She Duanzhi presented at the EU-China Business Summit on the subject ‘Investment in Society’. He spoke to EURObiz about what this means to Philips as well as the strategic importance of China as an R&D centre.
Philips’ healthcare products were being used in China more than a century ago during the late Qing Dynasty, and their first lighting products entered the China market in the 1920s. They were one of the first multinationals to return to China after the country reopened its doors to the outside world, establishing their first joint venture here in 1985.
China is now Philips’ second largest market, do you see it becoming number one in the future?
We certainly have the aspiration to grow the China market to be the largest in the world at some point in the future, and China definitely has that potential.
Why was it important to open R&D facilities in China?
To succeed in a large market such as China, we need to provide locally-relevant and innovative products, services and solutions to meet China’s needs which can be quite different from elsewhere in the world. In this sense, localised R&D is of critical importance.
Philips Research China was established in 2000 when China was one of the key emerging markets of Philips and was growing rapidly. Philips global decided to set up a research lab on the corporate level to drive technology transfer to local businesses more efficiently and quickly to respond to the high growth trend in this market, as well as to better leverage the resources from the ecosystem in China and build up local competence to bridge the technology gap between the West and China.
As China is playing a more strategically important role in Philips’ global landscape we’re building China into another global home in addition to the Netherlands and the United States. China has become one of the increasingly key innovation and operation hubs for Philips globally in terms of value creation. Now, Philips Research China is Philips’ second largest research lab—we have nine R&D centres with over 2,100 R&D staff, and an annual investment of more than EUR 110 million.
Is the focus of your China R&D centres to just create products for the Chinese market, or are your innovations here rolled out globally?
We do both—local for local and local for global. An example of the former is our air purifiers, which were developed to meet local consumer needs for good indoor air quality.
Two examples of the latter are the noodle maker and soymilk maker developed by the local China R&D team based on local consumer insights; these products have been used as a pasta maker and soup maker respectively in the European market.
Can you tell us what Investment in Society means to Philips?
At Philips, we strive to make the world healthier and more sustainable through innovation. Our goal is to improve the lives of three billion people a year by 2025; our EcoVision programme is a main driver to realise this. Investment in Society to us means taking our social responsibility for health, education and environment as a global blueprint for sustainable development. We see it as an ‘investment’ because it makes business sense to do it.
All our social investment programmes are designed and implemented around this concept. Our EcoVision 2015, for example, mandates a 50 per cent improvement of energy efficiency across our portfolio and doubling our global collection, recycling amounts and recycled materials in products by 2015. These not only represent our commitment to environmental protection but will also cut costs and improve our margins.
What do you see as China’s major societal challenges?
We see, among others, ageing, energy efficiency and sustainable urbanisation as the most critical challenges China faces going forward. However, we see more opportunities than challenges. With leading technologies in healthcare, consumer lifestyle and lighting, solid R&D capacity and local customer insights, we are convinced that Philips is well positioned and committed to China in providing innovative products and solutions to improve Chinese people’s lives in China.
To help address the ageing issue in China, Philips works closely with leading local hospitals and institutes to develop advanced technologies and affordable healthcare solutions to fight against prevalent diseases in China such as liver cancer and chronic obstructive pulmonary disease (COPD).
In responding to the Chinese Government’s call for building eco-friendly and smart cities, Philips not only provides innovative and energy-saving lighting solutions such as CityTouch and solar powered road lighting systems, but has also introduced the innovative Energy Management Contract (EMC) model to help accelerate the industry LED transformation.
What drives Philips’ CSR policy: is it demand from your customers, a genuine sense of responsibility or is it a platform for increasing brand awareness?
Philips’ vision is to make the world healthier and more sustainable through innovation. Sustainable development for us means enabling all mankind to live healthy and well within the ecological carrying capacity of our planet. CSR is part of our practice in delivering sustainability and we take our social responsibility for health, education and environment as a global corporate citizen very seriously.
What are some of the CSR initiatives that you are involved with in China?
In environmental protection Philips has partnered with the Climate Group and Overseas Chinese Charity Foundation in our ‘Lighting the Future’ programme, donating energy saving lamps to 264 rural schools in Yunnan, Gansu, Guizhou, Henan, Shanxi and Shandong, benefiting 109,434 students while reducing 264 tons of CO2 emissions at the same time. In health and education, we have implemented a programme in Yunnan province where Philips provides nutritious breakfasts to over 800 schoolchildren who previously had none. Other programmes include a partnership with hospitals in Beijing and Shanghai to save the lives of children with congenital diseases; a ‘SimplyHealthy@schools’ programme to promote health and hygiene awareness in schoolchildren and purify drinking water; and a cooperative programme with the Ministry of Health to screen breast cancer and cervical cancer for rural women and train rural doctors.
Are your staff engaged with these programmes?
Yes, our employees are totally engaged and feel proud to be part of these programmes. In fact, our CSR programmes have become a great morale booster and brand enhancer. For example, for two years in a row, Philips was awarded the title ‘Best Corporate Citizen in China’.
Aside from CSR projects, what other ways do you invest in society?
Our businesses provide innovative solutions that address major trends affecting the world—the demand for affordable healthcare, the need for greater energy efficiency and the desire for personal well-being. We continuously work on global societal challenges as well as stimulating business growth through our people.
We also invest in the development of Green Technologies and enable our consumers to contribute to a healthier world on a day-to-day basis by choosing green products. We take actions to continuously reduce the environmental impact of our operations and secure healthy ecosystems.
As the result of our integrated sustainable development efforts, Philips achieved a score of 90/100—a Best-in-Class score in Environmental Dimensions—on the Dow Jones Sustainability Index. Philips is also ranked in the Top 50 Best Global Green Brands by Interbrand and is one of the biggest climbers in the annual ranking: it made the second largest increase among technology brands, rising eight places to 23rd position, up from 31st last year.
How useful was the EU-China Business Summit?
The EU-China Business Summit provides a good platform for European and Chinese businesses, particularly small and medium-sized ones, to establish links and explore areas for collaboration. I myself was approached by several participants for follow-ups on cooperation.
What were the key things that you took away from the Summit?
I was encouraged by Premier Li Keqiang’s remarks on EU-China trade and investment relations, particularly the opening of bilateral investment treaty negotiations and the prospect of China-EU trade reaching USD 1 trillion by 2020. This bodes well for European companies doing business in China.