CORPORATE SOCIAL

RESPONSIBILITY IN
CHINA
Alexander Gardiner - 51124168

Are unethical practices Chinas only

recourse?

Corporate Social Responsibility in China

Are unethical practices Chinas only recourse?
It is a relentless and seemingly unavoidable truth that the popular image of business
and industry in China is somewhat less than stellar. In the western world, without any study
of the matter, the first thoughts that come to mind are all too often those of sweatshop, forced
labour, dangerous and unethical working conditions and corrupt management. This is perhaps
not without reason such instances as baby formula tainted with melamine in 2008 (Hao,
2012), or that of a factory being constructed within a fortnight, to beat other inventors to IP
rights, do much to hinder China being seen as a responsible and ethical country of industry.
On the other hand, an increasing number of Chinese firms are producing Corporate Social
Responsibility (CSR) reports and many see this as a step in the right direction, though
whether thats led to more sustainable business practices is an open question (Larson,
2013). With this in mind, the question is posed; is Corporate Social Responsibility an
oxymoron when it comes to China? Furthermore, the theory will be explored that the
growing pressures of globalization and the international competition thus brought are in fact
forcing China and Chinese businesses to adopt unethical practices.
For claritys sake, we must first define what is meant by Corporate Social
Responsibility (which hereinafter may be alternately referred to as CSR). The Berkeley
Journal of International Law tells us that CSR is an initiative whereby it is suggested that
companies conduct dealings and business in a manner that is beyond compliance with the
law and beyond shareholder wealth maximization (Lin, 2010). CSR also implies that, in
essence, company effort will exceed the required minimum level under laws governing such
areas as product safety, corruption, labour/human rights and others. This abstract concept of
responsibility has, in practice, been converted into a list of corporate and industrial practices.
This theme pertains in a particular way to China in the conversion from state-owned to
private business and industries, CSR has remained unfamiliar to most Chinese businesses
(Worldwatch.org, 2015) indeed, it has been referred to as a largely western concept
(Mullich, 2011). As noted above, Chinese industry has become infamous for sweatshops and
environmental pollution and the tag Made in China has become almost a byword for
cheaply made, substandard product. However, in recent years the lack of corporate social
responsibility has begun to recede. In 2006, only one Chinese company filed a CSR report
(that company being State Grid the largest state-owned electric utilities company in the
world). In 2009, 582 companies released, albeit in various forms, CSR reports. One study
estimates this value as being three point five times the number filed the year before. Even
more staggeringly, by 2012 this number had more than tripled again with sustainability
consultant Syntao arriving at a figure of 1722 companies having filed CSR reports. The
Chinese government is one of the driving forces behind this new initiative, with an estimated
quarter of all large state-owned enterprises having filed reports in 2012. Legal guidelines
have been brought into being to lead the way for CSR initiatives, with 2006 Chinese
Company Law Article 5 unequivocally stating that A company must, when engaging in
business activities, abide by the laws and administrative regulations, observe social morals
and commercial ethics, be in integrity and good faith, accept supervision of the government
and the public, and undertake social liability (Standing Committee of the NPC, 2006).
Private initiatives have also been undertaken, with the Chinese Industrial Association issuing
a joint declaration of Chinese CSR Industrial Principles. Many have touted this as being a
highly significant, if slow, change in Chinas attitude towards trade and industry and despite

the snails pace (Sarkis et al., 2011) of these developments, there is the opinion in many
circles that institutional-level winds of change are occurring (Sarkis et al., 2011).
There are, however, doubts as to the efficacy of these arrangements. The Berkeley
Journal of International Law questions whether these measures, though impressive on paper,
may in fact only exist on paper, with them possible being window dressing (Lin, 2010).
Some are of the opinion that although ideally this change would lead to enhanced
awareness, better monitoring practices, and action to curb detrimental occurrences, it is not
yet clear the trend has translated....into socially and environmentally sound policies (Larson,
2013). This would seem to be supported by the example of Baogang Group, a steel company
that despite claims of investments of tens of millions of dollars a year in environmental and
waste processing has continued to produce pollution near the village of Dalahai, which has
later been linked to unusually high levels of cancerosteoporosis and skin and respiratory
disease (Marquis and Chen, 2013). This same company lauds itself as having been
recognized for its Corporate Social Responsibility and sustainability activities, but reports
from later the same year have proceeded to show that radiation levels [in the vicinity of the
facility] are ten times higher than the surrounding countryside (Marquis and Chen, 2013).
This evidence, containing such glaring contradictions, would imply that significant
questions remain about the quality of these reports and whether this trend truly indicates
increased transparency (Marquis and Chen, 2013. It has been suggested, in fact, that the
increased number of reports is less of an indicator of true change in CSR than of simple
greenwashing, with firms presenting an image of sustainability despite dubious practices.
Obviously, the argument can be made that policy changes are not always enacted
immediately, and in many cases indeed cannot be. It could also be said, in the example above,
that diseases may take some time to manifest. Osteoporosis and similar diseases may be
hereditary, and take generations to be fully apparent. A change in policy is not always aligned
to a change in practice in such a short timescale. This argument may be strengthed through
the observation made in a report by the World Economic Forum, which found more than a
dozen vignettes of responsible business practices of Chinese companies, especially in
international operations (Zadek, 2012). Another example would be that of the airline Cathay
Pacific, which donates a portion of its profits to Wokai, a charitable organisation that helps
micro-entrepreneurs in China start small businesses and lift themselves out of poverty
(Mullich, 2011). In the Baogang example, though, this appears to be an extreme case of
playing Devils Advocate, and one rhetoric device may be answered with another Occams
Razor, with the simplest solution being most likely. It is most likely, in this situation, that the
CSR policies claimed are in fact only apparent on paper, and not in practice. From these
varying examples, we can see that there is a movement towards greater Corporate Social
Responsibility in China but we may also observe that as of this moment, it is largely
embryonic, and though a movement in the right direction, is far from developed to a level
that a Western perspective would find ethical. Corporate Social Responsibility in China may
not be an oxymoron, but it is still of dubious authenticity. However, the level of propaganda
on the topic leads to the conclusion that though the system is still in its infancy, the Chinese
government and corporate or industrial sectors recognize the need for increased CSR, and are
apparently moving towards a balanced system.
Secondly, the topic of globalization must be addressed. Economic globalization
inevitably brings competition it is almost an inherent part of the process, and oft touted as
one of the benefits of globalization as a whole. The Corporate Social Responsibility situation
in China is an excellent example of this as observed previously, the claimed CSR level
would seem to be far higher than the actual levels. This would indicate that the Chines
government and corporations see a need to present this potentially greenwashed image to

the world. The rationale here is obvious in the business world of today, with a more
environmentally and ethically conscious consumer, it is vital that a company not only present
itself as a purveyor of desirable goods, but a desirable company in and of itself. The advent of
social media has resulted in the capacity for instant and widespread feedback and judgement
a poor PR decision in Chicago can be read about and discussed in Paris or Munich within
the hour, and repercussions for business can be felt across the globe. This means that
Organisations are accountable for their actions like never before (Bell, 2008). Thus, the
increased competition, along with the capacity for instantaneous repercussions, means that
globalization is indeed exerting pressure on Chines corporations but far from forcing them
into unethical behaviour, it is encouraging a trend towards increased levels of CSR, a theory
borne out by the data indicating that CSR growth has been particularly prominent in the
international trade sector. On the other hand, we can observe unfortunate situations such as
the suicides at the electronics outsourcing manufacturer Foxconn, with workers feeling that
there was no future there. Economist Jeffery Sachs touts the theory of comparative advantage,
which posits that a developing country may improve its standing by undertaking a given task
cheaper than a more developed one. This, in theory, would benefit all involved, including the
consumer, with proponents arguing that in order for workers to take these jobs, it must
represent an improvement in quality of life. Thus, we can see there is weight to the argument
that globalization exerts pressure on Chinese companies to such a degree that they are forced
into unethical behaviour. It has even been remarked on that due to these pressures, and the
ideal of developing China through the use of cheaper labour, the government has the
incentive to control the development of CSR in China (Lin, 2010). It is suggested that it is
for this reason that economic areas of CSR initiatives are given more space to develop, while
human rights are given the least. This theoretical balance allows the undercutting of more
developed countries in terms of production and labour costs, while still allowing various
corporations to present a sustainable faade to consumers. From these facts, we may conclude
that globalization is a pressure felt by many Chinese corporations, but not a unilateral one.
The increased competition of globalization may drive corporations to find cheaper and
cheaper options, leading them towards courses of actions that may prove ethically
questionable or unsound however the increased connectivity that globalization brings, along
with a more image-based field of competition may drive the same corporations to implement
more and more CSR measures. This therefore suggests the existence of a balance and as
China develops more, through the benefits of sweatshop-style labour, it is to be expected that
as such options become less necessary, the balance will swing more towards CSR
initiatives.
In conclusions, though the largest part of what is presented as Corporate Social
Responsibility in China is simply part of a public relations campaign, the existence of this
gap does not relegate the CSR initiatives to simple window dressing (Lin, 2010). There is a
demonstrable growth in the number of CSR reports filed and in CSR initiatives both by
companies and corporations themselves, and by separate organisations with this as their goal,
such as the previously mentioned Wokai. Thus, despite there remaining a deficit in CSR
generally, and in particular in comparison to that which is claimed, Corporate Social
Responsibility in China is not an oxymoron. We may also conclude that though the
competition brought on by and encouraged by globalization, the pressure exerted on
companies acts as an incentive not only to reduce costs and rely on unethical and
questionable avenues of business and production, but also to increase CSR levels and grow
that sector.
Word Count: 1954

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