How can an enterprise become “greener” as the international community demands increasingly high standards for environmental protection? According to Chi Mei Corp. headquartered in southern Taiwan’s Tainan City, despite huge extra costs to operation, its green moves have helped the company go through two natural disasters largely unharmed and have also won the company awards and profits.
On 2016 Earth Day in late April, world leaders from more than 100 countries and territories, including the U.S. and mainland China, the two largest carbon emitters, gathered at U.N. headquarters in New York to sign the Paris Agreement on reducing carbon emissions with a goal of limiting global warming by 2100 to below 1.5 C.
“Other than fighting global warming by reducing carbon emissions, there is no Plan B as there is no Planet B,” said U.N. Secretary-General Ban Ki-moon.
Lee Yuan-tseh, former president and academician of Academia Sinica, Taiwan’s foremost research institute, said in a recent speech that energy restructuring efforts suggest comprehensive transformations in political, social and economic fields. “Developments without control of environmental risks will make human beings a total loser,” he said, adding that the world would face unmanageable crises by decades if nothing is done now.
The essence of Earth Day lies in global thinking and local action. In addition to individual efforts in reducing the use of resources and protecting the environment, the new generation of enterprises has adopted the “doing well by doing good” model to stay competitive.
Inescapable green challenges
The operation of green enterprises requires less use of resources and energy, less pollution and reduced carbon emissions in the production process. The latest progress of green enterprises has been driven by regulations irrelevant to the market on the one hand and by the market force on the other.
Changes in international regulations pose the greatest challenges to the export-oriented economy of Taiwan. The American Clean Energy and Security Act passed in 2009 by the U.S. House of Representatives seeks to promote a low-carbon economy and will begin imposing punitive carbon tax on imported products with high carbon emissions in 2020.
Multinational companies are also managing to build green supply chains. For example, IBM required its 28,000 suppliers to submit their own environmental impact reports and set their own goals of reducing carbon emissions. Sony Corp. set the target of reducing the energy use by 30 percent for each product’s life cycle by 2015, dropping from the 2008 level.
Green supply chains are also asked to reduce the use of water and electricity. For example, Nestle set the goal of reducing direct water withdrawals per tonne of product by 25 percent at all its factories around the world in 2020 versus 2011. Nestle’s dairy factory in Mexico recycles and reuses the water collected from the milk production process to wash iron cans and clean the factory, saving 1.6 million liters water a day equal to the amount for daily use by 6,400 persons.
In addition to environmental security and sanitation concerns, workers’ rights are another focus for green enterprises. In recent years, the tech giant Apple Inc. has made requirements for its suppliers around the world in such areas as work hours, wages and working conditions. For example, workers must not pay extra recruitment fees to brokers and the work is limited to no more than 60 hours a week. Suppliers have to improve their working conditions before they start making money from Apple.
Green production generates long-term benefits for enterprises. Statistics from the U.S. Green Building Council showed that the building materials comprising green structures help cut maintenance costs and outperform conventional buildings by 20 percent in return on investment. According to the Carbon Disclosure Project, from 1993 to 2010 the enterprises with sustainability strategies performed 1.5 times better than those with none in return on investment.
Notably, household goods multinational Unilever PLC CEO Paul Polman announced the Unilever Sustainable Living Plan in 2010. The plan promises to, by 2020, help the world’s more than one billion people improve their health and hygiene, halve the environmental footprint of making and using the company’s products, source 100 percent of the company’s agricultural raw materials sustainably, and advance human rights for workers across the company’s supply chains. By reducing the unnecessary use of energy and raw materials in the production process, Unilever has saved more than 200 million euros (NT$7.38 billion) in operation cost since 2008.
Becoming greener rather than expanding capacities
Global green trends have extended to Taiwan. Located in Tainan’s Rende District, Chi Mei Corp. won the ROC Enterprises Environmental Protection Award, an honor that the company had received 23 years ago.
In the past two years, Chi Mei was largely unaffected in its production and operation by a big earthquake and a major drought occurring in Tainan thanks to, surprisingly, the company’s devotion to environmental protection and corporate social responsibilities.
Today, the access to international supply chains requires not only quality of products but also green and CSR features. “Making quality products is something like getting an international driving license, which doesn’t mean you can drive well,” Chi Mei President Chao Lin-yu said. He cited a deal with a big international brand, which sent five inspectors to Chi Mei before placing orders. Only one of the five persons was responsible for purchase-related affairs. The other four were experts in such areas as industrial safety, environmental protection and CSR.
Regarding the industrial safety, environmental protection and workers’ rights, the standards introduced by the four inspectors were all higher than their Taiwan counterparts.
In keeping with international trends, in the recent five years Chi Mei has spent more than NT$10 billion (US$305.5 million), not for expanding capacities or increasing production, but rather for taking greener actions in such areas as environmental protection and industrial safety, entitling the company to the 2015 ROC Enterprises Environmental Protection Award and 2015 National Industrial Innovation Award. Due to emphasis on environmental protection and CSR, Chi Mei sees its client base expanding greatly from traditional Taiwan manufacturers to big international brands, selling materials to European makers of toys, tires and filtered water bottles.
So, many of luxury car tires and the filtered water bottles with health claims, as well as building block toys from Europe, have used plastic materials made in Tainan. Chi Mei, with its emphasis on industrial safety and environmental protection, in the past two years stood the test of major natural disasters in Tainan.
On Feb. 6, a major earthquake hit southern Taiwan before dawn and brought great damage to the Tainan area. Located near the epicenter in Kaohsiung City’s Meinong District, Chi Mei’s petrochemical plants are only 10 minutes driving distance away from the toppled Jinlong high-rise, more commonly known as Weiguan Jinlong building after the company that built it. Compared with the earthquake that hit central Taiwan Sept. 21, 1999, the Tainan temblor came three times stronger for Chi Mei plants, which yet remained largely unaffected and resumed production by noon that day while many companies at Southern Taiwan Science Park in Tainan seriously suffered from the quake.
“In the past five years, we’ve changed a lot of things big and small from transformers to light tubes and [light-emitting diode] streetlights. For our factories, some of which have been used for more than 30 years, they would have problems in such aspects as equipment efficiency, industrial safety and environmental protection if old structures were not renovated. So we did what we should do, and then the unexpected earthquake came,” said Chi Mei Vice President Lee Chien-hsing, who saw Chi Mei pass the test of earthquake.
In the wake of the 2015 Paris Climate Conference, the world has paid even more attention to greenhouse gas emissions. Earlier five years ago, Chi Mei decided not to burn heavy oil in its production process and to burn natural gas instead, which has been done by 80 percent, reducing carbon emissions by 17 percent.
Certainly, for an enterprise, changing from heavy oil to more expensive natural gas increases the cost of operation and requires additional investments on renovation of equipment.
Another major natural disaster occurred during the first half of 2015, when Taiwan saw its most serious drought after 1947. In the nightmare of water shortage, many semiconductor and panel factories had been fiercely struggling for more water. Yet Chi Mei, previously considered a petrochemical business consuming much energy and water, did not halt its production lines nor did it send trucks to get water.
The reason was that Chi Mei needed one third less water for making each tonne of products than it did five years before. Despite threats of drought, the production lines continued working normally.
“Our water-saving mission ensures that a drop of water can be used three times with the recycled water from a production process reused in the next one, somewhat like collecting and reusing the water used in taking shower for car wash and then for toilet flushing,” Chao said. Even the water used for toilet flushing can be reused. According to Industrial Technology Research Institute in northern Taiwan’s Hsinchu County, Chi Mei is one of the four traditional manufacturers in Taiwan to develop the electrodialysis reversal techniques for recycling and reusing the treated wastewater. Chi Mei plans to invest on large-scale EDR facilities capable of treating up to 6,000 tonnes of water per day.
Greener, worthier
A reform was crucial for Chi Mei’s success in reducing carbon emissions and use of water. For years ago, an energy strategy commission was formed in the company. According to Chen Shi-xian, an assistant manager at Chi Mei headquarters’ administration department, this commission comprising members from all units of the company targets three major areas, namely electricity, fuel and water resources. Each of the frontline production units is required to report its key performance indicators to the commission.
How can a commission comprising members from all units of the company help produce better results of saving energy and reducing carbon emissions? The reason is that, firstly, the production frontlines know best about each unit’s carbon emission volumes; secondly, different units are not likely to set up the same goal of reducing carbon emissions; and thirdly, participation by members from all units of the company can facilitate benign internal competition.
For the commission, Chi Mei plans to target the fourth area of waste management and reduction, which will be included as part of KPI. The company hopes to treat 90 percent of its wastes or change them into a form of energy for reuse within its factories.
“The two natural disasters are two exams conducted by heaven, which Chi Mei could have failed if it did not do those things,” Chao said. Such investments have also led to a change in Chi Mei’s client base. Chao compared Chi Mei’s products and their applications to the use of flour. “In the past, the flour was used to make cheap steamed buns, 10 NT dollars each, with the flour’s value determined by weight. Now, due to greater emphasis on green qualities, environmental protection and CSR, the flour has a higher value and is used to make bread valued at 500 NT dollars.”
Likewise, Chi Mei’s investments on the environmental protection and CSR work have created and raised the value of its products. Devotion to environmental protection and CSR can bring more profits.