As the U.S. continues to languish in a stagnant economy and some E.U. member states seem to be headed for bankruptcy, some may think that China’s economic power is the most stable. However, that isn’t necessarily the case. There are more than a few issues China has to deal with to continue its amazing growth. As an example, last week, HSBC strategist Wai-Shin Chan wrote in an article for ChinaDialogue, that China is one of the world’s most vulnerable countries with regard to climate change.

Chan points out that the Chinese government is well aware of the impact climate change is already having on their economy and population and is making long-term plans. After all, water scarcity is already costing the Chinese economy 2.3 percent of its Gross Domestic Product (GDP) and factories have already had to close due to lack of water, and water prices are on the rise. To address the issue, Beijing is already putting in place tighter environmental regulations, and is starting to focus on water efficiency and conservation.

investors need to consider water risks

But, it’s not enough for the Chinese government to take steps, Chan wants investors to make sure they’re factoring in these same risks as they review their investment options.

HSBC has a list of questions it suggests investors use to asses risk levels, corporate strategies, and operational efficiency. But they do note that getting answers to the questions can be difficult as companies aren’t always aware of their full exposure or don’t want to disclose them. Here are a few questions from Chan’s list:

• Which companies are directly exposed to serious water availability constraints?
• Which companies are located in provinces with ambitious energy intensity reduction targets?
• Are the risks of resource stress in China understood at board level?
• What contingencies have been put into place to respond to disruption of resources?

If nothing changes, or not enough, it’s likely that China will face massive water shortages by 2030. And if the droughts continue, there’s reason to expect power disruptions, civil unrest, and more government action in the coming year. In the short and long-term, China’s water scarcity will have an impact on business.

What are you doing to protect your investment or the part of your supply chain that comes from China?

Water and energy. Few people grasp how intertwined those two critical resources have become. Even fewer know that today’s energy production methods consume and contaminate freshwater at a rapid and unsustainable rate. A recent report from the non-profit Circle of Blue sheds light on the issue and warns that the escalating clash between energy demand and freshwater supplies could cripple the world’s two top economies–those of the United States and China.

Both nations have long recognized that energy supplies play a central role in economic strength and quality of life–and each has made energy production a national priority. However, it seems neither country has fully recognized that the pursuit of energy threatens clean water supplies.

it takes water to make energy

In the United States, our energy comes primarily from four sources: coal, natural gas, hydroelectric, and oil. Alternative and renewable sources such as solar, wind, geothermal, and tidal represent a tiny percentage of energy production. All major sources of energy are heavily dependent on water resources.

Continue reading ‘the nexus of water and energy’ »

A month ago, the price of cotton on the InterContinental Exchange (ICE New York Futures) crossed the $2 threshold for the first time—hitting $2.0193 per pound on Feb. 17. From there, cotton rose further, hitting a peak of $2.197 per pound on March 7.

Increases in global demand for the commodity have pushed cotton prices steadily higher, not just recently, but over the last six months–a trend that has led farmers to hold back supplies with the expectation of pocketing more money as prices continue to climb. It’s a self-fulfilling prophecy, since hoarding exacerbates the cotton supply-demand gap, and that, in turn, boosts cotton prices even higher. The cotton market has become so lucrative that many experts now worry that a wave of farmers will abandon their badly needed food crops to pocket the profits in cotton.

Continue reading ‘will record high cotton prices cause food riots?’ »

Most people have a particular issue or cause that resonates with them, inspiring their support or action. For us, it’s water, or more specifically water scarcity and pollution caused by the textile industry. We have dedicated our professional lives to devising new technologies that don’t require water in order to give everyone beautiful, practical, and affordable fabrics. Now, it looks as though we have a kindred spirit in the National Resource Defense Council (NRDC), a long-time champion for the environment.

Recently, we learned that the NRDC has an initiative that focuses entirely on the textile industry. They call it Clean by Design. The program aspires to change the textile supply chain through market-based strategies that both improve efficiency and reduce pollution.

After a fact-finding mission to more than a dozen Chinese textile dyeing and finishing mills, and an in-depth assessment at five of them, the NRDC found that as much as 200 tons of water is polluted with every ton of fabric produced.

“People don’t think of the fashion industry as polluting the environment like chemical or steel manufacturing, but in fact it is one of the biggest polluters in China,” Linda Greer, director of the Health Program at NRDC and Clean by Design creator, wrote on the group’s blog.

The pollution and prevention assessments resulted in a best practices program that not only saves water and energy, but also quickly pays for itself, making the factories more profitable in the long term.

The study found that simple changes make a big difference. For example, these easy measures can drastically cut a textile mill’s water and energy use:

• Maintaining steam traps
• Finding and fixing steam leaks
• Turning off hoses that are no longer in use
• Insulating pipes, valves, and flanges
• Reusing the water used for cooling

The NRDC also pinpointed what it believed to be the biggest opportunity for improvement, “right-first-time” dyeing. In most mills, 10 to 20 percent of fabric must be run two or three times to get the colors to a client’s specifications. Even then, five percent will never be right no matter how many times it’s run. When this happens, all the water, dye, fabric, and energy used for dyeing is wasted.

Of course, we can’t let an opportunity pass by, if these mills implemented AirDye® technology, there would be no water used during the dye process and an even greater reduction in energy use than the Clean by Design best practices can offer. Not to mention that every yard of fabric would be “right-first-time” dyed.

In all, the NRDC developed ten practical low-cost best-practice opportunities for textile mills that would quickly produce savings to more than offset the upfront costs. Taken together, these initiatives can reduce water use by 25 percent, and fuel use by 30 percent. In less than eight months, the investment can be recouped, enhancing productivity, and leading to annual savings.

To test the best practice theory, NRDC and a Wal-Mart supplier in China, Jiangsu Redbud Textile Company became the first case study. The results were immediate and impactful. “With only three best practices, Redbud achieved 23 percent reductions in water use and nearly 11 percent reductions in coal.” The mill made a one-time upfront investment of $72,000 to implement just three of the best practices. The result? The mill achieved annual savings of $840,000 and improved from the second-worst dye and finishing mill for environmental compliance, to second best.

The savings alone should be reason enough for mills to adopt these practices–even at companies not interested in curtailing their environmental impact.

If the NRDC could convince just 100 small- to medium-sized textile mills to adopt the recommended best practices, China could save enough water to provide 12.4 million people with drinking water for a year. The reduction in CO2 emissions would be the equivalent of taking 172,000 cars off the road. And if you think this is just China’s problem, consider this: 30 percent of California’s air pollution comes from across the Pacific.

We hope the NRDC succeeds in its quest to encourage textile mills to adopt these best practices. With the heft of the Clean by Design partner brands, Wal-Mart and H&M, perhaps this is just the right time for the industry to clean up its act.

Others in the textile industry can do their part by insisting their supply chain is adhering to environmental standards. Now everyone has a proven set of best practices they can use to measure mills.

Kudos to the NRDC and its partner brands for their hard work developing market-based solutions to improve efficiency and reduce pollution in the textile industry.

This past Monday we wrote about China’s plans to close over 2,000 factories that the government deems either too polluting, or energy intensive. On Wednesday, Ecotextile News reported that even more textile facilities are closing.

In the southeast province of Shaoxing, one of China’s important textile hubs, government officials have ordered the number of dyeing houses be cut in half. Production of dyed goods will be reduced to roughly 10 billion meters this year, from 15.6 billion.

The focus on this region is due to their disproportionately high energy use and extrordinarly high chemical oxygen demand (COD) discharge compared to textile factories elsewhere in China. COD is a major case of water pollution.

Already 600 facilities belonging to about 20 companies have been closed because they were either operating illegally, or did not meet the environmental and energy standards.

China, it seems, has taken a very strict line against some polluting and energy intensive industries. The textile industry being both energy intensive, and highly polluting is consequently suffering many shutdowns.

We are pleased to see that the talk of shutting polluting facilities was not rhetoric on the part of the Chinese. It is vitally important to stem the tide of industrial pollution, and what better way to start than closing dye houses that used over 200 million tons of water last year to dye clothing.

Earlier this month the Chinese government ordered the closure of 2,087 manufacturing factories by September 30. While many media outlets are focusing on the energy use concerns that are a major factor in this drastic course of action, we want to draw your attention to the environmental issues, specifically around the Chinese textile industry.

Of the thousands of companies that will close, among them are textile dyeing and printing factories that were deemed either heavy polluters, energy wasters, or did not meet safety requirements. The water pollution crisis in China has been going on for some time and is well documented. Up to this point, environmental standards enforcement has been lax with some local officials even blocking cleanup efforts.

China’s economic growth stems in part from heavily polluting industries such as textiles. Water contamination has become so bad that in the first half of this year, 43.2 percent of the nation’s rivers were unfit for human contact–this according to Chinese government statistics reported recently in The Economist. It’s an alarming assessment. Think about that for a minute. The water is so bad in 43 percent of Chinese rivers that humans should not even touch it.

In addition, almost a quarter of all China’s surface water – meaning lakes, rivers, streams, and wetlands–fell short of the nation’s standards for industrial use, according to data published by Reuters. Textile mills and dye houses are dumping so many toxic chemicals into the lakes and rivers that waterways are choked with algae.

The closure orders are aimed at eliminating the country’s worst polluters. Three government ministries have proposed taking an additional step by enacting an environmental tax on a trial basis. The tax would cover carbon dioxide emissions and water contamination–potentially increasing the price of Chinese goods. China does not want to add a tax that will impede growth, but at the same time, the country cannot grow if its water supply is unusable.

The central government in Beijing appears to be serious about reducing pollution and energy use. We’re confident that more regulations and enforcement are in store for Chinese manufacturing plants. So, if you’re relying on one of these polluting, inefficient factories to supply the textile for your company’s designs, it’s time to look for a more sustainable solution.

Photo credit: sheilaz413/ flickr

Textile pollution is getting some mainstream attention. CNN recently posted an article on its website about the pollution problems in China’s Pearl River delta. While the communist nation’s pollution woes have been highlighted in the media before, CNN’s piece goes a step further, specifically demonstrating how textile and denim dyeing is a major cause of the Pearl’s pollution.

In the town of Xintang, textile and denim dyeing is a big business. According to the Chinese government, Xintang produces 200 million pairs of jeans or roughly half of the jeans sold in the U.S. annually.

Denim starts as white cotton thread which is boiled in giant vats of indigo-blue dye before being woven into fabric. The water used in the dyeing process needs to be drained, but instead of treating and recycling all of  it (which is expensive), the wastewater flows through pipes into the Pearl River. The pollution is so bad that local residents and satellite images alike reveal that the river water is black in areas adjacent to denim factories.

“The number one problem (China) face(s) is water pollution,” Deborah Seligsohn of the World Resources Institute told CNN. “The textile industry is one of China’s larger industries and one that uses a lot of water, so it’s traditionally had a lot of wastewater problems.”

In several posts (here and here) on this blog, we have discussed the pervasive nature of China’s textile pollution and shown photos of the cancerous effects on local residents. The Chinese government knows this is a problem; we know it’s a problem; and if you follow this blog, you know it’s a problem. Now readers of CNN.com know it too, and that’s an indication that the issue is gaining wider recognition among the public.

Companies that source goods from offending dye-houses should recognize the potential for textile pollution to become a public relations nightmare. We believe water pollution will be the new sweatshop issue for the industry–garnering mainstream media attention, and eventually, spurring change.

Top executives whose companies rely on those dye-houses may assume they would be shielded from blame and bad PR if a controversy erupts over water pollution–after all, they might argue that they are merely customers, and don’t own the dye-houses. We suggest they talk to Nike about how that defense worked a few years ago.

Water pollution is disturbingly rampant in China, and it has become one of the country’s greatest environmental challenges as it struggles to rank among the world’s top industrialized nations. The textile industry is a significant source of pollution in China, and it is largely driven by the worldwide demand for cotton products.

just how polluted is china?

The World Health Organization estimates that polluted water causes 75 percent of diseases in China, and over 100,000 deaths annually. Cancer rates among villagers who live along polluted waterways are significantly higher than the national average.

According to information in a Scipeeps.com article, 70 percent of lakes and rivers in China are polluted, as is an astounding 90 percent of the groundwater. More than 320 million Chinese do not have access to clean drinking water – that’s more than the entire population of the United States.

Recently, a Chinese photographer won the W. Eugene Smith Grant in Humanistic Photography for his photos exposing the horrific instances of industrial pollution and its effects. Here is just a sample of Lu Guang’s extraordinary work and examples of how desperate the situation is in China:

the cotton problem

Go into any discount retailer such as like Wal-Mart or Target, and you’re sure to find inexpensive cotton T-shirts and other products. While low-cost goods please American consumers, the effects on the environment and population of countries like China are staggering.

China produced an average of 36 million bales of cotton each year from 2006 through 2008, making it the world’s largest producer of cotton. But it’s not the leading exporter. In order to meet its enormous domestic demand for cotton, China buys 45 percent of the yearly exports by U.S. cotton growers.

Each year, cotton growers account for more than 25 percent of worldwide insecticide usage, and 12 percent of all pesticide usage The crop requires seven times more fertilizer than insecticides, and the runoff from all these chemicals pollutes the rivers and lakes, leeches into the groundwater, and leads to China’s abnormally high water pollution. Farmers in China are using more than six times the amount of pesticides and fertilizers than growers in sub-Saharan Africa.

Cotton also is a remarkably water-intensive crop. Eco Fashion World estimates that to grow enough cotton for a single t-shirt requires 2,700 liters of water. The expansion of cotton farming is leading to increased desertification in areas of the world. The Aral Sea in Uzbekistan is an example of how cotton farming can turn lakes into deserts. In China, cotton farming is increasing the size of the Taklamakan Desert because an unsustainable amount of water is being diverted to grow the crop.

tainted textile production

The textile industry in China is a big business. The Chinese State Development and Reform Commission said that in 2005, textile and apparel exports exceeded $117.5 billion, with an average annual growth rate of 17.3 percent. According to the Danamex China Business Resource, China provided 24 percent of the global textiles and apparel in 2005. And as bad as growing cotton in China is currently, the textile industry is far more environmentally damaging.

In addition to heavy metals, carcinogens, fabrics, dyes, organic materials, starches, and bleach, the industry uses a large amount of water and energy. According to information from Bluesign Technologies, growing cotton for use in textiles requires between 8,000 liters and 40,000 liters of water per kilogram of cotton. Producing textiles creates up to 600 liters of wastewater per kilogram of textiles. The chemically-saturated and toxic wastewater is what makes textiles such an environmentally damaging industry in China.  Miller-McCune, a consultancy, estimates that only 10 percent of dye wastes are recycled. According to an article on textile pollution in the Wall Street Journal, treating contaminated water can cost more than 13 cents per metric ton. In order to keep prices low, many textile dye houses build pipelines that dump industrial runoff either underground or directly into rivers and lakes. In China, people often joke that to know what colors are currently in fashion, one need only look at the rivers.

In the same article, Andy Xie, former chief economist of Morgan Stanley Asia is quoted as saying, “Prices in the U.S. are artificially low. You’re not paying the costs of pollution, and that is why China is an environmental catastrophe.”

Although China’s national leaders have environmental guidelines and policies to curb pollution, local agencies routinely ignore violations because of economic development incentives. There is little enforcement of national environmental policies at the local level, and companies who conduct business with dye houses and textile mills often have a greater ability to influence change.

moving forward

It is clear to Chinese leaders that pollution is becoming a drag on the country’s economy. China’s Development Research Center commissioned researchers from around the world to create pragmatic solutions and policies that worked with the market. The researchers concluded that China would benefit from a “Green Trade Policy” to encourage sustainable cotton growing, supply chains, and textile production. One proposal recommended instituting a “green tax” on cotton and textile goods to pay for wastewater treatment and recycling, though this measure is not favored by industry.

The Chinese cotton and textile industries are coming under increased scrutiny as people around the world are becoming conscious of the country’s environmental catastrophes. Several companies have worked with textile partners to impose higher environmental standards, but that is not the norm. Most companies either are not aware of–or ignore–the true environmental costs associated with their products.

Some Chinese activists are taking it upon themselves to add transparency to the textile supply chain by publicly linking polluting factories with the overseas companies that purchase their products.

Ma Jun, a Chinese water pollution activist who posts pollution data on a website, told the Wall Street Journal, “We want them to know we’re watching from China.”

A company who is found doing business with major polluters could suffer reputational damage to its brand as customers increasingly demand products that are “better” for the environment. Pollution from cotton growing and textile production may become what sweatshop labor was for the industry in the 1990s.

Companies interested in avoiding brand damage should work with dye houses to ensure that better environmental standards are met. Another option is to use dyeing technology that doesn’t use massive amounts of water, energy, or toxic chemicals that can be dumped into waterways. Textile companies looking to establish sustainable supply chains need to seriously reexamine the cotton-growing, garment dyeing, and textile treatment operations in China.

photo credit: Lu Guang / Pollution in China

As yet another example of the risks of water scarcity, China has begun to resettle 330,000 people so it can divert water from the Yangtze River to northern China. A canal is being constructed from the Danjiangkou reservoir in Bubei all the way to Beijing, according to the Xinhua news agency. Those living in central provinces such as Henan and Hebei are being relocated to make way for the canal.

The multi-billion-dollar project was originally envisioned as a three-line system of canals and pipes, moving water via eastern, middle, and western routes to the north. The canal from the Yangtze River is part of a central line in the system. The plans called for the middle and eastern routes to be completed by 2010. However, objections from environmentalists, difficulties resettling the population living in the construction zones, and the cost of treating badly polluted water have helped delay the project’s completion until 2014.

The China’s South-North Water Transfer Project document (PDF) shows that northern China has only 19 percent of the country’s water resources, yet accounts for 47 percent of the population, 64 percent of the cultivated land, and 45 percent of the country’s GDP. In order to sustain economic development and growth in the north, water resources must be diverted. When completed, the water diversion project is expected to push about 460 billion cubic feet of water through the central canal each year.

China has outlined the threat of the northern water crisis in the South-North Water transfer document. The report declares that the lack of water resources in the north:

• Is an obstacle to the enhancement of people’s living standards
• Causes further worsening of the ecological environment, and is associated with environmental problems like land sinking and seawater intrusion
• Restricts agricultural development and threatens food safety
• Threatens national economic development, and will hurt the national economy should the water crisis worsen

Supply infrastructure alone may not be enough to solve China’s water problems. A World Bank report indicated that water prices should be allowed to rise to reflect the scarcity as well as to promote conservation. Whatever steps China takes to resolve its water scarcity, one thing is clear–its economy and people cannot thrive without water resources.

photo credit: PeaMasher 2002