The pace of life is fast in China. Along with strong growth in the economy have come allegations of poor labour standards, un-checked pollution of the environment, human rights violations, and aggressive breaches of copyright. Yet according to the results of the Tomorrow’s Value Rating (TVR) 2013 report there’s reason to be positive, with signs the world’s most common “country-of-origin” is adopting sustainability.
The TVR is DNV GL’s annual assessment of sustainability practices worldwide. It assessed the sustainability programmes of 50 companies all on the Dow Jones Sustainability Index, 10 from each of the ICT, oil and gas, energy utilities, food and beverage, and automotive sectors.
The report asked: are the companies considered by the Dow Jones Sustainability Index to be sustainability leaders likely to drive sustainable value in the future? To answer this tricky question an assessment was made, using publicly available information, as to how well companies have embedded sustainability in their core business model and strategy, how they involve and manage stakeholder expectations and how they use sustainability risks as a lever to drive innovation across the value chain.
Asian companies on the rise
The TVR is still dominated by European companies, but companies from the East Asia are quickly catching up with their western neighbors. China is often associated with fast economic growth, at the expense of ethical considerations. But state-owned telecommunications company China Mobile topped the scoreboard for governance thanks to its process of elevating stakeholder concerns to its highest governance body. Executives monitor and respond to stakeholders who email the CEO mailbox and concerns are incorporated into executive level decision-making.
Another Chinese company, Sinopec, an oil and gas major, has established a social responsibility management committee directly under its board of directors to integrate social responsibility into its business strategy and key decision making. The committee is responsible for developing the company’s social responsibility policy, governance, strategy, and planning and overseeing the implementation of its social responsibility plan.
While South Korea has already emerged as a leading global economic centre, firms in the country have seldom stood out as sustainability leaders. This time, South-Korea headquartered telecommunications company KT Corp came out as the second highest scoring firm worldwide. It was the highest scoring Asian company in the ten year history of the study, topping the traditional sustainability leaders such as Nestlé, Vodafone, E.ON and BMW.
Its strong performance can be attributed to a “beyond compliance” approach to engaging top suppliers on sustainability including technology transfer, financial support, and training, and strengthened management systems on sticky issues such as protection of customer data. As an example, KT supports suppliers in driving innovation by transferring technology, patents, and giving them the right to use them for free or under preferential terms. This has helped suppliers develop and supply £8m worth of new technologies.
Sustainable products in focus
The rise of Asian companies up the sustainability agenda is also supported by our global study on Sustainable Products. More than 1,400 companies were asked about the demand to deliver sustainable products or services and their capability to do so.
The survey found that 95% of respondents from Asia believed the delivery of sustainable products is a key factor for the successful performance of their business, 10% more than their European counterparts. 70% of Chinese respondents said they felt pressure from investors to deliver sustainable products, against only 39% of the Europeans.
The reason for this gap is obvious, but also a concern. The financial turmoil in North-American and European markets in the last five years has led to a diminished focus on sustainability in mature markets. But we live in a global marketplace where a growing number of consumers demand sustainable products. If sustainability is not in focus for the long run, European companies risk being outperformed by competitors.
In addition, nearly 50% of Chinese respondents said they were planning to invest more in sustainability programmes going forward. The results of this survey suggest a potential shift in sustainability leadership from west to east. However, it will be interesting to see if future product design reflects these results in reality.
The signs are there that companies from East Asia, and in particular China and South Korea, are moving ahead. One concrete example is within water footprinting, where the Asian companies take action to limit water consumption in their manufacturing. LG Electronics is one of the first companies to receive the Water Footprint verification from DNV GL.
Asian companies have flagged their intention. Though they are still far from dominating the TVR, we expect to see far-reaching change over the next years with a two-way flow of best practice between east and west.