The G20 members, first and foremost China, the USA, and the EU, have an important role to play in achieving global sustainability goals. What contribution are they currently making and what challenges are associated with the transformation to a climate-neutral society? Sustainability expert Changhua Wu talks about refined ESG strategies, approaches to address social inequality and the power of connectivity.
Changhua Wu
Expert for Climate Protection Transformation Processes
After the world economy recovered from the effects of the Corona pandemic in 2021, global CO2 emissions rose to a new record high. What governmental levers of action do you observe to reverse this trend?
There are a few dimensions to look at. Leading economies use the climate change agenda for competition decoupling. That is unfortunate, as we need to work with each other to achieve the committed climate targets by 2030 and reduce emissions by 43 percent over the 2019 levels. Without a closer collaboration between the largest economies, we will not be able to deliver.
Even though some economies are competing against each other, they share many similarities in how to advance the agendas. One example, the U.S., with the Inflation Reduction Act, that is quite similar to the industrial policy from China. On the other hand, China has been looking very closely at the EU practice. So, it's an interesting dynamic amongst the major economies, especially.
As a third perspective, I would like to mention China’s journey to address climate change during the last three decades. In China, we started from fossil fuels and then moved towards renewable energies in a rather isolated way of thinking, solely focussing on the clean energy transition. Nowadays, China has managed to step into a more systematic way of looking at the sustainability landscape. Of course, we need to address the decarbonisation of the energy systems, but we also need to look at resources, material usage and the industries. I think, that's where the government of China gets it right, they are using those levers of action and deliver the outcomes.
What role does circular economy play in the Chinese automotive and supplier industry?
Due to the rapid economic growth, China has felt the constraints that come with the lack of resources. Therefore, moving towards a circular economy is an important part of the national transition. The government has even set recycling targets in tonnages, not percentages, to be reached by 2025.
For the Chinese automotive supplier industry, the circular economy is not a new concept. Now, as the first generation of battery electric vehicles (BEV) is retiring, their focus is on batteries. So, while cities are moving towards 100 percent BEV, there is already a market and an organic development of demand and supply. Of course, companies continue to use mined materials. However, mainstream players have already recognized that the circular economy is going to play a critical role, particularly around the battery materials. In the future, maybe not yet by the end of this decade, 95 percent of the battery materials could be met by circularity and recycled materials. And this is going to be shifting the dynamics of the resources dramatically.
How can partnerships within the automotive supply chain be used to advance global sustainability goals for a mutual benefit?
If there is a common ground around ESG topics, cooperation becomes a win-win scenario. All those leading companies within the green mobility landscape should join forces to accelerate the progress towards zero carbon and challenge those market players that are still relying on fossil fuels. Of course, there are obstacles, especially for Chinese companies in the supply chain. On the one hand, they are leading players, for instance in metals processing and in manufacturing battery cells. That's the strength, Chinese industries have already built up. On the other hand, from what I observe, until recently, there was no adequate attention paid to sustainability, both from an environmental and a social perspective. So, for Mercedes-Benz actually, I'm delighted to see the company has its principles and ambitious goals. It shows a systematic approach to electromobility and is proactively working with the companies along the supply chain to overcome those issues, promoting innovative ways and alternatives. So, collaboration sounds wonderful, but it's complex. However, I see the trends unfolding there.
To address the social consequences of the transformation and to leave no one behind, the EU established the “Just Transition Mechanism”. Do you see similar efforts in China and the USA?
Politically, that's pretty much a shared vision. However, considering the federal constitution of the U.S. or the EU with its 27 member states, the implementation is complex. In my observation, comparatively speaking, the Chinese political system is facing less barriers in terms of the nationalised endeavour to address a particular challenge in the transition contest.
How do you evaluate the current efforts to make sure, no one is left behind?
It's hard to draw a clear conclusion at this moment. My general impression is that social challenges are increasing, with more and more people expressing their dissatisfaction. Leaving no one behind sounds like a simple thing. Actually, it's not. It's pretty much connected with a lot of things. It's not only about financial compensation and upskilling workers. Basically, we have to deal with some typical mechanisms of industrialisation. On a national level, the industrialisation is driven by cheap labour and low environmental constraints. The emerging economy becomes, globally speaking, the workshop for states that would have to buy labour more expensively in their own country. But at a certain point in the economic growth process, the industrialisation part gets more sophisticated in terms of technology, value chains, etc. Low-end manufacturing moves away to other parts of the world. Considering the bigger picture of the transition, it leaves a lot of people behind. It’s an ongoing transition, and policymakers have so far failed to take enough actions to make sure no one is left behind.
What concrete action do you expect from a global company like Mercedes-Benz in terms of a just transition?
I see that the company is continuously sharpening its activities of sustainability by lifting its goals and targets. It is putting a lot of efforts in the transition from combustion engines to 100 percent electric vehicles, especially regarding their own workforce and in alignment with German policymakers to leave no one behind. In this respect, the company is meeting my expectations. By saying this, I also see some challenges knocking at the door. When it comes down to the value chain, when you go beyond Germany and the EU markets, it’s important to keep up the fair transition agenda and try to collaborate on this with local decision makers and partners along the supply chain. That's where I would like to see even more clarity of the company down the road.
What gives you hope that the global community will overcome the hurdles on the way into a more sustainable future?
First, it's an ongoing effort. All countries need to thrive for a more just and inclusive society. We need people's awareness and behavioural changes as well to overcome these barriers. So, to really get each individual on board, we should use tools that have the power to make everyone act in sync together. The responsible use of social media is a great possibility to be connected and to raise awareness. And there are some good examples, in which companies use this power to raise awareness for sustainability issues, and to organise change. For instance, there are some effective initiatives around plastic collection. It may sound like a tiny thing, but it's a step forward. And once, it reaches enough people, it can become a fashion. I believe that many of these actions aimed at making the world more just and inclusive will end up creating a new reality.
Changhua Wu
is a policy advisor, analyst and climate change transformation strategist specialising in China. She currently holds the position of China Director at TIR Consulting, whose president is the economist Jeremy Rifkin, and is also Chief Strategist at CN Innovation and CEO of The Future Innovation Center Beijing. Changhua Wu is member of the Advisory Board for Integrity and Sustainability at Mercedes-Benz Group. She has master’s degrees in journalism, environmental policy and economics from universities in China and the United States.