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18 Aug 2015

Charles Cheng & Lowell Chow, East Asia Researcher & Representative, Business & Human Rights Resource Centre

From "Corporate Social Responsibility" to "Business & Human Rights": New challenges for Chinese Companies

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This blog was originally published in Chinese by China Development Brief

Corporate social responsibility (CSR) is no longer a new term for Chinese companies, especially for the large ones. According to the statistics of the 2013 CSR White Paper published by the Chinese Academy of Social Sciences, 1,231 CSR reports were released in 2013. In practice, State Grid Corporation of China conducted a pilot project “Comprehensive Implementation of Social Responsibility Management” and issued China’s first Guidance for the Implementation of Corporate Social Responsibility; Sinopec Group set up a CSR committee under the Board of Directors; Lenovo Group published “Lenovo CSR Quarterly”. And many Chinese companies were honoured for their outstanding CSR practices at the China CSR Annual Forum held by Southern Weekly Newspaper and the China National Textile and Apparel Council.

The Chinese government’s efforts to promote the development of CSR are also noticeable. The State-owned Assets Supervision and Administration Commission of the State Council (SASAC) and the Ministry of Land and Resources have supported and conducted CSR researches. Since 2008, the SASAC, the China Banking Regulatory Commission (CBRC), the State Administration for Industry and Commerce issued several individual documents to support relevant work: Guiding Opinions on the Implementation of Corporate Social Responsibility of the Central EnterprisesGuidelines on the Corporate Social Responsibility of Banking Institutions of China, Outline of the Central Enterprises for the Implementation of the 12th Five-Year Harmonious Development Strategy, Guidelines on the Implementation of Corporate Social Responsibility of Direct Selling Enterprises, Guidelines on the Implementation of Corporate Social Responsibility of Network Trading Platform Operators. The government’s efforts have dramatically facilitated the acceptance of CSR among the Chinese companies, especially among central enterprises. Since the issuance of Guiding Opinions on the Implementation of Corporate Social Responsibility of the Central Enterprises, by 2012 all central enterprises had released their CSR reports, and most of them have also set up CSR indicators, evaluation system and CSR committee.

However, the understanding of CSR by, both the Chinese companies and the government, has been limited. In a survey targeting 1,001 companies in Guangdong, Zhejiang and Hebei provinces conducted by Professor Li Zhi of Renmin University of China and Professor Cui Xiaoning of Beijing Foreign Studies University, most surveyed companies thought that the elements of CSR were paying taxes in accordance with the law, abating environmental pollution, conducting honest operations, ensuring product quality, protecting employees’ legal rights, energy saving and reducing consumption. In the above-mentioned government documents, CSR was also defined as acts including conducting honest and legitimate business operations, enhancing sustainable profit-making ability, improving product and service quality, saving resources, environmental protection, facilitating independent technological innovation, guaranteeing production safety, protecting employees’ legal rights and participations in social welfare activities.

International society is deepening its understanding of CSR; the most important trend observed is the introduction of human rights.

But the international arena has a different understanding of CSR. For instance, the definitions of CSR by the UN Global Compact and ISO26000 include respect for human rights, protection of labour rights and the environment, fair operating practices, protection of consumers’ health and safety, anti-corruption, improvement of management system and community involvement and development. Although a number of elements of CSR as understood by the Chinese companies, such as conducting honest operation, paying taxes according to the law, enhancing sustainable profit-making ability and improving product and service quality are consistent with the mainstream international standards, on the other hand, many elements and associated issues relating to CSR defined by the mainstream international standards are apparently absent in Chinese companies and the Chinese government. Moreover, some measures taken by the Chinese companies, such as the establishment of a CSR committee, are superficial with no real effect on the implementation of CSR. These problems have caused the Chinese companies being criticized frequently by domestic and foreign media, consumers and the civil society; in some cases, being fined or punished for their wrongdoing.

Meanwhile, the international society is deepening its understanding of CSR; the most important trend observed is the introduction of human rights. Given the extensive scope of the CSR concept, some companies choose to fulfil some items to sugarcoat their acts of avoiding shouldering some important ones. For instance, while some companies infringe the rights of workers and cause pollution to the environment they may also give charity donations and support community development to build their image as responsible corporates. It is observed that CSR has become a tool serving the centralism of companies, which gives rise to criticism on the concept from the civil society organizations. Moreover, CSR, in a sense, embodies moral expectations without legal bound obligations or  threatened punishment for failing to fulfil some responsibilities. Just as Christopher Avery – the founder of the Business and Human Rights Resource Centre – pointed out, human rights are rooted in the inherent dignity of every human being, are fundamental rights and freedoms enjoyed by every human being, and are protected and recognized by a series of international conventions and documents. Therefore, from the perspective of human rights, the selective implementation of CSR is unacceptable and should not be used to as a cover-up of companies’ acts of abusing human rights. As human rights are protected by international and domestic law, companies’ responsibilities relating to human rights should also be incorporated into relevant laws.

Based on this understanding, in 2005 the UN Commission on Human Rights adopted a resolution, requesting the UN Secretary-General to appoint a special representative on the issue of human rights and transnational corporations and other business enterprises. In 2008, the Special Representative John Ruggie proposed the “Protect, Respect and Remedy” Framework. This policy framework comprises three core principles: the State duty to protect against human rights abuses by third party; the corporate responsibility to protect human rights; and the need for greater access by victims to effective remedies. In June 2011, the UN Human Rights Council in resolution unanimously endorsed “Guiding Principles on Business and Human Rights” for implementing the “Protect, Respect and Remedy” Framework, which has reinforced the status of human rights in CSR.

According to the report released by the Business and Human Rights Resource Centre in August 2014, issues like labour rights protection, environmental pollution, forced demolition, food safety and infringement on privacy and freedom of express by the communication industry are main human rights challenges for Chinese companies. Foxconn worker suicide incidents and Xiamen citizens “hanging out” to stop the PX project are two examples.

In fact, with the development of transnational economy and the implementation of “going-out” strategy, Chinese companies’ overseas behaviours related to human rights have drawn greater scrutiny. The report by Business and Human Rights Resource Centre pointed out that 71 out of 127 cases inviting responses from the Chinese companies were related to their overseas activities regarding human rights; most problems came from issues related to security, conflicts with locals, workers’ rights and forced evictions, which took place in Southeast Asia (e.g. Myanmar and Cambodia) and South Asia (e.g. India) and Africa (e.g. Sudan and Zimbabwe). The Shwe gas project, the China-Myanmar oil pipeline project and the Murum Dam project in Malaysia all triggered local protests. The shootings at the Chinese-owned Collum Coal Mine in Zambia seriously damaged the reputation of Chinese companies. The under-evaluation of factors related to social responsibility and human rights has become one important reason leading to the failure of Chinese companies’ overseas investment. In his visit to four African countries, Premier Li Keqiang urged Chinese companies to “abide by local laws, respect local customs and fulfill their social responsibilities”.

Domestically, legal costs from infringing on labour rights and harming the public’s right to a clean environment and health are increasing. 2007 Labour Contract Law considerably improves the protection of labour standards. In June 2014, Xiamen Labour Dispute Arbitration Committee arbitrated the dismissal of striking workers on the ground of serious violation of rules and regulations was illegal, which served as a wind vane in labour dispute arbitration. For years the All-China Environment Federation has initiated public interest lawsuits against several companies for causing pollution. In 2011, Friends of Nature and the Green Volunteer League of Chongqing jointly brought the Yunnan Qujing chromium slag dumping case to Qujing intermediate people’s court, marking China’s first public interest lawsuit over environmental pollution initiated by grassroots public welfare organization. The 2012 revised Civil Procedure Law of the PRC officially recognized the system of public interest litigation over environmental pollution and infringement of the lawful rights and interests of consumers; the 2014 new Environmental Protection Law contained a more detailed and operational article on environment public interest litigation. These policy improvements will hold Chinese companies more accountable for their product quality and environmental wrongdoings.

Chinese companies should deepen their understanding of CSR and pay special attention not to infringe labour rights or the public’s right to environment and health

There are examples of Chinese companies monitored by the international market and international society abound in some ways. A considerable number of companies engaging in foreign trade and processing trade have improved their practices in protecting the labour rights and the environment to meet the requirements of international brands and WTO regulations on human rights. Some Chinese companies were subjected to the supervision of international civil society organizations. In 2013, Greenpeace released a report, criticizing Shenhua Group’s coal-to-liquid project in Inner Mongolia’s Ordos for overexploiting groundwater and causing groundwater pollution. The report drew the attention of the Chinese government and drove the Group to promise to make improvements. Chinese companies should come to realize the impact of transnational lawsuit on their wrongdoings. In 2012, one year after the oil spill at a field platform in the Bohai Sea owned by the China National Offshore Oil Corporation (CNOOC) and operated by ConocoPhillips, a group of fishermen from Shandong province sued ConocoPhillips in the Southern District Court in Texas, U.S., where the company’s headquarters are located.

Facing these trends, the Chinese companies should deepen their understanding of CSR and pay special attention not to infringe labour rights or the public’s right to environment and health, as the infringement may entail moral criticism, reputation damage, order cancellation, investment failure and lawsuits. The attitude of the Chinese government goes with the development trend of business and human rights. The next step for the government is to formulate a national action plan on business and human rights in order to enhance supervision on the practices of the Chinese companies and provide better legal remedies to victims of infringement resulted from companies’ practices.  


View the responses by 11 Chinese companies to our Company Action Platform

“Time for action: Business & human rights in Greater China” China Briefing, August 2014, Business and Human Rights Resource Centre