CHINA: An Introduction to Energy & Natural Resources (PRC Firms)

Decarbonisation of Supply Chains and Insights from Legal Practice

With China's commitment to the “carbon peak” and “carbon neutrality” goals, “decarbonisation” has become a new trend in the management of supply chains among Chinese enterprises. This article intends to share practical insights into the increasingly urgent need of supply chain decarbonisation, starting from the background and trends in domestic and international supply chain regulation, to the relevant legal practice of Sunshine Law Firm.

I. Background and Trends 

According to reports released by the World Economic Forum, supply chains account for 60% of global carbon emissions, among which, the “big eight” supply chains, including food, construction, fashion, fast-moving consumer goods, electronics, automotive, professional services and freight industries, account for more than half of the global greenhouse gas emissions. It is clear that carbon emissions from supply chains cannot be underestimated and decarbonisation of supply chains must be carried out.

Under the context of achieving carbon peak and carbon neutrality, some countries and regions have shifted their focus on carbon emissions from individual companies to the entire lifecycle of products. Some multinational corporations have taken the lead by initiating carbon reduction requirements for their suppliers, progressively extending these requirements upstream to achieve a full coverage. For example, Apple has called on its suppliers to decarbonise in all of its relevant operations, including the use of 100% renewable energy. Schneider Electric has set targets to achieve supply chain carbon neutrality by 2040 and net-zero emissions by 2050.

For enterprises, the actions taken for supply chain decarbonisation includes proactive, strategic planning and responses as well as external regulatory pressure. Proactively, many global companies have taken initiatives related to decarbonisation, such as the Science-Based Targets initiative (SBTi), the EP100, and the RE100. Reactively, enterprises are influenced by external regulatory factors, such as the European Union's Carbon Border Adjustment Mechanism (CBAM). The CBAM not only covers CO2 emissions, but also nitrous oxide emissions from fertiliser production and perfluorocarbons generated during aluminium electrolysis. The European Parliament's version also includes nitrous oxide emissions in the process of plastic production. In addition to direct emissions, indirect carbon emissions should also be considered in certain specific cases. For example, Regulation (EU) 2023/1542 of the European Parliament and the Council on batteries and waste batteries introduces requirements on battery carbon footprints and green public procurement. Although these regulations may have a relatively small direct impact within a short term, there is potential for the scope of products and emissions to expand in the future. They also drive the formation of climate clubs and the development of new rules of procedure, bringing far-reaching implications for future climate and trade regulations.

II. Corporate Exploration and Key Issues 

Decarbonisation of supply chains is an essential aspect of green supply chain management. The Chinese government attaches great importance to the construction of green supply chains and has introduced several policies in recent years. These policies include the “Guiding Opinions of the State Council on Accelerating the Establishment of a Sound Economic System with Green, Low-carbon and Circular Development” issued by the State Council in 2021, the “Implementation Plan for Carbon Peaking in the Industrial Sector” jointly issued by the Ministry of Industry and Information Technology and two other ministries in 2022, and the “Implementation Plan for Fostering Green Consumption” jointly issued by seven ministries, which proposes the construction of green supply chains and supports leading enterprises in certain industries, such as automobile, machinery, electronics, textiles and communications, to play a leading role in supply chain integration and innovation within key areas of low-carbon management. It also promotes the establishment of a full lifecycle green supply chain system, covering upstream, midstream and downstream entities in production, supply and sales.

Although many Chinese enterprises, including Tencent and Ant Group, have implemented green supply chain management systems that spur on and help suppliers to produce and deliver green products at the current stage, the emphasis on carbon emissions in supply chain management in China and among Chinese companies is still insufficient in general. In view of the current circumstances, several key issues are raised:

First, there is a lack of strong intrinsic motivation for core domestic enterprises to work on supply chain decarbonisation, resulting in insufficient emission reduction constraints on upstream and downstream companies in the supply chain. While most of the core enterprises in the domestic supply chain have carbon reduction awareness, they have not imposed significant emission reduction requirements on upstream and downstream companies, compared to multinational corporations.

Second, small and micro enterprises in the supply chain lack strong autonomy in emissions reduction and are sensitive to the changes of price and cost. A shorter lifecycle, weaker profitability and limited risk tolerance make it challenging for them to adopt energy-saving and emission-reduction technologies, as well as to bear the associated decarbonisation cost.

Third, the infrastructure for supply chain evaluation systems and standards is incomplete. The monitoring, reporting and certificate verification systems for carbon emissions are not well-constructed and the multi-party supervision and third-party assessment are not fully utilised. The complex production processes and multiple emission sources of traditional high-emission enterprises increase the difficulty of monitoring carbon emissions.

Last but not least, incentives and restraint mechanisms need further improvement, especially in the areas of finance and taxation. Apart from this, the green procurement policies are mostly encouraging instead of mandatory, and lack detailed implementation rules, resulting in insufficient incentives for green supply chain enterprises. Banks primarily obtain information on corporates' carbon reduction through companies and environmental departments, which would be less targeted and timely. The types of current financial instruments are limited, and cannot fully meet the financing requirements of various kinds of decarbonisation projects with different business models and financing needs.

III. Insights from Legal Practice 

Sunshine Law Firm is one of the earliest law firms in China to provide legal services related to climate change and carbon emissions trading. We have also contributed to the drafting and research of legislative and normative documents in the green and low-carbon field, commissioned by central government departments. In recent years, Sunshine Law Firm has been actively providing comprehensive services to domestic companies and multinational corporations in the field of supply chain decarbonisation from both supply and demand sides. These include the largest national-level and fair-price international green certificate trading project in 2021 (a benchmark project for Apple's supply chain companies to purchase fair-price green certificates in China), the first national-level carbon-offset iron ore trade by Rio Tinto Group and Nanjing Iron and Steel, long-term green power trading projects for several fashion and electronics multinational companies etc.

Based on our experience, we would like to share three key takeaways, in the hope of contributing to the improvement of domestic supply chain decarbonisation effort in the future:

In the first place, we suggest emphasising the leadership role of core enterprises in achieving synergistic effect in supply chain decarbonisation. The formulation of specific goals and implementation paths for supply chain decarbonisation should be prioritised, centred around core supply chain enterprises (such as leading companies in automobiles, electronics, communications and large-scale equipment industries). The data of Scope 1, Scope 2, and Scope 3 emissions need to be precisely identified and quantified, based on which, the formulation of decarbonisation goals and technological implementation paths should be actively explored. Supplier management should be carried out through the construction of a comprehensive supplier database and specification of decarbonisation and green management goals, in order to avoid “greenwashing”. Throughout the product lifecycle, comprehensive green management should be enforced by highlighting green design, green production as well as formation of green logistics and recycling systems. The purchasing power of governments, enterprises and the public can be leveraged to accelerate the green and low-carbon transformation of enterprises. Carbon accounting and measurement should not be underestimated, as well as the quantification of carbon emission and carbon footprint contained in products. This avoids using default values from the European Union Carbon Border Adjustment Mechanism (CBAM) without conducting carbon accounting and verification. Information disclosure needs to be prioritised through actions like establishing a platform for green information collection, monitoring and disclosure to exhibit the completion status of enterprises' energy-saving and emission reduction targets, and publicise the effectiveness of green procurement.

In the second place, we suggest improving institutional support, policies and financial instruments to facilitate green development. To enhance the legal and policy framework, revision of laws, such as The Energy Conservation Law, The Circular Economy Promotion Law, and the Cleaner Production Promotion Law, needs to be carefully conducted. The linkage among various market mechanisms should be coordinated and the interfaces of various transactions, such as electricity and carbon markets, need to be clarified. It is also advised to accelerate the construction of a unified national electricity market system by fully leveraging different markets for the trading of carbon emission rights, energy consumption rights and pollutant emission rights. Through the integration and connection of multiple trading mechanisms, such as green certificate and green power trading, green certificate/green power, absorption guarantee mechanisms as well as green power and carbon markets, the duplication of environmental rights calculations and transactions across different markets is likely to be avoided. The function of fiscal and tax policies as “guiding instruments” and “traction devices” ought to be further strengthened. It is encouraged to optimise the structure of fiscal expenditures and increase support for carbon peaking and carbon neutrality efforts through studying tax policies relating to carbon reduction. It enhances the role of taxation in promoting green and low-carbon development among market entities and guiding effective transmission of carbon costs among them. A sound dual carbon standard measurement system ought to be established, with efforts to promote mutual recognition of domestic and international standards. The general standard system for carbon emissions, including carbon emission monitoring, accounting, reporting, and verification standards as well as product lifecycle carbon footprint standards should also be improved. There should be a more comprehensive standard system of carbon emission reduction to provide strong support in sectors, such as energy, industry and transportation, for energy-saving and emission reduction, as well as promotion of using non-fossil energy, clean and low-carbon utilisation of fossil energy and greenhouse gas emission reduction and resource recycling in production and service processes. The green financial support system needs to be further constructed to ensure an effective usage of green financial incentive and restraint mechanisms, guiding financial institutions to increase support for green and low-carbon development. The green financial standards should be specified, so as to enhance the level of environmental information disclosed by financial institutions to support the development of green financial instruments and to strengthen international cooperation in green finance.

Lastly, we suggest placing importance on market cultivation and regulating carbon intermediary agencies. The development of domestic carbon intermediary service providers should be fully supported, like cultivating a group of intermediary service providers with international standards and international influences, with service scopes covering green certification, environmental consulting, green asset assessment, carbon emission accounting and data services. A diversified carbon intermediary supervision and management mechanism should also be built, promoting supervisory mechanisms involving relevant departments, internal supervision by various units, and external supervision by the public, which enhances the quality of intermediary agency practices. Industry associations should be fully utilised to provide guidance, training and capacity building for carbon footprint and carbon verification for companies exporting to the EU, urging them to adapt to the latest changes. Data quality supervision and management need further improvement. It is recommended to adopt a “zero-tolerance” approach to falsification, conducting rigorous investigation and imposing penalty on illegal and irregular practices, such as false reporting and deception. This strives to ensure the authenticity, compliance and fairness of technical service processes and results. A problem discovery mechanism can be set up to improve daily supervision, strengthen accountability, clarify responsibilities among all parties and ensure the stability and progress of achieving “dual carbon” goals. The credit evaluation mechanism for carbon intermediaries should be improved via building a credit record system for service agencies in coordination with the ecological environment authority and incorporating relevant credit records into the national credit information sharing platform.

企业供应链脱碳及法律支持 

随着中国“碳达峰、碳中和”目标的提出，“脱碳”已成为中国企业供应链管理的新趋势，本文拟从国内外供应链规管的背景及趋势出发，结合阳光时代律师事务所相关法律实践经验，就目前日益迫切的供应链脱碳业务分享实践心得。

一、背景及趋势 

根据世界经济论坛年会相关报告，供应链产生的碳排放量占全球总排放量的60%，以食品、建筑、快消品、时尚、电子、汽车、专业服务和货运为代表的八大行业，供应链排放量占全球碳排放量的50%。由此可见，供应链碳排放量不容小觑，供应链脱碳势在必行。

在碳达峰碳中和背景下，部分国家和地区对于碳排放的关注已经从单个企业转向产品全生命周期，一些跨国公司先行先试，在供应链管理工作中开始对供应商提出减碳要求，并将这一要求从一级供应商向上游逐级延伸实现全覆盖。例如：Apple 已经呼吁供应商在所有与 Apple 相关的运营中进行脱碳，包括使用 100% 可再生电力；Schneider Electric提出2040年实现供应链碳中和、2050年实现供应链净零排放。

对于企业而言，降低供应链碳排放，既有主动布局、抢占先机，也有被动应对、不得已而为之。主动方面，全球已有不少企业加入与减碳相关的倡议，如科学碳目标倡议（SBTi）、EP100倡议、RE100倡议；被动方面，则受制于外部环境的影响，例如：欧盟颁布的碳边境调节机制（CBAM），在覆盖的排放范围方面，除覆盖CO2 排放外，还包括化肥生产过程中排放的氧化亚氮以及电解铝过程中产生的全氟化碳，欧洲议会版本还包括塑料生产过程中排放的氧化亚氮；除直接排放外，在某些特定情况下，还要求纳入间接碳排放量。再如，欧洲议会和理事会关于电池和废电池的第2023/1542号条例》，也提出了关于电池碳足迹和绿色公共采购方面的要求。该些规则一经成型，尽管短期内直接影响相对较小，但不排除后续扩大适用的产品范围、适用的排放物范围，同时也推动了气候俱乐部形成和新的议事规则产生，对未来的气候与贸易规则带来深远影响。

二、 企业探索及主要问题 

供应链脱碳是绿色供应链的应有之义。

中国政府高度重视绿色供应链建设，近年来出台了多项政策，如2021年国务院发布《关于加快建立健全绿色低碳循环发展经济体系的指导意见》，2022年工信部等三部委发布《工业领域碳达峰实施方案》，国家发改委等七部委发布《促进绿色消费实施方案》，提出构建绿色供应链，支持汽车、机械、电子产品、纺织、通信等行业龙头企业在供应链整合、创新低碳管理等关键领域发挥引领作用，推行涵盖上中下游各主体、产供销各环节的全生命周期绿色供应链制度体系等等。

当前，尽管有包括腾讯、蚂蚁集团等在内的众多中国企业通过绿色供应链管理体系，带动和帮助供应商生产和交付的绿色化。但总体而言，中国以及中国企业在供应链管理方面对碳排放的重视程度还不足，主要存在以下几个方面的问题：

首先，国内核心企业供应链脱碳内生动力不强，对供应链上下游企业减排约束尚显不足。国内大多数供应链核心企业都具备碳减排意识，但与跨国公司相比，核心企业未对供应链上下游企业提出降低碳排放要求或要求较低。其次，供应链上的小微企业减排自主性不强，对价格和成本敏感。小微企业整体生命周期短、盈利能力和抗风险能力较弱，难以及时掌握节能减排技术和承担较高脱碳成本。同时，供应链评价体系、标准等基础设施建设不健全。碳排放监测、报告、认证核查体系等不健全，多方监督、第三方评估的作用发挥不充分，传统高排放企业生产工艺复杂，排放成因多，加大了碳排放监测难度。最后，财税金融等激励约束机制有待进一步完善，政府绿色采购多为鼓励性政策，不具强制性，且缺乏实施细则，对绿色供应链企业的激励不足；银行获得企业碳减排信息主要通过企业本身和环保部门等，信息针对性和时效性不强；不同类型的脱碳项目的商业模式、融资需求不同，现有金融工具无法完全满足其融资需求。

三、 法律服务实践经验分享 

阳光时代律师事务所是中国最早开展应对气候变化与碳排放权交易法律服务的律师事务所，多次参与国家政府部门有关绿色低碳领域的立法及规范性文件的起草和研究。近年来，阳光时代律师事务所从供需双方角度发力，帮助多家国内企业及跨国公司实现供应链脱碳提供深度服务，其中包括2021年全国最大规模平价国际绿证交易项目（苹果供应链企业在中国首个购买平价绿证的标杆项目）、力拓集团与南京钢铁全国首单碳补偿铁矿石贸易、多家时尚及电子跨国公司绿色电力长期交易项目等等。对国内供应链脱碳工作有以下三点体会：

重视核心企业的引领作用，实现供应链脱碳协同效应。优先制定供应链脱碳目标以及实施路径，以供应链核心企业为中心（如汽车、电子电器、通信、大型成套装备等行业龙头企业），在范围一、范围二和范围三排放数据精准识别和量化的基础上，积极探索制定供应链脱碳目标和技术实施路径。实施供应商管理，构建全面的供应商数据库，实施绿色供应商管理，为上游企业制定减碳目标及绿色要求；防止“漂绿”、“洗绿”行为。落实全生命周期的绿色管理，强化绿色设计、绿色生产，建设绿色物流、绿色回收体系；利用政府、企业的采购与公众的消费力量，推动企业加速绿色低碳转型。加强碳核算与计量工作，量化产品中包含的碳排放量及碳足迹，避免未进行碳核算与核查而使用CBAM可能带有一定惩罚性质的欧盟缺省值。注重信息披露，搭建绿色信息收集监测披露平台，披露企业节能减排目标完成情况，公布企业绿色采购的实施成效。

加大制度供给，完善支持绿色发展的政策和金融工具。健全法规政策体系，做好《节约能源法》《循环经济促进法》《清洁生产促进法》等制度修订工作。统筹多个市场机制的衔接，厘清电、碳市场等各种交易界面，加快建设全国统一电力市场体系，充分发挥碳排放权、用能权、排污权等交易市场作用，实现绿证与绿电交易、绿证/绿电与消纳保障机制、绿电与碳市场等多种交易机制的衔接融合，避免环境权益在不同的市场被重复计算和交易。进一步发挥财税政策“指挥棒”、“牵引机”作用，加强财政资源统筹，优化财政支出结构，加大对碳达峰碳中和工作的支持力度；研究支持碳减排相关税收政策，更好地发挥税收对市场主体绿色低碳发展的促进作用，引导碳成本在不同市场主体间有效传导。建立健全双碳标准计量体系，推动国内、国际标准互认，完善碳排放基础通用标准体系（如碳排放监测、核算、报告、核查标准，产品生命周期碳足迹标准等），加强重点领域碳减排标准体系建设，为能源、工业、交通运输等重点领域节能降碳、非化石能源推广利用、化石能源清洁低碳利用以及生产和服务过程温室气体减排、资源循环利用等提供关键支撑。完善绿色金融支持体系，用好绿色金融激励约束机制，引导金融机构加大对绿色低碳发展支持力度；健全绿色金融标准体系，提高金融机构环境信息披露水平，支持绿色金融工具发展，加强绿色金融国际合作。

重视碳中介机构的市场培育及规范管理。支持本土碳中介服务机构发展，培育一批具有国际水准的绿色认证、环境咨询、绿色资产评估、碳排放核算、数据服务等绿色中介服务机构，在碳资产管理、碳足迹管理、碳信息披露管理、低碳技术认证等领域形成一定的国际影响力。建立多元化的碳中介机构监督管理机制，推动有关部门依责监督、各单位内部监督、社会公众外部监督的监督体系，提高中介机构执业质量；充分发挥行业协会作用，加大针对出口欧盟企业的碳足迹、碳核查的指导培训和能力建设，督促企业顺应最新变化。强化数据质量监督管理，对造假问题“零容忍”，严查严处数据虚报、瞒报、弄虚作假等违法违规行为，确保技术服务过程和结果真实、合规、公正；建立问题发现机制，完善日常监管，强化责任追究，压实各方责任，推动双碳工作行稳致远。完善碳中介信用评价机制，生态环境主管部门会同有关部门建立服务机构信用记录制度，将相关信用记录纳入全国信用信息共享平台。