By Simon Zadek
Global businesses complain that emerging market companies compete unfairly by ignoring social and environmental standards. The accused in turn point to international media bias and argue that sustainability standards are North Atlantic clubs dominated by incumbent businesses using NGOs to protect profitable markets.
At stake is not just the fate of individual companies, but the impact of intensified global competition on our natural environment and communities.
Responsible leadership is not the preserve of Western businesses: Brazilian body care innovator Natura, Indian conglomerate Tata, and South Africa’s mining giant Anglo American are among a growing number of iconic companies in emerging markets that are matching or exceeding sustainability benchmarks set by their Western counterparts. The ‘Global 100,’ a prestigious ranking of the world’s 100 most sustainable, publicly-listed companies includes 12 emerging economy companies in its 2010 list, up from zero in 2005. Brazil’s Instituto Ethos is the world’s largest national business association focused on sustainability. African cellphone entrepreneur and billionaire, Mo Ibrahim, exemplifies the next ‘Rockefeller’ generation of self-made philanthropists.
Emerging economies will also be central players in shaping tomorrow’s international standards, challenging many of the sustainability standards that the West has established in the last two decades.
Post-apartheid South Africa has developed many ‘voluntary’ social compacts between business, labour and civil society and the government, mainly focused on black empowerment, but also dealing with pervasive social and economic challenges such as HIV/AIDS. Emerging nations are moving quickly to becoming market-makers, not takers. Brazil has led the charge in developing ISO’s new ‘social responsibility standard,’ SR26000. And as one senior executive of a North American company based in Shanghai commented, “China is developing 10,000 new standards with every intention of placing them at the heart of tomorrow’s global markets – the question is not whether these standards will be influential, but rather what will be in them.”
Indeed, it is China that will be key to how tomorrow’s markets factor in sustainability, given their growing importance in international markets and the centrality of the Chinese market to the success of all global business.
Leading Chinese businesses are certainly saying the right things about sustainability. Chinese companies published 600 corporate reports on sustainability performance last year, up from less than 10% of that figure in 2005. One recent report by the Chinese Academy of Social Sciences concluded that these reports are on average not just longer but of higher quality than those of their foreign competitors operating in China. 75% Chinese business managers in Fortune China’s most recent annual survey said that integrating social impact considerations into corporate strategy was important, up from 36% the previous year. Improving governance has jumped in stated importance (from 46% to 70%) as has social and environmental impact management (from 41% to 63%).
High profile cases have informed international perceptions of China’s domestic approach to sustainability, such as Google’s exit from the Chinese market in the face of state censorship of the internet, the conviction of four executives of the mining giant, Rio Tinto, for bribery and theft of commercial secrets, and the case of Sanlu Dairy, whose Chief Executive was sentenced to death following their conviction for knowingly selling tainted milk that killed several children and sickened thousands more.
Such cases highlight again the fact that emerging nations will shape their own future and how best to get there, as employees of the Netherlands-headquartered Clean Clothes Campaign discovered when summoned to appear in a Bangalore court in 2007 when their campaigning target, the international jeans suppliers Fibres and Fabrics International, turned on them accusing them of cyber crime, acts of racist and xenophobic nature and criminal defamation. Intense diplomacy at the highest levels eventually defused the situation and the international Interpol warrant for the arrest of the accused campaigners was withdrawn.
Emerging economy businesses are embracing the sustainability challenge, in their products and processes, through their measurement and reporting, and in how they see themselves and their future.