This article serves as an introduction to our new Special Focus on “Effective Communication and Cooperation between NGOs and Businesses”. It originally formed the introduction to CDB’s latest research report which we released in July 2015 (you can view the original here). Over the next few weeks we will be publishing translations of the ten case studies contained in that report. The case studies detail partnerships between Chinese NGOs, foundations, and businesses.
Businesses nowadays have become an important part of the philanthropy world. Enterprises or entrepreneurs, using their corporate resources and business models, have penetrated deeply and extensively into philanthropy. Apart from financial investment and material support, they have indirect or direct impacts on the sector, for example in terms of governance structure, team building, professional training, and credibility. Their growing influence has also affected the traditional values of the sector.
Why we need to discuss cooperation between businesses and NGOs
Although businesses have had a long history of doing philanthropic work, the communication and cooperation between NGOs and businesses in China is still in its early stages. In the past, most businesses involved in philanthropy had little to do with Chinese NGOs. How to cooperate with NGOs and build a healthy environment is a new issue for the industry. Many NGOs today are inclined to produce “social impact” and push for social progress at the micro-level. However, when it comes to the development of NGOs or civil society as a whole, the important factors, opportunities, and challenges often come from structural changes on a macroscopic level. These include the external changes of government policies and the corporate sector. To fully grasp this dynamic environment, one must combine macro and micro observations.
As the localization of philanthropic resources in China speeds up, businesses and corporate foundations that have great powers of social mobilization and social resources are becoming important partners for Chinese NGOs. Yet in general, there is still a lack of effective cooperation and communication between businesses and NGOs in China. The relationship between businesses and NGOs still remains on the simplistic level of resource demand and service supply.
This relationship should grow on the basis of mutual understanding, with both sides learning from each other and developing together. It should not simply be a vertical relationship of donating and receiving donations. Chinese NGOs, through communication, should understand the needs of Chinese businesses, learn from businesses the skills of management, marketing, and use business ideas to solve social problems. As for Chinese businesses, the purpose of partnering with NGOs is not just to deal with public relations in crisis situations or to improve the company’s image. They should strive to gain more knowledge about civil society and the social issues that NGOs deal with, improve civic awareness, and strategically realize the concept of corporate social responsibility (CSR) and sustainable development ideas. Moreover, because NGOs and business may have “conflicts of interests” due to their differing views and missions, it is necessary for both parties to have strong communication and transparent operations to find common ground for cooperation and to ultimately form a stable relationship.
China Development Brief has been working to push for the growth and capacity-building of Chinese NGOs for a long time through independent, objective, and accurate observations and by analyzing the latest developments and hottest trends in Chinese civil society. Considering the great structural changes that Chinese civil society is now experiencing, we believe that it must make efforts to break out of its insular shell and establish effective communication with other sectors. Through this, all sectors will be better able to reach a consensus on how to deal with challenges and seize opportunities for development. It is to achieve these goals that this report was written [the author is referring to the original research report available here].
The role of NGOs in the development of Corporate Social Responsibility
This introductory article will briefly examine the relationship between the development of corporate social responsibility (CSR) and NGOs in China. It is clear that the development of CSR was interconnected with social movements and market mechanisms at its very inception. China did not have consumer movements in the past, and campaigns promoting human rights and environment protection in the corporate sector have only started in recent years. As a result, the development of Chinese CSR in its early stages was driven by multinational co-operations and top-down reforms by China’s policy markers. But the participation of NGOs in the process later greatly enriched the movement.
Businesses and NGOs, with their own distinctive goals and missions, inhabit different sectors of society. It is only when they cross over on the issue of CSR that they become partners or competitors in the philanthropy field. The practice of CSR can be traced back to the 1980s when some American corporations caused great damage to the environment while operating their businesses. In order to avoid public outrage and criticism, they took precautionary measures to ameliorate the damage, and these attempts at rebuilding corporate images later became the foundations of CSR work. Yet the theoretical concepts of CSR had long before been coined by scholars in the early 20th century, reaching their climax in the 1980s, driven by international labor movements, human rights campaigns, consumer movements, and environmental movements and pushed by organizations within the framework of the United Nations. The direct driving force of CSR comes from consumer movements. Profits are the ultimate goal of all businesses, and consumers are the key element in the pursuit of profits, which means consumers’ opinions are valued the most by corporations, and corporate responsibilities that consumers pay attention to are the first priority of corporations. Under the pressure of consumer movements, multinational corporations started to focus on brand image and reputation. Surveys show that consumers, when choosing products and services from corporations, will gradually pay more attention to the company’s CSR work. CSR in its early days aimed mostly at improving labor conditions, but as more organizations with different aims and missions become involved and because of the complexity of the concept itself, the CSR movement is getting more and more complicated.
The changes and developments in cooperation between NGOs and businesses
When CSR became energised by the new social movements of the 1980s, Chinese consumers had not yet begun to understand consumer rights, and actions taken by social organizations (or NGOs) were rarely seen in the country. The establishment of the Chinese Consumer Association (the CCA) demonstrated the importance that the Party and the government were beginning to attach to the protection of consumer rights. However the real birth of CSR in China came from a combination of the need to incorporate international standards with the practices and innovations of the local business sector. For a long time Chinese consumer rights was represented by a single organization (the CCA) and became absorbed into the administrative system of China’s big government. At that time China did not have consumer movements. In general, the non-governmental forces in China, if not completely absent, were far less developed in promoting CSR than their international counterparts (Liu Haiying, 2013). The real and regular practice of CSR in China started from “Factory Check-ups” (查厂) by multi-national corporations in the 1990s. This refers to the practice of multi-national corporations checking their suppliers’ record of fulfilling social responsibilities (mostly the record of abiding by labor laws and regulations) before placing an order. “Factory Check-ups”, originated in Shenzhen in the 1990s, then gradually spread from the toy industry to clothing, shoes, leather, hardware and other consumer goods industries.
At the beginning of 2000, Chinese State Owned Enterprises started to research and experiment with CSR. Overseas, the assessment of corporate social achievements and social responsibilities had already started by the early 1990s. The “Dow Jones Sustainable Development Index” at that time already included corporate responsibilities to environment, society, and other interested groups. But China only began to make similar progress as late as 2006. In September 25th, 2006, Shenzhen Stock Exchange published the “Social Responsibility Instructions to Listed Companies”. Later on the Shanghai Stock Exchange published the “Guide to Environmental Information to Listed Companies”. Both called for listed companies to fulfil their social responsibility and push for social, economical and environmental sustainable development. On January 2008, the State-owned Assets Supervision and Administration Commission published the “Guide to Central Enterprises Fulfilling Social Responsibilities”. China has now has also created a series of sectoral CSR standards. Today there are also old, new, and amended laws and regulations that relate to CSR such as China’s Constitution, the Corporate Law, the Law on the Protection of Rights and Interests of Disabled People, the Law on the Protection of Rights and Interests of Women, the Law on the Protection of Minors, the Labor Law, and the Environmental Protection Law.
China implemented the Law on Donations for Public Welfare (公益事业捐赠法) on September 1st, 1999. It aims to encourage individuals and legal persons to donate to legally registered non-profit social groups (公益性社会团体) and non-profit institutions affiliated to the government (公益性事业单位) for the development of the public welfare sector. The law regulates “the act of donation and receiving donations”, protects the lawful rights of donors, recipients and beneficiaries, and it also acts as a guide for businesses to participate in philanthropy. Moreover, according to China’s Corporate Income Tax Law (企业所得税法), as long as philanthropic donations made through non-profit social groups or governments above the county level are less than 12% of the annual profits of a corporation, they can be deducted from taxable incomes. In some special circumstances, the government can also carry out other tax deduction policies to encourage businesses to make philanthropic donations. For example, after the 2008 Wenchuan earthquake, several departments jointly issued a document that enabled individuals and corporations to deduct before taxation 100% of the amount that they had donated to the stricken areas through non-profit social groups or governments and governmental departments above county level (财税 [2008] 104号). These tax preferential policies that come with philanthropic donations can help reduce the financial burdens on businesses, and donating to philanthropy have gradually become a useful strategy. On the one hand, charitable donations help corporations fulfil their social responsibilities and gain social recognition; on the other, today it has now become a part of corporate tax planning, helping them to make more effective and reasonable tax-related strategies.
Tracking back the development of CSR in China has shown that the role of NGOs, as independent third parties, was not significant in the early stages. The government successfully isolated China’s emergent consumer movement by executing administrative powers through the the Consumer Association. However today, 30 years later, the structure of Chinese society has changed: diversified interest groups have formed, and one single force or single organization cannot fix a problem where multiple interest groups are involved. Therefore, Chinese NGOs along with other social communities are now exerting their powers and influence like never before in pushing the development of CSR and social progress.
Additionally, the change in enterprises and entrepreneurs has also created better conditions for NGOs’ involvement in advancing the development of CSR. The rapid growth and accumulation of wealth in society and in private enterprises have provided a new material base for them to participate in philanthropy. The impact of this newly emerged class is manifested firstly in the control of the means of production and then the allocation of social resources. Through controlling their businesses, they can have an impact on society. Although the majority of them “have not yet passed, the early stages of development” (Xu Yongguang, 2009), as their control of the social economy is strengthening, the elites of the class are becoming more pro-active. Private wealth enters philanthropy as an independent agent, and philanthropy in turn becomes an ideal platform for enterprises and entrepreneurs to achieve their value-dictated goals. Since NGOs were early starters in the sector, and they have the advantage of expertise and close relationships with interest groups and related communities, they’ve now become important partners of those enterprises and entrepreneurs.
As described above, the Chinese public has witnessed the important role that NGOs have played in pushing for the development of CSR in recent years. For example Greenpeace’s forest protection program, pesticide detection program and GMO commercialization inquiry program are all successful consumer movements that have started in mainland China. These movements, unlike small-circle activities organized by NGOs in the past, have connected the media, corporations, and consumers. In recent times local Chinese NGOs are continuing to push businesses to take social responsibilities, and public participation has become an important part in the making of new laws such as the Environment Law and the Civil Procedure Law. In particular, the emergence of the Chinese environmental movement shows not only the awakening of citizenship awareness and the growth of NGOs, but also the improvement of government openness and tolerance. There are also examples of NGOs pushing for practices of CSR in the field of labor rights, including labor rights protection advocacy by NGOs, pro bono legal service, and college students’ acting as watchdogs over corporations. Some of these will be included in the translated case studies.
The first case study will be published in August.
