How Far Can Chinese Companies Take Corporate Social Responsibility?

February 23, 2009 | Print | Email Email | Comments | Category: Viewpoints

By Editors
The history of corporate social responsibility in China has as many variations as it has definitions. And understanding those definitions is key to realizing the assorted ways that companies and consumers have interacted in the past and how they will do so in the future.

While CSR has gained a critical mass of buzz in China in the last half decade ( started in 2003), many researchers point either to China's opening up in the late 1970s or even to 1949 as the start of China's commitment to connect the ascendancy of industry to providing a social good. For the former viewpoint, China's reforms in the 1980s and 1990s created an environment where businesses were held to higher standards and made to comply with new laws. And in the latter rationale for stating that CSR has its roots in the founding of the People's Republic of China in 1949, the creation of the "danwei" (Chinese word for "work unit") was key to harmoniously placing the interests of the people in direct connection with how they produced goods, how they were cared for, and how they were schooled.

Albeit these are simplified histories of the genesis of China's CSR movement, they parallel the disparate ways that companies — and consumers — have come to think of CSR in China. While CSR is generally considered the overarching moniker used for connecting business with its impact on society, other terms like sustainability, corporate citizenship, and green company are frequently used. And under those vague terms comes a layer of more definitive words such as cleantech, green building, supplier compliance, volunteerism, product safety, and charitable giving. Understanding that these words can mean both everything and nothing is key to determining whether a company is engaging in truly responsible behavior or is merely conducting a greenwashing campaign in China under the auspices of its misguided public relations firm.

While perhaps there was some hesitancy within the Chinese government a few years ago to fully embrace a more updated idea of CSR because of fears such as added costs to exporting goods, the situation has now changed. Not only are there new proposed regulations that foreign companies must submit their own sustainability reports within China, but various sectors within the Chinese economy have embraced both domestic and international standards to help propel Chinese businesses to greater heights around the world.

There has been a push recently to get Chinese companies compliant with the international SA8000 standard, and a few years ago, agencies in China worked with the European Union to formulate the China Social Compliance (CSC9000T) standard for the textile industry. On the heels of a tainted medicine scandal, a massive push was initiated last year to provide a transparent mechanism within which Chinese pharmaceutical companies could operate, and at the same time, the Chinese advertising industry was provided better guidelines to give consumers more trustworthy corporate propaganda from these same drug companies. Individuals are empowered too; Chinese media is filled with daily reports of consumers suing companies because of corporate irresponsibility.

And these varying initiatives underlie exactly how companies both define their CSR and make themselves more responsible to their stakeholders. A key difference between a company operating in China and one operating in Europe or North America is the hierarchy in which those companies place their respective stakeholders. Whereas a British company might focus on its customers and investors as its most vital constituencies, the government sits at the top of the CSR pyramid in China as the important stakeholder in a business. And partitioned further, a software company's key CSR focus might be on education, while a clothing manufacturer might be concerned more with worker safety. Just as every noodle is slightly different, there is no one way to formulate CSR initiatives across the business spectrum. Attempts at defining what is and what is not CSR usually come from the lips of paid "sustainability consultants" who thrive on confusing corporate executives with hollow caveats and hyperbole.

But while it's important to understand some of the varying ideas of how and when CSR developed in China, it is critical to understand where CSR is heading in the future. With Chinese firms like Haier, Lenovo, and Chery making advances into foreign countries, companies who were once reticent about embracing CSR as a business fundamental are now faced with a global supply chain that can easily cause havoc everywhere in the world if one small link is broken. Companies are proactively reaching out to engage government, consumers, investors, and suppliers in multifaceted initiatives to bolster legal compliance, create better brand equity, strengthen financial oversight, and ensure sound manufacturing principles. One employee in China working in a food processing factory who does not wash his hands can infect food shipped around the world and affect the company's brand over a long period of time. And the Internet delivers bad news around the world now faster than companies can react.

So faced with both the opportunity of grabbing new market share around the world and the risk that irresponsibility can impair that growth, Chinese companies are flocking to undertake CSR programs. The United Nations Global Compact and the Global Reporting Initiative have gained steam within China in recent years with more adherents, and more companies are creating CSR director and CSR manager roles. Hong Kong-based hotel chain Shangri-La recently unveiled a new sustainability manager position, and the Shanghai Pudong Development Bank has a team who work together on enhancing the bank's CSR functions.

The biggest CSR hurdles for Chinese companies will continue to be the same problems that plague their Western counterparts. First, as Chinese companies grow they will have more suppliers around the world. Each supplier is a potential weak point, and continual oversight is necessary. Next, every company runs the risk of greenwashing. After the Sichuan earthquake in 2008, some Chinese companies were ridiculed for not only giving too little in donations, but also for making the act of donating too much of a public relations gimmick. Finally, full commitment from a company's executive management and board of directors is intrinsic to encouraging corporate social responsibility to be deeply ingrained in all the business processes. Even during recessions, companies must focus on the long-term benefits of CSR.

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