Better business

In 2006, State Grid Corporation of China issued its first corporate social responsibility (CSR) report, which was also the first such document released by a domestic company to the public. From then on, among 152 central State-owned enterprises (SOEs), 11 had published CSR reports as of January 10, 2008.

Fulfilling social responsibility seems to be a natural part of SOEs. Why have these large SOEs become so keen on CSR? And compared with multinational companies (MNCs), does the CSR implementation of local SOEs contain some Chinese characteristics?

Necessities

The Chinese government is playing an active role in promoting social responsibility awareness in China, while SOEs, under direct control of and guidance from the government, have become pioneers.

On January 1, 2006, China's Company Law came into effect, regulating that all companies, including large SOEs, should fulfill their social responsibilities in line with related laws and business ethics. Meanwhile, they must be honest when doing business and accept government and public CSR supervision.

The law effectively propels SOEs to combine CSR with their overall business scheme.

In addition to the government's efforts, SOEs themselves have realized that adopting CSR strategies is conducive to their globalization and they should also fulfill their social responsibility in accordance with international standards.

Fortune magazine's 2006 Assessment of Social Responsibility of Enterprises, covering large enterprises around the world, ranked China National Petroleum Corporation and State Grid Corporation of China as the bottom two of the list, which, to some extent, affected their businesses overseas.

The two behemoths thus hurried to issue their CSR reports in a bid to demonstrate what they have done on CSR and strengthen their brands.

Comparison

Compared with MNCs, the implementation of social responsibility within local SOEs has distinct Chinese characteristics.

Besides basic CSR elements, such as legal responsibility, product safety and quality and employees' interest protection, they pay great attention to government policy compliance. China Construction Bank, for example, promotes government-directed policy lending for infrastructure development. China Mobile has invested 13 billion yuan in a government-initiated social responsibility program called Cuncuntong, which means "connecting every village" in Chinese.

As energy savings and emission cuts becoming the core policies for China's sustainable development and social harmony, domestic SOEs one after another put environmental protection as one of the key strategies of their CSR schemes.

They also follow international trends and try to keep in line with international standards. The process of formulating CSR reports by Chinese SOEs is that they first study the international framework of social responsibility reports, and then fill in the framework with their enterprises' various activities.

The social responsibility reports of China Mobile and National Grid have followed the standards of the GRI (Global Reporting Initiative).

GRI is a non-governmental organization (NGO) engaged in developing and disseminating globally applicable "Sustainability Reporting Guidelines" for voluntary use by organizations reporting on economic ethics. The NGO's guidelines have been commonly regarded as the standard CSR framework in the West.

In general, MNCs closely combine their CSR initiatives with their business activities and consider investors as god-like. Their CSR reports are the means to communicate with stakeholders.

Telecommunications giant Vodafone collects most-concerned problems from its stakeholders, and sets its key social responsibility as conducting research and taking measures to solve problems. This system ensures the UK-based MNC truly meets its stakeholders' requirements.

MNCs in China also take great effort to balance development of both companies and local society, in a bid to create a sound environment. Their activities concentrate on environmental protection, educational support and charity activities.

For example, Finland's Nokia concentrates its CSR initiatives on environmental protection and social causes, especially smoothing out the telecommunication gap between urban and rural China.

Because Chinese SOEs are in the early stages of CSR implementation, they lack sophistication. Donations are the path many of them chose to take. From 2001 to 2005, China National Petroleum Corporate alone donated more than 2 billion yuan.

In terms of creativity, MNCs are taking the lead. McKinsey, Motorola and Nokia joined hands with the China Youth Development Foundation, China's government-backed nonprofit organization, to launch an innovative venture philanthropic foundation, Non-Profit Partners.

The foundation provides free consultant services and financial support for grassroots charity organizations and acts as an incubator for startups.

British Petroleum not only operates a fund but also organizes a volunteer employee group to support social welfare in China. GM established a travel agency in northern and southern China, while embarking on environmental protection initiatives for its operation.

For CSR initiatives to be successful a number of factors must come together, including strong partnerships, communications, core values and policy engagement.

Domestic SOEs, in addition to shouldering basic responsibilities, are well responding to the government's idea of building a "harmonious society".

The author is a researcher of Samsung Economy Research Institute China. The views expressed are his own.

(China Daily 04/21/2008 page8)