Going Green Urged in Overseas Investment

A recent survey by KPMG and China Council for the Promotion of International Trade said that as Chinese enterprises speed up the pace of going global, they are facing mounting challenges from corporate social responsibilities, especially in environmental protection, owing to insufficient awareness and experience.

"In addition to financial performance, Chinese enterprises are also greatly challenged over integration into local cultures, setting up a positive image and getting accepted by local customers, communities, NGOs and governmental bodies in host countries," said the report.

Peng added that the emerging Chinese multinational corporations demonstrated distinct characteristics.

"Most of them are State-owned enterprises. They are big. More of their names are on the world's top 500 list, but they are less developed in brand and innovation and few names can be found on the list of world's most admired companies. In addition, they don't have sufficient knowledge and experience in overseas investment," Peng said.

In the recent survey Transparency in Corporate Reporting, Chinese companies ranked the lowest in public reporting practices in emerging markets, while Indian companies fared the best.

The 33 Chinese multinational corporations averaged a score of two out of 10 points in Berlin-based Transparency International's survey, which measured three categories: reporting on anti-corruption programs, organizational transparency, and country-by-country reporting of revenue, expenses and tax payments.

"The results show that companies from China lag behind in every dimension," Transparency International said in the report. "Considering their growing influence in markets around the world, this poor performance is of concern."

Huawei Technologies Co, the second-largest telecom equipment provider in the world, failed two attempts in 2007 and 2008 to acquire 3COM, a US network equipment manufacturer, because of alleged concerns about threats to US national security.

In 2010, Huawei's bids for 2Wire and the mobile network branch of Motorola also failed to obtain approval from the US government. In 2011, the company backed away from attempting to purchase 3Leaf, a US server producer.

Green operation

In the future, cost and quality alone will be unable to support the development of enterprises, while green products, environment engineering and technology will be the new force in shaping the competitive landscape of enterprises, said the report.

"In overseas operations, Chinese enterprises will face a more competitive market while their competitors have gained rich experience in green technology and operations. Chinese companies should especially emphasize green operational management and technology innovation and increase investment, which will not only build a new competitive edge but also enhance the country's image as a responsible investor in the world," said the report.

"Chinese enterprises should, before undertaking overseas investment, set down envisaged and strategic objectives for overseas green operations and make them an essential part of the company's strategy. Meanwhile, more efforts should be devoted to executing green operational strategies with improved internal organization and standards," it added.

Companies are also urged to maintain communication with all parties from the very beginning of projects and introduce the company objectively to build trust, according to the report.