At the foothills of the Great Wall at Mutianyu, two mixed Chinese and American couples have built their version of an ideal business.
They turned an abandoned schoolhouse into a restaurant and art gallery. They opened a hotel in an abandoned tile factory and a noodle shop in an old stone farmhouse. They’re leasing several villagers’ homes and renting them to tourists. The food served at all of these places is organic-grown and comes from the couples’ or the villagers’ gardens.
It’s a business model built around supporting villagers by paying them fair wages, rent and service fees, and by helping them set up businesses – but also around making a profit.
“If you can’t meet your payroll, you don’t get to keep playing,” said Jim Spear, one of the founders and an architect. “You’re not helping anyone. So one of our important claims has been that we need to make sense as a for-profit business.”
In the 10 years since the partners launched The Schoolhouse, they’ve attracted as much as 100 million yuan ($15 million) in investment, they say. But the challenge is to preserve the sustainable principles by which they do business.
Although far less common than in Europe and the US, sustainable businesses are burgeoning across China. Community-supported agriculture is becoming popular, with city dwellers buying weekly baskets of chemical-free vegetables from suburban farmers such as Shared Harvest and Little Donkey Farm. Sustainable tourism and manufacturing businesses are also becoming more common.
At a larger level, more Chinese companies comply with international corporate social responsibility standards than ever before, though there’s still a long way to go, according to a report published by the US Chamber of Commerce-Asia in 2012.
And laws are starting to press for change across other industries.
The Schoolhouse’s success is being taught this fall as a case study in marketing and social responsibility at China Europe International Business School, one of Shanghai’s top business schools.
That may be a sign of interest in the field and of its potential for growth.
Challenges and Rewards
But for people who want to start a sustainable tourism or agriculture business, land itself could be the first deterrent.
China’s land-use law doesn’t give people the right to own land. They can lease it for up to several decades and own any structures built on the land, but they can’t take away the improvements at the end of the lease period.
The Schoolhouse’s properties are all leased from individual farmers or village councils.
“You get no title. You get no deed. It really is the villagers’ home,” said Julie Upton-Wang, one of the partners.
People are often concerned about their land being taken away or about the length of time they can use it, Spear said. His suggestion to business people is to regard the investment in the land as an expense to be amortized across the lease period and judge if it’s worthwhile.
Their venture started about 10 years ago. Spear and his wife, Liang Tang, bought a house in Mutianyu. One day, the mayor asked them to think about making a contribution to the community. The couple reached out to their longtime friends, Peiming Wang and Julie Upton-Wang, and started talking about opening a business.
Mutianyu was a tourism site, so they wondered what impact tourism had on the rural community.
“And it turns out that with big-scale projects almost all of the benefits go to outsiders,” Spear said. “Local people still get left behind. They might get some scut jobs, but they don’t get help starting businesses, they don’t get promotions, they don’t get training. So we wanted to have small-scale businesses because that way we could fit in with the local community rather than take it over.”
The problem with small businesses, Spear said, is that often founders work hard but still lose money. So their solution was to open several small operations – lodging, agricultural, restaurants – but under a single corporate umbrella, which could provide services such as HR, sales, purchasing, finance and marketing.
In the fall of 2006, they opened a restaurant and art gallery in the abandoned schoolhouse, and a lodging and a noodle shop in restored farmhouses. Preserving the original buildings and materials was part of the plan.
“The business advantage of keeping what’s already there is then you get a story,” Spear said.
During the 2008 Summer Olympics, The Schoolhouse hosted corporate events for high-profile clients such as NBC, Universal, General Electric, Coca-Cola, Visa and Hilton. With the income from that year, they recouped their investment and broke ground on a new project, the Brickyard hotel, on the site of an abandoned tile factory.
The businesses employ about 50 people full-time, 50 part-timers, plus service providers and construction workers when needed. About 80 percent of the employees are villagers.
Locals also provide vegetables and hand-made goods such as uniforms and spa pajamas. Spear hires locals to work in construction projects for other clients, and he has helped one villager to found his own landscaping business.
“We’re still in business after 10 years, we’re not bankrupt, we certainly haven’t made enough to go off and be able to retire,” Spear said about The Schoolhouse’s bottom line. “We work really hard. But that’s OK.”
The partners say they’re proud to have made a contribution and leave something behind, but also because they’ve stuck to their ethical practices and haven’t resorted to bribing or cheating.
“It’s not sustainable to cheat,” Spear said. “You may prosper for a little while, but in the longer run, you’ve built on a foundation of sand.”