China's Pollution Woes Trigger a New Environment for Manufacturers in China

China presents foreign manufacturers with many paradoxes.

The most modern of manufacturing operations can exist nearby the most backward. Thousands of quality assurance, hygiene, energy conservation and other regulatory standards are in place, but access to, enforcement and interpretation of these standards is inconsistent. Environmental pollution is worsening in a number of areas to the point of threatening life and growth, yet many manufacturers in China are implementing some of the most innovative and effective environmental, health and safety programs.

The grave pollution situation in China has certainly created a political situation favoring the issuance of numerous framework laws and decisions, which may eventually lead to a very different regulatory environment for manufacturers. These laws include the amendment of China’s framework Environmental Protection Law, amended at the Eighth Meeting of the Standing Committee of the Twelfth National People’s Congress April 24, 2014, and entering into effect on January 1, 2015.

The Environmental Protection Law amendment has been in the works for years and replaces a version enacted roughly 25 years ago. This is essentially a law setting out a new “framework” for China’s environmental law and providing statutory language enabling more detailed regulatory action and guiding interpretation among China’s numerous ministries, agencies and affiliated organizations undertaking environment-related activities. As such, this amendment is not where manufacturers will find details on how, for example, wastewater treatment plant discharges will be monitored and sampled. Rather, the amendment identifies fundamental shifts in how, at a national and statutory level, China is promoting citizen empowerment and litigation, information disclosure, heavier penalties for violations, and other measures to address environmental ills.

Shortly after the amendment to the Environmental Protection Law was released to the public in April 2014, China’s Supreme People’s Court issued an Opinion on the Comprehensive Enhancement of Environmental Resource Trial Work to Provide Vigorous Judicial Safeguards to Promote Construction of an Ecological Civilization (June 23, 2014). The Opinion reinforced, and provided further insights into, the national government’s plans concerning citizen suits, information transparency and enhanced penalties and enforcement as tools for environmental governance.

Among the most noteworthy of the national government’s plans, the Opinion, (i) calls for intensifying public-interest environmental civil litigation, (ii) provides for an environmental trial leadership core that would emphasize politics, (iii) promotes increases in public participation in environmental trials and general openness of the justice system, (iv) encourages increased publication of information on judicial protection of the environment, and (v) specifies that authorities should innovate in their methods of enforcement.

On the subject of enhanced penalties and enforcement, the Opinion provides, that authorities should increase their focus on the application of criminal liability when reviewing penalties for environmental violations and that authorities should coordinate with safety and other government agencies in the pursuit of their enforcement activities involving criminal violations. More specifically, the Opinion, provides that authorities should seek criminal punishment for acts including: unauthorized exploration and deforestation, excessive capture of wild animals, unorganized exploration and excessive excavation of mineral resources, illegal use of farmland, making and discharging pollutants, illegal disposal of imported solid waste and unauthorized import of solid wastes, and dereliction of duty in enforcing environmental laws.

Conclusion

What do these developments mean for manufacturers in China? Despite the general nature of these laws, the following is clear.

• Manufacturers will need to prepare, if they have not already, for the growing role of “public supervision” in their operations in China. This includes increases in requirements for environmental information disclosure, potential community or citizen-group inquiries and even actions targeting manufacturer operations. We have already seen several initiatives by public-interest organizations aimed at facilitating citizen access to pollution source information from key cities in China, among those are: the Institute of Public and Environmental Affairs (IPE) and the Natural Resources Defense Council (NRDC).
• Manufacturers may increasingly seek siting of their operations in designated “development” or “technological” zones, providing a clearer buffer for their activities (in many, but not all cases) from encroachment of residential development.
• On an increasingly common basis, manufacturers may also be subjected to citizen or citizen group calls to account for and remedy supplier environmental violations. These calls may gain momentum through the use of the aforementioned information disclosure tools, particularly where the suppliers are linked to well-known company names.
• China’s enforcement and penalties for environmental violations (and related safety and other violations) will become increasingly severe and be reported more broadly in “old and new” media, such as newspapers and even via applications such as WeChat.