sbrchina

Enhanced Responsibilities

WHILE CORPORATE Social Responsibility (CSR) was far from self-evident in China a decade ago, the number of companies in China running CSR programs jumped from 18 in 2006 to 600 in 2011. Increasingly, CSR is perceived as generating more resources and also providing more accountability, all of which translates into a perception of greater value for stakeholders. Companies can achieve increased competitive value, improved government relations, and perhaps most importantly, a notion of “paying it forward” that becomes ingrained in the mentality of employees.

This leap has been made possible by a number of government-initiated pieces of legislation as well as a growing number of international entities with CSR norms and practices arriving in China. As international reporting and eco-friendly initiatives continue to force companies into a structured goal-setting business environment, a new paradigm of give-and-take has begun to overcome a historic model of purely linear, profit-driven management.

A shift in value

The conventional view of CSR is now transforming from one of philanthropy to one which views the phenomenon as a key element of business development. A clear signal of this change comes from firms operating in China, both Chinese and foreign becoming more transparent and responsive to the needs of their stakeholders. The issue of trust has now emerged as much more critical than before, with the public wanting to be assured that companies are not simply window-dressing as part of a marketing scheme. Demonstrating genuine commitment has become a matter of importance for consumers and potential organisational partners alike. Companies of the 21st century are adapting to a shift of value, where how money is invested is becoming just as significant as how it is made, and this has become central to the way in which overall company value is perceived in the eyes of consumers and other stakeholders.

The relevance of CSR to transforming corporate models is best represented by vanguard companies whose core set of values are intrinsically associated with social good. These firms have been coined “transforming companies”. Pia Polsa, Dean at Hult Shanghai International Business School, believes that transforming companies that use CSR goals in their core business plans are leaders in the corporate world, as such firms have a stronger sense of purpose, better risk management and a more loyal and motivated employee-base.

“The story aspect, behind, for example, a lampshade from a village in Orissa in India, is becoming more important to the new generation, thereby creating value to international consumers as well as treasure in communities living below the poverty line,” says Polsa. “Companies that take advantage of cross-product-line exchange can network themselves in such a way that one society, or two or three, can result in becoming more balanced and productive. Firms can learn from transforming companies that CSR is a business opportunity.”

The GM paradigm

General Motors, who have remained the Number 1 industrial enterprise in Fortune Asia’s “Most Successful CSR Companies in Asia” survey since 2009, can be viewed as a model for foreign businesses running CSR programs in China. They rose to the lead with the launch of two “ecomagination” and “healthymagination” product line campaigns focused on customer health and environmental protection. Keith Cole, global public policy and government relations executive for General Motors, offers his firm’s insights: “Have a good sense of where you want to go. In China, we have a well-developed CSR strategy focused on being greener, safer and healthier. These ideas are big pillars of social good and they have allowed us to become more defined in our approach as well as for defining the things we will not do. With limited funds, companies have to prioritize the plentiful opportunities that come in for CSR engagement.”

Of all the CSR projects currently enrolled in by GM China, the aspect that stands out the most is their willingness and capacity to work in partnership with other organisations in joint projects. GM currently has a total of twelve CSR joint ventures. In one, it has worked alongside a 2002 JV initiative SGMW to fund the acquisition of medical equipment at the Naman Rural Hospital. GM has also cooperated with Hudong, China’s largest wiki site, to launch GM’s Safe Road Project, and has worked directly with Shanghai Government authorities in introducing GM’s new energy vehicle (NEV) into China.

GM’s success in the CSR scene has been dramatically influenced by its initiative to partner-up in community-related projects. “By participating in groups like the US-China Business Council or SGTI we come across a variety of organisations in China doing work in the CSR space,” says Cole. “We utilise those connections and entities to the fullest. Important questions we ask ourselves include what is our strategy, what is the reach and reputation of the organisation, what positive outcomes would result, who are the audience and what would be affected? We use a very structured method for deciding a subjective list of possible JV projects.”

Going the distance

Another avenue into CSR is by way of CSR consulting firms that offer companies third-party auditing, information aggregation and corporate accountability reports, which provide companies a focused, China-specific method of review. Sam Yoonsuk Lee, CEO of InnoCSR Consulting in Shanghai, confirms that the perception of CSR as a form of obligatory philanthropic community service is an outdated notion. “Getting China to receive the concept of CSR has been an immense success for business development in the past decade for InnoCSR. There is evidence that implies that CSR was first introduced to China from Western companies. I partially agree to that. A lot of foreign companies are still leading in terms of innovative shared value projects with stakeholders as well as internal system and policy, which also affect their service, quality and branding of their companies and products. On the other side, as Chinese companies go global, they are catching up fast, and they see and learn from their competitors operating in mainland to find their own innovative ways of creating a win-win with the society and the market,” he says.

While both foreign and Chinese companies are increasingly seeing the value in CSR programs, statistics compiled by InnoCSR in their 2013 CSR Ranking Report for Fortune China reveal differences between the two. Chinese companies focus on regional philanthropic activities, poverty alleviation and the empowerment of vulnerable groups. Foreign companies conduct community projects focused on local culture promotion, technology innovation and entrepreneurship. The latter’s greater involvement in education and training programs represents their concept of CSR as being something symbiotic, whereas Chinese companies seem to take a more “big brother” approach.

Consulting firms in the business of CSR focus primarily on internal operational value and long-term impact by encouraging their partners to create measurement standards and timely goals. Tracking and achieving long-term goals is valuable to stakeholders that aim to reach some kind of target in a given space. Long-term predictability and goal-setting remain important cornerstones for demonstrating commitment to stakeholders.

Best foot forward

Corinne Hua, founder of an English education initiative, Stepping Stones, believes that CSR investment offers social leadership organisations opportunities to promote their cause. While the impression of NGOs is generally very positive, the question remains as to how companies can structurally benefit community initiatives. “NGOs just want to be asked, ‘How can I help?’” says Hua, who adds that the best approach to CSR investment is where the company listens to needs and identifies what resources it has available to assist those needs, which could be material, financial or human resources.

NGO grass-roots work and management gets its best support in an indirect sort of way. Hua says that companies would be best to show their support by indeed applying their own areas of expertise such as legal assistance, web-design, or information gathering and dissemination. “There are still boundaries between companies and consumers that can be broken down in an economy that recognises corporate reputation,” adds Hua. “Consumers are ready for change, and are starting to appreciate corporate efforts to improve society. It’s a pity for companies to put their resources into small scale, one-off projects, as we can achieve big solutions if we go outside of our boundaries and work in partnerships, pick key areas, develop an expertise, and keep thinking globally.”

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