A partnership for a sustainable future?
Updated: 2015-05-04 13:26
By ALEXANDER HOLST(China Daily)
Over the past 30 years, China has achieved a phenomenal level of economic growth. But like many countries, it now faces pressing environmental challenges caused in part as a by-product of such growth. China must find solutions to these environmental challenges while not putting its economic future at risk. In finding their way along a more sustainable path though, Chinese businesses face opposition from those fearful of the higher costs of sustainable business. But these fears are misplaced.
The key is to look to long-term objectives. And here is where it pays to consider Germany's ambitious Energiewende (transition to green energy) as an example. Germany has committed to a phase-out of nuclear energy by 2022 and to a 40 percent reduction of greenhouse gas emissions by 2020 from 1990 levels. The Energiewende has, of course, faced criticism. The scale of investment is massive. Bloomberg New Energy Finance estimates the total cost of Germany's clean energy expansion at 106 billion euros ($114 billion). Meanwhile, The Wall Street Journal quotes government sources as predicting total costs to 2040 at around 1 trillion euros.
But the benefits go way beyond the environment. The Energiewende is creating jobs. In 2004, Germany's renewable energy sector employed 160,500 people, and that number doubled to 367,000 by 2010. It also promises to increase Germany's GDP. By 2030, German renewable energy exports are expected to reach 69 billion euros. The figure is 48 billion euros in 2005. Sustaining competitive advantage requires constant upgrading and innovation by companies and nation states. The Energiewende is likely to deliver German energy independence, as well as driving innovation in renewable energy, transmission, storage and distribution.
Furthermore, the fact is that, today, many companies are investing in sustainable business practices not in response to policy imperatives, but because their customers are demanding them, especially in the growing markets of Asia. By 2050, 3 billion consumers are expected to enter the world's middle class. Millennials, those born between 1981 and 1995, are a dominant consumer group and set to be among the most influential shoppers. The majority are from emerging markets, especially urban Asia, and are characterized by a growing interest in and demand for a sustainable lifestyle, as Accenture's recent research with Havas Re: Purpose (a social business consultancy) has confirmed. This actually stands in contrast to their counterparts in Europe and the United States. Nevertheless, we know consumer purchasing behavior is still driven mainly by price. So it requires business leaders to consider embedding ecological and societal competitiveness as a core element of their products, strategies and business models.
With this is mind, what are the benefits of a deeper Sino-German partnership on sustainability? In Hamburg last year, Premier Li Keqiang captured it pretty succinctly when he said that, "in the area of green economy, Europe has advantages while China has the market".
While Germany can leverage its technological expertise as a pioneer in green technology, China has a potentially huge market for those products and services that foster, for example, a circular economy, in which resources can be used and reused more effectively. One of the reasons for Germany's pioneering role with regard to green technology is grounded in the fact that German companies have been confronted with increasing external pressure from different stakeholder groups regarding sustainable and responsible solutions within their supply chain for many years. And this is something that is increasingly true in China. As a consequence, companies have pushed their suppliers to innovate and develop green technology solutions to achieve environmental gains and efficiencies that also help them improve their operational and market competitiveness.
In summary, while Germany is taking a leadership role within the EU with its ambitious Energiewende, China faces a similar situation in Asia. Both countries are aware that the next decade will be crucial for the global community. The deepening partnership in sustainability between China and Germany could have a great impact on the global business outlook, and help set standards in establishing business practices.
The author is managing director at Strategy & Sustainability Services, Austria, Switzerland & Germany, Accenture. The views do not necessarily reflect those of China Daily.