Today we bring you a guest post from Plan China's Zheng Wei. Zheng is primarily responsible for implementing the organization’s corporate-community partnership strategy with multinational companies and foundations and advising companies on effective community programs. Having worked both at Plan’s fundraising offices in Canada as well as the field offices in rural China, he has gained a good understanding about the needs from both the donor and the field.

When we look at the present state of China we can see two distinct faces. The first is one of rapid economic development and continuous prosperity over the last two decades. The other is that of the rural areas, which lag far behind the developed cities especially in environmental and social challenges. Over one hundred million people in China still live on less than a dollar a day. Other challenges for the country include large-scale migration, a declining child population, approximately thirty-four million children living in poverty, and if it remains unchecked, the spread of HIV/AIDS.

With this unique background, Corporate Social Responsibility (CSR) is developing rapidly in China: resources are collected speedily, problems are identified quickly, and with government support, plans are carried out swiftly. If we look back to 2006, we find that few people in China had heard the words Corporate Social Responsibility, but three years hence it has become as much a cliché as an action point for companies.

China’s Corporate Social Responsibility (CSR) movement began with anti-sweatshop campaigns and is now broadening to cover issues from labor and environmental protection to poverty reduction and investment. In China today, all levels of government, enterprises, non-governmental organizations (NGOs) and the media engage in CSR activities. Some progressive organizations are acutely aware of the CSR imperative in China and have clearly defined plans and programs. Others have yet to become aware of how fast awareness of CSR issues is developing among Chinese agencies and enterprises. (Supporting CSR in China - Review of the International Contribution by Syntao & GTZ)

The rapid development of CSR in China has also been driven by a series of major events that occurred in 2008. First was the Sichuan Earthquake on May 12, 2008 that killed at least 68,000. This catastrophe moved the whole nation to help, support and donate money to the victims. Additionally, the public has given a lot of pressure for corporations to donate and those that responded quickly and generously (such as Wanglaoji Herbal Tea) received loud applause and consumer support, while those corporations that donated slowly and thriftily have been boycotted. Unfortunately, the public often fails to realize the internal procedures, which delay donations from multinational corporations (MNCs). Consequently, the public sees these organizations as unresponsive and irresponsible, responding by blacklisting the ‘exploiting and stingy capitalists’. As for Chinese corporations, a large number of them are making decisions rather quickly, but in general there has been a lack of coordinated strategies.

Implicit CSR (operating your core business in a responsible way, versus explicit CSR which is more about the benefit to external communities) has been a hot topic since last years’ milk scandal, which raised significant questions about product quality at both a national and international level. Three Deer (Sanlu), a Chinese milk brand worth 15 billion RMB went belly up one day after the public found out it had tainted baby formula with melamine. The lesson here is clear: CSR lies at the very root of any company’s survival. Implicit CSR, compared with explicit CSR, is less apparent but more fundamental for a corporation. Most corporations focus purely on the explicit (such as community investments) as it seems to be more related to building up a company’s reputation; however, managing implicit CSR properly is the art of managing potential risks which could damage a company’s reputation, perhaps beyond repair. The company’s donations of milk to rural schools did not mean much when it was discovered that they had knowingly produced poisoned milk. Good implicit CSR should be the foundation for explicit CSR.

The financial crisis has brought some other CSR issues to the world table including corporate governance and ethics. It has also been driving global solutions for global challenges. China Premier Wen Jiabao said, ”a company will only become one that is desirable by society if its production and operation has been wedded with morality.” As a result of the crisis, the Chinese government has been trying to strengthen the governance of its banking system. The China Banking Association has also begun to push CSR initiatives forward within the sector by drafting and publishing China Banking Sector’s CSR guidelines.

Environmental degradation, climate change, energy shortages, poverty and regional disparity have all become daily challenges we face today and the solution cannot be reached by any one company or country. Fortunately, companies from a variety of sectors have increasingly come together to find solutions to these problems that will benefit the whole globe; thus, a new collaborative platform composed of creative thinking and innovation has been developing.

Although there has been much heated discussion this year about CSR, there is still much to do and to improve upon in the actual implementation of policies. Many companies have written nice CSR reports and had CSR conferences, but how many high quality CSR projects have actually been created out of the past two years’ talk? Corporations in China do not usually have the capacity to implement CSR projects. Instead, they often go through partnerships with NGOs. From an NGO’s perspective, there is much that corporations could do to improve their decision-making process and to develop better partnerships; however, it would require a more significant time commitment from corporations than what they can usually give. As for NGOs, the larger ones are always under pressure to spend their money, usually inefficiently; and corporations tend to forget about the program once their donation is made as long as there are decent reports in the end. This has sometimes damaged NGOs who end up spending money for the corporation and not for the cause. In the end, some NGOs with poor programs could continue to receive donations from corporations as long as they are able to afford staff who can write nice proposals and reports. The reality of the situation is that without efficient and effective partnerships it is very hard to create high quality CSR programs.

Where is the next wave of CSR going in China? I will now shift our focus from MNCs to State Owned Enterprises (SOE) and Small Medium Enterprises (SME) regarding what they can do with CSR. It’s time to ask questions like: How can a restaurant engage in CSR? Likewise, a grocery store or a barbershop? Professor Francesco Perrini of Bocconi University cites data showing that small companies still employ the overwhelming majority of workers throughout the world. If large companies have learned that CSR makes good business sense, then SMEs should also be addressing this area. “Small companies are actors strongly embedded within their local communities,” states Perrini. “In fact, medium-sized Italian firms often hire the majority of the population in their area, and therefore exercise a strong influence on the community’s well-being.”

Personally I believe the concept of CSR will eventually disappear, and social enterprises will take its place, replacing both companies and NGOs. Any corporation that exists sustainably, operates responsibly, and delivers responsible products, could be described as a social enterprise. As for any nonprofit that hopes to exist in the long run, it will have to learn how to run more efficiently like a business and to generate income more sustainably, thereby gradually taking on the form of a social enterprise. A scenario in which organizations all become social enterprises is probably too ideal; bad apples always exist. Ultimately, what we can do is encourage everyone to live in such a way today as to make tomorrow better.