The Institute of Public and Environmental Affairs (IPE) and the Natural Resources Defense Council (NRDC) in July 2014 released a report ranking brands on the environmental impact of their supply chains.
The report, “Corporate Information Transparency Index (CITI) – Greening the Global Supply Chain”, demonstrates a new quantitative evaluation system designed to measure a company’s performance in managing the environmental impacts of factories in their supply chain in China.
The evaluation system based on five themes: communication & follow-up, compliance & corrective actions, extending green supply chain practices, target setting & data disclosure and recycling & re-use. These are then split into 10 criteria that are quantitatively evaluated. For more on the themes and methodology see here.
Whilst this is the inaugural CITI report, IPE, with other Chinese NGOs, has been releasing similar reports on brands’ supply chains in the electronic & textile sectors since 2010.
The purpose of CITI is to increase public awareness to the insufficient attention and action by brands to the pollution from their supply chain, with the purpose to increase pressure on brands to clean-up. Parallel to this the report also aims to provide a roadmap that brands can follow to green their supply chains in China.
Broader applications for the report
The results of this report could help move China towards the “ecological civilisation” that Beijing wants it to be. Moreover, the data could assist the government with its “Measures for Assessment of the Environmental Credit of Enterprises (Trial Implementation)” launched on 1 March, 2014. Companies in already identified heavily polluting industries will be assigned a rating according to a four-coluored scale: green (trustworthy); blue (good); yellow (warning); and red (adverse), which will be determined based on the company’s carbon emissions and efforts to curb pollution. The ratings will then be used by banks and financial institutions in China to evaluate whether a new loan offering or subsidy should be granted to the company in question. The MEP has recommended that companies with the worst ratings should be prevented from receiving new funding until their environmental credit rating improves.
CITI report results
The report evaluated 147 brands across eight sectors (IT, Textile, Food & Beverage, Household & Personal Care, Automobile, Brewery, Paper & Leather). Here we take a closer look at three: Textiles, Electronics and Food & Beverage.
To provide additional context we have reviewed previous Chinese NGO reports led by IPE that similar to CITI ranked textile brands on their supply chain. You can see our reviews of Phase I, Phase II and Phase III.
Point of note: Each report has a different total number of brands as more brands were added to the evaluation as the reports progressed. CITI evaluated 50 textile brands.
Best performing brands – H&M and Esquel lead the pack
The brands highlighted in blue are present in the Top 10 best performing brands across the CITI report and previous IPE lead reports (Phase I-III). Not surprisingly, three of the ‘Zero Discharge of Harmful Chemicals’ Joint Roadmap founders (Adidas, H&M and Nike) are in blue.
- H&M and Esquel clearly lead the pack as the top two performing brands in the CITI & Phase III report. They are also in the top three for Phase I & II reports. Moreover, H&M was ranked #2 and Esquel #3 amongst all of the 147 brands in the CITI report;
- GAP and C&A have significantly risen amongst the ranks since Phase I, where GAP wasn’t even in the Top 10 and C&A was ranked #8. Their improvement has continued and in CITI the two brands are joint third; and
- Conversely, Nike, whilst in the Top 10 across all reports has dropped from its highest ranking of 2nd in Phase I & II reports to joint 9th (with Walmart) in the CITI report.
Most improved brands
The most improved brands across all reports are (in no particular order): Esprit, Marks & Spencer, Puma and Zara. Both Marks & Spencer and Puma are in the CITI Top 10 best performing brands.
Laggard brands – big names in bottom performers like A&F and Victoria Secret
Point of note: The laggard brands are comprised of the bottom 10 performing brands or brands that shared the bottom ranking.
- The majority of the laggards are well known global brands such as: Abercrombie & Fitch, DKNY, Guess, Macy’s and Victoria Secret;
- The three brands highlighted in red (Giordano, J.C Penny & Kmart) have been amongst the laggards in all reports. Moreover, these three brands all share the lowest rank amongst all 147 brands evaluated in the CITI report;
- Abercrombie & Fitch and Polo Ralph Lauren have been constantly at the bottom since they were included in in Phase III in 2013; and
- Abercrombie, Guess, Victoria Secret and Polo Ralph Lauren spend millions of ad dollars to project a wholesome all-American image, quite the opposite of their environmental performance in China.
Electronics – Apple #1
Since 2010, China Water Risk has been covering the activities of IPE & other Chinese NGOs and the release of numerous research reports focusing on environmental pollution associated with the IT supply chain. The CITI report is the first to formally rank electronic brands.
- 37 electronic brands were evaluated;
- The Top 10 best performing are dominated by foreign brands with only one Chinese brand, Huawei;
- Meanwhile, there are three Chinese brands in the laggards: (#31) ZTE, (#33) Haier & in tied last position (#36) Xiaomi; and
- Apple is in pole position. The brand has faced strong pressure from Chinese NGOs for the past four years to clean-up its supply chain and increase disclosure. It would appear that headway has been made. The CITI report notes “Apple received points in every category, with an exceptional performance in establishing a mechanism for screening suppliers, pushing suppliers to take corrective actions and identifying main polluting sectors in the supply chain.” Moreover, Apple ranked first amongst all of the brands evaluated in the CITI report.
Food & Beverage – Coca-Cola top performer
- This is the first time Food & Beverage brands have been ranked on their supply chain impact;
- Out of the 16 brands evaluated, 8 are Chinese;
- There are 2 Chinese brands in the Top 10 best performing brands: (#5) Yili & (#7) COFCO; and
- Coca-Cola is #1, which is not surprising as it is one of the more active brands in managing supply chain impacts on the environment. We interviewed Director of Coca-Cola’s Global Water Stewardship, Greg Koch, you can read this here.
See the full CITI “Greening the Supply Chain” report here.
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