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2. THE ELECTRICAL & ELECTRONIC SECTOR IN HONG KONG

This section presents an overview of Hong Kong SMEs in the electrical and electronic sector in terms of their number, industrial composition, and location of facilities and activities (either in Hong Kong and/or Shenzhen).  The selection of appropriate Major Industry Groups (MIGs) upon which the Practical Examples illustrating the step-by-step approach to ISO14001 EMS implementation are based is also described.

2.1 Major Industry Groups (MIGs) in The Electrical & Electronic Sector

Different industries of Hong Kong's manufacturing sector, including electrical and electronic related manufacturing, are classified using the Hong Kong Standard Industrial Classification^[1] (HSIC) system by the Census and Statistics Department of the Hong Kong SAR Government.  Classifications consist of Major Industry Groups (MIGs), each with a three-digit code (for example, Electrical Appliances with HSIC code 385).  Further sub-codes are applied within many MIGs to allow their more detailed sub-classification (for example, Electrical Fans with HSIC code 385101).

	Office, Accounting and Computing Machinery (OAC machinery) - HSIC MIG Code 382
	Radio, Television, Communication Equipment & Apparatus (Radio / Communication) - HSIC Code 383
	Electrical Appliances & Houseware and Electronic Toys (Electrical Appliances) - HSIC Code 385
	Machinery, Equipments, Apparatus, Parts, Components, N.E.C Machinery & Parts - HSIC Code 386-387
	Professional / Scientific, Measuring / Control, N.E.C. / Photographic / Optical Equipment - HSIC Code 389

Table 2.1a presents these MIGs and also identifies the sub-classifications within each MIG that have been selected as relevant to this study for the purposes of quantifying the size and composition of the sector.  It should be noted that Electroplating (Code 381802) has also been included to ensure appropriate representation, even though its MIG (code 381) is not as a whole relevant to the study.

Table 2.1a            Manufacturing Industries and the HSIC Classifications

2.2.1 SMEs with Manufacturing Facilities and Activities in Hong Kong

The current number of Hong Kong electrical and electronic sector SMEs with facilities and activities solely in Hong Kong has been obtained from numerous C&SD publications^[3], including its annual publication the 2001 Annual Survey of Industrial Production (ASIP), with more up to date figures acquired where necessary through telephone enquiries.  Table 11 of ASIP (Principal Statistics for All Manufacturing Establishments, 2001) gives data on the number of establishments and persons engaged in each MIG.  Establishments with less than 100 employees are counted as SMEs as defined by the Trade and Industry Department (TID) for manufacturing enterprises (ASIP in fact groups establishments into six sizes according to their number of employees: 1 to 9; 10 to 19; 20 to 49; 50 to 99; 100 to 199; and 200 to 499)^[4].  As shown in Table 2.2a, the total number of Hong Kong electrical and electronic establishments is 2,828, 98% of which (2772) are classed as SMEs.

Table 2.2a      Electrical and Electronic SMEs with Facilities in Hong Kong

The composition of SMEs across the surveyed industry groups is shown in Figure 2.2a.  Clearly Machinery and Parts MIGs (HSIC codes 386 - 387) dominate in their number, distantly followed by Professional, Scientific, Measuring, Control, N.E.C., Photographic and Optical Equipment (MIG 389) and Office, Accounting and Computing Machinery (MIG 382).

Fig. 2.2a            Composition of Electrical & Electronic SMEs with Hong Kong Operations

The HSIC definition for manufacturing covers all establishments mainly with operations in Hong Kong. Data in ASIP 2001 covers exclusively companies that have manufacturing facilities or activities in Hong Kong.  Therefore, the ASIP 2001 data is considered a good estimation on the current number of establishments of Hong Kong based SMEs in E&E sector which have manufacturing facilities and activities in Hong Kong^[5].

2.2.2 Hong Kong SMEs with Manufacturing Facilities and Activities in Shenzhen

The current number of Hong Kong based SMEs in the electrical and electronic sector with manufacturing facilities and activities in Shenzhen has been quantified mainly through information compiled by the Hong Kong Electronic Industries Association (HKEIA)^[6].

The 2003-2004 Annual Directory of Hong Kong Electronic Industry (DHKEI) and the HKEIA member database provided the necessary data.  These records covered both member and non-member companies with operations ranging from electronic & electrical parts trading, consumer electronic product manufacturing, through to industrial electronic and electrical equipment manufacturing and export. The database also provided valuable information including company name, contact details, total number of staff in Hong Kong, location of manufacturing facilities (including Shenzhen, Guangzhou, Dongguan, Zhongshan. Shanghi or even overseas), business nature and product type^[7].

The breakdown of the number of Hong Kong SME establishments with manufacturing facilities and activities in Shenzhen in each selected MIGs in 2001 is shown in Table 2.2b.

Table 2.2b      Electrical and Electronic SMEs with Facilities in Shenzhen

The composition of SMEs across the surveyed industry groups is shown in Figure 2.2b.  Unlike those SMEs with facilities in Hong Kong, the distribution of SMEs across the different industry groups is more even.  Electronic Parts and Components (MIG 384) predominates, followed by Radio and Communication (MIG 383), Machinery and Parts (MIG 386 - 387) and Professional, Scientific, Measuring, Control, N.E.C., Photographic and Optical Equipment (MIG 389).

Fig. 2.2b         Composition of Electrical & Electronic SMEs with Shenzhen Operations

2.3 Identifying Appropriate MIGs For The ISO14001 EMS Practical Examples

As mentioned in Section 1, an important element of this support package is the provision of easy to use Generic ISO 14001 EMS Templates and User Manual that an SME can use to develop its own ISO14001 Environmental Management System.  Various Practical Examples, which reflect as far as possible on "real-life" activities and processes undertaken by real SMEs in the electrical and electronic sector, are provided to demonstrate clearly the step-by-step approach to EMS implementation.

The major industry groups chosen to provide the basis for these Practical Examples^[8] have been selected by consideration of:

	The number of electrical and electronic sector SMEs in each MIG with operations in Hong Kong and Shenzhen (discussed in Sections 2.2.1 and 2.2.2 respectively);
	The significance of the environmental impacts arising from the manufacturing activities of SMEs in the different MIGs; and
	The degree of supply chain pressures (for example, local or international legislation, client requirements, etc) experienced by SMEs in the different MIGs.

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^[8]Although based on selected MIGs, the Practical Examples are designed to be of assistance to SMEs in other electrical and electronic industries in illustrating how the Generic Templates can be used as the basis of an effective ISO14001 EMS.

The remainder of this section describes the criteria used in the selection process and identifies with explanations the MIGs that have been selected.

2.3.1 The Environmental Impacts of SMEs in Different MIGs

The significance of the environmental impacts arising from the manufacturing activities associated with each MIG has been evaluated by consideration of seven areas of key concern consisting of 29 environmental factors:

The selected MIGs have been evaluated in each area according to their severity of environmental impact, with verification by a technical advisor from a leading Hong Kong certification body, using the following scoring system:

Detailed results for the evaluation are presented in Appendix B and summarised in Table 2.3a below.  The top two ranked MIGs creating the most significant environmental concerns are found to be Electronic Parts & Components (MIG 384) and Electroplating (I/D 381802), whilst Professional, Scientific, Measuring, Control, N.E.C., Photographic and Optical Equipment (MIG 389) created the least.

Table 2.3a  The Significance of Environmental Impacts of the Different MIGs

Due to the similarity in the nature of operations between Hong Kong based and Shenzhen based establishments in each MIG, their environmental impacts are considered to be sufficiently comparable for the purpose of identifying appropriate Practical Examples.

2.3.2 Global Supply Chain Pressure Trends Facing SMEs in Different MIGs

Global trends on supply chain pressures environmental management have been investigated by considering the six typical supply chain environmental requirements faced by the MIG:

More detailed explanations and examples of these pressures are given in Section 3. 

The selected MIGs have been evaluated in each area according to the severity of existing and forthcoming supply chain environmental pressures, again with verification by a technical advisor from a leading Hong Kong certification body, using the following scoring system:

The results for the evaluation are presented in Appendix C and summarised in Table 2.3b.  The top two ranked MIGs facing the most significant environmental supply chain pressures are found to be Electroplating (I/D 381802) and Electronic Parts & Components (MIG 384), with Machinery and Parts (MIG 386 - 387) facing the least.

Table 2.3b      Degree of Supply Chain Pressures Facing the Different MIGs

As with the significance of environmental impacts, the high similarity in the operating nature of Hong Kong and Shenzhen based operations inferred supply chain environmental pressures sufficiently comparable for the purpose of identifying appropriate Practical Examples.

2.3.3 Selection of Practical Examples for SMEs with Operations in Hong Kong

In selecting the MIGs to form the basis of the Practical Examples to illustrate the EMS development process for establishments in Hong Kong, consideration has been given to:

	The MIGs with the greatest number of SMEs (presented in Table 2.2a for the SMEs with operations in Hong Kong);
	The MIGs with the most significant environmental impacts (in Table 2.3a); and
	The MIGs with the greatest degree of supply chain pressure for environmental management (presented in Table 2.3b).

The selection has been made by simple addition of the ranking of each MIG for each of these criteria, shown in the following table.

Table 2.3c      Selection of Practical Examples with Operations in Hong Kong

The top three business areas have therefore been selected as Electronic Parts & Components manufacturing (MIG 384), Office, Accounting & Computing Machinery (MIG 382) and Electroplating (I/D 381802).  These three MIGs have therefore been used as the basis for developing the Practical Examples for SMEs in the electrical and electronic sector with activities and facilities in Hong Kong.

2.3.4 Selection of Practical Examples for SMEs with Operations in Shenzhen

Similarly, in selecting the MIGs to form the basis of the Practical Examples to illustrate the EMS development process for establishments in Shenzhen, balanced consideration has been given to:

	The MIGs with the greatest number of SMEs (presented in Table 2.2b for the SMEs with operations in Shenzhen);
	The MIGs with the most significant environmental impacts (in Table 2.3a); and
	The MIGs with the greatest degree of supply chain pressure for environmental management (presented in Table 2.3b).

The selection has been made by simple addition of the ranking of each MIG for each of these criteria, shown in the following table.

Table 2.3d      Selection of Practical Examples with Operations in Shenzhen

The top three business areas have therefore been selected as Electronic Parts & Components manufacturing (MIG 384), Electroplating (I/D 381802) and Office, Accounting & Computing Machinery (MIG 382). These three MIGs have therefore been used as the basis for developing the Practical Examples for SMEs in the electrical and electronic sector with activities and facilities in Hong Kong.