China cannot afford to keep its economy growing the way it is-the strain on the country's populace, resources and environment has reached breaking point.

It was a stark message, and one that you might expect from one of China's small but increasingly vocal environmental pressure groups. Instead, it came in May this year in a report from a senior member of the Chinese government-Pan Yue, deputy director of the State Environmental Protection Agency (SEPA).

Commenting on the costs of China's industrial growth, he said the country had been following a resource-hungry model of development for too long.

"If we continue on this path of traditional industrial civilisation, then there is no chance that we will have sustainable development," Pan said. The problem has been compounded, he added, by the fact that China's development model is unsuited to the reality of its situation-a country with a huge population, scarce resources and increasingly limited agricultural land.

"If the current high-cost growth and serious pollution continues, China will face a heavily-polluted environment and a serious shortage of natural resources in the near future, which would not support its future development," Pan said.

While noticeable improvements have begun to be made in some areas, Pan argued that the only real solution was a fundamental restructuring of China's growth ethos. The emphasis, he said, needs to be on sustainable development, tackling the massive amounts of waste created by Chinese industry, developing renewable energy sources, and promoting recycling.

Unsustainable growth

Pan's comments made for a sobering wake-up call, but not one that was particularly new. Others in the upper echelons of China's government have made similar comments over the years about the unsustainability of China's ultra-fast economic growth. Take this, for example, from 1994 by Deng Nan, daughter of Deng Xiaoping and then Vice President of the State Science and Technology Commission:

"It is possible that development will bring about destruction of the ecology and worsening of the environment," she said. "If environmental problems are ignored in the process of development, economic development will be severely hampered."That was more than 10 years ago, and despite significant improvements in major cities like Shanghai and Beijing and the passing of wide-ranging legislation, in other parts of the country the environmental picture remains bleak.

Take a look at a few statistics: according to a recent World Bank report, China accounts for nine out of the world's 10 most polluted cities. The same report said that air pollution costs the Chinese economy some US$25 billion a year in health costs and lost productivity-amounting to about 5 percent of the country's GDP.

Outside of Shanghai and Beijing, China's vehicle-emissions standards are a decade behind those of most developed nations. Much of the pollution is attributed to coal-especially the most polluting kind, known as 'brown coal'- which is used for around 70 percent of China's energy needs.

A large part of the problem comes down to simple inefficiency, wasteful use of increasingly scarce resources and an industrial mentality that regards environmental issues as 'someone else's problem'.

According to SEPA at present the energy consumed in producing each unit of China's industrial output is 2.4 times the world average. In terms of sulfur dioxide (SO2) emissions, a major pollutant and cause of acid rain, China's discharge per unit of GDP unit is 68.7 times that of Japan, 26.4 times that of Germany, and 60 times that of the United States.

In short, while China's stunning double-digit growth rates have made headlines around the world, the price being paid is both huge and, say advocates such as Pan Yue, unsustainable.

Environmental awareness

Despite growing realization of the negative consequences (both economic and otherwise) of environmental pollution and destruction, there is still a lack of environmental awareness at different levels of both industry and government.

"Many Chinese businesses are unaware of the benefits of sustainable development," Jennifer Cole, the EU team leader of the EU-China Environment Management Cooperation Program (EMCP), told EuroBiz. The program, funded by the European Union, is aimed at increasing the adoption of sustainable development practices in China.

There is generally a lack of awareness of the economic benefits that sustainable development can bring to a company. sustainable development is about good management of a company, about the efficient use of resources, time, and money," Cole explained. But as an official with the SEPA Environment Supervision Bureau told state newspaper China Daily, "There is a saying...that the cost of abiding by the laws is higher than violating them."

Last year, China consumed 40 percent of the world's production of cement, 27 percent of steel, and 31 percent of its coal, according to China's State Planning and Reforming Commission. But China's GDP growth accounted for only 4 percent of the global total. Ma Kai, the director of the Commission, told China Daily, "Our high-input, high-consumption, high-emission, crude method of growth remains unchanged."

Meanwhile, water pollution is still rife and damage control still falls far short of the water pollution control goals of the 10th Five-Year Plan (2001-2005), according to SEPA. SEPA Minister Xie Zhenhua even went as far as to blame the situation on the blind pursuit of economic growth by some local governments, which he accused of failing to phase out outdated and polluting production methods and failing to allocate sufficient resources in pollution control.

Silver lining

But, it is not all doom and gloom.

"In recent years, there has been many cases of public backlash against private companies for poor environmental and social performance," said Piers Touzel, a senior consultant with ERM Shanghai, an environmental consultancy.

"Environmental awareness and sustainable development issues are beginning to pop up on the radar for the larger Chinese companies, particularly those listed on overseas stock exchanges," Touzel pointed out.

The central government has also been placing increasing emphasis on environment protection and pollution control in recent years. The World Bank noted in a 2001 report that China had in fact made extensive progress in lowering industrial pollutants and coal-burning. There are plans to tighten emission standards across the country-lowering limits to match those in Beijing and Shanghai next year. In Beijing, the city government is slated to lower limits even further early next year.

A high-profile blitz targeting firms that fail to meet environment impact assessment laws was launched by the authorities in April this year. Companies-both big and small-that contaminate drinking sources and river water, or have solid waste and sewage treatment plant problems are being put under scrutiny in the blitz which will continue until November.

This is the third year that the joint exercise by six ministries, including SEPA and the National Development and Reform Commission, is being carried out. Last year, more than 7,300 offenders were shut down and another 2,000 were ordered to clean up their act.

Enforcement lags

While a formal framework of law and regulations are already in place, the biggest problem faced seems to be enforcement. "I should say that China has a pretty comprehensive environmental legal system: the system is there, and we do have a lot of laws, but they’re not enforced properly," said Ma Jun, the China representative of the World Business Council for Sustainable Development who also leads its regulatory research department here.

"Laws have to be enforced fairly and thoroughly, otherwise those businesses that do comply find that it is not in their interest to do so because they will be undercut by those who are ignoring the laws," he said. "The most common problem is a lack regulatory enforcement by local government."

The central government may have taken the lead in the cause for sustainable development, but as Degussa's China head Eric Baden said at a the Chitech EU-China Sustainable Development CEO Forum held in Beijing in May: "No national government can manage this problem on its own. Corporate management must lend a hand."

The top-down approach has, however, led to a lag between rhetoric and reality. Ma said, "Businesses and stakeholders are not involved in the drafting process (of regulations), and as a result, laws are put together poorly-in such a way that they cannot be enforced sometimes."

Sherry Liao of Global Village Beijing, a non-governmental environmental pressure group, said, "The problem is there is not enough grassroots NGOs to help monitor the situation and help the central government monitor the implementation of the law."Raising the grassroots awareness and encouraging public participation is high on the agenda of the government, which recognizes the inadequacies of a top-down approach. The initiatives launched this year have included 'green communities' and a 'green strategy' to encourage recycling and other environmentally-friendly practices. Global Village's Liao also noted, "Premier Wen Jiabao said these projects have to take into account public opinion, so that's certainly an improvement."

The public is certainly sitting up and taking notice-in recent years, complaints by the general public about environmental problems have been increasing by 20 percent annually, according to SEPA. "I think everybody is worried about food safety and many people, especially the new rich, are willing to pay more for safer products," Liao added.

Jennifer Coleman of the EU-China EMCP summed it up, "The regulations are there, the need is there, the technology is available-it's a question of communication, of understanding the need and bringing it together with the right expertise and technology to solve it."

Building awareness

The EU-China Environmental Management Cooperation Program (EMCP) is a four-year scheme, started in 2001, aimed at increasing the adoption of sustainable development practices in China.

Funded by the European Union, the program works with Chinese and foreign-owned industries, local governments, project engineers, and key decision makers to raise awareness among Chinese businesses of the economic benefits of sustainable development, highlighting the successes of businesses which have followed the sustainable model.

The program also has four pilot projects involving industrial parks in Shanghai, Tianjin, Rizhao and Luzhou, designed to demonstrate the benefits of good environmental management to business.

In Tianjin, for example, the EMCP is working with authorities in TEDA, one of China's most advanced development zones, to develop an industrial waste management system. It is also looking at the creation of so-called "Waste minimization clubs", opening opportunities for companies to make use of the "waste' produced by other neighboring companies as a raw material in their own production, as well as sharing ideas about managing their operations in more environmentally friendly and less resource-intensive ways.

As part of the process, the EMCP works to promote the transfer of environmentally sound technologies and techniques, promoting information-sharing on China's environmental market and investment opportunities.

"The key is to take a business approach to the problem," says Jennifer Coleman, team leader for industry development on the EMCP based in Beijing.

China, she says, faces massive environmental problems in almost every area, but to date most efforts to evaluate and tackle environmental pollution issues have been highly technical and funded by outside donors. The EMCP's objective, Coleman says, is to change that approach and nurture the concept of sustainable development as a core business practice.

sustainable development should be something that is incorporated into the business plan as part of normal economic activity," she says. "Our aim is to make sustainable development something that should be done because you want to, because it makes business-sense to do so, rather than because the government says you have to."In many ways, building sustainability is as much a question of improving efficiency as anything else, says Coleman.

"In an increasingly competitive environment, where margins are being squeezed all the time, increasing efficiency and making best use of available resources makes good business sense."

For more information:

http://www.cestt.org.cn/emcp/eindex.htm

What is sustainable development?

The World Business Council on Sustainable Development, based in Geneva, defines sustainable development as "Progress that meet the needs of the present without compromising the ability of future generations to meet their needs."Sustainable development, it says, means looking ahead and doing "Our utmost to ensure that what we do today for our ever-growing population does not compromise the environmental, social and human needs of our descendants."More information: http://www.wbcsd.org/

Worst offenders...

The most polluted cities in China:
1 Linfen, Shanxi
2 Yangquan, Shanxi
3 Datong, Shanxi
4 Shizuishan, Ningxia Hui Autonomous Region
5 Sanmenxia, Henan
6 Jinchang, Gansu
7 Shijiazhuang, Hebei
8 Xianyang, Shaanxi
9 Zhuzhou, Hunan
10 Luoyang, Henan
Beijing came in at 29 on the list while Guangzhou was at 44 and Shanghai at 66.

...And the best

China's top five environmentally friendly cities:
1 Haikou, Hainan
2 Zhuhai, Guangdong
3 Zhanjiang, Guangdong
4 Guilin, Guangxi Zhuang Autonomous Region
5 Beihai, Guangxi Zhuang Autonomous Region

Education the key

German chemicals group BASF was one of the founding members of the China Business Council for Sustainable Development, launched in January 2004. Jorg Wuttke, chief representative for BASF China Ltd-a member of the European Chamber, comments on his company's approach to sustainable development in China:

What does sustainable development" mean to you?

For BASF, sustainable development means achieving a balance between the economic, environmental and social needs of the modern world without impairing the development opportunities of future generations.

What is needed for sustainable development to work in China?

Education is the key.

The central government has advocated sustainable development, the media is picking this message up, and people are more aware of the immediate needs.

In our field, chemical companies should take due responsibility towards the environment and society. Role models in each industry should be encouraged and propagated in the media. Eventually, the general public has to be mobilized to walk the talk in their daily life, making a difference to their immediate environment.

What can be done to encourage sustainable development practices?

In one respect there need to be stringent laws and regulations; on the other, incentives should be given to those who follow sustainable development practices, such as tax waivers, policy preferences, etc. And the government has to implement the law, meaning hefty fees in case the industry pollutes the environment.

How does BASF encourage sustainable development among its Chinese customers and suppliers?

Customers and suppliers are just two target groups for us. BASF takes responsibility in its interactions also with employees, partners, as well as local communities. From the customer perspective, we produce products that are safe to manufacture, use, recycle and dispose of. This fundamental statement documents BASF's overall position in regard to product safety. On the supply side BASF regularly audits its most important suppliers. If the environmental, health and safety standards required by BASF are not in place, the company applies its expertise to help the supplier meet its expectations.

How aware are Chinese consumers about environmental issues?

Awareness has increased significantly in recent years, starting from a very low base, and there are now many NGOs lobbying on the issue. But only when awareness transforms into acceptance, and acceptance to action, will a real change take place.

What opportunities are there for foreign firms helping China to achieve sustainable development (SD)?

There are a lot of opportunities. At the government level, BASF has on many occasions proposed our practices and suggestions to Chinese authorities. In 2002 and 2004, we held two SD symposiums respectively in Beijing and Shanghai, gathering experts and industry peers together to discuss sustainable solutions. The feedback and impact has been very positive and we are going to continue that effort.

We are also one of the 11 founding members of the China Business Council for Sustainable Development (CBCSD), to contribute to the SD campaign in China.

The CBCSD consists of international players and Chinese companies such as Sinopec, COSCO, Baoshan Steel, First Automotive Works, that are actively engaged in SD.

The sparrow's tale

The humble sparrow has had it tough in China in recent years.

In the 1950s, sparrows were one of the "Four pests" targeted by Mao's Great Leap Forward. Victimized as a consumer of the nation's grain stores, they became the target of a mass extermination campaign.

With the sparrow population duly decimated, locusts and other pests thrived-in turn wiping out thousands of acres of agricultural produce.

Eventually the sparrows were given a reprieve. As the insects' main predator and an important pollinator of crops, sparrows, it was decided, did more good than harm.

But today the sparrows-once as common as, well, sparrows-are again in the firing line. This time the cause is rampant use of chemical pesticides including illegal spraying of highly toxic DDT by Chinese farmers. Added to that, sparrows remain a popular street snack in many parts of the country.

So severe has the impact been that in some parts of China, the sparrow has recently been listed an endangered species-a status that, environmentalists say, has worrying implications for biodiversity and the ecological balance.