This year’s list of China’s greenest firms has some notable omissions.
Managing Editor for chinadialogue Beijing, Meng Si, looks at who made it, who didn’t and why certain big names have fallen out of favour.
Some of China’s best known companies, including online marketplace Alibaba, internet portal Tencent and car manufacturer BYD, are missing from this year’s list of the country’s most environmentally friendly businesses – the China Green Companies Top 100 – after being eliminated due to problems with corporate reputation, “greenwashing” and poor market performance.
Of all the lists ranking the performance of Chinese firms, the China Green Companies Top 100 is perhaps the one firms feel the most pressure to make it onto – because as much attention is given to the omissions as to the companies included. Twenty-two firms in the 2010 ranking failed to appear on this year’s list, almost all of them well-known companies.
“Running a list like this also takes courage on our part,” said Liu Donghua, founder of the China Entrepreneur Club, established in December 2006 by 31 entrepreneurs, economists and diplomats with influence in China. The club runs the Daonong Enterprise Institute and bi-monthly business publication Green Herald Magazine.
On April 22, the club held an event in Qingdao, eastern China, to launch this year’s list of green highflyers, which ranks the top 50 private firms, the top 20 state-owned enterprises and the top 30 foreign firms operating in China.
Liu explained: “We define a green company as one that ‘develops sustainable competitiveness through good ecological management’. The use of ecology here covers natural ecology, environmental ecology, and also human ecology and social ecology.”
The authors of the 2011 ranking evaluated firms on their disclosure of corporate information, with key indices including the degree of transparency on economic, social and environmental issues, as well as the release of information on innovation and company news. Environmental indices made up 25% of the total. Specifically, they looked at: the consumption of energy, materials and water, greenhouse-gas emissions during production investment and achievements in management of product lifespan. The assessment also took into account how well the companies had monitored “socially-controversial” incidents.
This year, property developer Vanke, China Ocean Shipping Company and General Electric (China) topped the private, state-owned and foreign lists respectively. Meanwhile, famous firms including Alibaba and appliances group Midea made the “list” of those not to make the list.
A report on the 2011 ranking, published at the same time, examined the different reasons for companies failing to maintain their place. The most serious was a company’s perceived break with basic values or a loss of confidence among the judges in its core competences. For example, it emerged in February this year that a lack of monitoring at online trading platform Alibaba had allowed frequent incidents of fraud to occur. And, in January, the National Development and Reform Commission – China’s top economic planning body – found instances of pricing fraud at some of Walmart China’s supermarkets, including fabrication of previous higher prices to attract customers with fake “cuts”, or charging higher prices than advertised.
Meanwhile, Tencent was found to have used unfair competition and infringed on internet users’ right to freely choose software, while BP (China) fell off the list due to the Gulf of Mexico oil spill.
Other reported problems included: inflicting commercial, social or environmental damage; businesses saying one thing and doing another; moving away from core businesses; operating double standards at home and abroad; and failing to disclose information.
According to the report, BYD has consistently publicised its electric and hybrid vehicles, but failed to actually bring them to the market. Meanwhile, it has sold so many fuel-burning cars that, in 2009, it became the best-selling Chinese automobile brand. “There is a large gap between what is said and what is done,” the authors said.
Differences between actions and words, the report says, essentially constitute “green-washing”: “A company’s behaviour or actions indicate that it is spending money to be economically, environmentally or socially responsible – but in reality it is doing the opposite.” Haier, Canon and Wahaha also lost their places on the list for this reason.
Total (China), Taikang Insurance and Changyu Wine Company were excluded due to inadequate information disclosure.
The report explained why it was relevant, from an environmental angle, when companies move away from their core business: even firms that concentrate on one kind of operation struggle to be green and innovative, it said – when they diversify into new sectors, it becomes even more difficult. Also, diversified companies often make short-term investment decisions for the sake of profit, which goes against the core principles of green investment, it said. Youngor, Hongdou, Aokang and the AUX Group were all removed from the list due to increased investment and speculation activities.
Although Dell publishes social responsibility reports globally, it does not do so in China, and the company does not make much financial, social and environmental information available online. Moreover, it has failed to drive its CSR measures in the Chinese market, and is believed to operate different standards at home and abroad.
And each sector is different, with environmental protection being much easier in some industries than others. New Oriental, an English language training firm, is listed 43rd out of 50 private enterprises. Its chairman and chief executive, Yu Minhong, is laid-back: “We’re classed as a green company every year. Even if we weren’t, we would still be green. We don’t create any pollution.”
Speaking at a seminar entitled “Interpreting a Changing World”, Yu said that “Chinese entrepreneurs should not try to do everything themselves.” Well known-academic and professor of finance and economics at the China Europe International Business School Xu Xiaonian added that, in China, there is always a power struggle between businesses and politicians: “Mayors act like CEOs, and CEOs act like politicians,” he said.
Xu said that the responsibility of entrepreneurs is to innovate, but that China lacks sufficient incentives for companies to become green. He said: “China’s policies aren’t green, they’re black. The costs of resources such as water, power, coal and oil are controlled by the government, and are generally low and do not reflect scarcity. Over the last decade, the proportion of the economy accounted for by heavy industry has increased by ten percentage points – our economic structure is getting ‘heavier’”.
One member of the selection committee responsible for putting together the green companies list is Cai Jian, executive director of Peking University’s Innovation Education and Research Institute. He said: “We hope this system of assessment will help to identify good institutional arrangements, and reduce the costs of innovation for firms. Government, firms and society need to work together to find a new social contract.”
Cai also said he hopes that future assessments will include wider public participation and cooperation from companies in data collection, and use case studies and in-depth interviews to reflect the deeper issues beneath the data.
Originally published on chinadialogue on 19 May 2011.