On Friday, November 14, I was able to catch the last section of the two-day green tech summit held in Shanghai. This summit is the companion event to the US-China Green Energy Conference, which Crossroads will be covering this week. Check out: http://ucgef.org/en/activities/beijing08/overview to look at the list of speakers. Crossroads will be taking notes on each of the presentations and offering side interviews as well.

Getting back to the Shanghai summit, I was able to catch panel 10 on “New Business and Financing Models” and a breakout session titled, “Competition & Regulation: What you need to know about China’s Green Technology Market.” Below are my notes for each the panel and breakout session.

Panel 10:
•    Government incentives are crucial in order to finance a greener economy.  Government must take the lead to help with start-up costs and the government’s policy innovation is the precursor to establishing a green market. A case in point would be San Francisco with their Solar Task Force, which cuts the cost of solar installation at different rates for residents, commercial buildings and nonprofits. If you look at the cost for solar, the only states in the US that are going for it are California and New Jersey because they have these government incentives.
•    When it comes to financing technology companies, inherent conflicts exist between: the cost of technology and the profitability of the firm and the growth of a region and meeting pollution reduction goals. There needs to be a good working relationship between government, technology businesses and investment banks in order to mitigate these conflicts.
•    There were a couple comments on the effects the financial crisis has brought to the financial sector for green tech. As a result of the crisis there is now higher equity and lower returns. In addition, it used to be all about collateral, but now it’s about the ability to re-pay: equity is not what it used to be.
•    China is showing a move away from the institutionalized banking system since they can now establish small loan companies. These small loan companies give money to SMEs (Small and Medium Enterprise).

Breakout Session:
•    Moderator David Gossack from the US Consulate General Shanghai highly recommends “Clean Energy: An Exporter’s Guide to China.” Check out www.export.gov or contact him directly to receive a copy.
•    Benjamin Pinney, from the Boston Consulting Group gave a refreshing overview of discussions at the two-day summit. He said he heard people talking about “solar collaboration” and “grid-parity.” He finds solar collaboration to be flat wrong because solar is about competition not collaboration. In addition, we are a long way off from even coming close to talking about grid-parity.
•    Mr. Pinney also had an excellent point about China’s consumer attitude about environmental protection that I think was dead-on. He said that we have to remember that alternative energies are a security issue and, thus, it is heavily financed by the defense bureau of government. Therefore, since consumers aren’t the one financing it, they only become aware of environmental protection and its importance because its being told to them from on-high. This type of “education” does not make them feel empowered because there is no role to play.
•    Regulations to achieve national goals: Renewable Energy Law (2006), Top-1000 Enterprise Energy Efficiency Action Plan (2007), Middle and Long-term Development Plan for renewable Energy (2007), tax incentives for renewables, and subsidies for renewables.
•    It is important that all sectors (wind, solar, hydro, etc.) do not have equal access to the market, government incentives, etc.
•    Charles McElwee gave a great presentation answering the often asked question: Can I do business legally in China?
1)    There is a catalog for foreign investment that is encouraged, restricted, prohibited, and other. See where you fall under these categories.
2)    What form of business? Contracting (easiest), establish a representative office (difficult), joint-venture (ok), WFOEs (ok).
3)    What about my IP (intellectual property)? Chinese businessmen do not use long contracts and the civil law system is not well developed. Also not a lot of case law to figure out ambiguous legal clauses. For dispute resolution don’t go to a Chinese court, arbitration is best. Arbitrary bodies include CIETAC, SAC and internationally Hong Kong’s HKIAC (preferred by the PRC).
4)    Major laws: Renewable Energy 2001, Conservation laws (April 2008), and be mindful of the Foreign Corrupt Practices Act (i.e. do not pay for guanxi)
“Slow, steady and wary wins the race in China”
•    According to Robert Theleen, Chairman of Chinavest, 90% of China’s bank loans go to State-owned enterprises and 10% to SME’s/private sector. Access to capital and bank funding has slowed in China, thereby changing the landscape of due diligence with commercial liability. Now, China finds the cost of capital as the most important, which is a sign of sophisticated banking.
•    An innovative technology came from the Solar Environment Technology Corporation case study. CENICOM is soon to be on the market. There technology can store solar energy for 5-10 days as opposed to the common 5-6 hours for existing solar thermal systems. There are no emissions and can be used with both local and regional grids.
•    The session closed with a recommendation to look for locally-sourced capital since it is your best bet for panicked-driven capital.
One interesting magazine distributed at the conference was called innocomm, published by the Knowledge & Innovation Community. Check the bilingual site out at: www.kic.net.cn
More to come this week from Beijing!

A recently released report shows that China’s grassroot non-governmental organizations (NGO) dedicated to environment protection have doubled their numbers in the past three years.

There are 508 grassroot-level environment NGOs in China as of October this year.This has increased by nearly 300 from 2005, the All-China Environment Federation said in an environment report here, which it took eight months to finish beginning January this year.

In total, there are 3,539 environment NGOs in the country, including government-sponsored ones, grassroot ones, branches of international organizations as well as school environment societies. The figure jumped by 771 from three years ago, the federation said.

According to the report, 55.2 percent of the NGOs now have their own offices, up 15.2 percent from 2005; while 26 percent have fixed source of investment, up 2.1 percent. However, most environment NGOs still face problems including difficulty in raising money, shortage in personnel and weak organization ability in their development process, the report said.

Interesting stuff. 58.6% were involved in energy saving and emissions reductions, and 11% participated in protecting people’s rights concerning environmental protection. No doubt this is a trend that will continue. Especially interesting that the survey categorised NGOs in this way as we have seen a tremendous growth in Environmental NGOs involved in legal cases, involved in utilising existing information to affect change, and in those trying to increase transparency as a way to overcome corruption and punish irresponsible companies.In all cases we have seen all levels of government work with, and against, such organisations in different circumstances!

Pulp Watch, a new website looking at paper pulp mills across the World and classifying them, has only 1 pulp mill in China on its radar screen so far -and it is owned by APP (Asia Pulp and Paper, an often cricitised company for its practices across Asia). This is how it fares:

Last week when I wrote, Get Them When They Are Young, over at Cleaner Greener China I was not planning a follow up post.

However, this morning while walking to work I was reminded of just how important environmental education is, how important it is to teach environmental education, and just how far China has to go. Perhaps one of the most interesting cultural/ fashion statements there is in china, many infants (up to age of 3) will don a set of pants that are split down the middle.  the purpose is simple.. to make doing to the bathroom easier.  No matter where one happens to be.

• Middle of the sidewalk.  Ok
• Middle of the subway platform.  Ok
• Middle of the road.  Ok
• Public park.  Ok
• Apartment Lobby.  Ok
• In front of car.  Ok
• Side of car.  Ok
• From back of bike.  Ok
• While mom holds your legs.  Preferable
• While Grandma holds your legs. Sure
• Dad holds your legs.  odd??

Initially, it was one of those things that you look on with a mix of curiousity and a mix of repulsion.  I once even asked a teacher about this practice, and was given a look that made me think I was asking the dumbest question ever.  Of course babies are allowed to poo and pee on the street… “their poos are special!” However, what I think is important to point out here is that while it may be quick, easy, and convenient for mom, these children are actually learning their first lesson in environmental protection… and I am not talking about compost. As my flatmate in Beijing so appropriatly said “If you teach a kid that they can crap on the street, you have taught them they can do anything they want”. If you think about it, the lesson learned is the ultimate lesson in selfishness.. that it is ok to expect people to walk through my wii (and more).  That one does not need to hold it until the next public toiley… that anywhere it is physically possible to squat IS A TOILET. With that as a foundation, China’s children are supposed to learn not to litter, not to dump chemicals in rivers, to conserve energy, and to think of the impact that one has on the environment… and how that will impact others.

On Saturday October 25, Crossroads attended the Fall Eco Design Fair, which brought together over 25 businesses and groups committed to well-designed and environmentally aware products. Walking through the narrow strip of tents, I was warmly greeted and handed information ranging from bamboo clothes and items, FSC-certified paper products (http://www.alocalprinter.com/uk/fsc-certified-paper/), environmentally-friendly diapers, an organic produce section and more. While taking a stroll around the area, I did a couple of quick interviews. Below I asked a designer, a worker from Greendesign, a university student and a worker from Studio Maki what sustainability and CSR meant to them.

London’s Economist magazine released a new study, which found that:

31 percent of Chinese consumers identify the environmental as a higher priority than the economy    versus 17 percent of U.S. consumers and 28 percent of UK consumers. The study was conducted by one of the world’s largest global communications services companies WPP’s agencies Landor Associates, Cohn & Wolfe and Penn, Schoen & Berland Associates (PSB).

Chinese consumers say that their environmental concerns influence their purchasing intent: 69 percent expect to spend more money on green products in the coming year. This contrasts markedly with the US, where only 38 percent of consumers expect to increase their spending on green products in 2009, and the UK where just 33 percent will spend more.

www.china.org.cn

I must say that I am a little skeptical of this article as it tries to paint a slightly rosier picture than I find day-to-day. First question I must ask is which consumers in China were surveyed exactly? I could see this being the case in bigger cities like Beijing and Shanghai since they have focused more on the environment due to the Olympics and the upcoming Expo; but as a representative sample of the Chinese population? ? I’m not sure that I trust that 31 percent statistic.

Second, yes, maybe more Chinese consumers will alter their purchasing toward green products; but we have to remember simple statistics here. China has many more consumers new to buying green, so the pool is much greater for people to spend more money on green products if they never have before. In the U.S./U.K. consumers have been exposed to green products for quite some time, thus, the pool for buying more green products is not as great. Thus, I don’t necessarily agree that Chinese consumers are more green than UK/US consumers.

If anyone else is curious or can give me more statistical analysis lessons, let me know. The full article is here: http://www.china.org.cn/environment/opinions/2008-10/06/content_16568827.htm

Below is a series of questions asked by China Crossroads to Dr. Esslinger following last Friday’s green design coverage. Read on!

1. Earlier at URBN you talked about how when you started in the design business, designers did not have a prominent role to play. This has changed significantly since the 1970s. Why the change and how far are designers going with their expanding roles?

First of all, it were both visionary CEOs like Akio Morita or Steve Jobs, who have recognized the multiplying effects of DESIGN to a company’s success. However, even as 80 percent of BMW’s customers claim that their buying decision has been “bccause of the design”, BMW only spends 0.1 percent of its product investment on design. Ultimately, design will become so important, that the CEOs of the future will be designers – and not engineers or financial specialists.

It actually is the stage 1 (product genesis) where most designers have no influence yet. Briefings and definitions for new products are too much defined by money and defensive marketing. My message is, that we designers have to become equal partners in this stage, which will enable us to provide positive change on principles.

Today’s thinking is to manage recycling. We must think ahead and avoid the amount of new products, especially when the existing ones just have one tech-component, which may become technically obsolete. I think of smart modularity and a switch of “product” to user-experience and exciting services. Very simple: avoid the problem of overproduction so you don’t have to deal with the pollution.

Sad fact is: most consumers only decide by money. When the gas prices rose in the United States, people realized that their gas-guzzling SUVs were an idiotic choice. Our challenge as designers is to make “green” both attractive and affordable. Naturally,this also requires some strategic re-thinking of the industrial model such as Open Source Design.

In 1969, frog design started indeed with a very idealistic vision and during our first years, we all had an open discussion about our salaries within a fixed budget. But “capitalism” in the form where performance is rewarded doesn’t stifle creativity – to the contrary. If I understand you right, you probably mean the limitation of designers by budget-driven short-sightedness – however, I have seen this in all kinds of economic models. Important is that designers are competent and contribute as professionals in executive teams.

First of all, we are really happy and proud to have a frog studio in Shanghai, probably the most dynamic city on Earth right now. In terms of our services, frog practices the convergence of physical products and virtual software experiences since about ten years. Our key challenge is to become a good “citizen” of Shanghai and China and I think, we are on a good way. In terms of work, I always loved the most difficult projects and there are many here.

6. Finally, in the most concise explanation, what is sustainability to you?

Sustainability for me as a designer is to avoid the mistakes of wasteful mass production, to design with as little bits, atoms and energy as possible – and then to provide full customer satisfaction for many years and eventually inspire true happiness.

Dr. Esslinger is the designer behind the sleek sophistication we see with Sony’s television series by Wagas and Apple’s “Snow White” design language. During the 1970s, early on in Esslinger’s career, designers did not have a prominent role when it came to producing a good. Now, however, they have become more important players with new responsibilities. Dr. Esslinger shares his views on how a designer can incorporate sustainability concepts within a capitalist system of production and what he has done so far in his own company frog design (not capitalized for the Bauhaus concept of nonhierarchical relationships) and at the University of Applied Arts in Vienna with his students.

Below is an outline of two separate talks given by Professor Esslinger on Friday September 19th, 2008.

The Next Apple and Sony
There was a panel of three people talking about design using the case studies of Sony and Apple while trying to answer the question of what it takes to become the next heavy weight brand today. The two supporting speakers were Mr. Sydney Chun from Kohler Kitchens and Lorraine Justice, Head of the School of Design at The Hong Kong Polytechnic University. The main speaker was Dr. Hartmut Essliger, founder of frog design and Professor for convergent industrial design at the University of Applied Arts in Vienna, Austria. Sydney presented on what made Sony and Apple successful in terms of using design as a tool for solving business problems and achieving leadership. Lori, on the other hand, was interested in exploring design differences between East and West. She made an interesting argument about how Sony’s layout corresponds with the East’s visual pattern in terms of being more holistic and viewing objects in a relational manner while Apple represented the West in terms of being punctual with focused detail areas. Stemming from these presentations, Professor Hertmut got into the meat of the discussion on Sony and Apple, remarking that Sony was and is a very undisciplined company, while Apple is on track now that Steve came back to lead the company in the right direction. The reliance on the charisma of a leader makes the industry unsustainable in terms of pushing the envelope for environmental sustainability.

Dr. Esslinger then got onto the topic of his role as the “leader” of frog design. He doesn’t see himself as the main guy; the company operates on a democratic principle and he said, “They don’t have to listen to me. I have to shut up sometime.” This makes the work at the office incredibly dynamic and creative. He also went on to upcoming designers in China. He thinks that there is a huge potential for Chinese designers to bring product back to the center. He cited the example that, in Western countries, designers work on software, the “virtual” design components. Since the factories are in China, they can do more work with the actual material. His example was the iPhone. He thinks the iPhone has great software but crap for telephone design because you are still using a telephone pad to access texts. It’s also awkward to carry and handle. This could be where Chinese designers could really step in a make a difference.

GIGA v5: Green Creative Leaps

Part I The Designer’s Role in Sustainability

Dr. Esslinger opens the GIGA hosted event with global warming and the role designers play in its creation. The proper role of a designer is to “create objects which are useful art, inspirational and use as few atoms and materials as possible.” He criticizes the role of capitalism and its relationship to the designer by saying, “Today’s business mania about ‘shareholder value’ and ‘pleasing Wall Street’ results in more and more incorporate[d] behaviors that promote ‘financially safe’ and ‘politically correct’ conformity [and] stifles creative thinking….” He goes on to say, “As of today, we designers are systemic players in a financially aggressive, economic model which depends on multiplying products into thousands and millions.” In the end, design-like marketing is still about driving mass consumption and that is something a designer needs to acknowledge and address.

So how does a designer begin to address this paradoxical relationship between design and consumption? Esslinger goes through the production process of a good:
1.    Product Genesis (strategy and design)
2.    Production and Operations (applying materials, consuming energy, emitting pollutants)
3.    Usage and Consumption (consuming materials, consuming energy, emitting pollutants)
4.    Recycling (re-using materials, management of disposal waste)

He then goes through how to improve each step starting with 4 (recycling) and working his way up to product genesis. This clip plays cuts off after step 3.

Part II ELF and Open Source Design

The court will be part of the city’s intermediate people’s court and will have jurisdiction over appeals by companies that have been found guilty of violating environmental laws in cities throughout the province.

 

Officials decided to create the special court after discussions with the local court, procuratorate, the security bureau and the environmental department, according to the report. Once established, the court will handle criminal, civil and administrative cases related to environmental pollution. It also will assume responsibilities from the local environmental protection bureau which files lawsuits to carry out consequent execution after the ruling.

 

Many believe that the new court will greatly enforce the supervisory powers of the city’s environmental protection bureau, the article said.

This is an interesting development. We will have to see if it helps bring more cases to court, or helps successfully solve more environmental cases. This development can only be a good thing, and should provide a focus as well as build up some environmental expertise amongst the judges in the court. Of course, the wider issues of corruption, political pressure etc still exist, but this is a step in the right direction.

for electronic brands and retailers around the world, there should be few issues more important than e-waste and supply chain management in a CSR report, and the recent Best Buy CSR report is no exception.

In the forward to the report itself, they begin by laying out their three aspirations:
1. A global champion for human ingenuity and opportunity — our employees providing leadership for our industry, our customers, and our communities worldwide
2. A global advocate for consumers in the world of technology — delivering consumer
electronics products and services to more people than any other company in the world
3. Environmentally and socially accountable for our brands and business operations
worldwide

according to the author:

This report is one of our first steps on the journey toward our aspirations.

Through this 30 page report, the main issues for me were related to eWaste, packaging, and product life cycles, and they have clearly addressed those issues. however, I think there is still a long way to go before I would feel comfortable saying Best Buy is truly dedicated to sustainability.

Some areas that I am encouraged by:
1) all of their 196 offshore “exclusive brand” suppliers have been audited! Few companies could say they same.

2) they are providing training to staff on energy star, and how to sell it. there is of course a benefit to this financially, but none the less it is a basic first step that has been covered and will create more awareness among its employees who are looking to upsell the more environmentally friendly products.

3) their 150,000 have logged 151,000 hours of volunteer service in the community. While only 1 hour per year on average is low, this number is 250% higher than last year, and that itself is commendable

providing a bit of constructive criticism, here are a few areas/ issues that I feel they should have addressed more fully, and/or should look to in the future as they take their next steps.
1) their recylcing events are limited to about 10% of their overall stores, and this should be expanded significantly in the future

2) The report does not mention transportation at all, and as a firm with 1000 stroes, stcked with goods that come in containers, on pallets, in master crates, and wrapped in bubble wrap, I would hope that they focus on increasing efficiency in this area - and tell us about ti

3) they are working with paper mills to identify more environmentally friendly weekly inserts, but getting 100% recycled paper and using soy based inks for a firm like this could be easily accomplished.

4) I would suggest more coordination on specific issues - i.e. create an environmentally friendly paper coalition between themselves and Dell - i.e. work with Music houses on media packaging design, materials, and logistics

going forward, Best Buy is going to need to really work on their supply chain issues, and I am happy to see that they understand that and seem to be prepared to invest in it.

In an ideal world, they would be part of cradle to cradle discussions with designers, consumers, OEMs, and transportation firm to really ramp up their platform in terms of sustainability, however in the real world this report is a good first step - an encouraging sign that another large retail firm has taken on a higher level of responsibility- and I am looking forward to reading their next report in the summer of 2009.