Market News

 August 17, 2006
The rise of Corporate Responsibility in China

 Guangzou, China - US based Business for Social Responsibility (BSR), a global organization that helps member companies achieve success in ways that respect ethical values, people, communities and the environment, has published an interesting series of articles by various writers in its Summer 2006 Newsletter (The View from the Middle Kingdom) which sheds light on the emergence of a CSR movement in China.

According to an article prepared by Doug Guthrie, New York University, Stern School of Business, and published in the BSR's summer 2006 edition of Leading Perspectives, China is becoming a hotbed for the convergence of corporate social responsibility (CSR) and development issues. Home to the largest export-oriented labour force in the world, China is the second largest consumer of oil and the largest consumer of coal. It also possesses a relatively weak regulatory environment. These factors taken together are of increasing importance to the world's environment and social culture.

Compared to Western countries, Guthrie points out, Chinese companies have developed rapidly and recently under very different social and economic conditions. In modern Western countries, the emergence of corporate social responsibility (CSR) did not emerge from enlightened self interest of corporations. Rather, it required individual citizens and civil society organizations to take an active and participatory role in pushing the agenda.

China, however, lacks a strong voice from its citizens and civil society; so under these conditions, and many have questioned whether CSR could work in China?

Zhou Weidong, a BSR staff writer answers this question in an article entitled "Will CSR Work in China. He notes that during the mid-1990s, Chinese exposure to CSR came from foreign multinational corporations mainly in the consumer goods and retail sectors that began auditing Chinese factories. Chinese enterprises passively accepted some of these foreign CSR requirements. At this time, the government, public, media and domestic Chinese enterprises had little exposure to the topic.

In the period 2000-2004, it was evident that Chinese suppliers felt increasingly burdened by excessive and often duplicative auditing efforts and demands. Also of importance during this period was the fact that several government departments began to pay closer attention to CSR.

Their overriding concern was that international organizations and multinational corporations might seek to link trade and labour conditions. Some government departments were especially concerned that improving CSR practices would increase the cost of exports.

As more Chinese government departments, business associations and trade groups conduct their own research on CSR, interest in the subject has broadened beyond export processing companies to include domestic oriented, state-owned enterprises (SOEs).

China's attitude towards CSR has also shifted from a passive approach (i.e. fearing economic sanctions and trade barriers) to an active and participatory approach. Today, even the Chinese government is playing an active role in CSR and is beginning to see it as a way to improve Chinese corporate competitiveness.

What to Expect Next

Based on China's short history with modern CSR, there are some trends identified worth noting that will likely impact all businesses in the years ahead:
  • Changing Government Role - Instead of trying to control things centrally, the central government will increasingly focus on creating the environment and control mechanisms that allow for growth, social harmony and environmental protection. Provincial governments will be encouraged to take the lead -- responding to frameworks and policies from Beijing, while focusing on attracting regional foreign investment, improving human resources and working conditions, and stewardship of the natural environment.

  • Civil Society Development - Civil society organizations will continue establishing themselves as independent organizations that represent a diverse range of community viewpoints and needs. Local Chinese NGOs, through collaboration and interaction with international NGOs, will increase their abilities to educate and impact Chinese citizens, corporations and policymakers on these issues. Likewise, international NGOs, through their collaboration with local Chinese groups, will learn how to adapt their practices to constructively work within the Chinese social, economic and political contexts.

  • Growing Media Coverage - With more government support for the idea of CSR, the Chinese media also is increasing its reporting on CSR topics. Multiple publications are now reporting on CSR. Last year several reporters in Southern China were sent on a study tour to learn more about how CSR is discussed in the UK. Upon returning, articles began appearing in newspapers to promote the topic. Moreover, there are now a handful of Chinese language websites devoted to CSR in China (such as www.syntao.com, www.csc9000.org.cn, and www.csr-china.net). Increased CSR reporting is a trend that will continue and the Chinese media will monitor CSR practices, uncover stories about labor and environmental challenges, and keep government departments responsive.

  • The Chinese Multinational Corporation - More Chinese corporations are entering the global stage as brand-name, multinational corporations. Recent examples include Lenovo, TCL, Shougang Steel, and China National Offshore Oil Corporation (CNOOC). As these corporations go through this transition, CSR can play a key role in reducing the risks they face. Ideas such as "stakeholder engagement" will go far in helping any Chinese corporation better understand how to meet and exceed new cultural, economic and political expectations as they access new markets. However, perhaps unlike other economies, in a centrally planned economy like China, if the value of CSR becomes widely accepted, China's largest SOEs may adopt these practices en masse to a very powerful effect. Time will tell.
The summer edition of Leading Perspectives is available here (PDF).