Green Manufacturing and China

IndustryWeek (Stephen Li and Arvind Kaushal, Principals, Booz & Company) -There is a lingering perception that China is relatively lax about environmental problems in its manufacturing sector. But more and more, that's a dated notion, ignoring the significant steps taken by China in the last year or so to address its green shortfalls, such as higher factory emission standards, an emphasis on developing renewable energy technologies, and stricter oversight of potential polluters...

Recent statistics support this trend. In a late 2009 survey of more than 200 foreign multinationals in China conducted by Booz & Company and the American Chamber of Commerce in Shanghai (AmCham Shanghai), three-quarters of respondents said they were adopting green technology in their Chinese operations and 60% anticipated savings in operations from their green investment. Moreover, 62% of the companies said they actually quantify the magnitude of the potential effect on their business from carbon, water, or other environmental constraints...


As the efficient green strategy proves its value and as Chinese leaders and consumers become more demanding about sustainability and environmental sensitivity, multinational manufacturers are more than likely to move toward a differentiated approach. Currently, however, few of them see a payoff from such a potentially expensive and complicated campaign. Although the cost of manufacturing and the price of goods are rising in the country, it is still too early in China's emergence as an economic power for a multinational to anticipate a consistent top-dollar (or, in this case, renminbi) return for unique products that meet high environmental standards. By contrast, the expectation of such a return drives differentiated strategies in the West. Only 30% of survey respondents said they could demand higher prices for green products and services in China, compared to 46% of companies that said they do so in other markets around the world.

The Booz & Company/AmCham Shanghai survey paints a much more nuanced-and rosy-picture of environmental conditions and prospects in the manufacturing community in China than is generally perceived. While multinationals have clearly helped the country improve its green record, China has changed its own behavior significantly, and it is probable that the continuing sustainable activities of domestic and foreign manufacturers will dovetail perfectly with China's own commitment to a cleaner future during the next decade. As this partnership evolves, the lucrative gains from green -- in both quality of life and company performance -- will make this period of gestation worth the painstaking effort. (For an in-depth analysis of multinational activities in China, see the third annual China Manufacturing Competitiveness Study 2009-2010, published in March 2010 by Booz & Company and the American Chamber of Commerce in Shanghai. www.booz.com)