China Needs to Lead

Question: What do you see as the incentive for the U.S. to collaborate with China on issues of sustainability, as depicted in the interview with Gro Harlem Brundtland? 

Robert Eccles: The issue that she brought up about China, the relationship between the US and China, I think is a fundamental one. People talk about the Big Two, I think the relationships between the US as the world’s largest developed economy and China, as the world’s largest developing economy, is absolutely a critical one. I happen to be spending a lot of time in China for work I’m doing at Harvard Business School, both in terms of sustainable urbanization and executive education programs of various kinds. What I’m finding is very interesting, is an extremely high level of interest in sustainability and integrated reporting in China. If you look at what the official government agencies are talking about, and I forget the exact term, but the current five-year plan is essentially one that says we need to continue to grow, we need to take care of a large population, but we need to do so in a responsible way that takes account of society’s limited resources. 

My book on integrated reporting is being translated into Chinese, it should be available in June. When I’m in Shanghai in June I will be doing a conference in collaboration with the Fudan School of Management. Since there’s an extremely high level of interest in sustainability in China, one of my colleagues, Professor Chris Marcus, is doing a study of CSR in China and when I asked him what the topics around CSR core responsibility are, that are in high on the list, environment is clearly high on the list, you know. Water’s high, energy, reporting around this is high. SASAC, the agency that manages the government’s share, the people shares of the large state-owned enterprises, last year required the SOE’s to start issuing CSR reports. It’s not hard to imagine that SASAC would think about, talking earlier, the role of regulation could require the SOE’s, which are the dominant market cap in China, to issue integrated reports. These large Chinese companies have the assets, have the ambition. They don’t want to just be big companies in China, they want to be global players and they understand that to be global players, they’re going to have to play by global rules and they’re going to have to establish themselves as legitimate in the global community, perhaps different standards in the US, certainly in Europe, around environment, around social, around labor. They’re smart, they get it, they’re adaptable, and I think you’ll see tremendous change in China. In fact, one can imagine in China, because it doesn’t have the same embedded infrastructure that you would get in places like Europe and the United States around rules and reporting and regulations, it’s not completely a green field, but it’s a greener field. 

One could imagine that leadership around things like integrated reporting could happen in China and could happen in China more quickly than it happens in the United States. In Brazil, for example, two of the companies that we talk about in our book are Brazilian, there’s an extremely high level of interest in Brazil around sustainability, driven by the great consciousness they have about the precious resources in the rainforests and they need to use those carefully. 

So it will be interesting over the next couple of years to see, as society becomes more and more committed to—I think the awareness is there—more and more committed to society, you could see leadership being taken by some of the major emerging market countries like China, like Brazil, like India. But I would agree with, Mrs. Brundtland that the relationship between the U.S. and China is an extremely critical one and if, from the point of view of my major mission around integrated reporting, if the US could exercise leadership here in the developed world and if China could exercise leadership in the developing world, I think that would be just terrific. And the rest of the world would probably bet on board fairly quickly.

Recorded on April 19, 2010

Harvard Business School professor Robert Eccles comments on a recent video interview with Gro Harlem Brundtland, a U.N. Special Envoy on Climate Change.

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