Going green urged in overseas investment

Mounting challenges

The increase of outbound direct investment is a natural process for Chinese enterprises while the acquisition of brands, resources and technology as well as market expansion are the major motives, Peng said.

Sean Gilbert, director of climate change and sustainability at global consultancy KPMG LLP said China has been receiving the benefits of overseas investment, including the driving force transmitted into domestic reforms and the emergence of a group of multinational corporations.

Gilbert said that during the process of going abroad to tap international markets, Chinese enterprises face challenges from both the external environment and internal management.

"Misunderstandings or insufficient knowledge about local cultures can lead to labor disputes for enterprises. Similarly, Chinese enterprises need to be aware of the concerns of local governments, communities, as well as NGOs (non-governmental organizations) even as they work to maintain good partnerships with host governments. As a foreign investor, you will be more welcome if you are bringing leading practices rather than simply complying with the minimum. Therefore, they should also aim for standards in business operations that are higher than local standards, including in the area of 'soft' laws or best practices," Gilbert said.

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."