Recently, Chinese authorities launched a national wide campaign to fight against the lead pollution of the battery industry in China. From the statics of ILBF CHINA 2011 (8th International Lead Battery Fair), China’s annual output of lead-acid batteries in 2009 was about 120 million kVA, with a total sale of more than 100 billion yuan. Lead-acid batteries account for 30% of Chinese battery output and in the past five years, the Chinese exports of lead-acid batteries has had a growth rate of 20+%.
But what is the true cost behind this growth?
Over two and a half years, thousands of workers, villagers and children have been found to be suffering from high blood lead level, mostly caused by the pollution from local battery factories. Since the beginning of this year, various news sources have disclosed the violations to the public and increasingly individuals have started to grasp the danger and gravity of the situation. People which live within the industrial zones were then quick to take personal initiative to go for health checks, and more serious case were being discovered especially in children.
The scandal of lead poisoning set off a national alert to the whole country regarding lead pollution. On March 28th, Chinese authorities (e.g. the Ministry of Environmental Protection of the People’s Republic of China, the Ministry of Industry and Information Technology of the People’s Republic of China) launched together a campaign to take action regarding this issue. From this official decision, nationwide investigations are being carried out at each province and all non-compliance factories must be closed for rectification. This has already had an astonishing effect as all of a sudden 250 battery factories/plants were closed in Zhejiang, which represent 90% of the production in this province and 70% of factories were closed in Jiangsu. Since then, this storm has spread into other provinces such as Guangdong, Henan and Sichuan, which has suspended more than 60% of the capacity of the lead-acid batteries production in China.
China began the pollution discharge permit management system for the battery industry in 2005, according to which all the new installations must be audited before the operation. In 2007 a detailed permission requirement on environmental factors was also published. However, the compliance of the regulation has not been effective. On one hand, the cost of installing new equipment is around 20% to 30% of the total cost and for Chinese companies the installation of waste treatment facilities means an immediate loss in price competitiveness. On the other hand, the monitoring system in China has not been efficient enough to detect company violations. “In China, there are more than 2000 lead-acid batteries enterprises, but the only about 200-300 of them comply with the regulation,” said one Chinese specialist in an interview with the local press.
Up until now, several months after the launch of the campaign, factories remain closed and there is still no sign of when factories will be reopened.
As companies are closed in such a quick manner, thousands of employees have lost their jobs, and moreover, their family member are likely ill. Some battery manufacturers have provided employees a lay-off pension or provided some social help for the medical care, but others have not seen any support and everyone is waiting for an official explanation. Another critical factor is that there must be a 500m protection area around all factories which restricts residents from access to their homes.
The implications for the global battery market have been huge. This “clean up” storm has left companies overseas with a shortage of lead acid batteries, and prices for lead acid batteries (used in various kinds of products, such as mobile phones, e-bikes and automobiles etc) are already surging, which has in turn also boosted the market for Cobalt.
It is a major challenge for companies to determine the true CSR performance of suppliers operating in China, or even to anticipate such a large disruption in the supply chain. Yet, one means to avoid collateral damage to the supply chain is to implement sustainable procurement systems cross-checks. In China and other risk countries where companies can sometimes easily get away with evading legal compliance, establishing internal monitoring systems (i.e. assessments, audits) and supplier sustainability engagement activities (i.e. trainings) is evermore important not only to ensure compliance to regulation, but also to encourage and support suppliers to go beyond.
This article was written by Ying Luo, a CSR Analyst at EcoVadis. To keep up to date with CSR issues in China you can follow her on twitter at @yluobo
Photo by Anja Disseldorp under Creative Commons license.