The Chinese telecommunication giant Huawei organized recently a conference in Brussels on sustainable supply chains. The conference was coordinated jointly with CSR Europe, a European Business Network for Corporate Social Responsibility (CSR). CSR Europe aims at contributing to EU’s Europe 2020 strategy for smart, sustainable and inclusive growth. Huawei, with its 9 900 employees in Europe, is keen on joining the effort. During the conference, they launched a new report outlining their commitment to Corporate Sustainable Development. It sets out Huawei’s philosophy and describes its achievements in bridging the digital divide, supporting stable and secure network operations, promoting environmental protection, and seeking win-win development. According to the report, Huawei reduced its global carbon emissions in 2014 after membership in its green supplier program expanded five-fold in just one year.
The Brussels Times took the opportunity to meet the people in charge of CSR at Huawei to discuss how CSR is applied in the company. We met Mr. Deng Biao, chairman of the corporate social development committee, Mr. Alan Aicken, vice president of global supplier sustainability, and Ms. Holy Ranaivozanany, head of corporate social responsibility.
In 2014, Huawei ensured communications for nearly 3 billion people worldwide, and supported stable operations for over 1,500 networks in over 170 countries and regions. Huawei was among others responsible for the ICT services during the football World Cup in Brazil. In Europe, Through its European Research Institute, Huawei coordinates 18 R&D sites in 8 European countries.
Huawei has over 170 000 employees world-wide. 75% of the employees outside China are local staff. Sales revenue reached CNY 288 billion in 2014 (47 billion US dollar) in 2014, an increase of 20% compared with the previous year. Net profit was 4.5 billion US dollar. 62 % of sales derive from outside the Chinese market.
About 75 % of Huawei’s sales are ICT networks and equipment to businesses and other telecommunication companies. Sales to individual consumers grew by 32 % in recent years, mainly because of the success of its smartphones which have become market leaders in several countries.
Figures from 2014 Annual Report
Q: Huawei was founded only in 1987 and has in a relatively short time become a multinational company. In Europe there are hardly any examples of newly established multinationals. How do you explain this fast development? Was it thanks to the huge Chinese market which enabled Huawei to grow before it became global?
Deng Biao started in a sales position 20 years ago and is familiar with Huawei’s development. He confirms that Huawei conquered the Chinese market before it became global – contrary to high-tech companies in smaller countries that are obliged to become “born globals”. Market penetration in China occurred in two steps:
“I would explain that our growth is due to two factors: focus on customer needs and heavy investment in R&D. We have always emphasized the importance of adapting our products to the needs of the customers. In the beginning, our products were hardly present in the market. Our technology wasn’t better than that of our competitors. The cities were dominated by foreign companies.”
“But this gradually changed. We focused first on China’s rural areas that have been ignored by the competitors and started to develop better solutions than they did. We also invested heavily in R&D, and last year we have invested 14% of total revenue. We adapted our products to the needs of the customers while our competitors reacted slowly. Today we are of course present everywhere in China as well as around the world.”
Q: CSR is generally defined as a kind of corporate self-regulation where a company integrates ethical standards in its business model and tries to further some social good, beyond creating value and profit for its shareholders. Is there a special business ethics for telecommunication companies?
“I wouldn’t say that there is a branch-specific ethical code,” Deng Biao answers. “We are required to comply with international professional and technical standards. All our staff, including our engineers, are obliged to enforce them. The use of private data in telecommunication is of course sensitive and we have to ensure that it cannot be misused.”
“We take privacy concerns and threats against cyber security very seriously. We have employed a leading international expert to head our cyber security team and last year Huawei released a third annual white-paper on cyber security. We listed 100 questions which the companies should ask their suppliers to ensure product security. Cyber security involves the whole supply chain and Huawei wants to take a leadership role in addressing the problem.”
“Furthermore, Huawei has issued business conduct guidelines that express the ethical code of the company. Every employee in Huawei is obliged to sign the code. This document is re-signed every year.”
According to Deng Biao, the application of Corporate Sustainable Development (CSD) policies does not vary by country.
“Overall, the standards are the same everywhere but awareness and understanding of them might differ. There are cultural differences and some countries are more mature in enforcing the standards.”
“CSR is an integrated part of our business model and embedded in all our business processes. Our standards for green development and environmental protection – promoting energy efficiency and reducing pollution – are a good example of this. By applying a strict CSD policy we improve the reputation of our company and the trust of our customers.”
|“Huawei strives to become the global leader of the ICT industry. To achieve this, we must act as a responsible corporate citizen, an innovative enabler for the information society, and a collaborative industry contributor. We will work more openly with top global partners to create a simplified, standardized, and easy-to-use network based on our concepts and blueprints for a Better Connected World. Through this process, we will also be able to build a larger pool of ICT talent.”
Message from the rotating and acting CEO of Huawei, Mr. Hu Houkun, 2014 Annual Report
Q: Your vision for corporate social development is based on four pillars: Bridging the digital gap, ensuring stable and secure operation of networks, promoting a green environment and realizing win-win development for employees and shareholders. Do you have any indicators or benchmarks for measuring the implementation of these policies?
Both Deng Biao and Alan Aicken stress that there is a model for assessing the performance and results under each pillar.
“We follow the PDCA cycle – plan, do, check and act (PDCA) – and make continuous improvements.”
In Europe not all countries oblige major companies to include CSR information in their financial reports. Huawei has been including separate sections in its annual reports on corporate government and sustainable development since 7 years. In addition, it publishes an annual sustainability report.
Q: But do CSR visions not risk just being nice words on paper? How do you ensure compliance with them?
“We measure ourselves against all the standards. Our customers measure us against them. Compliance is ensured by asking our customers to assess our products,” Alan Aicken replies. “There are thousands of technical standards and regulations concerning labor law, environment, management, health and safety. There are 14 000 standards only in the environment area. They all need to be complied with.”
“Our customers apply a checklist. And we ourselves also do so when we check our own suppliers. If we wouldn’t comply with the standards, we wouldn’t remain in business. Our customers are rewarding us for our performance. Compliance with standards is such an important topic that it should always be a criterion in awarding contracts besides quality and price.”
Q: According to your annual report, Huawei has audited 100% of medium-to high potential risk suppliers. Can you tell us more about the audit? What were the findings and recommendations?
“We are a member of the Electronic Industry Citizenship Coalition (EICC), an industry coalition dedicated to electronic supply chain responsibility. All our suppliers have to sign a sustainability agreement to comply with the standards and regulations. This gives us a right to audit them. We score the suppliers on a scale from 1 to 100. A score below 70 is unacceptable and requires improvement. The overwhelming majority of the suppliers comply – otherwise we wouldn’t engage with them or would stop working with them.”
“We mostly audit our suppliers ourselves and sometimes jointly with major audit firms. But more is needed than audit compliance. The larger suppliers are encouraged to take ownership by increasing their capacity to audit themselves and to address problems proactively. Overall I’m satisfied with the process although there is always room for improvement. Inside Huawei we ensure compliance through our internal audit groups which are spread out in the company.”
Q: Huawei is supporting ICT training in many countries. Do you intend to reduce the digital divide or the skills gap?
Deng Biao explains that according to statistics, the share of ICT in Europe’s economy is relatively low – perhaps less than 5%. Huawei wants to boost the ICT industry by providing training and internships for talented students, both in developing and developed countries.
“The program – we call it Seeds for the Future – is open to all countries in the world,” Holy Ranaivozanany says. “In Europe the program includes about 20 countries. The program started in 2008 and until now we have supported 400 talented students in Europe. Last year we had 10 students from Belgium. We are now expanding the program and will target 800 students worldwide in only one year.”
“We work closely with universities and ministries of education in all countries. With their support, we select top students. We offer them a 2-week program in China, both in terms of learning about the most innovative technology in telecommunications and offering them cross-cultural experiences.”
“By visiting our head-quarter in China, students obtain first-hand knowledge on cutting-edge technologies and industry developments. Some of them have already joined Huawei or other ICT enterprises, contributing to the development of the entire ICT industry.”
By Mose Apelblat
The Brussels Times