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Corporate Social Responsibility in China

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• Higher expectations from stakeholders and the general public

• Corporate transparency, accountability and stakeholder relationships are the new frontier for competitive innovation

• Stakeholders more aware of critical topics such as corporate ethics and climate change

• More processes outsourced than ever before

• Production located in different centers at a global scale

• Hyper-connected world / Speed of communications

• Need for horizontal and decentralised structures = fast response time and better service

New Paradigm for Doing Business in a Globalized World

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Defining CSR

Social Responsibility Responsibility of an organization for the impacts of its decisions and activities on society and theenvironment , through transparent and ethical behaviour that

⎯ contributes to sustainable development, including health and the welfare of society;⎯ takes into account the expectations of stakeholders;⎯ is in compliance with applicable law and consistent with international norms of behaviour; and⎯ is integrated throughout the organization and practised in its relationships

Source: ISO 26000 Guidance on Social Responsibility

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1. Emerging economies represent the most rapidly expanding economies, and hence the most lucrative growth markets for business

2. Emerging economies are where globalization, economic growth, investment, and business activity are likely to have the most dramatic social and environmental impacts (both positive and negative)

3. Emerging economies present a distinctive set of CSR agenda challenges which are different to those faced in the developed world.

Rationale for CSR in Emerging Economies

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Chinese Central Government Position on CSR

Premier Wen Jiabao:* “Enterprises should carry out the policy of the country, take care of society and assume their respective social responsibilities. The entrepreneurs should not only focus on business and management, they should have the blood of ethics flowing in their body.”

* 2009, Cambridge University, U.K.

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Social Challenges

Work safety Public and occupational health Labour rights and migration issues Product and food safety

Urban-rural divide

Income disparity

Environmental Challenges

Dramatic increase of demand for natural resources

Climate change Industrial and household discharge Environmental degradation and pollution Increasing resource consumption and depletion

Building a Harmonious

Society

CSR – A Response to the Challenges of China

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GIZ’s Sino-German Corporate Social Responsibility Project Objective:

Support key political institutions, intermediary organisations, and enterprises to incorporate CSR into their strategies, policies, and practices

Duration: 2007 - 2012

Key Government Partner:Department of WTO Affairs, Ministry of Commerce of the PRC

Focus on: Central and local governments (Macro) Intermediaries (Meso) Individual enterprises (Micro) International exchange

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International cooperation enterprise for sustainable development

Operations in more than 130 countries in Europe, Asia, Africa, and Latin America

17.000 people are employed worldwide, more than 60% are local personnel

A federally-owned not-for-profit organisation

Estimated turnover of EUR 1.9 billion

German International Cooperation (GIZ)

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CSR TRENDS IN CHINACSR TRENDS IN CHINACSR TRENDS IN CHINA

Public discussions on CSR are practically

non-existent.

(until 2000)

General concern: CSR is a trade barrier.

“Wait-and-See Years”

(2000-2004)

CSR seen as an opportunity.

(2005 → )

Multinational corporations begin auditing of Chinese suppliers.

Little exposure to CSR (Government, media and domestic Chinese enterprises).

Academics, international organizations and NGOs explore CSR.

The Ministry of Labor, Ministry of Commerce, and others created CSR investigation committees.

Chinese organizations proactive (CSC9000T, Shenzhen stock exchange, etc).

CSR linked with Harmonious Society in 11th Five Year Plan.

Chinese MNCs and SOEs becoming early adopters.

CSR Development and Trends in China

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Recent CSR Trends in China Government - promotion and support of CSR (SASAC and Shanghai)

Shanghai and Shenzhen Stock Markets - CSR guidelines

Industry associations - encourage members to implement CSR measures

Increasing media attention

Rising NGO awareness and supervision

Developing consumer awareness

Changing employee demands

Increasing influence of MNCs on CSR aspects

Rising interest in sustainable investment

Growing number of CSR reports

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Public pressure from consumers, NGOs, and government initiatives in western countries

Increased awareness in companies for responsible and sustainable processes of production

Pressure on supply chain to comply with sustainability standards and company specific Codes of Conduct

Improvements in companies along the supply chain

leads to

leads to

results in

CSR Driver 1: Consumer Pressure

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Examples

The Chinese Ministry of Commerce takes aspects of CSR into consideration when assigning export licences

Cooperation with consumer countries using the framework of development cooperation

e.g. with Germany, Sweden and Switzerland

Local governments, associations and institutions support companies in implementing CSR

CSR Driver 2: Government Support

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Trade-relevant: Export-oriented companies

were affected

Media attention: Strikes were covered by

Chinese media

Peaceful settlement: Blockades and strikes

were eventually resolved by meeting worker’s

core demands

Unexpected: Strikes, along with community

protests and actions, have been discouraged

ever before

CSR Driver 3: Local Strikes – A New Development

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Policy recommendations to the State-owned Assets Supervision and Administration Commission (SASAC), Ministry of Human Resources and Social Security, Ministry of Commerce, e.g. creation of an Inter-Ministerial CSR Coordination Mechanism, promotion of ISO 26000

Policy recommendations on CSR promotion and incentive policies to local governments, e.g. Zhejiang Province, Wenzhou, Taizhou

Research and Trainings on “Local Governments’ CSR Policies in China”

CSR Policy Advise

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Development of CSR action plans for Chinese industry associations and chambers of commerce, e.g. China Chamber of Commerce for Import and Export of Machinery and Electronic Products

Translation and dissemination of ISEAL Codes of Good Practice, e.g. Standard-Setting Code

Support of internet-based platforms operated by service providers, e.g. China WTO Tribune, focusing on CSR

Introducing CSR to Intermediaries

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Taking Chinese central government delegations to Europe, e.g. with focus on carbon reduction policies

Organising Sino-European roundtables and conferences on CSR in China and Europe (with BSCI)

Presenting CSR Best Practices at the 2010 World Expo in Shanghai

Training on CSR Reporting (with GRI)

Initiating international conferences on CSR issues and events on sustainability

Contributing to CSR Asian forums and conferences

Global Initiatives with the Chinese Market

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Upscaling of Voluntary Social Standards

AA1000

BSCI

CSC9000T

GRI

GSCP

ISEAL

SA8000

ISO 26000

Global Compact

ICTI

Initiative funded from July 2009 to September 2011 by German Ministry of Economic Cooperation and Development

Support the harmonization and alignment between national and international standard initiatives

Strengthen a transparent and efficient market for standard-related service providers

Support transfer and scaling up of social standards

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Development of CSR Reporting

Increase in number of published reports:

2005 – 13 Reports

2007 – 98 Reports

2010 – 692 Reports

0

188

375

563

750

2005 2006 2007 2008 2009 2010

663631

16998

3213

Number of CSR Reports Published in China 2005-2010

Num

ber o

f Rep

orts

Pub

lishe

d

Source: WTO Tribune Research on CSR Reporting 2010

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Cooperation in Supply Chain Management

PPP Type Private Partner Region

CSR Project PPP

8 local companies HebeiCSR Project PPP 8 local companies Zhejiang

CSR Project PPP

adidas Guangdong

German PPP Facility

Tchibo Yangtze/Pearl River DeltaGerman PPP Facility Wessling / D&H Jiangsu/Zhejiang

German PPP Facility

Int. Council Toy Ind. All China

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Capacity Building for Migrant Workers

Objective To ensure a just and fair recruitment as well as better treatment of migrant

workers in supplier factories

Measures Building up strategic relationships between factories and training centres to

improve recruitment practices and develop training programs Building capacity at both the source of migration and its destination

Preparation of migrant workers for factory work and urban life

Results Capacity of 356 villagers was built up Migrant workers became better prepared for factory work Two suppliers of adidas recruited 23 high-quality staff

Improving Recruitment of Workers with adidas

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Objective

Improving access to information, training and support related to compliance with health, safety and labour standards for toy factory workers in China

Improving Labour Conditions in Toy Production

Results

Eight toy factories and five NGO partners participated in the project Two-day training conducted for 16 managers and 17 workers In-factory training to be conducted by end of March 2011 for additional workers 131 sets of DVD training materials were developed and distributed to stakeholders Worker helpline service launched, 1,437 calls and instant messages received 595,000 “What You Should Know” pocket cards distributed in 1,186 factories

Measures Development of training materials Trainings for toy factory workers On-site visits and consultancy services

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Summary of CSR Experience with Companies

Capacity building and advisory services to individual Chinese and international companies on specific areas such as:

Environmental Management, e.g. Environment-oriented Cost Management

Hazardous Waste and Toxic Substances Management

Energy Efficiency

Improvement of Working Conditions and Social Standards in Enterprises

Introduction of Dialogue Systems between Migrant Workers and Management

CSR-related Communications, e.g. CSR Reporting

Implementation of Effective Monitoring and Evaluation Systems

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Contact:

Rolf DietmarProject Director

Sino-German Corporate Social Responsibility Project

+86 10 8419 5686rolf.dietmar@giz.de

www.chinacsrproject.org

Thank you for your attention!