KARL MOORE – This is Karl Moore of the Desautels Faculty of Management at McGill University, talking management for The Globe and Mail. Today, I am delighted to speak to a professor from the Harvard Business School, Chris Marquis.
So Chris, you have been very interested in looking at organizations as they become more environmentally aware but in the context of China. What are some of your key findings?
CHRISTOPHER MARQUIS – One refers to and looks at the extent to which the government is influencing the firm. So the Chinese government actually has really increasingly been focusing on environmental issues. In the 11th five-year plan and the 12th five-year plan, which we are currently in the middle of, [there have been] a lot of initiatives spurring environmental behaviour on the part of corporations. Also, really trying to encourage environmental entrepreneurship, growth of new industries, etc. So I think that one of the key things [is] the way that the government is encouraging companies to be more environmentally friendly.
The thing is though, that there is all kinds of environmental damage. [There have been] many, many examples of things like the “airpocalypse” where in Beijing in January of this past year there was tremendous air pollution, so China still has very far to go in defeating the legacy of growth at all costs – but there are a lot of indications that the government is really focused on it now.
KARL MOORE – Is there a lesson for governments in Europe, the U.S. or Canada, from what China has done? Is there something we should take away from what they have done?
CHRISTOPHER MARQUIS – Being able to focus attention on certain issues is tremendously important. I think that is the way that China has developed over the past 30 years, economically, by the government being able to really focus on specific issues.
Given that they have identified and are focusing on a bunch of very important issues in the environmental realm, the proof is still in the pudding and we still have not actually seen the reversing of a lot of the environmental damage. But I think that from the past and current focus on the environment, the lesson to really [focus] corporate attention, governmental attention, the attention of the people on specific issues is very important.
KARL MOORE – In China you have the state-owned enterprises that are a tremendously important part of the economy. We don’t have that in the U.S., typically. So is it something where it’s almost unique what China can do and we really can’t do this back home?
CHRISTOPHER MARQUIS – Certainly, in the past, being able to funnel resources through the banks, through government policy, to the [state-owned enterprises] who are then able to economically grow is certainly a key reason why China has advanced so quickly over the last 30 years.
However, over the past 30 years as these companies have grown, they have also developed their own interest-basis power themselves and in many ways are pushing back on the government on some of these sort of key environmental initiatives. So I think that as the government is able to sort of focus on attention on this and to the extent in which they are able to bring the SOEs around, is very important.
Secondly, however, and this is one area where things may apply more broadly to the United States and to other governments, is funnelling investment and focusing attention on certain industries and growth industries. So, in the 12th five-year plan they have outlined seven important growth industries; most of these have some kind of green or environmental component and preferential credit policy for banks, preferential matching investments, which is something that all governments can do whether they have SOEs or not.