Corporate Responsibility in China: ‘A hundred flowers bloom, a thousand thoughts contend’

August 04, 2008

Corporate Responsibility in China: ‘A hundred flowers bloom, a thousand thoughts contend’

Liza Lort-Phillips on the emergence of corporate responsibility in China.

A changing business environment

As if businesses didn’t have enough to think about in China.. and now corporate responsibility to worry about? It’s an inescapable fact. And it’s not just the usual suspects that will be after you – raging NGOs and rogue journalists from your home markets accusing you of complicity in human rights abuses and offsetting your carbon emissions onto China. It’s a rather more powerful and long-term presence: the Chinese government itself, and alongside it, a growing generation of civil society activists, a media hungry for tales of corporate misdemeanour, and an increasingly ‘rights conscious’ citizenry.

Against a backdrop of untold environmental damage, a steady rise in labour disputes (a 300% rise over the past five years), an officially recorded 87,000 ‘mass incidents’ in 2007, and a string of high profile industrial accidents, it is perhaps no surprise that China has begun to question the viability of the economic model that has served it so well for so long. The truth is it is paying the price for 30 years of centrally planned economics and a double digit growth that has been the envy of the world.

Playing host to the Olympics this year should mark the high point in China’s career as the world’s superpower-in-waiting. But plenty of reputational hazards lurk in the wings. Becoming a global power has brought with it global expectations. How a Chinese mining company treats its Zambian workers is no longer just a ‘local difficulty’ but a global concern. Overtaking the US as the largest producer of CO2 emissions demands of it a global response. The abject misery of slave and child labour found in a brick kiln last year is a sharp reminder to the world of how many still suffer to make what ‘China Inc’ is today.

Having unleashed the might of capitalism and enterprise, the call for corporate responsibility is, ironically a vindication of the government’s own political legacy. That is, capitalism in its raw form cannot be trusted, and must be corralled and educated into sharing the broader needs and burdens of society – either as partner, or scapegoat.

The past two years has seen the language of corporate responsibility formally enter mainstream political parlance in China. There is barely a government department that has not now published its own statement, policy, guidelines or principles on CSR. Rarely a mainstream paper that does not devote growing column inches to the ranking, naming and shaming of companies on their social and environmental performance. Cynics may roll their eyes. Indeed there is a fair share of spin and plenty of less altruistic agendas at stake. But there is substance too.

When protests involving tens of thousands of citizens, armed only with mobile phones and online blogs, start forcing the closure of profitable (but polluting) factories, block the approval of large-scale investments in Xiamen, and accuse government and industry of incompetence, conspiracy and cover-up over an oil spill in Heilongjiang, it is clear that there is more at stake than just short-term reputational embarrassment.

From voluntary…to less voluntary

The emergence of new legislation, guidelines and ‘instructions’ over the past year points to a genuine sea change in the way business is expected to engage on and respond to China’s social and environmental challenges. The new Labour Contract Law, extends greater protection to workers, the State Council’s State Assets Supervision and Administration Commission (SASAC)’s ‘Instructing Opinions on State Owned Enterprises fulfilling social responsibilities,’ (which amongst other things expects SOEs to report on impacts) and the draft Recycling Economy Law – with its focus on energy use, emissions, waste and water management, are key developments.

While the detail, scope and enforceability of each are at varying stages of debate, the implications of all are clear. Businesses operating in China can expect to be more closely regulated, scrutinized, fined or incentivized on a whole range of social and environmental concerns.

Emboldened by the government’s support for anything that promotes energy efficiency, protects or saves water or reduces pollution, the State Environmental Protection Agency (SEPA) has begun to take on powerful vested interests at national and local level – aided in this task by quasi-independent environmental groups such as the Institute of Public and Environmental Affairs (IPEA), whose web-based monitoring of polluting companies around China has ‘named and shamed’ 40 foreign firms (amongst several thousand) for air pollution violations, and another 280 for water violations. While local enterprises are increasingly fair game, foreign companies often make bigger headlines and are generally a softer, and safer, target.

A growing number of voices

Increased attention and publicity from the State has fostered a greater consciousness amongst workers, consumers, environmentalists and the media, each with their own growing sense of rights and interests at stake, many seeking scapegoats, and all concerned about the deterioration of the environment around them.

Nokia has been one of several companies singled out for discrimination – held hostage by its public commitments to ‘global standards’ on diversity and the workplace. The Chinese are increasingly challenging what they view as double standards – companies failing to honour in China, the standards they claim to hold so dear and practice so reverently at home. As fast food and confectionary companies have been beaten up for making developed nations obese, they will be held to account in China for doing the same. Until ‘healthy meal options’ are on offer in China, it would seem that they’re fair game.

Business response

There has been a mix of responses from business to this changing environment in China, ranging from pioneering and pro-active, through to ostrich-like head in the sand. At the more proactive end, companies such as Microsoft, BP, Nike and Coca-Cola are developing programmes that speak to the concerns and priorities of central and local government, and the communities in which they operate. Key themes include migrant workers, discrimination, environmental education, energy efficiency and water conservation. Few would disagree that these issues are now fundamental business concerns rather than mere philanthropic exercises.

A new generation of SOEs and Chinese firms are also signing up to CSR. The growth in the number of Chinese companies now producing CSR reports is one indication that the agenda has traction – albeit often narrowly defined, and largely self-serving – but nonetheless evolving. A first generation of wannabe “Corporate Citizens” in China will increasingly influence the broader debate.
What all this means is that companies either sourcing from or selling to China will have to raise their game. Those with ‘global standards’ will be expected to demonstrate just how those are being lived out. The Chinese CSR dragon has awoken.

Liza is Associate Director at Corporate Citizenship. A fluent Mandarin speaker, Liza worked in China for 10 years, her first job as procurement manager for a state-owned brewery. She later became Director of APCO China, where she advised companies on a broad range of investment, government relations and corporate responsibility issues.