2012 Water Risk Retrospective

By Dr. Peiyuan Guo 4 February, 2013

Dr. Guo of Syntao walks us through his views on water in the year of the dragon and predictions for 2013

Water crises will likely lead to social unrest; this is not helped by government's lack of transparency & disclosure
Textiles will continue to feel the pressure with increased focus from the China National Textile & Apparel Council
Business managers & investors in large cities should prepare for water price increases in 2013

Water crises lead to social unrest

It is reported that, on average, China faces over 1,700 water pollution accidents each year. This number clearly indicates how serious water challenge is in this country. Unfortunately, 2012 is not an exception and some cases were very serious and many people suffered. Here are some examples:

  • Jan 2012, cadmium pollution in the upper Longjiang River, Guangxi province, posed a potential threat to water supply in the downstream city of Liuzhou, which has 3.7 million residents;
  • Feb 2012, a “peculiar smell” was found in the tap water of Zhenjiang, Jiangsu province. After further detection and analysis by relevant experts and professional institutions, it was discovered that the smell was due to an excessive amount of volatile phenol in the tap water;
  • Jun 2012, in Shanghai, Jinshan district’s environmental protection bureau said some samples of river water in the area did not meet safety standards. It was suspected that the water source was tainted with industrial pollutants;
  • Jul 2012, in Nantong city, Jiangsu province, it was reported that Japan’s Oji Paper Group planned to build a water pipeline project to discharge 150,000 tons of wastewater a day into Tanglu Port. This project was cancelled after thousands protested; and
  • Dec 2012, nearly 9 tonnes of aniline leaked by a chemical plant in Shanxi province ended up in the Zhuozhang River. Handan city, located downstream of the river, had to temporarily suspend water supply for local residents.

Such water crises often result in social unrest. Many worry about their health and safety as drinking water sources are affected. As a result, once news or even rumors of the incident surface, people instantly rush into supermarkets to buy bottled water. If the stock of bottled water is no longer available in stores and pollution is not brought under control, then the government will be badly criticized.

Social risk exacerbated by lack of transparency & disclosure by government

“If the government cannot find a better solution for drinking water protection and improve transparency, we can expect to see more social unrest cases caused by water concerns”

Dr Guo Pei Yuan

Social unrest is also caused by the government’s lack of transparency and disclose. In the case of the aniline leakage in Shanxi province, the accident took place on Dec 31, 2012 but was reported to the public five days later. This made most people, particularly those downstream of the accident, uncomfortable. In the case of tap water not meeting standards in Jinshan, the government only disclosed that the smell might be caused by industrial pollutants. Furthermore, though they announced that they have already identified the polluting factory, the name of this factory was not disclosed.

If the government cannot find a better solution for drinking water protection and improve transparency, we can expect to see more social unrest cases caused by water concerns.

Textile is one of the most risky sectors

There are a number of sectors or industries that have a negative impact on water resources. In 2011, NGOs in China focused on the IT sector and its heavy metal pollutants while in 2012 the focus moved to the textile sector.

The main environmental problems of the textile sector are in the dyeing and printing processes, where toxic chemical materials are often used. NGOs have several concerns on the textile sector. Firstly, dyeing and printing processes are water intensive and consume a huge amount of fresh water. Secondly, such processes generate much wastewater, which without appropriate treatment, pollutes local watersheds. Finally, some chemicals still remain on the surface of clothes and these chemicals pollute watersheds where clothes are consumed and washed. According to Greenpeace, this demonstrates that “the direct pollution impacts of the textile sector extend far beyond the country of manufacture and are creating a global cycle of toxic pollution”

Greenpeace is taking the lead on this non-toxic campaign against clothing and footwear companies, particularly large global brands. The campaign started in 2011 when Greenpeace launched two research reports Dirty Laundry 1 and Dirty Laundry 2, which unraveled the connections of the textile industry and toxic water pollution in China. In 2012, Greenpeace strengthened this campaign and published three investigation reports: Dirty Laundry 3, Toxic Threads and Toxic Textile Parks. The first two reports continue to criticize big brands such as ZARA, H&M, etc. and the last report focuses on two textile parks in Shaoxing county and Xiaoshan districts in Zhejiang province.

Greenpeace is not alone and several local NGOs in China are also conducting similar investigations. The Institute of Public and Environmental Affairs (IPE), who led the campaign against Apple Inc. in the past two years, extended their focus from IT manufacturers to the textile industry in 2012. In alliance with four other NGOs such as Friend of Nature, IPE used an approach similar to the IT sector campaign and applied it to the fashion industry. In their first investigation report Cleaning up the Fashion Industry, many polluting textile factories who sell their products to global brands were disclosed.

NGOs are pushing global brands for higher disclosure of their supply chain management. At the same time they are also encourage consumers to make green choices and boycott brands that use polluting suppliers.

NGO pressure stresses the fashion industry. Though many still remain silent and passive, some brands such as NIKE, H&M, etc. are proactive and have made commitments to clean up their supply chain. At the industrial level, China National Textile and Apparel Council (CNTAC) has also put environmental issues on top of their agenda. The CSR Department of CNTAC, which used to focus primarily on labour issues, is now exploring green fields. In its 2012 annual CSR conference, CNTAC even launched the Green Non-dyed Textile Innovation Alliance which will study liquid coloring fiber technology and industrial applications. So it is quite likely that we could see a “greening” of the whole fashion industry in the next few years.

Water prices may increase again

Water price is one of the core issues in water resource management. The key trend in China (reflected in several government documents), is that the current water price is too cheap and water price increase is necessary to generate user incentives to save water. Therefore, the question China faces is not about whether water price should be increased but rather when it should be increased.

“the question China faces is not about whether water price should be increased but rather when it should be increased”

Dr Guo Pei Yuan

In the last two decades, water price has increased every few years. Each city has its own price increase cycle (in China water price is formed by city level government with a set of formal procedures such as a public hearing). Some major cities such as Guangzhou, Beijing and Shanghai increased their water price in 2009 and it is expected that water price may be adjusted this year and/or the next.

Actually, last May, Guangzhou already increased its residential water price from RMB 1.32 to RMB 1.98 per ton. It is reported that Baoding city in Hebei province, Wuhan city in Hubei province, Chongqing city, etc. are all going to increase water price very soon. In Beijing, water price increase in 2009 was part of the three year plan. 2012 marks the end of this 3-year plan and so it is likely that Beijing will also review its water price again.

It is likely that water price hikes will impact some businesses, particularly those which are heavy water consumers such as spas, car washes, etc. Business managers and investors in large cities are encouraged to prepare for water price increases in 2013.

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Dr. Peiyuan Guo
Author: Dr. Peiyuan Guo
Dr. Guo Peiyuan, who holds a Ph.D. in Management from Tsinghua University, is the chairman of China Social Investment Forum, general manager of SynTao and chairman of SynTao Green Finance. Dr. Guo Peiyuan continuously focuses on research and practices about corporate social responsibility (CSR) and socially responsible investment (SRI), with abundant experience on research, training and consulting services. Now SynTao has become a leading CSR consulting company in China with offices in Beijing, Shanghai, Guangzhou, Shenzhen, Chengdu and Washington D.C. SynTao Green Finance is a founding member of Green Finance Committee of China Society for Finance and Banking. It is also the first CBI approved green bond verifier from China. Dr. Guo Peiyuan has served for over one hundred companies, governments, and social organizations home and abroad, including China Mobile, China Pacific Insurance, Amway China, Volkswagen, International Finance Corporation (IFC), World Wide Fund for Nature (WWF), etc. He has served as a judge in multiple CSR awards. Now he also teaches MBA course Business Performance and Sustainability in School of Economics and Management, Tsinghua University, and teaches international student course Social Innovation and CSR in School of Social Development and Public Policy, Beijing Normal University. He also serves as consultant, trainer or member in many organizations, including UNEP FI advisor in China.
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