In 2023, the climate crisis has never felt so imminent, with extreme weather occurring across the globe, from the hottest summers to the coldest winters. There was some exciting news at the United Nations Climate Change Conference (COP28) in the United Arab Emirates in December 2023, but even if governments fully meet all the commitments made at the conference, they will only be able to achieve about 30% of the emissions reductions needed to limit global warming to 1.5 degrees Celsius.
What are the business world's efforts and what business opportunities are they seeing in the fight against the climate crisis? At the Fortune MPW Summit held in Shanghai on December 8, five representatives from manufacturing, retail, finance, and rating agencies gathered to share their thoughts and practices on sustainable development. The following is an edited transcript of the discussion.
December 8, 2023 Fortune MPW Summit. From left to right: Fang Wang, Executive Editor-in-Chief of Fortune Shanghai, Xiaolei Zhang, President, Vice Chairman and Regional Chief Executive Officer (China & Japan) of Standard Chartered China, Xue Wei, Vice President of TCL Technology Group and Chairman of TCL Foundation, Chengyi Zhu, President of Dow Greater China, Zhi Huang, Chairman of S&P Global China and CEO of S&P Global Ratings, and Chen Hui, President of IKEA Supply East Asia of IKEA Trade Services (China) Co., Ltd.
IKEA: Turn takeaway lunch boxes into carpets
Wang Fang: Every piece of furniture from design, production, manufacturing, to transportation, store sales, the chain is very long. What is the biggest challenge for IKEA?
Chen Hui, President of IKEA Trade Services (China) Co., Ltd., IKEA Supply East Asia
Chen Hui: IKEA's sustainability strategy focuses on three aspects: how to provide a healthy and sustainable life for the public, second, business growth must be in line with the logic of the circular economy and be climate-friendly, and third, strive to achieve fairness and equality through the ecological chain. Our goal is to reduce emissions by 50% across our value chain by 2030 and to achieve net-zero emissions by 2050 at the latest.
The materials used in furniture are the biggest challenge, accounting for 52% of the carbon emissions of the entire value chain. China is IKEA's largest purchaser, accounting for more than a quarter. Every day, we think about how to reduce the emissions of materials and how to replace virgin materials with renewable and recyclable materials. To this end, we have set a goal of making 100% of the materials used in our products recyclable and renewable by 2030. To date, 60% of our products are made from renewable materials.
Wang Fang: I heard that you are making a carpet out of takeaway plastic lunch boxes. Can you share that with us?
Chen Hui: Most of the carpets sold in IKEA stores are made of one material, that is, polypropylene, and we use 30,000 tons of polypropylene every year, which is equivalent to 120,000 tons of crude oil. It is imperative to keep this material circular. But the use scenario of polypropylene is very narrow, and most of the clothes we wear are polyester, so it is very difficult to cycle.
In a casual cross-group exchange, we found that the takeaway lunch boxes we usually use when eating takeout are made of a material called polypropylene, and polypropylene and polypropylene are actually the same thing, different forms of the same material, and this discovery made us very excited. In Shanghai alone, the use of takeaway lunch boxes per week has reached 300-500 tons, which is amazing, and in the national dimension, the annual use of takeaway lunch boxes is one million tons. Takeaway lunch boxes can be recycled, but according to Chinese laws and regulations, they can't be remade into food packaging after recycling. So we thought: why not use it for carpets?
We have now made a strategic layout for "lunch boxes to carpets", and will first replace them with new products. The carpet made from recycled polypropylene will be available in April 2024. To reveal, the value for money is very good.
Wang Fang: This can make us feel less guilty when ordering takeout. Does this increase costs for IKEA?
Chen Hui: As we all know, using recycled materials that meet the standards to make products is generally more expensive than using virgin materials, such as recycled polyester is generally 20%-50% more expensive. But in the carpet project, we have achieved the same price as virgin polypropylene through innovation. This cost-effectiveness allows us to see a new opportunity: with such a price-performance ratio, China can become an exporter of recycled carpet raw materials and export them to carpet producing countries such as Turkey and Belgium, thereby empowering IKEA's global industrial chain.
Wang Fang: That's very interesting. Considering that China is such a big consumer, it will produce a large amount of plastic waste, and it has technology and a complete industrial chain, so China can cut in from the perspective of circular economy and rewrite the global supply chain.
Dow: Helping the circular economy with technology
Wang Fang: How does Dow, a materials science company, contribute to sustainable development through more high-tech materials?
Chengyi Zhu, president of Dow Greater China
Chengyi Zhu: Dow's materials are widely used in various industries such as packaging, construction, automobiles, and consumer electronics. Dow is also one of the first foreign companies to enter the Chinese market after the reform and opening up, and has been operating in China for 44 years, establishing a relatively complete service network, world-class production bases and innovation centers.
In recent years, some of China's emerging industries have made remarkable achievements, including photovoltaics, new energy vehicles, wind power and so on. Many of Dow's materials are used in a wide range of industries, such as our silicone thermally conductive materials for new energy batteries and polyolefin encapsulation films for photovoltaics. Many of these materials were developed at our Innovation Center in Shanghai.
Every year, we hold more than 30 brainstorming sessions where we work with upstream and downstream companies and customers along the value chain to explore how our materials can contribute to the circular economy, for example, how to improve the availability of plastics at the source and how to reuse plastic waste.
Let's give you two real-life cases from us in China. One is that we have partnered with Mengniu to launch all-polyethylene yogurt packaging, which enables the recycling of food packaging bags that are usually difficult to recycle. Another example is that we cooperated with Liby to make a packaging material for fully recyclable laundry beads using biaxially oriented polyethylene resin.
By 2030, Dow aims to reduce its net carbon emissions by 5 million metric tons globally, 15% from 2020 levels, and achieve carbon neutrality by 2050. This is a very difficult goal, and China is our largest international market, so our China team will actively explore how we can help the company achieve this goal globally.
TCL: Integrate environmental protection and talent education
Wang Fang: TCL recently pledged to "peak carbon emissions by 2030 and achieve carbon neutrality by 2050", what experience can you share in carbon reduction?
Wei Xue, Vice President of TCL Technology Group and Chairman of TCL Public Welfare Foundation
Wei Xue: TCL has been established for 42 years and has grown into a comprehensive industrial group spanning semiconductor display, semiconductor materials, intelligent terminals, new energy photovoltaics and other fields. In 2020, we entered the new energy photovoltaic industry, which is also a solid step for us to take a solid step towards green transformation. With the investment of TCL green financial capital, we have built 13 international and national green factories, issued 1.5 billion green bonds, and all the funds raised are used for the construction of green factories, which is expected to reduce carbon dioxide emissions by 85,200 tons per year.
On the road to green transformation, we have a little experience of our own and summarized three principles. First, there must be a comprehensive and customized response strategy. TCL has raised the ESG management evaluation system to a strategic level, and all relevant departments and industrial chains must be under its management. We have developed a five-year review cycle to ensure we reach our carbon neutrality goal by 2050.
Second, it is necessary to form partnerships with various stakeholders, not only to invest in green actions themselves, but also to encourage scientific research institutes, civil society organizations or individual citizens, especially young people, to participate in green actions. For example, in September 2023, I went to Hohhot No. 1 Middle School in Inner Mongolia, and we built a low-carbon photovoltaic campus for this school, not only building a photovoltaic power generation system on the roof and public areas of the school, but also designing a photovoltaic interactive classroom for students, and building a new energy photovoltaic interactive knowledge corner in the school corridor.
Third, we need to integrate resources, promote cooperation, and make use of each other's superior resources, expertise and networks to jointly achieve green development. At present, TCL has helped more than 50 factories in 12 industries to realize the intelligent management of energy systems, with a cumulative carbon reduction of about 150,000 tons.
Wang Fang: You are responsible for many public welfare projects at TCL, especially rural education. Why are you obsessed with this, and how does this contribute to TCL's sustainable development?
Wei Xue: Whether we are talking about corporate sustainability or climate change, it will ultimately fall on people. There is a saying that "the greatest fairness is the fairness of education", so in recent years, we have been paying more attention to how to integrate environmental protection and talent education, hoping to cultivate young people into leaders in responding to climate change and green and sustainable development.
For example, in the past ten years, we have done projects that focus on the training of high school students, projects that focus on rural teachers, and projects that focus on smart classrooms. Through the smart classroom, we invite famous teachers in the city to let the children in the countryside and the city have a class together. Another example is our recent promotion of photovoltaic low-carbon campuses across the country, which can not only bring some benefits to schools, but also allow children to feel photovoltaic technology around them, and see the positive changes brought by new energy to our human beings and our hometowns up close.
Standard Chartered Bank: Leveraging the advantages of foreign banks to help the industry go green
Wang Fang: Can you tell us through one or two cases how Standard Chartered Bank does sustainable finance in China?
Zhang Xiaolei, President, Vice Chairman and Regional Chief Executive Officer (China & Japan) of Standard Chartered China
Xiaolei Zhang: First of all, at the group level, we have set several quantitative targets: to reach US$1 billion in sustainable finance revenue by 2025 and to mobilize US$300 billion in sustainable finance development by 2030.
In China, our sustainable finance business is divided into two main areas, one for "pure green" industries and the other for transition finance.
"Pure green" refers to the "new three" in China's exports of electric vehicles, lithium batteries and solar panels, we have made a full industry chain layout, giving full play to our advantages as a foreign bank, and using our overseas network to provide sustainable financial services for Chinese enterprises. A recent example is when a Chinese wind power company wanted to set up five wind power plants in Argentina, and we contacted a number of international financial institutions to lead the formation of a US$270 million syndicate for it, which is also the first sustainable green finance in the China-Argentina trade corridor.
In another case, we teamed up with seven international financial institutions to build a benchmark solar power project in Dubai, United Arab Emirates, to provide clean energy to the local area. This project is contracted by Shanghai Electric, and a number of supply chain manufacturers from all over the world participate, which has great influence.
The second is transition finance, which is the provision of financial services to high-emitting, carbon-intensive industries as they gradually turn green. In 2021, we launched the overall framework for transition finance and the corresponding products, and we have developed well in the past few years.
For example, we provided a sustainable cross-border trade finance to one of Europe's top three renewable energy traders specifically for the acquisition of sustainable energy products in China that meet international standards. In another example, we provided the first transition financing loan to HBIS Supply Chain, a subsidiary of HBIS Group, for the acquisition of scrap steel, to support the transformation of this traditional large steel company.
Wang Fang: Whether it's "pure green" or transition finance, how do you do your due diligence when looking for investment targets, and how do you make sure that they are not "greenwashing"?
Xiaolei Zhang: Large enterprises usually have a complete transformation and development roadmap, a quantifiable strategy, and also publish corresponding ESG reports. We just need to match them to our transformable finance framework and see how well they fit, and if they are executable quantitatively and to a certain extent, we can move forward.
Small and medium-sized businesses are more difficult. Most small and medium-sized enterprises do not have ESG reports, and when doing due diligence on them, we need to rely more on the core enterprises in the supply chain, and these core enterprises will set standards, and third-party rating agencies will rate SMEs.
S&P: Some Chinese companies have surpassed their European and American counterparts in ESG scores
Wang Fang: Standard & Poor's publishes the well-known Global Sustainability Yearbook every year, which has been published for 16 consecutive years, and in 2023 it launched its China version for the first time. Can you tell us about the reasoning behind this move?
Huang Zhi, Chairman of S&P Global China and Chief Executive Officer of S&P Global Global Ratings
Huang Zhi: There are three reasons for the emergence of the Chinese version. First, there are currently more than 2,000 Chinese companies participating in the yearbook, accounting for a significant proportion of the 13,000 companies in the world. Second, due to the downstream requirements of many supply chain owners and the ESG requirements of international investment institutions, more and more Chinese companies pay more attention to ESG, and their scores have increased significantly, which deserves recognition and recognition. Third, the Global Sustainable Development Yearbook is based on a global framework, and some of the issues are not particularly applicable to Chinese companies, so we came up with a dedicated China version for Chinese companies to better benchmark.
Wang Fang: How are Chinese companies performing in the yearbook as a whole?
Huang Zhi: We do sustainability assessments for companies, not only to score them, but also to help them sort out their internal ESG requirements, and benchmark each issue against an international standard, which can help companies better understand ESG performance. In fact, many Chinese-funded enterprises have surpassed their European and American counterparts in terms of scores, such as Baosteel and CATL, which have achieved very good scores in our evaluation. In the pharmaceutical and biotechnology sectors, Chinese companies have made rapid progress as a whole, and in 2023, WuXi Biologics also received the highest score in the global biologics industry. (Fortune Chinese Network)
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