Supply Chain

China

In the last 25 years, China has witnessed a wave of economic growth unlike anything in the history of modern civilization. Millions of individuals have been lifted out of poverty and are today reaping the benefits of the nation’s modern and vibrant economy. Yet, this tide of growth does not come without unintended consequences.

With a large and growing retail presence, and a vast network of suppliers that source from China, we see a responsibility and an opportunity to promote practices that will sustain the country’s growth and protect our world’s natural resources. Through our China Network, we are forming partnerships with government, industry and non-governmental organizations to identify solutions for sustainable growth and supplier best practices.

One of the network’s chief priorities has been the development of a “model factory” program. The model factory will highlight excellence in product quality, ethical standards and environmental practices – the building blocks of sustainable sourcing. Over time, the network is facilitating measurement of the following in participating factories:

  • Energy reduced in gigajoules (GJ);
  • Water reduced in cubic meters (m3);
  • Waste reduced in kilograms;
  • Carbon footprint (CO2) reduced in kilograms; and
  • Percent of reused or recycled waste.

To date, 13 suppliers have volunteered to be a part of our model factory program, and we are working with them to dig deep into their companies’ operations and sourcing models to help identify best practices and improvements that can be implemented in their factories and businesses so that they can be more environmentally sustainable while maintaining profitability. Our next step is to look beyond the factories to the raw material sources themselves. To this end, we recently undertook a research trip to explore opportunities for integrating more sustainable practices into the operations of raw material suppliers. To date, the cost savings for factories totals 4.8 million Chinese renminbi (RMB) or $640,000 (USD).

We are proud of our first steps, but the challenges we face are significant and complex. The high turnover of factories and suppliers, combined with a lack of long-term purchase commitments, has made progress difficult to accelerate. We also see an untapped opportunity to collaborate in more dynamic ways with the Chinese government.

Today, we estimate that there are thousands of export factories in China from which we directly source goods. This does not include the large number of factories from which we indirectly source goods. Moving forward, we must continue to look for innovative ways to engage all of our suppliers in the path toward sustainable development in China.