Shanghai Daily 29 September 2008

Chinese firms' attitudes toward CSR changing

Created: 2008-9-29

Author:Nancy Zhang

As a developing economy, Chinese businesses have traditionally focused on profits while relegating their social and environmental efforts to the background.

But with recent changes in the regulatory environment, attitudes to Corporate Social Responsibility are changing, and foreign multinational corporations with experience of more sophisticated CSR environments are helping to shape the movement.

In a recent survey commissioned by Britcham on 160 of its members, CSR was found to be a high priority in doing business in China , with companies spending on average 1 percent of their revenue on CSR-related activities.

The survey was released this month at a conference involving CSR experts, non-government organizations and business leaders.

Social impact

A key reason for its high priority is because CSR activities are seen to be aligned with the current regulatory environment. "Engaging in CSR was seen as a good way of developing government relations," said Laura Mitchelson, strategic director of Amber, the consultancy that designed and carried out the survey on behalf of Britcham. "Businesses told us of meetings with local government where the first thing officials asked about is their social and environmental impact."

The results of the survey followed hot on the heels of the Ministry of Commerce guidelines released the previous day.

Aimed at foreign companies in China , the guidelines emphasized laws and regulations, and also set out best practices with regard to key stakeholders and the environment, plus voluntary contributions to wider society.

"Often the government will release voluntary guidelines targeted at the foreign business community to test the waters," says Lu Haiqing, corporate relations director of Diageo. "If successful, these guidelines may become regulations and spread to domestic businesses."

A key finding from the Britcham survey was that many Chinese companies look to international investors and partners for CSR strategies.

The Chinese Company Law was amended in January 2006 to include clauses about corporate responsibility to society and the public interest, spearheading accelerated CSR awareness over the last two years.

Since then concrete steps have been taken such as an increase in the minimum wage and a new labor law that came into effect in January this year.

At the 17th National Congress of the Communist Party of China in October last year, President Hu Jintao also announced expanded efforts toward energy efficiency and protecting the environment, putting China on the path to "become an environmentally friendly society."

However there are still no specific guidelines on how the 2006 Company Law amendments should be interpreted. The consensus at the Britcham conference amongst CSR experts and business leaders was that foreign firms therefore have a great opportunity to share their experience of best practices with the government.

Multinationals in China with experience of more developed CSR environments have reacted faster than Chinese firms to recent changes.

An example is financial services giant KPMG. Having been in the Chinese mainland since 1992, they set up China CSR operations in June 2007.

Under the umbrella of KPMG's global CSR operations, KPMG's China offices have been able to set up a holistic CSR strategy with several national managers and seed teams in every office.

Charities have also noticed a difference. Shanghai Sunrise is a local education charity registered with the Shanghai Charity Foundation.

Founded in 1995, they have seen a steady increase in corporate support. It relies on corporate sponsors for one-third of their activities.

All their sponsors are international. "It's easier to get support from foreign firms as they have the CSR mentality." says Julie Chu, chairman of Shanghai Sunrise.

Leo Jia, founder of consulting firm CSR & Company, helps firms design and implement CSR programs.

Though he has major Chinese clients, such as state-owned China Erzhong Group, around two-thirds of his clients are international companies.

"International firms come to us because they already have a global CSR strategy in place and need help with implementing it in China ," Jia said. "But Chinese firms are not at that level of development yet. Those that have CSR strategies tend to be the more mature, publicly listed ones, or firms that want to expand abroad and appeal to an international market."

Mitchelson observes that CSR activities give multinational companies a competitive edge.

"Foreign firms have competed with local firms for a long time now, and they can no longer purely rely on better products.'' She added CSR is a competitive edge that separates them from domestic firms.

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