critical Blind Spot,” which can be found here,  was a follow on from a report I wrote about here released in April that named 49 global fashion brands using polluting factories in China and suggested consumers make a “green choice” when buying clothes.

Led by Ma Jun’s  Institute for Environmental and Public Affairs, “Cleaning up the Fashion Industry”  listed 6,000 water pollution violations by manufacturers of goods ranging from sports apparel to luxury handbags.

Subsequently, 30 brands began conversations with IPE about how to improve the environmental performance of their supply chain, according to Ma Jun.

Clothing brands and retailers such as H&M, Nike, Esquel, Levi’s Adidas, Walmart, Burberry and Gap have all established regular screening mechanisms, are actively identifying pollution violations in their supply chain and have pushed more than 200 textile and leather suppliers to clean up.

Adidas, Nike, Levi’s and H&M have begun to address environmental challenges with their dyeing and finishing suppliers, the report said.

The latest investigation looked deeper into supply chains following a letter sent September 25th by the NGOs to the 49 brands requesting information about pollution management issues at materials suppliers.

Besides IPE, authors of the report were, Friends of Nature, Green Beagle, Envirofriends and Nanjing Greenstone

In all, 22 of the brands receiving the letter, including Marks & Spencer, Disney, J.C. Penney, Polo Ralph Lauren and Tommy Hilfiger gave limited or no responses to specific questions relative to emissions violation problems in their supply chain. This despite Marks & Spencer, for example, promoting its “Plan A”, which is a sustainable business benchmark for global textile companies and retailers.

Companies promoting sustainability should “not continue to let suppliers pollute the environment and hurt communities whilst using concepts such as ‘zero waste’ and ‘carbon neutral’ to greenwash their performance,” the environmental NGOs wrote in the report.

The report draws attention to the fact that textile exports from China have dropped recently, weighed by higher labor costs in China, trade barriers, the appreciation of the RMB and higher resource costs.

Big brands have moved some of their cut and sew production to South and Southeast Asia.  Nike shut down its only shoe factory in China and recently, Adidas also closed its only factory in China, leading people to believe China is steadily losing its status as the textile factory to the world.

But materials production is still concentrated in China, with exports of these products rising steadily, according to the report. This is the most polluting portion of the apparel supply chain.

In the raw materials processing sector, which includes dyeing and finishing, exports are growing steadily. According to the 2011/2012 China Textile Industry Report, for the six main printing and dyeing product categories, the total amount of exported printed and dyed cloth was 14.412 billion meters which showed a year on year growth of 13.76%.

The value of exported printed and dyed products was US$16.979 billion, which showed a year on year growth of 31.26%. However, at the same time the total value of all exported textile products only increased by 0.49%.

The cut and sew industry provides the most jobs, uses less water and energy and pollution discharge is not a big problem. However, the reverse is true for textile production. Essentially, China has kept the dirty part of the business, while allowing the relatively clean, job-creating cut and sew industry to wane.

The problem is that enforcement of pollution remains weak in China, while the cost of inputs like water and energy are still relatively low. So dyeing and finishing companies often avoid any water or energy savings initiatives and disregard pollution control, ignoring environmental laws and regulations.

Sustainable apparel in particular,  has a ”dangerous blind spot,” according to the report, which means that dyeing and finishing mills and factories lower their environmental standards to cut costs and win orders in a race to the bottom.

Essentially the problem is that most apparel and retail brands still choose not to look into the polluting part of their business – the bottom of the supply chain. Consequently, materials manufacturers are still trying to produce in the cheapest way possible in order to keep costs low for fast fashion.

We as consumers must recognize that we have a choice not to buy the cheapest item on the shelves, to acquire less and from companies that truly care about not doing harm to our planet.

I am constantly surprised that Hong Kong does not pay more attention to its water supply, that something so vital to our city is far from secured by our government.

How many of us know that 75 percent of our water comes from the Dongjiang River, while only 25 percent of the city’s drinking water is supplied by reservoirs from within the territory? That while Singapore has similar water concerns, the island nation is investing in technology to conserve, recycle and desalinate water to ensure adequate supply, yet our government simply is not.

This is wrong for many reasons but here are two of the most obvious:

1) China is experiencing a significant water crisis and is acting aggressively to ensure its own supply. As Civic Exchange’s Su Liu recently pointed out while speaking on a panel, “We in Hong Kong don’t see the big picture – 40 million compared to our 7 million also rely on the Dongjiang. If water tensions rise on the mainland – where is the priority? ” You can more read about the excellent discussion on China’s water stresses moderated by http://www.ChinaWaterRisk.org’s Debra Tan, here.

2) The Lower Dongjiang River Basin is becoming intensely  industrialized and urbanized meaning industrial pollution regionally is a real concern. At the same time, agriculture further inland has intensified and pollutants from farms, such as pesticides and fertilizers are just as dangerous in drinking water as industrial materials. So How safe is our water in reality? Clearly local testing shows that currently the water we drink meets health standards but can we be sure that will always be the case?

To my first point, China registers a 50-billion-cubic meter water shortage annually, with two-thirds of cities having trouble accessing water, according to a China Daily article last week quoting Chen Lei, the country’s minister of water resources. In all, China’s water consumption apparently has exceeded 600 billion cubic meters, accounting for 74 percent of the country’s exploitable water resources.

In January, the central government issued a document asking the entire country to limit the scale of water exploitation, improve the efficiency of water usage and curb water pollution. According to the article, China aims to reduce water consumption per 10,000 yuan ($1,597) industrial value-added output to less than 40 cubic meters by 2030, raise the effective water use coefficient of farmland irrigation water to above 0.6 and improve water quality.

Chen also has said the nation will set water consumption quotas for local governments and continue to perfect the water price formation mechanism in order to promote water resource conservation and protection.

So it sounds as though Su Liu has the right idea – the Chinese government priority won’t be to keep prices low and supply constant for the 7 million Hong Kongers drawing ever higher upstream on the Dongjiang.

And we are vulnerable. Our water agreement with Guangdong was renewed in late 2011 but only for another three years, until 2014 and for a maximum supply of 820 million cubed meters from the Dongjiang, a major tributary to the Pearl River, 83 kilometers north of Hong Kong. Our current accord commits to this supply regardless of drought.  But the river also supplies fresh water to seven other cities, including Guangzhou, Dongguan and Shenzhen. All of those cities, however, have seen allowances decreased during drought years so will Hong Kong continue to receive privileged treatment?

At the same time, we would be ill-equipped for any water rationing. As China Water risk has pointed out here, Hong Kong uses more water per capita than Paris, London, Singapore or Melbourne and over 50 percent of our water is for domestic use. This compares to just 15 percent of water usage in China being for municipal use.

Part of the problem is that our tariffs are among the lowest in the world. As CWR points out, the first 12 cubic meters of water used every four months is free for all domestic users. Countries with comparable GDP per capita such as Netherlands, Switzerland and the U.S. all have higher water tariffs.

But tariffs are also low in China and the expectation is that with a push on the mainland toward water conservation, pricing will likely at some point rise to a water tariff level of 2-3 percent of average household income. That should also translate to higher prices in Hong Kong.

Turning to pollution, I have written several blogs on the lack of enforcement of water quality standards in China. The intense industrial development throughout China, but particularly in the south, has helped fuel annual GDP growth in the double digits but it has also rendered many rivers, lakes and reservoirs, indeed much of the country’s groundwater, essentially useless for agriculture or consumption.

Of the country’s 26 key lakes and reservoirs monitored, only 23 percent fall within grade 1-111, while 19 percent of China’s seven major river basins monitored are  considered essentially useless. Finally, almost 74 percent of groundwater is considered grade IV-V standard, or excessively polluted. More information on China’s water pollution can be found here.

We should remember that a river collects the water in its basin and that means that all the pollutants within the Dongjiang Basin could potentially end up in Hong Kong’s water supply – not a pleasant thought. Will we have to wait for a major accident on the Dongjiang or its feeders before the Hong Kong government wakes up to our vulnerability?

For now, Hong Kong water quality data, although only through September last year, can be found here, on the Water Supplies Department website.

Hong Kong consumers have the ability to sustain a significant tariff hike.  That would help us move toward greater water conservation and at the same time provide  the resources for the city to invest in making options such as desalination and water recycling economically viable. What are we waiting for?

Five Chinese environmental groups have named 48 global fashion brands using polluting factories in China and suggested consumers make a “green choice” when buying clothes.

A report  led by Ma Jun and his Institute for Environmental and Public Affairs  and released this week lists 6,000 water pollution violations by manufacturers  of goods that ranged from sports apparel to luxury handbags.

Brands were linked to the factories over seven months of painstaking review of official websites, financial reports, recruitment ads and procurement bids, among other documents, according to IPE.

Over the past eight years the Institute has gathered a database of over 90,000 air and water violations from official government  sources. IPE now works with many brands to make sure they are not using polluting suppliers and to help clean up those that are illegally dumping untreated toxic waste water into rivers.

Between march 22 and March 29  the five environmental groups wrote to the CEOs of each of the 48 brands linked to factories with repeated environmental violations. They asked the brands to ensure their Chinese suppliers would not pollute the environment while manufacturing their products.

While some of the brands named immediately responded to queries from the environmental groups, acknowledged the issues and detailed how they would address the issues, about two-thirds have not yet engaged, Ma Jun said.

Notably, Spanish clothing retailer, Zara, responded by saying that it was not the company’s policy to answer questions about its business model.

Nike, Walmart, Esquel, H&M, Levi’s, Adidas and Burberry were among the companies that responded positively, saying they would work with their Chinese  contractors to improve their environmental performance. Many of these brands were  already working with NGOs to clean their supply chain, IPE said.

Another 32 brands including Marks & Spencer, Esprit, Calvin Klein, Carrefour, Armani and China-based Anta and Youngor have yet to respond, according to the report.

Besides IPE, the other authors of the report, “Cleaning up the Fashion Industry,” were, Friends of Nature, Green Beagle, Envirofriends and Nanjing Greenstone.

China is a global leader in textile manufacturing, responsible for nearly half the world’s fiber and exporting 34 percent of the garments we wear.

This production has contributed significantly to the country’s GDP but has also taken a heavy environmental  toll locally. Ma said that fashion manufacturers discharge 2.5 billion tons of waste water and chemicals into rivers and the ocean, while 80 percent of effluent is generated in fiber dying.

This has a serious impact on the country’s water supplies and is compounded by the fact that the re-use of water in the textile industry lags way behind that of many others, creating a situation where water efficiency is incredibly low, IPE said.

Among the 6,000 violations, a number of factories were given administrative penalties. Many were told to rectify problems such as illegal effluent emissions via secret discharge pipes, directly discharging waste water into waterways, improper use of waste water treatment facilities and pollutant discharges in breach of standards.

Previously, IPE targeted the IT sector, also with information gleaned from the institute’s violations database. We have written about Ma Jun’s efforts here and here.

After five reports looking at the environmental performance of IT sector contractors, most of the brands named had responded to requests for information disclosure and action.

Among the last hold-outs was Apple, which was the focus of the last two reports. The company has since agreed to disclose its connections to suppliers and provide information on contractor environmental performance.

Clearly, Ma Jun and his colleagues hope for a similar response from another industry that is widely credited with some of the worst environmental performance in China.

With IPE and others watching, retailers and brands will no longer be able to hide behind stated ignorance about how a product is manufactured. They will no longer be able to refuse to divulge lists of suppliers or deny responsibility for egregious environmental emissions locally.

Part of the problem for the apparel sector has been the quantity of suppliers used to manufacture just one item of clothing or shoe. This is a problem we have written about here. 

While many brands are getting better at understanding and working with the factories actually putting together the clothes, they tend to know less about the dyers, the spinners and the knitters who cause much of the environmental damage.

yet engaging with polluting contractors in any part of the supply chain has become a serious reputational risk and thus business risk for global brands hoping to squeeze their suppliers on cost.

It is also a wake up call for consumers hooked on cheap product made at huge environmental expense abroad. It’s about time we all made careful choices about how we consume, make sure that brands are using responsible suppliers.

For companies, the argument turns back to fiduciary duty and redefining what that means, something I have written about here.

Greenpeace photo of worker and wastewater textile discharge

 

 

 

 

 

 

 

 

 

 

That trendy shirt or pair of jeans, the underwear we buy these days mostly comes with a “Made in China” label.  When choosing clothing presumably we think first about style and second about price. Can we afford the style and quality? We rarely think about the environmental or social cost of the item, the “true” cost of manufacturing a coveted dress.

We don’t know about the dye that washes into the local rivers where the item is made, the chemicals spreading downstream from manufacturing plants, contaminating water supplies and making local people sick. We want, we can afford, we buy. But should we without knowing how our clothes are made and the damage they do in the process?

Last year, according to the American Apparel and Footwear Association, Americans spent about $340 billion on clothing and shoes, accounting for 75 percent of the global market. Of that, 99 percent of shoes and 98 percent of clothing was made abroad, where environmental and social laws are less stringent and enforcement of those that do exist is significantly looser.

The trouble is, many of the clothes we wear, particularly the cheapest, are highly polluting to produce at the low cost-point. According to the World Bank, 17 to 20 percent of industrial water pollution comes from textile dyeing and treatment, and there are at least 72 toxic chemicals in our water that originate solely from textile dyeing. Of these, 30 cannot be removed.

That’s a real problem for the textile industry: In China, Polluted water causes 75 percent of diseases and over 100,000 deaths annually, the World Health organization has said. Meanwhile, cancer rates among villagers who live along polluted waterways are much higher than the national average.

Estimates are that 70 percent of lakes and rivers in China are polluted, as well as 90 percent of the groundwater. In all, an estimated 320 million Chinese do not have access to clean drinking water – more than the entire population of the United States.

It used to be that clothing was made close to home, so we knew when a textile mill or garment manufacturer was polluting the local water or air and U.S. mill towns experienced some of the same problems China now faces, with local rivers often fetid and colored by dye. With greater awareness of the hazards, then years of battling, government regulatory authorities set tougher environmental and labor standards to make sure production wasn’t exploitative or damaging to our air and water. Manufacturers were forced to comply, installing capture equipment on smokestacks and treating any wastewater before pumping it into rivers.

But that made clothing more expensive to produce and then with the opening of China in the mid-1970s and the growing availability in the 1980s of cheap labor along with manufacturing capability, most of the production process gradually shifted there. Eventually, environmental and social laws were put in place in China too but often local enforcement is limited and corruption rampant.

That has meant many factories and textile mills have been able pollute at will. When they have been fined for violations, the fines are often insignificant relative to profit. That, and the fact that an abundant migrant labor force comprised of some of the hundreds of millions who previously lived below the poverty line and were willing to work for cheap, meant clothing could be produced at prices that didn’t factor in either the real cost of labor or the environmental damage.

Those costs were left for future generations to cover in health care, clean-up and other forms of support.

The result is that we are all now hooked on the irrationally cheap. Prices on fabric and clothing imported to the U.S. have fallen 25% since 1995, partly due to the downward pricing pressure brought by discount retail chains, according to an article in the Wall Street Journal.

Still, in China, the future is now. While migrant workers, now with a better standard of living, want fair wages and benefits such as health insurance, the Chinese government recognizes that the holy grail of economic growth at the 10 percent plus levels seen over the past two decades is unsustainable if the rampant environmental degradation continues apace.

Unrest has been growing across the country, particularly around perceived labor and environmental violations, with tens of thousands of mostly small protests annually, many of them unreported.

Besides the cost of cleaning up contaminated water, land and air, pollution will cost China billions in additional health care, lost productivity and early mortality, dragging down growth, the government recognizes.  The World Bank in a 2007 report estimated China’s environmental costs at around $100 billion a year, or about 5.8 percent of GDP, including the impact on mortality.

So any way you look at it, those clothes we like to buy in abundance, and have been taught in recent years to purchase and throw away without thought because prices are so cheap and styles constantly new, are a real problem for the environment, for workers who make them and ultimately for China’s economy.

In a report released in December, Greenpeace recounted time spent in two textile industry towns in Guangdong province:  Xintang, the “Jeans Capital of the World,” and Gurao, a manufacturing town 80% of whose economy is devoted to bras, underwear, and other clothing articles.

Greenpeace testing found five heavy metals (cadmium, chromium, mercury, lead, and copper) in 17 out of 21 water and sediment samples taken from throughout Xintang and Gurao. In one sample, cadmium exceeded China’s national limits by 128 times.

Xintang, known as the “Jeans Capital of the World”, produces over 260 million pairs of jeans annually, equivalent to 60% of China’s total denim production, and 40% of the jeans sold in the United States each year.

Gurao, “the capital of sexy,”  in 2009 produced 200 million bras, or enough for every third woman in China to have one. But this prosperity has come at the cost of the degradation of the local river, the Xiao Xi.

Villagers told Greenpeace that the dirty, fetid river is no longer fit for drinking or laundry. Fish no longer live in the river and people living nearby complain that they must endure the stench from the wastewater. When the river overflows, their yards and homes are flooded by wastewater.

Unfortunately, Gurao and Xintang are not unique, representing just 2 out of 133 textile manufacturing cluster towns where there exists unregulated or at least tolerated hazardous chemical use and release – all in the name of economic growth and jobs.

True, the rise of China over the past few decades has been startling, and the achievements not to be forgotten. In no other time in history has one government accomplished a similar feat: Pulling some 300 million people out of poverty. The questions remain, however, around the price of that transformation and how the government will choose to address this looking forward.

Indeed the 12th five-year plan, unveiled in March, includes provisions for reform that involve working to rebalance China’s Economy and improve livelihoods.  The government is keen to shift the growth model from export and investment driven to domestic consumption drive, and will focus on the quality of economic growth, not just the growth rate itself, perhaps reducing GDP targets to around 7 percent. There will be additional investment in alternative energies and a push toward promoting less-polluting industries, with a shift away from more polluting producers.

As wages rise in China, however, this is a trend that is already underway, with some of the dirtiest factories moving to Bangladesh, Pakistan and Vietnam, where regulations are even lighter and costs less. Once again, rather than cleaning the supply chain and charging higher prices to reflect cleanup costs and higher wages, some brands are just looking further south.

Luckily, this is not universally the case. There are retail brands that are looking to improve their own supply chains and influence the industry more broadly.

In March a coalition of retail companies, apparel and shoe manufacturers, fashion houses, non-profits, and the U.S. Environmental Protection Agency launched a new organization that seeks to reduce the environmental and social impacts of the clothing industry worldwide.

The Sustainable Apparel Coalition (SAC), which includes Wal-Mart, Hanes, J.C. Penney, Nike, Gap Inc, H&M, Levi Strauss, Marks & Spencer, and Patagonia, among others, will help to develop improved sustainability strategies and tools to measure and evaluate sustainability performance. The group of thirty organizations began working on this informally last year.

The group announced it was developing a database of the environmental effects of every manufacturer, component and process in apparel production, with the aim of using the gathered information to give the garments a sustainability store.

Part of the problem for the apparel industry is the complexity of the supply chain. There are many bits and bobs that go into producing our clothes and each piece may be produced in a different factory and then assembled in yet another. That means accounting for the environmental impact of any one item of clothing, tracing the zippers, the buttons, the natural fabric, the dyed fabric, is quite a feat.

Still, for the new coalition, tracing the various parts that make up one jacket or pair of trousers is the goal, along with conveying that information to the consumer. The idea is that eventually there is a label that allows shoppers to see how well their coveted item of clothing is produced and learn about its impact on both the planet and people.

And as consumers we all have a responsibility to think about how much and how we consume. Are our expectations around price and how long we use an item of clothing unrealistic?

Greenpeace last week released the results of its third-annual green electronics survey – a look at how leading electronics manufacturers companies are doing. All but Apple and Phillips of the 21 companies contacted agreed to be ranked on three criteria; removing toxic substances, responsible take-back of their end-of-life products and energy efficiency.

The survey was motivated by the fact that throughout a product’s lifecycle – from material extraction to production, and from consumer use to disposal – electronic products have the potential to impact human health and the environment through the release of dangerous substances and energy consumption.

China is the world center for processing IT products and that country’s environment is paying the price. Printed Circuit Board and battery power production especially create heavy metal pollution.

Part of the problem is consumer demand for cheap products that don’t reflect the true cost of production – they don’t reflect the toll on the environment, on public and worker health.

Furthermore, IT companies continue to produce goods that have obsolescence built in, which means we consume endlessly looking for the newest or better product, boosting company revenues but at huge environmental and social cost, that, again, is not reflected in the price we pay.

The Greenpeace survey found a general improvement in green features compared to the previous two surveys in 2008 and 2007, including a significant decrease in use of hazardous chemicals and almost all products met or exceeded energy efficiency standards.

But lifecycle management was still the weakest point, with very little use of recycled plastic, varying take-back practices and few marketing efforts to prevent fast obsolescence of products.

Generally, also, Greenpeace found that electronics companies were becoming more transparent in the amount and type of product information provided to customers, often listing product’s chemical make-up and performance details.

Apple and Philips, however, once again refused to disclose any information to Greenpeace. Of course this reluctance to provide information is disappointing and not limited to probing by Greenpeace.

Beijing-based IPE, led by environmental activist Ma Jun, has also over the past year focused on the IT sector for its significant contribution to environmental degradation in China.

IPE has also contacted electronics companies about environmental violations and Apple is among those refusing to address questions about noxious emissions by factories producing its products.

Writing in a Guardian blog earlier last year, Ma Jun said 34 Chinese environmental organizations, including Friends of Nature, the Institute of Public and Environmental Affairs, and Green Beagle, questioned heavy metal pollution produced by companies in Apple’s supply chain in a letter sent to CEO Steve Jobs. Last week Ma Jun said that the only response from Apple has been a demand for proof that the polluting factories are producing electronics for Apple.

“The links between these companies and Apple are clearly established,” Ma Jun said last week. “We are working now to provide the company with hard evidence. Their unwillingness to release information about their production processes reminds me of Nike in the 1990s,”

By contrast, in an interview with Asia Water Project last year Ma Jun praised Hewlett Packard and Samsung for duck disclosure and movement toward greener products. Indeed, HP and Samsung were among the companies singled out in the Greenpeace survey for the producing some of the greenest products.

Why single out Apple, as IPE has done? Does a company with a solid reputation for being on top of its game, for producing innovative, quality and well-designed products, have a responsibility to manufacture without excessive environmental and social cost? Shouldn’t Apple be a leader also in its production processes and not a laggard?  Should we as consumers not demand more from the companies that sell us our products?

Fortunately, consumers ARE beginning to taking note. Companies that fail to adapt are poised to suffer huge reputational and revenue losses as a consequence.  A game-changing opportunity awaits those companies that choose to meet this challenge.

 

The world’s problems are too vast for philanthropy or governments alone to solve. The US$300 billion spent by U.S. philanthropists last year is just not enough to make a significant dent, while foreign aid represents less than 1 percent of global gross domestic product.

The reality is that only by harnessing the markets, large-scale private and institutional capital, will we even begin to meet the challenges posed by massive population growth, meet our many needs, address issues around water scarcity, our depleted resources as well as our polluted air and water.

Philanthropy can help spur innovation, it can be used as risk capital, to develop models for social benefit that can then be scaled. Governments can help take that innovation to scale but they can’t do it all. Only markets have the potential to bring about real change at the scale and speed we need that to happen.

In other words, we urgently need to take social investments out of the realm of just doing good and plant them firmly in business models in order to make our world fit for our children and grandchildren.

But how does that happen?

A new report released last week by J.P. Morgan and the Rockefeller Foundation in partnership with the Global Impact Investing Network  (GIIN) attempts to advance this discussion.

The report argues that impact investments are emerging as an alternative asset class, thus allowing the sector to be considered alongside any other as part of an investment portfolio.  Impact investments in this instance are defined as investments intended to create positive impact beyond, although not to the exclusion of, a financial return.

“With increasing numbers of investors rejecting the notion that they face a binary choice between investing for maximum risk-adjusted returns or donating for social purpose, the impact investment market is now at a significant turning point as it enters the mainstream, ” the report states.

It addresses questions such as what defines and differentiates impact investments, who is involved in the market and how they allocate capital. Also considered is what makes impact investment an emerging asset class, how much return investors are expecting and receiving,  how large is the potential opportunity for investment in this market and what does risk management and social monitoring involve?

The report analyzes five sectors that serve bottom-of-the-pyramid populations (the global population earning less than US$3,000 annually): Urban affordable housing, rural access to clean water, maternal health, primary education, and microfinance.

For just these segments of the impact investing universe, the report identifies a potential profit opportunity of between $183 and $667 billion as well as  investment opportunity between $400 billion and $1 trillion over the next decade.

Many impact investments will take the form of private equity or debt investments, the report says, while other instruments can include guarantees or deposits.  Publicly listed impact investments do exist, although as a small proportion of transactions.

B-Lab differentiates Impact Investing and Socially Responsible Investing, which has been around for some time, defining SRI (estimated at $2.7 trillion in 2007) as primarily negative screening, or investment in screened public equity funds that avoid so-called ‘sin stocks’ or seek to influence corporate behavior.

The core of the II asset class is that the model of the business (which could be a fund management firm or a company) into which the investment is made should be designed with the intent to achieve positive social or environmental impact, and this should be explicitly specified in company documents.

There are a handful of investment funds established to finance businesses that address social problems, especially in the developing world. Examples of funds working in these space include Acumen Fund, Root Capital, E+Co and IGNIA, among others.

A significant challenge identified in making impact investments is sourcing transactions. Many impact investment recipients are small companies and the majority of deal sizes analyzed from our investor survey are less than US$1m.

Particularly for investors based in different regions, the costs of due diligence on these investments can often challenge the economics of making such small investments.

Another, of course, would be setting the reporting standards needed to establish just what constitutes a social or environmental return on an investment. This is something on which GIIN and B-Lab are working hard.

It’s great to see a mainstream financial institution dipping into this discussion.

Last week,  I participated in a panel discussion at INSEAD, Singapore on impact investing and many of the points above were discussed at length. In particular, we spoke of the  challenges of II in a developing world context where this is urgently needed.

With air pollution at critical levels, the Hong Kong government fails to act to protect public health. After years of study, public consultation and dithering over what to do, there still is no action to revise air quality objectives, last rewritten in 1987.

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Mountains of garbage in Mumbai

Mountains of waste

 

We hear about climate change all the time now, we know it’s bad, we understand much of the science behind the phenomenon. But what can we do? No really, what CAN we do? How does this broad concept connect with our daily lives? 

We turn off and unplug appliances, we try to take public transport where possible, we use fewer resources, turn down the air conditioning in summer and heat in winter, we buy less bottled water. 

But often we don’t stop to think about the rest of our lives. We still want to eat strawberries in winter, meat flown in from the U.S. We (or our children) still buy clothes where often quantity and price reigns over quality. 

We look for lower prices (because we’re hooked on cheaper is better) and then don’t have to think so hard about whether or not that particular cheap item that clearly is not taking into account the environmental or social cost of  production is actually needed.  

We change our cars regularly, buy the latest Apple gadget (must have the ipad, the latest computer to stay in touch) and think nothing of chucking an iphone, ipod that has lasted only a year. 

What happened to the time in the not so distant past when we romanced a dress for a long time and just one purchase was ok, when we could buy fresh local produce and meat in season, when one car lasted a decade or more, when we didn’t need gadget upon gadget to be happy?    

So back to climate change: All of that consumption, flying goods around, needs energy. Production and energy (produced largely by coal in China) at least at the moment lead to air pollution and climate change. Sometimes we forget the connections. 

 In Hong Kong this week Clean Air Network has been good to remind us  with its tongue-in-cheek Fresh Air video what we face if we don’t change our bad habits:  http://www.youtube.com/watch?v=lmH3xCpOSW8

Asia Water Project: China

Lisa Genasci —  February 25, 2010 — 1 Comment

The ADM Capital Foundation and Civic Exchange today launched in beta the Asia Water Project: China and AWP’s first piece of commissioned research, Water in China: Issues for Responsible Investors, authored by the independent research company Responsible Research, which is Singapore based.

Feels great to get the water portal birthed and visible, even if it’s only in testing phase ahead of the official launch on March 18 in Hong Kong. That will happen with IPE’s Ma Jun, who was the inspiration behind the water portal. It was a desire to translate Ma Jun’s data from the IPE website that names and shames water and air polluters in China, (see Jan. blog) that first inspired ADMCF to create AWP. Ma Jun, who wrote the first major book on China’s water crisis in 2000, uses only government emissions and penalties data on his site and in that way has been allowed to work relatively unimpeded in China.

ADMCF saw there was space to fill a lacuna in information relating to China’s water supply, management and pollution and at the same time better inform investors. We see there are both risks and opportunities in China’s growing crisis. Informed investors can help shape how companies respond to water challenges. Ina Pozon, who has built and manages AWP and ADMCF environment director, Sophie Le Clue,  have worked tirelessly in recent weeks with freelance writer, Pua Mench, to get the site in shape. Still work to do but today we are a big step closer!

Bloomberg sponsored today’s event, which featured Christine Loh of the CE, Lucy Carmody of RR and Guo Peiyuan of Beijing’s SynTao, an AWP partner and participant in the RR water research.

The research, found here: http://www.asiawaterproject.org, showed that China may be looking at trade-offs between access to clean water and economic growth. At the national level, China’s water shortages are thought responsible for direct economic losses of US$35 billion every year.  This is 2.5 times the average annual losses due to floods.

The report points out that sectors where China dominates globally, such as in steel, textile, paper and forest products, are heavily water intensive. Fluctuations in quantity and quality of water supply in these industries carry significant potential risks to earnings.

The new report draws on case studies from ten industries that have the most impact on water in China including agriculture, forest products, textiles and beverages. As water becomes increasingly material to investors in China, they will need to be more pro-active in looking at how listed companies are addressing supply issues.

While there is some understanding of water-related risks to companies and investors, “a key barrier is the lack of reliable, comprehensive information on water issues in China,” according to Ina. “The Asia Water Project has a unique role to play in fast-tracking this trend, through its commissioned research and its new web-based information portal.”

Earlier this month, the Chinese government released the findings of a pollution survey that show water pollution levels in 2007 were more than twice the official estimate, in part because previous reporting had failed to take agricultural contamination of water supplies into account.

Christine Loh reads this as good news that the Chinese government has done its homework and now understands that “the problem is as big as it is urgent.” She anticipates that “there will be more dialogue and debate in China this year” as government plans require reductions in wastewater pollution that are not easy.

The new investor report  also highlights some shocking statistics: 70 percent of China’s rivers and lakes are “significantly” contaminated, 50 percent of the country’s cities have polluted groundwater and over 30 percent of China is affected by acid rain.

Hong Kong’s air quality is among the world’s worst for a city of comparable income levels. Here, the pollution we breathe negatively affects everyone. Not surprisingly, the poor are disproportionately impacted because they are unable to move out of some of the city’s most congested, polluted areas.

Since 1987, the World Health Organization has issued Air Quality Guidelines (”AQG”) to help governments protect public health. These AQGs are periodically revised to take into account the latest scientific research on the health impact of bad air. Currently, however, Hong Kong’s Air Quality Objectives (“AQO”) permit emissions that exceed the WHO’s latest AQGs by two to four times.  The AQOs, which are non-binding, were last updated in 1987. This year, the Government is reviewing the AQOs for the first time in more than 20 years.

Over the past two decades there has been insufficient action to mitigate air pollution in Hong Kong. We have often heard from government officials that there is little that can be done to change the quality of our air because much of the pollution drifts across the border from Guangdong.

Yet, research by the Hong Kong University of Science and Technology has shown that 53% of the time (192 days per year in 2006), most pollution affecting Hong Kong is from LOCAL SOURCES.

Some alarming facts about Hong Kong air pollution:

  • By WHO standards, Hong Kong’s air is only safely breathable 41 days a year.
  • Hong Kong air pollution causes three (avoidable) deaths a day, or more than 1,100 per year.
  • Hong Kong’s air is three times more polluted than New York’s and more than twice as polluted as London.
  • Although overall emissions tonnage has fallen in the past 15 years, roadside pollution has not improved. Because of its high concentration in close physical proximity to us, roadside pollution poses the biggest threat to human health.
  • 40% of roadside emissions come from buses.

It is therefore incorrect to believe that Hong Kong-based pollution abatement measures would make no or little difference in improving the local air quality.

We believe the Government could and should act immediately to improve the quality of air we breathe. Many cities worldwide have successfully taken action to clean their air and we believe that with tight AQOs and an appropriate plan of action could similarly clean up our air and improve the lives and health of residents

The Clean Air Network (www.hongkongcan.org) was formed to educate the public about the health impacts of air pollution and mobilize support for clean air in Hong Kong.

CAN is a NETWORK, bringing together and amplifying the voices of individuals, groups and organizations.

CAN’s overarching goal is to work with the Government to implement a stricter and more proactive air quality management regime.

Watch the CAN video here: http://bit.ly/86Md2r

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