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THE AKZONOBEL MAGAZINE ISSUE 5 SEPTEMBER 10
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THE AKZONOBEL MAGAZINE ISSUE 5
Vital support for life We understand how fragile our planet has become. Which is why we recently underlined our commitment to the sustainable use of natural resources by endorsing the CEO Water Mandate. Launched in 2007 by the United Nations Global Compact, the unique initiative is designed to help companies develop and introduce sustainable fresh water policies and practices. As a global company, we are fully aware that we have a responsibility to make water resource management a priority. By signing the mandate, we have reinforced our drive to make the conservation of scarce resources and operational efficiency an integral part of our strategy, culture and daily operations. Under the mandate’s strategic framework, we will be concentrating on areas such as direct operations, supply chain and watershed management, collective action, public policy, community engagement and transparency. We will also work together with private and public sector partners to take a leading role in fresh water conservation in the areas where we operate.
In September 2010, AkzoNobel was ranked top of the chemicals supersector on the Dow Jones Sustainability World Indexes.
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WELCOME Jim O’NeilL Welcome to the latest issue of A Magazine, which focuses on some of the world’s most exciting emerging economies and growth markets, centered around my beloved BRICs. It seems these days – given the challenges of the US, Europe and Japan – that the BRIC economies are single-handedly keeping the world afloat. The evidence, both in terms of published data and anecdotes from many leading global multinationals, is pretty spectacular. For example, in mid-2010, China overtook Japan to become the second largest economy in the world (about five years quicker than we originally suggested back in 2003). Germany is exporting so dramatically to the BRICs that this helped power the country to its strongest quarter in terms of quarterly growth rate (2.2 percent) since the boom days of unification. Remarkably, at the current pace of exports to China, German trade with them could be as big as German trade with France this time in 2011. Maybe China should replace Greece in the EMU? There is increasing evidence that China is changing the composition of its economy, with the future drivers to be domestic demand, especially consumption. In this regard, there are increasing signs that China is falling in love with environmental policies and alternative energies – a topic featured in this issue. Of course, while China is the dominant BRIC, it isn’t the only growth market doing well. Looking at the big picture, India is hugely important due to its one billion plus population, and more signs are slowly emerging that this decade could see India grow as strongly as China. Much of it is due to their rapidly expanding urban and young population, which is giving lots of self-sustaining impetus. This edition includes an interesting article in which India’s Ambassador to Mexico compares his nation to a Latin American country which just missed out on being one of our BRICs. Barely a week goes by when someone doesn’t suggest to me that I should regard the GCC countries as BRIC-like. They don’t really have enough people to have a chance of getting that big, although their influence on – and importance to – the world is likely to remain huge. On that note, this issue looks at how some of the Gulf countries are trying to diversify away from oil. People also ask which of our “next 11” countries – those with the largest population after the BRICs – have the best chance of becoming larger. I think of a BRIC-like economy as one which either is, or has the potential, to be 5 percent of world GDP. It isn’t an easy question and it’s a really diverse group. Of them, Korea is arguably as developed as some largely populated, developed countries and, as mentioned earlier, Mexico wasn’t far off being treated as a BRIC originally. Of the remainder, the current darlings are Indonesia and Turkey, and despite the renewed weakness of major equity markets, these two experienced new, all-time peaks this summer. Among the others, Vietnam is also interesting, and is featured in this issue. The US and many of the developed markets are struggling, but the world is doing just fine. Jim O’Neill is Chief Economist with Goldman Sachs and is credited with inventing the BRIC acronym.
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The A team Chief Editor David Lichtneker AkzoNobel Design and Art Direction Pepe Vargas AkzoNobel Design Consultancy Angus Hyland Pentagram Corporate Director Communications John McLaren AkzoNobel Head of Corporate Branding Berry Oonk AkzoNobel Traffic Manager Sarah Roozendaal AkzoNobel Publisher Akzo Nobel N.V. The Netherlands Editorial address A Magazine AkzoNobel Corporate Communications PO Box 75730 1070 AS Amsterdam The Netherlands Printing Tesink, Zutphen The Netherlands Additional imagery Corbis/HillCreek Pictures (Neal Preston, Peter Adams), Emy Smith, Getty Images, Oleg Dou, Photographers Direct, Rizami Annuar, Yas Hotel, Zeitguised. Awards Art Directors Club Bronze Cube (2009) European Excellence Award (2009) SABRE Awards Certificate of Excellence (2009) Opinions in this magazine do not necessarily represent those of AkzoNobel, and AkzoNobel accepts no responsibility for these opinions. While the information in this publication is intended to be accurate, no representation of accuracy or completeness is made.
Sebasti達o Salgado/Amazonas images/Hollandse Hoogte
Contents 6 A new world order An interview with economist and inventor of the BRIC acronym, Jim O’Neill. 12 Culture shock! Is the writing on the wall for popular culture as we know it? 16 Muscling in on the action The Indian Ambassador to Mexico discusses the growth prospects of two surprisingly similar nations. 20 China’s conundrum Can China handle the repercussions of its phenomenal growth? 26 Keep on running Could a shiny new electric car mean the end of the road for South Africa’s wheezing old bangers? 28 Seeds of hope How a miracle tree is helping to address Malawi’s chronic fuel shortage. 30 Getting into the rhythm We discover why Brazil is becoming a major force in sustainable development. 38 Power to the people A report on Mexico’s efforts to introduce new environmental standards. 42 Learning to cope We look at how young people in Vietnam are being given vital help to find employment. 44 Refining the route to prosperity It used to be all about the oil. But now the Middle East is diversifying, and leisure and tourism are high on the agenda. 50 Russia holds firm A different kind of revolution is taking place in Russia. One which is focused on style – and really good hair. 56 Leading the green revolution Find out how buildings can now be green on the inside, as well as the outside. 58 India hits the hi-tech fast lane Charting the unstoppable rise of India as a global technology powerhouse.
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A NEW
world order
WORDS Jim Wake
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ine years ago, as Jim O’Neill reflected on the significance of the September 11 attacks and prepared to assume the position of Chief Economist at Goldman Sachs, he came up with a clever handle he could attach to those forces he believed would exert a powerful influence on the global economy in the years to come. He wrote a short paper entitled Building Better Global Economic BRICs. O’Neill argued that the G7 was an inappropriate forum for guiding global economic policy when it excluded representation from those economies that were growing the fastest and playing an increasingly important role in the global economy. In the paper, he projected that the growth in the economies of the four BRICs – Brazil, Russia, India and China – were likely to significantly outpace the economies of the developed world. Without quite saying it, he implied that the emergence of the BRICs was one of those pivotal moments in history that signify the end of one era and the beginning of another. The name BRICs caught on and took on a life of its own – these days, conferences and academic programs are organized around the BRIC theme, dozens of books have flooded the market and O’Neill himself is a much sought after speaker, traveling the world to offer advice and analysis on developments in the global economy. That one paper, he says, changed his life.
8 Right: The 154-meter high Ponte Estaiada Octávio Frias de Oliveira is one of the most distinctive structures in the Brazilian city of São Paulo. [Photography: Marcosleal, Wikimedia Commons]. Below: The familiar skyline of Shanghai in China, dominated by the Oriental Pearl Tower. [Photography: David Wong, Wikimedia Commons].
As for the BRICs, O’Neill says he is mostly surprised by how the past year, those differences make it unlikely that the BRICs accurate the predictions have been. “The whole thing has will form any sort of meaningful political union. gone very much according to our projections. The key differHe sees quite different challenges in each of the BRIC ence being that it’s all happening a lot quicker. When I first countries. India, which has a highly educated and motivated wrote about it, the paper had four assumptions about what elite, needs to extend educational opportunities to a rapidly might happen by the end of the decade, and the most opti- expanding workforce – currently, says O’Neill, half a billion Inmistic one had the four BRIC countries being about 10 percent dians get virtually no education at all. It also requires massive of global GDP. In fact, they’re about 15 to 16 percent of GDP. investments in its infrastructure: in roads, power systems, safe What we assumed would happen by somewhere between water supplies and telecommunications. The Russians, on the 2015 and 2020 has already happened.” other hand, have to diversify an economy excessively dependSince publishing the paper in 2001, O’Neill and his team ent on oil, gas and a few other commodities They also have to have revisited their projections on growth in the BRICs, ex- purge Russian society of the rampant corruption which curtending them out to 2050. The most recent review, published rently prevails. In Brazil, the real challenge is to avoid backslidin December 2009, speculates that China’s economy could ing – after years of instability, inflation is under control and the surpass the US economy by 2027, the BRICs together will be currency is stable. The risk is that a populist politician could as big as the G7 by 2032, and together with the US, the BRICs exploit resentment among poor Brazilians and gain power by are likely to be the five largest economies in the world by 2050. pushing to reverse those policies that have brought stability Though the global economic crisis hit the BRIC economies and driven Brazil’s recent economic success. because of the slump in Western demand – in Russia’s case, In China, which O’Neill says is the most important of the particularly the collapse in the price of oil and gas – they have BRICs, the biggest long-term challenge is probably political, recovered more quickly from the crisis than the developed although he doesn’t think the Communist Party’s hand will be economies. The crisis also served as a wake-up call to eco- forced by popular unrest. “The whole issue of China’s onenomic planners in the BRICs that they needed to encourage party system and whether it will fall apart is a somewhat exdomestic demand, ultimately serving to strengthen them and aggerated issue. I think, broadly speaking, that the Chinese accelerate growth. What’s more, claims O’Neill, it is the rapid people are pretty content with life. Part of the reason is that recovery in the BRIC countries that has helped the West claw the Chinese politicians adapt as conditions change. But the its way out of the economic hole it dug for itself. “If it weren’t for long-term question clearly is, can the Communist Party conthe growth in consumption in these countries,” he says, “we tinue to adapt as the Chinese people get wealthier?” would probably still be struggling with some sort of recessionFor all the attention the BRICs have received, the public ary environment across the world.” discourse has tended to steer clear of what would seem to He sees growth in China as key for continued economic be a logical topic of discussion: what will the rise of the BRICs stability. “Can China adjust from a pre-crisis, low value-added (and other nascent economies) mean for the rest of the world international exporter into an economy that is driven by its in terms of politics, the environment and everyday life? O’Neill own consumers? I think that is the big question for China for dismisses the alarmists who view the rise of the BRICs as a this decade, and arguably, the biggest question for the world.” zero sum game where the West ends up the loser more or less Fortunately, he says, the Chinese government is doing most out of hand. “I think [the rise of the BRICs] scares people in of the right things to make that happen: boosting personal the West because they worry that these countries are taking income, developing a social security system and giving Chi- over and Europe and the US won’t be the center of the world nese citizens the confidence to save less and spend more. anymore. That leads to a lot of misinformation. In my judg“They need to make people feel that economic prosperity is ment, these countries becoming bigger is good for everybody.” something permanent and that they can behave just like nor- Recalling what executives at BMW and Siemens told him durmal Western consumers behave, and I think there are a lot of ing a recent visit about their trade with China, he continues: encouraging signs about that.” “I’d argue that what’s going on in China and India is probably O’Neill is quick to acknowledge that the differences be- more important to Munich than anything going on in Europe. tween the four BRIC nations are far greater than their similari- I think the laws of international trade and wealth creation mean ties. “The only similarity is that they have lots of people.” And that the emergence of the BRIC countries is fantastic news for while the four countries have held high level meetings twice in everybody else.”
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India GDP: $3.57 trillion (world ranking: 5)
Brazil GDP: $2.01 trillion (world ranking: 10) Population: 198,739,269 (world ranking: 5)
Population: 1,156,897,766 (world ranking: 2) GDP per capita: $3,100 (world ranking: 163) GDP 2010 growth rate projection: 8.0%
GDP per capita: $10,100 (world ranking: 107) GDP 2010 growth rate projection: 7.8%
GDP growth rates World: 2006 2007 2008 2009 5.0% 5.0% 2.9% -0.3% BRIC: 2006 2007 2008 2009 9.5% 10.4% 7.4% 5.9%
All data in 2009 US dollars. Sources: CIA – The World Factbook, Oxford Economics, World Bank, IM, EIU, Economist, FT.com
He is equally sanguine about the threats to the environment O’Neil argues for a significant shake-up of international posed by rapid growth in the BRICs. “We applied our 2050 organizations to reflect the changing power and economic projections to look at resource utilization, particularly for ener- dynamics. “They have greater representation in the IMF, gy and oil, and what we concluded is that there’s a major prob- the World Bank and the United Nations. And Western counlem between 2005 and 2020. After that period, the situation tries, particularly in Europe, have got to adjust to the modern will start to improve for two prime reasons. Historical evidence global reality.” suggests that once countries reach a certain level of wealth If there is anything that O’Neill seems to hammer on esand development, their natural tendency to become more pecially hard, it is the simple fact that what people in the West efficient in the use of energy grows dramatically. Secondly, and perceive as “reality” is badly distorted by the lens through linked to that, is what I call enlightened self-interest – particu- which they view the world. “There’s a perception in the West larly China and India – to become more energy efficient and today about this credit crisis going on and on and on,” he obmore thoughtful and creative in the use of resources. China is serves. “But in the BRIC countries – just in these four countries now falling in love with energy efficiency because they know – you’ve got almost three billion people, which is about half the they can’t carry on consuming resources at the same rate [as world’s population. And I’d point out that most of those people they are now] because it will put both incredible price pres- do not say the phrase “credit crunch” before they sit down to sures on themselves, and it will make the problems of pollution breakfast. Most people think they are talking about the world, in many Chinese cities just completely intolerable. So I think in but they’re actually talking about the West and the US. And the next five-year plan, this will probably be the number one that’s no longer the world. The world is a rapidly changing policy priority in China.” place, and the BRIC countries are the core and center of it.”
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Russia GDP: $2.11 trillion (world ranking: 8) Population: 140,041,247 (world ranking: 9) GDP per capita: $15,100 (world ranking: 72) GDP 2010 growth rate projection: 4.8%
China GDP: $8.75 trillion (world ranking: 3) Population: 1,338,612,968 (world ranking: 1) GDP per capita: $6,600 (world ranking: 128) GDP 2010 growth rate projection: 9.9%
Creating more focus
As a global company, AkzoNobel is strongly engaged in the BRIC countries, as well as most of the other major growth regions that are collectively referred to as the “N-11 countries” (the next 11 emerging economies). But until recently, that hasn’t really meant much in the way of an AkzoNobel-level strategy for the BRICs, individually or collectively. However, according to the company’s Director of Corporate Strategy, Jennifer Midura, that’s now changing. “Today,” she observes, “where we’re really successful in the BRICs is where we have either been there for quite some time (such as our position within the pulp industry in Brazil), or where we’ve acquired well.” She points out, for example, that, by acquiring ICI and Courtaulds, AkzoNobel’s position in performance coatings and decorative paints in Brazil, India and China was fundamentally enhanced. “In some
areas, these have been the result of strategic choices at a business level, but often our growth has been much more fragmented and tactical, such as following an American customer to Brazil, or making a specific bolt-on acquisition in China. “Going forward, we would like to be a lot more clear and disciplined with regard to what we want to achieve, and what we need to do to achieve it, across the entire AkzoNobel organization. With this in mind, we’re in the process of creating focused AkzoNobel country strategies for the BRIC countries. We convened key representatives from each part of the business and set up strategy workshops, which have already been held in Brazil, India and China. It’s really the first time that we’ve created an AkzoNobel strategy for these key countries, rather than simply having a collection of individual sub-business strategies or tactics.”
Adds Midura: “Originally, the idea was that the workshops would be where we’d create the strategy. But as things turned out, the workshops proved to be the first step in the creative process.” She explains that the workshops involved four major elements, the first being to assemble a group of people who could develop a shared sense of responsibility for building the business in that particular country. “Leaving aside what they will do in terms of economics, when I visit these places, what is massively exciting about them is that there’s such a sense of energy, accomplishment and movement. They approach problems differently – from a cultural perspective, from an economic perspective – and it’s so rejuvenating. That’s what they give to the world and what they give to me personally as well. You come back from a visit with such positive energy. You just have the sense that anything is possible.”
CULTURE
SHOCK! WORDS David Lichtneker
They’re coming. A cultural invasion is imminent. One which will see Brazil, Russia, India and China spread their unavoidable influence across the globe. The writing is on the wall. Welcome to the world of BRIC Pop.
Graffiti in Wuhan, China, by venuse crew & idt crew
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ccording to popular opinion, in less than 40 years, India and China will surpass the US and take over as the world’s largest economies, while Brazil and Russia will catch up with Germany, France and the UK. The writing is on the wall. The BRICs – as they’re often referred to – are destined to become economic superpowers. Which won’t actually come as much of a surprise to many people. Because ever since the term BRIC was invented by Jim O’Neill in 2001 (see page 6), feverish attention has been paid to the ever expanding economies of Brazil, Russia, India and China. What people won’t be so familiar with is something called BRIC Pop. Riffing on the name of a popular music genre which swept through Britain in the 1990s (Pulp, Blur, Oasis et al), BRIC Pop claims that the world’s cultural landscape is also about to undergo a seismic shift in influence from the four economic heavyweights elect. “Creativity in pop culture in 2050 will be all about the BRICs,” claims Richard Monturo, the man behind BRIC Pop. “As they become more economically prominent, people will become more attracted to their creative output, ultimately making their popular cultures more globally influential. Four new economic superpowers will give us four new cultural superpowers.” He stresses that BRIC Pop isn’t about the politics or economics of the BRICs, it’s about the growing cultural significance of the BRIC region, which we underestimate at our peril. “There’s just as much value in understanding the pop cultural side of the BRICs – music charts, TV formats, box office, street fashion, websites and art auctions – where globalization is starting to happen in reverse, from ‘them’ to ‘us’.” Monturo based his thinking on research conducted during a two-year period, when he traveled to 42 cities – from Ahmedabad to Yekaterinburg – discovering first-hand how the BRICs have shifted from exporters of products, services and commodities to arbiters of pop cultural cool. “They’re already matching the West and Japan for style, modernity, youthful energy and leading-edge inventiveness,” he points out. “We in the West, even in areas we thought would be safe from global competition, are going to have to expand our skills to compete with a generation of BRIC talent that’s hungrier, more openminded, energetic and determined.” The big advantage, he goes on, is that the BRIC Pop world of 2050 will have a richer, more diverse mix of styles and influences in music, film, art, media, fashion, values and lifestyles. There will effectively be four new stylistic pallets to play with. However, he also issues a warning. “On the minus side for us in the West, we’re outsourcing more than just low-cost jobs to the BRICs. We’re outsourcing cool. They have it, we’re losing it, and they’re not giving it back.”
As well as turning his BRIC Pop philosophy into a book, presentation and series of workshops, Monturo has also used his work to develop cross-border strategies for ABSOLUT, Michelin, McDonald’s, Heineken and Volkswagen, in both the BRICs and globally. But Deirdre van Deuren – Manager of the Foresee color and design group, part of AkzoNobel’s Specialty Plastics business – suggests that Monturo might be getting a little bit carried away, and rather than taking over completely, BRIC Pop might just have to roll with it. “I think Monturo is partly right,” she says. “The cultural influence of the BRICs will grow, but trends are all about fluctuation – they come and go. There is clearly a fascination with these four cultures and we will see more things coming our way. But in his view, it almost sounds like BRIC is the name of some huge monster that’s going to eat us all. I don’t think it’s going to end up being that way, even in 40 years or so.” The company’s Foresee Group is made up of designers, product designers and experts in color, special effects and marketing, who each year develop new global color trend presentations for customers in a variety of market segments – notably the IT, automotive, cosmetics, sport and leisure and lifestyle sectors. So keeping an eye on trends, fashion and regional influences is a key part of their research. “We have people in Europe, the US and Asia who are doing trend research all the time,” continues Van Deuren. “We look a lot at fashion, we take note of what’s happening on the street, we look at architecture, new product designs, new technologies and basically just keep our eyes open and absorb everything. We then translate that into color.” This all-embracing approach has already revealed that the BRIC region was starting to have more of an influence. Demand for colors with cultural relevance to the BRIC countries was increasing, so AkzoNobel did something about it. “Because the demand was really strong, we made specific pallets – aside from the usual global color trend presentation – to present colors that were interesting for the BRIC regions. That was around two years ago. Now we’ve integrated those into the overall global color trend presentation, because we feel nowadays the balance between the BRIC regions and Europe/ the US is much stronger. The BRICs have essentially been integrated into the global story.” Returning to Monturo’s mantra, he cites Japan as being a classic example of how cultural influence can be driven by economic momentum. “In a little over 20 years, Brand Japan has gone from being about cheap cars and miniature electronics to a mix of cultural touchstones well integrated into the rest of the world. For those of us old enough to remember when Japan was just a manufacturing and economic competitor to the US and Europe, a funny thing happened on the way from
the Toyota plant. Japan has developed probably the coolest and most creative pop culture on the planet, with market success to rival the West alongside a mix of cult following and street cred.” That’s difficult to argue against (the wide-ranging cultural impact of Manga being a classic example), and Van Deuren agrees that Japan has been at the forefront of driving Western cultural change. “There was a time when people only looked to Western youth to find out what they were doing and what was cool. But that’s changing, they’re daring to try stuff for themselves now. For example, we started to go crazy with patterns. There was a time when it just wasn’t the done thing to combine stripes and squares. Now you can mix basically everything, the crazier, the cooler. That’s something which came from Japan, where young people were trying out all kinds of combinations. They’ve got such a strong culture, you’d think we’d look to them rather than them looking to us.” Of course, one thing Monturo doesn’t examine too closely is the fluctuating nature of cultural influence. Trends, as we all know, come and go, and it’s not always possible to predict what factors will have an impact. “Things tend to happen all of a sudden,” notes Van Deuren. “It’s not simply a case of a new trend turning up every year. There’s a constant movement, which occurs on different levels. Even political and economic factors can contribute. Look at the recent financial crisis. People had a clear reaction and we saw them going for a lot of neutral colors when making choices for home interiors. On the other hand, people wanted strong colors on their cell phones and laptop covers. As if a little bit of craziness would make them feel happier. The environment is another factor. There are times when people are all about green and everything they buy has to be green. Influences like this are constantly moving. Since economies have started improving, people have been more hopeful, and have started choosing even crazier colors. The fact that the crisis has eased and hope has grown stronger has been reflected in their color selections.” It’s clear then, that BRIC Pop is a relevant phenomenon, it’s just how big an impact it will have which is up for debate. However, when asked to identify the most potent sphere of cultural influence, Van Deuren is quick to single one out. “It’s street culture – what we see on the street and the things happening around us – which really catches our attention,” she says. “You immediately notice the differences and the similarities. I’m also a really strong believer in the relevance of fashion, you can take a lot of information from the industry. In the end though, it’s all about finding a balance, because everyone is obviously intrigued by each other at the moment, and to be honest it’s great fun for all of us.”
muscling in on the action WORDS David Lichtneker
As the fast and furious pace of economic change continues, the Indian Ambassador to Mexico gives his views on how both countries are equipped to compete in the global marketplace.
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lobal companies looking to expand and invest are in both countries). India in particular seems destined for great invariably drawn to Asia – the world’s fastest grow- things, having already been billed as the premier emerging ing region – which in turn often leads them to China, economy. No surprise then that it’s a key strategic growth the fastest growing economy. It’s become so com- market for AkzoNobel, with the company having set a revenue monplace it’s almost instinctive, a kind of investment reflex. target of €1 billion by 2015. This ambition is reflected in recent But with the economic map currently embroiled in a fascinat- surveys, which reaffirm the high levels of confidence and optiing state of flux, a number of tantalizing options are rapidly mism at various levels in India about future growth. “The coungaining in popularity. try is poised to continue on a rapid growth path for years to One of the fastest growing and most attractive regions is come and is exuberantly upbeat about it,” continues Mr. Jain, India. A core member of the BRIC economies and already the who notes that India is also expected to become home to the fourth largest economy in the world in terms of purchasing largest number of multinational companies. power parity (PPP), its stock is soaring. Factor South America On the flip side, Mexico – where AkzoNobel has nearly 600 into the equation and the first country to spring to mind is employees – has to work harder for its economic success. Last probably fellow BRIC member Brazil (the ninth largest econo- year’s flu scare certainly didn’t help, and while it was damaging, my in the world in PPP terms). So it might come as a surprise it could have been far worse. “Coming as it did at the height that Mexico is also emerging as something of a dark horse. of the recession, it severely dented confidence,” adds Mr. Jain. Just two places adrift of Brazil in its PPP ranking, Mexico is “But the country’s leaders were prudent, far-sighted and courasometimes overlooked as a viable investment opportunity, de- geous in dealing with the situation. The long-term effect has spite being just a border’s width away from the global eco- fortunately been rather minimal and valuable lessons have been nomic powerhouse that is the United States. learned for the future. However, it did scar the national psyche.” Yet it seems that companies ignore Mexico at their peril. Foreign investments – mostly from the US – have long played Admittedly its future doesn’t look as bright as India’s, which a role in Mexico’s economic and industrial development, with is predicted to continue growing at a furious pace for years large areas of the country’s northern region acting as a magnet to come. But a glance at the Forbes Global 2000 list of the for companies relocating, especially from the United States. world’s largest companies in 2008 reveals that it features 16 “There are various factors that give Mexico an advantage,” companies from Mexico. This tends to suggest that the Latin says Mr. Jain “such as cheap labor, a lower cost of living, similar American country – which has an influential free trade agree- geographical and climatic conditions to the US and stability of ment (NAFTA) with the US and Canada – can’t be ignored. political relations. The associated cost-benefit ratios and econOne man ideally placed to consider the relative merits of both omies of scale are proving highly attractive and are fostering economies is His Excellency Dinesh Kumar Jain, the Indian the establishment of industries, services and other economic Ambassador to Mexico. Appointed in February 2009, he ad- activities.” Some major issues still need to be addressed, howmits both nations face differing challenges, but insists they ever, in order to coax even more companies into investing. “The can learn from each other and continue to attract investment economy is stagnating somewhat for want of reforms to allow for years to come. even more foreign participation, in turn facilitating the induc“There’s no doubt that global companies are attracted to tion of much-needed advanced technologies. The reforms are markets like India and Mexico, due to established factors as stymied because of the political deadlock, thus necessitating well as their potential,” explains Mr. Jain. “In India’s case, it’s political and electoral reforms as well. The political logjam is because of the size of the market, the burgeoning middle- also hindering reforms in labor laws, the education sector, and class, the demographic assets, the proven entrepreneurship taxation and fiscal policies.” and business acumen of the people and the immense growth According to Mr. Jain, India is not without its problems potential. India’s unparalleled diversity also offers something either. “The truth of the matter is that both Mexico and India for every kind of business. In a different way, Mexico has the are still developing economies and India in particular has additional advantage of the NAFTA membership with the US some way to go in its quest to wipe out poverty. The bigand Canada. It is no surprise, therefore, that a preponderant gest challenge is to minimize – if not altogether eliminate – number of Fortune 500 companies have found a profitable poverty, which unfortunately remains widespread in its numerbase in both India and Mexico and the experience has given ous manifestations. Having set a target for 2020 to effectively little cause for disappointment or regret.” overcome poverty, India has just a decade to face up to the He adds that both economies are of a comparable size, monumental challenge.” effectively at a similar level of development and technological The world of international business, it seems, is no differadvance, with much untapped potential for further consider- ent to the world of international relations. Both have become able growth (all three of AkzoNobel’s business areas are active far more varied, complex, dynamic and interactive. “On the
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one hand, a diplomatic envoy’s job has become simpler because of easy communications between the sending and the host countries. But on the other, the great variety of areas with regular interaction requires greater knowledge and expertise in many more fields, as well as adding to the responsibilities in a complex manner. This is variously true between most countries today, and is no different between India and Mexico.” Mr. Jain adds that today, diplomatic agents have to be far more conversant with, and involved in, commercial, economic and technological developments and interchange. “Given the nature of the friendly relations between Mexico and India, my own major responsibilities have been focused on advancing the bilateral relationship forward on the basis of
the much untapped potential in areas such as culture, trade and investment, technologies and multilateral diplomacy,” he goes on. “What makes the experience unique in Mexico is an inordinately high sense of spontaneous admiration and fascination – as well as the strong empathy – that the Mexican people have for India and her culture, traditions, values, philosophy, religions, leaders and heroes. Nothing can be more gratifying for an Indian Ambassador than to be accosted by people everywhere, at all levels, friends and strangers, coming up and professing their positive and friendly feelings – even love – for your country and all that it stands for. This alone has made my experience of Mexico most rewarding and enriching for a lifetime.”
China’s conundrum WORDS Jan Hökerberg PHOTOGRAPHY Lionel Derimais
Much has been written about China’s phenomenal rate of growth and the sheer pace of change. But there’s another side to the country’s economic miracle, one which could result in society and the environment having to cope with the consequences.
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n the last day of April this year, Shanghai celebrated Below: Alleviating poverty remains the opening of the World Expo with fireworks, foun- one of China’s biggest challenges. tain displays and lasers that rivaled the launch of Top right: China is the world’s the Beijing Olympics in 2008. When the Expo ends third largest exporter of goods on October 31, around 70 million visitors will have seen what and services. China and other countries offer the world when it comes to Bottom right: For some people, creating sustainable solutions for a better life in modern cities. China’s economic development China’s development from an agricultural third world has resulted in a rapid increase country into an urbanized industrial economy – the world’s in wealth. third largest – is the most rapid transformation of a nation in history. Never before have so many people, within such a short timeframe, been lifted out of poverty. It’s a truly incredible turn of events, which former Australian Prime Minister Kevin Rudd referred to earlier this year during the 70th annual George E. Morrison Lecture at the Australian National University. “In 30 years, China has transformed itself into an increasingly global, wealthy, industrial and urban-centered economy,” he said. “Around 500 million people have been lifted out of poverty. This is unprecedented. We have all been beneficiaries of China’s remarkable performance.” There can be no argument that China is changing. Nearly half of its population now lives in urban centers, including around 150 cities that each number more than a million people. If current urbanization trends hold, consultancy firm McKinsey & Company has estimated that China’s urban population will expand from 572 million in 2005 to 926 million in 2025 and hit the one billion mark by 2030. In business terms, China’s urbanization promises sub- stark reality is that in a short period of time, China has become stantial new markets and investment opportunities. The coun- the world’s largest greenhouse gas emitter – it’s responsible try already has more internet users than the population of the for more than half the global increase in emissions. However, US and Canada combined. It also has more than a billion since it is the industrialized countries within the OECD that mobile phone users, while the largest operator, China Mobile, have created – and are still creating – most of the carbon dihas more subscribers than the number of citizens in all 27 oxide emissions, China is only part of the global greenhouse European Union nations. And following two decades of an- problem. “Another reason why the responsibility for this has nual growth averaging around the 10 percent mark, China is to be shared is that an increasing part of the Western world’s now the world’s largest exporter of manufactured goods and consumer goods are produced in China, with greenhouse gas the third largest exporter of goods and services. It is also the emissions as a consequence,” notes Karl Hallding, Head of world’s largest car market, having surpassed the US in 2009. the Stockholm Environment Institute’s China Cluster. So the recent worldwide financial crisis posed a major Water poses additional problems. Ill-planned hydrological threat. But while all other major economies struggled after engineering projects – which interrupt the natural flow of rivers being severely impacted, China invested in a massive stimu- – and conversion of wetlands for agriculture, along with ill-conlus program and became the principle engine of the global sidered construction and infrastructure projects in the flood economic recovery. As the world slid into recession in 2009, plains, have destroyed ecosystems. Decades of waste pourChina’s gross domestic product (GDP) grew 8.7 percent. De- ing from factories and cities into China’s rivers have turned velopment continues at full speed and numerous construction many of them into open sewers. According to the World Wildprojects are underway, with new buildings, bridges, railways life Fund, around 40 percent of the water in the country’s river and subway systems being built nationwide. In a few years, systems is unfit for human consumption. While southern ChiChina will have the most modern high-speed rail network in na is relatively well watered, the north – home to about half of the world; electric cars are slated to be in mass production; China’s population – is parched and now threatens to become big cities are aiming to be more sustainable and renewable the world’s biggest desert. As if that’s not enough cause for energy sources should be producing a major part of the coun- concern, respiratory and heart diseases related to air pollution try’s electricity. are the leading cause of death in China. But there is also another side to the economic miracle. The country’s polluted environment is largely a result of China’s rapid growth has come at the expense of the country’s its rapid development and the consequent increase in energy air, land and water. Much of it has already been degraded by consumption, which is primarily provided by coal-fired power decades of economic planning that emphasized the develop- plants. While some progress has been made in improving ment of heavy industry in urban areas. As Wang Jinnan, one energy efficiency and carbon dioxide emissions reduction, of China’s leading environmental researchers, told the New 75 percent of energy production is still dependent on coal. York Times: “There is pressure for change, but many people Building conventional coal-fired power plants is the fastest refuse to accept that we need a new approach so soon.” The way to increase electricity supply, but China realizes it has
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to reduce its dependency on coal. That said, its demand for The challenges, therefore, are immense. But President Hu Jintao energy is not decreasing, so the government is now encour- and Premier Wen Jiabao have won praise globally for their role aging the development of cleaner energy, since the country in overseeing a Chinese economic miracle, making life easier has great potential in hydroelectric power, solar energy, wind for foreign-owned companies and following the obligations power and bio-energy. stipulated by the country’s accession to the World Trade OrImprovement efforts are also gathering momentum. ganization (WTO) in 2001. This success will bring with it even For example, China’s government has set up ambitious more challenges, but some experts argue that China’s political renewable energy goals and plans to nearly double the pro- stability will help it to overcome them. “In decades to come, portion of renewables in its overall energy mix – from 8 percent China can no longer sustain the cost advantages that defined in 2006 to 15 percent in 2020. In addition, part of the enor- its initial period of export success,” said Ang Yuen Yuen, a promous $586 billion stimulus package launched in November fessor of international affairs at the Columbia University in New 2008 (designed to maintain growth despite the global financial York, writing in the China Daily. “But it is a mistake to think that crisis) targets environmental issues. The money is being used China’s manufacturing will remain in the doldrums. Compared to enhance sewage and rubbish treatment facilities, prevent with many developing countries, China’s government is stable water pollution and accelerate the creation of green belts and and embraces foreign investment.” natural forest planting programs, while increasing energy conIt also appears to be embracing positive action for enservation initiatives and pollution control projects. vironmental change. Having invested $34.6 billion in clean History shows that in all major developed countries, such technology in 2009, China is now the world’s leading invesas the UK, US and Japan, heavy pollution followed as a re- tor in renewable energy technologies, and produces more sult of industrial development. It wasn’t until their economies wind turbines and solar panels each year than any other matured – and they became more prosperous – that govern- country. The state electricity grid has also been ordered to ments started worrying about the environmental damage that set up electric car charging stations in Beijing, Shanghai and had occurred. Tianjin, while subsidies of up to $8,800 are being offered to taxi It should also be noted that China’s speed of development fleets and local government agencies in 13 Chinese cities for has no real historical parallel, and even if there has been a each hybrid or all-electric vehicle purchased. Suggesting that rapid increase in wealth, large sections of the population still the country might well be on the road to tackling some of its live in poverty. For China’s government, the main priorities are biggest problems. economic development, poverty alleviation and social stability. All this will require further growth, which is fueled by energy, and while there is no denying China’s need for development, the question is how can growth be generated in a more energy-efficient manner – one which is increasingly based on renewable energy sources? Energy security, therefore, is one of the country’s overriding priorities and one of the administration’s key concerns. Meanwhile, as the Shanghai Expo opened its doors to the public, the media reported on unrest in Southern China at some Taiwanese and Japanese-owned plants. China’s labor market is probably at a critical turning point as it moves from an unlimited to limited supply of labor; and from first to second generation migrant workers, to a post-1980s generation of workers with higher expectations. These younger workers, it appears, are willing to take collective action to improve their salaries and working conditions. This should come as no surprise, because it also happened in the US, Japan and South Korea when these countries were at similar stages of development. Poverty, too, is still a major social issue. Since 1978, when China decided to open up the trade and investment sectors to the global economy to boost exports and foreign investment, the country has enjoyed rapid and continuous economic growth. All the same, poverty is still persistent – particularly in remote rural areas. Income inequalities between eastern and western China have broadened, while the income gap between rural and urban residents has widened considerably since the late 1970s (urban incomes are now more than three times higher than rural incomes). By world standards, Chinese workers are definitely underpaid. But, according to a recent study by the US consulting firm Jassin-O’Rourke, labor costs in China are higher than in seven other Asian countries. China’s balance act is clearly daunting. The government wants to avoid social unrest and give pros- Jan Hökerberg worked for 25 years as a business journalist perity to its people. On the other hand, sky-rocketing salaries in Sweden before moving to Asia, where he now runs Bamboo Business Communications from Hong Kong and Shanghai. would kill China’s export industry and increase inflation.
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Solving the puzzle
Chinese Premier Wen Jiabao once used a metaphor which vividly depicts the challenges of China’s economic development. He said that in China (population 1.3 billion), any small problem multiplied by that amount will become a major issue. Whereas any huge amount of wealth divided by 1.3 billion will be reduced to a small per capita figure. I believe this metaphor provides us with a very good perspective when analyzing China. Given the scale of the country, any drive in economic development should not be perceived as being over-aggressive. By the same token, a problem commonly found in developing markets could be magnified substantially and become an uphill battle – environmental issues and resource scarcity, for example. In an effort to cope with these challenges, the Chinese government has adopted a very pragmatic approach. In order to create wealth for society, its immediate goal is to ensure that all walks of life are able to enjoy a decent living. Early this year, Premier Wen made the following remarks when delivering the government’s report to the National People’s Congress: “Everything we do is to ensure that people live a happier life with more dignity and make our society fairer and more harmonious.” The Chinese authorities have also acknowledged the challenges generated by a surge in economic development,
taking several steps to tackle these issues. The environment, for example, has been made one of China’s top priorities in its 11th Five-Year Plan (2005 to 2010). The total investment in environmental protection during this period will amount to RMB 1,530 billion, a 70 percent increase over the RMB 700 billion of the previous plan. This substantial investment was allocated to support a wide range of initiatives, including water pollution control (RMB 640 billion), air pollution control (RMB 600 billion) and solid waste control (210 billion). These resources are expected to achieve considerable improvements in various aspects of the environment. However, as China is so big, the aforementioned endeavors need support from both the government and the private sector. In fact, all stakeholders need to offer full support in order to make them happen. For our part, we are among the leading multinationals supporting China in this process. We currently have more than 6,000 employees and 25 plants in China, with more facilities due to be added at our new €275 million Ningbo multi-site, which has already started producing chelates. We have ambitious growth plans for Asia, underlined in July when we announced plans to double our current revenue in China within five years. A target of $3 billion has been set for 2015, with China poised to play an integral role in our strategic focus
on the world’s growth regions. Our CEO, Hans Wijers, vividly illustrated the importance of the Chinese market when making the announcement: “Not only is China an important growth engine, but it is also rapidly establishing itself as a great center of innovation. It’s moving from made in China, via developed in China to innovated in China. We believe it will become a global powerhouse for science, technology and invention. AkzoNobel wants to make its contribution to that journey.” We also provide ample personal and career development opportunities to all our Chinese employees. Our colleagues do not simply get a job, but a career in AkzoNobel. More importantly, they feel proud of themselves, their work and their company. Our facilities observe the highest standards for protecting the environment and these endeavors have been recognized many times by various local authorities. But we are not satisfied to simply settle for these achievements and will keep on looking for ways to continue the pursuit of excellence. A sustainable business is of utmost importance to ourselves and the communities in which we operate. We are committed to working with China to make the country a better place for all its people. Colin Tan AkzoNobel Country Director, China
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keep on
running WORDS Adrian Burford
If there was a World Cup for getting every last mile out of a car, no matter how old, South Africa would be among the favorites. But is a shiny new model about to move the goalposts?
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outh Africa is basking in the afterglow. Our population of 50 million has experienced a collective epiphany as it suddenly dawns on us that we’re a nation of enthusiastic, passionate and capable people who helped to make the 2010 soccer World Cup one of the best sporting events ever held – anywhere. We also play a mean vuvuzela. Post-event polls indicated that around 85 percent of the nation felt positive and much good has, and still will, sprout from the event. Infrastructure has received a major boost and there are some fantastic developments underway as far as ‘planes, trains and automobiles are concerned. These will hopefully make it easier for the flood of tourists that we’re eagerly awaiting to make their way around! Much of it is still work in progress, but visitors were impressed by our revitalized freeway infrastructure and the fast Gautrain, which will eventually link key points in the economically powerful Gauteng province. There are about eight million vehicles on South Africa’s roads, and while the country is definitely First World when it comes to manufacturing – BMW, Mercedes-Benz, Volkswagen and Toyota produce and export in significant numbers – the average age of the passenger car fleet is in the region of 12 years. And it seems to have stayed largely unchanged for, well, forever. So despite the halcyon years of 2006 and 2007, when the market boomed and commentators talked up the possibility of sales hitting more than 900,000 units by 2010, most South Africans still drive old cars. And the market forecast for this year actually looks like being little more than half that heady 900,000 figure, which now looks pretty much pie-in-the-sky. But in fairness, our industry commentators weren’t the only ones who called it wrong! Given the country’s generally poor commuter network, personal transport in the shape of a car – even a well-worn one – remains an important dream for many. Keeping cars running on a shoestring is a key objective and as a result you see things which wouldn’t pass muster elsewhere. We managed to hide a lot of it quite successfully during the soccer, but fact is, we’re a mix of First and Third World. Believe me, seeing a wheezing 30 or 40-year-old Datsun pick-up juxtaposed with the latest BMW (the German brand enjoys one of the highest market penetrations of anywhere in the world) isn’t unusual. So the likelihood of remaining a country with a low vehicle ownership level coupled to an old fleet looks set to continue. As a result, backyard mechanics and body repair shops (in the loosest possible sense of the definition) are everywhere – even right next to the triple-lane suburban thoroughfares where you can have an exhaust repaired or an air conditioner compressor re-gassed. All while you have your haircut, al fresco. Hans Schrama, Market Manager for AkzoNobel’s Car Refinishes business in export countries, agrees that South Africa is a nation of contrasts, but nevertheless has significant potential. “This kind of development is also seen in other African countries,” he explains, “where the top classes drive their Porsche Cayennes and others use second-hand Japanese cars. We have had a presence in South Africa since 1997, so we understand the situation quite well. We think a product such as our stickerfix™ adhesive repair system could become successful in the top segment of the market, especially at dealer approved bodyshops. Whether it has a future in hiding cosmetic damage and keeping old cars looking fresh remains to be seen, because car owners tend to leave small things and then combine the small scratches with a larger repair.”
While many South African car owners focus on keeping their motoring costs to a minimum, some of the more affluent are looking at going “green”. An increasing number of hybrids are available, while South Africa’s much talked about all-electric car, Joule (above), will hopefully be on our roads by the end of 2013. Joule was most recently seen at the Geneva Motor Show, in a design form which is said to be close to its production version. It will be manufactured in an all-new factory, in an all-new automotive supplier park near the harbor of East London, making it easy to export. Plans are to make 50,000 units a year in left and right-hand drive, the vast majority for export. That’s a lot more than the Solaris Elettra, Ethiopia’s recently-announced electric car, and they hope to eventually produce 30 a week. With a top speed of 80 kilometers per hour, slow is obviously going to be an important part of the ownership experience. Of course, it costs less than half of what Joule will. Joule remains controversial because it is funded to a large degree by taxpayer’s money, and like many electric cars, the jury is still out on how it will perform in the real world. Optimal Energy, the company which designed and will manufacture it, claim a range of 200 kilometers, acceleration to 100 kph in 15 seconds (that means it’ll happily keep up with your average 1.3 or 1.4 liter runabout), and a top speed of 130 kph. The “green” awareness is partly due to an impending carbon dioxide tax on passenger vehicles, and once again it highlights a paradox: car companies feel the tax is poorly timed and hasn’t taken issues such as fuel quality into account. While ever higher grades of diesel fuel in Europe are contributing to better engine performance and lower emissions, South Africa can only expect diesel with 50 parts per million of sulphur to be available nationwide by 2016 (dirty, 500 ppm diesel is standard fare), which means we can’t take advantage of the new technology. But the vast majority of South African motorists don’t care and an issue such as exhaust emissions is way down their priority list. But having said all that, the soccer World Cup reminded not only us, but also the rest of the world, that we’re an important and potentially lucrative market. As I said, there are 50 million of us, and our euphoria doesn’t look likely to abate anytime soon. Adrian Burford has been writing about mobility in all its wheeled forms for 21 years, the last ten as a freelancer. If it has wheels attached, he’s interested in it.
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Seeds of
hope WORDS Brian Guest
In Malawi, a miracle tree is helping to address the country’s chronic fuel and energy shortage, while creating jobs along the way.
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oodoo rituals, dark rites. There’s clearly something very mysterious about the Jatropha cursas tree. For centuries, it has been used in Haiti, where it’s referred to as the miracle plant – to ward off evil spirits and release the trapped souls of the dead. Now, it seems the mildly toxic, bitter-tasting seeds produced by the tree have more to offer the world of the living than was previously thought. Native to the American tropics, it’s long been known by local people in the Caribbean and Latin America that the oil produced when the tree’s seeds are crushed and processed is a potent source of energy. In recent years, however, the spiraling cost of fuel has prompted many around the world, from India to Brazil, to explore the plant’s potential as a sustainable biofuel. “The Jatropha is an amazingly resilient tree,” explains Bernd van Dijk, who works for the Dutch express and mail company TNT in the Netherlands. He heads a World Food Program-backed campaign called BERL (BIO Energy Resources Limited). It was set up to address the chronic fuel shortages and high levels of poverty among local subsistence farmers in Malawi – one of Africa’s poorest countries – by promoting widespread cultivation of the plant. “It has the potential to provide Malawi with a reliable and sustainable source of income for poor farmers and a steady flow of good quality fuel that can provide the platform for real economic growth in a country where it is desperately needed.” The drought-resistant Jatropha can flourish on barren, degraded soil, where other crops fail to get a hold. As an inedible plant, it’s a massive advance on the first generation of biofuels, such as palm and rice-based oils, because it’s not part of the food chain. Planted in small, hand-dug holes, it takes five years before full fruiting and achieves a maximum yield five years later. The seeds can be crushed to produce oil for use directly in heavy diesels, or to be refined into high quality fuel.
The husks can also be used as cooking fuel or fertilizer. As part of its Moving the World partnership with the World Food Program in Malawi, TNT realized it had to get out into the field if it was to help persuade tens of thousands of smallholders to plant what eventually will be millions of Jatropha trees. This will create the network of suppliers needed to feed the biofuel processing plants BERL envisages is needed to address the country’s desperate shortages of good quality fuel and create long-time work for all involved. “Gathering the seed harvest is labor-intensive and needs around one person per hectare,” adds Van Dijk. “In Malawi, it will provide much-needed employment for up to more than 100,000 people. Moreover, villagers will still be able to continue growing maize and other food crops on more fertile land. Communities will avoid the need to import expensive diesel and not have to rely on the poor quality fuel available on the local market.” The only problem is, while TNT may have a finger in the pie in virtually every conceivable area – from providing funds and awareness campaigns to transporting goods and arranging knowledge exchange – since it entered into partnership with
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the WFP in 2002, it has been completely out of its comfort zone in terms of finding the technical expertise required to build a biodiesel plant. It was something that Van Dijk had puzzled long and hard about. Until a solution virtually presented itself on a plate when he was invited to a wedding in the Netherlands last year. At the reception, he got into conversation with the bride’s brother, Theo Horbach, production manager at AkzoNobel’s Industrial Chemicals plant in Rotterdam. As luck would have it, he turned out to be just the man Van Dijk was a looking for. Horbach recalls the meeting with some amusement. “I listened to his story about TNT’s plans to help create employment in Malawi. How they were trying to resolve the chronic shortage of good fuel and how the only thing that was missing was the technical know-how to build the processing plant. I told him he needn’t look any further. I was immediately sold on the project. The next day, it was a Monday, I gathered my team together, told them I was looking for volunteers to go to Malawi in their own free time to build a pilot plant. I couldn’t have asked for a better response.”
The only caveat, added Van Dijk, was that a pilot plant had to be up and running within four months to coincide with the first harvest of seeds, which would need to be gathered and processed. No problem, said Horbach. Over the next four months, his team of volunteers (Henk van der Werf, Toine van de Lindeloof, Michiel Bosch, Johan Breugem, Igor van der Hel, Evelien Pingen, Sybren Bakker and Frank Smalberg) took turns to visit Malawi to ensure everything was on track. Despite the lack of an infrastructure and the unknown territory, it was a highly rewarding experience for Horbach and his team. “It really was back to basics, with none of the tools we would normally take for granted,” he goes on. “Everything had to be trucked in from South Africa. We just had to rely on traditional methods and the many willing helping hands provided by the local people. It was very gratifying. At one stage, we ordered a conveyor belt, but we were sent one intended for a customer in Sierra Leone. No matter, we thought, it’ll do. That’s the way it is, you’ve just got to think out of the box and get the job done.” By the summer, a small pilot plant big enough to fit into a warehouse had been built and will serve as a blueprint for the large plants that will follow. For Van Dijk, the entire exercise has exemplified what can be achieved when companies and people are willing to come together to share knowledge and expertise. TNT’s strength is in logistics, AkzoNobel was able to meet a shortfall in another area. Other companies, such as Atos Origin and PriceWaterhouseCooper, are also pulling their weight in Malawi. “Our goal is for the BERL project to run as a sustainable business in its own right,” concludes Van Dijk. “The project has the full backing of the Malawi government and with 20 percent of the business in the hands of Malawians, they have a vested interest in making it work. It’s amazing just what can be achieved with committed people and a little help from natural resources in the shape of the humble Jatropha tree.”
getting into the
rhythm
WORDS Myrna Domit PHOTOGRAPHY Ricardo Funari / Brazil Photos
Brazilian verve, passion and zest for life can be intoxicating. But does that infectious enthusiasm stretch to the country’s efforts to get everyone dancing to the tune of sustainability?
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33 Top: More than 20,000 tons of Brazil nuts are harvested every year, around 40 percent in Brazil itself (2000 estimates). Below: Illegal commercial shark fishing is reportedly causing severe damage to Brazil’s offshore eco-systems.
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razil is on the verge of fulfilling its prophecy of becom- businesses committed to social responsibility, was created in ing a global player. Home to South America’s largest 1998 with the aim of sensitizing companies to manage their economy, the country also suffers from extraordinary operations in a socially responsible manner. Today, it is reinequality, corruption and violence. Yet it is this mo- garded as one of the leading CSR organizations in the world, saic of extremes that is fueling Brazil’s drive towards becom- with 1,362 member companies representing 35 percent of ing a major force in sustainable development. Brazil’s GDP. “Brazil naturally combines sustainability with With the 2014 soccer World Cup and 2016 Olympic economic growth,” notes Helio Mattar, founder of Instituto Games coming to its shores, Brazil – one of the emerging Akatu, a leading organization which aims to increase awareworld’s success stories – is firmly in the spotlight. Feeling the ness and mobilize citizens to achieve conscious consumption. pressure, business leaders are embedding economic, social From the outside, multinationals demand sustainability and environmental values into their business practices, ensur- reports from their Brazilian subsidiaries, while socially responing that economic growth and corporate social responsibility sible investors filter their targets based on an entire set of sus(CSR) move in sync. tainability indicators known as the Global Reporting Initiative “The BRIC economies are driving world economic growth – GRI. And from within, Brazilian business leaders who plan to right now,” says Felipe Arango, a partner at Business, Sustain- expand beyond borders have learned that without an active ability and Development, a pioneering sustainability consulting sustainability agenda, they won’t be doing business for long. firm in Brazil. “Their middle classes and consumption power Today, Brazil is ranked third in the world in terms of the number are expanding. But without a doubt, given these patterns, of companies reporting on the GRI standard, behind only the there is a question that needs to be asked: How to grow while US and Spain. reducing inequality? That is when sustainability becomes In order to continue attracting ethical investors, in 2005, even more relevant.” Brazil launched Latin America’s first and only corporate susBrazil’s lively CSR scene invariably outshines that of its tainability index – Bovespa’s ISE. The strict index considers Latin American neighbors, and business leaders claim that only 40 Brazilian companies per year, and if the selected this is only the beginning. For AkzoNobel’s Country Director companies do not keep up with adequate levels of sustainin Brazil, Jaap Kuiper, the country’s approach to sustainabil- ability, they are quickly removed from the listing. Yet while an ity has been impressive. “There is no healthy business in an engaged civil society keeps business leaders on a tight leash unhealthy world,” he explains. “In reality, we need products regarding everything to do with sustainable development, it’s that cause less damage, use less energy, that consider water- Brazil’s government which has emerged as a close ally of the saving processes and also generate lower levels of CO2 emis- sustainability movement. “Environmental, human rights and sions as a way of creating a low carbon economy.” labor legislation have always been there, but now the govStanding at the forefront of the continued push for sus- ernment is acting in concert with the private sector,” Arango tainable development clearly requires vision and innovation, points out. “This alliance combines innovation, efficiency and and specialized business associations – unique to Brazil – are market-driven growth with the governance necessary for sucplaying a key role. For example, Instituto Ethos, a network of cessful sustainable development.”
Rainforests such as the Amazon (which occupies an area measuring around 4,100,000 square kilometers in Brazil) are fast disappearing. One-and-a-half acres are lost every second. The last remaining rainforests could be consumed in less than 40 years.
36 Below: A eucalyptus plantation near AkzoNobel’s Pulp and Paper Chemicals production facility in Bahía, Brazil. Right: Brazil has more than 5 percent of the world’s total uranium deposits, but the Angra Nuclear Power Plant, between Rio de Janeiro and São Paulo, is the country’s only nuclear facility.
The confident BRIC economy has an impressive industrial platform, with leading industries in raw materials and energy. Destined to play a role in shaping the world during the coming decades, the CSR strategies devised by these sectors inevitably err on the side of caution. “We are talking about giant mining, energy, paper and cellulose and petroleum exploration companies working right next to the lung of the planet,” adds Arango. “Because of that, the entire world is watching.” For AkzoNobel, its strategic ambitions and commitment to innovation are key to the company’s own sustainability agenda. “We have a strategy for all six pillars of sustainability (transportation, waste, energy, people and community, products and services), and all the strategies come together as one framework for sustainable development, which is the basis for our business,” continues Kuiper. “Without sustainability, you can forget about the rest.” This crucial combination of strategy (investing in high growth markets) and innovation (developing pioneering products and services) is perfectly illustrated by Eka Chemicals, the company’s Pulp and Paper Chemicals business. Eka has developed its own Chemical Island concept, which involves constructing facilities next to a customer’s pulp mill in order to supply the chemicals needed for production. These include purpose-built plants at Três Lagoas (supplying the VCP mill) and in the state of Bahia (supplying the Veracel mill). “Our Brazilian management is very keen to take on new initiatives related to sustainability,” explains Eka’s Sustainability Focal Point Maria Norell. “We are working in Brazil with renewable energy sources such bio-energy, while the Chemical Islands on the pulp mill side use bio and hydro-power, as well as helping to avoid transportation hazards.” But AkzoNobel’s commitment to sustainable operations goes beyond traditional thinking. For example, a special campaign – called Tudo de Cor Para Voce (All Colors For You) – is
well underway in Brazil designed to educate and train communities to paint with environmentally-friendly products. Several senior executives even traveled to some of the country’s deprived neighborhoods recently as part of the painting initiative, which aims to combat urban decay while servicing the communities and the environment. “We’ve been going into communities in São Paulo, Rio de Janeiro and Santa Marta to train people and, with their help, we paint their neighborhoods,” says Kuiper, who is also General Manager of AkzoNobel’s Decorative Paints Latin America business. “We are bringing and adding color to people’s lives, which is another way of being sustainable – using the right products, in the right way. At a subconscious level, we’re also teaching people to preserve the neighborhoods of Brazil. That’s very powerful.” Over at Grupo Votorantim, one of Latin America’s largest industrial conglomerates, sustainability is also at the top of the CEO’s agenda. “We are a results-oriented company and sustainability is discussed in great detail at our board meetings,” notes Celia Picon, Votorantim’s Institute Director. A pioneering company in the implementation of stakeholder engagement strategies in Brazil, Grupo Votorantim maintains an active dialog with communities and NGOs. “After the year 2000, we adopted a less paternalistic strategy and focused more on dialog and the implementation of education projects within the communities where we have our industrial plants,” Picon goes on. According to corporate sustainability advocates, it is this unique combination of commitment at the executive level, together with a concerned civil society and an engaged government, which has placed Brazil at the frontier of CSR. But, according to Jean-Phillipe Renault from strategy consultancy and think tank SustainAbility, even with a striking sustainability report card, there is always room for improvement. “There is a great thirst for awards, ranking and external recognition with regards to sustainability in Brazil,” he says. “But I really hope that it goes beyond this, and that we will see a significant reduction in the income gap and other social issues that are affecting the country.”
Myrna Domit has been a journalist for more than ten years. An editorial assistant and videographer for the New York Times, she is now based in Brazil.
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power to the people WORDS Mary Cuddehe
Mexicans take great pride in their culture and traditions, but are the country’s ambitious plans to embrace the widespread use of alternative energy receiving enough support?
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he largest wind farm in Latin America can be found on the coast of southern Mexico, on the Isthmus of Tehuantepec. It has 167 turbines, compared with 627 at the world’s largest, which is in Texas. However, the moment the last of these was erected at the end of 2009, the Mexican farm was transformed. Having started out as a promise, it became the biggest symbol of the green development boom which President Felipe Calderon has been trying to promote for the last three years. It now supplies a quarter of the energy needs of Cemex, the Mexican cement company. Calderon has been talking about climate change ever since he took office in 2006. So far, he has overseen the passage of an environmental reform law (in 2008), and proposed a $10 billion global financing mechanism which would apply pressure to developing countries to curb emissions. He has hosted eco-summits and former Vice-President Al Gore, the doyen of global warming activists. He is even planning to hold the next world climate change conference in Cancun this December. The effect of all this attention has been three-fold. Firstly, it has thrust the environment into the national political dialog. Secondly, it has placed Mexico into a regional leadership role on the issue. And, perhaps most tangibly, it has encouraged investment from foreign companies such as Acciona Energia, the Spanish firm which teamed up with Cemex to build the massive south Mexican wind farm. Not to mention burnishing the green credentials of such homegrown multinationals that want to keep up with world trends (or, in some cases, participate in the United Nations carbon market). Says Phil Cohn, Director of Cool nrg, an Australian emissions-reduction company: “On the issue of climate change and using carbon finance to pursue projects on the ground in Mexico, we’ve found the government to be really responsive.” Elsewhere, the eco-rhetoric has fallen flat. Calderon has promised to reduce greenhouse gas emissions by 50 million tons a year. But national oil company Pemex – whose increased gas flaring in response to declining reserves is mostly responsible for the recent spike in emissions – remains mostly in charge of regulating its own environmental conduct. Meanwhile, the Energy Ministry plans to increase the use of alternative power sources by a mere 3 percent by the end of the President’s term in 2012. Calderon’s pet $2.7 billion peso reforestation effort, ProArbol, has become synonymous with dead trees and misspent funds. And although Mexico is a leading country with more than 100 projects on the Clean Development Mechanism, the carbon market, it’s unclear how many of those projects are successful. Even the wind farm reflects the limits of sustainable practices here. Private companies are forbidden from connecting to the grid to sell electricity straight to individuals. And because the state-run utility makes limited use of renewable energy, companies are largely left to their own ingenuity if they want to go green. The business community has taken the initiative in some areas, including alternative wind and hydropower and methane-to-energy projects. Walmart, Mexico’s largest private employers, for instance, has set the goal of 100 percent renewable energy by 2025. But for now, as many experts complain, it’s mostly the deepest pockets in the private sector that can afford to make real strides. Mary Cuddehe is a writer based in Mexico City. Her work has appeared in The Atlantic, The Financial Times and The New Republic, among many other publications.
Previous spread: More than a million Mexicans attending a rally in “El Zócalo” Mexico City’s main historic plaza. [Photography: Luis J. Jimenez]. Below: A wind farm in the southern Mexican state of Oaxaca. Top right: Satellite City, a modern suburban area which has become part of Mexico City. Below right: Portrait of a Mexican Charro, or gentleman horseman.
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learning to
cope
WORDS David Lichtneker
A special training program in Vietnam is helping street children and some of the most marginalized sections of the population to find employment.
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s the world’s population continues to spiral, so do the associated issues and dilemmas faced by society. Employment – or the lack of it – is just one of them. Consider the numbers. According to the UN’s International Labor Organization, around 1.2 billion young people will enter the global job market during the next ten years. But only 300 million jobs will be created. There is, to borrow a phrase, a youth bubble. It’s happening everywhere – Asia, Africa, Europe – and it is, quite literally, a growing problem. One country facing major potential difficulties is Vietnam. With a population of around 85 million, 45 percent of its unemployed are young people aged 18 to 25. It’s estimated that roughly 1.4 million Vietnamese youth enter the job market every year, and if gainful employment can’t be found for them,
the repercussions could be serious. What’s peculiar about the situation in Vietnam is that the jobs are there – in fact, there’s a labor shortage – and it’s this dearth of skilled workers which is in danger of slowing down the country’s economy. Companies such as Honda, for example, are having to spend six months training inexperienced new employees in order to simply introduce them to the workplace and modern industry. Part of the problem is that the education system isn’t currently keeping up with the demand of the labor market. But this comes as no surprise, because access to quality schooling in Vietnam is a longstanding area of concern – especially in the poorer and more remote regions. The fact that education from the age of 11 upwards has to be paid for presents additional difficulties for many people. Fortunately, however,
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help is at hand. Back in 2004, the Livelihood Advancement advantage over those without – AkzoNobel is investing in both Business School (LABS) was set up by the Plan International individual talents and the development of economically and development agency as part of a program to help integrate socially-empowered future generations.” street and working children back into their communities. Once The money is raised through various initiatives, events established, Plan continued to develop the program and an or- and personal donations. One of the main fund-raising activiganization called REACH was formed, which has continued the ties has been the annual sale of seasonal greetings cards to management of the LABS process. Now a growing local NGO, AkzoNobel’s businesses, who send them to customers and REACH offers short-term, skills-based training and has so far clients at Christmas. The proceeds are then donated to the trained more than 4,300 disadvantaged youths, achieving an Education Fund. Various projects in Vietnam have benefited impressive 87 percent employment rate once the courses have over the years, with one of the most significant contributions been completed. coming in 2008, when a record number of cards was sold and “The LABS model is a circular method of training which more than $52,000 was raised. The money was used to build encompasses employment services, counseling, life skills and a three-room pre-school in the small community of Tung Luat. work readiness training,” explains Chris Bane, Plan’s LABS/ Around 545 children are now enrolled at the school. REACH Project Manager in Vietnam. “Here in Vietnam, Plan “AkzoNobel’s support has been invaluable,” continues also works in the areas of education, childhood care and Bane. “The money the company has donated has helped to development, water and sanitation, child protection, juvenile build up the network of infrastructure and provide more access justice and reintegration, child-centered disaster risk manage- to schooling facilities in remote and poor areas.” As well as ment and we also support the national Child Helpline. Over the being used to build schools and construct new classrooms in years, it has become clear that there is a real need for what Vietnam, the money from the Education Fund has also helped we’re doing here.” to purchase new equipment and pay for the improvement of REACH centers have been established in several parts of existing facilities in various parts of the country. On a global the country, including Hanoi, Hue, Da Nang, Thanh Hoa and scale, around 65 projects in 15 countries have received fundHung Yen, with funding coming from sponsors all over the ing through the program, benefiting thousands of children and world. Bane adds that it costs $250 to put a student through their communities. the REACH program so that they can start making a decent Projects undertaken have focused on countries such as living. “We have a tremendous return on investment,” he says. Brazil, China, Bolivia, India, Indonesia, Ecuador and the Philip“For example, we can take a kid who has been begging on the pines. Some have involved constructing entire schools, while street, someone who’s living with a disability, or somebody others have concentrated on improving facilities such as dorwho’s living with HIV – which are some of the most marginal- mitories, toilet blocks, kitchens and recreation areas. It’s been ized sections of the population in Vietnam – put them through estimated that several thousand children aged from three to the program and help find them a job which transforms their 16 have directly benefited from quality pre-school and primary ability to earn.” He offers the example of a young girl, with a education provided by the Education Fund, while the number disabled mother, who went through the program and after of indirect beneficiaries is too high to count. “During the past three months found a job which tripled the household income 15 years, we’ve supported an incredible variety of projects,” to around $300 a month. “That’s not unusual,” he goes on “we says Pot. “Working together with Plan International has been have many stories like that.” a worthwhile experience for both sides, with the exchange of Plan International has been active in Vietnam since 1993. knowledge and ideas proving as valuable as the funds raised. Improving both the access to, and the availability of, quality By tapping into their potential, we can empower new generaeducation services is one of its main goals, with a particular tions to secure livelihoods and be all they can be, increasing focus on pre-schooling and the technical aspects of learning the social and economic inclusion of poorer, marginalized arprograms. “We’re starting to move away from investing mainly eas of society. We’re well aware that this is an important step in infrastructure improvement in order to concentrate on meth- toward breaking the cycle of poverty and creating a more balodology and improving the quality of teaching and learning,” anced global environment.” notes Le Thi Bich Hanh, Plan’s Early Childhood Care and AkzoNobel and Plan are currently researching the possibilDevelopment and Quality Basic Education Project Manager ity of setting up a special program designed to teach young in Vietnam. “For pre-schooling we still need to put a certain people painting and decorating skills and open up career and amount of focus on access to and availability of services, espe- business opportunities for them. One option is that the initiative cially in very remote, rural areas, where quite long distances of- will be funded by the Education Fund’s employee fund-raising ten need to be traveled. But for primary education, we are now activities for 2010 to 2011, with the proceeds being donated looking more at the quality of teaching and how to increase the to projects in Vietnam, Brazil and India. Based on the employinvolvement of parents and communities.” ment opportunities offered through programs such as REACH Some of the financial assistance Plan International has in Vietnam, Plan believes that young people can further benefit been receiving to build up Vietnam’s education infrastructure from the expertise offered by AkzoNobel in emerging markets has been coming from AkzoNobel. The company has so far around the world. donated more than $400,000 through its Education Fund, Having been in Vietnam for just under two years, Bane is which was set up in 1994 to support children in developing ideally placed to fully understand just how important initiatives countries. “Our philosophy is that only when children are well such as those paid for by the Education Fund can be. “We have educated will they be able to make a future contribution to their tangible proof that we’re transforming the lives of people who families and their communities,” explains Ans Pot, who is in go through our program. They’ve got the energy and the drive charge of the program. “A good education gives young people and we’re trying to help provide a safe environment for them a better chance of shaping their own futures, as well as those where they can be given proper opportunities to learn, assisted of their dependents. By ensuring that children have access to by teachers who are qualified to teach. We have a very strong full pre-school and primary education – giving them a crucial plan and the results speak for themselves.”
refining the route to prosperity WORDS David Lichtneker
There’s a new era dawning in the Middle East. Desperate to diversify, change its image and become a major tourist destination, the days of being just about the oil could soon be over.
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47 Previous spread: Dubai’s iconic Burj Al Arab hotel. Left: Bahrain’s new World Trade Center has its own wind turbines. Below: The new five star Yas Hotel in Dubai is part of the Yas Marina Circuit and even has a section of the nearby Formula 1 track running right through it.
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here was a time when the Middle East was only associated with one thing – oil. Black gold, as it’s sometimes called, still has a significant impact on the entire region, due to the wealth that it generates and the huge movement of labor that it involves. Lately, however, things have started to change, as the amount and pace of development in the United Arab Emirates (UAE) will testify. In many ways, the UAE is a barometer for the Middle East as a whole. Most of the countries in the region, notably Saudi Arabia and Qatar, have undertaken serious efforts to diversify their economies in recent years. But it’s the larger emirate states of Abu Dhabi and Dubai that have been the most prolific. They’ve spent billions of dollars on infrastructure, with huge investments being poured into real estate, tourism and leisure projects. One of Dubai’s most instantly recognizable landmarks is the iconic Burj Al Arab hotel, while the equally impressive Palm Jumeirah resort is one of three artificial islands being created to help Dubai solve its chronic beach shortage. The emirate is also home to the world’s tallest building, the 828 meter (2,717 feet) high Burj Khalifa, which opened in January 2010. Not to be outdone, Abu Dhabi – the UAE’s largest oil producer – has the seven star Emirates Palace Hotel and will soon boast elite holiday resorts Saadiyat Island and Yas Island (featuring the world’s first Ferrari theme park), both of which are currently under construction. The obvious irony in all this is that the Middle East – one of the world’s greatest energy consumers – is now one of the prime movers in the global shift towards “greener” living. Not only is the region concentrating on developing sustainable energy sources, but there has also been a significant change in attitude in the Gulf, typified by a new-found determination to minimize the impact of its countless new construction projects. By far the most publicized – and ambitious – venture is Abu Dhabi’s Masdar City. Costing a colossal $22 billion, Masdar will be the world’s first zero-carbon, zero-waste city. Home to around 50,000 people and 1,500 businesses, the car-free city will be powered mostly by solar energy (turning the desert’s greatest threat into its greatest asset), while residents will move around in travel pods running on magnetic tracks. Featuring sustainability as part of its fabric, it will also house the Masdar Institute of Science & Technology, the region’s first postgraduate level, research-driven scientific institution focused entirely on renewable energy. The long-term aim is to create a broad range of innovative industries and transform the UAE into a kind of Silicon Valley for sustainable technology, a beacon for the clean revolution. A Memorandum of Understanding has already been signed with the US Department of Energy to promote collaboration on clean and sustainable energy technologies.
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The impressive Palm Jumeirah resort, an artificial island created to help solve Dubai’s chronic beach shortage.
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“Masdar aims to become a source of energy, knowledge and plant in Saudi Arabia. “It’s certainly a focus area for us,” contininnovation in order to maintain Abu Dhabi’s position as a global ues Crowther. “We don’t only supply the market for high value energy leader,” explains Chairman of the initiative, Ahmed Ali infrastructure, which we’re relatively new to here. We are also Al Sayegh. “It is committed to the optimum use of natural and extremely active in the marine business and the oil and gas inhuman resources so that Abu Dhabi can develop into a global dustry, so we are very competitive. The fact that environmental center of excellence for renewable energy research, develop- issues are becoming more important also gives us an edge ment and innovation.” Adds Chief Executive Dr Sultan Ahmed because many of our products already meet the increasingly Al Jaber: “Our investment funds are already fueling future en- strict sustainability criteria.” ergy inventions and innovations and we are working with longThe building boom has also been beneficial to the comestablished industries to reduce carbon emissions. This is a pany’s Powder Coatings business, which supplies products long-term initiative. Our aspirations are broad and our ambi- for both the architectural and oil and gas sectors. “The Middle tions are global.” East is an important market which has different dynamics to Master planned by Foster + Partners, Lord Norman the rest of the world,” notes Gabriele Camorani, who is responFoster claims that Masdar “promises to set new benchmarks sible for AkzoNobel Powder Coatings in the Middle East. “It’s for the sustainable city of the future,” with 100 percent of the not easy to predict the economy, but there are excellent openergy it uses being generated through renewable resources. portunites here and we have very attractive technology for a Occupying a site measuring six square kilometers, work start- region where sustainability has become such a driving force.” ed in 2008, with the development scheduled to be completed To date, the company’s infrastructure track record in the in 2018. The city is expected to become an engine of economic Middle East includes Dubai’s Burj Al Arab hotel, the Dubai growth, adding two percent to Abu Dhabi’s gross domestic Metro network, the Qatar National Convention Center in Doha, product on completion. The first buildings are due to open later the Museum of Islamic Arts (also in Doha), and Abu Dhabi’s this year. stunning Yas Hotel and Ferrari World. Involvement with MasElsewhere, Qatar is building a $520 million waste treatment dar City has also been lined up for the project’s second conand recycling plant, while Doha is setting up a research cen- struction phase. With Abu Dhabi alone estimated to start up ter for recycled plastics, with a view to developing new poly- around $700 billion worth of new schemes in the next ten years, mer products from waste. Saudi Arabia, on the other hand, is the potential for business in the region is staggering. Howlaunching six “economic cities” due for completion by 2020. ever, despite its obvious wealth, the region was not immune These new industrialized zones are intended to diversify the to the impact of the recent economic crisis. “There has been country’s economy and are expected to increase the per cap- a slowdown, but nothing that compares with the rest of the ita income. Meanwhile, Bahrain’s new World Trade Center in world,” observes Crowther. “Government involvement in many Manama is the first skyscraper in the world to incorporate wind projects meant that money was made available, so they didn’t turbines. Further evidence, as if it were needed, that the times have the same issues that many private schemes experienced. are a-changing in the Middle East. “The projects we’re see- The projects coming through now are the ones that survived, ing throughout the Gulf region are incredible,” comments Nick they’re better quality and more well thought out. Crowther, Business Development Manager, Heavy Industry – But it’s the growing insistence on using sustainable materiMiddle East, for AkzoNobel’s Marine and Protective Coatings als – Abu Dhabi, for example, has created its own green buildbusiness. “It’s clear that the Middle East wants to be perceived ing rating system – which is playing into AkzoNobel’s hands. differently by the rest of the world. They want to be regarded in “We’re one step ahead of most people in terms of the environthe same breath as countries such as the US, the UK and the mentally-friendly products that we can offer,” notes Crowther. rest of Europe. I think there’s an assumption that because the “The strong eco profile of our portfolio has certainly helped us to Gulf is so reliant on oil, nobody really cares about the environ- win several contracts in the Middle East.” He also explains that ment, but that’s something they’re trying to change.” working with the Masdar project and learning about its specific AkzoNobel is a relative newcomer to the Middle East requirements will help with the company’s future product develmarket in terms of facilities located there, although under the opment. “They gave us a very detailed list of the raw materials International Paint brand, the company has had a presence that were allowed and those that weren’t. We’ve been able to in the region for more than 30 years. Crowther, on the other go back to our labs and are looking at the kind of formulations hand, has only been based in Dubai for less than two years. that specifiers are going to be demanding in the future.” Adds But the company’s presence is escalating and is likely to in- Camorani: “This is definitely the right place for us to be. We have crease beyond the handful of existing facilities. Both Interna- the right technology and will certainly be looking to increase tional Paint and AkzoNobel Powder Coatings have locations in our presence in the region. The boom isn’t quite what is was a Dubai, while International Paint also runs offices in Abu Dhabi, couple of years ago, but the rate of development still makes the Qatar, Kuwait and Bahrain, as well as a major manufacturing Middle East a very interesting business opportunity.”
Russia
holds firm WORDS Brian Guest
Russia is experiencing another revolution. Only this time, fashion and style are leading the revolt and really good hair rules.
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Fashion designer: Anna Miminoshvili Black & white photography: Anna Polzunova Color photography: Michail Smirnov
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ot so long ago Russian fashion and style was in the The Russian style revolution is now being exported by a new doldrums. Now, however, tastes are being trans- breed of young and dynamic entrepreneurs back to the craformed as fashion-hungry Russian women let down dles of fashion in London, Paris and New York. Glamorous their hair, cast aside simple dye jobs and rediscover Russian women – led at first by the rags-to-riches supermodel the meaning of “roskosh”, the old Russian word for luxury. One Natalia Vodiana and now the likes of Dasha Zhukova – are fast particular beneficiary has been the hairstyling business – quite becoming de rigueur household names among the fashion apt really for a country with a city called Perm. savvy in the West. They are carving out a name for themselves From Peter the Great and his Window to the West, to the as having their finger on the pulse when it comes to knowing Bolshevik Revolution and on through the Gorbachev years what the new generation of Russian women want most. and perestroika, Russia’s history has been marked by sweepQuite how strong the dynamic is between their success ing and often profound social upheaval and political change. and the buoyancy of the Russian domestic market is anyAnd where political change leads, fashion follows in its wake. one’s guess. According to Elena Musatova, a Moscow-based It was Peter the Great’s obsession with ending Russia’s sales manager working for the global Personal Care business, isolation that opened the door to Western values and dress part of AkzoNobel Surface Chemistry, the upshot is that the codes. To the disgust of the ruling boyar class, he made Rus- entire cosmetics and personal care industry in Russia is on an sian men shave off their beards and wear trousers for the first unprecedented roll compared with the modest growth being time, while women dispensed with traditional head scarves experienced in the mature markets of the West. For the busiand exposed their cleavages for the world to see. Throughout ness she’s in – providing the polymers that are the foundation of the 18th and 19th centuries, dress codes in the Russian court hairspray – it’s bonanza time. were on a par with the French and Prussian courts and it was “The personal care market in general is expected to grow vying with them in terms of opulent indulgence. dramatically over the next five years in Russia,” she explains. This came to a sudden halt with the 1917 October Revolu- “And that’s a conservative estimate.” For Musatova, what is clear tion and a period of relative austerity was ushered in that was is that while cutting edge brands and fads may grab the headto last until 1991. Since the demise of the Soviet Union, Rus- lines, it’s important to realize that fashion is like throwing a stone sia’s long love affair with fashion and design and its people’s into a pond. The most dynamic force is at the center and its deep-seated appreciation of luxury and the finer things in life effects ripple outwards in concentric circles. Hence, the streets – from Faberge’s eggs to exquisite gold and precious stone of Moscow and St Petersburg are not Russia, just as Paris is embroideries – has been rekindled. not France and the West End of London is not England. The Both internationally and domestically, the Russian fash- trickle-down effect takes time to reach the furthest outposts. ion industry is booming. Like a slumbering giant awakening, Continues Musatova: “What makes the Russian hairspray marit is beginning to find its feet again after a period of relative ket distinctive is that while the more mature markets in Western dormancy following the monoculture of the Soviet era. As the Europe and North America are shifting towards more flexible American fashion guru and film maker Tom Ford recently ob- styling products such as gels and pomades, Russian consumserved, Russia’s great appreciation of luxury is “something ers – and I am talking mostly about women – prefer something that’s in the hard drive of the Russian people in the same way to keep their hair in shape for longer. Hairspray is the perfect it is for Italians.” product and our polymers provide the perfect foundation.”
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In the Soviet period, the personal care industry fell under the started co-packing for Schwartzkopf & Henkel styling brand centralized government planning system. In other words, a TAFT, now the number one hairspray in Russia. limited choice of raw materials and formulations developed “All of this been a great boost for us, because all of TAFT’s centrally. Although a Russian aerosol styling industry was set hairspray products are based on AkzoNobel acrylate polymer up in the 1970s with large plants at JSC Arnest in the Stav- technology,” notes Musatova, who as the market geared up ropol region, Sibiar Novosibirsk in Siberia, Harmonia in Mos- was appointed in 2004 to coordinate a bigger and more cocow, Khiton in Kazan in central Russia and Novomoskovsk ordinated effort to develop the Russian market. “It’s not just Bytchim in the Tula region, only one brand, Prelest, was pro- that we’ve been successful in selling our hairspray resins such duced. “Women’s fashion was expected to fit the regime’s as AMPHOMER®, AMPHOMER® HC and RESYN® XP to both ideas about how a socialist woman should dress and be multinationals and local producers. The entire market set-up styled,” says Musatova. “Anything that did not fit the collective has become far more sophisticated for AkzoNobel, with more identity and relatively sober look was regarded as too Western technical service support and close collaboration with cusand therefore bourgeois. It was clear that any relaxation of the tomers so that we can understand and respond to their needs and raise our market recognition. And it’s working. Just resystem would open the floodgates for women’s style.” And that is precisely what happened. The subsequent col- cently, we were approached by L’Oréal to give them a presenlapse of the Soviet Union triggered a rush of cosmetic and per- tation about our knowledge of hairspray in Russia. It all bodes sonal care products into Russia, which before long accounted well for the future in Russia.” Back on the streets and in the salons, Russia’s style for more than 90 percent of sales. This tide was only stemmed when the economic crisis of the late 1990s began to bite and revolution continues apace. The shopping malls in downtown things started to look up for local producers. There were new Moscow and other cities are being transformed as expensive brands on the shelves and a real opportunity to use different fashion stores spring up everywhere and Russia reclaims its ingredients. Since then, multinational companies have sought rightful position in the world’s fashion pecking order. Leading to gain a larger slice of the market by entering into partner- from the front are the nation’s women. And in a country which ships with Russian businesses in order to establish a founda- boasts 10 million more women than men, and where the life tion for the business and to have a local partner to help them expectancy for men is 59, compared with 72 for women, they navigate Russian rules and regulations. In 2000, JSC Arnest aren’t content to look anything but good.
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hat does going green mean to you? For most of us, it might be as simple as recycling our newspapers or using the car less when making shorter journeys. But in business, there’s a whole new perspective. Realization has dawned that it’s not enough to just act green; we have to physically be green, too. And nowhere is the drive for ecologically-friendly buildings stronger than in South East Asia. However, it’s one thing to develop sustainable buildings – it’s quite another to continue the culture within. According to Darren Buttle, managing director of office furniture design and technology company ABF Europe, many businesses could have an even more positive environmental profile by rethinking the way they meet and train people. “So many companies have big boardrooms with traditional U-shaped or rectangular table layouts,” says Buttle, who trades globally with a particular focus on the Far East. “But this is incredibly limiting and means the rooms are often empty for long periods, while still using light and heat. In the meantime, employees are driving out of town to attend training courses, resulting in carbon emissions and cost to the business.” ABF Europe developed and patented Kite – a folding mobile table – to address the issue, and slowly but surely is changing attitudes towards meeting and training. The innovative design means tables can be operated within moments by a single person and nested neatly against the wall when not in use, while patented castors and leveling mechanisms offer the highest levels of stability when they are. “If you’ve got a room that can be set up for a high level board meeting and then cleared within minutes for practical health and safety training, you’ve got something truly multi-functional and sustainable,” insists Buttle. “Energy consumption isn’t wasted on an empty room. Your staff are only absent for the duration of the session. You’re saving traveling costs, venue costs, fuel emissions – a change like this can have a huge impact.” Buttle is so passionate about his beliefs that his work goes far beyond merely selling his tables to customers. In his words,
there’s more to Kite than “just badging.” He goes on: “We want to work with people and teach them how they can make their meeting rooms green. We could give them the equipment and walk away, but that’s defeating the object. We want to educate, show how it can be used to best effect to instill a green ethos into every part of their business. It’s not just about knowing the carbon footprint of your product, it’s about realizing that a boardroom standing empty for 90 percent of the week is a waste of money and resources, but that you can redress the balance.” Before looking at the inside, however, there has to be an outside. And when it comes to addressing environmental building challenges, Singapore is raising the bar. The country’s Green Building Council is on a mission to ensure that 80 percent of the state’s buildings attain a Green Label standard by 2030. Each property would be rated on its environmental impact and performance, with scores awarded for everything from the kind of lighting used to the type of exterior coating. Of course, it’s easier for new-builds to be designed to meet the criteria and last year the island’s Building and Construction Authority imposed a mandate for minimal environmental sustainability. But owners of existing stock are being encouraged to make alterations too – for example, by using modified building materials or reducing cooling requirements. In this way, the BCA hopes to generate around $1.5 billion in energy cost savings each year and, as an incentive, a green mark scheme worth nearly $93 million has been introduced. The Singapore Green Building Council even aims to share its knowledge with other countries in South East Asia. To underline the giant strides being made, last autumn saw the launch of the region’s very first Zero Energy Building, a 4,500 square meter construction which will produce as much electricity as it uses – a saving of just under $60,000. Features include floor diffusers that supply cool air which, once warm, rises to ceiling vents to be removed. Air conditioning is adjustable to individual needs around each desk, while artificial lighting is controlled by dimmers and motion sensors. A roof garden and
leading thegreen revolution WORDS Rebecca Parsley PHOTOGRAPHY Ian Townsley
The shift towards a greener society continues to gather momentum, particularly in Singapore, which is setting the pace when it comes to sustainable building.
wall plants form a greenery system which cuts heat transmis- There’s a trend towards products that are both functional and sion into the building, while high performance glazing reduces work environmentally in conjunction with a building. A prime glare and heat while tapping the sun’s energy at the same time. example is Dulux Weathershield Keep Cool, which features “Green building is one area where Singapore has been revolutionary reflective technology that reduces exterior wall ahead of the region and, one could argue, of the rest of Asia,” temperatures by up to 5° Celsius. This in turn leads to cooler explains Jeremy Rowe, Managing Director of AkzoNobel’s Dec- indoor temperatures, which means consumers can reduce orative Paints, South East Asia & Pacific business. “It sees what the use of air conditioning – resulting in lower energy conother people are doing around the world and crafts its own sumption and costs, typically of up to 15 percent for an averstandards that are invariably higher. There’s the green agenda age bungalow. and also an industrial agenda in this, because Singapore is a “Our next focus is the general quality of indoor air,” continbrand name, it stands for good government and high quality. ues Rowe. “It’s a big issue in the humid and damp atmosphere By leading the way, it attracts – and then supports – technical of South East Asia, especially with regards to the airborne development and expertise.” presence of fungus and bacteria. This is a little different to the The kudos and rewards for having a green building mean indoor air quality issues in cooler climates, so here it’s essential the Green Label is becoming increasingly sought after. Using that we can offer a range of highly effective anti-fungal and products with a similar certification means more points are anti-bacterial products, and then hopefully move further into awarded – this in turn puts pressure on manufacturers to de- air purification. Products that clean themselves is another area velop Green Label solutions. “If using a particular product will we’re moving into. If you reduce the need to clean the outside gain more points and help you achieve the green mark more of buildings as frequently by providing exterior coatings that do quickly, then of course you’ll prefer it,” notes Rowe. “This puts it themselves, you’re reducing energy costs, water consumpthe onus on us when it comes to product development. There tion and so on.” is a commercial objective, of course, but being environmentally At the heart of it all is the desire to meet the needs of conresponsible is equally important. We’re committed to making sumers and make their lives better. Where a product itself can’t our products as sustainable as possible.” be designated as sustainable – which is the case with some Almost the entire Decorative Paints range has now been kinds of coating – then AkzoNobel will seek to replace it over converted to low-VOC (Volatile Organic Compounds) – but this time through technological development. In the meantime, the is just the first step, says Rowe. “We’ve done a lot of technical company will focus on what it can do in areas such as recycling development work to enable this and we’re the first people to and responsible disposal methods. do it across a whole range,” he explains. “Some companies “We aim to make our products as eco-efficient as poslaunched low-VOC as premium products, but we decided to sible and be environmentally responsible in other areas too,” go the whole way. We rolled it out to South East Asia before concludes Rowe. “We’re also involved in community initiatives the Green Label standard began. Vietnam is a good example. such as tree-planting and city-wide cleaning campaigns, such They’ve only just really begun to think about green issues, but as we’ve done in Vietnam. It’s all about demonstrating in acwe’re already there for them. We’re on the Green Building tion how AkzoNobel’s Dulux brand is a responsible partner to Council and discuss what environmental benefits they want work with.” from our products.”
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India hits the hi-tech fast lane WORDS Jim Wake
The emergence of India as a technology superpower has taken many people by surprise. So why didn’t we all see it coming?
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here was a time – and it was not all that long ago – when tech in India was mostly about call centers and outsourced computer programming. Not any more. India is rapidly emerging as a global technology powerhouse. According to Vivek Wadhwa, an Indian-American scholar and former entrepreneur: “India’s outsourcing industry has moved from back office, to business process, to core R&D work once thought immune to outsourcing.” He takes these observations one step further on TechCrunch, an online technology blog: “While the West was sleeping, Indian IT morphed into a giant R&D machine. This is happening as multinationals set up their own R&D operations in India and partner with local shops. Both the Palm Pre smart phone and the Amazon Kindle have components designed in India. Intel designed its six-core Xeon processor in India.” IBM, he notes, employs more than 100,000 workers in India, while hi-tech high flyers such as Cisco, Adobe, Cadence, Oracle and Microsoft have all set up big R&D operations on the sub-continent. “There are several factors that have contributed to India becoming an IT hub,” notes Saugata Banerjee, Head of IT for AkzoNobel India Limited. “Number one, there’s a huge pool of IT talent available in the country. Every year, we produce a few hundred thousand IT professionals. India also has the advantage of language – most of the people in India can speak English well and understand English well. I think the language also helps us to reach out to the outside world. The third advantage we have is the cost. Indian resources are still available much cheaper than anywhere else in the world. Fourthly, we also find that a huge number of Indians work abroad, and many are willing to come back to India and work here. Plus, here in India, we have strict rules on intellectual property rights, which is reassuring to Western investors.”
But India’s tech emergence is not restricted to computers and IT. While IT has been driving economic growth – and chip design, software development and mobile technology may be the fields where Indian firms are making the greatest impact – they are also becoming increasingly active in biotech, pharmaceuticals, medical equipment and advanced engineering. Firms such as Pfizer, Dow, Siemens and GE are heavily invested in research facilities in India, while home-grown research institutes such as the Tata Institute of Fundamental Research, the Raman Research Institute, the National Chemical Laboratory in Pune and the Indian Association for the Cultivation of Science in Kolkata, have well-deserved reputations for world class science. Indeed, India’s pharma sector has recently seen a spate of takeovers and alliances featuring prominent global players: Abbot Laboratories bought generic drugmaker Piramal Healthcare Solutions for $3.7 billion; Japanese drugmaker Daiichi Sankyo bought a major stake in Ranbaxy Laboratories, India’s largest pharmaceutical producer; Sanofi-Aventis assumed control of Shantha Biotechnics; and GlaxoSmithKline, Pfizer and Bristol-Myers Squibb all entered into partnerships with major Indian firms. And it’s the government, says Asesh Sarkar, AkzoNobel’s Head of Research for the company’s Decorative Paints business in India, which is playing a key role in promoting technology. “R&D is considered a core strength. Some home-grown firms have grown tremendously just on the back of support for innovation provided by the government.” India’s democratic tradition is also a factor in allowing for the free exchange of ideas and a spirit of innovation, but Sarkar notes that it also means that sometimes good ideas and ambitious development initiatives can be blocked because of public opposition.
What the Indian government is doing that is certain to make a the number of middle class households in India will grow from difference to both tech start-ups and potential investors is to 100 million in 2005 to 160 million by 2015, and the top socioinvest in major upgrades of the much-maligned Indian infra- economic tier will increase from 3.6 million households to structure. “Poor infrastructure has been an issue in the past,” 9 million households in 2015. acknowledges Banerjee. “But for the last government and the To take advantage of both the expertise and the growth government now in power, the main focus has been on build- potential, AkzoNobel has established two research centers in ing infrastructure. Huge budgets have been allocated in the India, one for its Decorative Paints business in Mumbai and last few years; tax incentives have been provided for investing one for its Car Refinishes business in Bangalore. “Our Deco in infrastructure and so on; so the government is clearly doing facility in Mumbai is very well-connected with AkzoNobel’s the right things.” global research activities in Deco,” explains Sarkar. “We’re With the Indian economy growing at close to ten percent geared to producing superior performance products and soa year, multinational technology companies are not only look- lutions. One example is our Keep Cool project with an exterior ing for low-cost researchers. They also want to establish a paint for our Weather-shield line called SunReflect. We worked strong base to expand into a market which is rapidly chang- together with a global team, looking at how the pigment reing character as millions of Indians escape poverty. A report flectance behavior works in such a way that it would reflect by McKinsey & Co’s McKinsey Global Institute projected that IR light to keep the buildings cooler. In a country like India,
that’s obviously quite important. And with SunReflect, you can reduce exterior surface temperatures by five degrees Celsius, which means energy savings on air conditioning.” Scientists at the Mumbai center have also been working on manufacturing processes in collaboration with one of AkzoNobel’s Expert Capability Groups. Sarkar says that the facility has achieved some important breakthroughs that will lead to more energyefficient and more sustainable ways of producing high performance decorative paints. The Car Refinishes Research Center in Bangalore focuses on everything to do with color. For the company’s Car Refinishes business, color is absolutely key – the whole idea is to return a damaged vehicle to the owner so that it looks like new. Bangalore’s scientists are involved in understanding color and in developing the formulas so that repair specialists anywhere in the world using any AkzoNobel Car Refinishes brand can
perfectly match any car color they may come across. “The Bangalore center has become quite a large establishment in the last few years,” adds Sarkar. “We benefit from the cost advantages of India, combined with outstanding color science talent. They are able to provide solutions in a very cost effective manner on all these aspects of color using state-of-theart color measurement systems and application technologies such as robotic spray.” “It’s not just about cost efficiency,” adds Bangalore Center Director Sudhhakar Dantiki. “The biggest advantage we have here in India is that we have such a huge – and also varied – talent pool. I can find people with PhDs on a par with the best universities anywhere in the world – but I can also find skilled people at all the other levels of expertise that we are looking for. I think that’s something that many people don’t recognize about India.”
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One bottleneck for more rapid expansion of the Indian tech their backs or they will find the work has moved to India? sector is a shortage of capital. India, writes Vivek Wadhwa, still Probably not, says Banerjee, in part because India is currently lags the US in private sector investments in promising start- challenged just to train enough skilled engineers to meet its ups and technologies. In fact, American venture capital firms own needs. “For now, the IT industry is still centered mostly are establishing their own offices in India to take advantage in the US,” he points out. “We do have that huge talent pool, of opportunities they see, and to seed projects that might not and the cost advantage, but as India develops and grows, otherwise get off the ground. Venture capital, continues Wad- the cost differential will come down. It will always be there to hwa, generally flows to those places where there is a critical some extent, but not to the extent that it is today.” mass of innovation, so the shortage of funds may mean that It is not just innovation that is flowing from the West. that critical mass is not yet there. But during a visit to India last One of the most interesting trends – and possibly one of the year, Wadhwa saw signs of change – promising products as most important as well – is the flow of Western-trained Indian well as indications that the more established Indian tech firms scientists back to India. Many Indians with advanced dewere looking to fund home-grown projects. Narayan Murthy, a grees are deciding to return to India because they are seeing co-founder of Indian tech giant Infosys, recently set up a ven- more opportunities for career advancement with the boom ture capital firm for the express purpose of supporting Indian in India’s tech sectors. They are also moving back for less start-ups. “Given that there are now hundreds of thousands of tangible reasons – quality of life issues, culture and family. R&D workers in India who are gaining valuable experience…, That talent is certain to further boost the technology sector it is simply a matter of time before they begin to hatch their in India. entrepreneurial plans,” wrote Wadhwa. For the moment, there is much activity and much promise, “Today,” Sarkar goes on, “what is happening is that innova- but it’s probably too soon to speak of India as a technology tion flows from the West. But in the future, the reverse may be superpower. But could that change in 20 years? “I hope so,” true.” Does that mean that Western engineers better watch says Banerjee. “I believe it will happen.”
Vital support for life We understand how fragile our planet has become. Which is why we recently underlined our commitment to the sustainable use of natural resources by endorsing the CEO Water Mandate. Launched in 2007 by the United Nations Global Compact, the unique initiative is designed to help companies develop and introduce sustainable fresh water policies and practices. As a global company, we are fully aware that we have a responsibility to make water resource management a priority. By signing the mandate, we have reinforced our drive to make the conservation of scarce resources and operational efficiency an integral part of our strategy, culture and daily operations. Under the mandate’s strategic framework, we will be concentrating on areas such as direct operations, supply chain and watershed management, collective action, public policy, community engagement and transparency. We will also work together with private and public sector partners to take a leading role in fresh water conservation in the areas where we operate.
In September 2010, AkzoNobel was ranked top of the chemicals supersector on the Dow Jones Sustainability World Indexes.
We’re the largest global paints and coatings company and a major producer of specialty chemicals. We supply industries worldwide with quality ingredients for life’s essentials. We think about the future, but act in the present. We’re passionate about developing sustainable answers for our customers. Based in Amsterdam, the Netherlands, we are a Fortune 500 company and are consistently ranked as one of the leaders on the Dow Jones Sustainability Index. We have operations in more than 80 countries, and employ more than 50,000 people, who are committed to excellence and delivering Tomorrow’s Answers Today™. © 2010 Akzo Nobel N.V. All rights reserved. “Tomorrow’s Answers Today” is a trademark of Akzo Nobel N.V.
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THE AKZONOBEL MAGAZINE ISSUE 5 SEPTEMBER 10
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THE AKZONOBEL MAGAZINE ISSUE 5