Transnationals invest in social program
(Business Weekly)
Updated: 2005-06-13 11:35

The programme is a joint effort by China's Ministry of Education, the World Wide Fund for Nature (WWF) and BP, the British petroleum company. It will benefit 500,000 primary and middle school students in China.

The programme's third phase to integrate environmental education guidelines, worked out in the previous two phases, into teachers' lesson plans and teaching activities has begun in China. The guidelines, according to education officials, advocate teaching methods that encourage students to participate in EEI and take action.

To date, BP has invested US$2.1 million into the three-phase programme, which began in 1997.

"We do not expect much of the business returns for the community investment. It is our sustained effort to reward the local community that has grown with our business," says Grace Ren, vice-president of BP China.

Although the immediate effects of such sponsorship termed as corporate social responsibility, or CSR for the company have not been a major point highlighted by BP, there have been some direct or indirect incentives, industry analysts suggest.

"CSR's activities will definitely increase the reputation of these companies, and magnify the influence of their corporate images," says Chen Fuguo, Greater China chief executive officer of Interbrand, a London-based expert in branding.

"It (CSR) is something you don't have to do, but doing it will be for the greater good," says William Valentino, Bayer (China) Ltd's general manager of corporate communications for Greater China.

BP, one of the world's largest oil companies, has invested US$7 million for community activities in China, at the national and local levels, the company says.

These BP-sponsored events range from environmental protection, energy conservation, road safety and school education.

The oil giant's first quarter global profit totalled US$6.6 billion, up 34 per cent from the same period of 2004, say company sources.

BP is not the only firm making a huge investment in community activities in China.

A large number of transnationals with a business presence in China including Pfizer, Coca-Cola and ABB have also made aggressive investments in social activities.

"It has been a trend, or rather, a must for market players to put an effort into community activities, which have been a major channel for corporations to strengthen ties with the local communities," says Chen.

Pfizer Pharmaceuticals, one of the world's leading pharmaceutical companies, has pumped 50 million yuan (US$6 million) into community activities in China in recent years.

The company, since 1994, has donated 2.3 million yuan (US$278,000) worth of capital and medicine and equipment to the Chinese Foundation of Lifeline Express, which helps improve health services in rural communities.

Coca-Cola, the US-based soft drink giant, has linked its marketing efforts to sports events since the company returned to the Chinese mainland's market in 1979.

"With the Beijing Olympic Games drawing near, Coca-Cola will further unfold its expansion plans in sports, to give a combined push to the under-taking, together with the Beijing Olympic Organizing Committee, and to inject more freshness and life into the Coca-Cola brand," says Paul Etchells, Coca-Cola China's president.

Etchells projects a double-digit increase, in each of the next three to five years, in sales revenues in the mainland. The firm's sales revenues jumped 20 per cent, year-on-year, last year.

The company is a major sponsor of such celebrated sports events as the first Formula One Shanghai Grand Prix and China Open tennis tournament. It has also targetted younger consumers by using the Internet to sponsor sporting events such as last year's NBA China Games.

Besides, the company has actively participated in several of the country's charities. In the past 25 years, Coca-Cola has donated 40 million yuan (US$4.8 million) to education, environmental protection and other charities.

Such investments do not directly aid a firm's corporate image, but will boost its general reputation.

"Branding is different from a company's general reputation," says Chen, "If a company invests in social activities that are closely affiliated with its business, then the investor's branding and reputation will benefit."

But the situation will be different if the company chooses to sponsor activities that have little to do with its business.

Carly Fiorina, former CEO of Hewlett Packard, says "doing good," in terms of social activities, can help a firm "do well" in corporate performance. Social investment can bring benefits to the corporate image in the minds of customers, investors, employees and communities.

This concept, coupled with corporate identity, contributes to the making of corporate reputation, suggest industry analysts. "It (social investment) is a voluntary behaviour," says Chen.

E. Allan Gabor, chairman and general manager of Pfizer Pharmaceuticals Ltd, last month cited as an example the Chinese doctor who agreed to fly to Thailand within 24 hours of last year's tsunami, even though he did not know when he would return home. "Even though he represented his organization, it was an individual act," Gabor says.

For a company, the scale of social investment largely depends on its corporate strength, in terms of finance and business performance, industry analysts say.

"Companies at different phases of corporate development will make different social investments," says Chen. "It (social investment) reflects the awareness of a company's social responsibility."

Many Chinese companies including Sinopec, FAW and Baosteel have started their own CSR programmes, with the view of promoting Chinese companies' social responsibilities, including small and medium-sized enterprises (SMEs).

"Some of these CSR activities are not widely known, only because they do not advertise them," Chen says.

Another major factor driving many transnational and local companies to heavily invest in social investment is the lesson they draw from the fragile relations between other companies and society, which results mainly from the lack of CSR awareness and leads to the narrowed recognition of their corporate images.

"Many corporate scandals, or financial grift, in particular companies have mangled their corporate reputations thus have crippled their business performance," Chen says.