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2. SUPPLY CHAIN PRESSURES FOR ENVIRONMENTAL PROTECTION
This section provides an analysis of current trends in supply chain pressure for environmental management and EMS.

2.1 CONSTRUCTION SECTOR CHARACTERISTICS
SMEs in Hong Kong's construction sector are collectively a major part of the economy, ranking high in terms of the number of establishments, contribution to gross domestic product, and size of employment. Construction sector SMEs, however, also account for substantial environmental concerns, such as air, water and noise pollution, energy consumption, waste generation and chemical waste production, compared to other sectors.

The construction industry in Hong Kong is also characterised by its large number of sub-contractors. Numerous specialist operators, often using short-term labour, typically support the larger main contractors (as illustrated in Figure 2.1a). The industry is highly competitive and works to tight deadlines. Completion on time is a high priority, whilst resources such as space on site for the recycling of materials remain limited.

Figure 2.1a Typical Supply Chain of a Local Construction Project

Construction activities have resulted in on-site and off-site environmental and amenity impacts that affect the community and the wider environment. These impacts, particularly noise, dust, water and waste arising, have been subjected to close legislative control. Despite these efforts, the construction sector consistently attracts more prosecutions for violation of environmental legislation than any other industry.

Figure 2.1b below presents the statistics on pollution complaints by different types of trade from January to December 2003 (from the EPD Report Environment Hong Kong 2004, Chapter 9 Enforcement - Resource Materials, 9.1 Complaint Statistics). Construction sites accounted for 69.7% of industrial related complaints during this period.

Figure 2.1b Pollution Complaints by Different Types of Trade (2003)

In response to such concerns, the construction industry faces ever-increasing expectations towards environmental compliance and improved performance. Many main contractors and larger construction companies in Hong Kong have already implemented an EMS that has been certified to ISO14001 in response to this, as shown in Figure 2.1c. Unlike other industries in Hong Kong, in which global partners and customers have demanded ISO14001 certification, ISO14001 adoption in the construction industry has been implemented on a purely voluntary basis.

Figure 2.1c Number of ISO14001 Certificates issued for the Construction Sector

Source: EPD web site under Environmental Management Tools "Directory of ISO 14001 certified companies in Hong Kong" at http://www.epd.gov.hk/epd/english/how_help/tools_ems/iso14001.html. Supply chain pressures for improved environmental performance in the construction sector can be classified into the following four levels, which are described further in the following sections:

2.2 INDUSTRY STAKEHOLDERS (CIRC AND PCICB)
The Construction Industry Review Committee (CIRC) was established in 2000 to catalyse enhancements in quality, efficiency, productivity, customer satisfaction, site safety and environmental performance in the construction industry. The CIRC report Construct for Excellence (January 2001) sets out 109 recommendations recognised by industry as the authoritative roadmap towards a modern, safe, innovative, efficient and client-oriented construction industry.

Seventeen of these recommendations (numbered 89 to 105) specifically addressed the protection of the environment^[1] by the means listed in Table 2.2a. These recommendations are observed to have direct impacts on main contractors and they may also indirectly affect sub-contractors through the supply chain.

^[1]Source: Construction Industry Review Committee (CIRC) Report "Construct for Excellence" (January 2001)

Table 2.2a CIRC Recommendations for an Environmentally Responsible Construction Industry

* Recommendations substantially implemented by Government and further improvements will be ongoing.

The Provisional Construction Industry Co-ordination Board (PCICB) was established in September 2001 to spearhead industry reforms recommended in the CIRC report, in part through the formation of six working groups. Progress on the environmentally-related CIRC recommendations, as reported in PCICB Paper No 114 (July 2004)^[2] , are summarised in Appendix B. Recommendations with a direct impact on construction contractors include:

^[2] Progress Report on Implementation of Recommendations of the Construction Industry Review Committee (July 2004), accessible from the PCICB website www.pcicb.gov.hk

All of these developments relate directly to the management practices of construction contractors, whether or not they adopt an EMS that conforms or is certified to ISO14001. Specific to EMS, the CIRC report in (para 8.50) encourages the voluntary adoption of ISO14001 by committed industry participants, with mandatory ISO14001 certification "preferably considered at a later stage when the construction industry has acquired more expertise in tackling the environmental challenge".

2.3 ENVIRONMENTAL LEGISLATION AND CODES OF PRACTICE
Clearly a key supply chain pressure facing in all construction related companies and contractors no matter their size is compliance with legislative and regulatory environmental requirements. Companies have financial reasons for avoiding environmental convictions; particularly for the construction industry because prosecutions lead to points will be deducted when tendering for government works contracts (described further in Section 2.4 below). A list of current ordinances and regulations is provided in Appendix C^[3] . These consist of:

^[3]Each of these requirements is described on the Environmental Information and EMS Support Website and in the Register of Legal and Other Requirements Register for the Practical ISO14001 Example for the Construction Sector.  Hence in the interest of brevity their descriptions are not included in this review report.

New legislation and amendments are being introduced on a regular basis. In July 2004 the Legislative Council passed a Bill for the implementation of a construction waste disposal charging scheme in line with the polluter-pays principle. This will provide further supply chain pressure for environmental protection, particularly waste reduction, in construction.

Appendix C also identifies numerous other standards relating to environmental protection, as are often included by companies in their Register of Legal and Other Requirements of their ISO14001 EMS. These other standards include:

Clearly for any company to be assured of compliance with relevant legislation and codes, a systematic process is required to identify, understand and keep up to date with the many requirements in place. This is a fundamental element (and benefit) of an ISO14001 EMS.

ETWB Technical Circulars, being the key means of implementing policies and procedures relating to construction sites, are isolated for further discussion in Section 2.4.

2.4 GOVERNMENT TECHNICAL CIRCULARS
ETWB Technical Circulars (TCs) are the key means of implementing policies and procedures relating to construction sites. At present some 46 current TCs (issued from 1988 to date) include explicit requirements for environmental protection^[4] . These are presented in Appendix D in a matrix format that identifies their broad area of environmental coverage relating to:

^[4]Source: ETWB website www.etwb.gov.hk and TC (Works) No. 1/2004 Retention of Technical Circulars

Seventeen TCs with environmental requirements related to common construction activities have been issued since 2002 as identified in Table 2.4a.

Table 2.4a Environmentally-related Technical Circulars for Common Construction Activities Issued Since 2002

Section 1 of TC 14/2003 (Role of Departmental Safety _ Environmental Advisor on Health, Safety and Environmental Protection on Construction Sites) gives an insight into future intentions for EMS and a "Pay for the Environment" scheme in the construction industry, stating that:

"The objective to revise and extend the duties of Departmental Safety Advisor (DSA) is to enhance the communication and management on environmental performance of contractors on construction sites so that the established framework for the safety management system and the Pay for Safety Scheme (PFSS) can be extended for applying to environmental protection."

Such environmental requirements, although non-statutory, create strong drivers to the second and third tier players of the supply chain to move towards improved environmental management and performance. It is evident that an increasing number of construction companies are addressing these requirements in a company-wide and systematic manner through the development and implementation of an EMS.