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Course: OMS 511 – Operations Management (Spring 2010) Professor: Rich Miller Student: Marcello Correa Article Scorched

Earth: Environment Risks in China
a. The article discusses two possible approaches to be followed in order to avoid, or at least minimize, risks associated to environment issues in China: defensive and proactive approach. Based in both approaches, US based organizations should both make effort to reduce harm and invest in environment efforts. Companies and their supply chain’s partners should follow and exceed industry wide standards. They should also keep their environment footprint in China as small as possible, using initiatives to reduce water and energy use, as well the generation of hazardous waste. Every single step to reduce waste and provide a cleaner environment counts. Others more proactive initiatives include the creation of program to build and develop new technologies to help Chine preserve its environment, and the sponsorship of communityorientated environmental programs in conjunction with the Chinese government and NGOs. Although all these initiatives represent costs, some companies such as Hewlett-Packard, Mattel, GE and Coca-Cola, has demonstrated in China that is possible to align strategic goals with environment responsibility. These companies recognized real opportunities to create a reputation as a clean company committed to a sustainable development in China, and, at the same time, cheaply develop new green technologies that can be applied later on back in the United States, leveraging their competitiveness in the US Market. However, in order to succeed, all these steps needs to be enforce not only inside the company but also across its supply chain’s member. Knowledge sharing between US companies

This is the only way to protect the entire supply chain from the environmental risks and potential bad publicity existing in China. and energy/water savings techniques are among the ones that need to be shared by the companies with their suppliers. tasks and responsibilities regarding aspects related to environment issues should be clearly explained to supplier and customers. Roles. but also of their supply chain’s partners.and their Chinese suppliers in areas such as recycling techniques and energy/water savings combined with repeatedly and insistent audits are keys factors to success. Areas such as recycling technologies. US companies should create incentives and rewards for better performance and environmental compliance. Companies should incorporate long-term strategies seeking continuous improvement of their own compliance with local and government environmental standards. However. In order to ensure that the strategies of all members of the supply chain are aligned. To accomplish that. US companies need to pass along knowledge throughout their supply network. Environmental Management Systems (EMS’s) help companies align their strategies and goals with green principles that protect ecosystems and the environment. hazardous waste reduction. Green procurement policy should be adopted to consider supplier’s environmental performance along with cost and quality. . b. today company’s strategies should also enforce that the members of its supply chain are required to adopt its global corporate standards or other internationally accepted standards.

First. Companies who fail to monitor their suppliers can be vulnerable to bad publicity like in the case that happened with Apple in 2006. partnerships among US companies. Third. Chinese suppliers should be required to adopt EMS based in internationally accepted standards such as ISO 14001 and ISO 14004. organizations not only benefits of a better green performance of all supply chains but also avoid negative publicity or media scrutiny. companies and suppliers should create environmental metrics to measure and evaluate their green improvements and performance. to perform an independent environmental audits to monitors their suppliers. These metrics can also be helpful to evaluate performance and return of investment (ROI) of green initiatives when compared to potential environmental risk in China. Companies should proceed with repeatedly and insistently audits in order to ensure that their suppliers meet industry wide and corporate standards. US companies should take at least one of the following four actions discussed below. policies and operations with principles that protect the environment. Although these procedures can be expensive in the short run.c. In order to monitor its partners. . NGOs and special interest groups in China could earlier identify an environmental issue inside the company or in its supply chain. companies should hire specialized consulting firms. they pay back in the future by avoiding unpleasant surprises. The use of green metrics allows US companies to clearly identify problematic areas or suppliers that need adjustments in order to meet local or corporate standards and goals. And fourth. By doing that. where the company was the target of negative press in and outside China for the living conditions of employees at one of its suppliers. such as ICF International. The second way to enforce compliance with environmental standards is to require that suppliers implement an Environmental Management System (EMS) to help aligning their corporate strategies.

By doing so. therefore. there are also less responsible companies that barely meet Chinese already weak regulation and use other techniques to reduce even more their productions costs. in the short term. developed cheaply overseas to reduce waste or harm to the environment that can be used to meet the strict US regulation constitutes a positive edge to any company in a high competitive market. Going beyond the current Chinese standards can represent a tradeoff between Corporate Responsibility and the bottom line. However. At the same time. Any new technology. its profitability. In a scenario where two US companies compete against each other. . Because of that. companies can test new green technologies and changes in relevant process in a market way less regulated than the US Market. and until Chinese regulation rise its environmental standards. companies exceeding Chinese regulations can face strong price competition in the US Market from companies that just meeting the current level of environmental regulation in China. Low labor costs. few employee benefits and weak regulations were among the reasons why these companies moved part of their operations overseas. These companies have moved their plant overseas for the same reasons as other big companies do. US organizations should not only meet Chinese regulations but also exceed them. or process. Costs with regulations are already high in US and represent a burden to almost all companies. The results obtained in the Chinese plants can then be applied to the US based plants. In most cases. the one with lower regulatory compliance cost takes advantage over the other. It can mean a higher unit cost for a specific product line. these companies will do just the minimum to comply and take the associated environmental risks. reducing. exceeding Chinese regulations can increase the operating costs of these companies and their supply chain.d.