Reconciling economic development with environmental protection is the struggle of our times. Growth and sustainability have proven, in most cases, to be inversely related. And few countries epitomise the â€śgrowth versus greenâ€ť dilemma as well as China, where three decades of extraordinary growth have caused environmental degradation of epic proportions.
As a result, anti-pollution is now one of the â€śthree key battlesâ€ť China has pledged to fight over the next three years, together with financial risk and poverty. Since 2017, the central government has taken unprecedented action against environmentally non-compliant businesses and government officials, displaying enough political muscle to prove its point: Chinaâ€™s green push is here to stay.
Does this mean China is willing to accept slower GDP growth for the sake of healthier, more sustainable development? Or will it be able to push through its environmental agenda without hampering progress?
How the â€śgreen versus growthâ€ť dilemma plays out at a country level is yet to be seen. But for international businesses operating in China, there is only one option: to make sure their growth projections remain on-track as they struggle to meet Chinaâ€™s tougher environmental requirements.
Achieving this will not be easy – especially in the short term. On the sourcing side, companies must prepare for order delays and rising costs as a result of upstream factory closures. On the production front, they will need to invest in monitoring and minimising their environmental impact. And on the sales side, companies who transfer the cost burden of environmental compliance to clients can expect to lose out to competitors who meet those requirements more cost-efficiently.
Businesses who adjust to Chinaâ€™s environmental requirements sooner rather than later, and do so in a strategic and systematic way, will be able to balance sustainability and success. In the process, China might even become the birthplace of innovative solutions that prove that â€śgreenâ€ť and â€śgrowthâ€ť are not mutually exclusive.
Fiduciaâ€™s â€śEnvironmental Health Checkâ€ť, explained below, is designed to help industrial companies drive environmental improvements in a systematic and strategic way. Beyond ensuring compliance, this approach enables our clients to turn sustainability into a source of competitive advantage by minimising the cost burden of environmental compliance – and doing so sooner and more effectively than competitors.
Compared to companies who produce in China, those sourcing from China are being hit less directly by the governmentâ€™s anti-pollution drive. But the implications theyâ€™re facing are equally profound. Managing Director of DIY Trade Far East Limited, HELLWEGâ€™s buying office in Asia, TamĂˇs Pollich gives us an insiderâ€™s view.
1. Rising prices
â€śIn 2017 we saw marked price rises in product categories that were highly exposed to steel and carton prices.â€ť
2. Extra workload
â€śSearching for alternative suppliers in less affected regions, and following up more closely with suppliers to prevent delays, required additional efforts and time.â€ť
1. Monitor raw material prices
â€śWe follow raw material reports on a monthly basis to track changes in key cost drivers.â€ť
2. Improve communication
â€śSuppliers are one of our most valuable sources of information. Deepening our communication with them keeps us up to speed with regulatory and price developments.â€ť
3. Review supplier base
â€śSmall to medium-sized manufacturers in specific regions are more affected by new regulations. Weâ€™re evaluating our supplier base with this in mind to ensure stable prices and quality for our products.â€ť
How Fiducia can help:
Contact us at email@example.com for advice on how to adjust to Chinaâ€™s stricter environmental regulations.
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