By USA China Law Group

Definitions of Corporate Social Responsibility

Corporate social responsibility (“CSR”) goes by many names. The Honorable Donald J. Johnston of the Organization for Economic Co-operation and Development (“OECD”), when giving his speech on the 22nd of February 2006 at the Global Corporate Social Responsibility Forum in Beijing, said that the term “Corporate Social Responsibility” was not specific enough to the individual responsibility and decision making process of a corporation. He preferred the term “responsible business conduct” because it spoke more to the people/stakeholders who make the decisions for the corporation, and their role within the corporation to determine the business environment.

“The Eastern idea of “merchant spirit” from Confucius thought coupled with the Western idea “obligation spirit” rooted in Greek thought together fully represent the corporate efforts to pursue excellence and give back to society.” Weihua Ma, speech at the founding conference of CRCSR, 2006.

CSR has many definitions. It has been defined as “achieving commercial success in ways that honor ethical values and respect people, communities, and the environment” by the U.S. Congressional Human Rights Caucus. Davis et al., The Responsibility Paradox: Multinational Firms and Global Corporate Social Responsibility, www.isr.umich.edu/carss/projects/davis-whitman-zald1013.pdf, at n.1. The European Commission has defined it as “a concept whereby companies integrate social and environmental concerns in their business operations and in their interactions with their stakeholders on a voluntary basis.” Id.

There have been two main trajectories of thought regarding CSR. The first is the idea that corporations are responsible to society and have a “responsibility to do something about the problems that affect society.” Antonio Vives, Corporate Social Responsibility: the Role of Law and Markets and the Case for Developing Countries, 83 CHI.-KENT L. REV. 199, 201 (2008). The second is the idea that corporations must take responsibility for its own activities as they affect society. Id. These ideas are not mutually exclusive, but instead can be seen as a broad and narrow definition of CSR. Both types of CSR have been specially developed by governments, non-governmental organizations (“NGOs”) and corporations through guidelines and standards.

History and Development of Corporate Social Responsibility ?Western View

The idea of CSR existed long before the term was coined. In the late 18th century, Europe began to change from an agrarian society to an industrial society. Factories began to sprout up all over England and Western Europe. With the growth of factories and the need for workers, management began to face a new set of problems never previously addressed. First, they had to pull in a work force from the country. To do this, the factories ended up building towns for their workers. See Davis et al., supra, at 4. The factories provided their workers with housing, roads and canals. Id. Second, once they had a workforce, they had to change the habits of employees unfamiliar with the strict structure required by a factory to operate effectively. Id. To combat the drunkenness, roaming, and illiterate children, the factories provided education and supported churches to “change the moral codes of the laborers outside the workplace.” Id. at 405. For the factory owners, the need to provide for workers was not based on an idea of responsibility; rather it was based on the real needs of the factory and means of production.

Over a hundred years later, the formation of the Trust or Corporation became popular within the United States. Companies like the conglomerate U.S. Steel begin to grow. These companies were part of a new system of business based on stock and public ownership. Ford Motor Company incorporated in 1903 with Henry Ford as a major shareholder, and the Dodge brothers as minor shareholders. Dodge v. Ford Motor Co., 204 Mich. 459, 461 (1919). The Ford Motor company was able to provide its shareholders with dividends and special dividends. Id. at 461-67. In 1915, Ford decided to change corporate policy, under which regular dividends would still be paid to shareholders, but there would be no more special dividends. Id. at 467. Instead, profits would be reinvested in the corporation including building a new plant. Id. In 1919, the Michigan Supreme Court decided a landmark case, Dodge v. Ford Motor Co., wherein it held that the main purpose of a corporation is to make a profit for its stockholders. Id. at 500. The judge took issue with Henry Ford’s idea to “give a gift” to the public for social welfare finding that corporations are not in the business of doing charitable works. See id. at 505-07.

The Dodge case was decided just before the “roaring twenties”. With the new Doctrine of Shareholder Primacy, created by the courts, corporations began to grow without regulation. Harwell Wells, The Cycles of Corporate Social Responsibility: An Historical Retrospective for the Twenty-Fist Century, 51 U. KAN. L. REV. 77, 80 (2002). The new American vision was based on the idea of big business. Id. During the 1920s, there was a general erosion of legal safeguards and there existed a growing divide between the owners of the corporation and the management that ran the corporations. See id. at 83.

Two law professors, A.A. Berle and E. Merrick Dodd, both worked on Wall Street and witnessed the “abuses possible by new-ownership structures of larger firms.” Id. In the pages of the Harvard Law Review, they engaged in the first debate on the responsibilities of corporate officers. A.A. Berle published his research findings on control and corporate powers in Corporate Powers as Powers in Trust. His article argued for primacy of shareholder responsibility. Id. at 87. E. Merrick Dodd wrote a response in For Whom are Corporate Managers Trustees. He argued that corporate officers should take into account not only the needs of shareholders, but stakeholders as well. Id. at 81. At the time, the discussion received little attention because, by the time the articles were published in 1931 and 1932, the Great Depression had already taken hold of the nation. However, the Great Depression resulted in securities regulation with the Securities and Exchange Act and the formation of the SEC. Corporations would be regulated from then on. Furthermore, with the New Deal, the role of both government and corporations and corporate individuals began to expand. By WWII, employee health insurance and pension programs were part of welfare capitalism. Davis et. al, supra, at 6.

In 1953, a new landmark case regarding the role of the corporation emerged, this time from the New Jersey Supreme Court, a court that has always been known to be rather progressive. In A.P. Smith Mfg Co. v. Barlow, 26 N.J. Super. 106, aff’d 13 N.J. 145 (1953), the court upheld a New Jersey Law allowing corporations to make charitable donations. A.P. Smith Mfg Co., 26 N.J. at 109, 125. The court reasoned that just as the conditions, prevailing when corporations were originally created, required that they serve public as well as private interests, modern conditions require that corporations acknowledge and discharge social as well as private responsibilities. See id.

Academics on both sides of the debate responded. In The Hidden Persuaders by Vance Packard, The Lonely Crowd by David Reisman, and The Organization Man by William H. Whyte, the writers tended to be largely critical of the large corporation. John Kenneth Galbraith and C. Wright Mills went even farther in American Capitalism and The Power Elite, respectively, arguing that the large corporation produced cultural conformity. C. Wright Mills argued that the corporation’s economic dominance had also given them disproportionate political power. Wells, supra, at 104 – 105.

It became in vogue for men who had been especially wealthy as a result of corporate success to become extra-philanthropic. John Rockefeller made available funds to create the University of Chicago. Davis et al., supra, at 5. Andrew Carnegie contributed to the growth of public libraries all across the country and made available funds to begin the TIAA, which helped support college faculty pensions. Id. at 5-6. In 1958, Theodore Levitt wrote, “[i]t is no longer ‘fashionable for the corporation to take gleeful pride in making money. What is fashionable is for the corporation to show that it is a great innovator; more specifically, a great public benefactor; and very particularly, that it exists ‘to serve the public.” Wells, supra, at 100 (citing The Dangers of Social Responsibility, 36 HARV. BUS. REV., Sept-Oct. 1958, at 42). David Rockefeller agreed, stating, “the old concept that the owner of a business had a right to use his property as he please to maximize profits, has evolved into the belief that ownership carries certain binding social obligations.” Wells, supra, at 100 (citing Herman E. Krooss, Executive Opinion: What Business Leaders Said and Thought on Economic Issues, 1920s – 1960s, at 50 – 53 (1970)). By the early 1960s, it became generally acknowledged that large corporations had amassed great economic, social, and political power and with that new power came new responsibility. Wells, supra, at 110.

The late 1960s was a time of great “social unrest, perceptions of environmental degradation, and protests over the Vietnam War.” Wells, supra, at 111. There were general “populist campaigns to redirect corporate power to solve looming social and political problems.” Id. In response, large corporations began to voluntarily redirect resources toward addressing urban ills to keep it from becoming mandatory through legislation. Id. at 112. “They redirected charitable donations, started new employee training programs, targeted disadvantaged populations, and promised to support a nascent movement for “black capitalism.” Id. Shareholders also supported the move toward greater CSR. The era saw greater use of the shareholder proxy for social issues, which had been available since 1934 under S.E.C. Rule 14a-8. Id. at 113. By 1972, General Motors published its first Public Interest Report in which it promoted corporate transparency by highlighting its charitable and social endeavors.

Meanwhile, the active legislature began to create different types of regulation to address the problem. In 1970, Congress created the Environmental Protection Agency and passed the Occupational Safety and Health Act. In 1972 they passed the Equal Employment Opportunity Act which gave the previously established Equal Employment Opportunity Commission litigation authority in its efforts to eliminate workplace discrimination. Finally in 1977, Congress passed the Community Reinvestment Act, which at the time sought to ensure that banks and financial institutions would provide credit to persons in lower income communities.

The social responsibility of corporations had become normative by the 1990s when general guidelines of CSR began to appear. Although academic literature promoted a new “Progressive Corporate Law” that would require mandatory CSR instead of the voluntary nature of CSR that was common up to that point, Congress chose to follow the “Triple Bottom Line” approach instead. Amiram Gill, Corporate Governance as Social Responsibility: A Research Agenda, 26 BERKELEY J. INT’L L. 452, 460 (2008). CSR is still voluntary in nature, but business should declare a commitment to the three p’s: people, the planet, and profits. Id. at 461.

Then came the fall of Enron and the seriousness of the corporate governance problem was square in the face of Congress. Congress reacted with the Sarbanes-Oxley Act (“SOX”). Heralded as the “most significant piece of legislation since the 1930s”, SOX redrafted securities laws making the individuals that run businesses more responsible for the actions of the business. Aaron Einhorn, The Evolution and Endpoint of Responsibility: the FCPA, SOX, Socialist-Oriented Governments, Gratuitous Promises, and a Novel CSR Code, 35 DENV. J. INT’L L. & POL’Y 509, 524 (2007). The most important aspects of SOX for a discussion of CSR are the new requirements for internal controls and ethics. SOX made “individuals responsible for designing internal controls, to create such controls, to assess and evaluate these controls, and to draw conclusions about their effectiveness.” Id. at 526. Furthermore, it “adopted a code of ethics for senior financial officers.’” Id. at 526-27. Section 806 of the SOX also put in place certain regulations regarding employees, prohibiting “corporations and their constituents from discharging, demoting, suspending, harassing, threatening, or otherwise discriminating against any employee who informs the government of corporate conduct that may violate an SEC regulation or a federal law involving fraud against shareholders.” Id. at 527. Two years after SOX was enacted in the United States, the United Kingdom and the European Union passed similar corporate governance measures largely based on SOX. Id.

CSR Standards and Guidelines

The CSR Standards and Guidelines were largely developed in the 1990s and generally follow the Triple Bottom Line Approach, addressing people, the planet and profits. Although there has been some academic writing suggesting that there is a general movement toward a singular, mandatory standard and guidelines for CSR, the proposition is contrary to the substance of current guidelines, which support free market and voluntary compliance.

There are currently numerous different guidelines, to the point that Global Reporting Initiative (“GRI”) and the AccountAbility Institute of Social and Ethical Accountability, has published a brief for businesses on how to decide which guidelines to follow. Written by Ernst Ligteringen, Chief Executive of the Global Reporting Initiative, and Simon Zadek, Chief Executive of AccountAbility, the brief takes a corporation through a series of questions and tools to decide which standards the business should abide by. See Ernst Ligteringen and Simon Zadek¸ The Future of Corporate Responsibility Codes, Standards, and Frameworks, http://www.globalreporting.org/NR/rdonlyres/19BBA6F5-9337-42B0-B66D-A3B45F591938/0/LigteringenZadekFutureOfCR.pdf (“the Brief”). The Brief breaks down the standards into three different types: normative frameworks, process guidelines, and management systems. Id. at 3. Normative frameworks provide substantive guidance on acceptable standards of performance. These include the ILO Tripartite Declaration of Principles concerning Multinational Enterprises (“MNEs”), UN conventions and declarations on sustainable development issues, UN Global Compact Principles, and the OECD Guidelines for MNEs. Id. Process Guidelines describe how to measure and communicate performance. Id. These include the AA1000 Assurance Standards and the GRI Sustainability Reporting Guidelines. Id. Management Systems Guidelines show how to integrate specific issues into corporate activities. Id. International Management System Guidelines include the AA1000 Framework, ISO 14001, ISO Social Responsibility Guidance, Social Accountability SA8000, and Sigma Guidelines. Id.

• A. Normative Frameworks

International standards have been put forth by institutions including the Organization for Economic Co-operation and Development, the U.N., Center for Ethical Business Culture, the Caux Round Table (“CRT”), and the Sullivan Foundation. Perhaps best illustrated by the simplicity of the Minnesota Principles, the normative frameworks suggest a general standard of business conduct. The Minnesota Principles are based on the premise that the purpose of business is to stimulate economic growth, proposing that the responsibility of business is to keep its business activities fair and honest while respecting human dignity and the environment.

In 1999, the Global Sullivan Principles of Social Responsibility (“Sullivan Principles”) were introduced by the Leon H. Sullivan Foundation. As one of the first set of guidelines established, they “inspired Fortune 500 companies to pledge modifying their internal policies in order to meet the guidelines set forth.” Gill, supra, at 466 – 467. Although criticized for their free market ideology and self-regulation along with the belief that the codes are more lip service than actual improved corporate conduct, the Sullivan Principles were largely incorporated into the framework of multinational businesses. Id. at 467. They mainly address the first “p”: people, including a basic commitment to human rights, workers’ rights, and fair competition.

These same ideals are promoted by the OECD Guidelines for Multinational Enterprises, which was originally adopted as part of the Declaration on International Investment and Multinational Enterprises. However, the OECD goes into more detail the three p’s: people, the planet, and profits. Thirty nine governments have agreed to its non-binding principles that encourage the governments to suggest certain behavior patterns be followed by multinational corporations within their jurisdiction. The Guidelines stress their voluntary nature and include “provisions on human rights, sustainable development, supply chain responsibility and local capacity building, and more generally call on enterprises to take full account of established policies in the countries in which they operate.” OECD Guidelines on Multinational Enterprises, available at http://www.oecd.org/dataoecd/56/36/1922428.pdf. It also addresses employment and industrial relations, environmental management systems, combating bribery, consumer interests, the spread of science and technology, open and competitive business, and taxation.

Meanwhile the U.N. Global Compact takes a much more general stance with its ten principles on human rights, labor standards, the environment, and anti-corruption measures. Under its principles, business should support and respect human rights and not take part in abuses; should uphold freedom of association and recognize collective bargaining while eliminating forced and compulsory labor, child labor, and discrimination; should promote greater environmental responsibility and develop environmentally friendly technologies; and lastly, “business should work against corruption in all its forms.” U.N. Global Compact, available at http://www.unglobalcompact.org/AbouttheGC/TheTENPrinciples/index.html.

The Minnesota Principles are the basis of the Caux Round Table Principles of Business (“CRT Principles”). Business leaders from the United States, Europe, and Japan worked together to establish the CRT Principles. The CRT Principles are based on two ideals, the Japanese Kyosei, which means “living and working together for the common good” and human dignity, which “refers to the sacredness or value of each person as an end, not simply as a mean to the fulfillment of others’ purposes or even majority prescription.” Caux Round Table Principles of Business, available at http://www.cauxroundtable.org/documents/Principles%20for%20Business.PDF . The CRT Principles stress that corporations are not only responsible to shareholders; they are also responsible to stakeholders. See id. The responsibility to stakeholders includes a responsibility to customers, employees, shareholders, suppliers, competitors, and the community through following the letter of the law, improving economic standards, human rights standards, education, welfare, and the vitalization of the community. See id. In general, it encourages businesses to follow a “spirit of trust” by striving to improve relationships through acting sincerely, keeping promises, and upholding a commitment to candor, truthful, and transparent reporting. Id. Furthermore, business should respect the environment, multilateral trade, and avoid illicit operations. Id.

• B. Process Guidelines

Largely issued by NGOs and academic centers, process guidelines are much more detailed in its expectations. For example, the GRI Guidelines, issued by the American NGO, offer standards for the content of corporate reports disclosing information on sustainability issues of an environmental, social, and economic nature. Meanwhile the ECS2000, issued by the Business Ethics Research Project, Reitaku Center for Economic Studies, Reitaka University, addressed corporate ethical standards systemically specifying the development of management systems to ensure ethical practices.

• C. Management System Guidelines

These guidelines tend to address a specific area of CSR, which a business wishes
to target. For example, the AA1000 are standards developed by the British NGO to help organizations raise their social and ethical accountability with stakeholder participation. Meanwhile, the SA8000 specifically addresses human rights, the ISO 14001 address environmental standards, and the ISO 2600 gives guidance standards on social responsibility.

Because of the voluntary nature and the many different guidelines established, businesses have a gamut of choices in front of them. As the Honorable Donald J. Johnston of OECD stressed, businesses are run by individuals and it is up to the individuals to decide which standards of CSR to follow. These guidelines are mainly based on the ideals of honest, fair, and transparent standards of doing business while keeping in mind all stakeholders of a corporation. The Brief provides guidance on how to make the decisions, but without voluntary compliance by the individuals that run the companies, CSR is nothing.

The History and Development of Corporate Social Responsibility in China

Although CSR is said to have been founded in the West, China has a long history of CSR. “From a tradition deeply in Chinese culture, one’s happiness and success is possible only when those around him are also happy and successful.” Yining Li, speech at the founding conference of CFCSR (2006).

During the planned economic period in China, the government mandated corporate social responsibility. Guo Jun, Director of the Democratic Department at All China Federation of Trade Unions, The Rise of CSR in China, www.acftu.org. During this period, corporations did not exist in China in the way that they do now or in the western sense of the term “corporation”. YONGNIAN ZHENG, WHY CHINA LACKS THE RIGHT ENVIRONMENT FOR CORPORATE SOCIAL RESPONSIBILITY 6 (CHINA POLICY INSTITUTE (2006), http://www.nottingham.ac.uk/shared/shared_cpi/documents/policy_papers/Briefing_6_China_CSR.pdf. The Chinese government believed these companies should be “corporations of society”, focusing “more attention to social responsibility than profits. Guo Jun, supra. The government required companies to provide “employment opportunity, social welfare, public services, established childcare, schools, public dining halls, hospitals, cinemas, and even crematoriums. Id.

Following the planned economic period, the Chinese government changed its policy to focus on the pursuit of profits, much like the American courts response in Dodge v. Ford Motor Co. Id. During the transition to and implementation of this policy, the applicable laws become uncertain. As a result, China saw a rise in labor rights violations and a disproportionate loss of corporate commitment to social welfare. Id.

The concept of CSR returned and has gradually been accepted during China’s unprecedented growth from the 1990s until the present. The growth has been divided into three generally acknowledged stages largely spurred by the passage of laws and regulations by the government.

The first stage is often referred to as “CSR 101”. The introduction of CSR was prompted by the greater openness China encouraged during the 1990s. Between 1996 and 2000, China was first exposed to western concepts of CSR when multinational corporations entered China and began to audit Chinese factories. Zhou Weidong, Will CSR Work in China?, China CSR (August 10, 2006), available at http://www.chinacsr.com/en/2006/08/10/653-will-csr-work-in-china/.

CSR actually begin to mature during the “Wait and See Years” of 2000 to 2004. Id. This period saw a reactionary discussion of CSR. Academics, NGOs, and international organizations actively promoted CSR and encouraged the Chinese government to adopt the fundamental principles of CSR. Id. In response, the Ministry of Labor, the Ministry of commerce, and the Chinese Enterprise Confederation created CSR investigations committees to study the development of CSR in China. Id. In general, the government was worried about the cost and effect of CSR practices on China’s rapid economic growth. Id. Instead of immediately acting to either encourage or repress the acceptance of CSR practices and development, the Chinese government chose to “wait and see” what happened. Id.

In 2004, the Chinese government had a markedly changed attitude towards CSR. Id. During this “Engagement” phase, the Chinese government shifted from the passive approach of waiting and seeing what happened to an active approach through laws and regulations. Id. The Chinese government currently promotes the creation of a wealthy and “harmonious society” with a more people-oriented system of governance and a scientific approach to development. Id. The Chinese government has found that CSR is effective in furthering this goal while increasing China’s competitiveness in the world market. Id. FROM CSR IN CHINA TO CHINESE CSR, 7TH ROUND TABLE ON SOCIAL STANDARDS AND CSR IN CHINA (2006), www.csr-roundtable.org.

In Chapter I, Article 5, of The Company Law of the People’s Republic of China was amended to provide as follows: “… [w]hen undertaking business operations a company shall comply with the laws and administrative regulations, social morality and business morality. It shall act in good faith, accept the supervision of the government and general public, and bear social responsibilities.”

Notwithstanding the government’s current attitude to and implementing legislation even today, many people in China still believe CSR in China is still in the infancy of its development. Silvia Sartori, Corporate Social Responsibility, Chinese Style (Aug. 29, 2008), available at http://www.devex.com/articles/corporate-social-responsibility-chinese-style.

The Chinese Business Perspective

Because CSR in China is still in its infancy and continues to develop, there are many different concepts of CSR in China. These differences are largely based on the type of business in which the individuals are involved.

Individuals who work or manage multinational enterprises generally have more exposure to international standards of CSR, and tend to develop CSR programs in their Chinese departments consistent with their parent’s global CSR standards. Id. However, even though they are consistent with international CSR standards, when multinational enterprises do business in China, they must also prioritize their CSR in reaction to the concerns of the Chinese government. Id.

Meanwhile, the managers of large and medium-sized state-owned enterprises tend to have mixed views of CSR. See id. They associate the modern concept of CSR with the welfare-like social services that existed in China before public sector reform in the late 1970s. Id. Because of the unique situation of state-owned enterprises, there is confusion as to which CSR duties are owed to what groups in society and whether there should be an increased focus on the duties owed to managers, employees, stakeholders, or customers. See id.

The stakeholders of publicly traded Chinese companies are largely unaware of CSR or the need for CSR. Id. Most investors in the Chinese stock-market are short-term-profit-oriented, holding on to the old Doctrine of Shareholder primacy. Id. For these shareholders who do not hold onto stock for long periods of time in order to realize the long-term benefits of CSR, they consider CSR to be a waste of corporate funds that could be going to them. Id.

Individuals who run small and medium size enterprises are more suitable to adopt CSR. However, to these individuals, CSR is a way to boost their marketing image and reputation. Id. It is a public relations ploy that increases access to public officials. Id. They will commit to CSR in the short-term as long as they see immediate results. Id.

Very few Chinese companies currently fit the Western CSR profile. Companies that see CSR as genuinely valuable to their bottom line tend to be large, financially stable, and sensitive to their brand image. The Growth and Future Development of CSR in China: Bringing Workers into Play, CHINA LABOUR BULLETIN, http://www.clb.org.hk/en/node/100288. For these businesses, investing in CSR is a proven method to enhance their brand image. See id. At this time, many factories in China do not have an image to protect and therefore, CSR does not affect their bottom line and has no financial value. See id. Without financial value, there is no stimulus or motivation to implement CSR. See id.

The Chinese Government’s Perspective

The Chinese Government’s view of CSR was publicized by Yu Guangzhou, the Vice Minister of Commerce, at the Sino-Swedish CSR High-level Forum in 2008. In that speech, he stated “CSR among Chinese enterprises should follow through ‘one main thread’, focus on ‘three alignments’ and achieve ‘four harmonies.’” Yu Guangzhou, Strengthening CSR for a Harmonious Society, Speech at the Sino-Swedish CSR High-level Forum (April 14, 2008) (transcript available at http://english.mofcom.gov.cn/aarticle/translatorsgarden/famousspeech/200806/20080605573007.html).

“One main thread” refers to a general belief that Chinese companies should follow a scientific outlook on development to reach short and long term growth, profits, and employee development while still focusing on “Chinese Characteristics”. Id. These Chinese characteristics include “high economic and social productivity, low resource consumption and pollution, effective protection of consumer and employee rights and interests, and to move ahead with building a socialist harmonious society and to achieve sustainable socio-economic development.” Id.

To further the “one main thread” approach, Yu proposes “three alignments.” These include (1) governmental encouragement of CSR adoption by businesses through incentives and direction; (2) incorporation of the best international CSR practices with the realities of the national conditions in China; and (3) improvement of the overall compliance with CSR by targeting businesses that are weak in compliance. Id.

Just as the West outlines CSR responsibility with the three P’s of responsibility toward people, the planet, and profits; the Chinese government not only recognizes these responsibilities, but integrates Chinese characteristics through the “four harmonies.” The government has highlighted four important relationships that must be fostered, including (1) the employer-employee relationship, (2) the competitive and collaborative level playing field of business to business relationships, (3) the relationship of business to society and, (4) the relationship of man and nature. Id. By addressing these concerns, the four harmonies largely reflect the concerns outlined in international standards of CSR.

The Perspective of China’s Society

For many Chinese, CSR has yet to be widely embraced and is still considered a public relations tool rather than a genuine concern of the real responsibilities a corporation owes society because of its power. The Chinese have not had an opportunity to learn as the West has learned over 100 years of CSR evolution that there is a need for CSR that goes beyond an emphasis on marketing with peripheral benefits for people and the planet. Posting to CSR International Blog entitled CSR in China: Cause for Hope or Despair (2008), http://csrinternational.blogspot.com/2008/10/csr-in-china-cause-for-hope-or-despair.html. The view that marketing is the central purpose of CSR for many Chinese firms was highlighted in the tragic aftermath of the Sichuan earthquakes, where companies were ranked by Chinese bloggers on the size of their charitable donations rather than how effective they were in mitigating the effects of the earthquake and the people affected by it. See, e.g., Posting to Globalization 101 Blog entitled CSR: the Chinese Way,, http://www.globalization101.org/index.php?file=blog&id=8.

It is fair to say the prevailing western concept of CSR has not been adopted in China. However, the fundamental principal of corporate development with an emphasis on profits, people, and the planet in harmony with social development or CSR with Chinese characteristics is becoming an accepted business practice in China.

The word “harmony” is at the heart of the Chinese culture and a “harmonious society” is a concept that involves most aspects of Chinese society and all major social organs including the ruling party, all government agencies, all state owned enterprises and other similar public entities. See Susanna Myllyvainio & Nina Virkkala, Corporate Social Responsibility: a Concept Under Translation in China (2006).

The concept of harmony and the harmonious society has allowed China to further their idea of “CSR with Chinese Characteristics.” With greater emphasis on “CSR with Chinese Characteristics”, the Chinese have been able to assimilate the global concept of CSR with the unique control of the Party-State. Id.

CSR with Chinese Characteristics still shares many fundamental similarities with Western CSR. Under both concepts, CSR is understood to highlight that the scope of corporate responsibility goes beyond profits, but includes a responsibility to people and the planet as well. Id.

There are two key differences between CSR with Chinese Characteristics and the western idea of CSR. First, CSR in China has largely been approached through a mandatory imposition by the government. Long Yongtu, Keynote Address at Asia Society Southern California Luncheon: A Business Leader Roundtable with Long Yongtu (2008). The mandatory approach to CSR through laws and regulations has kept many Chinese corporations from embracing the primary ideas of CSR as good for their company and at the same time good for their people and the environment. Id. For many, there is a prevailing belief that the government is imposing a trade barrier that is hampering economic growth. Id. Because the principles behind CSR are being lost in its implementation, the goals of CSR as dictated by the West cannot be achieved.

The second is the concept of “social harmony.” Id. Even the concept of “social harmony” is different in the east than what it is in the West. The Chinese view of social harmony comes largely from the Chinese traditional teachings of Confucian virtue of righteousness, which means “behaving in a way that is appropriate for approval, protection and favor upon his inferior.” Id. (Citing M. Holst-Jensen, Serve the People! Corporate Social Responsibility in China, Copenhagen Discussion Papers 18 (2006)). M. Holst-Jensen argues that the hierarchical idea of righteousness hinders the interpretation of the multi-stakeholder dialogue, a key element in Western CSR. Id. (citing M. Holst-Jensen, at 31).

Conclusion

CSR globally is at a crossroads

The recent world wide credit and liquidity crises and the reactions of the world’s governments to them will not only determine the future of CSR in the West and China it will also impact the planet that our future generations will inherit.

In harsh economic times like this it is difficult to invest time and money in CSR when it has no immediate discernable effect on the financial bottom line.

Hopefully the need for CSR to ensure sustainable global growth will inspire both the people and the governments of the world to meet their collective responsibility to our generation and future generations.