China expects better compliance

HELD TO ACCOUNT

CHINA • MULTINATIONAL CHEMICAL COMPANIES SHOULD TAKE MORE RESPONSIBILITY FOR THEIR INDUSTRIAL PARTNERS IN CHINA, SAYS A HARD-HITTING REPORT ON A FATAL EXPLOSION

On 21 March 2019, a major explosion occurred at the Jiangsu Tianjiayi Chemical (JTC) plant in the Xiangshui Chemical Industrial Park, Yancheng City, Jiangsu Province, China. The blast, which was powerful enough to register on seismic monitoring systems, caused 78 deaths and injured more than 600 people. Authorities in the Yancheng Municipal Government have since closed all operations at the Xiangshui Chemical Industrial Park to look more closely at other hazards.

The incident, which was not widely reported at the time, has drawn criticism from environmental groups in China, angry that European and North American chemical companies were still doing business with JTC, despite repeated alarms over poor environmental and safety standards at the plant.

“Records indicate that at least four of the world’s global chemical giants – DuPont, Merck, BASF and Clariant – may count JTC in their supply chain. Yet these companies have kept their heads down about the urgent need to put their own shoulders to the wheel and join government and stakeholder efforts to prevent similar incidents from happening again,” says a report on the incident published by the Institute of Public & Environmental Affairs (IPE), a Beijing-based group that is part of the ‘Green Choice Alliance’, a group of Chinese non-governmental organisations that promotes a global green supply chain by pushing large corporations to pay attention to the environmental performance of their suppliers.

MULTIPLE VIOLATIONS Publicly available inspection records clearly suggest that JTC was an accident waiting to happen, IPE says. The factory had multiple serious safety and environmental violations on record – 13 types of safety hazards were documented in February 2018 by the former State Administration of Work Safety (SAWS), now the Ministry of Emergency Management (MEM), including the lack of an emergency shut-off valve near the bottom of the benzene tanks that have been identified as the root of the March explosion. Environmentally, the factory was similarly operating well outside the law, with egregious infractions such as building a hidden pipeline to discharge pollutants into nearby waterways and evading supervision of its air emissions.

It also appears that the situation at JTC is far from unique; many other chemical factories located in the Xiangshui Chemical Industrial Park where JTC operated and in adjacent industrial parks also have extensive documented environmental violations. Adding insult to injury, a nearby factory in Zhejiang

THE JTC EXPLOSION WAS ONLY ONE OF SEVERAL

province, which benefited from the reduced competition in chemicals production following the closure of JTC, itself has a record of environmental violations and has just been listed as posing critical safety hazards.

In response to the JTC explosion, government agencies have been rolling out major corrective actions, IPE notes. Officials in Jiangsu have announced draft plans to significantly reduce the number of chemical enterprises in the province. Thousands of enterprises will be re-evaluated and those not up to standards will be shut down. Other provinces such as Shandong and Zhejiang are following suit, based on lessons drawn from the JTC incident, and have launched safety inspections to phase out potential hazards and pollution from chemical manufacturing operations. GETTING TOUGH While Chinese state and provincial authorities have been taking an increasingly strict approach to the management of chemicals and the chemical industry, IPE believes that multinational companies are well placed to make a big difference to standards in China. IPE says that they can introduce sourcing policies that require their procurement departments to buy only from factories that comply with local safety and environmental laws and by rewarding factories that go beyond compliance with additional business.

“If, instead, corporate buyers look only at price, and violators remain eligible for business, these companies sustain a powerful engine for continued irresponsible operations around the world. Their procurement policies serve as a damaging drag and counterforce to stakeholder efforts to achieve safer and more environmentally responsible manufacturing, particularly in China,” IPE says.

It should be noted that the four international chemical companies implicated in the IPE report have all denied any direct commercial relationship with JTC; however, at least two have indicated that JTC may have been an indirect supplier. Given the complexity of the international chemical supply chain, it is indeed possible that other non-Chinese chemical companies may have been purchasing JTC product and may well still be sourwcing material from other manufacturers in China that have similarly lax approaches to safety and environmental protection.