The teeth of the dragon

What happens when the Chinese bids on large contracts outside Mainland China? If one is to take the lesson from what is happening in Africa and South East Asia it would seem that there is reason to be somewhat comprehensive.

Recently there have been moves by China to bid on European railroad contracts. This type of infrastructure work requires large amounts of labour in order to lay the many kilometres of track, which is required.

If one looks at the experiences that we have had with China in the developing world in tendering for major contracts they have often included the use of Chinese labour to execute projects. In some instances have entire shantytowns sprung up overnight, and thousands of Chinese labourers are shipped in order to make the often very tight budgets. According to Chris Devonshire-Ellis is the Principal of Dezan Shira & Associates “The exclusive or almost exclusive use of labour from mainland China almost always runs contrary to local laws and national regulations, work and safety permits, in addition to breaking the host nation’s individual income tax laws, but lax policing, state inefficiency, simple corruption or authoritarian states allow many to turn a blind eye.”

In some instances the use of cheap labour have produces some very bizarre situations were local governments have actively participated in the cover-up of breaches of both national law and the principles of fair trade across boarders. One example comes form Sourth East Asia:

“In order to keep the local population in the dark, many such projects, such as the building of a port on Sri Lanka’s east coast, involve the placing of high security road blocks to prevent access and even Chinese machine gun manned security guards to keep curious locals away. If no-one can see the project, no one can get politically upset about the lack of involvement of local labour, even if that labour is generally considered lazy and inadequate. It is, in many cases, a pragmatic, yet somewhat grey solution to getting much needed projects built. Never mind that it is usually illegal. Authoritarian governments can always find a way.”

In another instance from Africa Chinese management gunned down several works as they protested over working conditions at a mine. The incident as it was called occurred at the Collum Mine near the Zambian capital of Lusuaka. The mine is privately Chinese owned by a family with investment interests in coal mining originally in Jiangxi Province. The Collum Mine managers are all Chinese nationals with little or no understanding of either English or the local language, Tonga.

According to the South China Morning Post, African workers were agitated over labor conditions and were protesting outside the managerial office. The Chinese management apparently panicked and shot workers with several shotguns. No workers were killed, but several were seriously wounded.

Could one imagine something like these incidents in Poland or France? If we only pursue short-term profits and go for the lowest bids we could very well see situations like these emerge in mainland Europe.

A.P. Moller-Maersk and strategic philantrophy

A. P. Moller-Maersk Group

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The Danish oil, shipping, airline and retail giant A.P. Moller-Maersk (APM) donates free transportation to victims of the earthquake in Japan. It is not the first time that APM steps up and helps out using its core capabilities in line with strategic CSR.

Senior Consultant in APMs CSR department Jens Munch Lund-Nielsen was quoted by Reuters to say that the offer of free transport is sent out via diplomatic channels from the Danish Embassy in Japan. The beneficiaries are governments and organizations.

“We have allocated one million U.S. dollars for relief ship transport. So far we have received response from the UN and an Eastern European country that will send emergency relief. In this situation we can do what we do best” says Jens Munch Lund-Nielsen.

The donation follows A.P. Moller-Maersk same line as the flood disaster in Pakistan last year and the earthquake in Haiti, where it also sailed with free emergency assistance. At the same time the Danish Red Cross can look forward to a nice cash donation from APM and the many thousands of employees in more than 130 countries.

“We have started a collection among the staff through the Danish Red Cross. It runs until 15 April. The sum of this collection among the staff is being doubled up by the company” says Jens Munch Lund-Nielsen.

APM have for several years have been lacking on the CSR front but one of the things that the company always have done well it is to use it resources and knowledge as strategic philanthropy.

With the company ideally situated as the biggest freight forwarder in the world it can use it ships and terminals to help at a fraction of the expense that other companies would have to pay for a similar service. While APM have plenty of other issues that it have to deal with around the world especially related to Human and Labour rights this is one instance were the company really does things well.

Wal-Mart is “Slimming” its supply chain

Street sign for Wal*Mart Drive, south of Gordo...

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Wal-mart has announced a plan to introduce more health food into it shops. If this effort has the same effect as we saw with when they greened their supply chain there is good reason to think that they will drive a global trend.

The plan is to lower its products content of unhealthy salts, fats and sugars, and to drop prices on fruits and vegetables. In addition will the Wal-mart work to reduce prices on products made from whole grain.

While the costs associated with a lower price on fruits and vegetables will come out of the Wal-marts own revenue and will not be transformed into supplier pressure or so the company claims at least. “This is not about asking the farmers to accept less for their crops,” says Leslie Dach, Wal-Mart’s executive vice president for corporate affairs.

The changes in purchasing and supplier relations will be introduced over a period of five years, to give the company time to overcome technical hurdles and to give consumers time to adjust to foods’ new taste, Mr. Dach said. “It doesn’t do you any good to have healthy food if people don’t eat it.”

Changing Wal-mart purchasing strategy is not something that will be an easy fix but with a five year implementation span it just might happen. The plan which has the support of Michelle Obama is composed of five elements:

  1. Reformulating thousands of everyday packaged food items by 2015 by reducing sodium 25 percent and added sugars 10 percent, and by removing all remaining industrially produced trans fats. The company will work with suppliers to improve the nutritional quality of national food brands and its Great Value private brand in key product categories to complete the reformulations;
  2. Making healthier choices more affordable, saving customers approximately $1 billion per year on fresh fruits and vegetables through a variety of sourcing, pricing, and transportation and logistics initiatives that will drive unnecessary costs out of the supply chain. Walmart will also dramatically reduce or eliminate the price premium on key “better-for-you” items, such as reduced sodium, sugar or fat products;
  3. Developing strong criteria for a simple front-of-package seal that will help consumers instantly identify truly healthier food options such as whole grain cereal, whole wheat pasta or unsweetened canned fruit;
  4. Providing solutions to address food deserts by building stores in underserved communities that are in need of fresh and affordable groceries; and
  5. Increasing charitable support for nutrition programs that help educate consumers about healthier food solutions and choices.

One can always argue if Wal-mart is doing enough or if it is just taking one step back from the ten steps it took forward when it sold unhealthy food in the first place. It is well known that obesity is one top health hazards in the US so even the most rudimentary steps towards more health food is welcomed.

The question that remains is what the impact could be on the rest of the world. Wal-Mart is by far the biggest “consumer” on the planet so will they be able to drag the rest of the world supermarkets with them to the altar?

If the lessons from the efforts to green the supply chain are to be used as a guide the answer would be a big YES? Today I have a significant bigger range of different ecological, fair-trade and low carbon emission product to choose from in my local supermarket than I had before and at a price which I can afford. Of cause I can’t say that this is all due to the actions taken by the company. But their actions put “green” on the world map told producers around the world that there was a market if they wanted to produce in a more sustainable way. Supermarket chains in the UK, Germany and Scandinavia that I know of has at least to my knowledge done a huge effort to offer a variety of sustainable products in the product line.  

Before you go off and get real upset about my promotion of Wal-Mart as the big savior of the world from obesity. I would like to remind you that the companies do fail on other key issues related to good governance and labour rights as documented by the NGO Wal-Mart watch. There is no doubt that the company has a long way to go in ways of improving its relations with its own employees and the communities that the stores are part of.