Two environmental groups are accusing Xiaomi of poor oversight of its supply chain after the Chinese tech giant earlier this month filed for an IPO with the Hong Kong Stock Exchange, according to a joint report released Tuesday.

On May 12, the environmentalists found that a Jiangsu factory which manufactures components for Xiaomi was discharging copper-contaminated wastewater into a nearby river. According to the report, coauthored by the Institute of Public and Environmental Affairs (IPE) and the Lüse Jiangnan Public Environment Concerned Center (PECC), tests conducted on May 12 confirmed the contamination.

The factory, owned by Taiwan-headquartered Ichia Technologies, had previously been fined 117,000 yuan ($18,000) by the provincial environmental bureau in March for the same offense. Sixth Tone’s calls to the factory went unanswered on Tuesday.

The report also accuses four other companies said to manufacture screens, casings, and other parts for Xiaomi cellphones of having past environmental violations.

On May 3, Xiaomi filed for an IPO on the Hong Kong Stock Exchange, aiming for a $100 billion valuation that would make it the largest listing of the year. But the environmental groups say that the tech company did not disclose the supply chain environmental lapses in its prospectus — contravening the exchange’s full disclosure requirement.

When reached by phone on Tuesday, a Xiaomi PR representative told Sixth Tone that he was not at liberty to comment, as the company was still ascertaining the situation.

A drainage pipe from the Ichia Technologies factory in Suzhou, Jiangsu province. Courtesy of IPE

“We use contractors to assemble hardware products,” the company said in its IPO prospectus. “We do not operate any production or assembly facilities. We only operate some essential warehouses, and we employ third parties to transport our products — thus we do not face any significant health, safety, or environmental risks.”

However, IPE director Ma Jun disagrees. “We believe the company presents huge environmental risks — it just didn’t reveal these risks when it filed for its IPO, despite being required to do so,” Ma told Sixth Tone. He added that such environmental risks are often viewed as financial risks by investors.

“A publicly traded company should take responsibility to establish a management system for a green supply chain,” Ma continued. “If it raises funds and expands production without developing such standards, then the more it produces, the greater the cost to the environment.”

This is not the first time Xiaomi has found itself in environmentalists’ crosshairs, Ma said, adding that the company’s passive responses have become increasingly irksome to activists. “Over the past four years, we have found environmental violations in [Xioami’s] supply chain many times, and tried to talk to the company,” he explained. “However, they never face us directly — they only responded once on Weibo [in 2015], saying they have the same supply chain used by other international brands.”

But according to the IPE’s index of major brands’ supply chains, Xiaomi ranks dead last — indicating poor supply chain oversight — while American competitor Apple tops the list. Some brands make a concerted effort to work with environmentally friendly suppliers, Ma said, though “a majority of Chinese companies still lack the awareness and ability to build up green supply chains.”

“We hope that in the future, the success of companies like Xiaomi will be determined by their social and environmental responsibility,” Ma said.

Editor: David Paulk.



(Header image: People wait for the official release of the Xiaomi Mi MIX 2 phone in Beijing, Sept. 11, 2017. VCG)