The Shaping of Chinese Corporate Social Responsibility

Abstract

There is increasing evidence that corporate social responsibility (CSR) is emerging as a management issue within Chinese business (Moon and Shen 2010; Yin and Zhang 2012). The main drivers of this movement, which are commonly discussed, include domestic political will and international pressure. However, what is less understood is the nature of the shaping of CSR. As a concept, CSR has been widely interpreted as the way companies take into account interests of a broader range of stakeholders beyond owners and shareholders of the firm. Hence, it is about the way firms develop policies and practices to minimize the negative impacts and even increase the positive impacts of their business practices on various stakeholder groups. In a Western context, the rationale for CSR has been explained as a result of interaction between business, government and society where institutional pressures that develop from these interactions lead to certain expectations regarding the nature of business practices. This is where firms increasingly see CSR as a strategic approach to maintaining and enhancing legitimacy and reputation so as to ensure the buy-in and loyalty of key stakeholder groups such as employees and customers.

Next to this more instrumental view, it has also been identified that firms can have more normative motives for CSR – seeing it as the right thing to do. In addition, another explanation looks at CSR as a form of window-dressing or “green-washing”: a superficial, mostly communicative tool to enhance the image of the firm without making any substantial changes within it. Do the latter rationales apply to the Chinese context? This topical issue aims to shed some light on the nature of CSR in China and to identify key elements of the direction that CSR in China is moving.

Particular focus will be placed on how CSR is being shaped in China through the interaction of business with a variety of stakeholders, including government, employees and societal groups. From a business perspective, the definition of “stakeholder” places the firm in the centre of analysis and refers to “any group or individual who can affect or is affected by the achievement of the firms’ objectives” (Freeman 1984: 25). Thus, a group or individual could represent employees, shareholders, customers, suppliers, governments, communities, media, competitors, analysts, trade unions, NGOs and the general public (Mikkila, Kolehmainen, and Pukkala 2005; Su 2007; Greasley 1999; Clarkson 1995; Van Tulder and Van der Zwart 2006). Bailey and Bryant (1997) categorize these “given” groups of actors as 1) the state, 2) multilateral institutions, 3) business sector, 4) environmental NGOs and 5) grassroots actors.

The differential roles of these stakeholders in shaping Chinese CSR in today's global context will be assessed by the four contributors to this issue, who will address the following three questions:

▪

Is CSR in China predominantly shaped by business–government interactions?

▪

What role do business–civil society interactions play in the shaping of CSR in China?

▪

How is CSR in China shaped by international pressures?

This introduction will first discuss the changing Chinese context conducive to the rise of CSR and map its history in China. Then it will identify instrumental actors in Chinese civil society and discuss the nature of interactions between the various stakeholders. The other articles within this topical issue will continue in a similar way, as contributors employ the stakeholder approach and focus on the differential roles played by state and non-state actors in shaping Chinese CSR.

The Chinese Context and Emerging CSR

The “opening up” policy in 1979, which began with the process of rural reform, has since seen exports grow from 18.1 billion USD in 1978 to over 1.19 trillion USD in 2009 (Nolan 2004; Xinhua 2009). Since the late 1970s, China has experienced extraordinary economic growth (exceeding 9 per cent per year over more than 20 years) brought on by the privatization and de-nationalization of economic enterprises, the opening of export markets and new partnerships of state cadres with transnational investors in addition to local township, provincial and domestic entrepreneurs (Nonini 2008).

Together with high levels of public investment, and the accession to the WTO in 2001, foreign direct investment (FDI) in China (transnational companies’ expansion in China) has been crucial to this growth and to the wider restructuring of the Chinese economy. From 1985 to 2010, FDI inflows rose from 2 billion USD to 105.7 billion USD (MOFCOM 2010). There has also been a significant outflow of investments from China into the global economy over the past five years. The financing corresponded with a massive upsurge in foreign reserve accumulation and a significant expansion of China's domestic economy, which grew 9.6 per cent in 2008 and 8.7 per cent in 2009 (China Daily 2009, 2010) despite the global economic downturn. In 2010, China's outward FDI reached 57.9 billion USD, nearly twenty times 2003 levels (Huang 2011). It is estimated that by the end of 2008 there were approximately 12,000 businesses with Chinese capital in 174 countries (MOFCOM 2009).

This rise of China's economic development was accompanied by increased unethical and unsupervised practices from private enterprises, resulting in heightened levels of social and environmental violations as well as environmental degradation. Challenges such as water scarcity and quality, industrial pollution, labour conditions, product safety, corruption and income inequality are issues to be tackled by the Chinese government (Zadek, Yu, and Forstater 2012). Although the central government recognized the need to address these issues, the absence of an independent judiciary sector, ambiguous laws and poor enforcement capacity have led to China falling short of its reform targets (Seymour 2005). Indeed, the biggest challenge facing the enhancement of environmental protection in China is how to “regulate the behaviours and relationships of various stakeholders – different levels of government, the industrial sectors, and the public” (Fu 2008: 611).

The latter challenges have evoked a series of governmental actions, and the Chinese government is increasingly looking to business for help in addressing policy shortcomings. Hence, the role of the private sector has also evolved from the economic core responsibility of securing profits for its shareholders, to engagement with wider social issues, such as the use of natural resources and the impact of their business on the environment, poverty and health (Moon and Shen 2010). In fact, many firms have started to assume social and political responsibilities that go beyond the legal requirements and fulfil functions of protecting and enabling citizenship rights (Scherer and Palazzo 2011). As such, CSR has become a feasible tool for mitigating the impacts of a neoliberal economy. For example, it was utilized in the forming of institutional policies, where investment practices took into consideration environmental, social and labour impacts. Furthermore, CSR was able to positively impact the implementation of global measures, such as the International Organization for Standardization (ISO) standards (ISO 14001 and ISO 26000), the UN Global Compact (UNGC) and the Equator Principles (EPs) regarding social responsibility. These global standards were either adopted (for example, the EPs) or adapted (for instance, the Forestry Stewardship Guidelines: see Tan-Mullins in this issue for details) to the local Chinese context and then put into practice through CSR activities such as philanthropy or pre-project environmental impact assessments (EIA).

History of CSR Uptake in China

Historically, CSR was driven by exogenous factors, and first made its appearance in China in the mid-1990s (Zhou 2006) with multinational companies (MNCs) bringing Western CSR norms and standards into the Chinese market during the “anti-sweatshop” campaign that opposed working conditions in factories. Chinese companies then, as suppliers to the global assembly plants, were socialized to accept CSR requirements (particularly labour conditions) as part of the basic prerequisite to compete in the global market. However, CSR was not widely accepted based on the argument that it was a confusing Western concept, with many standards that did not jibe with the Chinese reality (Wang and Juslin 2009: 436). Since then, other international drivers for CSR in China, such as global market demands and socialization by international and non-governmental organizations, prompted the passive acceptance of CSR. For example, some NGOs and MNCs have drafted “codes of conduct” specifically for Chinese business, including the “China Business Principles” of the International Labour Rights Fund and Global Exchange (Wang and Juslin 2009). What can be concluded here is that CSR was mostly driven by external factors rather than a firm's internal desire for normative change.

Indeed, in China, the government has had a bigger role in pushing CSR, at times prompting intellectuals to give a tongue-in-cheek response as to whether to rebrand CSR in China as “government social responsibility”. This is because as early as 2003, CSR was given a legitimate boost with the proposed “Scientific Development Concept” of President Hu Jintao. Together with the later “Construction of a Harmonious Society” idea, the Chinese government demonstrated clear interest in promoting CSR proactively (Zhou 2006). Henceforth, enacted laws and regulations became the main drivers of CSR uptake in China. Combined with increased media concerns, which raised public awareness on topics such as environmental pollution and labour conditions, CSR was further promoted. An example of change can be seen in the new Company Law, enacted in 2006, which stated:

Corporations in their business operation must abide by the laws, regulations, social and business morality and good faith rules, must accept supervision by government and the public, and must undertake social responsibilities (PRC 2006).

In 2007 the Ministry of Commerce also issued a circular on “enhancing environmental surveillance on exporting enterprises” to restrict socially irresponsible enterprises from conducting foreign trade (MOFCOM 2007). The measure was partly in response to poor business practices and an overall poor performance in responsible competitiveness, which hindered China's strategy to produce products with global followings (Zadek et al. 2009: 33).

The drive for CSR adoption by Chinese enterprises was further consolidated with the CSR guidelines for SOEs issued by the State-Owned Assets Supervision and Administration Commission (SASAC) in January 2008. The guiding principles define CSR in terms of “actions to implement the philosophy of scientific development” and require SOEs not only to develop in a people-centred, “scientific” way and make profits, but also to “take responsibility for all stakeholders and the environment, and ultimately to harmonize the enterprise with social and environmental development” (SASAC 2008). Combining education and regulatory tools, the first CSR report from an SOE was published in 2005, by the State Grid Corporation of China (SGCC 2005). Nearly 200 Chinese companies also joined the UN Global Compact in 2008, an initiative through which firms commit themselves to ten principles in the areas of labour, environment, human rights and anti-corruption (Zadek et al. 2009: 31). Today, more than 70 per cent of the largest 100 companies publish CSR reports (Zadek, Yu, and Forstater 2012). Most reports address issues such as employee management, product quality, social contributions (philanthropy) and environmental governance (mainly pollution).

The major businesses in China are usually the state-owned enterprises (SOEs). The entanglement between the state and business enterprises further complicates transparency issues, as accounting between the state and the SOEs is difficult to assess. The SOEs are usually supervised by MOFCOM and SASAC. In 2002, the government selected some 50 globally competitive national champions from the most promising or strategic SOEs in China. The policy was designed to develop the corporations’ technological skills, exploit China's comparative advantages, gain access to key inputs, open new markets abroad, create global Chinese brands, and help China to avoid becoming overly dependent on export-led development (Accenture 2005). In addition to the key SOEs, there are hundreds of others that are equity-funded by different government agencies (Chen, Firth, and Xu 2009). Local SASACs (those at the provincial and city level) handle SOEs within their respective jurisdictions, with independent powers over SOEs delegated to the local level.

Due to the former arrangement, Chinese companies have a very different perception of CSR than do Western companies. A survey by the Chinese Academy of Social Sciences (CASS) of Chinese business leaders showed that their understanding of CSR entailed contributing to the expectations of their communities through local economic growth, complying with local laws, caring for the environment and making donations to schools and hospitals (Illegal-logging.info 2007). Chinese firms tend to focus more on the philanthropic and charity aspects than the transparency and accountability of their investments (Anonymous 1 2011). Indeed, one key difference between Chinese and Western conceptions of CSR concerns the extent to which the Chinese are willing to consider whether business practices reinforce or undermine local legal and political institutions, particularly in institutionally weak countries. While the Western model for overcoming state corruption in managing natural resource revenue is based on encouraging transparency, the Chinese model tends to rely on the direct provision of public infrastructure, especially in Africa (Forstater et al. 2010).

Emerging Actors, Evolving CSR

While the companies’ approach towards CSR is mainly reactive to changing domestic circumstances and global demands, the Chinese government's push for CSR is confined to enacting legislation; however, implementation and enforcement have been relatively lax (Sarkis, Na, and Zhu 2011). This is mainly attributed to the decentralised system of governance in China, where the central government delegates implementation and enforcement authority to the regional and local governments. Moreover, a local bureaucrat's performance is mainly assessed by the central government based on whether s/he reaches the economic targets (Tong 2007). Thus, the undervaluation of the social and environmental well-being in the assessment may lessen the priority given to CSR, as well as that given to social and environmental protection. Although the government regulations encouraged and promoted the uptake of CSR by Chinese firms, actual implementation still relies on the voluntary will of businesses. As such, CSR in China could be considered as a “green-washing strategy” to comply with the government's legislation with few actual impacts and outcomes.

The green-washing image is further solidified by the limited role that Chinese civil society plays in creating policies and addressing societal issues. Chinese civil society is comprised of actors beyond the state such as the media, NGOs and local leaders. In the realm of CSR, an NGO's focus could range from environmental matters to labour and gender rights. Although the number of social organizations (NGOs) in China reached 186,000 in 2006, the role of civil society was not perceived to be prominent until the late 2000s. The situation was partly attributed to state–civil society relations whereby decision-making authority and control of information is concentrated in the hands of the Chinese Communist Party (Tilt 2009: 9). All NGOs in China have to register with the government. The application to establish an NGO stipulates that none can be set up by “specific social groups”, such as migrant labourers, laid-off workers or ex-servicemen. NGOs with politically sensitive agendas, such as human rights and ethnic-minority rights issues, are not allowed to formally register either.

The government has also prevented NGOs from growing too big and powerful by prohibiting them from setting up regional offices, which in turns curtails their growth. In addition, the Chinese government does not allow new NGOs to be established if there is already an NGO doing similar work in the same administrative area. Finally, NGOs do not have any ability to raise funds. However, environmental NGOs (ENGOs) are allowed to proliferate due to the government's explicit commitment in law and policy to strict environmental standards. Another reason for the rise in ENGOs is that environmental issues are increasingly being considered by government officials to be a non-sensitive subject (Tilt 2009: 126). Furthermore, ENGOs act as an extra set of eyes and ears for the government, helping the state monitor and report business violations.

What is more interesting in this vein is that CSR has become an empowerment platform for NGOs – especially those working in non-sensitive areas (such as the environment) – to participate in and influence the operating practices of private firms, as exemplified in the papers in this topical issue by Moosmayer and Davis, Whitehead, and Tan-Mullins, but also in the sensitive area of employee–employer and industrial relations (see paper by Hofman, Wu and Liu in this issue). Although CSR was originally conceptualized as a business management and ethics strategy and has been researched extensively by academics such as Carroll (1979, 1991, 2008), Wood (1991), De Bakker, Groenewegen, and Den Hond (2005), Bondy, Matten, and Moon (2004), Swanson and Fisher (2008), McWilliams, Siegel, and Wright (2006) and Moon and Shen (2010), this rich array of business literature has spurred discussions in other social science disciplines as well. Focusing on motives in fields such as political science and sociology, the impacts of CSR on development paradigms and its role in social policy, governance and democracy has been exemplified in the works of Sklair and Miller (2010), Lyon and Maxwell (2008) and Scherer and Palazzo (2011). Additionally, Moosmayer and Davis's paper (this topical issue) demonstrates how NGOs, both international and local, are using the CSR platform to challenge the environmental practices of firms operating in China. At the local level, Chinese NGOs engage with concepts of branding to influence Chinese suppliers, while at the international level, global NGOs seek to influence Chinese standards through legislation and the implementation of standards. Together, the NGOs have managed to support the state in terms of enhancing the quality of environmental protection practices.

Enhanced support has occurred not only in the domestic context, but also in overseas CSR by Chinese firms. In his paper, Douglas Whitehead (this issue) discusses business–NGO relations in overseas settings. By examining the environmental conduct of Chinese hydropower in the Greater Mekong Subregion and the overseas impacts of Chinese CSR practices, he argues that dam-building has great environmental implications due to the scale and modification of nature; hence there is an urgent need to engage SOEs in this sector. Writing from a practitioner viewpoint, his paper demonstrates the complex process in which an NGO socializes Chinese state enterprises into global norms of CSR practices regarding the environmental and social aspects of dam construction.

Although environmental NGOs have more leeway in terms of the process of negotiating with and socializing businesses, there is an interesting trend in China whereby labour organizations are beginning to gain prominence on the issue of company CSR. Hofman, Wu and Liu (this issue) show how CSR opens up opportunities for the creation of alternative communication channels in firms through which workers can voice their concerns. Workers feel that existing channels benefit and are dominated by management. The emergence of socially responsible practices by Chinese supplier firms in collaboration with labour-oriented civil society organizations and international stakeholders indicates the presence of supplier firms whose mindsets are changing towards more intrinsic and substantive CSR.

Finally, despite the positive change in the increasing proliferation of non-state actors’ engagement in the policymaking process, in various environmental, social and labour fields, this perceived sharing of power in the decision-making process is carefully controlled by the state. As illustrated in Tan-Mullins's report (this issue), certain aspects of policymaking, such as environmental issues, are receptive to input by non-state actors. However, if the area of debate concerns national security issues, such as energy and territorial disputes, participation by non-state groups is severely restricted. This demonstrates that the politicization of CSR initiatives in China has become a substantial platform of empowerment for non-state actors, despite the viability of contribution being dependent on the willingness of the state to share power.

Conclusions: CSR as a Governance Tool?

In the case of CSR in China, this topical issue takes the stand that the role of non-state actors is still relatively submissive to the state's role in terms of promotion and adoption of CSR policies. Although CSR should originate from businesses, with input from multi-stakeholders such as communities, civil society and the public, the Chinese government is still the main agent of change in shaping CSR outcomes. However, rigorous national policies and effective international collective action are required in the face of rapid globalization, the expansion of neoliberal approaches in management (Perreault 2005; Mansfield 2004) and the lack of effective regulation, combined with increasing economic and ecological interdependence (Esty and Ivanova 2004: 17). Traditional government institutions could not respond effectively to these new problems and changes (Griffin 2008: 461), and there was a move from a state-centric approach towards a collaborative management approach involving a diverse group of players including public and private actors, a phenomenon commonly termed “multi-stakeholder governance”. Glimpses of this new collaborative governance are beginning to materialize in China, evinced by the results of fieldwork laid out in the various contributions in this issue. The shift in governance style confirms a reconfiguration of power relations between state and non-state stakeholders, which raises more important questions such as: Who decides what? Who governs?

The questions above led the authors of the articles in this topical issue to assess whether CSR uptake in China will truly promote structural change, or exist only as a window-dressing strategy to enhance the image of Chinese businesses locally and internationally. It has been concluded in this issue that there are still major challenges to getting Chinese firms to accept CSR despite strong political will from the Chinese government to improve governance. The foremost challenges are transparency and accountability. Due to the political, cultural and social situation in China, it is extremely difficult to discuss transparency issues. This is because the act of gift-giving is considered an integral part of Chinese culture, which has also led to it becoming an outlet for bribery and corruption. For instance, during the Mid-Autumn Festival it is traditional for businesses to give “moon cake” pastries in elaborate boxes that are often stuffed with cash notes to “build a relationship” (, guanxi) or offered as thanks for favours rendered. Such practices prompted the current president of China, Xi Jinping, to take action to curtail corruption, especially by government officials. However, achieving objectives related to transparency and accountability will involve a gradual change of the cultural mindset, which requires a long-term plan.

In addition, the lack of knowledge, information and skills to translate CSR policy into practice is a major obstacle to substantial change, especially in the global context. For example, SOEs such as Sinopec have comprehensive CSR programmes published on their websites (Sinopec 2011). However, it is important to note that the context of CSR mentioned by Sinopec is mainly in China, and overseas investment locales such as Africa and Asia are not mentioned in the CSR statements. Additionally, while Chinese CSR initiatives are in theory universal, they are implemented differently in overseas projects due to varying local conditions of the host countries. Hence, Chinese SOEs enter new markets with complex environments of heterogeneous legal and social demands that often do not make it clear which economic activities and practices can be considered legitimate and acceptable (Scherer and Palazzo 2011). Furthermore, there is a vacuum of enforcement as local governance can be lax or nonexistent, particularly in weak or failed states that abound in Africa and Asia. In such cases, the burden of enforcement of CSR programmes falls exclusively upon corporate managers, who might not be adequately trained to manage social, labour and environmental issues (Anonymous 2 2011) or who use Chinese guidelines as a yardstick, which could be considered substandard compared to global norms (Scott 2012).

Therefore, it is important to transfer knowledge, skills and know-how in CSR management and implementation. This could be achieved through intensive collaboration and exchange of knowledge between Chinese firms and foreign experts, such as those from the EU and US, as well as international CSR consultants and businesses and CSR practitioners. It is through continuous exchange and collaboration that CSR will be seen as an effective mechanism of empowerment for positive change, improving the livelihood and security of the affected multi-stakeholders.

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