Call it marketing gamesmanship or put it down to having a simple and honest approach to consumers, but Lenovo Group Ltd, the Chinese multinational electronics company, is leading the pack in China by pushing for greater environmentally conscious certification.
The company, with its operations headquarters in North Carolina, United States, recently received a new certificate, the Green Product Mark for its ThinkVision LCD display from TUV Rheinland.[Hong Kong Company Registration Guide]
TUV, with headquarters in Cologne, Germany, is a global provider of testing, inspection and certification services.
But unlike most companies in China, which tend to settle for a CCC label - the China Compulsory Certification, the country's standard mark for consumer safety - Lenovo voluntarily chose to have both certifications on its new display.
"Back in the 1980s, (Chinese) companies just wanted a certificate to get their products exported to Western countries, but now some are volunteering to get their products tested even if it is not required by the government," said Cathy Yan, vice-president of TUV Rheinland's Greater China division.
But while the voluntary move is not game-changing, the trend is a sign of two things. First, more Chinese companies are maturing in their consumer outlook; and second, they are beginning to realize the importance of the Green Product Mark (which oddly enough uses a blue triangle in its label) in building their brands in international markets.
Chinese companies are hoping a certificate by a renowned independent testing company will give consumers more confidence in their products' quality. TUV Rheinland's certificate is based on four standards: responsible use of chemical substances, proper management of waste and recycled materials, energy efficiency and the size of a product's carbon footprint.
Established in 1872, TUV Rheinland is reaping the benefits of China's new marketing outlook. The company operates in more than 500 locations in 65 countries with 17,000 employees. It tests and inspects products from more than 10 industries, such as automobile parts, solar energy products and electronics. It has nine locations in China with 3,000 employees.
Yan was the first Chinese employee at TUV Rheinland after it set up a Shanghai office in 1989, a year after it opened an office in Hong Kong. She said that 20 years ago, products sent for testing were rudimentary goods such as electric fans. Now, clients come from many different sectors, such as solar energy, rail transportation and medical equipment, and have products on the cutting edge of technology. The company's clients include General Electric and Philips.[Businesses Registration]
This is a sign that industries, including Chinese companies, are becoming more aware of environmentally-clean trends, Yan said.
"Eventually, their initiatives will influence other companies," she said.
As recessions in Europe and North America continue, TUV Rheinland has attracted more business from emerging markets such as China, Brazil, Turkey and India.
"In mature markets such as Germany, there is about a 2 percent growth rate every year, but in emerging countries, businesses are booming," Yan said, adding that in seven overseas regions, companies in China have been its most successful clients.
In 2011, companies in China contributed 16 percent of TUV Rheinland's total sales and 22 percent of its profits, though it would not release total revenue figures. The Shanghai office is the company's biggest overseas testing center among its seven centers around the world.
While multinationals used to be TUV Rheinland's chief clients, Chinese companies such as Sany, XCMG and Zoomlion have overtaken them in recent years.
Auto parts companies have become some of TUV's main clients. Parts suppliers for Volkswagen, for instance, used to send parts to Germany for testing due to a lack of adequate centers and accredited labs in China. But as business boomed, TUV Rheinland set up a component-testing center in Shanghai in 2011, designed to test auto parts supplied in China. This initiative cut the time to test parts from six months to a month.
Driven by the increasing demand from Chinese companies to test products, similar organizations have popped up over the past decade. In 2001, the China Certification and Accreditation Administration was established. Figures from the administration show there are 183 certification and accreditation entities in China, including nine from Europe and one from Hong Kong.
But TUV has been one of the most preferred certification agencies in China. By 2011 it had more than 100,000 clients in the country. The company also has agreements with other organizations to ensure their testing results are mutually recognized. The Worldwide System for Conformity and Certification of Electrotechnical Equipment and Components CB Scheme is the world's first international system to accept test reports and certificates dealing with the safety of electrical and electronic components.
The Chinese government has also looked to TUV Rheinland for infrastructure-testing, and Yan said that in recent years rail-transportation firms have formed a substantial business segment for the company. TUV tests the safety and stability of tracks, railway carriages, and signals and communication systems.
It also audits suppliers and franchise stores as requested by clients.
For instance, its auditors pretend to be customers and shop at clients' stores to check if products there meet the company's requirements. Yan said she believes this has more potential in China than traditional third-party certification services.
"Chinese companies are getting more and more standardized, so there is less room for a third-party audit. But we still have enormous opportunities in the second-party audit as it is more flexible and diversified," she said.[Hong Kong Company Formation & Registration]
Despite their openness to auditing and testing, Yan said Chinese customers do not pay as much attention to certification as in developed countries. The Chinese government should strengthen its supervision of firms, and make them face tough penalties if they break laws concerning consumer safety standards, she said.
"In Germany, there are many professional magazines evaluating products from garden machinery to automobiles, and consumers will refer to these products before buying. But in China, the supervision system hasn't been established and consumers' purchases are heavily dependent on commercials," she said. "The Chinese government is becoming more open and transparent, but it can do even better."
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