In Indic icator ors an s and Me Metrics f rics for S or Socially In ocially Inclu clusiv sive e Waste Manageme ment and Resource Effic fficiency (WM&RE) in Supply Chains: Measuring and ReporAng to Emb mbed Sustainability in Policy and PracAce The Governance Gap in Supply Chains of Foreign Mul8na8onal Corpora8ons (MNCs) in China Dr Qingxiu Bu 23-25 May 2017, Florianópolis, Brazil
Ou Outline e • China as a Major Centre for Global Supply Chains • Why do we intervene? • Foreign MulKnaKonals’ Governance Gap • What are challenges? • Framework to Build Sustainable Supply Chains • Where is a legal avenue?
Gl Glob obal S Supply Ch Chains • Supplies Go Global • Supply Chains ScruKnised • Global supply chains remain crucial to the success of mulKnaKonal companies (MNCs)
China: A Majo jor Centre for Global Supply Chain • Supply chains as part of the globalisaKon of producKon • Supply chains are mulK-faceted, interdisciplinary, complex and mulK- layered systems and are becoming increasingly complex in our globalised world economic system. • With the globalisaKon of producKon and the development of global supply chains, mulKnaKonal corporaKons (MNCs) are moving producKon to developing countries.
Wh Why do y do w we in e inter ervene? ene? • As globalisaKon conKnues to grow, supply chain in China will generate more toxic chemicals and hazardous wastes, mostly coming from industrial, agriculture, and manufacturing processes, but current waste management policies are not linked with resource conservaKon/ecosystem protecKon. • It is NOT sustainable! • China needs to move towards a system where the enKre supply chain of products moves towards the circular model. • How do global supply chain strategies impact Chinese suppliers?
Leverage/Game me Theory s? Who Who ar are act e actors/ s/stak akeho eholder lders? • Home State • Host State • Foreign MulKnaKonal Companies (MNCs) • Supply Chain
En Ensu sure S e Sustain ainab able le Consump mpAon and ProducAon PaOerns • InternaKonal frameworks to achieve the environmentally sound management of hazardous wastes, chemicals and persistent organic pollutants • Basel ConvenKon on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal (183 parKes. 22 March 1989, Amendment 22 September 1995) • Ro^erdam ConvenKon on the Prior Informed Consent Procedure for Certain Hazardous Chemicals and PesKcides in InternaKonal Trade (155 parKes, 10 September 1998) • Stockholm ConvenKon on Persistent Organic Pollutants (180 parKes) • IntegraKng the 12 th SDG into Supply Chains
The circular economy is a part of the EC’s roadmap for sustainable growth Source: Royal Society for the encouragement of Arts, Manufactures and Commerce (2013)
Dir DirecAv ecAve 2008/98/E e 2008/98/EC o C on W n Was aste e Waste Fr Frame mework DirecAve (WFD FD) • Aiming to limit the producKon of waste, as well as encouraging the use of waste as a resource by recycling and recovery. • ArKcle 3(1) of the Waste Framework DirecKve (WFD, 2008/98/EC) defines “waste” as:- “…any substance or object which the holder discards or intends or is required to discard…” • ArKcles 17-20 of DirecKve 2008/98/EC: Hazardous wastes • One of the key aims of the WFD and related EU legislaKon is to promote the be^er use of resources by recycling. • RegulaKon (EC) No 1907/2006 of 18 December 2006 concerning the RegistraKon, EvaluaKon, AuthorisaKon and RestricKon of Chemicals (REACH)
Dir DirecAv ecAve 2008/98/E e 2008/98/EC o C on W n Was aste e (Waste Fr Frame mework DirecAve) • Place greater emphasis on the waste hierarchy to ensure that waste is dealt with in the priority order illustrated below. • ProducKon processes should not only factor resource efficiency but also the waste generated and its disposal. New defini8ons of by-products, end-of-waste, recycling and recovery – partly enshrining the European Court Jus8ce (ECJ) case law
Commi mmission v Belgium m ( Wa Walloon Wa Waste ) ) (Case C–2 –2/90) [1992] ECR I–4 –4431 • Wallonia, an area of Belgium, prohibited waste originaKng in another Member State from being stored, Kpped or dumped in its locality. • Did this prohibiKon run contrary to Art 34 TFEU (prohibiKng quanKtaKve restricKons on imports from other Member States)? • Yes! • Waste must be considered as “goods” within Art 34 TFEU, as it forms the basis of commercial transacKon (even if only for transportaKon purposes) • Belgium could not adequately jusKfy its absolute prohibiKon with reference to environmental consideraKons
Commi mmission v Belgium m ( Wa Walloon Wa Waste ) ) (Case C–2 –2/90) [1992] ECR I–4 –4431 • Waste is not only an environmental issue – it is also an economic issue. • The European Court found in “the Walloon Waste judgment” of July 1992 that:- “It must… be concluded that waste, whether recyclable or not, is to be regarded as ‘goods’ the movement of which, in accordance with ArKcle [28] of the Treaty, must in principle not be prevented.” Case C-2/90 §28 • Does the EC Treaty provide a suitable framework for regulaKng waste?
SEPA’s Waste to Resources Framework Business are Realising Waste Ac8vi8es are Compliant. the Benefit of Resource Efficiency Maximum Value is Derived from Resources Circula8ng In the Economy Waste Crime is Eradicated
T op Five Country Sources of Facilities that Supply Apple Corporation in 2015 Source: Apple Corporation 2015 supplier list. Note: Includes suppliers of materials, manufacturing, and assembly of products worldwide
Tw Two Faces of Apple: Fo Foxconn • Race to the Top or…? • Too big to governance Moral Hazard? • Does 'When in Rome, do as the Romans do´? consKtute defence? • Zero Waste Facility: First “Zero Waste” factory to receive cerKficaKon in China. (√) • Foxconn, Shenzhen Zero Waste UL Environmental Claim ValidaKon Procedure (ECVP) 2799 cerKficaKon (April 2015) • UL ECVP 2799 Sustainable Manufacturer cerKficaKon (January 2016)
Intensive Environme mental Engineering Programme mme • Some 40 footwear suppliers located primarily in China, Vietnam and Indonesia. • Discharging toxins into a local river (×) • Those footwear factories now generate one-third less nonhazardous materials waste and have reduced hazardous waste by almost 40% per pair of shoes manufactured since the programme started. (√) Source: Erica Plambeck, Hau Lee and Pamela Yatsk ‘Improving Environmental Performance in Your Chinese Supply Chain’ MIT Sloan Management Review (21 December 2011)
Con Control ol of t of the T e Trans-Bou -Boundary y ment of Hazardous Wastes Moveme • Chinese government enforces new laws to increase transparency and accountability • China focuses on Criminal Enforcement of Environmental Laws • Supreme People’s Court (SPC) Judicial InterpretaKon (23 December 2016) • EffecKve 1 January 2017 • SPC Judicial InterpretaKon 2017 ArKcle 8 • Crimes involving importaKon of solid waste and transportaKon of hazardous waste.
Managing Sustainability in Chinese Supply Chain of Foreign MNCs Incen8ves • Sustainable supply chain creates a compeKKve advantage worldwide. • Right incenKves and collaboraKve efforts can help their suppliers achieve be^er sustainable performance . • Provide incenKves for idenKfying, disclosing and addressing problems • Foreign MNCs’ DisincenKves • Compliance Cost • Take the chance between legal but unethical behaviour
Managing Sustainability in Chinese Supply Chain of Foreign MNCs Innova8on • Resource efficiency policies need to be further developed and mainstreamed • Establish a shared commitment with suppliers • Leveraging the Supply Chain to Gain “Reciprocal Value” • Upgrading the technology to reduce hazardous waste in the manufacturing process • Foreign MNCs should tailor their approaches and narrow the governance gap to create sustainable supply chains • Gap between Home and Host States • Gap between Coastal Areas and West Region
Build Responsible and Resilient Supply Chain Source: Cory Searcy, ‘What Makes a Supply Chain Sustainable?’ MIT Sloan Management Review (15 November 2016)
CreaAng a Level Playing Fi Field Re Regulatory, Legal and Policy Issues • The legal and regulatory framework will be an important tool to accompany the evoluKons in “Resource Efficiency” • Law and policy on the resource efficiency of supply chains • Eradicate illegal waste shipments with a special focus on hazardous waste But • Legal certainty is a prerequisite!
Tr True Sustainability Needs Regulatory Supervision • World Bank Group Environmental, Health, and Safety Guidelines (EHS Guidelines): Non-Legally Binding • Technical reference documents with general and industry-specific examples of Good InternaKonal Industry PracKce (GIIP), as defined in IFC's Performance Standard 3: Resource Efficiency and PolluKon PrevenKon • PRC Circular Economy PromoKon Law 2009 (EffecKve 1 January 2009): Legal Binding • Reducing the consumpKon of resources and the generaKon of waste; • Encouraging resource recovery and recycling; and • Specifying producers’ obligaKons to recycle and dispose of waste products
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