The Uses of Corporate Social Responsibility in China

Introduction: Wu Chen, deputy director of the Social Resources Institute (社会资源研究所) writes about the various ways that CSR is used and abused in China.

The most important aspect of the formation, dissemination and use of any concept or theory is people. In addition, it is undeniable that people from different walks of life lack an understanding of the concept of “corporate social responsibility” (CSR). After the modern concept of CSR entered China, as in the West, people had to adapt their mindset. However, the historical context of state-owned enterprises managing social life posed a particular problem unique to China.  [Editor’s note: Here the author is referring to the work unit or danwei system that was part of China’s centrally-planned economy. While this system has receded over the last three decades, it still retains its imprint on contemporary Chinese society.]

On a global scale CSR has been applied on a voluntary basis. There have been calls for the mandatory requirement of CSR to be enshrined in law – for example, India is currently trying to pass legislation to require businesses to allocate a certain percentage of their profits toward CSR – but these efforts have aroused widespread controversy in academic, government and business circles. Those trying to constrain government power believe that this [mandatory system] will open up the floodgates for those attempting to obtain improper benefits from enterprises. Others seeking to constrain corporate power are of the opinion that companies would take advantage of this system to expand their influence. A Chinese proverb can be used to summarize: “you cannot criticize someone on whom you depend.”

State-owned Enterprises as CSR Spokespersons

In China, enterprises carrying out CSR can be divided into the state and private sector. Based on different enterprise types, we can also make distinctions between multinational, state-owned and private enterprise CSR strategies.

We can generate a 2 x 3 matrix, listing the main actors who could be considered as spokespersons for CSR (See Table 1):

The source of pressure on multinational corporations attempting to fulfill their social responsibilities mainly comes from consumer groups, and civil society organizations. Due to global anti-corruption regulations, multinational corporations tend to be more cautious in their cooperation with the government. When large disasters strike, responding to calls for donations from district and city governments where businesses are located, and donations to the Red Cross, Project Hope and other social organizations with government background, are currently the most common choice.

Table 1

The main CSR work of state-owned enterprises (SOEs) of making donations to support Xinjiang and Tibet, and organizations like the Red Cross, and Project Hope. Because it is difficult to distinguish between the SOEs and government, the CSR initiatives of these enterprises bears a strong flavor of administrative directives. Few SOEs have a clear CSR strategy, but when it comes to issuing their CSR reports, they do a very good job in aligning their disclosure indices with international norms, irrespective of the validity and completeness of the report’s contents.  Of course, this still reflects the will and strength of their governing body–the State Assets Commission. Therefore, even though SOEs mostly operate in high-risk monopoly sectors such as energy, chemicals, and hydropower, they also engage in high-profile publicizing of their CSR initiatives, and tend to be relatively transparent in disclosing information. But there are very few domestic NGOs that can take on these SOEs which have the capacity to shoulder any negative fallout that might result.

Private enterprises vary in size and have not completely emerged from their era of “wild growth.” Their CSR initiatives generally fall within one of two extremes: favoring local governments, or community residents.

We often see on television the scene in which an enthusiastic elderly citizen delivers a drink to a traffic policeman on a scorching summer’s day. Private enterprises often play a similar role to this elderly citizen, donating money and goods to various government departments. It is difficult to establish whether or not there is an element of duress involved and even harder to establish clearly which party is being compelled to act.

For private entrepreneurs, especially those involved in commercial or industrial enterprises who make their fortune in their native place, their business operations rely on people in the community.  These entrepreneurs tend to place more importance on the relationship between their business and the development of their community; therefore they have the interest and ability both in promoting the employment of local residents, and in improving the local infrastructure.

We therefore find that the CSR initiatives of multinational corporations reflect to some degree the interests of ordinary people due to pressure by consumers and NGOs. For somewhat different reasons, the CSR activities of private enterprises meet the needs of local communities to some degree because they are innately sensitive and realistic in the way they carry out their work.  In contrast, while China’s SOEs have always carried out some form of CSR, the true driver behind it comes not from the enterprise’s management or from its owners (the Chinese people), but from government agencies.

The modern concept of CSR has been around in China for nearly a decade, but the government has only begun paying serious attention to the concept for the last 4-5 years.  The abrupt appearance of SOEs as pioneers in the CSR field started solely because the State Assets Commission required SOEs to issue CSR reports. In fact, our previous analysis of SOE behavior shows there has been no real conception [of their CSR responsibilities]; the real beneficiaries are limited to the government or its crony organizations.

When we talk about those who use “CSR”, we need to clearly state the reality: anyone can use the banner of CSR to benefit their own interests under the condition that each side is relatively equal in power. . Therefore, when we talk about Chinese-style CSR, we will always find that we cannot avoid talking about the big SOEs, while those that are capable of engaging in a dialogue with SOEs on the issue of CSR are neither the Chinese consumers, nor the migrant workers whose wages are in arrears.

In 2012, China’s  railway construction faced a difficult situation. Migrant workers whose wages had been withheld by China Railway Construction Group (中国铁建集团) could only attract media attention by staging various performance art events. Not long before, the  “Dolls Demanding Back Wages” event took place in Yunnan.  [Editor’s Note: On August 19, 2012, 13 children raised banners in public in the town of Dali in Yunnan province to demand the back payment of their parents’ wages.] The target of this event was a subsidiary of China Railway Construction Group which had announced that it was facing financial difficulties. Yet a few days earlier, the Group’s publicly-listed company had published figures which showed that the Group’s profits had risen by 10 percent over the previous year, despite a slump in the construction industry. In these disputes over pay, the term CSR was never once used by the workers to assert their demands. This idea seems to be expressed only on happy occasions, and from the mouths of corporate public relations and government officials.

From “Advocacy” to “Consensus”

When CSR is only widely used in terms of “an assumed responsibility”, its meaning will slowly degenerate until the point that it lacks any real meaning and becomes an empty slogan. Its widespread use at all levels of government will have two effects. One is ideological symbolism thereby creating fear among private enterprises and keeping multinational companies at a distance. The second is to blur the boundaries of “responsibility” and “legal obligation” As soon as an enterprise obtains the tacit consent of a government department, it can engage in irresponsible business actions that should be punishable by law. For example, if we use the CSR framework to analyze the large number of food safety incidents observed in China, in fact we can see that there was a blurring of the difference between responsibility and legal obligation.

In my neighborhood community, there was a need for the property management company and owners to engage in a long-term negotiation over an increase in the management fees and finally the management firm stated it would withdraw. The Street Committee Office then issued a statement expressing their hope that the firm not forget its corporate social responsibility. [Editor’s Note: The Street Committee Office, sometimes called Sub-district Office, is the lowest level of government in urban areas.] That such a low-level agency is thinking of the issue seems to prove that the concept of CSR is deeply rooted in the hearts of the people. However, as a government agency, would it not be more appropriate for the Street Committee, in the face of a property company reneging on its contractual obligations, to remind the company to comply with the requirements of the Contract Law?

Here we can draw the conclusion, at least at this point in the development of modern China, that most of the real users of CSR will remain limited to corporations and government departments, and that CSR is evolving into a tool accepted by both businesses and the government. The group of NGOs that ought most to be advocating for CSR are skeptical about the concept and believes it allows companies to reduce their responsibility. Consumers, community residents, and migrant workers who have had their rights and interests violated are unable to understand the concept. For those making efforts to promote the concept of CSR, the current situation produces mixed feelings.