When the West thinks about China, the first things that come to mind are negative stereotypes; an uncontrollable hyper-capitalist economy wreaking havoc on the environment, corruption, and product and food safety scandals. The recent blasts in Tianjin have only further lodged international fears that China’s rapid economic expansion is hurting the global community. However, the reality is much different.
China has made an extraordinarily rapid shift from a production source to a more mature consumer market. As a result, balancing economic development with protection of environmental resources has become a clear priority in both Chinese public discourse and government policy.
In the private sector, like other places in the world, the decline of resources combined with the rise of global transparency has led to a new standard in business, i.e. sustainability. While the heat of the corporate social responsibility (CSR) debate took shape in the west over 50 years ago, China has only begun its battle in the last decade.
Speaking with The Nanjinger, Shawna Tao, President of Icicle, China’s first eco-fashion brand, took the time to explain the foundations of China’s CSR culture.
“When the economy opened up in the late 70s the educated class stayed behind and observed the changes out of fear. The brave souls that charged ahead and seized the opportunities of an empty economy were the uneducated class with nothing to lose and everything to gain. The focus was on production, expansion and profit. Without education and with the memory of hunger driving them forward, the corporate pioneers of that era sacrificed our 5000-year-old values and got very rich very quickly. The consequences were pollution and corruption…. But, now is a great time in China. Bellies are full and the memory of hunger has been replaced with a more refined palate. Now that the void has been filled, and the young are being educated, we are starting to remember what is important. More and more companies striving to give back to the community have started appearing.”
While Tao’s optimistic outlook is reflective of the current trends in Chinese CSR efforts, they still have a long way to go. MNCs and SOEs have been quite effective at recognizing the benefits and integrating CSR strategies in their daily operations. However, a study carried out by the Centre for Corporate Social Responsibility points to SMEs lagging behind. Most SMEs do not yet fully understand the economic value of CSR despite the fact that it is become the central issue on contemporary business’ agenda.
Incentives/Drivers
We must first seek to understand the drivers, as they are key for a business to fully comprehend the benefits and urgency in adopting a CSR platform.
Government Regulation and compliance is considered to be a key driver in the promotion of CSR. The Central government’s 2006 Harmonious Society policy officially put forward sustainability and CSR as the over-arching strategic goal of the CCP. This was partly due to the increase of serious incidents causing social unrest, by an average of 29% per year. Since then, the concept of CSR has been entrenched in corporate and contract law, and mentioned in top-level speeches and official documents. The Chinese government has also strongly supported the absorption of CSR business models for its SOEs. It is clear that the government is taking CSR very seriously. Businesses need to implement changes as soon as possible if they do not want competitors to gain the upper hand. Furthermore, as policies to reduce greenhouse gas emissions are implemented, companies that fail to be proactive will find that their raw materials and energy costs will increase. These companies will spend more on risk management, as the cost of social and environmental irresponsibility will get out of hand.
The Role of MNCs and Global Competitive Advantage
International clients are another important driver of CSR development. The presence of MNCs has helped to introduce, improve and encourage Chinese organizations to adopt CSR. As MNCs are responding to global pressures and implementing stricter controls, Chinese companies along the supply chain are forced into following CSR guidelines to survive.
As China’s economy continues to mature, businesses are looking to expand overseas. Out of the 500 Global Fortune companies listed in 2014, 95 were Chinese. During interviews carried out by the United Nations Global Compact, many Chinese business leaders emphasized the urgency for companies to evolve in the area of CSR if they want to succeed and remain competitive in global markets. As Chinese firms are now increasingly investing outside of China, companies that fail to implement CSR policies and practices will find themselves wrestling with consequences of the fallout in their host countries.
Civil Society, New Media and Public Opinion
Civil society is a major player in the promotion and implementation of CSR activities. As of 2009, with the opening up and allowance of civil discourse by the Central Government, more than 425,000 NGOs were seen operating in China. On one end, most are promoting “orderly” public participation in environmental and consumer matters. On the other, they are forming collaborations with corporations as the private sector is increasingly seeking guidance to improve their CSR performance. Ma Jun, Chief of the Institute of Public & Environmental Affairs (IPE) and well known environmental activist, is spearheading the public education movement by publishing available data on new media in an easy to interpret form.
With the emergence of new media, the speed and scope of information available online is making it easier for the digital-native youth to engage in discussions about contemporary issues. China boasts an impressive community of over 640 million Internet users, millions of which are also blogging. And according to research by PR company Edelman, Internet users are presently growing at an annual rate of 40 per cent. We live in an age where one faux pas can go viral and reach millions of users. Businesses can either falter or flourish at the whim of a click.
The last few years have witnessed a growing level of public involvement in CSR-related issues, especially with the new generation of environmentally conscious, technologically savvy millennials. An MSL Group survey that questioned 8,000 Generation Ys born between 1984 and 1996 around the globe, found that 92 percent of respondents in China believe corporate involvement is necessary in tackling social issues. MSL Group Chief Strategy Officer Pascal Beucler says, “millennials look to businesses not only to lead, but to actively engage them in the process. This opens up huge opportunities for businesses worldwide to reset in the face of declining consumer trust.” China has approximately 400 millennials who express themselves quite liberally on environmental and consumer concerns. They are an ambitious, self-confident group that represents the future of the country. 69 percent, the highest in the world, demand transparency on corporations’ citizenship activities. “Brands that are socially active are perceived as forward thinking and responsible,” said Ellen Cheng, MSL’s Asia practice group lead for Corporate & Brand Citizenship based in Beijing. “This indicates that citizenship is a strong differentiating factor for brands: more than 83 percent of Chinese Gen Y would recommend a brand to friends or family because of its citizenship efforts.”
The 5 Benefits
Chinese companies generally still struggle to see the business case for CSR. It is usually viewed as a part of wider PR, philanthropy or crisis management strategy. Businesses need to adjust to 21st century realities or they are on their way to becoming the proverbial frog. I have compiled below a list of five benefits a Chinese company can achieve from imbedding a sustainability strategy. But, I will let business leaders and industry professionals do the speaking.
Survival
“We’re talking about a transformation of the economy, and when you transform economies, then some businesses win and some businesses lose.”
Paul Gilding, Former Greenpeace Executive Director during an interview with Eco-Business, an Asia Pacific based media outlet covering sustainable business, ahead of the Responsible Business Forum on Sustainable Development.
“We firmly believe that businesses in the 21st century must take responsibility to help solve the problems of society. This is not only a moral duty, but also the foundation of our own survival and growth.” Jack Ma, in an open letter to the company’s
investors after unveiling the largest tech IPO ever seen.
“Even if they are motivated by profits, they will have no choice but to answer to the changing business environment and listen to what their stakeholders want. They may not want to but they must if they want to survive the next 5 to 10 years.”
Shawna Tao, President of Icicle, China’s first eco-fashion brand, speaking with The Nanjinger.
Social Capital and Brand Reputation
“Reputation is their biggest asset or their biggest potential liability.”
Greg Babe, Former CEO Bayer Corp. in a Forward for Chris Laszlo and Nadya Zhexembayeva’s book “Embedded Sustainability: The Next Big Competitive Advantage”.
“A consumer is willing to spend more money on your brand if they consider you a meaningful brand.” Maria Garrido, International Marketing Director for Havas, speaking with The Guardian.
“As it will soon be the norm for all products to be environmentally friendly and socially responsible, we believe a product’s sustainability benefit will strongly differentiate a brand (akin to price, quality and effectiveness).”
2011 KPMG China CSR Report
Innovation
“Sustainability is not a constraint, it’s a field of opportunities at every level. It creates value in multiple ways – efficiency, innovations in processes and product development.”
François Pinault, Chairman and CEO of Kerring, speaking with VOGUE UK
“Companies that are breaking the mold are moving beyond corporate social responsibility to social innovation. These companies are the vanguard of the new paradigm. They view community needs as opportunities to develop ideas and demonstrate business technologies, to find and serve new markets, and to solve longstanding business problems.” Rosabeth Moss Kanter, Harvard Business Review.
“Market shifts create winners and losers, and companies must innovate to survive.”
Andrew J. Hoffman, Professor and Associate Director of the Erb Institute for Global Sustainable Enterprise, in a Forward for Chris Laszlo and Nadya Zhexembayeva’s book “Embedded Sustainability: The Next Big Competitive Advantage”.
Human Resources
“Without talented, happy, diligent and passionately committed employees, our commitment to serving customers will be empty. A company that does not have satisfied employees will not have satisfied customers, and without satisfied customers, we could not possibly have satisfied shareholders.”
Jack Ma, in an open letter to the company’s investors after unveiling the largest tech IPO ever seen.
“Developing a strong CSR program that engages employees’ enthusiasm in issues of individual interest is crucial to a firm’s competitiveness, especially in attracting China’s most talented professionals and keeping them aboard as alternative opportunities emerge.”
The American Chamber of Commerce in Shanghai in their report “A Guide to Corporate Social Responsibility in China”.
A total of 72 percent [millennias] want their employers to help enable them to get involved, while 84.9 percent “want to work for an active citizen.”
MSL Group sourced from Jing Daily Magazine.
Direct Financial Impact
“The 10 per cent reduction in electricity is enough to power the annual consumption of 3 theme parks.” –
Disney’s Climate Program
“Proactive environmental strategies can result in cost reduction, such as decreasing costs related to current and future legislation, and operational costs.”
The Business Case by the Doughty Centre for Corporate Responsibility.
This article was first published in The Nanjinger Magazine, October 2015 Issue. If you would like to read the whole magazine, please follow this link.
