Presentation Pack. Corporate responsibility and business success in China. Structure. Sustainable development Facts about China Sustainable development in China Business role and responsibilities Business implementation.
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Corporate responsibility and business success in China
“Sustainable development meets the needs of the present without compromising the ability of future generations to meet their needs”
Brundtland Commission, “Our common future”, 1987Getting started
Water, Air, &
“In a world of instant communications, whistle blowers, inquisitive media, and googling, citizens and communities routinely put firms under the microscope.” Tapscott and Ticoll (2003)
Poverty eradication & population growth lead to a rising demand for materials and natural resources
OIL, GAS, URANIUM, MINERALS, CLEAN, WATER … are finite and limited resources, and could become rare in the near future
x 4.5 in 40 years
Globalization goes together with the emergence of a growing
number of stakeholders (more demanding and powerful)
PRESERVE PEACE & STABILITY
SEEK GLOBAL LONG-TERM SOLUTIONS
POWER TO RULE, INCITE, TAX
DEMAND MORE TRANSPARENCY, INFORMATION AND ETHICS; INCLUDE SOCIAL & ENVIRONMENTAL PERFORMANCE IN BUSINESS NOTATION
POWER TO PROVIDE FUNDS
DEMAND TO BE CONSULTED AND ASSOCIATED
POWER TO INFORM AND DENOUNCE
(MEDIA, INTERNET, JUSTICE, …)
SEEK QUALITY OF LIFE AND SECURITY
DEMAND FREE CHOICE
POWER TO VOTE, DENOUNCE, BOYCOTT
CONTRIBUTE SERVICES, PRODUCTS AND TECHNOLOGY TO SOCIETY
BALANCE ECONOMIC PROFITS WITH THE LONG_-ERM SUSTAINABILITY OF THE BUSINESS
1948: Declaration of human rights
1961: WWF, amnesty international
1970s: Environmental movements
1980s: 1984: Bhopal; 1986: Chernobyl; 1989: Exxon Valdez…
2002: Enron, WorldCom…
The search for solutions is happening on a global scale and is being led by both public institutions and as part of private initiatives. Solutions include new legislation, stakeholder partnerships, voluntary agreements, codes of conduct, multilateral agreements, interdependent actions, etc.
ProfitKey for success in sustainable development
Natural resources & energy
Health & Safety, equity
Population growth (%)
* Ref: The Economist, UNDP and UNFPA
* Ref: The Economist, UNDP and UNFPA
Lack of jobs in western China
74% of electricity produced in coal plants
Coal reserves mainly in western China
Shortage of electricity production capacity
Strain on rail transport
Safety of workers in mines
New coal plants built in urgency
Energy shortage prevents shutdown / modernization of old coal plants
Limited implementation of standards: Pollution, safety & health & health issues
Health and Safety conditions
Strain on resources
CO2 emissions, global warming
Coal prices on the rise
China is the second largest consumer of oil after the USA, and accounts for two-fifths of the increase in global consumption since 2000.
China occupies the second place among the major greenhouse gas emitters worldwide (13.5%).
China only has 1.7% of worldwide oil reserves.
Expected % of needs to be imported:
50% in 2010; 85% in 2030.
China is expected to become the world's third largest automaker by 2010.
Less than 10% of new buildings are made according to existing isolation standards
Energy growth is increasing faster than GDP (=
“power elasticity co-efficient”)
Power elasticity co-efficient should be less than 1.0 (opposite to current trend)
* Ref: UNIDO
Land degradation and desertification
China is already the world’s largest consumer of many commodities, such as steel, copper, coal and cement. Its increased needs account for much of the 50% rise in the world’s commodity prices over the past three years.
Reserves = 334.5 billion metric tons (“only” 3rd in the world)
Out of the 20 most polluted cities in the world, 16 are in China.Estimated annual health costs due to air pollution is 44 bln RMB
* Ref: The Economist, + UNIDO
China wrestles with 'massive' environmental degradation
Xinhua News Agency
Overwork in China claims another life and a foreign MNC is to blame
Ethical Corporation | 19.11.2004
China seizes the nuclear option
South China Morning Post | 04.03.2005
Population growth and change in social demands
Which sustainable development issues could result from the tension between these 3 conditions ?
Limited natural resources
Fast economic growth
lasting SD practice
Same issues apply to all countries;
their significance in China is the rate and magnitude at which they create imbalances
Resources and efforts from all stakeholders
are required to correct the imbalances;
Failing to act immediately
only worsens the severity of the required solutions
Implementation is everyone’s responsibility
= NGO’s, business and government
Central government recognizes the need for action.
Programs initiated to counter China’s SD challenges:
Key Government Organizations with EHS Responsibilities
Key: (chart showing approximation of hierarchy)
NPC: National People’s Congress
SEPA: State Environmental Protection Administration
MII: Ministry of Information Industry
AQSIQ: Administration for Quality Supervision, Inspection and Quarantine
MOFCOM: Ministry of Commerce
SAC: Standardization Administration of China (within AQSIQ)
SDRC: State Development Reform Commission ( or NDRC)
All of them have to meet legal standards!
From 1 March 2005, manufacturers of energy consuming products will even have to join labels to their products including:
- The name & brand of the producer
- The degree of energy efficiency
- The energy consumption volume
- The China energy standards referenced to determine the product’s degree of efficiency.
Are Chinese companies required to submit reports on their energy consumption?
Of course they are!!!
Much more than a simple statement on their level of consumption, companies exhibiting significant energy consumption are required to periodically submit their energy efficiency and the implemented saving measures to the relevant authorities.
Thus progress in energy efficiency is a legal requirement in China.
The import of backward energy intensive technology is illegal… before 2008 the law will be reinforced by incentives and disincentives towards businesses in order to promote energy efficiency…
The approach to hazardous solid waste identification is defined by the law as the prevention and control of environmental pollution by solid waste.
What about liquid waste?
The hazardous waste identification approach applies to liquid as well as solid waste.
Is it legal to import waste into China?
Waste import is basically forbidden (or at least highly restricted), except when it can be used as raw material.
Movements of waste are strictly monitored and controlled. This is true for trans-boundary waste shipment, as well as for waste movements between Chinese provinces.
Facts about China
Sustainable development in China
Business role and responsibilities
e.g. increase eco-efficiency, reducing pollution
e.g. engage in community development
(Even stock exchanges are joining the Global Compact!)
Efficient use of water, energy, raw materials
Starting “at the source” (not end-of-pipe)
More efficient and eco-friendly products
Example: Energy Star products (the US)
Blue Angel (Germany)
Healthy, happy employees
Command & Control Legislation
Assess the situation
Develop a strategy
Alternative model: The Sigma Guidelines provide a systematic model of sustainability management (www.projectsigma.com).
Benefits to be gained from incorporating sustainable development into business management practicesAssessing: General checklist
Does your company:
Banks Westpac Banking Group
Basic resources Alcan
Cyclical goods & services Royal Philips Electronics
Food & Beverage Unilever
Health care Novozymes
Industrial goods & services 3M
Non-cyclical goods & services Procter & Gamble
Utilities Severn Trent
Care & Education
GovernmentDeveloping: Your company’s place in society
Your company is a stakeholder in many shared societal processes
Cleaner Production projectsDeveloping: Environmental Management System approach
and economic feasibility
Implementation of EMS in all aspects of business will makea company more profitable and competitive
Summary: Degussa AG with support from DEG (a German investment and development company), in a public-private partnership, conducted a series of training events in Beijing for employees of Chinese paper mills on how to optimize wastewater circuits (2004-2005).
Drivers/Benefits: To help paper mills reduce their amount of wastewater.
Results so far: One paper mill implementing zero-effluent technology; several mills short-listed as “Nations Model Clean Production Enterprise”.
Key success factors: Expert knowledge, working in a public-private partnership, drive of participants to transfer training into practice.
Summary: ABB, with the Alliance for Global Sustainability, devised the China Energy Technology Program (CETP), an extensive partnership program bringing together a diverse group of participants to assess the relative costs and environmental performance of different strategies for meeting power demand in China.
Drivers/Benefits: To identify the true costs of electrical power generation and use and develop cost-effective and efficient solutions for the future, to bring significant environmental benefits, not just to China, but globally.
Key success factors: Active involvement and participation of academia, industry and the stakeholders involved.
Summary: CH2M HILL was hired to assist the State Environmental Protection Agency of China to advise on technical and economic feasibility and construction requirements for energy recovery facilities at municipal waste landfills.
Drivers/Benefits: Promote better waste management practices, rewarded with economic benefits from selling recovered methane as fuel.
Challenges: Institutional barriers to progress; communication & translation problems, funding difficulties
Key success factors: Commitment from all; quality communication and translation; careful choice of the host country lead agency
Summary: Lafarge and DuJiangYan Building Materials Co., joint venture agreement to construct a new cement plant in ChengDu, Sichuan province, in line with latest technology, quality and safety standards.
Drivers/Benefits: For Lafarge -- establishment of substantial & profitable position in region, where an accelerated infrastructure development program fuels increase in demand for high quality cement; for Chinese government -- strategic importance for regional economic development & to reduce persistent supply/demand gap in the region.
Challenges: Quality control during construction, cultural differences, implementing safety practices, Song relics on site, heavy rains.
Key success factors: Financial strength and technical support; strong management team; good working relations between Chinese and foreign partners; Government support; listening to the different parties.
Summary: This Chinese automobile company first started production in 1968. It went from a loss-making venture with revenue of less than 3 million RMB in 1990 to one of the most important Chinese automobile producers with 5 wholly owned subsidiaries and revenues of 26 billion RMB in 2000.
Drivers/Benefits: Systemization of processes & operations and introduction of EMS increased efficiency and quality, timely delivery to customers, reduced waste, improved company image.
Challenges: Culture change within the company needed; long-term process.
Key success factors: Strong management vision, employee commitment, good cooperation with local government, starting from “at-the-source” principles as opposed to “end-of-pipe”.
From “Greening Chinese Business” by Ulrich Steger, Fang Zhaoben and Lu Wei
Summary: BASF systematically conducts Responsible Care (RC) audits of its service suppliers; RC = a voluntary improvement process of the chemical industry, dealing with Environment, Health and Safety (EHS).
Drivers/Benefits: The systematic method provides a tool to evaluate supplier site risks, in order to select the best alliance partner and to deliver a contribution to society and the environment; contributes to positive company reputation.
Challenges: Investment in time and effort from both auditing company and service supplier.
Key success factors: Systematic, realistic method and timescale, using principle of risk = EHS performance x hazard potential; good collaboration between service provider and (potential) customer.
Summary:Jinling-DSM Resins is a Chinese-Dutch joint venture producing resins in Nanjing. Employment conditions of its 17 temporary workers were improved to a level in between those of surrounding temporary workers and employees.
Drivers/Benefits:Achieving the optimum, realistic balance between international standards and local circumstances.
Challenges:Building on the inheritance of a non-greenfield operation; different cultural perceptions of appropriate employment conditions for temporary and permanent workers.
Key success factors:Open discussion between management and employees; finding the optimum mix between foreign views and local culture and habits.
Summary: Novozymes supplies treated wastewater and converted biomass from its production processes free of charge to TEDA to be used for irrigation and as biological fertilizer (NovoGro).
Drivers/Benefits: Sustainable use of wastes, reduced consumption of limited resource, support for eco-industry, responsible neighbor and good company reputation
Challenges: Infrastructure for storage and transportation of treated wastewater, composting and expanded application of NovoGro to ensure more sustainable use.
Key success factors: Close cooperation with TEDA, advanced waste treatment technology, experience in the production and application of NovoGro from Europe and US.
Summary: Chinese fertilizer plant, in collaboration with Chinese authorities and CIDA implemented Cleaner Production, starting with zero- and low-cost measures and continuing by implementing medium cost measures.
Drivers/Benefits: Enabled reduction of product losses, efficient use of raw materials and energy, reduced emissions, reduced waste, healthier working environment, increased revenues, improved company reputation.
Challenges: Collaboration between parties with different experience levels, overcome initial investment requirements for medium cost measures.
Key success factors: Management commitment & employee participation, tackling zero- and low-cost elements first, partnership with Chinese government, training & sharing of information, stimulating gender equity.
From the China-Canada Cooperation Project in Cleaner Production“Picking Low-hanging Fruit: The Strategic Role of CP in China” by M. Osterman, LL.L.CEA