Ethical Corporation China Briefing March 2010


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Ethical Corporation China Briefing March 2010

  1. 1. Country briefing: China 28 Supplying the planet 33 Non-activism? 34 State controlOverviewCorporate responsibility, Chinese-styleBy Paul French, China editor, in ShanghaiAs China’s economy has exploded, concepts of sustainability and business ethics have developed that differ from thosein the west ince the launch of the Reform and the country the “workshop of world” and Large companies work with a network ofS Opening Up policies of the late 1970sand early 1980s the People’s Republic of the planet’s largest holder of foreign currency reserves. factories employing thousands in total. For instance, Nike is thought to have productsChina has been on a prolonged trajectory of The range of products and goods made in 180 factories across Chinaeconomic growth. This growth saw the sourced from China is staggering. The employing about 200,000 workers. Moni-country achieve double-digit annual GDP largest single buyer, US retail giant Wal- toring operations as extensive as these hasgrowth for more than a decade, and even Mart, is, by some estimates, buying as much proved a daunting growth is topping 8%. as $27bn a year in Chinese goods. Crucially, This sustained 30 years of expansion has In large part the success of the Chinese as China has progressively moved up the not been without bumps along the road.economy has been predicated on two value chain, the country has moved from China’s vast rural population has beenfactors. First, is the ability to produce goods being the producer of countless plastic steadily urbanising, leading to massivecheaply and in large quantities for export, goods, toys, jeans and T-shirts to a producer internal migrations from the farms to theattracting multinational companies to of hi-tech mobile communications, cars, factories. China’s cities have become hugeincreasingly source products from China. ships and iPods. megalopolises with the government desper-Second, as labour costs remain low by inter- ately trying to create new jobs to supportnational standards and global supply chains Workers without number those moving from agriculture to manufac-became increasingly integrated, so foreign Nobody really knows quite how many turing and services.companies have increasingly opened their factories there are in China or how many At the same time an internal revolutionown manufacturing operations in China. people employed. As an indication, the has been occurring as China’s large state This has meant that China’s economic government admitted that 20 million owned enterprises, the backbone of thegrowth has been driven largely by export workers lost their jobs with the downturn in country’s heavy industry, have been priva-earnings and inward investment, making sourcing at the start of the recent recession. tised, with many now listed on newly
  2. 2. 26 Country briefing: China Ethical Corporation • March 2010 created stock exchanges. And China’s tures and social welfare policies have not banking and finance system has been the always managed to keep pace. subject of repeated reforms. Now, in the face of the international Both these elements of reform have led recession, China has begun to reorient its to any number of issues including emerging economy as export orders have slumped – notions of corporate governance, corrup- away from a reliance on manufacturing for tion and labour rights – issues that have at export and attracting inward investment to times, most notably during the Tiananmen increasingly attempting to harness the Square demonstrations in 1989 and their potential of the country’s domestic market brutal suppression, burst into protest and and its consumption capabilities. This desire challenges to the ruling Chinese Commu- was most recently expressed at the Davos nist party. World Economic Forum by the Chinese Put simply, China, the world’s most vice-premier, Li Keqiang, a man tipped to be populous country, is now heading towards China’s next leader after Hu Jintao stands becoming the world’s largest economy too. down. He said: “We will focus on boosting Yet it is still an economy and a country in domestic demand. The growth in domestic transition. As fast as the economy has consumption in China will not only drive grown, and people’s expectations of higher growth in China but also provide greater living standards have been raised, the markets for the world.” Tiananmen: all quiet now Chinese legal system, governance struc- China’s economic growth has brought China corporate responsibility factsheet Ethical Corporation survey results Foreign sustainability leader (most mentioned): Socio-economic statistics 1. Nike Population: 1.34 billion Corporate responsibility statistics 2. Bayer GDP (nominal): €3.2tn (2008) 3. Volkswagen GDP per capita: €2,400 (2008) Number of employees spending 50% or more time on 4. Procter & Gamble Monthly minimum wage: €78 CSR/sustainability: (720 yuan, 2007) 38% have over 11 employees Guidelines and initiatives most preferred: Human Development Index China: 0.772 17% have 5-10 employees 1. GRI (ranked 92 out of 182 countries). 38% have 2-4 employees 2. UN Global Compact Hong Kong: 0.944 4% have 1 employee (ranked 24 out of 182) 4% have none Top challenge/risk: Change internal perceptions of CSR and gain support Current leadership: Size of CSR/sustainability budget: President: Hu Jintao 36% have a budget over €30,000 Top three opportunities: Premier: Wen Jiabao 18% have a budget €20,000-30,000 1. Energy Type: Communist 9% have a budget €10,000-19,000 2. Provide value to business partners 18% have a budget €5,000-9,999 3. Develop sustainable products Primary industries: 9% have a budget €1,000-4,999 Mining and ore processing, iron, 9% have a budget under €1000 Guideline and standards statistics steel, aluminium, and other metals, coal, machine building, Focus of CSR/sustainability team: Number of 2009 GRI reports: 47 armaments, textiles and apparel, 1. Partnerships and collaboration (50% indicated it as a main Number of DJSI licensees: 1 petroleum, cement, chemicals and activity) Number of UNPRI signatories (Hong Kong only): 4 fertilisers, consumer products, including footwear, toys, and 2= Energy efficiency (33% indicated it as a main activity) electronics, food processing, 2= Performance measurement (33% indicated it as a main Sources: transportation equipment, activity) • Socio-economic statistics obtained from recent publications including automobiles, rail cars by the IMF, the CIA World Factbook, the European and locomotives, ships, and Local sustainability leaders (most mentioned): commission, the ILO and the Human Development Index. aircraft, telecommunications 1. China Ocean Shipping Company (COSCO) • Corporate responsibility statistics obtained from a equipment, commercial space 2. China Mobile January/February 2010 Ethical Corporation survey. launch vehicles, satellites 3. State Grid Corporation of China • Guideline and standards statistics obtained during February 4. Haier 2010 from the official website of each initiative.
  3. 3. Ethical Corporation • March 2010 Country briefing: China 27massive 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. Urban bright lights burning stronglyLack of freedom rate philanthropy on the other. constraints and the landscape companiesThere is effectively no independent judi- Second, there is a broad distinction operate under in China. This again has ledciary, no free press and heavy censoring of between the importance attached to corpo- to problems.all forms of media including the internet. rate responsibility, its implementation and Similarly, NGOs in China are not able toThere are limitations on international travel enforcement between Chinese companies, operate with the freedom of movement andand capital movement. As is well known, whether private or state-owned, and voice they have in other countries. Thethe Communist party brooks no challenge foreign firms operating in China. The development of domestic company corpo-to its ruling legitimacy through either inde- gradual emergence and integration of many rate responsibility strategies, those ofpendent organisation, protest or democratic foreign firms operating in China and theactivity, which is important when consid- nascent NGO movement are all guided byering the role of NGOs. China’s evolving notion of these concerns and constraints. Under- This then is the backdrop against which standing these differences, and the fact thata concept of corporate responsibility – qiye corporate responsibility will the Beijing government will evaluate anyshehui zeren – has begun to emerge and also have its own set of caveats corporate responsibility initiatives in termsattract attention in China. Just as Deng and distinctive parameters of its two major objectives – staying inXiaoping announced that China would power and promoting the slogan of ahave “capitalism with Chinese characteris- “harmonious society” – is crucial to evalu-tics” so it seems that China’s evolving Chinese companies, from oil firms to ating what is achievable in China andnotion of corporate responsibility will also kitchen appliance makers, in the global measuring progress.have its own set of caveats and distinctive market has begun to change this, but it is The result has been a growing conver-parameters. still fair to say that there is a major divide in gence between the corporate responsibility To better understand this evolution in approach between local and foreign. This is activities of domestic and foreign compa-China it is crucial to understand two divi- often a source of conflict and misunder- nies in recent years as Chinese firms expandsions. First, contrary to popular definitions standing. their definitions of corporate responsibilityin the US and Europe that highlight the The result is that national and interna- and foreign companies come increasingly tovoluntary nature of corporate responsibility, tional stakeholders do not yet share a seek to raise their profile domestically rathermost of the debate around corporate common understanding of corporate than simply respond to overseas criticisms.responsibility in China focuses either on responsibility in China. Still less do share- And so, it’s been a busy time for corporatelegal compliance on the one hand or corpo- holders in the west always understand the responsibility in China recently. I
  4. 4. 28 Country briefing: China Ethical Corporation • March 2010 activities in China than their Chinese coun- terparts and more effective at communicating their respective CSR activi- ties.” Chinese companies that do communicate their engagement on respon- sibility issues have tended to focus particularly on community investment and philanthropy. There are a number of reasons for this. The vast majority of Chinese companies are private and not listed internationally and so are not submitted to the same sorts of shareholder or NGO pressure as foreign companies. Most of these companies simply do not, as yet, realise the potential benefits of corporate responsibility. It is also the case that most Chinese companies that are not state-owned enter- prises are owned and managed by Sourcing in China individuals who exercise a large degree of personal power within the company and A unique attitude to responsibility have often become very wealthy. And polit- ical priorities have so far stressed the need for “harmony” in a society emerging from rigid socialism and into an environment where many individuals have become rich. By Paul French, China editor, in Shanghai So community investment is popular China’s factories, suppliers to the world, have developed philanthropy projects because factories are located in relatively but not yet established proper corporate responsibility programmes poor areas; areas where government spending on social welfare has been hina has been a major challenge for the records, a lack of effective grievance minimal. Beijing has been keen to see C corporate responsibility profession, mainly because it is so important. Most big systems for workers and hiring practices that did not ensure minimum age standards companies invest in social infrastructure such as hospitals, clinics and schools. In clothing, electronics and automotive were met. Nike had rolled out a programme part, this is a political trade-off – business companies, and countless firms in a host of to check the identity of some 150,000 of its people and entrepreneurs know they exist other industries, source primarily from workers in China and found 167 cases of in a relatively grey area and their newly China. people who were below minimum age acquired assets are not well protected under While western buyers were enticed by when they were hired. Sometimes compa- China’s rather weak legal system. attractive pricing, many failed to make sure nies such as Nike have been reduced to While some business people do that their Chinese partners could live up to simply trying to ensure workers are paid. In genuinely wish to do good it is also widely their technical and logistical requirements. 2005 and 2006, Nike “secured” more than accepted that many put money into Supply chains became problematic. When $921,300 in back wages owed to workers in community investment projects to curry Chinese suppliers struggled to meet China alone. favour with the government. Similarly with production schedules, buyers used expen- The need to address basic issues, such as philanthropy. sive airfreight, for example. whether contracted factories are abiding by The rise of corporate philanthropy has Quality issues also surfaced. Chinese local laws or paying their workers, naturally been rocky to say the least in China. Origi- suppliers often lacked the skills to maintain cuts into the time and effort that can be nally it was encouraged and pointed to, by process control and implement engineering expended on more advanced corporate both business people and the government, changes. The combination of problems responsibility initiatives in China. as a sign that a corporate responsibility often eroded the expected cost savings. mentality was emerging. This movement Just before the 2008 Beijing Olympics, Beyond philanthropy really peaked after the Sichuan earthquake Nike issued its first country-specific supply There are still two stories in China: the on May 12 2008 (known simply as 5/12 in chain report and it chose China. Nike approach and activities of local Chinese China). detailed the efforts it had been making to firms and those of foreign companies oper- About $1.5bn was donated, mostly by encourage suppliers to comply with its code ating in the country. Chinese companies, but also by ordinary of conduct and Chinese law, including a A 2008 survey by the Environment- people and foreign companies in China. programme to monitor Olympics-related Oriented Enterprises Consultancy in Despite praise at the time, questions were suppliers. Zhejiang, one of China’s wealthiest soon raised by both NGOs active in the The report noted problems such as falsi- provinces, found: “Foreign multinationals quake zone and China’s notoriously tetchy fication of factory documents and payroll are both more actively engaged in CSR blogosphere as to how much money had
  5. 5. Ethical Corporation • March 2010 Country briefing: China 29really 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 indicate Western brands can provide an ethical boostthat the government is allowing these ques-tions to be asked, which they did not when responsibility programmes has proved prob- It is only a couple of years since Jonathonthey were raised after 5/12. lematic with so many factories to cover – a Porrit, the environmental campaigner, typical European clothing brand might annoyed many in China’s nascent greenForeign vs domestic source from more than 150 factories in China movement by claiming in an interview withWith the recent rise of philanthropy by and have many more sub-contractors. the bilingual website China Dialogue thatChinese companies being openly ques- Increasingly foreign companies have Chinese people only cared about gettingtioned, many are now looking beyond the rich and not the environmental cost of thesimple giving of cash. Rather than outbid- The rising green consciousness process. Porrit has since changed his viewsding each other on philanthropic donations on China, but still, to those living andChinese companies are turning their atten- in China is coming about as working in China on corporate responsi-tion to the activities typified by foreign a direct result of the rise and bility and the environment, they weremultinationals in China that are both reflective of a major disconnect betweenbroader and also welcomed by the govern- expansion of an educated western impressions of the country and thement – good corporate citizenship. middle class reality. Foreign companies in China are more The rising green consciousness in Chinaengaged in developing corporate responsi- sought to become good corporate citizens in is coming about as a direct result of the risebility than domestic companies. But they China as they both manufacture for export and expansion of an educated middle class.have still found themselves in trouble. and try to tap into the growing domestic This now numbers more than 600 millionWestern companies from Timberland market for their products and brands. This people in households with an income ofto McDonald’s and Nokia to Apple have has meant that while, perhaps five years between $7,000 and $9,000 a year. Thisbeen criticised in the press locally and ago, most companies focused their corpo- emerging class is highly urbanised, isinternationally over issues ranging from rate responsibility activities on working educated, and invariably works in whitepay to unions, health and safety to human conditions, they are now moving closer to collar occupations. These people haverights. the Chinese model of stressing community begun to acquire property, cars and appli- Auditing and maintaining corporate investment and philanthropy. ances as well as being better travelled
  6. 6. 30 Country briefing: China Ethical Corporation • March 2010 Multistakeholder initiatives – not there yet The last few years have seen a growing amount of talk in China of multistakeholder initiatives (MSIs). However, to date, real examples of MSI projects have been few and far between and encountered a host of problems. In 2003, for example, nine Hong Kong labour groups and trade union organisations, including the Hong Kong Confederation of Trade Unions, became involved in a MSI developed by a British group, the Ethical Trading Initiative (ETI). The Hong Kong groups and ETI committed significant amounts of time to the project but there has been almost nothing to show for this effort. Eventually, the Hong Kong groups involved withdrew. The ETI initiative necessarily had to involve China’s only trade union, the state-sponsored All-China Federation of Trade Unions (ACFTU). In fact, having to deal only with this state union has long been a problem for all MSIs in China. Many of the Hong Kong participants and ETI wanted stronger shop-floor involvement, which was strenuously resisted by the ACFTU. The union wanted to have control of all Chinese worker involvement. There was poor communication – both the Hong Kong groups and the local ETI coordinator became caught up in a morass of negotiation with largely uninterested local corporate representatives and confused suppliers. Again communication between the partners and the ACFTU was virtually non-existent. Sichuan earthquake provoked widespread charitable giving Finally the initiative suffered from weak corporate commitment. This was perhaps its key failing and is both internally and often outside China. Tesco’s China chief executive Ken Towle in fact the reason given for the weakness or failure of This is a sizeable group of people with a said: “We are very pleased to announce our most attempted multistakeholder initiatives in China. high awareness of issues, the means to first green store open in China. Energy Too many reps at Chinese factories have no real express them (via the internet) and a more saving has become a hot issue in the understanding of corporate responsibility issues. international outlook. They are the group nation.” Others have conflicts of interest being both sourcing most concerned about food quality, air There have also been moves to reduce managers and compliance officers at the same time. quality, water quality and sustainability. packaging and introduce more recyclable They have a stake in China’s future and are packaging by many international retailers often members of the 74 million strong environmental debate in the blogosphere. Communist party. They also happen to be While the government media praised the the backbone of the ongoing consumption Foreign companies were not Chinese delegation’s work at the Copen- boom that the government has staked its enacting policies in China hagen climate summit, there were raging future on. debates between government supporters In the past many in the corporate that were in place in their and detractors on the internet, many feeling responsibility and environmental move- home markets China was not acting responsibly. For ments in China had noted that foreign observers of China the problem is under- companies were not enacting policies in and fast food chains in China. However, standing that Chinese citizens do not have China that were in place in their home while this is welcome it should be noted the same opportunities for action as those in markets. The most obvious of these were that these changes have largely been intro- other countries. Letters to editors do not get the retailers and fast food brands. duced in response to new laws by the printed, mass protests are forbidden, legal That is changing now. In the last couple Chinese government banning plastic bags action virtually impossible. of years British supermarket chain Tesco has and enforcing recyclable packaging. However, the new middle class is finding launched a number of energy saving and So China’s new middle class is now more ways to make its voice heard. Sometimes environmental initiatives in its China stores aware of the environment – from the legion this is through discreet protests. Communi- that it had enacted several years previously of university “green clubs” springing ties protesting about polluting factories in the UK. Opening a new store in 2008, up on campuses to the outpouring of have gathered and walked in small groups
  7. 7. Ethical Corporation • March 2010 Country briefing: China 31 Case study: Tetra Pak A prime example of a convergence in CR is Sweden’s Tetra Pak, the world’s leading supplier of packaging. Having been operating in China for 30 years, the company 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 its projects in China into three elements: its Food for Development programme, environmental sustain- ability and philanthropy. Li Hexun, Tetra Pak’s China president says: “I hope we can do more CSR work in China, since the greatest significance of an enterprise in society is no less than the value it creates for others.” Tetra Pak has been involved in a school food programme, which it claims has been a major success. The programme provides milk to school children in poorer provinces, arranging cheaper prices for milk between local governments and suppliers. According to Yang Lei, communications manager for Tetra Pak China: “120m yuan [€12.9m] has been committed to the school food programme so save milk costs and promote health education since 2000.” Low cost milk So far 170 primary and middle schools in 24 provinces and cities have received milk in Tetra Pak packages at low prices – totalling 3.5m portions per day. Obviously Tetra Pak, a major supplier of packaging to China’s burgeoning dairy industry, hasTrolley green giant an interest in more people drinking milk. But the company also believes its programme will spur thearound government offices to avoid being community investment, philanthropy and development of local agriculture, according toidentified as mass protests. Of course, other the environment, the issues of factory Ulla Holm, Tetra Pak’s global head of Food forChinese people see immediately what is conditions and human rights have not gone Development.happening. away. Indeed, they have become even more Tetra Pak has also worked to raise environmental While Chinese consumers may not be pertinent. consciousness – aiming to reduce its carbon emissionsable to demonstrate, sue or bombard news- With export orders harder to find and a in China by 10% in 2010 and sponsoring environ-paper editors, they can exercise choice in number of scandals involving everything mental awareness adverts on Chinese TV. The companywhere they shop and what they buy. from toothpaste to dog food and iPods, has also upped its philanthropic contributions and is many Chinese companies have looked to the biggest patron of the Maternal and Infant Health corporate responsibility as a potential way While Chinese consumers may to fight back. In this they appear to be Project of the China Foundation for Poverty Alleviation (CFPA). It donated $1.5m during the Sichuan earth- not be able to demonstrate, they supported by the government. Though quake which was spent on reclaiming damaged can exercise choice in where many factory owners still see corporate farmland. responsibility as a western concept they do they shop and what they buy Tetra Pak’s activities are typical of the areas foreign see it as a potential method to counter criti- companies are now moving into as they attempt to be cism of China’s labour and environmental seen as good corporate citizens in China and buildForeign, and increasingly domestic, brands practices. their initiatives that are more visible to the Chineseand retailers realise this. Initiatives such as Textiles has been an area where China people. Cynics may say that this is all just business –Tesco’s and others – Marks & Spencer intro- has become a massive exporter and come Tetra Pak wants more milk to be bought, Tetra Pakducing Plan A in its first Chinese store in under fire for working conditions. Some encourages recycling because they sell the processingShanghai for instance – are becoming both factories had been better at working with machinery for recyclable containers, Tetra Pak donatesmore common and more regularly reported their western buyers on corporate responsi- money to please the government. But, it is the casein the Chinese media. bility than others. that Tetra Pak, like many other foreign brands, is While both domestic and foreign compa- A universal code of conduct was the goal increasingly talking to a more aware and questioningnies are concentrating their corporate of many. And on this China has responded. Chinese consumer.responsibility strategies increasingly on The China National Textile and Apparel
  8. 8. 32 Country briefing: China Ethical Corporation • March 2010 Council is a government-linked body over- Chinese vs foreign companies – CR survey seeing the industry. Its job is improving China’s reputation to bring in more work A 2008 survey by the Sino-German Corporate Social Responsibility Project researched both Chinese and foreign and has developed a three-pronged companies to see what corporate responsibility activities they were engaged in. strategy: oppose dumping by Chinese Chinese domestic companies revealed the following results: companies, something that had been • 10% of the surveyed companies reported no information related to any of the 12 elements on their English concerning the US and EU; try to tighten up website but did report information about their respective CSR activities on their Chinese websites. infringements on intellectual property, • 70% of the companies indicated that they were actively involved in different levels of philanthropy. something many Chinese textile firms are • 26% conducted activities related to cleaner production and eco-efficiency, health and safety, and environmental guilty of; and introduce concepts of corpo- management systems. rate responsibility across the sector. • 23% of the companies’ surveyed reported activity in community investment. Their solution was CSC9000T, a code of • 20% reported waste and recycling activities. conduct, or as the Chinese prefer to call it, a • 13% offered information on having a code of conduct. “management system”. Then the recession • 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. Chinese factories are in a • 3% reported no information relating to any of the 12 CSR categories. • None of the companies provided information on equality and diversity. holding pattern, in survival mode amid a slump in Research of the foreign multinational companies’ websites revealed the following: export orders • 20% of the companies reported no information on their Chinese website concerning the 12 CSR elements. • 77% were actively engaged in community investment. hit and CSC9000T appeared to be forgotten. • 50% reported publishing a CSR report and were actively engaged in cleaner production and eco-efficiency. Indeed the pressure from outside as well as • 37% included information regarding health and safety programmes. internally for change appears to have • 33% reported having environmental management systems. receded. • 30% reported that they engaged with stakeholders and reported waste and recycling operations. Alexandra Harney, the Financial Times • 20% explicitly stated that they had codes of conduct and labour rights. south China correspondent, whose 2008 • 10% reported equality and diversity policies and included HIV/Aids programmes. book “The China Price” surveyed the state • None of the foreign multinationals reported issues related to anti-corruption policies on their respective websites. of corporate responsibility in China, says Source: the old problems of falsification of factory audits and lack of enforcement of the labour laws remain widespread. Initiatives still occur but are question- able. The government-issued China Corporate Social Responsibility Develop- ment Index Report (2009) says that the corporate responsibility index of foreign- funded manufacturing enterprises in China lags far behind that of their Chinese coun- terparts. The researchers say the low corporate responsibility index of foreign- funded companies is mainly caused by a lack of disclosure on the subject in China. However, a major benchmark was chari- table donations, a questionable strategy in China due to the politicised nature of giving. At present Chinese factories are in a holding pattern, in survival mode amid a slump in export orders. Enforcement of the new 2008 labour laws appears weak. Workers are being encouraged to work hard for the national good and protests are being repressed. The west is largely obsessed with its own problems and so the spotlight on China is far less bright than it once was. And so, many observers see China’s factory conditions as a forgotten cause in these Working hard for the national good economically troubled times. I
  9. 9. Ethical Corporation • March 2010 Country briefing: China 33The role of NGOsSmoke andmirrors disguisetrue corporateactivismBy Paul French, China editor, in ShanghaiIn western terms, NGOs do not existin China as the government’s controlextends into civil society on-governmental organisations findN themselves in China amid the best oftimes and the worst of times. Anecdotalevidence indicates that the number ofChinese people volunteering to become Prepared to get involvedinvolved in NGOs – mostly the young,urbanised and educated – is exploding. grow. It is that they do not know how to The field an NGO works in has a great With no real way to express themselves grow. Others disagree, arguing that the deal to do with how it is perceived byon causes outside the rigid Chinese government is seeking to constrain the Beijing. NGOs providing rights advice toCommunist party structure, NGOs are burgeoning NGO sector and see it as overly workers or, for example, seeking compensa-providing a “space” for the concerned corporatist, suggesting that most domestic tion for the victims of blood plasma poolingyouth of China to get involved. However, NGOs exist primarily as another mecha- that led to HIV/Aids infection have beenthe government places severe restrictions nism for the state to communicate its repressed and curtailed by Beijing. Others,on the establishment and activities of interests to society. working in areas such as wildlife preserva-NGOs, domestic and foreign. It monitors This may be true in the case of most tion and the environment, have been giventhem closely and has repeatedly interfered Gongos, and the government’s extensive more their campaigning work. regulation and monitoring system certainly For many NGOs the balancing trick validates the corporatist perspective. Typical Climate actionbetween attracting more support and volun- The Chinese Civilian Society on Climateteers and maintaining a good relationship Change was established in 2007. Its missionwith Beijing is becoming a major problem. The government places is to discuss and respond to climate issues The China head of one well-known severe restrictions on the and reach a consensus on future actionsinternational NGO, who wished to remain establishment and activities regarding climate change. NGOs includinganonymous, told Ethical Corporation that Friends of Nature, Global Village of Beijing,he was now in a strange position. He had of NGOs Green Earth Volunteers, Institute of Publiccome to China to try to make change and and Environmental Affairs, Greenpeace,inspire and encourage young people to of these new-type Chinese NGOs that Oxfam, and Action Aid are involved. Theybecome involved in environmental issues. appear to be essentially philanthropic had been soliciting Chinese civil society’sHe has been so successful that he now organisations was the January launch of the stance on climate change since last June,spends most of his time reining in his 7th Shenzhen Care Project, which claims to holding a series of discussions before theenthusiastic volunteers from organising too be a prime example of a “new social aid formal release of a document – Chinesemuch and attracting the government’s ire. NGO model” that derives from “the innova- Civil Society on Climate Change (2009). This tive socialist country’s national social aid report has been circulated but was notGovernment takes charge model”. reported in the Chinese media.There are about 387,000 registered NGOs in The Shenzhen Care Project has And so ultimately for NGOs it has comeChina; a further unknown number exist but organised various philanthropic social down to finding areas where they canremain unregistered. Most are forced to programmes under the themes of “love, operate. NGOs still cannot really campaignhave some sort of relationship, or “partner- thanksgiving, return” to be carried out one in a way they can in the west, though thereship”, with a government-linked body – the after another in Shenzhen. is deemed to be more political space aroundso-called Gongos (government operated What all this means is not clear though it the environment question than, say, humannon-government organisations). appears to tap into the government’s desire rights. This is another reason many corpo- Zhai Yan, director of the Huizeren to encourage patriotism and a “harmonious rate responsibility strategies are focusing onVolunteer Development Centre, based in society”. Many of these new “NGOs” are environmental and community issuesBeijing, says NGOs’ main challenge now is essentially offshoots of Chinese companies rather than traditional factory basednot that the government will not let them or organised by wealthy business people. reforms. I
  10. 10. 34 Country briefing: China Ethical Corporation • March 2010 The political dimension The intricate web of business and state By Paul French, China editor, in Shanghai While public and political perceptions of business ethics and sustainability had been evolving, recent events have turned attention back to corporate philanthropy hina’s economy is opening up, and has C been for three decades now, but its political system remains rigid. Many of the initiatives citizens use in other countries – protests, leaflet distribution, setting up ad Environmental issues emerged from the gloom hoc organisations – are all virtually impos- sible in China or at least involve major government is being forced to deal with lishing a focus on improving worker condi- personal risk. environmental issues through its height- tions, dealing with environmental impact As the recent arguments over Google’s ened international role as a world power. and the other well-trodden stakeholder threat to pull out of China show, censorship And it also has to act in response to the engagement issues. Since the Sichuan earth- remains firmly in place across the media. growing environmental awareness of quake and the international recession, On the other hand the Chinese business Chinese citizens. however, corporate responsibility in China community, as Alexandra Harney – the Combating growing environmental has shifted towards the more traditional Financial Times southern China correspon- degradation and carbon emissions in China charity and community involvement. dent – notes, should be more receptive to will be hard but many believe it can be Alex Harney sees a “danger of regression corporate responsibility initiatives now than done. Jonathan Watts is the Guardian back to philanthropy and well-timed dona- at any other time previously. This is due in newspaper’s East Asia environment corre- tions to politically salient causes” rather part to the global recession, making export spondent and a Beijing resident. He than any attempts to promote fundamental orders harder to find and so shifting power highlights China’s fast adoption and roll out and structural change. This, she adds, “is further towards buyers and away from of alternative energy technologies such as neither sustainability nor CSR”. manufacturers. wind and solar power as well as the rising Workers were promised change, not least Foreign buyers have found that environmental consciousness among in the form of new labour laws introduced demands for more health and safety China’s rapidly expanding middle class. in 2008. Analysts argue that workers will training, better living conditions and other remember those promises. At the same time basic aims are being listened to more seri- Increasing consciousness the rising environmental consciousness of ously now as the other side is more Chinese citizens, organised in Chinese-style many ordinary Chinese could lead to a desperate to sign the contract. Harney also NGOs, on the blogosphere, in a university more rounded embracing of concepts of points out that China’s factory owners and green club or perusing the shelves in their sustainability. managers are increasingly a new generation local supermarket, are now increasingly History has led many companies in – younger, better educated, more aware of conscious of corporate responsibility issues. China to feel unsupportive towards corpo- international best practice and keen to build They have used the internet and informal rate responsibility initiatives. One company their companies up from cheap assembly networks to punish many companies and corporate responsibility manager, who like shops into world class factories. brands they believe to be endangering their many requires anonymity, comments that at In contrast to the previous generation health, mistreating them or disrespecting the moment he is not able to persuade that followed Deng Xiaoping’s advice and them – boycotts and online attacks are just Chinese partners that corporate responsi- “jumped into the sea” starting businesses, two methods they have developed to bring bility is not just PR and that there has to be the new generation of factory owners the recalcitrant to heal. more than just a press release of stated understand that social capital is as impor- The thrust of the drive behind corporate intentions that are never followed through. tant as financial capital. As this generation responsibility in China is the Chinese There has not been enough embedding gradually takes over more and more of watching themselves and those who of corporate responsibility in Chinese China’s economy, many believe the future operate in their country. In this sense, business culture. Until that happens then of corporate responsibility will be brighter. corporate responsibility in China has the larger concepts of sustainability and But at present this is not the case. potential to become a more internal and business ethics are likely to remain on hold. However, it is the environment that over- important issue. Perhaps the younger generation holds the shadows so much in China now. The There had been moves towards estab- key to China getting back on track. I