China’s Environmental Crackdown: is Your Supply Chain Ready?

• The scale and background of China’s ongoing environmental crackdown

• Industries and regions affected by factory closures

• Impact on the supply chain of brands and retailers sourcing from China

China’s Environmental Inspections: Sudden or Long Overdue?

This autumn, companies across multiple industries were hit by production delays on the part of their Chinese suppliers. Though this disruption may have come as a surprise to Western brands, China’s environmental campaign began over a year ago.

Pollution has been China's hot-button topic for a long time, and in July 2016, the government put its new environmental policy in action. Now in their fourth round, the central environmental inspections have finally become noticeable in the West as thousands of factories failed to meet their shipping deadlines this year.

According to the estimates, as many as 40% of China’s factories have already been affected by the crackdown. Many were wiped off the map, unable to comply with the environmental requirements or pay the steep fines, which amounted to a total of USD $54 million as late August 2017.

For companies sourcing consumer goods from China, including toys and textiles, risks get higher further down their supply chains, as raw material suppliers and dyeing facilities are among the worst polluters, and therefore, at the highest risk of closure.

Key facts about China’s ongoing environmental crackdown:

• The current rate of enforcement is the new normal

• The non-compliance rates are very high

• Factory closures can last weeks, months, or indefinitely

• Many small suppliers are being forced out of business

• The market changes are driving prices upwards

• No supply chain is immune

Download our quick guide to learn more about what is going on with China environmental policies and the potential impacts to your supply chain.