Corporate sustainability is based on the idea that companies can best fulfil their social commitments by running their core business operations sustainably, not merely through charitable donations. Six years ago only 5 out of 100 top China-listed companies responded to the Carbon Disclosure Project’s survey but 45% replied last year. China director Li Rusong talks to chinadialogues’s Harry Lee about the latest developments.
(CD): Your CDP China 100 Climate Change Report 2014 found better quality answers to CDP’s questionnaire and more corporate initiatives on climate change. Is corporate sustainability catching on in China?
Li Rusong (LR): There has been both behavioural and mindset changes especially from the banking and ICT sector. In particular, mobile phone companies are realising carbon disclosure is a very good platform for them to be doing an exercise to improve energy efficiency, and save money.
One of them invited us to their office three times to go through those questions one by one to understand their rationale. They also asked us to put them in contact with global peers like BT and Vodafone, and worked hard at studying BT’s responses [to CDP’s survey]. They want to compete with them.
I am enthusiastic about this. The policy push is there; companies have to comply with government regulations. The market incentives are also there. Consumers’ environmental awareness is awakening, though individual consumer power is limited.
But collective power from multinationals as huge purchasers will play a big role. Institutional investors are increasingly looking at sustainability. Even with Chinese investors, we see a trend towards engaging in dialogue with their investees.
HL: What has been the most important factor behind this growing interest in corporate sustainability?
LR: Investors are one of them, but there is a larger driving force, and that is the purchasing power of multinationals. . As buyers, they’re in a very good position to pressure Chinese suppliers to make their services more environmentally friendly.
A small company in Zhejiang province told us that, previously, they considered environmental concerns to be very remote, until multinationals pressed them to solve their water wastage problem. They had to shut down some of their production lines because they didn’t have advanced technology at the time. But, during that process, they shut down out-dated production lines and, in the end, managed to find new technology to really improve their performance. Of course, government regulations are also important.
HL: Despite progress, companies revealing their data are a minority. How can you get more firms to disclose their data? And how does CDP ensure data is genuine, not green-washing?
LR: We have to convince the government that disclosure is useful for China’s competitiveness. At the same time, we have to convince the companies that disclosure is useful for them too. Otherwise there is no way forward.
Some organisations are watchdogs. We are not one of those — we try to design a framework or methodology to help companies find problems and solve them. CDP works with market-shapers – with institutional investors, and multinational purchasers. If a company has a motivation to hide something, or report false information, it will be no good in the long run, because CDP’s supporters are their shareholders. And if they lie, eventually they will be found out and punished by watchdogs and auditors.
HL: Does disclosure lead companies to automatically change their behaviour? How does disclosure actually drive corporate sustainability?
LR: When you have the data, you’ve got insight into where to go next, either by asking for CDP for feedback, or a third party consultation. You have points on which to base your future improvement, and behavioural changes. Disclosure is in itself a competitiveness exercise; they get to know their strong and weak points, and their sector’s trends. It allows them to see their potential risks and identify innovation points. Of course, companies won’t deal with problems automatically; it’s still up to the company leadership’s determination to take this forward. But disclosure is a very good foundation for possible change.
HL: How important is it for NGOs to work with companies in pursuit of transparency and corporate sustainability?
LR: The large percentage of pollution comes from companies themselves. At the same time, they have the capacity to solve the problem. Corporations will play a very important role in sustainability, as much as the government. Soo if NGOs really want to solve problems and be a positive force, rather than sitting there just to criticise, they should work with corporations. And I do see a lot of Chinese NGOs are beginning to see this point, and they already started working with corporations in different ways.
LR: Chinese government officials are very clever. Before they have a 100% trust in certain organisations, or certain ideas, they will wait and see, as they can patiently They watch and listen to what you do and say. We have to take a very practical approach, to reach out to them. We need to show a track record that shows [data disclosure to CDP] will benefit companies and China. Finally, CDP has to prove that it is a trustworthy organisation. Here, in China, organisations consist of people, so if the people within this organisation can be perceived as trustworthy, that’s good enough for first step. It is a very human relationship.