02 Nov How to Transform Your Business Through Sustainability in China

Posted at 10:40h in China Insights, Sem categoria by

Achieving sustainability requires multiple stakeholders within and beyond an organization to work together while prioritizing alignment of the key objectives and “languages”. A sensitive topic like sustainability attracts people’s attention and can also easily bring up judgment. Thus companies will need a cautious yet effective approach to exerting positive influence and creating a sustainable Chinese way of life.

With the deterioration of global warming and the spread of the pandemic, sustainability is undoubtedly one of China’s frequently-discussed topics these two years. The word sustainability generally indicates programs, initiatives, and actions aimed at the preservation of a particular resource, including human, social, economic, and environmental.

Among all of them, environmental sustainability is the most fundamental. As the development of clean and renewable energy has not been implemented on a large scale, how to control pollution and waste is particularly important. Therefore, net zero has naturally become a common goal across the globe.

China’s ambitious climate goal to set the tone for the future actions

China has been the country with the most serious air pollution in recent years, and its carbon emissions are more than double those of the United States ranked second in 2020.

The 10 most polluted countries in 2020
(in million tonnes of CO2)

Source: BP Statistical Review of World Energy 2021

To show its determination, China’s goal of carbon peaking by 2030 and neutrality by 2060 was announced at the UN General Assembly in 2020 and considered the most ambitious goal in the world, therefore great efforts are expected to be carried out for achieving sustainability and policies, initiatives and mindset will move forward much faster in the next few years.

The up-and-coming ESG phenomenon in China

This June, the “Enterprise ESG Disclosure Guidelines” issued by the China Enterprise Reform and Development Association came into effect, which is the first enterprise ESG information disclosure standard in China. 

We can see that transparency is pushed to the next level for companies when facing stakeholders external (investors, partners, customers, etc) and internal (board members, employees, etc).

Large multinational companies in China usually follow the ESG instructions from the headquarters but the success should lie in how to make it China-relevant and more efficient to seamlessly adapt to the market strategy. China is already leading in renewable energy production and is currently the world’s largest producer of wind and solar energy, and the largest domestic and outbound investor in renewable energy. Those advantages should always be remembered for sourcing strategic partners of renewable energy in China.

Consumers yet to fully embrace sustainability

Since the milk scandal in 2008, the focus of Chinese consumers has been mainly on personal safety and health and this single dimension of perception on sustainability will still last for quite a long time. 

While appreciating brands’ efforts on sustainability, consumers sometimes still have concerns in purchasing those products mainly because of the premium of the sustainable products bring and the unmatched product desirability. 

In our experience, there are 4 important aspects for companies, especially multinationals to practice ESG in China.

1. Government collaboration and localization

It is suggested that companies closely follow the government appeal for the decarbonization and set a specific net-zero target for the China market when adapting the global decarbonization roadmap and making it more locally relevant. 

Meanwhile, seek opportunities to collaborate with the local government or get related government-certified green labels to expand the influence and establish credibility among the public.

Apart from the strategy, a new business model can also be transformative. Even in the global sense, 90% of executives consider sustainability to be important, however only 60% of companies incorporate sustainability in their strategy, and merely 25% have sustainability incorporated in their business model.

In a country like China where opportunities are diverse and people’s acceptance of new concepts is high, we expect to see more agile and innovative business models come forward.

2. Employee onboarding and executive education Government collaboration and localization

We have found that multinationals have a better-established and systemic understanding of decarbonization as they tend to think in the long run and are able to fast onboard staff.

In order to successfully practice ESG, employees play crucial roles in making changes and delivering company values. Employees at the forefront should be empowered to act as brand sustainability ambassadors to educate customers and engage with them. They are the windows through which business verifies the results of their sustainable efforts.

Meanwhile, executives will have to have a sophisticated understanding of sustainability as many of them still struggle with short-term costs of transitioning to a low-carbon future. 

3. Integrate innovation into the value chain

To meet the increasing demands of the customers and multiple stakeholders, companies have to find the changemakers in the industry and make a strategic partnership with them.

So far, we have seen companies making great efforts in production innovation (low-carbon and biomaterials, etc), sourcing (origin tracing), and circular economy (re-selling platform, recycling, sharing economy, etc), and more are coming forward across design, production, distribution, and communication shortly.  

For instance, luxury groups including LVMH, Prada, and Richemont leverage blockchain technology to communicate through authenticity, responsible sourcing, and sustainability. Consumers scan a QR code to access an app to learn the story behind the item, from raw materials to manufacturing and distribution. Local sustainable solution providers like Remake hub, Green Initiatives, WasteZero, etc are dedicated to recycling textile waste into lifestyle products.

4. Locally-relevant communication with the consumers

Chinese consumers, especially the young generations, tend to welcome and appreciate this topic. They are also the ones who are willing to take action and ready to advocate on social platforms as well as in the communities across city tiers.

One way to be more locally relevant in terms of communication is to link the “hometown pride” with the damage to the surrounding environment where they live. We also find that one of the communication barriers is the imported and direct-translated sustainable concepts and terms. To solve that problem, digital solutions are highly recommended which can provide a seamless shopping experience and lighten up a serious study process.

For instance, Kering‘s mini-program “My EP&L”, allows users to calculate the environmental “profit and loss” of their purchases. This sustainable go-to mini-program also provides a vocabulary list of the materials, and the methodology and helps to understand how the environment is impacted by various pollutions.

To further explore your potential with Sustainability,
Contact us at: meet_shanghai@fabernovel.com

1. Government collaboration and localization

  • Fabernovel developed the Value Wheel to help companies make strategic decisions and integrate impact into their value creation model.
  • Study on law/regulation and China market
  • Agility methodology

2. Embark employees as brand sustainability ambassadors

  • Workshop 
  • Sustainability academy
  • Learning expedition

3. Integrate innovation into the value chain

  • Startup scouting

4. Locally-relevant communication with the consumers

  • Social media retainer
  • Campaign
  • Consumer asset building

Special acknowledgment to Green Initiatives, IKEA China, WasteZero Shanghai, Re:mtr, Beiersdorf Innovation Center Shanghai

Fabernovel was born from Design Thinking 20 years ago, designing & building solutions that solve user pain points. Our design studio is expert in Art Direction, Graphic Design, UI/UX Design and Design Thinking.

EY Fabernovel’s Design Services

BUSINESS DESIGN

  • Discovery research (Focus Group / Panel)
  • Usability research
  • Design Benchmark & Auditing
  • Customer Journey Mapping

CREATIVE

  • Brand Book & Visual Identity
  • Campaign Creative
  • Games
  • AR / VR

SOLUTION DESIGN

  • Website & WeChat Mini Program Design& Revamp
  • Omnichannel Product Design
  • User Interfaces
  • Design A/B testing
  • Prototypes
  • No Code / Low Code Design

To tailor-make your digital products, contact us at: meet_shanghai@fabernovel.com

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