The environmental degradation caused by China’s unprecedented economic development during the last 30 years is has taken a huge toll on the environment. On numerous days over the last several years, smog levels have exceeded levels that the World Health Organization deems safe, which is the result of China’s reliance on burning coal for 70 percent of its energy needs (Xu 2014, 3). Estimates suggest that 40 percent of rivers are also heavily polluted (Yang 2012, 1). China’s environmental degradation has, according to numerous figures, cost the country an estimated 9 percent of its GDP (Xu 2014, 1).

To address the environmental degradation, the Chinese parliament, in 2014, amended its 1989 Environmental Protection Law (EPL) to strengthen government and enterprise transparency by imposing harsher financial and criminal penalties on polluting companies. This  has  increasingly  become  a  social  issue  in  recent  years,  as  environmental  protests  have  increased   by  around  30  percent  each  year  (Liu  2013,  1),  indicating  growing  public  skepticism  on  the   government’s  willingness  and  ability  to  hold  companies  accountable  for  environmental  violations.  To   address  the  environmental  degradation,  the  Chinese  parliament,  in  2014,  amended  its  1989   Environmental  Protection  Law  (EPL)  to  strengthen  government  and  enterprise  transparency  by   imposing  harsher  financial  and  criminal  penalties  on  polluting  companies.  The  new  EPL  exposes   companies  and  their  trading  partners  to  significant  levels  of  risk  if  operations  are  not  managed   appropriately.

 The  effectiveness  of  the  new  enforcement  mechanisms  provided  under  the  new  Law   will  depend  greatly  on  the  commitment  and  capacity  of  local  governments.  Each  of  these  elements,   which  create  an  uncertain  regulatory  environment  for  companies,  is  discussed  in  detail  paper. This paper by the EcoVadis analyst team examines the new enforcement mechanisms of this bold new law amendment, as well as implementation challenges.

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