COSCO Sustainable Development Report 2005

COSCO Group’s development will play an active role in boosting the international trade and economy. Ships and containers with the conspicuous "COSCO" logo are shuttling among over 1,300 ports in more than 160 countries and regions around the world, building bridges for the development of the international economy and commerce, shaping the image of “high-quality and high-efficiency service” in their industries of international trade and shipping. The group has gradually built up an image of responsible global enterprise. ?

Shipping enterprises take the position as system integrators in the logistics supply chain, which affect the upstream & downstream development mode and regional development mode. The core competitive capability of shipping companies plays a key role in the whole logistics supply chain. As a system integrator, COSCO Group horizontally develops the integral competitive capability of its fleets of container, dry bulk cargo, tanker and special vessel, and longitudinally develops the competitive capability of worldwide supply chain extending from shipping to two-end logistics, to drive the healthy, stable, and sustainable development of the whole supply chain.

Powered by fuel, shipping companies live in an ocean-related industry of high risks and are of great responsibility in security and environmental protection.

With the globalization of economy, which has changed the market rules, the focus of the competition among multinational companies has been shifted from hardware to software, and from technology and product to social responsibility conception and moral level. Advanced responsibility conception and behavior have become the indispensable key competitive capability for companies to make success.

The logistics industry is in higher risk, due to unbalanced economic development among different countries, excessive fluctuation of international exchange rate, more and more evident global commerce protectionism, occurrence of many frictions and collisions in international trade, and impact on imports and exports brought about by China’s position in the center of commerce friction.

Since the September 11 Terrorism Attack, the average insurance premium on the global business wealth and debt has been up by 30%. The security measures increase the cost of international trade by 1-2%. The instability of international security increases the uncertainty of the international commerce growth. The complicated and changing international environment makes the peace and development uncertain and unstable. With the interweaving between traditional and non-traditional security threat factors, the harm of terrorism is exacerbating, which leads to the hike of anti-terrorism cost for shipping companies.

The hike of the global oil price will weaken the profitability of a shipping company while the shipping industry is in depression, and then affect the development of the company. The serious energy problem makes the company to meet the challenge of energy saving while increasing its shipping businesses. Therefore the enterprise has to pour more investment in energy saving technology and equipment.

While the global economy is stepping into a new cycle of growth, the economy develops more rapidly and the international trade accelerates expansion, which will provide a huge market for the development of the shipping industry and other related industries. The increasing demands on the supply chain business management worldwide offer a good opportunity for the rapid growth of COSCO Group.

With the implementation of China’s 11th Five-Year Plan, the bottleneck restrictions and system obstacles for domestic development will be gradually broken, the national economy will keep stable development and the market demand will be stable. The perfection of modern enterprise system and modern property right system and the healthy development of national macro control system will provide more loose policy environment for the enterprise to perfect its operation and management mechanism.

The development of China’s economic trade and shipping market is playing a more and more role in the development of the international shipping market. The emergence of “China Factor” provides a strategic opportunity for the development of COSCO Group.

In the new century, Chinese Government has put forward the target of building a harmonious society, according to the new situation of economic and social development, and based on the whole situation of opening China’s new socialism cause, the objective requirements of adapting to the new phase of reform and development, and the basic interests and common wishes of the masses.

The construction of a harmonious society is a great and lofty social project that needs the joint efforts of all the country. The participation of Chinese enterprises, the main body of the national economy, is of particular significance. An important state-owned enterprise, which is significant to national security and national economy vitals, COSCO Group will play a leading role during the construction process of a harmonious enterprise, and make contributions to the building of a harmonious society.

To build up a harmonious society, China is supposed to persist in human orientation, and gradually shift the focus from one-sided economic growth to the integral development of both human beings and society. To build up a harmonious enterprise, an enterprise is supposed to persist in human orientation, show soul concern, and establish harmonious enterprise culture fit for enterprise development. COSCO Group must firmly follow the scientific development view and focus on the shaping and promotion of enterprise operation and management culture.

Only the permanent prosperity of an enterprise can ensure the basic interest of employees. Therefore, based on the 20 billion yuan of profit in 2005, we have put forward the target of “Creating 10 Billion Yuan of Annual Profit, Building Permanent COSCO”, and enhancing enterprise’ sustainable development capability, which has got powerful support of all COSCO staff.

Through reform, the group has established encouragement and restriction mechanism adaptive to the market economy system, and implemented annual salary system for second-tier unit leaders, appointment system for family members of employees stationed outside, ship accompaniment system for family members of senior crews, salary localization system for employees stationed outside, etc. The implementation of these systems has stably increased the earnings of staff, maintained their basic interest and improved their recognition and enhanced their cohesion for the enterprise.

The security is the life of an enterprise. A harmonious society is based on and guaranteed by the working environment and life safety of enterprise staff. Hence, COSCO has been making great efforts to shape featured security management culture, and has established long-term efficient mechanism to ensure continuous stability of security manufacturing and peaceful and content live and work for the staff.

It pays special attention to environment, promotes energy-saving and substitute strategies, enhances energy utilization, increases investments to environmental protection, improves environmental protection performance and sets up a mechanism for harmonious development with environment.

In recent years, the group has established its own featured modern operation conceptions based on the conclusion of previous experiences and lessons, such as the strategy of shift from ownership to control, the realization of maximum enterprise benefit, shareholder return and enterprise value. These conceptions have become the common value of enterprises.

Regarding the distribution system, the company keeps the principle of giving priority to efficiency and paying attention to fairness, trying to build up a human environment where fairness and harmony will drive the development.

The group’s enterprise culture of hardship in business opening and great contributions to the nation has had a long and deep influence on many generations of COSCO employees. The staff has a common expectation to pursue growth together with the group, which provides internal power and stable enterprise environment for the construction of harmonious enterprise.

With the society’s increasing expectation and concern on enterprises, enterprises of law abiding, faith, active assumption of social responsibility, and sustainable development are offered more and more powerful support, which provides more development capacity for enterprises. The pleasant social environment is boosting COSCO Group on the track to pleasant circulation development.