Green Supply Chain in Real Estate Industry in China

Voluntary Actions Taken by Chinese Companies to Reduce Carbon Emissions throughout the Entire Supply Chain

1. BACKGROUND & CONTEXT The Chinese government has made a number of environmental policies and laws to deal with envi-ronmental issues that partially resulted from the rapid pace of economic development. However, there is still a lack of large-scale, market-driven and voluntary emission reduction behaviors in China,especially in carbon-intensive industries like steel, cement and wood production. These in-dustries, many of which have overcapacity problems, are among the main producers of carbon emissions and pollution in China. Research shows that China accounts for 20% of global carbon emissions, of which nearly 40% is generated by the real estate and construction sector, meaning that this sector in China alone con-tributes 8% of the world’s carbon emissions. In this context, the Society of Entrepreneurs & Ecol-ogy (SEE), business associations and leading property developers jointly launched the program “Green Supply Chain in Real Estate Industry in China” in early 2016. The founding members in-clude SEE, the China Urban Realty Association, the China Real Estate Chamber of Commerce, Landsea Green Properties Co., Ltd and China Vanke Co., Ltd. As of November 2016, 70 real estate companies, representing sales revenue of 1.1 trillion RMB (163 billion US dollars) in 2015 or 12% of the whole sector, have joined the program and engaged more than 2,000 upstream suppliers. Unlike previous programs conducted in China by governments or individual companies, this pro-gram is the first sector-wide, market-driven, voluntary emission reduction initiative that engages companies along the entire supply chain. It is also the business community’s concrete actions to facilitate global emission reduction as well as a prompt response to the Chinese government’s commitment to the Paris Agreement.

2. PROGRAM OBJECTIVES & MECHANISM 2.1 Objectives

• Reduce carbon emissions and pollutants of corporations throughout the entire supply chain of the real estate industry. • Help corporations with environmental management and capacity building by helping them to rec-ognize and avoid environmental risks. • Provide governments with best practices from the program to facilitate the refinement and imple-mentation of a national environmental roadmap and policies. 2.2 Mechanism

The key implementers of the program are real estate companies and their suppliers, which identify several key product categories to make eco-friendly purchases. Independent organizations like NGOs and testing & certification bodies provide technical support, while a Promotion Committee composed of founding members and a Working Group composed of all participating companies are responsible for coordinating and integrating resources.

2.2.1 Collaborative Efforts [Facilitators] Real estate companies: identify suppliers and supervise them in adopting better envi-ronmental practices; incorporate environmental assessment into purchase and bid policies. [Implementers] First-tier suppliers: cooperate with real estate companies to work through the whole process; incorporate environmental assessment into purchase and bid policies. Second-tier and third-tier suppliers: improve environmental practices according to project requirements; give feed-back on progress to the independent organizations. [Monitors] Independent organizations: assess the environmental performance of suppliers and pro-vide feedback on results at all levels of the supply chain; give regular feedback on the performance of suppliers to the promotion committee and working groups. [Coordinators] Promotion Committee and Working Group: coordinate implementation schedule and direct its implementation; supervise the implementation schedule for real estate companies; exert collective pressure and urge suppliers to improve their environmental practices. 2.2.2 Product-based Implementation Taking factors such as environmental impact and program feasibility into consideration, GSCP identifies several specific product categories to implement. Detailed implementation plan and pro-curement guidelines are developed for each category. Participating real estate companies accord-ingly select at least one product category to follow up the implementation. Early on, the projects are conducted in four categories: controlling heavy pollution (including steel and cement), aluminum alloy without chromium passivation, using legal wood sources for commer-cial development (flooring), and controlling formaldehyde content of man-made indoor flooring. In the future, GSCP will gradually expand the number of product categories.

3. DELIVERABLES The program will deliver the following outputs: • White Papers of Purchasing Standards for Green Supply Chain in Real Estate Industry in China, including specific action plans and standards.

• Establishment of environmental management systems by property developers and upstream suppliers to reduce carbon and environmental footprints; establishment of a recommend list (White List) and a deny list (Black List) based on the environmental performance of suppliers. • A sector-specific environmental information database and disclosure platform. • Practical experience provided to governmental policy makers, facilitating the development of

policies and laws related to industrial sustainability.

4. PROGRESS

4.1 On-going Processes:

• Publish of the White Papers of Purchasing Standards for Green Supply Chain in Real Estate Industry in China. • Revision of property developers’ bidding and purchasing contracts with suppliers, integrating the green purchasing standards into the supplier evaluation system. • Preparation for the establishment of a preliminary “White List” according to supplier environmen-tal performance. • Apart from the real estate sector, SEE also sponsors IPE (The Institute of Public and Environ-mental Affairs) to carry out an environmental information disclosure index (CITI, Corporate Information Transparency Index) evaluation of more than one hundred brands from eight sectors including IT, textiles, food & beverages, automobiles, pulp and paper, leather and beer. The evalu-ation and Index successfully mobilized 1,800 suppliers to improve their environmental practices. 4.2 Actions to Take:

• Industry cooperation and information sharing: develop an online system and website to disclose environmental information of suppliers; launch and update a “White List” of qualified suppliers. • Transform environmental risks to opportunities: assess and reduce the environmental risks throughout the entire supply chain; explore potentials for energy saving and emission reduction. • Expand environmental benefits: include more product categories like glass and stone in the green purchase list; attract more companies to participate in the program. • Scale up and policy advocacy: apply the green supply chain mechanism in other sectors, such as the household chemicals and IT; facilitate the development of favorable policies for emission reduction and sustainable development.

5. PARTICIPATING ORGANIZATIONS & COMPANIES 5.1 Founding Members 5.1.1 Society of Entrepreneurs & Ecology Founded on June 5th, 2004, SEE (Society of Entrepreneurs and Ecology) is a ground-breaking non-governmental organization aiming to protect environment. It was the first environmental NGO in China with a membership comprised mainly of entrepreneurs who dedicate to advance enter-prise social responsibility. In 2008, SEE Foundation, also known as Beijing Entrepreneur Environmental Protection Founda-tion, was established with the mission of supporting and nurturing Chinese environmental civil soci-ety organizations, and facilitate a learning platform for entrepreneurs, NGOs and the public to en-gage in environmental protection and sustainable development. SEE has so far provided more than 300 million RMB (approximately $45 million USD) in accumu-lated funding, focusing on three main areas, namely desertification control, pollution prevention and green supply chains, as well as ecosystem conservation and nature education. While the

scope of its work continues to expand, SEE Foundation is firmly committed to supporting the envi-ronmental cause of China’s civil society. 5.1.2 China Urban Reality Association China Urban Realty Association (CURA) was founded in 1999. It is a non-governmental organiza-tion consisting of multiple enterprises and also a subsidiary of City Development Committee of China Real Estate Association. CURA has 64 excellent membership enterprises, with projects in more than 100 major cities in China. As an influential organization within the Chinese real estate industry, CURA has been invited to the United States, Japan, Britain, France, Germany, Italy and many other countries many times. It serves as an important platform for the international commu-nity to understand and engage with China's real estate industry. Since its founding, CURA has been committed to "becoming the impeller and practitioner of ad-vanced human settlement concept". 5.1.3 China Real Estate Chamber of Commerce China Real Estate Chamber of Commerce (CRECC) is a national non-governmental organization established in 2001. It was supervised by the All-China Federation of Industry & Commerce (ACFIC) and registered with the Ministry of Civil Affairs of the People's Republic of China. CRECC represents the common interests of China's real estate industry with its mission to promote sus-tainable growth of the real estate sector. It is dedicated to defending the interests of its members, responding to their common concerns, and providing services using integrated resources. It main-tains an information exchange platform to keep the members informed with domestic and interna-tional market trends, as well as the latest technological development. CRECC is an advocate for self-regulation, social responsibilities, and a fair and free market. 5.1.4 Landsea Green Properties Co., Ltd. Landsea Green Properties Co.,Ltd., established in 2001, is one of the top 100 real estate enter-prises in China. It is an industry leader engaged in property development and operations with green technology. Landsea has implemented a long-term strategy on using green technology in buildings. While focused on residential property development as its principal business, Landsea also actively engaged in new businesses including green seniors housing, green design, green decoration, green construction technology and investment in green industries. Landsea provides environmentally friendly, comfortable and energy saving residences that are beneficial to the health of residents and that are welcomed by customers. 20 of Landsea’s residen-tial projects were awarded the Green Three-Star Identification, which is the highest level of na-tional green property design certification in China. Landsea has about 150 patents in construction technology, and it is widely recognized as the leading developer and builder of green properties. 5.1.5 China Vanke Co., Ltd Founded in Shenzhen in 1984, China Vanke Co., Ltd has become a leading real estate company in China since it stepped into the housing market over thirty years ago in 1988, with its main busi-ness being real estate development and property service. Adopting the strategy of focusing on city clusters, Vanke has covered 66 cities in mainland China by the end of 2015, mainly in the Pearl River Delta centered on cities of Guangzhou and Shenzhen, the Yangtze River Delta centered on Shanghai, the Bohai Rim Region centered on Beijing, and the Chengdu Region which covers ma-jor cities in Midwest China. Its sales volume in 2015 amounted to RMB261.47 billion with a year-on-year growth of 14.3% for 20.671 million square meters with a year on year growth of 20.7%, making it an industry leader globally in terms of sales performance. 5.2 Third-parties Institute of Public and Environmental Affairs (IPE), World Wide Fund for Nature (WWF) ,Vanke R&D Center, Landleaf Technology and certification agencies.

5.3 Participating Companies 1) Landsea Green Properties Co., Ltd. 2) China Vanke Co., Ltd. 3) LuckyKing (Xi'an) Real Estate Development (Group) Co., Ltd. 4) Sichuan BRC Hejun Industry Co., Ltd. 5) Suzhou SunnyWorld Real Estate Co., Ltd. 6) Xinyi Properties (Shanghai) Co., Ltd. 7) Beijing Tenhong Land Co., Ltd. 8) Vantone Investment Holding Co., Ltd. 9) DongDu International Group Co., Ltd. 10) Huainan Xinyi Real Estate Development Co., Ltd. 11) Joy International Group Holding Co., Ltd. 12) Nanjing Qixia Construction Co., Ltd. 13) Shenzhen WorldUnion Properties Consultancy Co., Ltd. 14) Thai Hot Group Co., Ltd. 15) Hodo Group Wuxi Property Co., Ltd. 16) Inner Mongolia Yitai Estate Co., Ltd. 17) Anhui GDDG Investment Holding Co., Ltd. 18) Powerlong Real Estate Holdings Limited 19) Beijing Science Park Development (Group) Co., Ltd. 20) Beijing Huayuan Property Co., Ltd. 21) Beijing Sun Group Estate Development Co., Ltd 22) Ziroom Property Service Co., Ltd. 23) Botai Investment Group Co., Ltd 24) Chengdu Jiaoda Realestate Co., Ltd. 25) Chongqing Sincere Holdings (Group) Limited 26) MOMΛ (China) Co., Ltd. 27) Fu Wah Property Co., Ltd. 28) Guangxi Tianning Real-estate Development Co., Ltd. 29) Guangzhou R&F Real Estate Company Limited 30) Guprui Properties 31) Hubei Ren Xin Real Estate Development Co., Ltd. 32) Hua Fu Group 33) Central China Real Estate Limited 34) Jiangsu Eastide Group Co., Ltd. 35) Jiangsu Zhongda Real Estate Group Co., Ltd. 36) Jiangxi Yida Investment Development Co., Ltd. 37) Antaeus Group 38) Kingway Construction Group Limited 39) Metro Land Corporation 40) Junfa Real Estate Co., Ltd. 41) Qingdao Urban Construction Group Co., Ltd. 42) Qingdao Hisense Real Estate Co., Ltd. 43) QingdaoTiantai Real Estate Development Co., Inc. 44) Cherish-Yearn Co., Ltd. 45) Risesun Real Estate Co., Ltd. 46) Shanghai Fosun High Technology (Group) Co., Ltd. 47) Shanghai San Sheng Hong Ye Construction Group Co., Ltd. 48) Minmetals Land Limited 49) Xi'an High-tech Development Zone Real Estate Development Co., Ltd. 50) Xi'an Rong Hua Group Enterprise 51) Xi'an Yahe Real Estate Development Co., Ltd. 52) SAMTAK Co., Ltd. 53) Future Land 54) Star River Group 55) CIFI Holdings (Group) Co., Ltd.

56) Sunshine City Group Co. 57) COFCO Property (Group) Co., Ltd. 58) China Railway Real Estate Group Co., Ltd. 59) Glodon Company Limited 60) Jiaxing Green Living Equity Investment Fund Management Co., Ltd. 61) Ping An Real Estate Company Ltd. 62) Riverside Group 63) Suzhou Gold Mantis Group Co., Ltd. 64) Grand China Fund 65) Shenzhen Mingyuan Purchase E-commerce Co., Ltd. 66) Broad Homes Industrial Co., Ltd. 67) China VAST Industrial Urban Development Company Limited 68) China Construction Steel Structure Corp, Ltd. 69) Chiway Holding Group 70) Beijing New Building Material

Assessment of Environmental Benefits from Promoting Green Supply Chain in Real Estate Industry in China

1. Basic Information There are three phases for this program:

1.1 Phase One (2016-2017): 70 real estate companies which participate in this program require

the upstream suppliers to reach environmental standards, eliminating the supply chain enter-

prises’ illegal behaviors and playing a leading role in real estate industries.

1.2 Phase Two (2018-2020): the number of engaged real estate companies spread from 70 to

around 600 including the related member companies in SEE, the China Urban Realty Associa-

tion, the China Real Estate Chamber of Commerce. And their supply chain companies will

reach the main standards of energy conservation and emission reduction in advance in desig-

nated-sized industrial enterprises, which is set up by the Ministry of Industry and Information

Technology’s document of “The Industry Green Development Plan in the 13th Five-year Pe-

riod”.

1.3 Phase Three (2021-2025): By the real estates’ great promotion and their leading role’s influ-

ence as well as by standardizing and restraining the supply chain companies, this program ex-

pects the union of different industries in the name of green supply chain at the third phase,

and to set up environment management mechanism with the upstream supply chain industries

in steel, cement, aluminum alloy, and lumbering, rather than just conducting environment man-

agement to the related architectural products purchased by real estate companies. According

to the program design, the supply chain companies’ environment performance and energy effi-

ciency level need to keep or reach the international best standard at the third phase. Under

the huge consumption size and the peak demand of energy efficiency, the potential of energy

conservation and emission reduction of green supply chain will be very surprising.

2. Outcomes in the Three Phases 2.1 Phase One: the current 70 real estate companies represent 290 million ㎡ of construction area

annually; the corresponding purchased products’ energy consumption is about 24 million ton in

the process of production, including 18 million ton standard coal of energy consumption in the

process of steel production, 6 million ton standard coal of energy consumption of the process

of cement production. In addition, these 70 companies’ annual floor consumption is about 130

million square meter which is equal to 500 hectare of forest.

2.2 Phase Two: For the 600 real estate core member companies in the three organizations of SEE,

the China Urban Realty Association, the China Real Estate Chamber of Commerce. In 2018-

2020, the estimated steel consumption is 110 million ton, along with 330 million ton of cement.

According to the main standards of the Ministry of Industry and Information Technology’s docu-

ment of “The Industry Green Development Plan in the 13th Five-year Period”, the energy effi-

ciency of steel per ton drops to 560kgce, along with 105kgce/t for cement. At the second

phase, the steel, cement, and proximate matter aluminum alloy provided by the 600 real estate

companies consume energy in total of 98 million ton standard coal and release 350 million ton

of carbon dioxide which is approximately equal to the total amount of carbon dioxide by Aus-

tralia in 2015 (BP World Energy Statistic Review, 2016). By increasing the unit energy effi-

ciency of steel, cement, and proximate matter aluminum alloy, the 600 real estate companies

could reduce 50 million ton of carbon dioxide emissions which is equal to the carbon dioxide

emission by Portugal in 2015 (Global Energy Review and Outlook, 2016) at the second phase

(BP World Energy Statistic Review, 2016).

2.3 Phase Three: All the companies related with steel, cement, proximate matter aluminum alloy,

and wood will reach to or be higher than the international environment and energy standards.

Specifically, the unit energy efficiency of steel is no more than 520kgce/t; the unit energy effi-

ciency of cement is no more than 80kgce/t; the unit energy efficiency of aluminum alloy is no

more than 450kgce/t. Followed by these standards, the whole supply chain will realize reducing

890 million ton of CO2 emissions in 2025 due to the increased energy efficiency, which is

equal to the double carbon dioxide emissions of England in 2015 (BP World Energy Statistic

Review, 2016).

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The first and second phases focus on the consumed forest area by wood floor, while the third

phase focuses on the consumed forest area by the whole lumbering industry. By strengthening the

requirement of the legal source of wood, the biodiversity will be greatly protected. Specifically, it

could promote the protection of endangered species, such as Manchurian Tiger’s habitat in Russia

and teak protection in Mekong district in Southeast Asia, and effectively protect the local animals

and communities which inhabit old-growth forest, as well as promoting global old-growth forest pro-

tection. With more and more forest to be identified, forest degeneration will be greatly contained,

which will help the sustainable development and protection of forest resources.

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