Business Response to CSR/ Sustainability in China

CSR and Sustainability in China

Develop long term capacity within the various actors (NGO, MNC, academic, gov’t, and citizen) to create stable/ sustainable solutions
Provide a platform where civil sector professionals can share best practices
Conduct research, study problems, assess program, & create partnerships
Work with social entrepreneurs and NGO leaders to develop capacity
On campus research, develop student leaders, clubs, mentorships, internships
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.
Coordinates volunteer opportunities for active professionals, according to their availability and personal interests
Support project partners with direct donations, fundraising planning and execution, community project design/implementation
Design and manage a variety of community relations programs for private sector partners in Shanghai – CorpWorks!
Developed the project based class Sustainability and Responsible Leaderships for 193 MBA students
To institutionally support society by leveraging its students, faculty, alumni
Improve student awareness of the social and environmental challenges in China
36 teams will conduct research, develop external partner, & present business plan

Global “Sustainability”
Conversations about sustainability have largely driven
been focused on climate change, and as have the solutions.
Conversations
Solutions:

Issues of Economy

Issues of Environment
Systemic Fact that China’s economic growth has negatively impacted the environment
Water pollution – more than 95% of China’s water is not drinkable
Air Pollution – 16 of the world’s 20 cities with the worst air are in China
Carbon emissions – China is now #1 emitter of carbon dioxide
System that has lost resilience and is vulnerable to shocks.
Regular Flooding in the south of China
Regular sand storms in the North of China
Extinction of animals and plant life from habitat destruction

Social Fissures
Urbanization: Over 400 million people have moved to city in last 20 years, and another 400 million will move by 2020!
Gender Imbalances: More then 115 boys for every 100 girls born
Aging Society: By 2050, China will have more than 440 million people older than 60, 31% of the population
Community Engagement: Integration and engagement within community is diminishing
Cultural Preservation: Lost languages and cultures

Interconnected Systems

Key Questions/ Debates

Severity of the Problem
How large are the problems?
Are these issues isolated anecdotal cases?
Are these problems systemic?
Are the problems TOO BIG TO FAIL?
Are the problems manageable/ solvable?
Can a global recession be averted?
Will Beijing fail to find more water?
Can safe milk be delivered to consumers?
Or… Are we going to burn up?
Economic depression?
End of polar bears?

When to Act
What is the timeline?
Act now… with uncertain need or return…
Wait until perhaps it’s too late….
How much can be solved today?
Who should take the first step?
Confidence becomes the biggest issue, and source of further pressure

Who’s to Blame / Who Should Lead
Business Leaders
Citizens
Politicians
Change Leadership
Personal Accountability
Harmonious Society

How Big Should the Response Be?
Is 750 billion enough to save the global economy?
Is 5 Trillion enough?
… and how much is saving the polar bears going to cost?

What Pressures Do Firms Face:

CSR/ Sustainability
Governance
Workplace
Environment
Community
Consumers
Internal
programs focused on employee wellbeing and job satisfaction
Developing process and programs that minimize impact to environment
External programs that link firm & community through volunteering & philanthropy
Providing products/ services to consumers that are safe and live up to expectations
Internal program meant to reduce risks of corruption / abuse in the firm

Workplace
Conditions that still exist in China
China says 83,196 people lost their lives in work-related incidents last year
Factories with up to 20 beds in a room
Low end factory positions with poor working conditions, repetitive jobs, and in unfriendly environments
2007 Labor Law
Meant to remedy issues of wages, working conditions, and disputes
Little mention of the physical and mental conditions of employees
Pressures and Responsibilities growing for firm
Fines for labor abuses going up
Firms are having to improve working conditions to attract and retain workers
Wages are rising

Governance
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.
- WSJ
One of China’s most difficult issues:
Chinese firms looking to globalize operations are addressing (Sinopec)
Many firms look to reduce exposure through third party arrangements and tough codes of conduct

Environment
At the national government level
Local leaders were warned that they must abide by national policies
SEPA and NRDC were given more power and support
National level “audits” of projects with potential for negative environmental impact
At the local government level
Shutting down of factories considered low hanging fruit
Immediate tightening of all investment regulations occurred and turning away investments
An open recognition that the old days were gone/ cannot ignore environmental impact
Which has led to:
Abusers seeing closures, fines, and drying up of finance
Government incentives meant to entice high-value production
Firms releasing sustainability reports and engaging media/ NGO

Community
Volunteerism culture is one of the key reasons why I join/stay with GE.
Participating in volunteering projects increases my work satisfaction.

Consumers
The Facts:
Product recall was initiated for contaminated milk powder
Source of contamination was US manufacturing site
Limited to few batches
Batches were sold in the United States, Puerto Rico, Caribbean
Unlicensed sales of product has been found in China
China recalls ultimately allowed

Actions: What are Firms Doing

Historical Role of Business
Responsibility of business to community has historically been unclear, and clarity/ guidance typically only came from rules and regulations set up by governments
Only roles that were previously accepted for companies to contribute to society:
Obey the laws
Employee people
Make Money
Pay Taxes
Donate a little money… when you have the chance
… but the rules are changing
China is Maturing
New regulations are strong
Healthy vents and feedback mechanisms are being added
Enforcement is WIP, but getting more consistent
Consumers Have Changed – and So Have Their Expectations
Consumers are becoming citizens, and citizens are becoming active
Consumer pressure on industry will only grow stronger

New Responsibilities
Moving Past traditional definitions and appearances of
“CSR” and “Sustainability”
Changing Business Model
Paying full price of operations
Rebalancing risk / reward equation
Improving labor conditions and standards
Addressing issues of governance and exploitation
Changing Product Portfolios
Focus on quality and safety vs. price and speed
Moving away from environmentally damaging processes
Working to improve industry standards
Developing Communities
Internally and Externally
Creating core values that align with values of employees
Moving away from value system that places citizens before consumers

China Foundation
Global
International NGO
Program Partner
Program Partner
Program Partner
BU
BU
BU
BU
BU
BU
BU
Organizational Trends
Globalized Programming:
Era of centralized / disengaged programming:
Partnerships chosen at global level
Partnerships reflected global issues of interest
Little local ownership
Programs that were chosen were at a global level and, regardless of program effectiveness, isolated local offices from programs.
Global HQ
China HQ
Localized Programming
Era of decentralized/ engaged programming:
Entrance of locally chosen program partners
Alignment of issues at the regional level that tie to global level
High local ownership / engagement
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
China HQ
Corning
BU
Local Organization
Local Partner
Local Partner
Local Partner

Publicly
Governance
Workplace
Environment
Community
Consumers
Developing green products
PR/ media messaging referencing “commitment to the environment
Website and CSR reporting on labor practices
Sustainability Reporting
Donations to green NGOs
Splash advertising of any green credentials of product, services, or investments
Long term financial commitments to local NGOs
Employee volunteering
None

Privately
Governance
Workplace
Environment
Community
Consumers
Working to figure out what it is consumers value
Working with suppliers / distributors to ensure safe products
Preparing disaster plans
Review of employee handbooks, and alignment of benefits to market
Internal programs focused on moral boost
Environmental assessments of operations
Private engagement with NGOs and Agencies to understand future concern
Internal program guidelines being developed
Exploring mechanisms for more effective giving with local NGOs
Risk Assessment and process evaluation
Installation of systems to identify, track, and alert to misconduct

Takeaways
The problems that are faced are complex, dynamic, and growing:
Economic, environmental, and social issues are growing in size with lower resiliency
Costs of issues is being seen (by some) as too great with expectations of change building
The pressure(s) that a firm will face can come from all angles:
Often catalyzed by external issues
Required Internal/ external stakeholders alignment
Understanding stakeholders is critical (during a crisis):
Firms should know their key stakeholders well (ahead of time)
Efforts to engage should be genuine
Competitive advantage of CSR/ Sustainability programs are seeing diminished returns:
Increased awareness and transparency leads to increased expectations:
Economic conditions are increasing pressure for real (sustained) changed:
Environmental damage has led to new regulations. Regulations that increase costs
Environmental/ social damage have reduced the quality/ quantity of resources

“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”
- Institute for the Future, 2008
Richard Brubaker
Founder and Managing Director, Collective Responsibility
Founder and Executive Volunteer, HandsOn China
Adjunct Professor, Sustainability and Responsible Leadership, CEIBS
rich@collectiveresponsibility.org

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Business Response to CSR/ Sustainability in China

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Business Response to CSR/ Sustainability in China Presentation Transcript