China's listed polluters made public
By Olivia Chung
HONG KONG - Chinese citizens demanding a cleaner environment and more
responsibility from industrialists who have rendered much of the country's
water poisonous and air virtually unbreathable have taken their fight to Hong
Kong and the city's stock exchange, where many mainland companies are listed.
About 175 Hong Kong-listed companies, 15% of the exchange's listed outfits and
including the likes of drinks giant Tsingtao Brewery and the petrochemicals
behemoth, Sinopec, have notched 750 environmental violations on the mainland as
of March 2010, according to a report compiled by the Institute of Public and
Environmental Affairs (IPE) and the Hong Kong-based Civic Exchange.
The organizations said the Hong Kong Exchanges and Clearing
(HKEx), which runs the local stock exchange, should amend its listing rules to
promote more environmental disclosure by locally listed companies with
operations on the mainland.
China is suffering increasingly widespread damage to its environment as the
economy continues three decades of rapid industrialization and economic
expansion, affecting land, rivers and coastal waters. As a result, most
shellfish in China's offshore areas contain excessive harmful chemicals such as
lead, cadmium and DDT, a common pesticide, a report by the State Oceanic
Administration said last month. Lead detected in shellfish was 50% higher than
standard levels, while cadmium and DDT levels were about 40% higher, the report
said.
On land, 320 million people in China do not have clean drinking water and one
third of the rivers are polluted, Edward Chan Yue-fai, Greenpeace's campaign
manager, said, citing the Organization for Economic Cooperation and
Development.
Christine Loh Kung-wai, a former Hong Kong legislator and founder and chief
executive of Civic Exchange, a local think-tank, told Asia Times Online that
the HKEx could be a vehicle to enhance disclosure as companies seldom disclose
environmental performance voluntarily.
"In China, the law now requires both environmental protection bureaus [EPBs]
and companies to disclose a lot of environmental information. This is the right
direction. So this affects all Hong Kong companies operating on the mainland.
Using HKEx as a vehicle to enhance disclosure is useful, especially since the
Shanghai Stock Exchange is beginning to do it," she said.
The 175 companies cited for Chinese environmental violations are Hong
Kong-owned companies, H-shares (companies incorporated in mainland China and
traded on the HKEx), and red chips (based on the mainland but incorporated
internationally and listed on the HKEx). Of the 750 violations recorded,
H-share companies have the highest number at about 450.
The culprits are drawn from mainland government records by IPE, a
non-governmental organization set up by Ma Jun in 2006. He then launched the
China Water Pollution Map followed by the China Air Pollution Map, which
provide searchable databases where the public can access environmental quality
data and factory-based infraction records released by the government, including
the Ministry of Environmental Protection and its branches across the country.
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Many of the polluters are serial violators. Sinopec Guangzhou Co, the Guangzhou
branch of Sinopec, a subsidiary of Shanghai- and Hong Kong-listed China
Petroleum and Chemical Corporation (Sinopec), has records of violations in
2004, 2005, 2007 and 2008. The company paid 20 million yuan (US$2.9 million) in
discharge fees and penalty fines in 2008 alone for emitting toxic materials
such as sulfur.
Datang International Power Generation Co notched up more than 20 environmental
violations between 2005 and 2010. In one case, Datang Power's subsidiary in
Chaozhou, Guangdong province, was fined 100,000 yuan for breaking air emission
standards, false reporting and refusing to report on various types of
emissions.
Tsingtao Brewery, China's best-known beer brand and second-biggest by volume,
has more than 20 environmental violations recorded across China from 2004 to
2009, despite having more than a century to decide on how to treat its waste
products. One of the oldest beer makers in China, it was founded in 1903 by
German and British merchants under the name Nordic Brewery Company Tsingtao
Branch,
By the late 1990s, Tsingtao Brewery had more than 50 breweries in 18 provinces,
municipalities and autonomous regions.
One of its factories in Chongqing municipality was found to discharge
wastewater with suspended solids exceeding the government's standard by 45.6
times and phosphate exceeding the standard by 36.2 times.
Zijin Mining Group, a gold-producing H-share company, has had a series of
environmental violations and pollution incidents since 2005 in northern Hebei
province, the Xinjiang Uyghur Autonomous Region and southwest Guizhou province,
some involving discharging toxic waste into local waters.
Zhuzhou Smelter Group Co in central China's Hunan province, a subsidiary of
Hunan Nonferrous Metals Corp, the country's largest integrated producer by
volume of nonferrous metals, excluding aluminum, was found by the Zhuzhou EPB
to have frequently exceeded discharge standards for chemical oxygen demand,
which measures the capacity of water to consume oxygen during the decomposition
of organic matter and the oxidation of inorganic chemicals such as ammonia and
nitrite.
Among red chip companies, a subsidiary of China Resources Enterprise in east
Jiangsu province was found in 2007 to be discharging 5,000 tonnes of untreated
wastewater daily into a river. China Resources and China Resources Power
Holdings Co, engaging in the investment, development and management of power
plants, were cited for having more than 20 environmental violations from 2005
to 2008.
In an e-mail response, Tsingtao Brewery said the company had corrected its
violations. A spokesman said it had invested heavily to improve the
environmental footprint of brewers it had acquired, ensuring they met
environmental standards. Sinopec, China Resources and Datang International
Power have not responded to inquiries.
IPE director Ma told Asia Times Online that a few companies listed on the
Shanghai Stock Exchange had disclosed environmental information since late
2009, in line with rules based on a 2008 notice issued by the exchange to
publish corporate information.
"Companies like PetroChina and Sinopec for example have released discharge
data, but their reports are still incomplete as they have no mention of records
of violations and the subsequent penalties," Ma said.
Hong Kong-listed companies that are responding directly to the IPE and other
non-governmental organizations include DaChan Food (Asia), Tingyi (Caymen
Islands) Holding Corp, Want Want China Holdings, and Maanshan Iron and Steel
Co, which have come forward to explain their violation records, Ma said.
Ma blamed the repeated violations of some companies on the small financial
consequences of their violations, with weak enforcement of regulations and
insignificant fines.
"Penalties have often been regarded as part of the cost of doing business," he
said. "Despite this, the trend is veering towards tighter enforcement and the
imposition of higher punitive fines, a clear indication that environmental
violations will become more costly to companies," he said.
Ma called for the HKEx to require listed companies to notify the exchange of
environmental violations on the mainland and committed elsewhere by any of
their subsidiaries, to indicate what follow-up remedial measures were being
taken, to provide updated monitoring data and to create a disclosure system on
their websites of these notices.
"Beside, the HKEx should take advantage of the mainland's increasing
environmental transparency and require companies preparing for an IPO [initial
public offering of shares] to make mandatory disclosure about publicly
available infraction records," Ma said.
A spokeswoman for the HKEx said the exchange declined to comment on the
specific content of any reports published by third parties, or on individual
listed companies. "But we will consider the IPE's recommendations," she said in
an e-mail reply to Asia Times Online.
Regarding the HKEx's approach to disclosure requirements on environmental and
social affairs, issues in those two areas were taken into consideration during
the exchange's vetting of a listing application, both from a disclosure point
of view and in terms of assessing an applicant's suitability for listing,
although the listing rules of the exchange did not stipulate specific
environmental or social criteria, she said.
"Typically, there will be disclosures in the prospectus regarding these
matters. In certain extreme cases where the facts and circumstances suggest
serious concerns over the applicant's compliance with environmental or social
requirements, they may escalate into a determination as regards the applicant's
suitability for listing," the spokeswoman said.
The exchange's Listing Division would establish a corporate social
responsibility (CSR) code for all listed companies later this year, she said.
"We are exploring engaging a CSR consultant to advise us on the development of
the CSR code, including its content and format ... It is premature to tell the
timing of implementation but we are working towards introducing the CSR code
for listed companies in 2011."
As the exchange talks about establishing codes, the extent of China's
health-threatening pollution expands apace. The economy grew by 11.9% in the
first quarter of this year, and is forecast by independent economists to grow
by as much as 9% in 2010. As a result of this growth and rapid
industrialization, the mount of wastewater produced is expected to increase
almost 40% to 79 billion tonnes by 2015, according to a report by the JLJ
Group, a Sino-US consultancy.
Already last year, the amount of heavy metals discharged into the sea increased
16% to about 14 million tonnes, with about three-quarters of the country's 457
pollutant-discharging outlets releasing excessive pollutants, the State Oceanic
Administration's annual report on the oceanic environment said last month.
Yet in terms of one measure of urbanization, China's plastic consumption, at 40
kilograms per person, is still less than half the 100kg per person consumption
in North America and Western Europe.
In terms of air quality, 16 out of 20 of the world's worst-polluted cities are
in China, according to the World Bank.
The State Environmental Protection Administration has branded Linfen, in
coal-producing Shanxi province, as having the worst air quality in the country,
with levels of pollution many times higher than limits set by the World Health
Organization
Tianying, in Anhui province, is one of the largest lead production bases in
China, with an output accounting for half of the country's total production.
Low-level technologies, illegal operations and the lack of any serious
pollution control measures in the firms operating there have caused several
severe lead poisoning cases.
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