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by Christopher C. Pinney, Director of Executive Education, Boston College Center for Corporate Citizenship
February 2008
 In a visit to China last summer I had the opportunity to experience the economic transformation that is turning China into a global economic powerhouse. It was an exhilarating visit.
What was clear is that corporate citizenship must be a vital part of China's future if it is to address the enormous social and environmental development challenges it now faces. The stakes are high. If corporate citizenship fails in China it will have enormous implications not simply for China but for the global economy and global environment.
Made in China
The challenge now is defining a "made in China" approach to corporate citizenship that respects the norms and values that underpin Chinese society while at the same time addressing global expectations and values. The Boston College Center and its member companies working in China are committed to helping China address this challenge. This year The Center will work on this with its member companies and partners in government, including China’s National Development and Reform Commission (NDRC) and multinational corporations that are part of the American Chamber of Commerce. We will be providing a series of training and educational initiatives to support the development of corporate citizenship.
The government, business, and academic leaders we have met with recognize that the immense social, environmental, and economic challenges facing the country cannot be solved by government alone and will require the active participation of the rapidly growing domestic private sector and the foreign funded enterprises operating in China. (It is important to note that non-domestic foreign-owned enterprises account for almost a third of Chinese industrial output.)
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China: Charging Forward on All Fronts
China is already the world's fourth largest economy and if current growth rates continue according to some economists will surpass the U.S as the world's largest economy by 2015. Few could have imagined the scale of transformation that began in 1978 with the launch of Deng Xiaoping's economic policy, to alleviate poverty and improve the lives of citizens. By 2006 the Chinese economy in real terms was 11 times larger than it was in 1979, and real per capita GDP was 8 times larger with hundreds of million lifted out of poverty. From 1979 to 2006 China's real gross domestic product (GDP) grew at an average annual rate of 9.7%. Real GDP grew by 11.1%in 2006 and by 11.5% during the first half of 2007 (over the same period in 2006).
With almost 21% of the world's population (1.3 billion people) the sheer scale of the Chinese development model can be difficult to comprehend. In 2003 China announced plans to build 400 new cities of over million in population in by 2020 or roughly on average the equivalent of over 2 cities of over a million a month. It will build 500 coal-fired power plants in the next decade; at the rate of almost one a week (by comparison China built 114,000 megawatts of fossil-fuel-based generating capacity last year alone while Britain has 75,000 megawatts in operation, built over a span of decades).
To position China to compete in the global economy, leading business schools there are already making English the language of instruction and China will need to build 800 universities by 2015 to keep up with demand. From the forest of construction cranes transforming Beijing for the Olympic to the Dongtan, a new "eco-city" expansion outside Shanghai, the speed and drive for success is present everywhere you travel in China. In China the time to act is now and China is charging forward on all fronts.
The flip side of this rapid growth is the social and environmental impact it is having on China and the world. From slavery, to toxic rivers, to choking air pollution to unsafe export products, to a growing gap between the rich and the poor China faces development challenges that left unaddressed will have profound consequences not simply for China but for the global economy and world environment into which its now integrated. Chinese greenhouse gas emissions are increasing at the highest rate of any country, rising by 16% during the year 2002-03 and China like the US is unwilling to commit to hard targets for reduction. More than 135 million people live on less than one US dollar a day. Income disparity is increasing between urban areas and more developed coastal provinces on the one hand, and rural areas and the interior provinces of the west on the other.
Many of these social, environmental, and economic ills of China are expected to be addressed under the rubric of what the government is calling “harmonious society is deeply rooted in Chinese cultural philosophy Confucian thinking. In 2005 President Hu Jintao introduced the concept of harmonious society into the national policy debate about the socio-economic future of the country. This idea of a harmonious society as a policy framework includes:
- Developing democracy and the legal system
- Doubling by 2010 the 2000 per capita income levels
- Increasing the efficiency of energy utilization by reducing energy input per unit of GDP by 20% from 2005
- Perfecting the market-oriented economic system, opening the economy, and seeking more balanced international trade
- Expanding and consolidating the nine year compulsory educational system
- Creating more employment opportunities
- Improving the social security system, alleviating poverty, and further improving social order
- Raising income levels and living standards in rural and urban areas and addressing the problem of the rural migrant population
- Boosting the quality of housing, transport, public health, and the environment
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Harmonious Society
Under the broad rubric of building a harmonious society, the national government and many regional governments are working to create an "enabling" environment that encourages voluntary initiatives by business that address the social, environmental and economic interests of the entire country.
This concept of harmonious society is deeply rooted in Chinese cultural philosophy Confucian thinking. In 2005 President Hu Jintao introduced the concept of harmonious society into the national policy debate about the socio-economic future of the country.
In general, the idea of a harmonious society as a policy framework shifts the focus of development from centralized control to greater participation and multi-stakeholder involvement, and from a premium on economic growth to overall societal balance, including environmental stability and social equality.
It should be noted that corporate social responsibility or corporate citizenship are not specifically mentioned by name in the broad policy, but implementation of those ambitious goals will require government agencies in lead roles and both the business and the emerging institutions of civil society to make contributions.
One of the current problems faced by governments, local and national, is while often there are laws in place, there are many problems with compliance and enforcement. Interpretation of laws is also often left up to regional governments. To try and address these issues the national government introduced an amended company law in 2006 that expands on the social responsibilities of companies. It provides that a company, in conducting its business, must not only abide by the law, but also observe industry ethics, strengthen the development of the socialist spiritual civilization, and subject itself to supervision by the government and the public.
A new labor contract law (LCL) that took effect January 1, 2008, created in response to rising social unrest and income inequality, requires that all firms of more than 25 people allow unions and ensures some basic labor rights for employees. In addition to these legal measures it seems like every ministry has some form of corporate citizenship or CSR initiative underway, but there is often little coordination between them. The National Development Research Council of the State Council of the PRC, a key policy body, has more recently taken a proactive interest in coordination of information on CSR initiatives as well as training.
Corporate Citizenship Landscape Beyond the Government
In addition to these national governmental initiatives there are a broad variety of regional and "independent" business initiatives, academic programs and schools, and management and communication consultancies working to promote and support corporate citizenship in China. These tend to break into a few key categories.
- "Independent"government sanctioned and supported initiatives: These include organizations such as the Chinese Committee for Corporate Citizenship and the China Business Council for Sustainable Development. Many of these initiatives are also participating or affiliating actively with international multilateral initiatives such as the Global Compact, the GRI, and the ISO 26000. Most have the active participation of state enterprises as well as foreign firms. It fair to say, however, that for the state enterprise sector, corporate citizenship, with a few exceptions, is still in the very early stages of development and this is a concern for the government.
- Private sector initiatives: These include the newly created and fast growing domestic private sector. For many of the companies corporate citizenship is still in very early stages of development and often focuses on philanthropic endeavors. It is important to remember that most Chinese business in the private sector are small- and medium-sized firms with relatively few large established companies, for example, the household appliance manufacturer Haeir. As one business leader told me, "We don't have a General Electric with a 100 year history of corporate citizenship, this is all new for us."
Despite this lack of history, several entrepreneurial corporate citizenship initiatives championed by private firms have sprung up in the last two years. Most of these tend to be registered out of Hong Kong. The Chinese Federation for Corporate Social Responsibility (CFCSR), for example, which started in 2006, has three focus areas: research on best practices in CSR in China; encouraging and promoting CSR; and supporting their members in their CSR and charity efforts. CFCSR brings together some leading Chinese domestic companies and western companies operating in China, including IBM and CISCO. CFCSR is supporting the development of an independent NGO Asia Charity Forum to assist in charitable work in western China. A mixture of western and Chinese companies are supporting CFCSR.
- Large western multinational companies operating in China: Not surprisingly this group of players has the most experience and is the most advanced in its understanding and practice of CSR, and the Chinese government has high expectations of these companies. Well over half of China's trade is conducted by foreign firms operating in China, and it is their actions and those of their Chinese suppliers that account for much of China’s commercial image abroad. In this context the Chinese expects these companies to successfully manage corporate citizenship issues such as supply chain and environmental practices. They also expect these firms to lend their experience and leadership in helping domestic Chinese firms learn how to manage corporate citizenship. Given this context it is not surprising that there has been rapid growth in the number of western based communications and management consultancies working in China, helping both western and Chinese companies manage CSR issues.
I came back from China inspired by the aspiration of Chinese leaders to make their country a leader on every front, including corporate citizenship. Just as China launched its path to economic development in 1980, it is now determined to ensure that the benefits of economic development are shared by all Chinese, and is committed to making corporate citizenship a powerful tool for enlisting the support of the business sector.
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