ethical corporation china briefing march 2010

Since the launch of the Reform andOpening Up policies of the late 1970s

and early 1980s the People’s Republic ofChina has been on a prolonged trajectory ofeconomic growth. This growth saw thecountry achieve double-digit annual GDPgrowth for more than a decade, and evennow growth is topping 8%.

In large part the success of the Chineseeconomy has been predicated on twofactors. First, is the ability to produce goodscheaply and in large quantities for export,attracting multinational companies toincreasingly source products from China.Second, as labour costs remain low by inter-national standards and global supply chainsbecame increasingly integrated, so foreigncompanies have increasingly opened theirown manufacturing operations in China.

This has meant that China’s economicgrowth has been driven largely by exportearnings and inward investment, making

the country the “workshop of world” andthe planet’s largest holder of foreigncurrency reserves.

The range of products and goodssourced from China is staggering. Thelargest single buyer, US retail giant Wal-Mart, is, by some estimates, buying as muchas $27bn a year in Chinese goods. Crucially,as China has progressively moved up thevalue chain, the country has moved frombeing the producer of countless plasticgoods, toys, jeans and T-shirts to a producerof hi-tech mobile communications, cars,ships and iPods.

Workers without numberNobody really knows quite how manyfactories there are in China or how manypeople employed. As an indication, thegovernment admitted that 20 millionworkers lost their jobs with the downturn insourcing at the start of the recent recession.

Large companies work with a network offactories employing thousands in total. Forinstance, Nike is thought to have productsmade in 180 factories across Chinaemploying about 200,000 workers. Moni-toring operations as extensive as these hasproved a daunting challenge.

This sustained 30 years of expansion hasnot been without bumps along the road.China’s vast rural population has beensteadily urbanising, leading to massiveinternal migrations from the farms to thefactories. China’s cities have become hugemegalopolises with the government desper-ately trying to create new jobs to supportthose moving from agriculture to manufac-turing and services.

At the same time an internal revolutionhas been occurring as China’s large stateowned enterprises, the backbone of thecountry’s heavy industry, have been priva-tised, with many now listed on newly

Overview

Corporate responsibility, Chinese-styleBy Paul French, China editor, in Shanghai

As China’s economy has exploded, concepts of sustainability and business ethics have developed that differ from thosein the west

Country briefing: China

28 Supplying the planet33 Non-activism?34 State control

Country briefing: China26 Ethical Corporation • March 2010

created stock exchanges. And China’sbanking and finance system has been thesubject of repeated reforms.

Both these elements of reform have ledto any number of issues including emergingnotions of corporate governance, corrup-tion and labour rights – issues that have attimes, most notably during the TiananmenSquare demonstrations in 1989 and theirbrutal suppression, burst into protest andchallenges to the ruling Chinese Commu-nist party.

Put simply, China, the world’s mostpopulous country, is now heading towardsbecoming the world’s largest economy too.Yet it is still an economy and a country intransition. As fast as the economy hasgrown, and people’s expectations of higherliving standards have been raised, theChinese legal system, governance struc-

tures and social welfare policies have notalways managed to keep pace.

Now, in the face of the internationalrecession, China has begun to reorient itseconomy as export orders have slumped –away from a reliance on manufacturing forexport and attracting inward investment toincreasingly attempting to harness thepotential of the country’s domestic marketand its consumption capabilities. This desirewas most recently expressed at the DavosWorld Economic Forum by the Chinesevice-premier, Li Keqiang, a man tipped to beChina’s next leader after Hu Jintao standsdown. He said: “We will focus on boostingdomestic demand. The growth in domesticconsumption in China will not only drivegrowth in China but also provide greatermarkets for the world.”

China’s economic growth has brought

Socio-economic statisticsPopulation: 1.34 billionGDP (nominal): €3.2tn (2008)GDP per capita: €2,400 (2008)Monthly minimum wage: €78(720 yuan, 2007)Human Development IndexChina: 0.772(ranked 92 out of 182 countries).Hong Kong: 0.944(ranked 24 out of 182)

Current leadership:President: Hu JintaoPremier: Wen JiabaoType: Communist

Primary industries:Mining and ore processing, iron,steel, aluminium, and othermetals, coal, machine building,armaments, textiles and apparel,petroleum, cement, chemicals andfertilisers, consumer products,including footwear, toys, andelectronics, food processing,transportation equipment,including automobiles, rail carsand locomotives, ships, andaircraft, telecommunicationsequipment, commercial spacelaunch vehicles, satellites

China corporate responsibility factsheet

Tiananmen: all quiet now

Ethical Corporation survey results

Corporate responsibility statistics

Number of employees spending 50% or more time onCSR/sustainability:

38% have over 11 employees

17% have 5-10 employees

38% have 2-4 employees

4% have 1 employee

4% have none

Size of CSR/sustainability budget:

36% have a budget over €30,000

18% have a budget €20,000-30,000

9% have a budget €10,000-19,000

18% have a budget €5,000-9,999

9% have a budget €1,000-4,999

9% have a budget under €1000

Focus of CSR/sustainability team:

1. Partnerships and collaboration (50% indicated it as a mainactivity)

2= Energy efficiency (33% indicated it as a main activity)

2= Performance measurement (33% indicated it as a mainactivity)

Local sustainability leaders (most mentioned):

1. China Ocean Shipping Company (COSCO)

2. China Mobile

3. State Grid Corporation of China

4. Haier

Foreign sustainability leader (most mentioned):

1. Nike

2. Bayer

3. Volkswagen

4. Procter & Gamble

Guidelines and initiatives most preferred:

1. GRI

2. UN Global Compact

Top challenge/risk:

Change internal perceptions of CSR and gain support

Top three opportunities:

1. Energy

2. Provide value to business partners

3. Develop sustainable products

Guideline and standards statistics

Number of 2009 GRI reports: 47

Number of DJSI licensees: 1

Number of UNPRI signatories (Hong Kong only): 4

Sources:

• Socio-economic statistics obtained from recent publications

by the IMF, the CIA World Factbook, the European

commission, the ILO and the Human Development Index.

• Corporate responsibility statistics obtained from a

January/February 2010 Ethical Corporation survey.

• Guideline and standards statistics obtained during February

2010 from the official website of each initiative.

massive change for its 1.3 billion people.China’s urbanisation rate will reach 48% in2010, according to the Chinese Academy ofSocial Sciences and is expected to exceed thecritical 50% mark in 2012 or 2013. Urbanisa-tion is expected to spur consumption asChina’s roughly 200 million migrantworkers send money earned in the cities totheir families in the rural areas. China’snumbers are always vast – when the urban-isation rate grows by 1% about another 10million people have moved to the townsand cities.

In those towns and cities – and China hasmore than 660 cities of which 99 have popu-lations officially over one million – liveshave changed dramatically in the past threedecades. Vibrant property markets haveexploded, the number of service jobs hasgrown, educational opportunities haveexpanded and a swelling middle class hasemerged.

Huge problems remain – China’s socialsafety net is thin with poor medicalcoverage and an inadequate pensionssystem for a rapidly ageing society – and, ofcourse, while the past few decades haveseen massive doses of “perestroika” recon-struction there has been little to no“glasnost” openness.

Lack of freedomThere is effectively no independent judi-ciary, no free press and heavy censoring ofall forms of media including the internet.There are limitations on international traveland capital movement. As is well known,the Communist party brooks no challengeto its ruling legitimacy through either inde-pendent organisation, protest or democraticactivity, which is important when consid-ering the role of NGOs.

This then is the backdrop against whicha concept of corporate responsibility – qiyeshehui zeren – has begun to emerge andattract attention in China. Just as DengXiaoping announced that China wouldhave “capitalism with Chinese characteris-tics” so it seems that China’s evolvingnotion of corporate responsibility will alsohave its own set of caveats and distinctiveparameters.

To better understand this evolution inChina it is crucial to understand two divi-sions. First, contrary to popular definitionsin the US and Europe that highlight thevoluntary nature of corporate responsibility,most of the debate around corporateresponsibility in China focuses either onlegal compliance on the one hand or corpo-

rate philanthropy on the other.Second, there is a broad distinction

between the importance attached to corpo-rate responsibility, its implementation andenforcement between Chinese companies,whether private or state-owned, andforeign firms operating in China. Thegradual emergence and integration of many

Chinese companies, from oil firms tokitchen appliance makers, in the globalmarket has begun to change this, but it isstill fair to say that there is a major divide inapproach between local and foreign. This isoften a source of conflict and misunder-standing.

The result is that national and interna-tional stakeholders do not yet share acommon understanding of corporateresponsibility in China. Still less do share-holders in the west always understand the

constraints and the landscape companiesoperate under in China. This again has ledto problems.

Similarly, NGOs in China are not able tooperate with the freedom of movement andvoice they have in other countries. Thedevelopment of domestic company corpo-rate responsibility strategies, those offoreign firms operating in China and thenascent NGO movement are all guided bythese concerns and constraints. Under-standing these differences, and the fact thatthe Beijing government will evaluate anycorporate responsibility initiatives in termsof its two major objectives – staying inpower and promoting the slogan of a“harmonious society” – is crucial to evalu-ating what is achievable in China andmeasuring progress.

The result has been a growing conver-gence between the corporate responsibilityactivities of domestic and foreign compa-nies in recent years as Chinese firms expandtheir definitions of corporate responsibilityand foreign companies come increasingly toseek to raise their profile domestically ratherthan simply respond to overseas criticisms.And so, it’s been a busy time for corporateresponsibility in China recently. �

Country briefing: China 27

China’s evolving notion ofcorporate responsibility willalso have its own set of caveatsand distinctive parameters

Ethical Corporation • March 2010

Urban bright lights burning strongly

China has been a major challenge for thecorporate responsibility profession,

mainly because it is so important. Most bigclothing, electronics and automotivecompanies, and countless firms in a host ofother industries, source primarily fromChina.

While western buyers were enticed byattractive pricing, many failed to make surethat their Chinese partners could live up totheir technical and logistical requirements.Supply chains became problematic. WhenChinese suppliers struggled to meetproduction schedules, buyers used expen-sive airfreight, for example.

Quality issues also surfaced. Chinesesuppliers often lacked the skills to maintainprocess control and implement engineeringchanges. The combination of problemsoften eroded the expected cost savings.

Just before the 2008 Beijing Olympics,Nike issued its first country-specific supplychain report and it chose China. Nikedetailed the efforts it had been making toencourage suppliers to comply with its codeof conduct and Chinese law, including aprogramme to monitor Olympics-relatedsuppliers.

The report noted problems such as falsi-fication of factory documents and payroll

records, a lack of effective grievancesystems for workers and hiring practicesthat did not ensure minimum age standardswere met. Nike had rolled out a programmeto check the identity of some 150,000 of itsworkers in China and found 167 cases ofpeople who were below minimum agewhen they were hired. Sometimes compa-nies such as Nike have been reduced tosimply trying to ensure workers are paid. In2005 and 2006, Nike “secured” more than$921,300 in back wages owed to workers inChina alone.

The need to address basic issues, such aswhether contracted factories are abiding bylocal laws or paying their workers, naturallycuts into the time and effort that can beexpended on more advanced corporateresponsibility initiatives in China.

Beyond philanthropyThere are still two stories in China: theapproach and activities of local Chinesefirms and those of foreign companies oper-ating in the country.

A 2008 survey by the Environment-Oriented Enterprises Consultancy inZhejiang, one of China’s wealthiestprovinces, found: “Foreign multinationalsare both more actively engaged in CSR

activities in China than their Chinese coun-terparts and more effective atcommunicating their respective CSR activi-ties.” Chinese companies that docommunicate their engagement on respon-sibility issues have tended to focusparticularly on community investment andphilanthropy. There are a number ofreasons for this.

The vast majority of Chinese companiesare private and not listed internationallyand so are not submitted to the same sortsof shareholder or NGO pressure as foreigncompanies. Most of these companies simplydo not, as yet, realise the potential benefitsof corporate responsibility.

It is also the case that most Chinesecompanies that are not state-owned enter-prises are owned and managed byindividuals who exercise a large degree ofpersonal power within the company andhave often become very wealthy. And polit-ical priorities have so far stressed the needfor “harmony” in a society emerging fromrigid socialism and into an environmentwhere many individuals have become rich.

So community investment is popularbecause factories are located in relativelypoor areas; areas where governmentspending on social welfare has beenminimal. Beijing has been keen to seecompanies invest in social infrastructuresuch as hospitals, clinics and schools. Inpart, this is a political trade-off – businesspeople and entrepreneurs know they existin a relatively grey area and their newlyacquired assets are not well protected underChina’s rather weak legal system.

While some business people dogenuinely wish to do good it is also widelyaccepted that many put money intocommunity investment projects to curryfavour with the government. Similarly withphilanthropy.

The rise of corporate philanthropy hasbeen rocky to say the least in China. Origi-nally it was encouraged and pointed to, byboth business people and the government,as a sign that a corporate responsibilitymentality was emerging. This movementreally peaked after the Sichuan earthquakeon May 12 2008 (known simply as 5/12 inChina).

About $1.5bn was donated, mostly byChinese companies, but also by ordinarypeople and foreign companies in China.Despite praise at the time, questions weresoon raised by both NGOs active in thequake zone and China’s notoriously tetchyblogosphere as to how much money had

Sourcing in China

A unique attitude to responsibility

By Paul French, China editor, in Shanghai

China’s factories, suppliers to the world, have developed philanthropy projectsbut not yet established proper corporate responsibility programmes

28 Country briefing: China Ethical Corporation • March 2010

really been donated, where it went and howit was spent.

Official statistics, reported in the ChinaDaily newspaper, show that charitabledonations in China grew 3.5 times from2008 to 2009. But more recently the blogos-phere has become seemingly increasinglydisenchanted with “Big Boss” corporatephilanthropists.

A widely reported example is that ofChinese entrepreneur Chen Guangbiao,chief executive of Jiangsu Huangpu Invest-ment, a property company. Chen madelarge donations to 5/12 disaster relief butthen publicly criticised the government’slack of transparency in explaining how themoney was being spent. He decided todonate straight to where cash was required,telling the Chinese press: “An inadequatecharity system and lack of openness andtransparency on funds are the main reasonsthat many entrepreneurs choose to donatedirectly to the poor.”

However, his latest philanthropicventure – to travel with 126 other philan-thropists to China’s poor western regions,taking with them $6.3m – appears to havebackfired. After Chen was pictured standingin front of a wall of money, many in China’sonline community questioned his motivesand accused him of generating publicity forhis own benefit, and trying to establishhimself as an “economic personality”. Thatthese posts have not been blocked indicatethat the government is allowing these ques-tions to be asked, which they did not whenthey were raised after 5/12.

Foreign vs domesticWith the recent rise of philanthropy byChinese companies being openly ques-tioned, many are now looking beyond thesimple giving of cash. Rather than outbid-ding each other on philanthropic donationsChinese companies are turning their atten-tion to the activities typified by foreignmultinationals in China that are bothbroader and also welcomed by the govern-ment – good corporate citizenship.

Foreign companies in China are moreengaged in developing corporate responsi-bility than domestic companies. But theyhave still found themselves in trouble.Western companies from Timberlandto McDonald’s and Nokia to Apple havebeen criticised in the press locally andinternationally over issues ranging frompay to unions, health and safety to humanrights.

Auditing and maintaining corporate

responsibility programmes has proved prob-lematic with so many factories to cover – atypical European clothing brand mightsource frommore than 150 factories in Chinaand have many more sub-contractors.

Increasingly foreign companies have

sought to become good corporate citizens inChina as they both manufacture for exportand try to tap into the growing domesticmarket for their products and brands. Thishas meant that while, perhaps five yearsago, most companies focused their corpo-rate responsibility activities on workingconditions, they are now moving closer tothe Chinese model of stressing communityinvestment and philanthropy.

It is only a couple of years since JonathonPorrit, the environmental campaigner,annoyed many in China’s nascent greenmovement by claiming in an interview withthe bilingual website China Dialogue thatChinese people only cared about gettingrich and not the environmental cost of theprocess. Porrit has since changed his viewson China, but still, to those living andworking in China on corporate responsi-bility and the environment, they werereflective of a major disconnect betweenwestern impressions of the country and thereality.

The rising green consciousness in Chinais coming about as a direct result of the riseand expansion of an educated middle class.This now numbers more than 600 millionpeople in households with an income ofbetween $7,000 and $9,000 a year. Thisemerging class is highly urbanised, iseducated, and invariably works in whitecollar occupations. These people havebegun to acquire property, cars and appli-ances as well as being better travelled


The rising green consciousnessin China is coming about asa direct result of the rise andexpansion of an educatedmiddle class


Western brands can provide an ethical boost

both internally and often outside China.This is a sizeable group of people with a

high awareness of issues, the means toexpress them (via the internet) and a moreinternational outlook. They are the groupmost concerned about food quality, airquality, water quality and sustainability.They have a stake in China’s future and areoften members of the 74 million strongCommunist party. They also happen to bethe backbone of the ongoing consumptionboom that the government has staked itsfuture on.

In the past many in the corporateresponsibility and environmental move-ments in China had noted that foreigncompanies were not enacting policies inChina that were in place in their homemarkets. The most obvious of these werethe retailers and fast food brands.

That is changing now. In the last coupleof years British supermarket chain Tesco haslaunched a number of energy saving andenvironmental initiatives in its China storesthat it had enacted several years previouslyin the UK. Opening a new store in 2008,

Tesco’s China chief executive Ken Towlesaid: “We are very pleased to announce ourfirst green store open in China. Energysaving has become a hot issue in thenation.”

There have also been moves to reducepackaging and introduce more recyclablepackaging by many international retailers

and fast food chains in China. However,while this is welcome it should be notedthat these changes have largely been intro-duced in response to new laws by theChinese government banning plastic bagsand enforcing recyclable packaging.

So China’s newmiddle class is nowmoreaware of the environment – from the legionof university “green clubs” springingup on campuses to the outpouring of

environmental debate in the blogosphere.While the government media praised the

Chinese delegation’s work at the Copen-hagen climate summit, there were ragingdebates between government supportersand detractors on the internet, many feelingChina was not acting responsibly. Forobservers of China the problem is under-standing that Chinese citizens do not havethe same opportunities for action as those inother countries. Letters to editors do not getprinted, mass protests are forbidden, legalaction virtually impossible.

However, the newmiddle class is findingways to make its voice heard. Sometimesthis is through discreet protests. Communi-ties protesting about polluting factorieshave gathered and walked in small groups

Foreign companies were notenacting policies in Chinathat were in place in theirhome markets


Multistakeholder initiatives– not there yet

The last few years have seen a growing amount of talkin China of multistakeholder initiatives (MSIs).However, to date, real examples of MSI projects havebeen few and far between and encountered a host ofproblems.

In 2003, for example, nine Hong Kong labourgroups and trade union organisations, including theHong Kong Confederation of Trade Unions, becameinvolved in a MSI developed by a British group, theEthical Trading Initiative (ETI). The Hong Kong groupsand ETI committed significant amounts of time to theproject but there has been almost nothing to show forthis effort. Eventually, the Hong Kong groups involvedwithdrew.

The ETI initiative necessarily had to involve China’sonly trade union, the state-sponsored All-ChinaFederation of Trade Unions (ACFTU). In fact, havingto deal only with this state union has long been aproblem for all MSIs in China. Many of the Hong Kongparticipants and ETI wanted stronger shop-floorinvolvement, which was strenuously resisted by theACFTU. The union wanted to have control of allChinese worker involvement.

There was poor communication – both the HongKong groups and the local ETI coordinator becamecaught up in a morass of negotiation with largelyuninterested local corporate representatives andconfused suppliers. Again communication betweenthe partners and the ACFTU was virtually non-existent.

Finally the initiative suffered from weak corporatecommitment. This was perhaps its key failing and isin fact the reason given for the weakness or failure ofmost attempted multistakeholder initiatives in China.Too many reps at Chinese factories have no realunderstanding of corporate responsibility issues.Others have conflicts of interest being both sourcingmanagers and compliance officers at the same time.

Sichuan earthquake provoked widespread charitable giving

around government offices to avoid beingidentified as mass protests. Of course, otherChinese people see immediately what ishappening.

While Chinese consumers may not beable to demonstrate, sue or bombard news-paper editors, they can exercise choice inwhere they shop and what they buy.

Foreign, and increasingly domestic, brandsand retailers realise this. Initiatives such asTesco’s and others – Marks & Spencer intro-ducing Plan A in its first Chinese store inShanghai for instance – are becoming bothmore common and more regularly reportedin the Chinese media.

While both domestic and foreign compa-nies are concentrating their corporateresponsibility strategies increasingly on


While Chinese consumers maynot be able to demonstrate, theycan exercise choice in wherethey shop and what they buy


Case study: Tetra Pak

A prime example of a convergence in CR is Sweden’sTetra Pak, the world’s leading supplier of packaging.Having been operating in China for 30 years, thecompany has Chinese investments of more than€250m.

Tetra Pak is one company that issues a China corpo-rate responsibility report, in which it breaks downs itsprojects in China into three elements: its Food forDevelopment programme, environmental sustain-ability and philanthropy. Li Hexun, Tetra Pak’s Chinapresident says: “I hope we can do more CSR work inChina, since the greatest significance of an enterprisein society is no less than the value it creates forothers.”

Tetra Pak has been involved in a school foodprogramme, which it claims has been a major success.The programme provides milk to school children inpoorer provinces, arranging cheaper prices for milkbetween local governments and suppliers. Accordingto Yang Lei, communications manager for Tetra PakChina: “120m yuan [€12.9m] has been committed tothe school food programme so save milk costs andpromote health education since 2000.”

Low cost milkSo far 170 primary and middle schools in 24provinces and cities have received milk in Tetra Pakpackages at low prices – totalling 3.5m portionsper day. Obviously Tetra Pak, a major supplier ofpackaging to China’s burgeoning dairy industry, hasan interest in more people drinking milk. But thecompany also believes its programme will spur thedevelopment of local agriculture, according toUlla Holm, Tetra Pak’s global head of Food forDevelopment.

Tetra Pak has also worked to raise environmentalconsciousness – aiming to reduce its carbon emissionsin China by 10% in 2010 and sponsoring environ-mental awareness adverts on Chinese TV. The companyhas also upped its philanthropic contributions and isthe biggest patron of the Maternal and Infant HealthProject of the China Foundation for Poverty Alleviation(CFPA). It donated $1.5m during the Sichuan earth-quake which was spent on reclaiming damagedfarmland.

Tetra Pak’s activities are typical of the areas foreigncompanies are now moving into as they attempt to beseen as good corporate citizens in China and buildtheir initiatives that are more visible to the Chinesepeople. Cynics may say that this is all just business –Tetra Pak wants more milk to be bought, Tetra Pakencourages recycling because they sell the processingmachinery for recyclable containers, Tetra Pak donatesmoney to please the government. But, it is the casethat Tetra Pak, like many other foreign brands, isincreasingly talking to a more aware and questioningChinese consumer.

community investment, philanthropy andthe environment, the issues of factoryconditions and human rights have not goneaway. Indeed, they have become even morepertinent.

With export orders harder to find and anumber of scandals involving everythingfrom toothpaste to dog food and iPods,many Chinese companies have looked tocorporate responsibility as a potential wayto fight back. In this they appear to besupported by the government. Thoughmany factory owners still see corporateresponsibility as a western concept they dosee it as a potential method to counter criti-cism of China’s labour and environmentalpractices.

Textiles has been an area where Chinahas become a massive exporter and comeunder fire for working conditions. Somefactories had been better at working withtheir western buyers on corporate responsi-bility than others.

A universal code of conduct was the goalof many. And on this China has responded.The China National Textile and Apparel

Trolley green giant

Council is a government-linked body over-seeing the industry. Its job is improvingChina’s reputation to bring in more workand has developed a three-prongedstrategy: oppose dumping by Chinesecompanies, something that had beenconcerning the US and EU; try to tighten upinfringements on intellectual property,something many Chinese textile firms areguilty of; and introduce concepts of corpo-rate responsibility across the sector.

Their solution was CSC9000T, a code ofconduct, or as the Chinese prefer to call it, a“management system”. Then the recession

hit and CSC9000T appeared to be forgotten.Indeed the pressure from outside as well asinternally for change appears to havereceded.

Alexandra Harney, the Financial Timessouth China correspondent, whose 2008book “The China Price” surveyed the stateof corporate responsibility in China, saysthe old problems of falsification of factoryaudits and lack of enforcement of the labourlaws remain widespread.

Initiatives still occur but are question-able. The government-issued ChinaCorporate Social Responsibility Develop-ment Index Report (2009) says that thecorporate responsibility index of foreign-funded manufacturing enterprises in Chinalags far behind that of their Chinese coun-terparts. The researchers say the lowcorporate responsibility index of foreign-funded companies is mainly caused by alack of disclosure on the subject in China.However, a major benchmark was chari-table donations, a questionable strategy inChina due to the politicised nature ofgiving.

At present Chinese factories are in aholding pattern, in survival mode amid aslump in export orders. Enforcement of thenew 2008 labour laws appears weak.Workers are being encouraged to work hardfor the national good and protests are beingrepressed. The west is largely obsessed withits own problems and so the spotlight onChina is far less bright than it once was. Andso, many observers see China’s factoryconditions as a forgotten cause in theseeconomically troubled times. �

Chinese factories are in aholding pattern, in survivalmode amid a slump inexport orders


Chinese vs foreign companies – CR survey

A 2008 survey by the Sino-German Corporate Social Responsibility Project researched both Chinese and foreigncompanies to see what corporate responsibility activities they were engaged in.

Chinese domestic companies revealed the following results:• 10% of the surveyed companies reported no information related to any of the 12 elements on their English

website but did report information about their respective CSR activities on their Chinese websites.• 70% of the companies indicated that they were actively involved in different levels of philanthropy.• 26% conducted activities related to cleaner production and eco-efficiency, health and safety, and environmental

management systems.• 23% of the companies’ surveyed reported activity in community investment.• 20% reported waste and recycling activities.• 13% offered information on having a code of conduct.• 10% reported that they published an annual CSR report and have anti-corruption policies.• 7% actively engaged with stakeholders.• 3% had HIV/Aids programmes and indicated the inclusion of a labour rights programme.• 3% reported no information relating to any of the 12 CSR categories.• None of the companies provided information on equality and diversity.

Research of the foreign multinational companies’ websites revealed the following:• 20% of the companies reported no information on their Chinese website concerning the 12 CSR elements.• 77% were actively engaged in community investment.• 50% reported publishing a CSR report and were actively engaged in cleaner production and eco-efficiency.• 37% included information regarding health and safety programmes.• 33% reported having environmental management systems.• 30% reported that they engaged with stakeholders and reported waste and recycling operations.• 20% explicitly stated that they had codes of conduct and labour rights.• 10% reported equality and diversity policies and included HIV/Aids programmes.• None of the foreign multinationals reported issues related to anti-corruption policies on their respective websites.

Source: www.chinacsrproject.org

Working hard for the national good

The role of NGOs

Smoke andmirrors disguisetrue corporateactivismBy Paul French, China editor, in Shanghai

In western terms, NGOs do not existin China as the government’s controlextends into civil society

Non-governmental organisations findthemselves in China amid the best of

times and the worst of times. Anecdotalevidence indicates that the number ofChinese people volunteering to becomeinvolved in NGOs – mostly the young,urbanised and educated – is exploding.

With no real way to express themselveson causes outside the rigid ChineseCommunist party structure, NGOs areproviding a “space” for the concernedyouth of China to get involved. However,the government places severe restrictionson the establishment and activities ofNGOs, domestic and foreign. It monitorsthem closely and has repeatedly interferedin their campaigning work.

For many NGOs the balancing trickbetween attracting more support and volun-teers and maintaining a good relationshipwith Beijing is becoming a major problem.

The China head of one well-knowninternational NGO, who wished to remainanonymous, told Ethical Corporation thathe was now in a strange position. He hadcome to China to try to make change andinspire and encourage young people tobecome involved in environmental issues.He has been so successful that he nowspends most of his time reining in hisenthusiastic volunteers from organising toomuch and attracting the government’s ire.

Government takes chargeThere are about 387,000 registered NGOs inChina; a further unknown number exist butremain unregistered. Most are forced tohave some sort of relationship, or “partner-ship”, with a government-linked body – theso-called Gongos (government operatednon-government organisations).

Zhai Yan, director of the HuizerenVolunteer Development Centre, based inBeijing, says NGOs’ main challenge now isnot that the government will not let them

grow. It is that they do not know how togrow. Others disagree, arguing that thegovernment is seeking to constrain theburgeoning NGO sector and see it as overlycorporatist, suggesting that most domesticNGOs exist primarily as another mecha-nism for the state to communicate itsinterests to society.

This may be true in the case of mostGongos, and the government’s extensiveregulation and monitoring system certainlyvalidates the corporatist perspective. Typical

of these new-type Chinese NGOs thatappear to be essentially philanthropicorganisations was the January launch of the7th Shenzhen Care Project, which claims tobe a prime example of a “new social aidNGOmodel” that derives from “the innova-tive socialist country’s national social aidmodel”.

The Shenzhen Care Project hasorganised various philanthropic socialprogrammes under the themes of “love,thanksgiving, return” to be carried out oneafter another in Shenzhen.

What all this means is not clear though itappears to tap into the government’s desireto encourage patriotism and a “harmonioussociety”. Many of these new “NGOs” areessentially offshoots of Chinese companiesor organised by wealthy business people.

The field an NGO works in has a greatdeal to do with how it is perceived byBeijing. NGOs providing rights advice toworkers or, for example, seeking compensa-tion for the victims of blood plasma poolingthat led to HIV/Aids infection have beenrepressed and curtailed by Beijing. Others,working in areas such as wildlife preserva-tion and the environment, have been givenmore latitude.

Climate actionThe Chinese Civilian Society on ClimateChange was established in 2007. Its missionis to discuss and respond to climate issuesand reach a consensus on future actionsregarding climate change. NGOs includingFriends of Nature, Global Village of Beijing,Green Earth Volunteers, Institute of Publicand Environmental Affairs, Greenpeace,Oxfam, and Action Aid are involved. Theyhad been soliciting Chinese civil society’sstance on climate change since last June,holding a series of discussions before theformal release of a document – ChineseCivil Society on Climate Change (2009). Thisreport has been circulated but was notreported in the Chinese media.

And so ultimately for NGOs it has comedown to finding areas where they canoperate. NGOs still cannot really campaignin a way they can in the west, though thereis deemed to be more political space aroundthe environment question than, say, humanrights. This is another reason many corpo-rate responsibility strategies are focusing onenvironmental and community issuesrather than traditional factory basedreforms. �

Prepared to get involved


The government placessevere restrictions on theestablishment and activitiesof NGOs



The political dimension

The intricateweb of businessand stateBy Paul French, China editor, in Shanghai

While public and political perceptionsof business ethics and sustainabilityhad been evolving, recent events haveturned attention back to corporatephilanthropy

China’s economy is opening up, and hasbeen for three decades now, but its

political system remains rigid. Many of theinitiatives citizens use in other countries –protests, leaflet distribution, setting up adhoc organisations – are all virtually impos-sible in China or at least involve majorpersonal risk.

As the recent arguments over Google’sthreat to pull out of China show, censorshipremains firmly in place across the media.

On the other hand the Chinese businesscommunity, as Alexandra Harney – theFinancial Times southern China correspon-dent – notes, should be more receptive tocorporate responsibility initiatives now thanat any other time previously. This is due inpart to the global recession, making exportorders harder to find and so shifting powerfurther towards buyers and away frommanufacturers.

Foreign buyers have found thatdemands for more health and safetytraining, better living conditions and otherbasic aims are being listened to more seri-ously now as the other side is moredesperate to sign the contract. Harney alsopoints out that China’s factory owners andmanagers are increasingly a new generation– younger, better educated, more aware ofinternational best practice and keen to buildtheir companies up from cheap assemblyshops into world class factories.

In contrast to the previous generationthat followed Deng Xiaoping’s advice and“jumped into the sea” starting businesses,the new generation of factory ownersunderstand that social capital is as impor-tant as financial capital. As this generationgradually takes over more and more ofChina’s economy, many believe the futureof corporate responsibility will be brighter.But at present this is not the case.

However, it is the environment that over-shadows so much in China now. The

government is being forced to deal withenvironmental issues through its height-ened international role as a world power.And it also has to act in response to thegrowing environmental awareness ofChinese citizens.

Combating growing environmentaldegradation and carbon emissions in Chinawill be hard but many believe it can bedone. Jonathan Watts is the Guardiannewspaper’s East Asia environment corre-spondent and a Beijing resident. Hehighlights China’s fast adoption and roll outof alternative energy technologies such aswind and solar power as well as the risingenvironmental consciousness amongChina’s rapidly expanding middle class.

Increasing consciousnessChinese citizens, organised in Chinese-styleNGOs, on the blogosphere, in a universitygreen club or perusing the shelves in theirlocal supermarket, are now increasinglyconscious of corporate responsibility issues.They have used the internet and informalnetworks to punish many companies andbrands they believe to be endangering theirhealth, mistreating them or disrespectingthem – boycotts and online attacks are justtwo methods they have developed to bringthe recalcitrant to heal.

The thrust of the drive behind corporateresponsibility in China is the Chinesewatching themselves and those whooperate in their country. In this sense,corporate responsibility in China has thepotential to become a more internal andimportant issue.

There had been moves towards estab-

lishing a focus on improving worker condi-tions, dealing with environmental impactand the other well-trodden stakeholderengagement issues. Since the Sichuan earth-quake and the international recession,however, corporate responsibility in Chinahas shifted towards the more traditionalcharity and community involvement.

Alex Harney sees a “danger of regressionback to philanthropy and well-timed dona-tions to politically salient causes” ratherthan any attempts to promote fundamentaland structural change. This, she adds, “isneither sustainability nor CSR”.

Workers were promised change, not leastin the form of new labour laws introducedin 2008. Analysts argue that workers willremember those promises. At the same timethe rising environmental consciousness ofmany ordinary Chinese could lead to amore rounded embracing of concepts ofsustainability.

History has led many companies inChina to feel unsupportive towards corpo-rate responsibility initiatives. One companycorporate responsibility manager, who likemany requires anonymity, comments that atthe moment he is not able to persuadeChinese partners that corporate responsi-bility is not just PR and that there has to bemore than just a press release of statedintentions that are never followed through.

There has not been enough embeddingof corporate responsibility in Chinesebusiness culture. Until that happens thenlarger concepts of sustainability andbusiness ethics are likely to remain on hold.Perhaps the younger generation holds thekey to China getting back on track. �

Environmental issues emerged from the gloom

ethical corporation china briefing march 2010

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