From CSR to Business Sustainability in China

Fotolia_95557863_S.jpg

Editor’s Note: As part of the new “Global Distinguished Speaker” series, AmCham China will be hosting Dr. Neil C. Hawkins, Corporate Vice President and Chief Sustainability Officer of the Dow Chemical Company on Jan. 17, 2017. Dr. Hawkins will be sharing his insights about the global trend of corporate social responsibility (CSR) and sustainable business. To sign up, click here.

For the development trajectory of Corporate Social Responsibility (CSR) as a business concept, 2016 is a significant year. Not only is it the 100th “birthday” of this term, but it is also the 10-year anniversary of China’s CSR field. Meanwhile, the concept of CSR has rapidly developed in the past decade, both in China and globally. For many companies, CSR has changed from a liability imposed by external pressure to an initiative generated from a business' core purpose. With government encouragement, more Chinese companies, together with their multinational peers, compile and publish CSR reports based on international standards. This dynamic evolution has also demonstrated the need for a better understanding of the past and future of CSR strategy.

Less Giving, More Empowering 

Although MNCs understood that CSR could have a critical impact on corporate reputation and customer relations, companies found it difficult to engage the community due to limited local partners and resources. Thus, at the outset, contributions of money, goods, and volunteers were the main avenue through which many MNCs in China conducted their CSR efforts. However, the 2008 earthquake in Sichuan Province triggered nationwide criticism on the so-called “Iron Rooster” (meaning “stingy person” in Chinese) MNCs, when their disaster donations were considered “too little” compared to their profits in China. From there, the drama escalated into a competition of donation totals. This was a turning point for the entire philanthropic environment in China, when the public and MNCs started to look for more effective solutions to social issues.

After this massive public relations crisis, many MNCs began to contribute more resources to “teaching people to fish” rather than to “giving them fish,” which also reflected a global trend toward encouraging economic empowerment and building local capacity. Goldman Sachs, Mary Kay, and many other companies initiated women empowerment projects in China to provide funding, skill training, and market access to encourage female entrepreneurship. IBM’s Corporate Service Corps and SAP’s Social Sabbatical Program all facilitated corporate volunteers to provide free consulting and assistance for local nonprofit organizations, government agencies, and educational institutions in emerging markets like China, with the goal of helping them to solve economic and social problems. Compared to the blunt instrument of donation totals, these methods are delicately designed to target the roots of poverty and provide the recipients with skills that can benefit them for the rest of their lives.

The 2008 earthquake in Sichuan drew attention to CSR strategy in China

More Stakeholders, Greener Supply Chain

In 2011, Michael Porter and Mark Kramer first introduced the term of “Creating Shared Value (CSV)” in the Harvard Business Review. It encourages companies to generate economic value in a way that also produces value for society by addressing local challenges. With this concept, boundary of CSR responsibility has expanded from the company itself to the entire supply chain, and to the all the links in production (such as R&D, manufacturing, distributing, selling, and recycling). The relevant stakeholders in this entire ecosystem are no longer just consumers, governments, media, or NGOs, but also their suppliers, partners, clients, and end users. Animal welfare in product testing, labor rights, energy efficiency, carbon emissions, environmental protection, etc. all are increasingly viewed as challenges that corporations should work to address.

MNCs are also increasingly held accountable for everything in their supply chain, such as sweatshops, energy waste, or pollution. They also need to create shared value among varied stakeholders to make mutual improvement. Many MNCs in China are collaborating with the Chinese government and NGOs to address the above issues, together with their suppliers and agents, such as Apple’s commitment to clean energy development and Dow Chemical’s Safer Operation and Emergency Preparedness Pilot Project with the Ministry of Environmental Protection and the United Nations Environment Programme.  

Jack Ma, Alibaba’s founder, recently said: “A great enterprise must solve social issues.” In order to convert social challenges into opportunities for new business and continuous growth, many MNCs are upgrading their CSR strategies into business sustainability strategies. The intention is to make the programs longer-term, more comprehensive, and better reflective of the United Nations’ Sustainable Development Goals (SDGs) in economy, environment, human rights, and social development. In China, this trend is also captured and addressed in the 13th Five Year Plan, urging enterprise transformation and sustainable development. In this process, MNCs are leading the trend by introducing innovative ideas with expertise developed from global strategy and practices.

AmCham China co-sponsored the 2016 China CSR Awards

From Ad Hoc Projects to Continuous Strategy

With the increasingly complex requirements for addressing social issues, more and more MNCs and their Chinese counterparts are integrating their CSR practices into their core business strategies. They are asking themselves: What is our core business or products? What is our comparative advantage in the sector? What are the unique resources we have that can be used to solve relevant social problems? Ad hoc CSR practices are being replaced by a series of systematically designed projects, reflecting corporate strategy from program conceptualization to completion, and contributing to the overall business development goals.

When Walmart used their massive storage and logistics system for the transportation and distribution of disaster relief material, when Coca-Cola launched a water replenishment goal to give back clean water to nature, and when VISA initiated projects to improve children’s financial literacy, they found the common ground between their core business and sustainability approaches.

AmCham China has a long history of CSR activities in China

Forward Thinking on CSR

CSR in China seems to be following the global trend and upgrading into business sustainability, stimulated by the Chinese government’s inclusion of sustainable development in the 13th Five Year Plan. It is no longer only about charity, but also about a deeper integration with core business and development strategy.  “The corporate perception about the role of CSR is evolving or being redefined from Corporate Social Responsibility to Corporate Sustainability Reform, and hopefully to Catalyst for Social Renovation one day,” commented Roy Zhang, Director of United Technologies Corporation (UTC) Community Affairs / CSR in Asia.

To better serve members’ relevant strategic needs and address the following tendencies, AmCham China’s CSR Committee also evolved into the Business Sustainability Committee. We strive to be the platform for members to communicate with varied stakeholders, thought leaders, and like-minded peers from both the private and public sectors, and to advocate for policy changes and support. (To know more or subscribe its contact list, please click here.)