New Companies in the Public Interest Marketplace

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Introduction: CDB’s Editor, Liu Haiying, offers an in-depth, critical examination of the growth of for-profit, consulting companies in the public interest sector.  It interviews their founders, many of whom had previously worked in the NGO sector, about the work they do, the nature of their companies and their relationship with the larger public interest sector. How do they reconcile their profit motive with their public interest mission?  What are their views on the relationship between the for-profit and nonprofit sectors.  Do they see themselves as a bridge between the private and public sector? 

It seems almost as if overnight, one after another, several NGO practitioners have been starting their own advisory firms to provide consulting services for non-profit organizations and foundations. Duan Defeng, Feng Li and Wang Zhongping  have been in the public interest circle for many years, so people might find it difficult to recall the organizations they started: Recende CSR (瑞森德), China Philanthropy Advisors (CPA,  公域合力咨询机构) and Horizon Corporate Volunteer Consultancy  (和众泽益志愿服务中心).

In 2008, Li Zhiyan and his colleagues left the Transition Institute (传知行社会经济研究所) and started up the Social Resources Institute (SRI, 企业社会责任的社会资源研究所). That same year, [the Shanghai-based NGO] NPI  (恩派) founded the company, Corporate Citizenship in Action (明善道(北京)管理顾问有限公司). In 2009, Duan, who previously worked for Oxfam Hong Kong and the Haicang Charity Foundation, established Recende CSR. In that same year, Feng, who had worked for the Fuping Development Institute (北京富平学校) and YouChange Foundation (友成企业家基金会), established CPA. At the end of 2010, Wang, who had also worked at the Fuping Development Institute, established Horizon. [Editor’s Note: The founders of these consulting firms all came from major players in the NGO sector in China.  NPI and Fuping Development Institute are both well-known Chinese NGOs, Haicang and YouChange are well-known private foundations, and Oxfam HK is a large international NGO with many projects in China.]  Aside from these companies, several other public interest consultancy management companies founded by people from diverse fields have also been set up. In terms of numbers, these firms are just a drop in the ocean compared to social organizations.  However, the appearance of these new companies providing public interest services may represent a new change in this sector.

Market Opportunities

Among the newly established companies, the emergence of Recende CSR confirms that there are opportunities in the market for socially-oriented consultancy firms. Duan, the founder of Recende CSR, took advantage of the backing, support, and opportunities available at this stage of social development.

Before founding Recende CSR, Duan was the Secretary General of the Haicang Charitable Foundation, which itself was only established at the end of 2008. Before the official founding of the Haicang, he had already been deeply involved in its registration process and recognized how rapidly China’s private foundations were developing. At the time he predicted that very soon China would have 3,000 private foundations.  [Editor’s Note: As of 2011, the number of private foundations in China surpassed the 1,000 mark.]  His previous working experience gave him the firm belief that private foundations would become the funding backbone for the public interest sector, not only providing funding, but also increasing the sector’s effectiveness.

He felt that if he left Haicang, then he would no longer be tied to one foundation, and could do more. So, he started his consultancy firm in 2009.

The last among these firms to be established was Horizon Corporate Volunteer Consultancy. Wang, the founder, was previously a project officer at the NPO Information Center (NPO信息咨询中心) as well as a senior project officer at the Fuping Development Institute. After many years in nonprofit capacity-building work, he asked himself “We’ve been doing so much capacity building, but have these organizations really developed?” Later, he decided to focus all his energy on doing just one job, something that would have to be professional and effective. This “one job” was Corporate Social Responsibility (CSR).

Although the firm has been established less than a year, it has been in the works for a long time. In 2005 he started to research CSR and staff volunteering services, and soon began providing advisory services and training for dozens of well-known companies. He also built a staff volunteering service platform, assisted several multi-nationals in setting up staff volunteering associations, successfully planned and executed various events. In 2008 he saw the dramatically growing need for corporate public interest work. That year China hosted the summer Olympics and faced the aftermath of the catastrophic May 12 Wenchuan earthquake, two events which made everyone aware of what it was to be a volunteer. He noted that, “some people refer to that year as the ‘Year of the Volunteer’.  We take pride in 2008.”  The sudden rapid growth in their workload made him realize that he had chosen the right niche. From 2008 to 2010, he continued his work in this area and became known by many corporations for providing specialized services.  These experiences gave Wang confidence.

SynTao Sustainable Solutions (商道纵横) was established in 2005 as one of the very first specialist CSR firms in the country. In 2003, Guo Peiyuan, the founder of SynTao, was still a Ph.D student at Tsinghua University. Before establishing SynTao he had worked at the UN and the WTO. At that time he met his eventual co-founder Shi Wei’en. Shi had been paying close attention to the latest developments in US and European CSR investments for a long time, and was an advocate for investing based on socially-responsible principles. He is a co-founder of the Calvert Group, one of America’s largest CSR investment firms with over $140 hundred million (USD) under management. He is also one of the founders of the Social Venture Network.  Having such a partner enabled SynTao to have an edge internationally.

Before establishing his firm, Guo often attended meetings overseas. Seeing that Chinese enterprises were viewed by outsiders as sweatshops, Guo felt that Chinese businesses were weak on corporate social responsibility. In 2005 he and Shi decided to act. In the beginning, he set up a blog, and wrote news about CSR. He also registered a company, and used funding he had found to establish a website, employing someone to take care of its upkeep. After graduating with his Ph.D in 2006, he went full-time into building SynTao. He took on the multiple roles of founder, shareholder and staff member.

Using market techniques to promote social change is a core competency of these organizations. What they can provide to the public interest sector is their ability to use market methods to promote efficacy. Their target group is not grassroots NGOs, but rather companies and foundations with large capital bases. Although these organizations have not been established for long, from their very inception, they each have their own expertise that draws on the personal experiences and resources of their founders.

China Philanthropy Advisors Management Consulting (Beijing) Co., Ltd. was established by Feng Li in December 2009. For the most part the firm provides assessment of public interest projects and organizations, industry reviews and public interest sector training and consulting. The firm’s projects are almost all executed in cooperation with the NPO Research Center at Renmin University under Professor Kang Xiaoguang. The firm’s projects include the “Report on Cao Dewang and Caohui 200 million yuan Poverty Relief Donations Program” (曹德旺曹晖2亿元扶贫善款项目报告), the “Research Report on the Internal Governance of Private Foundations” (非公募基金会内部治理研究报 告), and the “2011 Report Reviewing China’s Third Sector” (中国第三部门观察报告2011).[Editor’s Note: Cao Dewang is the founder and CEO of the Fujian-based Fuyao Group and  one of China’s biggest philanthropists.  Cao Hui is his son.]

Recende CSR mainly provides services in four areas: the compilation of CSR reports, CSR strategic consulting and training, corporate public interest project planning and management, and strategic consulting services for corporate foundations. Recende CSR’s website also mentions fields like climate change and water pollution. Duan explains that there are certain fields that they are interested in, but only when their clients express a need, will they promote these.

Horizon Consultancy is an organization that specializes in corporate volunteer training, consulting and research.  Its services include specialist corporate volunteer services consulting, building communication platforms for corporate volunteer services, and promoting the theory-based research for corporate volunteering services.

For Wang Zhongping, the founder of Horizon, the public interest needs of corporate enterprises are extensive. Aside from CSR reports, volunteer services, and event planning, [those needs take] many other different forms. Currently, public interest organizations have yet to meet many of these needs.

These companies have come about as a result of changes in China’s economy and society. According to Guo, China’s CSR movement began around 2000 or earlier. It was the inevitable route for China to take following accession to the WTO. The earliest CSR work took the form of “factory checks”. A company would entrust a third party to examine the factories in its supply chain. At the start, Chinese enterprises were troubled by these checks, as factory checks were bound to increase their costs. Around 2003, the attitudes of relevant government departments such as the Ministry of Commerce and the Ministry of Labor, were still unclear. Only in 2004 did they begin to issue clear policy guidance. The key turning point was in 2008, when the Chinese government required national state-owned companies to make CSR a part of their business practices. This prompted enterprises to implement CSR measures. As such, more organizations had the opportunity to become involved in doing this type of work.

In contrast with the period when SynTao was created, the environment today is very different. There is no longer a need to explain to the customer or the media what corporate social responsibility is. The number of organizations specializing in CSR reports, consulting and management has also grown.

The founders of these organizations have clearly responded to changes and needs in the public interest marketplace.  Wang has noticed the impact of the external environment for corporate development on corporate public interest behavior.  Companies in the past had to exchange resources with government. The main form of corporate public welfare activity was direct donations. Donating to GONGOs was the best way to keep things simple. Companies have now begun to consider the effectiveness of public welfare work. Their behavior has begun to change. There has also been a change in the nature of public interest work, as reflected in the growth of businesses engaging in volunteer services. However, relatively speaking, in China the public interest work of a company is still largely determined by the attitude of its leaders.

In spite of these changes, NGOs are still unable to become the direct customers of [these consulting companies]. Guo’s college major was in environmental protection. Ten years ago he was a volunteer at various environmental protection organizations. He still maintains close personal connections with some of these environmental NGOs, and sometimes participates in environmental NGOs’ projects. However, SynTao has not worked with NGO partners. Guo says quite frankly “it’s not possible to involve NGOs in most of our projects, because there’s little opportunity for making profit.”

Can we understand the emergence of these consulting firms as the appearance of a division of labor and collaboration within the public interest food chain?  Guo does not agree with this assessment: “The logic of it isn’t like that. It’s not that only after things have developed to a certain level that you find things to market. Rather, it was possible all along for this to be marketed. It’s just that we only gradually realized this. If what you’re doing is of value, if it can create value for others, then there will be people who will pay for it.” He believes that NGOs are the same. After the work within the NGO sector has been subdivided, more opportunities will be realized.

Working with a Business Mentality

If we look at NGOs as part of the public sector, in theory, we can say that these third-party consulting firms are a bridge between the public and private sectors. Guo explains that outside of China this type of organization is very popular, because they are able to identify opportunities for collaboration between the public and private sectors. The appearance of a market for public interest consulting is only natural. As long as the third-party can reduce the costs of cooperation between Party A and Party B, then they are of value.

The notion that a third party can promote responsible and sustainable corporate behavior is based on the fact that mature corporations are already used to purchasing the services of a third party. Duan believes that in a lot of corporations, corporate public welfare is still something that needs the boss to give the final go ahead.  “If you’re inside an organization trying to lobby the boss, it’s going to be very difficult for you to sell him this way of thinking. The boss might even question whether you are motivated by the interests of your department or by personal gain. However, if a third party appears, the boss will be willing to hear what they have to say.” Third party consulting firms and enterprise are equal corporate partners. The interests of the enterprise and the consulting company are the same.  In the case of a NGO, the boss might be skeptical and wonder what their position is.

At a time when we are still trying to understand what is meant by social enterprise, these consulting firms are all the more willing to refer to themselves as businesses. In certain respects, Duan treats his organization in exactly the same way as a traditional company. On the Recende CSR website, the employee’s photographs are dressed up to look like corporate white-collar workers, while in reality at the company they dress much more casually. He emphasizes his hope that customers can easily understand that the organization is a company.  Recende CSR is the same as the traditional service providing companies that other companies purchase services from.  Guo also “only fears that others don’t know that we are a company”, as the services of the company have to be paid for, and they are not seeking donations.  On the other hand, Wang is not particularly concerned about whether his own organization is labeled a company. He says that they are an organization that is involved in public interest work, stressing their operational methods are more like those of a for-profit corporation.

Duan’s experience has given him thicker skin in dealing with awkward situations. Before entering graduate school at Peking University, he had eight years of experience working in sales.  “I’ve sold furniture, electric welders and washing machines. I do have a little understanding about how to serve others as a service company, as a partner. A lot of NGO people can’t get past their own air of self-righteousness.”

NGO Feelings Are Still There

After leaving Fuping Development Institute, Wang registered his organization as a company in Beijing for two reasons: first, the rate of success for registering a NGO in Beijing is low. Second, he wanted to use a social enterprise approach to solve social problems. This year Wang is going to register an NGO (minfei) in Shanghai, creating two parts to his operations. In his view, in order to undertake public interest activities, it is still necessary to win external recognition. Gaining the label “NGO” should help in this respect. At present, for-profit companies are generally not nominated for the awards given within public interest circles. Also, Wang hopes in the future to start doing community service. Doing this as an NGO is the most appropriate option. This also requires that he register as a NGO (minfei). I ask him: “what’s the difference between  Horizon Corporate Volunteer Consultancy and a NGO?” Wang replied “to be frank, our board of directors hasn’t been completely set up yet. At the moment we have advisors. If we set up a board of directors then we’ll be pretty much the same as an NGO. We place emphasis on the public interest nature and level of transparency of what we do.”

Before entering the Haicang Charitable Foundation, Duan was the communications coordinator at Oxfam Hong Kong. It is possible his sudden exit from the Haicang Charitable Foundation to establish a company is the result of a clash between the traditional principles of Western public welfare and those of a Chinese foundation run by entrepreneurs.  Duan does not try to avoid the clash between principles. “The key is whether the conflict is big or small, whether or not you can put it aside. Any two organizations are bound to have cultural and ideological contradictions between them. After all, the Haicang Charitable Foundation is backed mostly by private entrepreneurs. According to Duan, if it had started out with a ready-made, perfected system like Oxfam, then it would be out of the Chinese people’s comfort zone. This process of acclimatization is not something that can happen overnight.”

The aid work following the Wenchuan Earthquake in 2008 gave Duan a deep feeling for the need for mainland organizations to respond in the face of great disasters. The decision-making mechanisms of international NGOs take far too long, waiting for management overseas to make decisions via long-distance communications.  He remains convinced that Chinese private foundations will be a backbone of the public interest sector.

As a result of enterprises and corporate foundations entering the public interest domain in recent years, those committed to market-based, survival of the fittest principles have almost drowned out other voices. Even some influential and well-endowed public interest organizations believe that NGOs will have to rely on their own resources to survive. Duan has much to say about this view. He thinks that not every NGO needs to generate its own revenue. It’s not as if we should expect a government department and an enterprise to rely on their own resources in the same way.  If we look at society as a large machine, then corporations exist to produce goods while NGOs for the most part exist to spend money (and oftentimes do not generate profit themselves).

Some people from a business background, after entering the public interest sector, not only emphasize professionalism and efficiency, but also replace the traditional notion of a partnership between donor and NGO with relationships based on market-driven supply and demand. Some grassroots organizations are concerned about this, worrying that the core values of public service will be overturned by the power of capital. Guo is astonished to hear this. He even asks “is there really this worry?”

Wang does not mince his words: “I’m an advocate of competition, NGOs should be competing on the basis of survival of the fittest.” Upon asking him what impact the appearance of these consultancy firms may have on the public sector in the future, Wang laughs and says: “There are still not many of these organizations.  It’s still a very small group, not like the private foundations which have made a big impact. If I had to say what impact we might have, it would be that we could provide a model for NGOs wanting to be social enterprises.”

In Brief

CDB’s Editor, Liu Haiying, offers an in-depth, critical examination of the growth of for-profit, consulting companies in the public interest sector.
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