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Electronics Firms Struggle to Grasp Chinese Suppliers' Water Impacts

The rise of supply chain measuring and management is causing some wrinkles when it comes to electronics companies. China serves as "the world's factory," especially for electronics manufacturers, but it is difficult to know exactly how well -- or how poorly -- suppliers are performing on environmental issues in that country.

A new report from BSR in partnership with the Electronics Industry Citizenship Coalition finds that a number of electronics suppliers have poor records for managing wastewater, and lays out a number of steps that companies can follow to increase the transparency of their supply chains, for water as well as other environmental impacts.

The report, Electronics Supply Networks and Water Pollution in China, looks at the results of a supplier risk assessment conducted by 10 members of the EICC. The companies provided information about 640 suppliers to BSR, and the group checked those names against a public database of environmental violations.

About 5 percent of the suppliers had environmental violations, with 20 percent of those companies having been penalized for multiple violations in recent years. One facility had been cited four times, all about its wastewater discharge, a warning that there are systemic problems with some suppliers.

"With growing concerns globally and in China about access to water, more and more companies are developing proactive strategies to mitigate water risks," Laura Ediger, environmental manager at BSR and co-author of the report, said in a statement. "This study was designed to provide electronics companies with context on China's water challenges and an initial assessment of known supply chain risks, in order to give them an informed basis for effectively investing time and resources in improvement of supply chain performance."

Water impacts from business is one of the looming problems facing companies around the globe, but in China the problem is spotlighted by the already highly stressed nature of the country's water supplies.

A report published by the World Bank in 2009 monitored 745 river sections in China, and found that only 40 percent met the Grades I-III water quality standards meaning safe for human consumption after treatment. Nearly one-quarter of the river sections monitored fell above Grade V, which is water unsafe for any use.

"Water quality and availability is rapidly becoming an emerging global issue; the EICC will continue to provide focus on it for our members," EICC Chairman John Gabriel said in a statement. "This report informs our members on water issues in China and provides resources and recommendations for them to consider in addressing their respective supply chains."

Among the recommendations offered in the report are the following ways for a company to begin scrutinizing the environmental impacts of its supply chain:

1. Suppliers that are the most "strategic" in terms of spending and importance to business. Importance to business may be higher for suppliers that produce components or products that generate the greatest revenues or profits for the company, and/or are used extensively for less tangible but equally important purposes, such as for branding;
2. Suppliers that have already been identified by the public, media, or NGO community as responsible for previous environmental offenses;
3. Suppliers known to have poor quality management or reporting systems; or
4. Suppliers that are financially unstable, maintain poor external relationships, or have a history of labor or environmental issues, ownership changes, and workforce disruptions.

The report also indicates that some elements of the electronics supply chain are more water-, energy- and chemical-intensive than others, spotlighting some areas where companies may want to focus their efforts. Printed circuit boards (PCBs), semiconductors, LCD screens and batteries and power supply units were all flagged as some of the most resource-intensive elements of electronics manufacturing.

The full report, "Electronics Supply Networks and Water Pollution in China," [PDF] is available for download from BSR.

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