Meeting China's Global Resource Needs Managing Sustainability Impacts to Ensure Security of Supply: Palm Oil Pilot Study

China’s large and growing inbound supply chains are among the most direct ways in which China’s rise impacts economies worldwide.

For exporting countries this trade brings economic benefits such as employment, income and investment, but can also be associated with social and environmental (or “sustainability”) problems. Negative impacts on land, water, air, biodiversity and communities can translate back into supply chain problems for China, whether through short-term disruptions or the broader impact on China’s “brand” in international markets, which can affect the ability of Chinese enterprises to access international capital, resources, markets and talent.

China’s strategic concerns to address resource scarcity and build an “ecological civilization” make effective management of the social and environmental footprint of inbound supply chains increasingly critical. Sustainability risks therefore should count for enterprises and policy-makers concerned with China’s inbound supply chains. Yet for most companies operating in China, sustainability risks in inbound supply chains are poorly understood and often inadequately managed.

This initiative of the International Institute for Sustainable Development, supported by the U.K. Government’s Department for International Development (DFID), is intended to help overcome this gap. The project:

• Developed and tested a methodology for assessing the relationship between sustainability and security of supply risks in inbound supply chains.
• Undertook two pilots to test the methodology, based on desk research, looking at the copper and palm oil supply chains.
• Surveyed and convened discussions with business people, policy-makers, academics, and non-governmental organizations to test the concepts, methodology and findings, and to identify policy-relevant conclusions.

This paper, which outlines the findings of the palm oil pilot, is therefore complemented by a paper on the copper pilot, and a technical paper on the methodology. These three input papers feed into the overall synthesis paper, which integrates the overall findings and draws out conclusions and policy recommendations.