Responsible returns

Foreign investment seekers meeting in Xiamen last month may not have noticed that their cash drive, which has turned a 10-year-old annual fair into a deal-making extravaganza, was tempered by a dose of corporate responsibility.

On either side of the front doors of the 10th annual China International Fair for Investment and Trade (CIFIT) large signs listed every seminar and briefing on offer.

Delegations from almost every province in the country, as well as ones from countries such as Venezuela, Nigeria, Canada and Italy, were staging events to bring some of the thousands of attendees – and their cash – into a single room.

But missing from the list was a small symposium that brought together the heads of Motorola, UPS and Sinochem; one vice-minister from the Ministry of Commerce; and high ranking executives from the Organization for Economic Cooperation and Development (OECD).

Baby steps

The symposium on corporate social responsibility was the first step in an OECD project to elevate the quality of business practices among Chinese corporations.

Ultimately, the OECD hopes China will sign on to a set of guidelines already subscribed to by 39 countries around the world. But, in the meantime, it is hoping to elevate the quality of debate during a two-year-long consultation process.

"There is a great business case to be made for responsible business conduct," said OECD Deputy Secretary-General Richard Hecklinger.

Chinese businesses have been traditionally reluctant to jump into the corporate social responsibility bandwagon, preferring instead to focus on making money. But, as more of them become global players, they find themselves having to adapt their practices to meet the requirements of partners and consumers abroad.

What’s more, the government is also piling the pressure on corporations to be better citizens. The current five-year plan makes a point of the importance of shifting China’s mode of production from one of quantity to one of quality. Sustainable development has become a mantra whenever Hu Jintao or Wen Jiabao talk about the country’s economic future.

"In the past we stressed the more the better but now we stress responsible development," said Professor Wang Zhile, Director of the Research Center on Transnational Corporations, who has written extensively on the topic.

"Many Chinese corporations want to go global. They want to become suppliers to multinational corporations."
But multinationals cannot afford to be linked with companies that underpay or overwork their employees, pollute without much regard for the consequences or manage their finances behind a veil of secrecy.

At the same time, the influx of foreign firms is beginning to impact China’s corporate social responsibility landscape.

As Motorola China’s president, Ruey Bin Kao said: "Making money is only one of our goals. It is not our only goal."
Skeptics are quick to point out that corporate social responsibility merely equates to public relations. Meanwhile in China, opponents of the international push for more stringent corporate standards say the corporate responsibility movement is little more than a thinly veiled excuse for protectionism – preventing Chinese companies from entering markets by imposing impossibly high ethical standards.

But these arguments do not appear to be taking hold.

Positive action

The OECD is not the first international organization to make a concerted foray into China’s corporate responsibility arena. The Global Compact, a collection of multinational corporations has been active in China for several years now. In March, more than 80 global corporations operating in China signed on to the Beijing Declaration calling for more CSR initiatives.

The OECD’s timing may be spot on. Companies like Sinochem, Lenovo and CNOOC are fast becoming influential global players. At the same time, China is coming out of its diplomatic shell and playing a more active role in world affairs.

There have been some very public setbacks. Last year, a factory owned by a Chinese investor in Zambia exploded and killed 55 workers. In November, a huge chemical spill sent thousands of tones of black and toxic sludge down the Songhua river. These are among the type of problems – fatal to both people and reputation – that proponents of corporate social responsibility in China hope to avoid.

With growing public interest in the role of corporations in China’s economy, a growing middle class and more discerning investors the time may be right for Chinese people and their corporations to embrace more responsible practices that may not pay off in immediate hard cash.

It remains to be seen how long the transition will take.