Tuesday, October 4, 2011

Voluntary and Mandatory, a step at a time but can you ever take just one step?

I started learning about sustainability a little over a year ago. I first began with environmental laws; the nuisance of back and forth litigations about EPA rules and Congressional enactments drove me nuts. I wondered if I am forever doomed to continue the work of badly publicized lawyers to litigate meaningless and frivolous things – or are they meaningless and frivolous as the public make them out to be?

Then I learned about health and food and the sustainable culture (or unsustainable culture) of the way we eat. This led me to ponder my childhood, growing up in China and eating veggies grown by farmers nearby. I pontificated the benefits of it all and reminisced the things forever lost. Today, China is on a path of fast foods, childhood obesity, and rising healthcare cost just like America; today, China and the U.S. is in a tug of trade wars about importing industrial meats and ideological protectionism. I won’t say who is right or who is wrong here, but the badly needed constructive dialogue between the two nations seems amiss at times.

I also started a one-man operation a year ago hoping to combine social entrepreneurship and sustainability in some meaningfully packaged way to use technology as a facilitator for progressive growth in the area. As my operation unfolded, I learned the vast gap between my knowledge base and the market forces that creates profit – starting a business is not as easy as I had envisioned, but giving up is an undesirable option.

So in the mean time, I am learning as much as I can, and pushing forward as slow as it is necessary. I am more cautious these days, always thinking how to leverage the best of the differences.

Recently, I started to see a growing trend of voluntary participations from large businesses in the new green trend. At first I was cautious, the green-wash for profit is entirely possible and I am wary about the motives behind their incentives. But then I came to a light in the darkness – the incentive is money and that is the only thing that will motivate companies and the rest of our great global economic engine turn. Sure we are faced with a crisis environmentally and socially, but it is not until the economy comes to an edge do we see the necessity of changing our ways. Crying foul and arguing that it is too late will accomplish nothing, so I happily joined the thoughts of many and began to look at Corporate Social Responsibility seriously.

Coming to a full circle, I now wonder about the difference between enforcements and voluntary participations. This distinction is also very helpful in understanding the inherently different approaches taken by China and the U.S.

China’s new Clean Production Laws and Circular Economy Laws are aimed to enforce regulations about environmental compliance, supply chain standards, and social and economic impacts. This makes sense given China’s centralized law making powers. It wouldn’t necessarily work in the U.S. given our favoritism for federalism. The U.S. on the other hand, only has a baseline environmental compliance program and even that is hotly debated. In order for the U.S. to make any significant progress, and keep its innovative advantage for its companies, it will have to promote voluntary incentives for the likes of P&G and Walmart to participate. From what I can tell, these coglmerates are already on board and the work of figuring out how to make sustainability work for profit has already began.

What will be the results of each nation’s actions remain to be seen.

This brings me to the analogy I want to make. As the human specie, we have grown into different types based on our cultural differences. If you ask my wife, a diehard cultural psychological anthropologist, she’d tell you about why people are inherently different and why different cultures will take different steps in accomplishing the same goal. I always wondered if we could ever be in sync as a collective whole and march toward progress not as Chinese or American, but as HUMAN.

Maybe this is because I grew up as Chinese and matured as an American – I am partial to finding a cooperative way for my own identities to coexist.

Selfish considerations aside, the whole point about this particular post is to alert you to the steps we take as human beings and how the left foot will always be different than the right, but that does not mean we have to separate the two legs and walk in different directions.

Chinese style regulations are generally highly prescriptive with specific components. The new laws include standards to be met, describe principally what actions must be taken, and then require compliance at the provincial levels.

U.S. volunteer sustainability projects often start with citizen and corporate actions that provide a definition of goals, grassroots agreement on how to achieve those goals, a method of analyzing the results and monetization on measuring the success of those goals.

The biggest difference between them comes from management for investment in the projects. While in a Chinese context, where central authorities have mandated the programs, ROI is often left to the provincial officials to work out. In the U.S., the ROI is not easily quantified for any kind of bottoms-up compliance programs. We as Americans can understand EPA regulations and fines that are imposed, but capturing ROI for voluntarily participating in a sustainability program is hard to capitalize on charts and in boardrooms. Maybe that’s why a lot of environmentally aspired law students are so set on working for the EPA to go after the bad companies. A win is a win and a fine is less dollars in the hands of dirty polluters. But this does not address the source of the problem and it does nothing to shift the mentality of corporations.

That is why I am glad there are more companies participating in voluntary CSR type sustainability programs. Their hardest work will not be evading the EPA, but making a combination of collaboration work – voluntary and compliance.

Combining the two types of thinking may also lead to meaningful impacts for a company – reducing duplicated data collection, eliminating internal confusions about compliance and profit driven voluntary initiatives. This may also increase the chances of synergy between compliance work and voluntary work and a company may discover innovative methods to improve on existing processes.

Voluntary programs, due to its inherent visionary nature, may have significant benefits for the compliance side of the house. In the U.S. climate, often voluntary standards become the mandatory standard – call it the race to the top corporate phenomenon. Using voluntary programs to shed light on mandatory compliance will help a company gain advantages in the market place in China or the U.S. The added advantage is compliance side and voluntary envisioning side will walk towards the core middle of a company’s mission – brining together profit with its focus on the environment and social responsibilities. This can only mean more market exposure and profit opportunities – a win win for the company and consumers.

Why is this important you ask? Well, it seems that China is rolling out the red carpet for foreign companies to invest in its green sector as of late. A Massachusetts-based lithium-ion battery maker was recently awarded $125 million in funds, loans, incentives and construction assistance for a new plant in Shanghai. There will be more, companies and investors are lining up to get in on the new upgrades in China’s market economy. Once the currency problem works out and the China U.S. BIT is put in place, you can bet on even more competition in the sustainability “green” industry will arise.

The kind of bilateral thinking about compliance and voluntary visionaries will help you gain an edge in the next few decades – but that’s is just me pontificating.

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