Firms display greater responsibility

The website of SynTao, a Beijing-based CSR and social responsibility investment-consulting firm, which releases a survey called "A Journey to Discover Values 2008".

A growing numbers of firms operating in China are realizing the importance of corporate social responsibility (CSR) reporting, according to a survey published by SynTao, a Beijing-based CSR and social responsibility investment-consulting firm.

The survey, "A Journey to Discover Values 2008", showed that the number of sustainability reports released in China has increased significantly since 2006. The number of reports released in 2006 alone exceeded the total number from all previous years combined and since then the number has kept rising, with 77 reports in 2007, and 121 in the first eleven months of 2008.

Half of the 121 businesses that released sustainability reports in 2008 were State-owned enterprises, and an increasing number of privately owned firms have also started reporting on their CSR practices.

Overseas firms' reports

In contrast, the number of overseas firms publishing CSR reports in China has barely increased. Statistics indicated that most sustainability reports are published by large corporations from sectors including finance, energy and public utilities, with over half of them listed on the stock market.

Some firms, including China Mobile, Cosco Group, State Grid and China National Petroleum Corporation, have already published their second or third sustainability reports. Industrial and Commercial Bank of China, South Grid, China Southern Airlines, China Huadian Corporation, Sinosteel Corporation and Wuhan Iron & Steel Corp (WISCO) recently published their first sustainability reports.

Last year also witnessed the publication of the first CSR reports in China's civil aviation, insurance, transportation and logistics, cement and pharmaceutical scetors.

One reason for the boom in CSR reporting is that more companies simply realize its importance. Another factor is the combined effort by the government, civil society and the media in promoting the development of CSR and sustainability reporting.

Huge changes

In recent years, remarkable changes have taken place regarding the development of CSR in China: moving from labor issues alone to a more comprehensive concept, CSR is now considered as an important factor in the construction of a harmonious society.

As President Hu Jintao remarked, businesses should incorporate social responsibility into their business strategy, abide by the laws and regulations of where they operate, and follow international business practices to achieve both economic and social benefits.

Under these circumstances, both the central government and local governments have published a series of documents requiring or encouraging companies to release sustainability reports, leading to a sharp increase in the number of reports released.

Although stock exchanges are not government bodies, they play a significant role in shaping policy, according to the survey. Therefore, documents on the CSR performance of listed companies issued by the Shenzhen Stock Exchange and Shanghai Stock Exchange in 2006 and 2008 encouraged listed companies to release their own sustainability reports.

The authors interviewed many experts to get their perspectives on specific issues. The interviews indicated that people differ greatly in their identification of key stakeholders; the importance of the management factor as the primary impetus in terms of writing sustainability reports is now commonly recognized; preparation of sustainability reports is often done in-house or with external help, instead of being outsourced; consensus has been achieved on disclosing non-financial information, even though whether such disclosure should be compulsory or voluntary remains a contentious issue; and managements' lack of attention remains the biggest barrier to the publication of corporate sustainability reports.

Two aspects

The authors pointed out that these reports have both internal and external value.

The internal value includes the measurement of non-financial performance, allowing for the development of improvement plans and the management of risks and opportunities, strengthening interdepartmental communications, enhancing employee loyalty, and gaining support from leaders.

Meanwhile, the external value includes boosting the firm's reputation and brand value, strengthening communications with stakeholders, appealing to consumers and investors, and gaining support from government and non-governmental organizations.

In order to realize the ultimate aim, or value, businesses need to form a virtuous cycle by combining corporate responsibility management with reporting. Corporate sustainability reporting helps improve responsible management, which in turn boosts corporate values and facilitates the accessibility of performance data, further promoting the quality of reporting.

Undoubtedly, writing sustainability reports is a necessary step for businesses to achieve total responsibility management, said the authors.

Most businesses in China have still not developed a total responsibility management system before they start compiling sustainability reports. Therefore, such "first reports" often provide mostly qualitative statements with little or no quantitative data, let alone concrete management measures.

These businesses will undoubtedly encounter various challenges when writing their second report.

The authors suggested that firms should appoint reporting specialists, undertake a thorough strategic analysis before writing reports, build a data-collection and management system, and design data-collection tables with appropriate specifications and encourage the participation and coordination of all departments, as well as collect feedback and create an improvement plan.

(China Daily 02/23/2009 page10)