Beijing's Push and Chinese Consumer Pull Shifting Sustainability Strategies in China
The UN Climate Change Conference COP26 wraps up in Glasgow this week, with more than 100 of the world's leaders having had high level discussions over climate targets. One notable absence was Xi Jinping. As the world's largest CO2 emitter, the no-show from the president was lambasted by Biden, Obama, and others, reversing some of the diplomatic goodwill that China gained in 2017 when it confirmed its commitments after Trump announced that the US would withdraw from the Paris Agreement.
Xi's absence was unsurprising. Formerly one of the most-travelled world leaders, the president has not left China's shores in 22 months as the country continues its crusade as the last bastion of the zero-covid policy. Xi's request to beam in through a video link was declined.
No person on the planet has as much sway in influencing climate change as Xi Jinping. China now accounts for more carbon emissions than the developed world combined. And no other leader of any major economy has more sway in directing government, business and consumer behaviour. A recent Deloitte study calculated that climate action in China will increase GDP in the country by ¥116 trillion ($18.3 trillion), and the cost of inaction will be in the trillions. Clearly China has some tangible financial incentives to get cleaner.
Xi Jinping's message to COP26 was a continuation of the commitments it made six years ago in the Paris Agreement. This will see peak emissions by 2030 and carbon neutrality by 2060.
China has made some sweeping changes to improve its environmental footprint. Its forestry programs aimed at reducing pollution and soil erosion have seen China getting greener at a faster rate than any other country. It has installed almost one third of the world's solar power - over three times the US. More EVs sell in China than the rest of the world combined, but unfortunately most of the electricity powering them is generated by dirty old coal.
Although China's emissions are likely to continue to grow for the rest of the decade, companies in the market should ensure that their strategies already have a strong green component - and not just due to their social obligations. While Chinese consumers aren't as concerned about sustainability as their peers in other countries, there are signs that they are becoming more environmentally conscious. Eco-friendly, recyclable, and plastic/micro-plastic free have been among the fastest growing trends coming out in the consumer panels in our Skincare Tracker. Similarly, organic certification and eco-friendly production are the two most compelling brand features cited by consumers in our Dairy Tracker.
Nevertheless, it is Beijing's push for sustainability that has even more influence in company behaviour than the consumer pull. As we've seen this year, China is coming down hard on industries and companies that aren't aligning with its overarching goals. Similarly, industries and companies that do are onto a good thing. Companies driving sustainability are in the pole position for Beijing's support. With this support comes favourable regulations, capital and propaganda to the masses.
The latest Hurun rich list illustrates the importance of Beijing support on wealth. Following the crackdown on the property sector, no real estate developer made the top-10 for the first time since the list started in 1999. But with the government championing renewable energies, Luo Liguo, the CEO of solar product firm Hoshine Silicon was the biggest riser. His net worth multiplied 6.5 times, vaulting from 220th to 21st spot, despite import of his company's materials banned in the US.
Companies across all industries are ensuring sustainability permeates in everything they do. Sustainability was the overarching theme at this year's CIIE. Diageo's just-announced $75 million whiskey distillery in Yunnan will be carbon neutral. Budweiser has also announced it is expanding its brewery operations in China, with a big focus on green power. And even Alibaba, still in the dog box with Beijing, has green as a key theme to lighten its carbon-fused consumption festival, Double-11, with a dedicated "green products" channel and ¥100 million ($15.6 million) of special coupons for them.
In reality, whether it is moral obligations, serving increasing consumer demand, or adapting to Beijing's mandate, brands should be devising strategies through a green lens to ensure they can have the best footing for success in China, and help the planet at the same time.
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