Comparing Chinese Hydropower Overseas
By Stephanie Jensen-Cormier 4 February, 2016
International Rivers' Jenson-Cormier shares results from their benchmarking study on Chinese Hydro overseas
Having developed a massive 305GW in hydropower within the country, Chinese companies and banks have branched out beyond their borders to become the biggest builders and financiers of hydropower projects in the world. To date, they are involved in some 330 hydropower projects in 74 countries.
For eight years, International Rivers (IR) has been engaging with Chinese companies to advocate for improved policies and practices and to encourage them to compete for a strong environmental track record. Information supplied to the companies by IR has helped them decide to cancel or mitigate dams they have themselves pronounced “unstable” and “uncontrollable,” and which would have harmed the environment and communities that are dependent upon rivers.
This past summer, IR released the first-ever report that benchmarks and ranks the policies and some of the overseas projects for seven Chinese state-owned hydropower companies. The report is available in English and Chinese. More on the report and the results below.
Benchmarking Chinese Overseas Hydropower Companies
The participating seven state-owned hydropower companies are now some of the largest and most influential hydropower companies in the world. They are:
The Benchmarking Report evaluates 26 indicators across three categories:
- Environmental Management;
- Communities and Labour Relations; and
- Risk Management.
It provides scientific and evidence-based analysis on these three themes and shows the concern by companies over maintaining a positive image abroad.
6/7 companies were active throughout the process
… Huaneng Group only responded after facing criticism
Six out of the seven companies were active throughout the process of collecting data from the headquarters and/or arranging site visits to meet with managers and workers at the project sites. Sinohydro, Three Gorges and Gezhouba were particularly engaged throughout the research and compilation phases.
The only company that was not responsive during the research phase was Huaneng, which is working through its subsidiary company HydroLancang to build the Lower Sessan 2 Dam in Cambodia, the largest dam in the country, as its first overseas hydropower project.
But when the report came out HydroLancang engaged with us. It sent top-level executives to Beijing in order to initiate a dialogue with us after coming under criticism by its parent company because the project which was reviewed was the second-worst-performing in the Benchmarking Report.
The Ministry of Commerce was particularly receptive
The Ministry of Commerce was particularly receptive to our work as it is developing a mechanism to encourage Chinese companies to implement better projects even when the legal requirements in host countries are low.
Chinese companies are interested in seeing how they stack up compared with other Chinese companies. They are also interested to know how they compare to international hydropower companies.
Findings show significant gaps between policy commitments and performance
The report revealed that there are significant gaps between policy commitments and performance on the ground. Most companies talk the talk, but don’t necessarily walk the walk. The cost is borne by those who can least afford it – rural communities and fragile ecosystems.
As for individual performance, Sinohydro International had the strongest record in both policies and projects. Meanwhile, Huaneng had the weakest ranking for policy commitments and Datang had the weakest ranking for projects.
#1 Sinohydro Int. – both Policy & Projects
Meanwhile, Huaneng had the lowest ranking for Policy & Datang the lowest for Projects
(Click on table to enlarge)
- Companies performed strongest at the project site if required by the laws of the host country. Local governments play an important role in lifting the environmental performance of their projects;
- Companies with more experience overseas are taking policy and implementation seriously. These companies prepare detailed company guidelines and trainings. Newcomers generally make empty promises;
- Sinohydro International, which develops Engineering Procurement Construction projects, had the strongest record in policies and projects;
- Meanwhile, Huaneng and Datang had the weakest rankings for projects;
- Generally, companies that build projects as contractors perform better than companies that invest in and own their projects;
- At the policy level, all the companies received their highest scores for dam safety measures. In practice, companies performed better when implementing environmental standards than standards relating to host communities, workers and general risk management; and
- Companies often have their own environmental, social and corporate responsibility guidelines and follow guidelines from the Ministries of Commerce and Foreign Affairs and other government institutions. It is important to acknowledge and understand how the companies incorporate these into their work, rather than guidelines that are more common internationally. In some cases, Chinese company guidelines are similar to World Bank, United Nations or human rights and business practices.
Huge appetite for investing overseas to drive more projects but also better brand management
With a huge appetite for investing overseas, Chinese companies are interested in finding out how they can improve their reputation and image abroad.
Project will run again in 2016 and expand beyond Chinese dam-builders
The benchmarking work by International Rivers provides an incentive for companies to compete on their environmental and social track records rather than simply on financial grounds. The Benchmarking Project will be repeated in 2016 and will expand to include non-Chinese dam builders.
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