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Huawei: Technology for Sustainable Development

The original manuscript for this article is from the White Paper on ESG Strategies and Implementation for Chinese Companies (2022), co-produced by HBR-China and Bain & Company

Chinese enterprises that want to build quality brands with a competitive edge in the global market can look to Huawei as an example of how to create social value in business activities through ESG or sustainability efforts, and seize new business opportunities while creating social value. This will form a positive circle that allows enterprises in this globalized world to continue to grow and prosper.Tao Jingwen
Board Member and Chairman of the CSD Committee

The costs of the modern technologies that we all enjoy are often ignored. A cloud service provider operating 34 service areas around the world for one year, for example, consumes three times as much electricity as the entire city of Chicago uses in three years. As we enter a truly digital age where data is growing exponentially, energy consumption will only continue to increase.

This is the conundrum that Tao Jingwen, Board Member and Chairman of the Corporate Sustainable Development Committee of Huawei, presented to us in our interview. He explained that this is why Huawei has focused so heavily on transforming its growth models in recent years: "Since 2016, many industries have been paying more attention to digital transformation," said Tao. "We've seen the digital economy become a bigger and bigger consumer of energy as the amount of data we need to process increases. It's the digital economy itself that we must transform."

Using bits to manage watts

As an unlisted company, Huawei has adopted what they call their sustainability strategies, instead of the Environmental, Social, and Governance (ESG) framework used by other corporations. Huawei asserts that this allows them to better align with the UN's Sustainable Development Goals (SDGs) and international standards as they publicly disclose the social value they create and drive the transformation of the company's growth models. Huawei has released their annual Sustainability Report since 2008. In their most recent 2021 Sustainability Report, the sustainability strategies they have shown well align with ESG. Tao said, "We are an unlisted company and do not work around ESG like listed companies do. However, we still want to keep pushing our understanding of sustainable development. Where we are at now is actually pretty consistent with ESG. ESG looks at what a company needs to do from a management perspective, so it is definitely one part of our sustainability strategies."

According to Tao, Huawei's sustainable development has undergone three stages.

In the first stage, during Huawei's early years, the company mainly operated in the Chinese market and its social contribution programs focused on education and disaster relief. An example of these programs was the scholarships offered to nearly 100 universities across China intended to help nurture tech talent. These social contribution programs were all part of Huawei's efforts to fulfill their social responsibilities.

The second stage lasted from 2001 to 2013, when Huawei began expanding into the international market. At that point, Huawei adhered to four different yet intertwined sustainability strategies: The first was to bridge the digital divide, by making connections more affordable and connecting regions previously unconnected. The second strategy was to support stable, secure network operations anytime, anywhere. This has long been part of Huawei's commitment to its customers. The third strategy focused on environmental protection, by creating and implementing power saving and emissions reduction policies. The final strategy was to pursue shared development. By cultivating a healthy business ecosystem, Huawei said they would be able to better integrate into and serve local communities.

The third, and current, stage has seen the company refine these four strategies to focus on: digital inclusion, security and trustworthiness, environmental protection, and a healthy and harmonious ecosystem. As the company's business diversified beyond the telecom sector, they decided to broaden their goal of "bridging the digital divide" to digital inclusion. Based on this strategy, Huawei has launched its TECH4ALL initiative to help more people learn the digital skills and access the digital services they need. Huawei has also expanded its energy saving and emissions reduction program to cover its entire supply chain, including its users and partners up and down the supply chain, to create a healthier business ecosystem.

In addition, Huawei has espoused the importance of "using bits to manage watts". This means integrating digital and power electronics technologies to keep improving the energy efficiency of digital products. An example of how this is implemented can be seen in Huawei's intelligent photovoltaic inverters which use digital technology to help photovoltaic power plants generate electricity more efficiently.

Through these efforts, Huawei has built up its own ecosystem that supports its sustainable development.

TECH4ALL: digital inclusion

TECH4ALL is one of Huawei's key sustainability initiatives that has attracted wide attention. On November 30, 2021, Houlin Zhao, Secretary-General of the UN's International Telecommunication Union (ITU), said that an estimated 37% of the world's population – or 2.9 billion people – have still never used the Internet.

According to Tao, Huawei has been concerned about this digital divide for a long time: "We knew that about one third of the world's population, especially people in many parts of Asia, Africa, and Latin America, had no access to Internet technologies. We hope that more young people will have equal access to education."

That's where the TECH4ALL digital inclusion initiative come into play. Ken Hu, one of Huawei's three rotating chairs, personally advocated and launched this initiative. It focuses on four areas: driving equity and quality in education, conserving nature with technology, enabling inclusive health and well-being, and driving inclusive digital development. All of this will be made possible by enabling more technologies, more skills, and more applications.

More technologies mean more people would have access to technology, which in turn increases access to education, and the other benefits of technology. Built on this, Huawei provides "more skills" to industries and individuals to empower them to secure a place in society. Finally, more applications mean there are more scenario-based applications for different industries. This will help more industries go digital and contribute more to society.

As part of its goal to become an active, productive member in local communities, Huawei has also worked closely with many international organizations, NGOs, academic institutions, universities, and ecosystem partners. The company has established a dedicated team in each country where it operates to support this goal. Huawei's evolution of fulfilling basic social responsibilities to this larger sustainability framework has undoubtedly been effective, helping them establish a mature sustainability governance mechanism.

ESG never stands in the way of business value

"I used to work in Europe, where I worked with this one local carrier customer. The customer later got into trouble because one of its regional subsidiaries used child labor. This significantly impacted the customer both commercially and socially," explained Tao. As business models continue to evolve and information exchanges become increasingly transparent, enterprises have found themselves tied more closely to partners up and down their supply chain. This makes supply chain management an increasingly important part of enterprise management.

According to Tao, the first thing that Huawei's sustainability strategies target is its own supply chain and procurement practices. While working to conserve energy and cut emissions in its own operations, Huawei is also engaging with its partners up and down the supply chain to reduce their carbon footprints. Since 2011, Huawei has participated in the Green Choice initiative, which was launched by the Institute of Public and Environmental Affairs (IPE). Huawei now uses the IPE's Blue Map environmental database during supplier audits and self-checks to encourage suppliers to improve their overall management and environmental compliance. In 2021 alone, Huawei checked the environmental records of 900 key suppliers and helped more than 10 suppliers rectify problems.

Huawei also prioritizes sustainability in its production and delivery operations. The company uses bioplastics and renewable plastics as much as possible in its packaging, and prefers using eco-friendly materials like recycled aluminum, tin, gold, cobalt, and paper in its products. They have also decided to significantly reduce the size of their manuals for multiple products, including their smartphones, by balancing paper material reductions and user experience requirements. Their new pre-installed Tips app helps achieve this by creating a digital space where users can get more information about their devices. In its day-to-day operations, the company also uses digital technologies to manage and adjust energy consumption on their own campuses based on foot traffic. In addition, they have also optimized the way they operate their campuses, allowing each campus to serve multiple roles while consuming less energy.

In addition, the company opened its largest global Cyber Security and Privacy Protection Transparency Center in Dongguan, China to address cross-border data transfer issues.

Its latest sustainability report shows that Huawei has continued to purchase more electricity from green and clean energy sources in recent years. Huawei's campuses in Shenzhen and Dongguan are both fully powered by clean energy, and its Chengdu Research Center has become its first research center to achieve net-zero carbon operations.

This progress though did not come without a cost. This may mean decreased profits, higher business costs, or other unprecedented challenges. Huawei admits its own sustainability efforts have been hindered by a global shortage of talent, geographical obstacles, and low public opinion. However, one quote from their founder Ren Zhengfei seems to stick with employees like a mantra: "With no way back, success is the only way forward." Tao continues to assert that sustainable development will ultimately create social and business value, even if that value is not seen immediately.

Huawei is not shy about sharing their experiences in this area. According to Tao, no enterprise should neglect ESG, sustainability, or social responsibility out of concerns for business value as these concepts are inextricably intertwined. Chinese enterprises, he asserts, are bound to take a journey that looks very similar to Huawei's own. By following globalized business standards, they will be able to build quality brands with a competitive edge in the global market. ESG and sustainability are a crucial element of this edge.

Enterprises exist to create business value and fulfill their corporate visions. As sustainability goals gain traction both within the industry and the world at large, enterprises must learn to transform and meet ESG and sustainability goals. This is a key issue that enterprises must address if they want to succeed and prosper.

Chinese enterprises that want to build quality brands with a competitive edge in the global market can look to Huawei as an example of how to create social value in business activities through ESG or sustainability efforts, and seize new business opportunities while creating social value. This will form a positive circle that allows enterprises in this globalized world to continue to grow and prosper.