Greening China

["Ian Murray" <seamus2001@xxxxxxxx>]

< http://www.feer.com >
SUSTAINABLE DEVELOPMENT
Still Spewing, Just a Little Less
Times are changing. Industry in China is beginning to realize that if
it wants to get ahead it must go green. Now that the environment is in
vogue, clean, efficient business practices are good for both the image
and the bottom line

By Kathy Wilhelm/BEIJING and SHANGHAI
Issue cover-dated July 05, 2001


MORE PRODUCTION, more pollution. That has been the norm for Chinese
industry during the no-holds-barred growth of the past two decades, as
the nation's grey skies and black rivers attest. But the power of the
market is finally coming to the aid of the environment. Leading
Chinese companies with global business interests are cleaning up their
acts to bolster their bottom lines.

Take Sinopec, China's top oil refiner. It bought full-page newspaper
ads in April to announce its adoption of a health, safety and
environment or HSE management system partly modelled on that of BP
Amoco. It promised to spend 1.2 billion renminbi ($146 million) this
year to upgrade safety and make production more environmentally
friendly.

An attack of altruism? No, good business. "It's an industry demand,"
says Zhai Qi, head of Sinopec's Safety and Environment Bureau.
"Companies that don't implement HSE management systems will have
limited options when it comes to international cooperation." Having an
HSE system, he says, "is good for our corporate image and creates a
good foundation for entering world markets."

Most Chinese industry is inefficient and heavily polluting. Many
factories don't treat their waste at all before discharging it into
the air or water, confident that local officials who often double as
investors will protect them. Only the nation's leading cities have
mustered the political will to force clean-ups or factory closures at
the expense of tax revenues and employment.

"It's like a sports event where the athlete and the referee are one
and the same person," says Niu Wenyuan, head of the Sustainable
Development Strategy Group at the Chinese Academy of Sciences, who
travels the country advising governments and companies on the
long-term costs of unchecked pollution. "If you're the mayor of a
city, you're also in charge of the city's environmental-protection
bureau and you won't let it shut down a polluting factory."

Chinese companies serving only the domestic market may enjoy their
licence to pollute for years. But those with global aspirations are
encountering a different mix of incentives, says Husayn Anwar, chief
executive of Sinosphere, an environmental consultancy in Beijing.

"All those companies that are adopting environmental programmes are
doing it because they have something to lose--reputation, money,
market share," he says. "Those that go abroad have suddenly realized:
'People can scrutinize us, can take us to court'."

Zhai says Sinopec has noted the beating that oil companies' share
prices regularly take on world markets following any accident.
"Western green groups will always demand more, and companies that fail
to be proactive may find their existence threatened," he says. "It's a
wake-up call for us."

Sinopec began drafting its HSE system in 1999, about the same time it
started preparing for its October 2000 listing on the Hong Kong and
New York stock exchanges. It wanted to reduce the chances of accidents
that could endanger workers and the environment. Instead of just
mounting a safety campaign, Sinopec drew up detailed work codes for
each operating unit and made safety a factor in awarding bonuses.

With its 520,000 employees scattered across oil rigs, refineries,
petrochemical plants and fuel stations, Sinopec created a database
containing details of each facility's emissions, accident history and
other related information.

By the time Sinopec announced the system to the public in April, it
was already implementing it in more than 20% of its units, says Zhai.
The goal is to reach 80% by the year's end.

Meanwhile, harmful emissions were falling through the 1990s, even
before the HSE system was introduced. The level of contaminants in
discharged water was cut 7% in 2000 from the year before, says Zhai.
Sulphur dioxide emissions were reduced 40% by cutting down on the
amount of natural gas burned off at oil wells and refineries.

Anwar says Sinopec's HSE system is impressive. "In terms of policy,
Sinopec has pretty much caught up" with international standards, he
says. "The problem is implementation. There they are probably still
half a decade behind." Most impressive is the degree to which the
company has linked its public image to environmental performance, he
adds. "No other company in China has gone so far."


MORE TO FOLLOW

A few others are starting down the same road, however. Shanghai
authorities have long showcased Baoshan Iron and Steel, built in the
1980s using the latest equipment from Japan. That auspicious start
made it easily the cleanest steel mill in the country, but now
authorities want it to be on a par with the best international steel
plants.

"We satisfy the present government requirements but Shanghai wants to
be one of the great cities of the world. Its environmental demands
will definitely get tougher, so we have to stay ahead of the curve,"
says Guo Kezhong, assistant to Baoshan's president.

The safety and environment chief of Baoshan Steel, Sun Xiaolin, ticks
off recent achievements: Sulphur dioxide emissions last year down 80%
from 1990 levels. Smoke and ash emissions 50% lower than in 1998.
Virtually all the waste water was treated on-site and reused in
production, while most furnace waste was processed and sold for use in
road construction. Big gains were made in energy efficiency, with the
amount of fuel needed to produce a tonne of steel down to 713
kilograms from 767 kilograms in 1996.


"We're still behind the world leaders in Europe, Japan and South Korea
when it comes to some pollutants, like dust," says Guo. "But our
energy efficiency is ahead of everyone except the Japanese."

The improved energy efficiency helps the bottom line, as does some
recycling. But Guo says anti-pollution upgrades rarely pay for
themselves. "It's not a question of making money," he says. "It's a
question of long-term, sustainable development." With Baoshan's public
image tied to rising international standards, he says the company
can't afford to stop investing in clean production. "We are China's
model steel mill. We have to maintain our reputation."

If these companies' green strategies help them thrive, other companies
may follow suit. Niu, of the Chinese Academy of Sciences, estimates
that fewer than 5% of Chinese companies do any long-term environmental
planning. "What they understand is that if they pollute, they can be
fined," he says. "They haven't calculated the real costs of the
resources they use or considered what they'll do in 10 years if
they've depleted the resources."

Zhai agrees: "Few companies have a sense of urgency." Sinopec was
awakened by the clamour of international green groups. But passing the
message on to the rest of Chinese industry could be a long process.