- Companies are rapidly awakening to the urgency of operating more sustainably. With pressure mounting from governments and consumers, the business benefits of being more socially and environmentally responsible have never been clearer, nor have the risks of failing to do so.
- As China accelerates its transformation into a green juggernaut, the world’s soon-to-be-largest economy now offers one of the most promising frontiers globally for companies to pursue and capture sustainability-oriented opportunities.
- However, many underestimate the challenge of successfully integrating sustainability into their business models, and most companies end up falling short of their aspirations.
- Through H+K Better Impact™ – a unique performance strategy which empowers businesses and brands to have a better impact on people and the planet – we help our clients ensure that their visions for sustainability succeed in the incredibly competitive Chinese marketplace.
Ask someone to name the biggest champions for building a sustainable future. Until recently, you’d probably only have heard something like “NGOs” or “environmental activists” or the “United Nations.” But today you just might hear a big corporate or iconic brand tossed in there too.
Why? Because most companies have finally awoken to the urgency of adopting healthier approaches to their businesses. As the decade winds to a close, it’s now virtually impossible to get through the daily news without being bombarded with warnings about the climate-ravaged dystopia we’re all hurtling towards: wildfires raging across the Arctic and the Amazon; Europe sweating through lethal heatwaves; Indonesia deciding to relocate its capital as Jakarta sinks slowly into the sea; the UN declaring that the world lies on the brink of a “climate apartheid” between the rich and poor.
What this all translates into for businesses is simple: they’re increasingly being held under the microscope by both governments and consumers who want to dissect their impact on people and the planet. This rising scrutiny means that the pressures for companies to be more socially and ecologically responsible – and the costs of failing to do so – have never been higher.
But so are the hugely enticing rewards at stake. It’s been estimated that achieving the UN Sustainable Development Goals (SDGs) could unlock at least US$12 trillion in new market value by 2030. With such tremendous opportunities up for the taking, integrating sustainability at the heart of a company’s business strategy is no longer a selfless, altruistic endeavor.
Frankly, it’s just good business.
The sustainable world, according to China?
And few places offer a more promising frontier for companies to seize sustainability-oriented opportunities than China. In many respects, the Chinese economy has already evolved into a green juggernaut – the largest global investor in renewable energy, producer of wind and solar power, and adopter of electric vehicles. Paradoxically, it also remains the greatest C02 emitter, yet only when considered as an aggregate whole; on a per capita basis, it doesn’t even make the top 20 nations.
China’s sustainability awakening was no accident. This transformation has been carefully engineered by a national leadership looking to shift the country onto more sustainable footing. Decades of rapid industrialization and urbanization may have lifted hundreds of millions out of poverty in China and created unprecedented prosperity, but they’ve also taken a heavy toll on the environment which has impacted people’s wellbeing.
In response, the Chinese government has dramatically escalated its push to deal with the less rosy byproducts of hyper-fast development. For instance, after declaring an official “war on pollution” five years ago, authorities have since made big strides in cleaning up urban skies. More broadly, President Xi’s administration has persistently called for building an “ecological civilization” and a “beautiful China” throughout its term in office.
Lofty rhetoric for sure – but far from grandstanding. The official discourse from Beijing has been backed by hard commitments and vast financial resources. Policymakers have embedded sustainability considerations across all major plans for national development, from the 13th Five-Year Plan (2015-2020) to the Made in China 2025 advanced manufacturing strategy, the Internet Plus policy for boosting the digital economy to the Belt and Road Initiative, China’s flagship overseas endeavor for trade and investment. In the world’s soon-to-be-largest economy, sustainability is now a defining feature of economic governance.
Looking just over the horizon, it’s also important to remember that the leadership’s deadline for building China into a “moderately prosperous society” by 2021 – the 100th anniversary of the Chinese Communist Party – is approaching fast. Next year will see the final push towards achieving that critical goal on the path towards reorienting China’s growth paradigm around greener, more people-centric development. And this means that sustainability will almost certainly receive spiraling levels of attention from Chinese authorities and government media throughout 2020.
People clamoring for better business
For corporate China, the state-led pursuit of sustainable development has been the main engine driving its own shift towards better business practices. Yet it’s not been the only factor at play. The Chinese populace has also rapidly found its stride as an immense new force pushing companies to become stauncher advocates for sustainability.
Quick question: among the world’s 10 biggest economies, whose citizens do you think are the most aware of the UN Sustainable Development Goals (SDGs)? The focus of this article is a bit of a giveaway, but yes, it’s people in China. During the recent UN climate summit in New York, Ipsos published the findings of a global survey which showed that the overwhelming majority of Chinese respondents (90%) had heard of the SDGs. By comparison, those in other major economies like the United States (home to the UN’s headquarters), Japan, and Great Britain fared poorly – only about half knew the SDGs existed.
When it comes to recognizing why sustainable development is so important, this reflects how Chinese nationals have leapt far ahead of the global curve in many ways. And as high-spending consumers, they’re demanding companies provide greener goods and services. For example, a national survey showed that about three-quarters of respondents said they would pay more for climate-friendly products. Another study by Kantar revealed similar results, with 71% of Chinese participants saying they would shell out extra cash for products that are “better for the environment.” This was also 17% higher than the global average, further indicating just how eco-conscious Chinese consumers have become.
Corporate trailblazers forging a new path forward
So clearly there are powerful forces at work propelling companies to jump onto the green Chinese bandwagon as it gathers momentum. Squeezed between top-down pressure from authorities and bottom-up calls from consumers, many members of China’s business community are realizing that taking sustainability seriously will soon be about far more than just securing a competitive edge; it will be about ensuring their survival and longevity. KPMG’s latest global survey of CEOs found that more China executives now identify environmental and climate change risk as the greatest threat to their organization’s potential for growth than anything else.
But who exactly are some of the business frontrunners across China’s accelerating sustainability movement? Which Chinese and international companies are truly pushing the envelope when it comes to positioning themselves as forces for good?
BYD comes immediately to mind. The electric-vehicle behemoth has been a pioneer in meeting booming Chinese demand for cleaner transportation, having topped global sales for several years running. While the overall Chinese auto market continued to soften, BYD’s profits catapulted more than 200% during the first half of 2019. And last year BYD achieved a world-first milestone when it completed the electrification of virtually the entire bus and taxi fleets of Shenzhen, its home city and China’s biggest technological powerhouse.
Or take Tesla, which is also diving headlong into the Chinese electric-vehicle revolution. The Californian automaker sold about 21,000 vehicles in China during the first half this year, up more than two-fold compared to the same period in 2018. At the moment, the company is wrapping up construction of its new Gigafactory in Shanghai. After it opens later this year, the enormous production facility will be Tesla’s first operating plant outside the U.S. as well as the first electric-vehicle factory that is wholly owned by a foreign automaker in China.
On the sustainable finance front, Cofco International is leading the way. Over the summer, China’s biggest food company partnered with a banking consortium to engineer a US$2.1 billion sustainability-linked loan, the largest ever raised in the agricultural trading sector. Under the agreement, the company will pay a lower interest rate as long as it hits a series of annual targets on sustainability, such as the sourcing of soybeans produced in Brazil without contributing to deforestation. Cofco International plans to then reinvest the margin savings into its sustainability-focused initiatives.
In China’s booming digital economy, Alibaba Group is moving rapidly into rural markets, enabling those residing in remote regions to participate in China’s thriving online marketplace for the first time. The sprawling tech conglomerate’s Rural Taobao platform has already established service centers in over 30,000 villages to help local merchants sell their goods online, with plans to widen that network five-fold to 150,000 villages by 2021. Last year, Alibaba saw nearly US$9 billion worth of goods being sold through its channels from some of the most impoverished parts of the country.
And fellow retail giant Walmart has brought its ambitious Project Gigaton to China. Aiming to erase a billion tons of C02 emissions from the U.S. retailer’s global supply chain by 2030, Project Gigaton saw Walmart’s Chinese suppliers avoid around 3.5 million tons of greenhouse gas emissions during their first year as part of the program. This reduction was equivalent to the emissions associated with the annual electricity consumption of over three million Chinese households.
It goes without saying that there are countless companies helping to power China’s shift towards a sustainable future. Those highlighted above provide just a snapshot of a few game-changing corporate leaders. However, their dynamic strategies on sustainability reinforce the fact that there are indeed many better ways forward for all businesses to consider – new approaches which can bolster their bottom lines and build their brands just as much as they help to empower communities and safeguard the planet.
Navigating a difficult but ultimately profitable journey with Better Impact™
It would be naïve though to underestimate the challenges of successfully integrating sustainability into business models. This is an exceedingly difficult path for almost any organization to follow, riddled with obstacles, setbacks, and frustrated aspirations. According to a global survey by Bain & Company, only 4% of companies believed they had fully succeeded in achieving their sustainability goals; almost half thought they had failed.
At Hill+Knowlton Strategies, we’ve spent a lot of time listening and reflecting on the many challenges that companies encounter while pursuing sustainability. That’s why we created H+K Better Impact™, which is a tailored performance strategy to empower businesses and brands to have a better impact on people and the planet. Our holistic approach includes a unique Score/Act/Consult/Partner process that helps businesses zoom in on the best areas for targeting their sustainability endeavors – those where they can create an immediate impact that endures.
First, we create ongoing benchmarking against China’s sustainability agenda and the UN Sustainable Development Goals. We listen carefully and work with you to identify goals that match with your business performance, stakeholder values and brand purpose. Using our bespoke score card that incorporates Global Reporting Initiative metrics, we’ll then deliver a robust report to you.
Time to move forward. We build our learnings from the Better Impact Score™ to create and help you deliver strategies that transform your communications so they are authentic, engaging and believable.
What are the issues that keep your audiences up at night? What makes their blood boil? And what makes them get off the sofa and do something? We’ll help you identify what matters most to them and where they really want to see your business have a better impact. This can be in support of the Better Impact™ Score and Action plan, or specially targeted, standalone consulting.
No company is an island. To ensure success, it’s crucial to forge the right sustainability partnerships that harness the greatest synergies. We’ll help identify the organizations that your business should join forces with and then work closely with you to build vibrant collaborations that make a real difference.
A final thought for any sustainability skeptics still out there: always remember how reshaping your business model to have a better impact will almost assuredly contribute to that most powerful of motivators for any profit-driven organization.
Or as Johnny Chi, the chairman of Cofco International, succinctly put it earlier this year:
“Sustainability earns us money.”
To learn more about H+K Better Impact™ and how our sustainability offering works in China, please contact us: email@example.com