Business Response to CSR/ Sustainability in China

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As part of this presentation to the Shanghai Chapter of the British Chamber of Commerce, I discuss the dynamics of CSR/ sustainability in China and how firms are responding.

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Business Response to CSR/ Sustainability in China

  1. 1. CSR and Sustainability in China<br />
  2. 2. Develop long term capacity within the various actors (NGO, MNC, academic, gov’t, and citizen) to create stable/ sustainable solutions<br /><ul><li>Provide a platform where civil sector professionals can share best practices
  3. 3. Conduct research, study problems, assess program, & create partnerships
  4. 4. Work with social entrepreneurs and NGO leaders to develop capacity
  5. 5. On campus research, develop student leaders, clubs, mentorships, internships</li></ul>Established in 2004, Hands On China’s mission is connecting people – both locals and foreigners in Shanghai who want to become involved as volunteers in community activities with local charities who need assistance.<br /><ul><li>Coordinates volunteer opportunities for active professionals, according to their availability and personal interests
  6. 6. Support project partners with direct donations, fundraising planning and execution, community project design/implementation
  7. 7. Design and manage a variety of community relations programs for private sector partners in Shanghai – CorpWorks!</li></ul>Developed the project based class Sustainability and Responsible Leaderships for 193 MBA students<br /><ul><li>To institutionally support society by leveraging its students, faculty, alumni
  8. 8. Improve student awareness of the social and environmental challenges in China
  9. 9. 36 teams will conduct research, develop external partner, & present business plan</li></li></ul><li>Global “Sustainability”<br />Conversations about sustainability have largely driven <br />been focused on climate change, and as have the solutions.<br />Conversations<br />Solutions:<br />
  10. 10. Issues of Economy<br />
  11. 11. Issues of Environment<br />Systemic Fact that China’s economic growth has negatively impacted the environment<br /><ul><li>Water pollution – more than 95% of China’s water is not drinkable
  12. 12. Air Pollution – 16 of the world’s 20 cities with the worst air are in China
  13. 13. Carbon emissions – China is now #1 emitter of carbon dioxide</li></ul>System that has lost resilience and is vulnerable to shocks.<br /><ul><li>Regular Flooding in the south of China
  14. 14. Regular sand storms in the North of China
  15. 15. Extinction of animals and plant life from habitat destruction </li></li></ul><li>Social Fissures<br /><ul><li>Urbanization: Over 400 million people have moved to city in last 20 years, and another 400 million will move by 2020!
  16. 16. Gender Imbalances: More then 115 boys for every 100 girls born
  17. 17. Aging Society: By 2050, China will have more than 440 million people older than 60, 31% of the population
  18. 18. Community Engagement: Integration and engagement within community is diminishing
  19. 19. Cultural Preservation: Lost languages and cultures </li></li></ul><li>Interconnected Systems<br />
  20. 20. Key Questions/ Debates<br />
  21. 21. Severity of the Problem<br />How large are the problems?<br /><ul><li>Are these issues isolated anecdotal cases?
  22. 22. Are these problems systemic?
  23. 23. Are the problems TOO BIG TO FAIL?</li></ul>Are the problems manageable/ solvable?<br /><ul><li>Can a global recession be averted?
  24. 24. Will Beijing fail to find more water?
  25. 25. Can safe milk be delivered to consumers?</li></ul>Or… Are we going to burn up?<br /><ul><li>Economic depression?
  26. 26. End of polar bears?</li></li></ul><li>When to Act<br />What is the timeline?<br /><ul><li> Act now… with uncertain need or return…
  27. 27. Wait until perhaps it’s too late….</li></ul>How much can be solved today?<br />Who should take the first step?<br />Confidence becomes the biggest issue, and source of further pressure<br />
  28. 28. Who’s to Blame / Who Should Lead<br />Business Leaders<br />Citizens<br />Politicians<br />Change Leadership<br />Personal Accountability<br />Harmonious Society<br />
  29. 29. How Big Should the Response Be?<br />Is 750 billion enough to save the global economy?<br />Is 5 Trillion enough?<br />… and how much is saving the polar bears going to cost?<br />
  30. 30. What Pressures Do Firms Face:<br />
  31. 31. CSR/ Sustainability<br />Governance<br />Workplace<br />Environment<br />Community<br />Consumers<br />Internal <br />programs focused on employee wellbeing and job satisfaction<br />Developing process and programs that minimize impact to environment<br />External programs that link firm & community through volunteering & philanthropy<br />Providing products/ services to consumers that are safe and live up to expectations<br />Internal program meant to reduce risks of corruption / abuse in the firm<br />
  32. 32. Workplace<br />Conditions that still exist in China<br /><ul><li>China says 83,196 people lost their lives in work-related incidents last year
  33. 33. Factories with up to 20 beds in a room
  34. 34. Low end factory positions with poor working conditions, repetitive jobs, and in unfriendly environments</li></ul>2007 Labor Law<br /><ul><li>Meant to remedy issues of wages, working conditions, and disputes
  35. 35. Little mention of the physical and mental conditions of employees</li></ul>Pressures and Responsibilities growing for firm<br /><ul><li>Fines for labor abuses going up
  36. 36. Firms are having to improve working conditions to attract and retain workers
  37. 37. Wages are rising</li></li></ul><li>Governance<br />A government report from the State Council said prosecutors investigated more than 240,000 embezzlement, bribery and other cases involving official corruption from 2003 to 2009. In the past five years, more than 69,200 cases of commercial bribery involving some 16.59 billion yuan were investigated, the report said. The Communist Party leadership said China’s “harmony and stability” depended on efforts to build a clean government.<br />- WSJ<br />One of China’s most difficult issues:<br /><ul><li>Chinese firms looking to globalize operations are addressing (Sinopec)
  38. 38. Many firms look to reduce exposure through third party arrangements and tough codes of conduct </li></li></ul><li>Environment<br />At the national government level<br /><ul><li>Local leaders were warned that they must abide by national policies
  39. 39. SEPA and NRDC were given more power and support
  40. 40. National level “audits” of projects with potential for negative environmental impact</li></ul>At the local government level<br /><ul><li>Shutting down of factories considered low hanging fruit
  41. 41. Immediate tightening of all investment regulations occurred and turning away investments
  42. 42. An open recognition that the old days were gone/ cannot ignore environmental impact</li></ul>Which has led to:<br /><ul><li>Abusers seeing closures, fines, and drying up of finance
  43. 43. Government incentives meant to entice high-value production
  44. 44. Firms releasing sustainability reports and engaging media/ NGO</li></li></ul><li>Community<br />Volunteerism culture is one of the key reasons why I join/stay with GE. <br />Participating in volunteering projects increases my work satisfaction.<br />
  45. 45. Consumers<br />The Facts:<br /><ul><li>Product recall was initiated for contaminated milk powder
  46. 46. Source of contamination was US manufacturing site
  47. 47. Limited to few batches
  48. 48. Batches were sold in the United States, Puerto Rico, Caribbean
  49. 49. Unlicensed sales of product has been found in China
  50. 50. China recalls ultimately allowed</li></li></ul><li>Actions: What are Firms Doing<br />
  51. 51. Historical Role of Business<br />Responsibility of business to community has historically been unclear, and clarity/ guidance typically only came from rules and regulations set up by governments<br />Only roles that were previously accepted for companies to contribute to society:<br /><ul><li>Obey the laws
  52. 52. Employee people
  53. 53. Make Money
  54. 54. Pay Taxes
  55. 55. Donate a little money… when you have the chance</li></ul>… but the rules are changing<br />China is Maturing<br /><ul><li>New regulations are strong
  56. 56. Healthy vents and feedback mechanisms are being added
  57. 57. Enforcement is WIP, but getting more consistent</li></ul>Consumers Have Changed – and So Have Their Expectations<br /><ul><li>Consumers are becoming citizens, and citizens are becoming active
  58. 58. Consumer pressure on industry will only grow stronger</li></li></ul><li>New Responsibilities<br />Moving Past traditional definitions and appearances of<br />“CSR” and “Sustainability”<br />Changing Business Model<br /><ul><li>Paying full price of operations
  59. 59. Rebalancing risk / reward equation
  60. 60. Improving labor conditions and standards
  61. 61. Addressing issues of governance and exploitation</li></ul>Changing Product Portfolios<br /><ul><li>Focus on quality and safety vs. price and speed
  62. 62. Moving away from environmentally damaging processes
  63. 63. Working to improve industry standards</li></ul>Developing Communities<br /><ul><li>Internally and Externally
  64. 64. Creating core values that align with values of employees
  65. 65. Moving away from value system that places citizens before consumers</li></li></ul><li>China Foundation<br />Global<br />International NGO<br />Program Partner<br />Program Partner<br />Program Partner<br />BU<br />BU<br />BU<br />BU<br />BU<br />BU<br />BU<br />Organizational Trends<br />Globalized Programming:<br />Era of centralized / disengaged programming: <br /><ul><li>Partnerships chosen at global level
  66. 66. Partnerships reflected global issues of interest
  67. 67. Little local ownership</li></ul>Programs that were chosen were at a global level and, regardless of program effectiveness, isolated local offices from programs.<br />Global HQ<br />China HQ<br />Localized Programming<br />Era of decentralized/ engaged programming: <br /><ul><li>Entrance of locally chosen program partners
  68. 68. Alignment of issues at the regional level that tie to global level
  69. 69. High local ownership / engagement</li></ul>Global firms (and their foundations) began developing capacity internally to locally source project partners as a means to create more stable programs that have greater buy in locally<br />China HQ<br />Corning <br />BU<br />Local Organization<br />Local Partner<br />Local Partner<br />Local Partner<br />
  70. 70. Publicly <br />Governance<br />Workplace<br />Environment<br />Community<br />Consumers<br />Developing green products<br />PR/ media messaging referencing “commitment to the environment<br />Website and CSR reporting on labor practices<br />Sustainability Reporting<br />Donations to green NGOs<br />Splash advertising of any green credentials of product, services, or investments<br />Long term financial commitments to local NGOs<br />Employee volunteering<br />None<br />
  71. 71. Privately <br />Governance<br />Workplace<br />Environment<br />Community<br />Consumers<br />Working to figure out what it is consumers value<br />Working with suppliers / distributors to ensure safe products<br />Preparing disaster plans<br />Review of employee handbooks, and alignment of benefits to market<br />Internal programs focused on moral boost<br />Environmental assessments of operations <br />Private engagement with NGOs and Agencies to understand future concern<br />Internal program guidelines being developed<br />Exploring mechanisms for more effective giving with local NGOs<br />Risk Assessment and process evaluation<br />Installation of systems to identify, track, and alert to misconduct<br />
  72. 72. Takeaways<br />The problems that are faced are complex, dynamic, and growing:<br /><ul><li>Economic, environmental, and social issues are growing in size with lower resiliency
  73. 73. Costs of issues is being seen (by some) as too great with expectations of change building</li></ul>The pressure(s) that a firm will face can come from all angles:<br /><ul><li>Often catalyzed by external issues
  74. 74. Required Internal/ external stakeholders alignment</li></ul>Understanding stakeholders is critical (during a crisis):<br /><ul><li>Firms should know their key stakeholders well (ahead of time)
  75. 75. Efforts to engage should be genuine</li></ul>Competitive advantage of CSR/ Sustainability programs are seeing diminished returns:<br /><ul><li>Increased awareness and transparency leads to increased expectations:</li></ul>Economic conditions are increasing pressure for real (sustained) changed:<br /><ul><li>Environmental damage has led to new regulations. Regulations that increase costs
  76. 76. Environmental/ social damage have reduced the quality/ quantity of resources</li></li></ul><li>“In the end, environmental, social and economic sustainability cannot be separated. A sustainable planet must include a sustainable human civilization – resilient human systems that respect the complicated relationships among poverty, human rights, economic development, environmental health, and human success” <br />- Institute for the Future, 2008<br />Richard Brubaker<br />Founder and Managing Director, Collective Responsibility<br />Founder and Executive Volunteer, HandsOn China<br />Adjunct Professor, Sustainability and Responsible Leadership, CEIBS<br />rich@collectiveresponsibility.org<br />

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