China Environmental Social Governance Monitor - August 2010
By Grace Mang, Coordinator of the China Global Program, International Rivers
Since 2007, International Rivers has been monitoring the environmental
and social standards of Chinese overseas dam builders. As a result of
China's "going-out" strategy, we have witnessed significant growth in
the number of dam projects that Chinese companies build and develop
during this period.
Dam building, like other natural resource extraction activities, is a
socially and environmentally sensitive industry. Good hydropower
projects are the result of a balanced assessment of all available water
and energy options, a thorough environmental impact assessment that
leads to well implemented management plans, the participation of
affected communities in decision-making and the sharing of benefits with
these communities. It has taken many years of debate among governments,
business, hydropower associations and civil society to prepare model
environmental and social safeguards for international infrastructure
projects. Even today, this discussion is still continuing.
Since founding the China Global Program in 2007, International Rivers
has witnessed the growth of Chinese dam builders in the international
sphere. Sinohydro, a Chinese state-owned enterprise, is now the world's
biggest hydropower company. The company controls 70 per cent of the
Chinese domestic and 50 per cent of the global hydropower market.
Following an internal restructuring, Sinohydro announced its plans for
an Initial Public Offering (IPO) on the Shanghai Stock Exchange in
November 2009. The company intends to raise RMB 12.9 billion to invest
in projects for example in Cambodia, purchase engineering equipment and
replenish working capital.
As part of the IPO regulatory approval process, China's Ministry of
Environmental Protection (MEP) invited comments on Sinohydro's
environmental record. Sinohydro has encountered social, environmental
and safety problems in some of its overseas hydropower projects. Dam
projects such as Merowe in Sudan, Hatgyi in Burma, Bui in Ghana,
Dikgatlhong in Botswana, and Pubugou in China have been the focus of
opposition from affected communities, environmental organizations, and
With this in mind, environmental organizations from China and host
countries of Sinohydro projects responded to the MEP's invitation by
recommending that the company adopt an environmental policy that
reflects international standards before listing.
International Rivers has been engaged in a constructive dialogue with
Sinohydro since July 2009. In March 2010, Sinohydro informed us that it
was preparing an environmental policy and invited our input. In our
recommendations we made clear that if Sinohydro wants to become a
world-class brand, then it needs to adopt a world-class environmental
policy. A world-class environmental policy should set out an overriding
commitment to environmental responsibility including:
a commitment to biodiversity protection by assessing ecological values,
allocating appropriate environmental flows in dam operations and
developing effective environmental management systems;
a commitment to engage openly and honestly with stakeholders,
particularly with affected communities; and
a commitment to respect and observe traditional rights of indigenous
peoples and their culture heritage.
But why stop there? Sinohydro could set its goals higher and become a
global leader on environmental issues. Chinese companies have already
played a pioneering role in commercializing technological advances in
the renewable energy sector. China's green securities policy sets a new
model for the rest of the world on environmental protection through
financial market regulation.
There are also compelling foreign policy reasons for Sinohydro to become
a global leader on environmental issues. The Sinohydro Group has
branches in no fewer than 47 countries. Its hydropower and
infrastructure construction business takes the company to remote
locations in Africa, South America and Asia. In such places Sinohydro is
often the public face of China.
With this in mind, Sinohydro's CEO Fan Jixiang, in an article in the
Public Diplomacy Quarterly (April, 2010), reflected on the role of
Chinese companies overseas in shaping China's public image and
strengthening the country's soft power.
"[Chinese government-owned enterprises] that are 'going global'
represent the country's image, and become part of the national brand,"
Mr. Fan wrote.
"They are widely expected to fulfill civic obligations in international
community. To this end, enterprises need to pay more attention to social
responsibility in international business, and take environmental
protection and sustainable development into consideration in the
company's overall strategic plan."
Sinohydro is currently leading the global hydropower industry in price,
market share and technical expertise. We have no doubt that with a
commitment from its top management it can also break new ground on
environmental issues to pioneer new water and energy solutions.
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