Corporate Social Responsibility or “CSR” is essentially a western rooted phenomenon whereby corporate entities actively self-regulate their practices to ensure compliance with internationally recognized norms of social responsibility.

By Matthew Apfel*

Corporate Social Responsibility or “CSR” is essentially a western rooted phenomenon whereby corporate entities actively self-regulate their practices to ensure compliance with internationally recognized norms of social responsibility.

When it comes to CSR and its application within China, most studies of CSR practices within the ‘Middle Kingdom’ appear to lack a Sino-centric methodological approach. In other words, many scholars have approached this important issue from a western individualistic paradigm and not from the community focused perspective prevalent within Chinese society. It is important to recognize these Chinese social factors when analyzing CSR as a phenomenon within China, as these practices are deeply rooted in culture. To try to analyze CSR within the context of foreign rather than Chinese cultural assumptions will result in conclusions riddled with undue cultural bias and inaccuracy.

Chinese society is markedly collectivist in nature. Individuals in collectivist societies are “primarily motivated by the norms of, and duties imposed by, [their communities, family, work, nation]… and give priority to the goals of these collectives over their own personal goals.”11[1]  As such, Chinese have historically placed the duties to family, work, and nation before satisfying their own wants. In contrast to collectivism, individualism emphasizes the self-worth of the individual as distinct from the interests of society. Persons within an individualist society enjoy legally conferred autonomy and are largely motivated by satisfying personal interests before considering the interests of fellow citizens.

Through an individualist paradigm, an ideal society would revolve around each member being motivated by “their own preferences, needs, rights, and the contracts they have established with others” rather than group goals, group needs, and conformity to group regulations. [2]  As such, in China, collectivist interests prevail over individual interests and most importantly private life is invaded by groups.

In this regard, civil society—arguably the primary beneficiary and promoter of CSR— has been slow to evolve within China. As one prominent Chinese commenter writes, “[t]he Chinese government needs to do a lot more to enable civil society development in China.

For the past 30 years, the government has committed to further reforms to foster the development of trade associations and private foundations but with total control of the process.” Therefore, a meaningful civil society has been slow to develop as individuals have been largely unable to freely associate and cultivate meaningful interpersonal relationships sanctioned fully by the law. Should civil society fully develop and prosper within Chinese society, then this important mechanism will act as both a watchdog and partner to business.

On the other hand, should the further development of civil society be hindered then corporate accountability will be primarily to the government and not to the individuals, collective groups or associations that make up civil society in general.

Arguably, one key indicator of a vibrant civil society from a legal perspective is whether tort and contract law exists. Until quite recently, China did not have an established code of tort and contract law to vindicate civil law rights. With regards to tort law, although there were various provisions in the Chinese code, it was not until 2010 that a comprehensive and consistent body of tort law was passed in full– commonly referred to as the Tort Liability Law. As such, China’s historic lack of legal mechanisms by which individuals could vindicate rights through tort and contract law clearly indicates the fact that law was intended to impose duties on individuals rather than allow citizens to vindicate individual rights through court action; and court enforcement.

The inability to foster individualist rights through the court process has fostered a culture largely unaware of these foundation blocks for a vibrant civil society and therefore a faltering notion of true CSR within China.

How then can civil society further develop within “collectivist” China so as to facilitate a more vibrant application of CSR? The first step has already been accomplished—the actual codification of tort and contract law. As laws engender expectations of citizens by specifying the existence of individual and collective rights and duties the building blocks for civil society have already been created and are ready for assembly.

The second step is the actual recognition and regular application of the law to address civil grievances and CSR in general. Along these lines, many point to Article 5 of the 2006 Chinese Company Law, which mandates that enterprises “undertake social responsibility” in their regular business practices. As previously mentioned, these laws are important, but the actual implantation of these laws is key.

Thirdly, as collectivist society tends to change based on “public shaming” rather than “private guilt”, media should continue to play an important role in educating society about their individual rights so as to foster a more rights conscious society within China and exposing those enterprises that breach their CSR commitments.

Lastly, along these same lines, it is critical that foreign corporations within China set an example to domestic enterprises within China by implementing CSR best practices while fostering a model of true corporate stewardship within society. In effect, by demonstrating that no entity is above the law, foreign corporations will cultivate a culture of accountability and engender individuals to assert their rights against those corporations that overstep CSR best practices as recognized in the west.

One example of progress on this front is that of Apple which terminated a contract with a specific contractor after it found that the contractor utilized underage labor in contravention of established law. According to Apple’s own report, it decided to sever ties with the contractor because it had “determined that management had chosen to overlook the issue and was not committed to addressing the problem.” Similar examples should only continue and may bring an unintended effect—the development of civil society through the self-regulating application of CSR principles within China.

Notwithstanding the above, one important example from recent months illustrating the uphill battle proponents of civil society within China are fighting is that of Zhao Lianhai who was convicted for “disturbing social order” by a district court in Beijing after he helped organize parents whose children were harmed or killed by ingesting melamine laced milk products during China’s melamine milk scandal. Rather than supporting Zhao’s efforts and furthering the development of a civil society based endeavor, the government cracked down on Zhao and imprisoned him as an example to others demanding responsibility for corporate excesses.

This is not to say that civil society is not expanding within Chinese society and that CSR guidelines will not actually assist Chinese companies in expanding their own profit margins and community well being at the same time. For example, following the devastating May 12, 2008 earthquake in Sichuan province, by May 20 of that year, domestic Chinese enterprises had donated in excess of US $645 million to victims of the quake. When donations from multinational corporations were not deemed by the Chinese public as timely or as grand as those donations from domestic firms, there were major boycotts and uprisings against various multinational corporations.

This serves as an important example of a developing Chinese civil society and the dangers that civil society poses to CSR practices that are lacking in appearance. As previously mentioned, as collectivist society tends to change based on “public shaming” rather than “private guilt” the Chinese public came out to “shame” those enterprises which were not deemed to be carrying their weight in relief efforts. Accordingly, as Chinese civil society expands we will see both Chinese and multinational companies expand their CSR best practices in order to avoid public backlashes and possible boycotts which would detrimentally effect their bottom lines.

Although CSR is expanding within China commensurate with the growth of civil society in general, in order to ensure that CSR continues to develop into a check on corporate excesses within China, it is necessary for the continued promotion of a vibrant Chinese civil society bound by tort/contract and inspired by individual based rights. If this fails to materialize then the norm of profit seeking at the expense of all other variables may continue unharnessed by demands for social accountability.


Read More

*Matthew Apfel is an Associate at Heideman Nudelman & Kalik, P.C. in Washington, DC. He is also a China specialist focused on China related trade and legal issues and is a member of the Washington, D.C. based China Hands group which is a society of China specialists.