Big Data Accelerates The Expansion Of Green Supply Chains

By Erin Wong, Shan Shan Helen Ding 15 November, 2018

IPE's Wong & Ding share key results from the 5th Green Supply Chain CITI Index & highlights brands' progress

The fifth Corporate Information Transparency Index (CITI 5.0) report looks back on a year of accelerated environmental action by suppliers in China and highlights the brands leading this movement. (See what the CITI Index is about and last year’s results here.)

This year’s report evaluated 306 brands across 16 industries, with the addition of two new industries: retail, and environment and waste management, including companies that invest in waste incineration. In general, brands are included in the report scope if they are suspected of having pollution in their supply chain and have already been contacted by environmental NGOs.

This year’s CITI report evaluated 306 brands across 16 industries; with 2 new industries: retail & environment & waste mgmt

CITI 5.0 also ramped up its evaluation standards from last year, increasing requirements for the timeliness of supplier response, rectification, and disclosure. The evaluation criteria cover five areas: responsiveness and transparency, compliance and corrective action, extended green supply chain practices, energy conservation and emissions reduction, and performance disclosure. Each of these areas and their indicators may be tackled in sequence, thereby providing a roadmap for brands to effectively adopt environmental supply chain practices.

Apple, Dell and Levi’s hold strong as the top 3 performers

Apple, Dell, and Levi’s top the charts for the second year in a row

Three US brands, Apple, Dell, and Levi’s topped the charts in first, second, and third place for the second year in a row. Apple has now held first place for all five years of the CITI evaluation, with 84 out of 100 total points. Since 2014, Apple has maintained its high score by pushing a total of 157 of their suppliers in China to voluntarily disclose environmental information, and more recently, the company achieved 100-percent renewable energy in its direct operations worldwide, with at least five suppliers sourcing from China committed to the same goal.

Samsung was the only other brand to hold its place among the Top 10, joined by consistently high performers Primark, H&M, Target and Inditex (previously listed as ZARA) this year. The most notable entrants to the Top 10 were apparel brands C&A and Nike, both of whom leapt from CITI scores in the mid-30s up to the high-60s, demonstrating immense work over the past year.

Nike moved well beyond the first few evaluation areas of disclosure and corrective action by using Blue EcoChain and working with direct suppliers to extend pressure for environmental compliance upstream, not to mention reducing the energy required to produce a pair of shoes by nearly 20-percent since 2015 through its Energy Minimum Program.

(Editor’s note:  Blue Ecochain system is an automated system that allows registered brands and suppliers to receive dynamic, instantaneous updates about suppliers’ environmental performance from the Blue Map Database, enabling more efficient supply chain management.)

Among the Top 30, Foxconn, Esquel & Huawei continue to outdo their competitors from Greater China

Among the Top 30, Foxconn, Esquel and Huawei continue to outdo their competitors from Greater China, now ranked in this top cohort for five straight years. Similarly, amid leaders in the IT and apparel industries, Landsea and Kao exemplify longstanding commitments to responsible procurement, earning more than double the scores of the No.2 brands in the real estate and household & personal care industries, respectively. Landsea Green Group also paves the way for others in the industry by supporting the China Real Estate Industry Green Supply Chain Action coalition, and taking deliberate steps to include environmental compliance requirements in its centralized procurement bidding documents.

Only 20/306 brands reached the halfway mark of 50 points…

…need more momentum still

However, it is important to note that only 20 brands out of 306 reached the halfway mark of 50 points. Although this number includes five more brands than 2017, relatively few mid-tier performers demonstrated year-on-year improvement, demonstrating the need for more momentum amid increasing pressure from central government inspections.

Brand efforts spur continued expansion of supplier action

Over the past twelve months, Chinese and international brands have pushed 2,458 suppliers to respond to their environmental violation records by disclosing related information or taking corrective action. Among them, a total of 1,508 suppliers gave public explanations for their records, demonstrating active acknowledgement and response.

A total of 1,206 suppliers passed audits overseen by representatives from the Green Choice Alliance (GCA) to verify their corrective action taken in response to a prior violation record and demonstrate its current compliance with legal standards. Encouragingly, this number represents a 280-percent increase from the number of suppliers who undertook audits in the 2017 cycle, a rate that underscores the growing trend of proactive environmental management. (Editor’s note: The Green Choice Alliance, founded in 2007, is a coalition of more than 56 Chinese environmental organisations that call upon brands and consumers to inspire green production through green procurement.)

1,206 suppliers passed audits verified by GCA

With 38 brands using Blue EcoChain and 55 brands using the Blue Map Database on a quarterly basis or more frequently, leading brands have pushed their direct suppliers to extend green procurement both upstream and downstream; this evaluation period consequently witnessed more environmental action from suppliers close to raw material production and waste disposal than ever before.

11 brands also published their entire list of suppliers in China on IPE’s Green Supply Chain Map

Eleven brands also took the additional step of publishing their entire list of suppliers in China on IPE’s Green Supply Chain Map, openly tying their logo to the performance of their suppliers, many of which offer real-time air and wastewater emissions data. As of October 2018, ten textile brands – Adidas, Esprit, Gap Inc., Inditex, Levi’s, New Balance, Nike, PUMA, Target, and Tesco – and Samsung have taken this landmark step for brand transparency and accountability.

New SCTI report evaluates supply chain climate action

Given the critical importance of climate change, this year, IPE released an extension of the CITI report that focuses directly on brands’ management of greenhouse gas (GHG) emissions in their supply chains in China – the Supply Chain Climate Transparency Index (SCTI), developed in partnership with the Carbon Disclosure Project. The SCTI evaluation is founded on the understanding that supply chain emissions outside of direct operations account for over 75-percent of a company’s overall emissions in most industrial sectors, with the goal of providing a similar roadmap to CITI for brands to follow.

The Supply Chain Climate Transparency Index report examines the GHG emissions management of 118 IT & textile industry brands

After ranking 118 apparel and IT brands from the CITI report, the SCTI analysis found that only 23 brands published information regarding their Scope 3 emissions, and only 17 set targets for reducing their supply chain emissions. However, of these 17, at least 16 are actively working with their suppliers to incentivise information disclosure and climate action, including Apple, Nike, and Walmart, who topped the list in this evaluation. (Editor’s note: Scope 3 emissions referred to all other indirect emissions in the corporate value chain outside direct operations as defined in the GHG Protocol “Corporate Accounting and Reporting Standard.”)

Recommendations

Based on findings from this CITI evaluation, IPE recommends that the government add to the existing foundation of past regulations for open information to mandate the disclosure of pollution, emissions, climate and energy data by companies and suppliers in China.

Financial Institutions, in partnership with the government, are recommended to incorporate green supply chain performance standards into their development of China’s green finance system, which will eventually unlock market power to boost companies with sustainable procurement practices.

Public data can & will form the essential foundation for green finance & carbon trading

To date, IPE has collected over 1.2mn environmental violation records in its database of publicly available information, growing in tandem with China’s environmental law enforcement. In light of increasing government pressure and intensifying climate change, brands would also do well to adopt available data-based solutions such as Blue EcoChain to ensure effective monitoring up and down their supply chains.

Public data can and will form the essential foundation for green finance and carbon trading but information disclosure is only possible with collective action nationwide toward climate mitigation and pollution reduction.

Further Reading

• Have Investors Incorporated Climate Risks Into Portfolios? – Hear from WWF HK’s Jean-Marc Champagne & Sam Hilton on their new report that introduces climate change & financial risks to institutional investors, focusing APAC & the energy sector
• Upgraded Water Risk Filter: From Assessment To Response – WWF’s Water Risk Filter has been upgraded, from expanded data sets & climate change projections to new response & valuation sections. Their Ariane Laporte-Bisquit highlights everything new
• Dell’s Water Stewardship – Dell is not only reducing water use in its supply chain but also managing water as a shared resource at a watershed level through water stewardship. Find out more from their Jason Ho
• Belt & Road Initiative Injects Vitality Into Economies – Professor Asit Biswas & Cecilia Tortajada from the National University of Singapore show how China’s Belt & Road Initiative can benefit developing economies in Asia & Africa by promoting connectivity
• APAN Climate Adaptation Forum: 3 Takeaways – As climate adaptation conversations becomes mainstream, the focus is now to accelerate actions. China Water Risk’s Feng Hu shares key takeaways from the Asia Pacific Climate Change Adaptation Forum

• Brand Rankings On China Supply Chain Action – Kate Logan & Helen Ding from the Institute of Public & Environmental Affairs expand on the 4th Annual CITI Evaluation Results. Which sectors are doing best? Which brands are taking the lead?
• Real-time Monitoring: Cleaning Up Textiles – There’s now nowhere to hide. The latest IPE Blue Map app integrates real-time emissions data with violation records plus there’s an interactive module linking with brands’ CITI Index scores IPE’s Kate Logan on what this means value for brands, suppliers & consumers
• How Green Is Your Beer? – From Tsingtao to Carl sberg, just how green is your favourite beer? Hear from IPE’s Na Wang on findings from their recent environmental impact analysis on China’s beer supply chain
• Introducing The Better Buying Index – Suppliers can now rank buyers’ purchasing practices with the unique Better Buying Purchasing Practices Index. Explore the index and its first benchmark report with their co-founder Dr Marsha Dickson
• Where Is The E In ESG Disclosure In China? – China is moving to mandatory environmental disclosure with a tentative 2020 deadline, but where are listco’s now? China Water Risk’s Dawn McGregor & SynTao’s Dr. Peiyuan Guo share 8 key takeaways from their newly released joint report, “CHINA PRIORITISES ENVIRONMENT: More Disclosure Needed To Match Rising Risks”