Given the recent commitments to curb coal consumption, and the signature of carbon agreements in Paris, it should come as no surprise that the recently announced 5th-year plan would heavily emphasize sustainability and the continued need to address China’s mounting environmental and social challenges.
Within the recent plan, which you can access here, there are a lot of measures for corporate leadership to understand and act on when it comes to the sustainability challenges faced, as well as the actions that will be taken to address those challenges. Particularly given the new level of accountability that is being brought to bear on firm’s who break the law.
Key takeaways and areas of focus
- Air pollution remained a focus, even with the recent improvements. For companies, the inclusion of VOCs (volatile organic compounds) in air quality targets for the first time has significant impacts for the chemical industry as well as the plethora of companies using solvents and paints within their value chains.
- For the transport sector, in an effort to meet reduced energy intensity goals, the government plans to spend $120bn on high-speed rail, aiming to shift demand away from inter-city automobile journeys and air travel. With plans for more sustainable and energy-efficient cities, it also expects to invest heavily in public transportation within urban centers.
- Water is a major concern again for the government and should be for companies with high usage: textiles, food & beverage, automotive. In terms of quantity, excessive consumption has led to the missing of one of the goals of the 12th FYP for per capita water consumption, and there is now increased pressure for the industry to reduce their usage and find ways to reuse water in their supply chains.
- Water quality is equally important, with new pollution standards for Chemical Oxygen Demand (COD) and ammonia nitrogen to particularly address industrial use. New monitoring equipment has made the measurement and management even easier, and so all companies expelling wastewater in their processing and manufacturing should take additional steps to ensure compliance and go even further to reduce future risk.
- The last soil census in China was in 2007, with the next one being currently planned to understand the extent of China’s soil pollution crisis. Soil pollution is already having downstream impacts on the food industry, and with this in addition to the previous water quality concerns, means that the use of fertilizers and pesticides has been capped to current levels, which is likely to upset agro-chemical producers.
- Construction and real estate businesses will be affected by the new target to reduce construction land per GDP unit by 20% to prevent urban sprawl, reduce energy use, and create denser cities.
- For the paper, pulp and forest-based industries, there is now a ban on commercial logging in China’s natural forests. However, with renewed ambitious reforestation goals, commercial forest management companies should continue to have opportunities to thrive.
But wait, there is more!
Separately from the fact that these changes may seem like they are just creating additional corporate compliance to follow, this FYP is also signaling an opportunity for firms to create commercial returns through the development of solutions to the problems that are faced. An opportunity for firms to align with core issues that China is facing and work with cities to deliver the solutions that address their local, tangible, problems. Given cities in China are amongst the first-movers as they already feel the intense environmental and social pressures, companies should be tactically looking at the city level needs when developing out their strategies.
For entrepreneurs, this is also a great time as with a clear shift in policy on the way, opportunities to drive pilot programs, attract money, and scale will be some of the best seen for those in this space. Environmental issues aside, aligning one’s platform in the areas of elderly, healthcare, education, and urban migration is all markets where indirect exposure will improve their markets.
Should you be interesting in gaining a deeper understanding of the issues that China faces, key stakeholders, and the strategy for playing defense (or offense), please visit our publications page or contact us to learn more about the customized work we do for our members and clients to help them understand the strategy and tactics around the issues and stakeholders.