China embraces Sustainability

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John Holden
Managing Director, Hill & Knowlton (China)

In China, “sustainability” is a term whose meaning has evolved rapidly.  Only a decade ago it was an imported concept often suspected of being marketed by developed countries to prevent China from growing its economy, untrammeled, as they themselves had done a century ago.

Even today, this theme continues to emerge in China’s position on global climate change issues.  Ma Kai, former head of China’s National Development and Reform Commission (NDRC), which oversees climate change policy, reflected this concern when he said, “The ramifications of limiting the development of developing countries would be even more serious than those from climate change.”  Still, over the past several years and with increasing tempo, sustainability, along with “green technology,” “clean energy,” and other buzzwords of the environmental movement have been more warmly embraced by policy makers, media, and the public.

Industry has been slower to adapt, however, with the notable exception of companies that are building the equipment needed to reduce greenhouse emissions and curb pollution. Already the world’s largest producer of solar panels, and with plans in place to put 60,000 electric vehicles on its roads by 2012 and to become the world’s largest user of wind power by 2013, China is well on its way towards a commanding position in those and other green technologies.  A joint report issued by PwC and AmCham Shanghai in 2009 estimates that by 2013 the size of China’s green technology market could be up to one trillion US dollars annually.

Foreign-invested companies took an early lead in China with environmentally sensitive practices, particularly large MNC’s whose manufacturing systems often replicated those in their home markets.  Chinese bureaucrats, evaluating the costs of damage to China’s environment by rapid industrialization, instituted environmental regulations usually as tough as those of advanced economies.  The results were, unfortunately, poor compliance and, eventually, pollution so egregious that citizens felt compelled to acts of civil disobedience.  Approximately 80,000 ‘mass incidents’ were reported by the Chinese government in 2008, and some estimates cite over 50,000 incidents in the first quarter of 2009 alone.  Chen Xiwen, who heads the Chinese Communist Party’s office on rural policy, said in a February 2009 media interview with Reuters that environmental pollution was one of the four major causes of these ‘mass incidents’.

Today, all companies in China, whether foreign or domestic – invested, are coming under the scrutiny of the public, and beleaguered regulators are finding it easier to enforce compliance.  According to China’s Ministry of Environmental Protection, the number of administrative penalties, including fines, for environmental wrongdoing has increased steadily from 29,523 in 1997 to 101,325 in 2007, the last year for which statistics are available.  The most talented and farsighted corporate leaders are paying attention, and looking for ways their firms can show that they grasp the challenge of sustainability, and are responsive to society.

In the run-up to Copenhagen, therefore, the Chinese government finds itself in a position many expected would take much longer to develop.  With more domestic constituents in favor of sustainability, Beijing is now able to engage more positively  to international calls to the Copenhagen agenda.  In recent dialogues with the United States, for example, China’s leaders have been much more forthcoming than in the past.  In response, Washington has elected to be encouraging towards China, and appears willing to back off from previous demands that Beijing commit to rigid quotas.

These are still early days for environmental stewardship in China.  Corporate approaches to sustainability, as in other forms of Corporate Social Responsibility (CSR), are too often episodic and slapdash.  More attention is needed to design thorough and effective programs to eliminate pollution and improve energy efficiency.  At the same time, companies need to find effective ways to communicate to their stakeholders, both internal and external, what they are doing to be sustainable – and why.

This is particularly true for international companies operating in China, because they are expected by the Chinese public to apply the same standards of stewardship in China as they do in their home countries.  Failure to do so is evidence of a condescending and “imperialistic” attitude, and is punished by consumers quickly and severely.  And it is equally true of Chinese companies that are operating in foreign markets, where they are expected to be as sensitive to public concerns about the environment as home-grown companies.

As technology and globalization inexorably lead to thinner communication membranes between countries, multi-national corporations, regardless of where they are headquartered, are realizing that what they do in one market cannot remain invisible in others.

It is too early to say of China, as TIME magazine did recently about the United States, that “we are seeing a rise of the citizen consumer – and the beginnings of a responsibility revolution.”  But it is not too soon for the best managed corporations to listen to the crescendo of voices in China demanding that they do their part to protect the environment.  Those that respond with meaningful efforts - that are effectively communicated - will be rewarded.

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