Xiaomi acknowledges environmental risks in its supply chain

Xiaomi has acknowledged alleged environmental risks by its suppliers after being accused of violating disclosure requirements relating to environmental pollution in its Hong Kong IPO filing.

In early May, the company was called out in a report by environmental groups for withholding knowledge about environmental risks in its supply chain from documents submitted ahead of the company’s initial public offering. It later acknowledged the shortcomings in its filing to the China Securities Regulatory Commission, marking the first such admission by the smartphone manufacturer, according to the environmental groups.

The report, co-authored by the Institute of Public & Environmental Affairs (IPE) and SIP Lvse Jiangnan Public Environment Concerned Center (PECC) accused Ichia Technology (Suzhou), Xiaomi’s flexible circuit boards and control panels supplier, of repeatedly discharging wastewater illegally through a hidden pipe, contaminating waters near the manufacturing site. Wastewater samples collected by the groups showed the copper concentration was 195 times higher than legal standards and the pH value was 2.64, out of compliance with the standard value of six to nine.

Apart from Ichia Suzhou, the report also revealed other possible Xiaomi suppliers that have been violating environmental regulations, including display panel and phone casting suppliers.

In Xiaomi’s recent filing to China Securities Regulatory Commission, the company said “several current suppliers had violated environmental regulations, but they didn’t have a significant influence on the company’s business. Upon the date of the filing, the suppliers had corrected their wrongdoing and fully complied with the environmental regulations.” However, Blue Map, an environment monitoring app developed by PECC, said via its official account on Weibo, that the suppliers haven’t corrected their production and urged Xiaomi to fulfill its commitment to environmental protection.

Hong Kong Stock Exchange mandates that companies disclose policies on managing environmental and social risks of the supply chain or the companies need to explain related issues to the exchange. According to IPE and PECC, such information wasn’t found in Xiaomi’s filing to the exchange.

Xiaomi delayed its China Depositary Receipt offering on June 19 and said the offering would come only after its IPO in Hong Kong without specifying a date. On June 25, the company updated the prospectus. The shares will be listed on the exchange on July 9 and traded for HK$22 per share. Based on the latest quote, the company is to raise HK$ 48 billion at the valuation of HK$ 480 billion.

Xiaomi had not responded to requests for comment at the time of publication.