Working with China - Purposeful Business Isn't Always Easy

This “purposeful business” thing isn’t as easy as it looks, as many large businesses are finding. The latest challenge comes as China is increasingly the subject of international criticism for its alleged treatment of the Muslim Uighur population in the “autonomous” north-western region of Xinjiang.

China is accused of detaining more than a million Uighurs in “re-education camps”,  using people as forced labour and even forcible sterilisation of women. Terms such as “genocide” and “crimes against humanity” are being used, whilst China denies the allegations, saying it is combatting separatism and Islamist militancy in the region.

China has been increasingly confident in its dealings with the US and other critics. That also applies in other foreign policy matters, such as conflicts along the border with India and its claiming of disputed islands in the Pacific around Borneo. That all reflects its increased economic power, as well as the strategies of its authoritarian and ambitious President, Xi Jinping, who has centralised his own power.

This all presents a dilemma for western governments and businesses. They want to do business with China, given the sheer size of the opportunities and indeed the way China has a virtual monopoly of many supply markets. Yet they feel they should be making a stand against some of China’s most egregious actions.  In the case of the accusations of forced labour in the production of cotton in Uighur, for instance, western firms that claim to care about human rights are struggling to have it both ways.

These firms are worried about actions the Chinese government might take if they speak out. And Chinese consumers appear very supportive of the government and will punish firms who are seen to be anti-China in any way.  Some firms, such as retailers including H&M and Nike, have already faced a boycott by Chinese shoppers after they voiced concerns about cotton sourced from the region.  Other firms have said they will continue to source cotton from Xinjiang, but that opens them up to criticism or even boycotts from western consumers who are sensitive to human rights and modern slavery issues.

Then we have Burberry. Burberry announced that they don’t source cotton from the region. But it appears that their membership of the Better Cotton Initiative (BCI), a sustainability project that last year suspended its links to Xinjiang over alleged human rights and labour abuses, was enough to get a reaction. Their brand ambassador in China halted her contract and they saw their trademark plaid design removed from a top video game in the country!  

Other firms appear less certain about their stance. Spanish company Inditex, owner of Zara, has said that is has no commercial connection with any Xinjiang company. It also did publish a "zero tolerance for forced labor" statement on its official website, But “on Thursday morning, Global Times found that Inditex appeared to have quietly removed this statement from its official website”.

Last year, Hugo Boss said it didn’t source cotton from Xinjiang . But the firm appeared to reverse its position in March, telling its Chinese customers that it uses cotton from the region in its clothing products and doesn't plan to stop. Profits taking precedence over purpose, perhaps?  

It isn’t just the cotton industry facing these issues. The HSBC financial services group faces an almost impossible dilemma. As China cracks down more and more on independence and democracy in Hong Kong, it feels like financial services giant HSBC (the Hongkong and Shanghai Banking Corporation) will have to take sides at some point.  If it does not speak out against China’s action, it will be damned in the UK and other countries where it has significant business. But if it does speak out, it could be an existential problem. Asia delivered more than 80% of HSBC's profits last year, and its operations in Hong Kong alone can account for half its profit in some years.  

The challenge is not one-sided, we should say. China needs western export markets to deliver economic growth and wealth to its own citizens. And while the Chinese people seem happy to punish the occasional western brand, they might be less happy with their own leaders if they couldn’t buy any western brands, use HSBC or watch Disney or Netflix films! The world and its economy is incredibly inter-linked these days, so that offers some protection against the more Doomsday scenarios we might imagine.

But that doesn’t offer a solution to a company or brand that wants to be seen to “do the right thing” – yet also wants to grow revenue in China. As we become more aware of “procurement with purpose” issues, there will be many similar challenges and dilemmas ahead, and there are no easy answers.