Why working on human rights in China is good for business

Today, October 25, the state visit to China of the Dutch King and Queen officially started. In the run-up to this state visit, the discussion on whether or not the King and Queen should talk about human rights in China in their meetings with Chinese counterparts intensified again. This is a regular recurrence ahead of any high-level event between the Netherlands and China. It is also not unique to the Netherlands. I have read similar discussions in the past week while President Xi visited the United Kingdom.

As usual, the state visit is accompanied by a large trade delegation. And sometimes the question about human rights in China also gets asked of Dutch entrepreneurs: Do you talk about human rights when doing business in China?

The answer often is: We’ll leave that to the politicians.

At first glance, this makes sense. For example, when talking about the Chinese government’s attitude to human rights’ defenders, which is often part of this discussion. How can a Dutch business do anything about this? Let business people focus on running their business.

More than freedom of expression

What is forgotten here is that human rights are many more than only the rights referred to in the above context, such as freedom of expression. The Universal Declaration of Human Rights also includes others such as freedom from slavery, the right to a fair wage and the right to join a trade union, to name a few. These are the type of rights that should have the attention of business. After all, business has an impact on what people earn, under what conditions people work and on the environment (clean or polluted) people live in.

This gives businesses a responsibility to respect these rights and to ensure that their business operations do not have a negative impact on them (on the rights of employees, but also on the rights of people living near a factory, for example). The United Nations Guiding Principles on Business and Human Rights are the framework that outlines this responsibility. The Guiding Principles are also integrated in international standards such as the OECD Guidelines. These Guidelines are the foundation of policies on international corporate social responsibility as developed by the Dutch government: Dutch companies are expected to follow these Guidelines in their international operations.

In some countries the discussion on business and human rights has already led to legislation: this year, anti-slavery legislation came into effect in the UK and as of this month, as part of this law, large corporations are required to report on the steps they have taken to ensure slavery does not exist in their supply chain.

An opportunity for business

Over the last decades, China has achieved remarkable progress on eradicating poverty. This is a commendable achievement but unfortunately not all problems are yet solved. Regularly, multinationals headline international media with news on unsafe labour conditions or on toxic materials used on their production locations in China. International supply chains are often long, complex and non-transparent: it is difficult to know everything that occurs in the many links that connect that supply chain. But by not knowing, a company exposes itself to a lot of risk.

It is not all bad news. In addition to the ethical argument that a modern business should take responsibility for the societal impact of its business operations (aside from only financial impact), companies increasingly show that it can be good for a company to do so.

In-depth knowledge of what happens in your supply chain and executing due diligence, ensures that a company can act faster on issues that might otherwise only show after causing a problem. This means that a company can manage its supply chain risks better and can prevent unnecessary disruptions to production.

Transparency about a company’s policy on human rights and CSR increases access to finance, from banks or investors but also when applying for funding from the Dutch government (which requires following the abovementioned OECD Guidelines). That transparency also leads to increased trust from clients: when supplying business clients it means that you are also reducing risk for them. But also consumers are increasingly asking questions about where and how products are being manufactured. Being able to provide answers to those questions can give you access to a loyal new group of customers.

How does your business work on human rights in China?

Taking the above perspective, it almost seems strange that companies who do business in China (or any other country) don’t get that question more often. Within their value chain, this is something a company has influence on: human rights are not only relevant to politicians but also to business. Positively using that influence, sets a company apart from its competition and makes it better positioned for future business success.

Does this sound complicated? That first step is easier to take than you might think: take a good look at your business operations and your (international) supply chain and use that as your starting point. Knowing your supply chain and identifying the main risks is key. Go from there for your next step.

Are you wondering if you should even be active on the Chinese market because of the government’s human rights track record? Then also consider that even if you cannot influence government policy, you can make a positive impact through your own activities and your supply chain.

This blog was first published in Dutch on www.china2025.nl

CCTV Beijing Koolhaas blue sky

On solutions and blue sky

It was already noticeable when driving into the city from the airport yesterday: Beijing is hosting the annual APEC Summit this weekend. For those who don’t know, the Asia-Pacific Economic Cooperation Forum encompasses 21 countries, together making up 54% of the world’s GDP and 44% of world trade. Among its member states are the United States, Japan and China: the top 3 economies of the world.

Not surprisingly, there’s a lot to talk about this week and most of which fits neatly with China’s domestic agenda as Elizabeth Economy points out: regional economic integration, innovative development and infrastructure development, to name a few.

Yet, the world’s eyes are more focused on if a bilateral meeting between Japan’s Shinzo Abe & China’s Xi Jinping will happen: it would be a welcome break in a very fraught relationship.

But even more than the political dimension of this summit, media in Europe (at least) is talking about the blue sky that is starting to appear in Beijing in preparation of the arrival of the expected heads of state.

Factories are being shut down, cars are restricted and yes, at least today this has resulted in a bright blue – and clean – sky, as you can see above. I took advantage by being outside a lot on a day of meetings talking about China’s pollution and solutions for this.

First, with a Dutch entrepreneur who has made it his business to bring promising and innovative technology to China, often with a focus on reducing pollution, for example by introducing technology for cleaner energy-from-coal production. The main take away: don’t be afraid to do business in China. Yes, there are risks but the opportunity for truly innovative technology here shouldn’t be missed. (And: China is further advanced then you might think, so make sure you really are innovative).

Another meeting today was at the China office of American NGO NRDC (Natural Resources Defense Council). We spoke mostly about their work on cleaning up the supply chain in the textile industry, focusing especially on dyeing mills. This work started after research showing the extent of water pollution in China, of which the chemical and textile industry are the main contributors. By working with large retailers, NRDC has slowly built a program working with mills directly on decreasing water pollution and improving energy conservation.

However, often, for companies in the textiles industry such as brands and retailers, focus is on working with their first tier supplier: the factories where clothing is sewn together. Mills are another step back in the supply chain and, especially for smaller companies, often unknown – as last week’s SOMO research showed for South-India where completely different issues are at stake.

So, while large international retailers such as H&M, GAP, Nike see a definite business need to tackle this issue partly based on reputational risk, this argument isn’t as strong for smaller companies. What incentive do they have to include second tier suppliers such as dyeing mills in their CSR activities? One reason can be an increased risk of an unreliable supply chain if there is little information about where fabrics come from: mills have been closed down by local governments in the past on the basis of excessive pollution which compromises the timely delivery of fabrics and ability to maintain critical production timelines. Or the risk of hazardous chemicals in the fabrics used.

Lots of work still to do.

Impact: China’s growing civil society

Hope for the people in China is not in the government, it’s not in the Communist Party. Hope is in civil society.

Listening to Teng Biao, renowned Chinese human rights lawyer, speaking today in Amsterdam, this quote stuck with me as one of his few positive comments on contemporary China.

He spoke about his career and experiences as a university lecturer and part-time lawyer in Beijing. His work focuses mostly on human rights cases, such as cases related to Tibet, Falun Gong or other politically sensitive topics. Doing this work at first meant that he was hindered in acting as a lawyer in these cases and he was faced with progressively increasing pressure: being disbarred, having his passport taken away, being kidnapped, being locked up, being tortured. He now lives in Hong Kong unable to return to his native Beijing for fear of being arrested. Again.

Over the past two months I have been speaking with over 40 Dutch companies about the business opportunities for them in China and how to go about making the most of these opportunities. And while talking about many of the positive developments in China that have happened in the last few years, it is sometimes easy to not look at all those things that are not improving in China. Such as the position of human rights defenders. And today’s talk was a bleak reminder of actually how dire a state they are in.

Under Xi Jinping’s leadership the political climate for these lawyers and other activists has been getting worse, in Teng’s view, with an increasing crackdown on movements such as the New Citizens Movement. In his talk, Teng called on foreign governments and ngo’s to keep putting pressure on the Chinese government so that this crackdown will relax. At the same time, it is unclear what effect this pressure has – but as Teng rightly points out: if you don’t say anything, you can be sure nothing changes.

Fortunately, despite the doom and gloom of Teng’s perspective he also sees positive developments. Influenced by amongst others globalization, the growing penetration of the internet and ongoing activities from the pro-democracy movement civil society is growing stronger.

Despite government pressure, despite the lack of an independent judicial system and many other forces working against it, the impact of civil society in China is increasing. During his talk, Teng shows pictures of protests in all forms across China. Pictures of events which wouldn’t have been allowed in any way in the 1990’s, as a keen listener from the audience observed.

As Teng states, the hope of the people in China is in a strengthening civil society to contribute towards change in China. Hopefully, the commitment and dedication of courageous and admirable people like Teng and his fellow human rights lawyers and other activists will see this happen.

Chinese cities in Africa

If it would be a contest, China is in pole position.

Last week I attended an evening at Pakhuis de Zwijger about Chinese cities in Africa, and the above is what has stuck with me. The evening was centred around the research of Michiel Hulshof and Daan Roggeveen within their Go West Project, where they are travelling to African cities to research how Chinese activity in Africa is influencing these cities.

China and Africa are becoming more and more connected: some examples of this are through Chinese investment and through Africans setting up in China. There has also been increasing attention on this activity, as China’s engagement with Africa is happening on very different terms than European engagement with the African continent.

The evening highlighted specific activities of China in some of the places that the duo has travelled to so far (including Nairobi, Lagos, Luanda, Addis Abbeba – to name a few African cities): development of mass housing and establishment of Special Economic Zones.

Some of the points that struck me during the evening:

  • throughout the evening, the language used was very much in terms of a contest: who can build the most and the biggest (buildings, infrastructure, etc) and who can tie African governments to their own country the strongest? China isn’t the only country that is actively seeking opportunities in Africa – others include of course European countries, but also for example Turkey and Brazil. But is it really a contest? Is it really about being the most important non-African governmental actor (in whichever form) on the African continent? I don’t know – in traditional geopolitical terms, possibly it is. But in terms related to how to progress on sustainable development in Africa I don’t think it should be.
  • the evening shared different examples of Chinese firms building mass housing complexes in African cities, or of establishing joint economic development zones with a local government authority. Yet, what didn’t come through much in these stories was what the impact is on the development of society in these African cities: how does living in a gated compound (copied from the Chinese model of housing) change the social structure in any given African city where the way communities were living will have been very different.
  • what is the contribution of Chinese investment to economic and sustainable development of African cities and communities? What comes across in the contributions of experts during this evening is that the Chinese firms come in with their own workers (though this is slowly changing), underbid local African firms and are only recently becoming more interested in contributing to local capacity building. Some Chinese firms are starting to engage in a more active CSR-policy (and in fact, the Chinese government is requiring companies active in the extractive industry to implement CSR in their operations) and during the evening Huawei was mentioned as an example of a company which is developing a local CSR programme that focuses on local capacity building.  Yet, building the skills and capacity locally across Africa will be important to contribute to future-proof development.

Finally, the conclusion of the evening was also that it isn’t possible to ‘just’ copy the Chinese model to gain similar results in development and economic growth. Parts of it may work, but Africa is – of course – a different place. Africa is not one place, and it is likely that the Chinese model can be more successfully implemented in countries with a more authoritative government (examples are Ethiopia or Angola).

In any case, yet again an interesting Go West Project to keep track of while the research into the influence of Chinese urbanism in Africa continues.

Hong Kong discoveries

Without turning this into a travel blog, I can’t resist sharing some of my discoveries in Hong Kong this past weekend.

Shopping
I’m not a big shopping fan, and on top of that I’m not a big brands type of shopper: finding those big brands is very easy Hong Kong. It still surprises me that a city can sustain this scale of luxury retail.

hong kong 064

But of course, there are other places as well. One shopping mall that I really enjoyed is K11, a smaller mall that combines art with shopping: there are several art installations set up inside which makes it a fun place to walk around. The shops inside are a combination of well-known brands (lots of sports gear, but also shoes and bags of course). But part of the first floor is devoted to designers with some smaller shops selling really creative and funky clothing, accessories etc. And, don’t miss the amazing book shop on the top floor which has great stationery, office material and – of course – books on design, fashion, photography and an extensive kids section.

Qips is a stationery shop in the Miramar Shopping Centre on Nathan Road (and also on Hoi Ting Road, according to the website): a place to browse all their really smart things to use for paper and more. Of course, they sell many things you never thought you could need at all as great stationery seems to be very hard to find in the Netherlands. Much of the stuff sold here was Japanese, which isn’t surprising. So, if you are looking for quirky post-its, markers or clips, this is a great place to go (also makes for some unusual small give-aways).

Eating and drinking
Apart from shopping, eating & drinking are very easily done in Hong Kong: there’s an abundance of restaurants, cafés, etc. Which also makes it difficult to choose and find some nice places in the midst of all those on offer. My Saturday night was spent at the following places which I all really enjoyed – though be warned that none of these get you into any local Hong Kongese places: the clientele is mostly expat.

Start off your evening with a few glasses of wine, and some people watching, at Staunton’s Wine Bar, nice place just off the escalators on Staunton Street. They serve a pretty wide range of wines.

For dinner, and especially if you are looking for some meat-less options (which I always find difficult in Asia), Life just below Staunton’s Wine Bar is great: an organic and vegetarian café and restaurant, which also does take-out. The restaurant has a roof terrace upstairs, and unusual food options on the menu. I loved the spicy tempeh burger.

And to close off an evening in Hong Kong in style, head to the other side of the river for a cocktail at Ozone, the top floor bar at the Ritz Carlton in the ICC. The view from the 118th floor is simply stunning, from where you look across all of Hong Kong Island.

hong kong 090

Practicalities
Hong Kong is a very easy city to get around, which makes a stay here very comfortable. Some quick tips:
> use the airport express to get in to the city: you can buy a ticket (for around $100) at the counter as soon as you get out of the luggage claim area to avoid the queue at the counter in the main arrivals hall. Trains run every 10 minutes, and reach Kowloon and Hong Kong in about 25 minutes.
> get an octopus card: a travel pass that is charged with money so you swipe your way on to the metro, tram, ferry, bus etc. Supereasy.
> use the tram to travel up and down HK Island and to see a bit of the city at the same time (most trams only travel from East to West so you can’t really go wrong with any of them) and take the Star ferry to cross between Hong Kong Island and Kowloon which is a really nice 15 minute way of travelling (except when you’re in a rush: then the metro beats both of these modes of transportation).

Newly launched Japan & China blogs

Now go blog about this
via Flickr/nightthree

When ChinaFile was launched a few months ago, I looked on enviously. What a great discovery: a website full of relevant articles on any topic that is worth knowing about when it comes to contemporary China. With a few articles posted daily, my reading speed can’t quite keep up. But also: wouldn’t it be great if a similar website existed in the Netherlands, writing from the Dutch/European perspective on China?

Maybe I wasn’t the only one thinking this: over the last few weeks two Dutch websites have launched with one focusing on Japan and the other on China. Both of these websites publish regular articles on current affairs in either Japan or China, with a range of topics covered from design to social issues to politics and doing business.

Katern:Japan has been going for a few weeks now. The site is easy to navigate with the different categories listed at the top. With several writers there is a steady flow of articles published which are easy to read and cover many different issues. Interesting to follow for anyone interested in modern Japan, although I also noticed that a ‘economy’ or ‘business’ category seems to be lacking. Maybe this will change in the near future.

The newest ‘kid on the block’ is China2025, a ‘crowdblog’ with a similar format to Katern:Japan: a range of writers covering different topics. But only launched this week, it’s more difficult to assess how this blog will develop. The categories are a little harder to spot, they can be found in a tagcloud in the right column. I’m looking forward to see how this blog will develop from now onwards.

‘White elephants’

I was contacted recently by a journalist asking about some photographs I took on a trip to China two years ago. He is working on an article on ‘white elephants’ in China which is why he contacted me. I had never heard of this expression until then, but Wikipedia explains:

A white elephant is an idiom for a valuable but burdensome possession of which its owner cannot dispose and whose cost (particularly cost of upkeep) is out of proportion to its usefulness or worth. The term derives from the story that the kings of Siam (now Thailand) were accustomed to make a present of one of these animals to courtiers who had rendered themselves obnoxious, in order to ruin the recipient by the cost of its maintenance. In modern usage, it is an object, scheme, business venture, facility, etc., considered to be without use or value.

The New South China Mall in Dongguan, Guangdong province in southern China is one of these ‘white elephants’. I was taken there on a road trip showing the extremes of Chinese development. I wrote the below short article on my impressions of that day (written in april 2010).

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The Pearl River Delta is the main economic region in China and the two main cities, Shenzhen and Guangzhou, are some of the richest cities in the country. We spent the day driving to see some extremes of China – a good change from being in meeting rooms in Beijing for the four days before.

Shenzhen actually surprised me. The city has transformed in 30 years from a small fishing village across from Hong Kong to a major, modern city filled with high-tech companies. It was the first Special Economic Zone in China, announced in 1978 as part of Deng Xiaoping’s Open Door policy. It sparked tremendous growth for the region and ultimately made the Pearl River Delta into the production powerhouse of the world. A lot of the cheap toys and computer components which are ‘made in China’ are likely to have been made here. So in my mind Shenzhen would be a very industrial, factory-filled, dirty & grey, chaotic city. Similar, in fact, to surrounding cities such as Dongguan.

Surprisingly it was much better than that. We visited Shenzhen to meet with an architect from OMA who is working on the construction of the building for the Shenzhen Stock Exchange. And this is only one of many buildings under construction with some other top designed buildings close-by. The wealth of the city is clearly showing.

But to show me that China isn’t all about amazing growth rates, spectacular buildings and more, my colleague also took me to the biggest shopping mall in the world. I guess it’s another symptom of China’s development where everything needs to be bigger and better. But bigger doesn’t always mean better, as the New South China Mall clearly shows.

At first we thought we were in for a disappointment. Driving up to the mall we saw shops, people, lights and, well, activitiy. This wasn’t what we were coming for. Because apart from it being big, we were told it would also be empty. When we walked in behind the McDonald’s we were relieved to see this was true. Five floors and corridors going off in every direction, but no shop in sight. It was clear that there had been some shops at a point in time, but everything was gone apart from the Spar, the McD’s and the local drugstore out front. A ghost shopping mall – and an example of how it can go very wrong as well.

Haphazard investment clearly doesn’t automatically guarantee growth and further investment. And that ties in nicely with a presentation I attended earlier that week on the Chinese economy. That presentation closed off with the prediction that the current level of high investment is only going to have a negative effect and that China’s economy will crash within the next few years. Let’s see what will happen.

Dongguan/ New South China Mall