The recent environmental inspections may just be a beginning.
The 4th series of environmental inspections by the central government was launched on mid-august and lasted until last month. The 4th inspections covered 8 provinces: Jilin, Zhejiang, Shandong, Hainan, Sichuan, Tibet, Qinghai, and Xinjiang. Thousands of factories had to shut down due to these inspections leading to a shortage of suppliers and cost increase of some raw materials and products.
The rising trend
Recently, the total 4 series of environmental inspections covering all China mainland came to an end. They were respectively conducted on July 2016, November 2016, April 2017 and August 2017. We can see from the statistics that the inspections have become increasingly stricter and have impacted more factories. For instance, the number of treated complaints on environment has doubled during the third series of inspections, compared with second series, and the number of factories affected has increased by more than 2000.
With the previous experience of the last three series of inspections, the provinces receiving the inspections last month had taken measures before the arrival of central governmental officials. The local governments had ordered all polluting or illegal productions to stop. Even those that don’t pollute seriously were required to reduce their production. That is one of the reasons more factories were shut down during this inspection, thus the impact in the supply chain was more serious than previously.
What’s more, the Minister of Environmental Protection, LI Ganjie, was appointed in May this year, so it might also explain why the 4th series was actually stricter, as a Chinese old adage says: A newly appointed official works hard to show his efficiency. Directly after his appointment, LI Ganjie created his “five-step method” for environmental inspections: inspection – assignment – patrol – interview – special inspection. Inspection teams will randomly patrol in the inspected factories to check if non-conformities are corrected. If they find that the correction is slow and weak, they will organize interview with local government to put more pressure, and will restart the patrol to check. For those places where the local government doesn’t take effective measures, the inspection teams will conduct special inspections and will investigate until the last responsible person to make sure that problems are solved.
The government will come back
Besides the 4 series of environmental inspections, LI has also launched in the beginning of September a project of correction and improvement of disorganized or polluting factories in Beijing, Tianjin, Hebei, Shanxi and Shandong. The mission is to push factories to re-organize, to eliminate and renovate polluting devices, to treat VOCs etc. If the factory fails to reach the government’s requirements, the government will cut down the water and electricity of the factory and clean off all raw materials, products and production machines. In fact, many illegal factories found during this 4th inspections have already tasted this hard attitude of the central government.
Since the publishing of the new Law Environmental Protection on January 2015, the Chinese government has contributed more and more human resources and energy to the supervise and enforce its implementation. From the central government’s attitude and several series of action taken, we can see the clear rising trend of environmental protection in China. Even though many local governments still try to develop economy by sacrificing the environment, the central government decides to show its solid attitude with effective actions, just the same as the anti-corruption actions taken and still being taken today.
So if one may think these series of environmental inspections will soon come to an end and a relief resulting in the previous status quo, their will likely be a serious consequence. These inspections are seemingly just beginning. Guided by the “five-step method”, the inspection team could come back to patrol at any time to check if corrective actions are effectively taken. Under the pressure from the central government, now some local governments have been forced to cooperate. For example, the province of Guangdong was inspected on November last year and began to conduct auto-inspections. That’s why many factories in Guangdong have also shut down recently even though the province is not on the list of this 4th series of inspections.
What to do?
If you think you maybe a polluting factory but not shut down yet, you should always keep an eye on your environmental performance, because you are probably already on the re-visit list of central government. Many closed factories still don’t know when they could re-open. There will be less and less breathing space for poorly organized and seriously polluting factories in the near future. You need to get comprehensive knowledge on legal requirements to keep the factory compliant to the new Law of Environmental Protection.
If you are purchasing company, you will need to start to watch more closely your suppliers on environmental issues, especially for those having polluting process. One polluting factory could be forced to shut down abruptly if the case is serious. Take actions to avoid the chances that serious consequences arrive to your direct suppliers. You can start by evaluating all your supplier’s environmental performance and get to know the distance between your supplier’s level and the Chinese Law’s requirement. This helps to avoid a nasty surprise and direct impact to your company’s business. On the other hand, you should start to watch your supplier’s management on their suppliers. If your suppliers are big and legal factories, they should be safe themselves. However, if they don’t watch their small supplier’s environmental performance, their supplies could be cut down and this in turn could lead to a late delivery of goods.