Directors' Dialogues: Stewardship in the Boardroom
Directors’ Dialogues is hosted by the Climate Governance Initiative. Each episode takes a deep dive into the stewardship journey of board directors from across all sectors, types of companies and parts of the world. Whether you are new to the climate governance space or an accomplished steward, this podcast will bring you true voices sharing their experiences, challenges, and successes in navigating climate action and integrating it into the boardroom conversation. For more information on what we do, visit climate-governance.org.
Directors' Dialogues: Stewardship in the Boardroom
04: Corporate sustainability and supply chain transformation in China with Changhua Wu
In this episode, hosts Alexandra Bolton and Matthew Moss are joined by sustainability expert Changhua Wu. She is a non-executive director at Tianqui Lithium, an energy materials company with operations in China, Australia and Chile. Changhua is a leading figure of sustainability in China, she is part of the Community of Climate Governance Experts of the World Economic Forum and the Chair of the Asia Pacific Water Forum.
The conversation covers an overview of climate governance in China; its challenges as a high greenhouse gas emitter country, but also its proactive approach to a green transformation. Changhua also reflects on a wide range of sustainability issues: from water challenges in the region to cultural sensitivity.
For more information on what we do, visit climate-governance.org.
Hello and welcome to Directors' Dialogues from the Climate Governance Initiative, where we lift the lid on the different ways that company board directors are speaking up for climate in their boardrooms. In each episode we meet a climate champion who's been leading or nudging or badgering their boardroom colleagues towards climate-friendly policies and practices. I'm Alexandra Bolton.
Speaker 2:And I'm Matthew Moss.
Speaker 1:And today we're delighted to have Changhua Wu with us.
Speaker 2:Changhua Wu is a member of the Community of Climate Governance Experts. She's a director in both private and not-for-profit organisations. An advisor, researcher and an analyst in the climate space want to ask about, about you, about your, your, your journey, um, as they say, about your education, your first steps on the career ladder, um, and how you, um, how you got to the position that you currently occupy, wearing many hats in many organizations thank you, matthew, and thank you, alessandra for having me on this podcast.
Speaker 3:Uh, you know it's's a great opportunity and an honor to share my experience with more colleagues. You know I'm still relatively new on this journey as a non-executive director, but somehow, you know, one year on, and I feel like somehow this is not only significant but also really meaningful journey for me to pursue as well. Also, the senior global senior fellow for the Institute of Public Environmental Policy, which is a nonprofit Chinese NGO and which runs the only independent public environmental big data platform which is pretty much driving, you know, transparency, accountability agenda, particularly now. We all know why it is important there. Besides that, I've also been serving as the China-Asia Affairs Director at the office of Jeremy Rifkin, who is more my mentor because he's the author of the Third Industrial Revolution, the Anthropy. Now he's having another new book coming out in China in a month or so which is called Planet Aqua, which is on water. But anyway, so that's so. I've been. Sounds like a lot of things, you know, real wide.
Speaker 3:I started my, so I was educated more like as a journalist, and so I started my career as the editor of the English edition China Environment News and, after graduating from Chinese Academy of Social Sciences there. Interesting enough, that was literally, you know, my page zero to get into environmental issues there, and so that was around 1992. And so when the global community actually was really busy preparing for the real Earth Summit there, so I was lucky enough as really totally young professional getting into this space and of course, with the duty to write, to edit and to communicate a lot of messages there, not only from China but also from global perspective there. So that was sort of my really the beginning of the journey, you know, in the environmental landscape there. Then of course I got a chance to go to the US and studied there at University of Maryland School of Public Affairs, majored in environmental policy and management. That pretty much started my shift in career, I think, as actually a policy analyst there. Then I joined the WRI Water Resources Institute afterwards and really started to work on, of course in the beginning, all the China-specific program projects there, but later managed to help create the China Studies program and literally really focusing on China. So that was sort of an early career experience to become a really policy analyst actually specialized on China's environment, climate change, energy policy and sustainability issues, including actually environmental health issues there. So in a nutshell that's sort of my early training and learning.
Speaker 3:And of course then you get into you know different projects there and I think around. You know that was around 1997 during the Kyoto process. So my step into professional, step into actually the climate change landscape, that was pretty much the turning point there Because back then global community needed, you know everyone was making the efforts to drive to deliver a Kyoto process, you know the Kyoto Protocol and China somehow was put in a very difficult position. It's the largest developing countries and I remember back then you know the Clinton administration and Gore Vice President Gore back then actually really made a tremendous effort trying to get China on board or whatever. So luckily I was involved in that sort of a process, particularly starting to focusing on the nexus of the energy policy, air pollution, climate change issues there. So in the end I think I wouldn't say you know China's really joining Kyoto Protocol was because of the project we did back then. But definitely I think you know the efforts we've made. The joint research efforts, particularly from the US and China together for a couple of years really made a significant impact, putting on the table to the top leadership in China back then, basically a strong case saying, actually, you know, taking stronger efforts to fight climate change, benefiting China in terms of, you know, public health and, you know, and of course, we can pursue cleaner energy, energy efficiency. So it's a winning strategy and that was a simple but a very strong message there. So that was the beginning of the climate change there, fastly forward.
Speaker 3:So my experience, you know, as a policy analyst, you do not just focusing on the market-based instruments or one particular piece of the policy. There you started getting into so okay, laws like legislation, regulations, standards, the policy incentives there that you started to deep dive into further at the regional level. And so, because China is a large country, you have very well developed regions as well as less developed regions there. So, at the regional diversity there, but also really looking into different industries, you know. For instance, back then later of course, I joined the climate group and really, you know, becoming the greater China director for the climate group, setting up this sort of platform in China, totally, totally focused on climate change, and that was a sort of the step after the World Resources Institute there. So in that context, there you started to learn, you know, started even to look at technology.
Speaker 3:So now, of course, very recently, about a year and a half, a little bit more than a year ago, I officially became a non-executive director of the Tianqi Lithium, which is one of the largest, not only in China but globally, lithium material.
Speaker 3:You know technology companies there, although it's not simply just say materials but also it's already expanded to upstream. For instance, it has assets in Australia, it invested in Chile, but also downstream it also invests in smart too, on the EV side as well. But the core expertise of the company is more like in the middle range, right processing, which is a chemical process. Actually, the reason why the chairman of the company, the leadership of the company, decided to reach out to me to bring me on board actually to co-chair the ESG sustainability subcommittee of the board, of course to support the corporate sustainability agenda, for a particular reason because the leadership has the vision level of ambition and definitely would like to continue its leadership. So that's very important sort of foundation that for me you know being part of the family, and really start to contribute my expertise, you know, through this very powerful vehicle as a non-executive board director to help facilitate and drive the sustainability agenda.
Speaker 2:Yeah, thank you. I really want to dig into that point that you ended up on about the powerful position of the non-executive director. So I mean, firstly, perhaps you could tell us something about the corporate board structure in China. What is the position of a non-executive director in the organizations that you've been involved with, and what sort of responsibilities do they have?
Speaker 3:Sure, you know from the regulatory context. So we have China. This is a heavily regulated sort of context there. By the way, it's not just, it's not the not-for-profit, you know, non-governmental, whatever organizations there. So it's governed by the company law and the you know the equity law. So those are the two fundamental pieces of legislation really governing the capital market actually in China and in terms of the behavior of listed companies' behavior there.
Speaker 3:So for a board which is legally required, that's a basic structure actually for any public listed companies there. You have to have that actually. So usually, you know. So you have shareholders. Shareholders are the owners of the company, right? So the board is that legally designated actually on behalf of the older shareholders actually to govern, you know the company and so you know, in terms of number of people, tianng Lithium has eight board members.
Speaker 3:I think different companies probably vary a little bit, not too many. It depends on whatever they need, I guess actually, and the structure of the board. So for executive directors, they are, you know, for instance, the owner of the companies. You know, for instance, the owner of the companies. They are the largest shareholders of the companies and they are the CEO executive, you know, and the CEOs of the companies. So they have their sort of you know, the own part of the companies, certain shares of the companies there and the, you know, from the CEO's perspective, that's his designated actually to run the company. And we have the senior management team basically there.
Speaker 3:And for non-executive members there with a very specific reason because regulators realize for any companies, whatever the sectors are there, because the laws, regulations require many, many things, it's really difficult actually for all executive directors to fulfill that sort of duties. So non-executive directorship is designated to be more like a specialized expertise right To bring a small group specialized expertise to join the board to support the company, to govern the company. Of course, if you look at the mandatory, for instance, auditing, accounting, auditing, that's because that's crucial, that's key right. And you know, if you look at the capital market there, if you look at the nomination, remuneration, things like that, termination remuneration, things like that, so there are a few. And also investment, you know strategic investment committee subcommittee there as well.
Speaker 3:So then, of course, coming down to our sort of space there, so ESG sustainability, you know it's not specified in terms of you know each board actually needs to have, you know, a specialized person you know in the accessibility and then you need to create a subcommittee for that particular purpose there. But it's sort of voluntary. But the regular contest there is said already because it's a special expertise right. So this is sort of non executive directors, a group of people who somehow are specialized in their professional field, their expertise actually are needed for a board, for a company actually to govern better, you know, the company's business.
Speaker 1:So we have a large number of complex and interconnected systems, of systems happening here, where you're talking about energy, food, water, infrastructure, housing. We can go on, but both in the water context and also as an independent director of Changi Lithium, you will be needing to make decisions that balance lots of different things that are connected. So a good example in mining is the environmental challenges that are associated with mining and, of course, the growing demand for sustainable energy solutions, so lithium-free batteries, for example. Have you seen any good examples of how boards are managing to balance both these sort of two potentially conflicting issues, but also the wider systems effects that boards are having?
Speaker 3:So Tianqi Lithium, you know this is sitting in a very sort of interesting scenario. On one side we're all pursuing clean, accelerated clean energy transition, right, batteries, EVs, whatever. So it provides products, solutions actually to fulfill that sort of accelerated transition there. But then there's the other side, meaning so we have to also make sure that's delivered in a sustainable manner. That's pretty much the core narrative within the board room there, right? And so then what do we do? So there are different tiers At the bottom line. There are laws and regulations there, right?
Speaker 3:China has rather restrictive laws and regulations on the environmental side, on the ecosystem side, on the water side or whatever, even though we have specific, you know, on the mining sector, specific laws and regulations there. So from the compliance perspective there, sector specific laws, regulations there. So from the compliance perspective, there are very specific laws, regulations, standards that the company in that sector has to fulfill, has to comply. So that's the starting point. Then P&G Lithium, you know, has been a leadership company. So the way the mindset of the company's top leadership board is say okay, this is business, it's not just a compliance issue, this is about a business there, right, and so I think that's a very different sort of incentive for the boards actually to really look at the issues in a very different manner. So the narrative, the conversation in the boardroom is not just like oh gosh, you know, we have laws, regulations, we have to do this, we have to do that, but rather very, really proactively, positively looking at the solutions there. That's why the company has taken many, many steps, for instance on the mining side. You know we call it green mining. That's already a mainstream solution. The company has been doing that. You know there are certain sort of standards. You know voluntary, mandatory standards or frameworks already out there. They started to reach out to the sector globally actually to advance the agenda as we are talking about it here. It's not like we all have laws, regulations covering everything or standards covering everything. They already it's not In many, many cases relatively new. So you have this sort of vacancies in terms of standards, frameworks, you know whatever. You know that sort of, you know really regulating, guiding the actions there. So the company would take really initiatives to not only to sell but to bring others together of their industry together. You know even started to participate in developing standards within the ISO framework, right. So that's one thing that if you look at the supply chain. So, okay, guys, supply chain is another thing. Procurement, particular from procurement system, we need to really make sure within the company, the procure, we have really well developed a system there to make sure we have very clear, defined criteria, framework to manage that and that's embedded in there as well.
Speaker 3:But in the meantime, another way actually of looking at it, so within the company, one major thing actually I've been sort of advocating, which I also feel rewarded in a way that actions are taking. So today within the company, the sustainability issue, you know, climate issue, is not just to say, ok, this is one particular department you are designated to lead, that it's not, it's pretty much embedded in everything. So you know, the board member, non-executive board directors actually we've been already doing this twice already started to reach out, ask the secretary to the committee supporting the board basically, so literally using designated time and opportunity to get the finance CFO on board with us. So we need to learn how the finance system works actually within the company, how the budget is made right, how they really follow through everything, and so you know it was on separate cases there. So we started to meet with, you know, the C, whatever O's actually of different departments so far actually. So CFO, the guy in charge of the supply chain procurement besides sustainability, there's a department designated for that as well. So CFO, the guy in charge of the supply chain procurement Besides sustainability, there is a department designated for that as well. And the sales and safety.
Speaker 3:And now there's a relatively new sort of a segment being created within the company, not at the department level but above that but under the CEO is called oversight and auditing. So of course, auditing has always been an important part of the governance actually for any company. But rather than just you know different departments, including you know auditing, but now it's called oversight and auditing and created sort of lifted up further, above all the others, so creating mechanisms. So rather than relying on others as internal sort of auditing to find a problem through it you know and then find the problems that tell you. So yeah, this is wrong. But rather the company itself started to build up this mechanism, governance mechanisms there, make sure you know, driving through the nodes within the company to do so.
Speaker 3:So Tianqi Lithium today sets a really good example At least. Actually their efforts have been recognized by the sector, by the industry in China, to certain extent globally. So they've been in the global resources, you know, mining and whatever, because there are different platforms actually globally there as well, so they all be part of it. So from that perspective again, so the tone, you know it turns to be more positive, rather than say, gosh, this is their liability, right, non-compliance, we have to do this and that, by the way, actually I not only chair the subcommittee of ESG sustainability, I also sit on the subcommittee of strategic investment there as well, right, so for the company, just imagining, you know, I'm not an investor or whatever stuff like that, but somehow, you know, they somehow see my value.
Speaker 3:So this is more like about you know, to make sure, when the look into potential investment opportunities there, somehow sustainability has to be an important part of this strategy there as well. And from that perspective, I just give you a little bit of my learning on that curve. So, for instance, for any merger, acquisition, investment decision, whatever you had to do all the auditing right, legal, accounting, financial, whatever stuff like that how do you make sure this climate, the sustainability elements, is well integrated, embedded in that process is key. That's what I learned basically, rather than say, oh, after this investment decision is made already, let's take a look at, you know, think about carbon footprints, you know, whatever, that's going to be too late, right? So that's a major step the company has also taken. It's a decision made by the board, so we move ahead to the early stage.
Speaker 3:I can give you this explanation. My argument is that, so, because the company has committed to, for instance, of course, by 2050, carbon neutrality, so I'm aligned carbon emission reduction targets there. Right, it's not just about existing, you have to look into the future. Right, that's about investment. So when you decide what asset you're going to invest in, you have to take a look into this potential carbon footprint there as well. So the argument is not hard to make at all. Right, it's more like okay, how do you do it? It's not case by case, rather to embed that sort of thinking and action into the system, into the process, to the early stage, as early as possible, right, for instance, there are cases of probably not adequate information available, available for data, whatever. Yeah, there are always challenges like that. But this awareness, right, this sort of awareness of the issues there needs to be there at the very beginning. That's another major step actually, the board has taken as well.
Speaker 2:Glorious. Thanks so much for that. I think our listeners can hear the unique position that you occupy in this space with wearing all of these hats, and I know we've mentioned that you're a member of the World Economic Forum's community of climate experts as well, so you bring a colossal breadth of experience to this conversation and the conversations you have in the boardroom. You've mentioned a little already about the unique position that China is in here. It's the world's highest carbon emitter, but also the world's largest investor in renewable energy. It is a colossal and diverse country. As you've said, there are very poor regions. There are very highly developed regions. The sectors that its companies are active in are very, very varied, so I wanted to ask you to reflect a little bit about how you see China's unique opportunities and responsibilities when it comes to climate change and carbon emission.
Speaker 3:I could talk very big in a way, so I don't want to really spend time on that. We all know why China is important, as you mentioned already, as a world current largest emitter, you know, contributing largely, actually in large proportion, to the new growth of emission every year. So of course, sometimes we joke about it to say, ok, globally, if you want to address the climate change challenge, you first need to somehow decode China's fossil fuel, particularly the coal issues there, because without that there's no way we're going to address that. It might not be fair to China but, as I said jokingly, that seems to be the reality To a large extent. Basically, also, it tells the importance actually to not only the country itself it needs to take actions to address those issues but, very, very importantly, other countries need to work with China there as well. Now, in terms of the solution, this is a really difficult story to tell. I think that to be fair to China, the country with all the data evidence there already, I don't have to repeat that it's really fascinating to see how the country has managed to drive the clean energy transition so far. If you look at the progress we've made, particularly around renewable energy, energy efficiency, renewable energy, batteries, evs, this is mobility, energy storage grids so there are many, many shining spots actually highlights China has delivered so far. So why would China be able to do so? I think compared to even the US, many parts of European countries there, so the political system is, compared to me speaking, is a little bit simpler in a way in terms of decision making. Right, top leadership in this country decides that this is the thing, then that's pretty much the signpost actually guiding the shift that has been the case.
Speaker 3:So China and the Chinese leadership has embraced something really bigger called ecological civilization, and it's big Civilization, is really a big term. Ecological. We're all part of nature, right, and so that's really big sort of agenda vision mission there already. But the more important thing is that you cannot just say you know that, yeah, that's all you know. Ecological civilization. So what do you mean? How do you deliver that? I think that's a major milestone the country has made so far. So there were three things actually to say. What is it in it actually of the ecological civilization specifically, china wants to deliver Three things.
Speaker 3:First, is ecological red lines Globally we call it planetary boundaries there, right, so the whole country, particularly the land, space, actually been really examined to the nitty gritty details. You know, look at, you know the functions, the biodiversity, the health, whatever stuff like that. So that's one thing. The second one is really about pricing nature, right, so we take a lot, we take resources from nature. It's not free, right, for a long time we've been doing that. So it's free. Why we take? We cut down trees, whatever, we just pollute. No, you cannot do that anymore. So pricing, you know, from the policy perspective, that has become a really powerful tool. That relates to companies, meaning companies you know you operate, meaning you have to pay for you know there's no free riding anymore, right, and so that's the second one.
Speaker 3:The third one is about really equity issue. We call it ecological compensation. This is a particular to address upstream, downstream, sort of you know differences there. As I said, the coastal areas in China, they sit at the very downstream of the major watersheds, riversheds, very well developed already, right, but then going upward, actually, if you look at the Western, central, western part of the country, in many cases they're really lagging behind and now, with the rich, the wealth in their hands, already developed a region. Say, ok, laws, regulations, said the environmental protection quality I do not like pollution anymore. Do not do chemical industry, whatever polluting industries upstream, you know, upstream decision makers say wait a second, what do I do? How do I survive? What's my livelihood there? Right? So this sort of compensation mechanism, those are the three things actually, three major pillars that have been deployed, you know, continue to improve actually in this part of the world already.
Speaker 3:That's really important, foundational piece of, you know, sort of China's decision to transform its economy. So, of course, on one side, of course we need to address the coal issue and the fossil fuel issues. There China has been doing so, but the level of sophistication has been continuous to increase, you know progress, like you know Rachel mentioned before about your nature, right, we have to take into the issue in a very more sophisticated manner, right, and that requires policymakers make really the right decisions or effective decisions actually to incentivize the transition towards we'll call it a positive tipping points. Actually, at this moment it's not an easy task at all.
Speaker 3:Now, the complicated issue, particularly coming down to emissions part, is the supply chain. Supply chain, as we all recognize and particularly talk about within the web community. We call it scope three, right, the thing is that China occupies a large part of the industrial value chain. If you look at the UN, unido, industrial Development Organization, unido, I think that they have this list look at the different industries. They categorize altogether 666 industries globally. China is the only country that has all of them. So China is put in a position to really somehow, like it or not, to lead the supply chain transformation. And now globally, of course we're all looking into, you know, particular scope three, because that occupies a big chunk of the emissions there.
Speaker 1:I completely agree. I think it was Antonio Guterres who stole a film title and said we need to do everything everywhere all at once. It is about that completely holistic thing.
Speaker 3:Yeah, and it's almost impossible. That's the conclusion.
Speaker 1:Nothing's ever perfect, but we can do what we can do. So what advice would you give to peers people who are earlier on their journey than you in this space? What advice would you give to peers that are trying to deliver climate action on the boardroom? What sort of that one thing you'd like to pass on from all your experience and knowledge?
Speaker 3:I don't think I have one simple suggestion, whatever stuff like that. As I said, in my particular case, the reason I was given this opportunity because of the leadership of the company. Already, right, when you have that sort of foundation, the DNA, the culture in it, that's the beginning, that's a good beginning point actually. So when I was given this chance, I decided to embrace it, right. So that's sort of the journey I'm on now, basically. So I went through the process and really, lucky enough, because of the good foundation, the DNA, the culture, the leadership awareness, the desire, the aspiration of the leadership of the company, so I do not have much problem in terms of really speak very openly within the board, by the way, actually.
Speaker 3:So out of the eight board members, four are women, board members for women. So now, actually it's now just a couple of months ago the chairman is now the daughter. So yeah, she was born in the 1980s. This is the younger generation, educated overseas, whatever. So the chair of the board now is a woman. Then we have three other non-executive directors a woman there as well. So this is really sort of they created this culture within this eight people, right, this culture element.
Speaker 1:That's wonderful to hear. Absolutely, the learning and the cultural sensitivity have come across as really important. Thank you, sadly, we're at time. Thank you so much, shang-wen Wu're at time. Thank you so much, chang-wu, for your time and for sharing so much of your expertise with us today. It's been an absolute pleasure speaking with you.
Speaker 2:It really has. Thanks so much, Chang-Wu.
Speaker 3:My pleasure, thank you.
Speaker 2:The Climate Governance Initiative is a global non-profit network reaching more than 100,000 board directors. Most of the world's greenhouse gas emissions come from the private sector, so the central question the initiative asks is Thank you, and our work draws on the principles for effective climate governance set out by the World Economic Forum. If you want to know more, there's a link in the show notes where all our content is available for free and where you can find your local chapter.
Speaker 1:This podcast was recorded in July 2024.
Speaker 2:In our next episode, we'll be talking to Tina Mavracki. Tina is a brilliantly experienced board director and strategic advisor with a colossal executive career in the finance sector and in the real economy, working in energy and metals and minerals, and has been driving climate governance in all of her organizations. We're really looking forward to talking to Tina.