New University of Cambridge paper finds Chinese investment should be used to promote strategic sustainability leadership in South Africa and the African continent
Cambridge. 19 August 2015
A new paper by the University of Cambridge Institute for Sustainability Leadership (CISL), authored by visiting researcher Han Cheng, investigates the local business context and sustainability drivers in South Africa to recommend how Chinese businesses can implement sustainability strategies and practices.
The paper concludes that Chinese companies need to consider sustainability issues through a widened lens, and adopt a more holistic and strategic approach to sustainability management, in order to:
- Manage unconventional risks in a complex environment
- Approach sustainability as a new lens through which to explore opportunities
Han Cheng explains: "Sustainability is, and should be, far more than a 'cost' to businesses. Social and environmental challenges present a chance for companies to develop business opportunities and manage risks in the longer-term through innovation and leadership.
“Corporate responsibility implies working together in partnership to enhance the livelihoods, wellbeing and economic vibrancy of a society – in other words creating ‘shared value’.”
As the world's third largest foreign investor, China is increasingly shaping the global market through its private sector. In turn, the environmental and social footprint of international Chinese businesses is felt through the direct operations of these businesses, as well as through their global supply chains and cross-border trade.
Africa, in particular, has attracted Chinese investment, and is now the continent's largest trading partner with bilateral trade exceeding US$200 billion since 2013. It is therefore in the interest of both African stakeholders and Chinese businesses to understand and resolve relevant sustainability challenges.
Author of the report Han Cheng continues: "Over the past few years, instances of poor social or environmental management linked to Chinese foreign investment projects have caused concern both in the international community and in China itself. Turning this trend around will enable China's foreign investors to demonstrate that they are delivering positive social impacts - in turn, helping bolster their strength and reputation in the global market.
"However, while we have seen a recent policy push by the Chinese government to promote the adoption of sustainability best practice, there has been limited uptake among Chinese businesses. What appears to be missing is a clear understanding of business drivers that would persuade international Chinese businesses to act."
South African business sustainability drivers that Chinese investors should consider factoring into their decision making and operations include:
- Sensitivity to local contexts
- Awareness of emerging sustainability networks and standard-setting bodies that are advancing the frontier of business leadership at a global level
- Establishing a clear and long-term vision of the role of business in society
- Recognising that strict extra-territorial compliance influences the behaviour of South African businesses that have an international footprint
- Preparing for the fact sustainability-related accidents or crises can have a 'game-changing' effect on a company
- Understanding that state-owned businesses tend to have unique social and cultural characteristics
- Acknowledging carbon policy creates a new market environment, within which international businesses must respond
- Accounting for cost-savings that represent a major driver for sustainable management
- Leveraging competition which is deeply rooted in South African business culture
- Addressing water scarcity, which comprises a significant constraint to local and national socio-economic development
- Being alert to the different cultural, social and political landscape in Africa is critical
Chinese businesses operating overseas approach sustainability issues with a particular set of goals, motivations and business drivers. These are framed by China's historical context, its prevailing business culture and Chinese perceptions of stakeholder engagement. Some crossover between Chinese and South African attitudes towards corporate sustainability can be seen, but there are a large number of points of divergence as well:
- Legal risks and obligations in overseas markets such as South Africa represent a major driving force for Chinese investors to adopt sustainable business practices
- Social and environmental responsibility has risen up the agenda of Chinese businesses in recent years
- Meeting China's domestic laws and policies remains an obligation for Chinese companies even when they are operating overseas
- Cost saving through energy efficiency measures makes economic sense for companies as well as strengthening the price competitiveness of energy-intensive products
- Access to local and export markets incentivises Chinese businesses to manage their sustainability practices well
- The intended lifespan of an investment has substantial impacts on a company's approach to sustainability issues
- The role of Chinese financial institutions can be leveraged to promote improvements in corporate sustainability
- The practice of 'helping the less fortunate' is deeply rooted in Chinese culture
- A true 'win-win' is possible only if with cross-sectoral partnerships
To read the report visit https://www.cisl.cam.ac.uk/publications/working-papers/should-investment-in-africa-consider-sustainability.
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Notes to editors
According to official government figures, China's direct investment in Africa increased from US$1.44 billion in 2009 to US$2.52 billion in 2012, representing an annual growth rate of 20.5%.
Within Africa, South Africa is China's largest individual trading partner, at a volume of US$20.2 billion2. According to the South African government, between January 2003 and January 2014, a total of 38 foreign direct investment (FDI) projects were recorded. These represent a total capital investment of around US$1.24billion.
Methodology
This project deployed a research methodology based on in-depth, semi-structured interviews in South Africa. These were conducted face-to-face. The approach sets out to provide first-hand insights into leading practices as well as to offer an understanding of business drivers for the adoption of sustainable management. In addition, it seeks to draw on cross-cultural comparisons and to point to potential pathways for knowledge transfer.
In total, 25 key interviewees participated in the research. These included the qualitative methodology employed with the majority of this sample was face to face in-depth interviews. senior business executives, corporate sustainability managers, academic scholars, community experts and other practitioners. The South African participants were recruited via contact lists supplied by CISL. All are recognised as having contributed significantly to sustainability theory or practice. Chinese participants were approached through the author's research network, all of whom are employed by Chinese companies operating in South Africa. Although the limited number of interviewees may restrict the overall representativeness of the study, it remains large enough to provide a nuanced and perceptive analysis.
About the author
Han Cheng's interest lies in international development, environmental sustainability, and public policy. His work with the University of Cambridge Institute for Sustainability Leadership in South Africa and Cambridge focuses on governance and private sector partnerships for development, as well as the Institute's China engagement.
Han works as an independent consultant with environmental groups, academics and public bodies in Asia and Africa. He is most recently a visiting scholar at Yale University's MacMillan Center for International and Area Studies, and The Energy and Resources Institute in India. Prior to this, he was the Global Governance Futures Fellow to the Global Public Policy Institute in Berlin, Tsinghua University in Beijing, and the Brookings Institution in Washington DC. Han graduated from Renmin University of China.
About Cambridge and CISL
For 800 years, the University of Cambridge has fostered leadership, ideas and innovations that have benefited and transformed societies. The University now has a critical role to play to help the world respond to a singular challenge: how to provide for as many as nine billion people by 2050 within a finite envelope of land, water and natural resources, whilst adapting to a warmer, less predictable climate.
Within the University, the Cambridge Institute for Sustainability Leadership (CISL) empowers business and policy leaders to make the necessary adjustments to their organisations, industries and economic systems in light of this challenge. By bringing together multidisciplinary researchers with influential business and policy practitioners across the globe, it fosters an exchange of ideas across traditional boundaries to generate new, solutions-oriented thinking. His Royal Highness the Prince of Wales is the Patron of CISL and plays an active role in its work.
A particular strength of CISL is its ability to engage actors across business, finance and government. With deep policy connections across the EU and internationally, dedicated platforms for the banking, investment and insurance industries, and executive development programmes for senior decision-makers, it is well-placed to support leadership in the real and financial economies.
