By Sean Gilbert (China Daily)
Updated: 2008-01-24 16:03

But it is not only automakers that are using China's massive manufacturing capacity as a launch pad for global environmental solutions. China is already one of the biggest global manufacturing bases and markets for everything from windmills to energy-efficient printers. In these industries Chinese companies often lead the charge.

The Chinese government is backing the drive toward "green" and ethically responsible industry as a method to promote its vision of a harmonious society. China's current five-year plan spells out reduction targets and central leaders now stress "scientific development" that pollutes less and reduces income disparities between China's coast and its interior.

Local governments are already adopting environmental growth indicators such as "green GDP" and assisting companies that show environmental stewardship. In October, the provincial leader of Jiangsu Province, for example pledged that the health of Lake Taihu would take precedent over GDP growth in the province.

Helped by such government support, some Chinese companies are now getting several sources of funding for their efforts to cut waste. Companies have shown that they can reduce costs by limiting the amount of resources they use in their production process.

Some can gain subsidies from local governments for passing environmental audits or are able to source funding from international partners who pay local Chinese firms for their carbon reductions through a Kyoto Protocol scheme.

The scale of such funding schemes in China is huge. The country already accounts for 60 percent of the world's carbon reduction projects, according to the Financial Times newspaper, and this month the Chinese government established a multi-billion-dollar fund that will invest the government's share of carbon reduction earnings into environmental projects.

But it is not just "green" solutions that can make good financial sense, a focus on people and ethics can also give companies an edge.

For example, businesses have also shown that by engaging a wider number of stakeholders, including society's poor, they can outsell their competition.

Unilever's Indian HLL subsidy, for example, has pioneered sales models that are geared toward the needs of India's poor consumers. Its methods have been replicated by Unilever to boost sales in developing countries from Nepal to Brazil.

In China, companies that can innovate their products to make life better for society's poor could not only sell their solutions in China, but also transfer such knowledge to other markets.

The company quagmire of how to develop a better business in China, is one that already has a partial-answer: Businesses can profit from a market that is demanding environmentally and ethically responsible companies.

The path to a more responsible business can start with compiling a sustainability report. The value of sustainable reporting schemes is recognized by companies worldwide. Over the years, about 1,400 companies have issued sustainability reports based on the Global Reporting Initiative (GRI) Sustainability Reporting Guidelines, including 80 percent of the top 15 Business Week global brands.

Strong values, like strong brands, attract consumers, and a proven commitment to an ethical and environmental business model can help companies boost their business both globally, and in the national Chinese market.

[The author Sean Gilbert is the technical director at Global Reporting Initiative, a non-profit organization based in Amsterdam.]

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