China’s Green Shift: Is Your Business Ready?
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 “growth versus green” 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 “three key battles” 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: China’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 “green versus growth” 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 China’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 China’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 “green” and “growth” are not mutually exclusive.
Key milestones in China’s “war” on pollution
An “Environmental Health Check” for your China production
Fiducia’s “Environmental Health Check”, 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.
Sourcing security as China goes green
Compared to companies who produce in China, those sourcing from China are being hit less directly by the government’s anti-pollution drive. But the implications they’re facing are equally profound. Tamás Pollich gave us his insider’s view as Managing Director of DIY Trade Far East Limited, HELLWEG’s buying office in Asia.
1. Rising prices
“In 2017 we saw marked price rises in product categories that were highly exposed to steel and carton prices.”
2. Extra workload
“Searching for alternative suppliers in less affected regions, and following up more closely with suppliers to prevent delays, required additional efforts and time.”
1. Monitor raw material prices
“We follow raw material reports on a monthly basis to track changes in key cost drivers.”
2. Improve communication
“Suppliers are one of our most valuable sources of information. Deepening our communication with them keeps us up to speed with regulatory and price developments.”
3. Review your supplier base
“Small to medium-sized manufacturers in specific regions are more affected by new regulations. We’re evaluating our supplier base with this in mind to ensure stable prices and quality for our products.”
How Fiducia’s Trade Team can help you:
- Supplier search & evaluation
- Ongoing supplier management
- Negotiation support
- Cost benchmarking
- Supply chain planning & optimisation
Contact us for advice on how to adjust to China’s stricter environmental regulations.