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China’s Environment: Business As Usual Not An Option

Australia, China, Company Strategy, Environment, Sustainability, Technology, US
By John Richardson on 19-Aug-2015

By John RichardsonTianjincar

SONG Wei, an environmentalist from Hunan province, told the BBC in July:  “No more economic growth stained by blood. Under the new environment law, every factory has to be approved before it’s built. We’re putting an end to unregulated chaos.” (China introduced a New Environmental Protection Law in January).

The cynics will, of course, say, “Just look at last week’s Tianjin explosion as evidence that China isn’t that serious about the environment.” They  will then go back to their chemicals companies and continue with business as normal, This will be a very serious mistake.

Instead, as I discussed on Monday, an integral and crucial part of China’s New Normal is a new type of altogether different and so more sustainable growth. Yes, there will be steps forward and also huge steps back, such as the Tianjin tragedy.

But you would be a fool to believe that the Chinese government is not deadly serious about China’s environmental crisis, which, literally, is nothing short of existential.

Money often talks best of all, though, and so here are some numbers to reflect upon: China says it will cost at least US$1 trillion over each of the next five years to  clean-up its environment. This spending is due place under China’s 13th Five-Year-Plan (2016-2020), details of which are due to be released later this year.

The opportunities are obviously immense for forward-looking chemicals companies.

You all know your companies  a lot better than I do, of course. You know exactly what you can already do, and what more you can realistically do in the future. So rather than looking at specific products, let’s start with what I think are the just some of the “basic needs” – or perhaps “basic rights” – that China has to address. You can then apply these to your different product portfolios:

  • Safe drinking water. Nearly 60% of groundwater is unfit for human use and air pollution is 20 times the recommended safe levels.
  • Safe soil, and so safe food: One-fifth of farmland is too polluted to grow crops.
  • Water shortages: The most serious water shortages are in the main grain production areas of the North China Plain. This region has 33.8% of the nation’s arable land but only 3.85% of the national water resources. As a result, the water table has fallen steadily due to intensive agriculture and industry uses over the past 40 years
  • Clean air: Berkeley Earth’s scientific director, Richard Muller, says breathing Beijing’s air is the equivalent of smoking almost 40 cigarettes a day and calculates that air pollution causes 1.6m deaths a year in China, or 17% of the total.

All of these challenges will have to be tackled in affordable ways. This has always been the challenge, but the trouble is that too many chemicals companies became side tracked by the 2008-2013 “wealth effect”. Referring back to the BBC report again, the BBC’s China editor, Carrie Grace, writes: “The neighbours are sliding the lid off the well in their courtyard to pump water from twenty metres underground. They tell me they buy bottled water for the baby, but they can’t afford it for the rest of the family.”

And as you keep your costs down, you will also have to meet a rising cost of environmental compliance if you operate chemicals plants in China. Despite the oversights that might have led to the Tianjin disaster, there is plenty of evidence that this is already happening.

“Not to worry, I’ll just import from overseas,” might be your answer – but then, of course, as Tianjin demonstrates, you will have to make sure that all the storage and distribution companies that you deal with comply to higher safety standards. That will again equal extra costs.

Sure, as I said, there will likely be further steps backwards as well as steps forwards because of the legal system in China. Citizens who want to take companies to court for breaching the environmental rules are going to continue to find it difficult.

But be warned: Beijing, as I said, is deadly serious about this. One practical indication of this that it is giving environmentalists more freedom to set the agenda.

Here is a good example from the UK’s Guardian, where, in an interview with the veteran Chinese environmentalist, Ma June, the newspaper wrote the following:

For Ma it is the active participation of citizens that will be key to forcing local government and industry to act. It was this belief that led him to set up one of China’s most respected NGOs, the Institute of Public and Environmental Affairs in 2006, now backed by funders including the Alibaba Foundation (set up by internet billionaire Jack Ma). From here he has worked on making official pollution data more easily available to the public, “lifting the veil” on the worst offenders as one commentator described it.

He has already had success in getting multinationals like Apple, Hewlett-Packard, H&M and Gap to root out the worst polluters from their supply chains in China. “We can’t go to courts in China, so we have to find alternate ways, like working with brands to try and create a level playing field by identifying the most obvious polluters.”

China is a becoming a very different place because environmentalists such as Ma are being allowed to a.) Give interviews like this and b.) Much more importantly, of course, carry out this kind of work.