Engaging IT’s Elusive Giants

By CWR 10 June, 2010

China Water Risk summaries the response to letters sent to 27 technology company CEOs charging them with using polluting supply chain companies.

In late April, a coalition of 34 Chinese environmental groups, led by Friends of Nature and the Institute of Public and Environmental Affairs (IPE), sent letters to the CEOs of 27 leading technology companies, charging them with using polluting supply chain companies. In particular factories producing printed circuit boards (PCB) and batteries¹.

The report, released first in Chinese and only this week in English, identified case studies such as Shanghang Huaqiang Battery, which was implicated in the lead poisoning of 121 children in Fujian province last year².  Shanghang Huaqiang Battery was a key equipment manufacturer for Narada Power Source (from 2007-2009), which claimed on its website to be a supplier for Vodafone, Nokia, British Telecom, Siemens, Motorola, Alcatel, and Singapore Telecom.

Another case is Wannianfu Electronics Co. Ltd, a PCB manufacturer located in Dongguan.  Wannianfu was found to be discharging untreated wastewater into a sewer. Wannianfu Electronics Co. Ltd’s parent company, HK listed Kingboard Chemical Group. Co., Ltd, is a supplier to IBM and Intel.

While the NGOs’ initiative was covered widely in Chinese and global media, the corporate response has been mixed, if somewhat disappointing. On June 5, the NGOs released an update on the corporate response to their report, revealing that while there has been an increase in feedback from companies, of the 27 identified only a few have taken concrete steps: Samsung, HP, Panasonic, Toshiba and Siemens.

A recent blog from RiskMetrics Group covering the suicides at Foxxcon (also on the list of the 27 leading technology companies) may explain why the IT industry has been less responsive–compared to, for example, the apparel industry, which has been targeted in the past for poor environmental practices. The electronics supply chain is unique for the simple reason that electronics are complicated and proprietary. By way of comparison, an American/European company selling clothes has a wide range of suppliers to choose from. This provides the buyers with significant leverage that can and has been used to pull suppliers into line. An IT company, because of the complexity of its product, has in a way locked itself into suppliers who have committed a huge amount of resources – human, material and financial. Apple, for example, in demanding total secrecy in the production of its products inevitably finds itself working with only a few trusted suppliers.

This means that an IT company can’t just threaten to take its business elsewhere, the way apparel brands can, without a huge interruption in production. One solution offered was for brands to collaborate (Foxconn’s top five customers account for 93% of its business) but this would take much skillful and protracted negotiation given the secrecy issues around their products.

So while the obvious leverage remains with the global brands (companies can achieve much by integrating environmental requirements into their sourcing practices), NGOs looking to push the envelope (particularly within the IT industry) can begin to examine the companies sitting below the brands– giants in their own right, but having long kept out of the spotlight, they remain out of reach.

¹Friends of Nature, Institute of Public and Environmental Affairs, Green Beagle, The IT industry has a critical duty to prevent heavy metal pollution, April 24, 2010.

²Guardian, Global IT brands urged to be more accountable for pollution in China supply chain, May 6, 2010.