CSR Developments in China
ComplianceMay 06, 2015

CSR developments in China

Corporate social responsibility is ready to bloom in China—and a new law helps explain why.

Is a new era of corporate social responsibility (CSR) about to emerge in China?

If the early returns from a new Chinese environmental law are any indication, the prospects for such a shift are good.

A recent article in the China Economic Review argued that the new law, which went into effect January 1, could be the development that finally nudges Chinese businesses toward greater CSR efforts.

The law allows for increased environmental regulations and penalties and more avenues for redress. Under the new law certain NGOs may now sue Chinese polluters—and four such lawsuits have been filed in the law's first 100 days. While that's hardly a deluge, the China Economic Review points out that only nine such cases were filed between 2009 and 2013.

A stronger position on social responsibility

While the Chinese government has made gestures toward adopting CSR norms in recent years, the intensity of its efforts has increased. This is likely due, at least in part, to anger over pollution among many Chinese people—anger which has helped spur tougher environmental regulation and legal oversight.

In 2008, the Chinese Academy of Social Sciences issued CSR guidelines for large corporations to follow. Companies began releasing CSR reports and implementing new CSR tactics as a response to these guidelines.

Unfortunately, the China Economic Review points out that researchers from Harvard Business School and Shanghai Maritime University discovered this new corporate enthusiasm for CSR reporting had marginal practical value. Without serious verification measures in place, the reports did not result in serious changes to corporate behavior.

Even worse, fewer firms began releasing reports as the years went on. Of those who did, only about five percent were verified by an independent third party evaluator.

Will new laws and environmental support change Chinese CSR practices?

While corporate social responsibility may not have spread with optimal quickness since 2008, the time may finally be right for more widespread adoption. China's aforementioned environmental law is already shaking up entrenched corporate practices.

In recent years, spotty verification and toothless enforcement have given Chinese businesses little incentive to ensure their environmental claims align with actual performance. With record levels of penalties assessed in the wake of China's new law, companies no longer have that luxury. With public opinion now running strongly against polluters, businesses may no longer stress growth to the total exclusion of responsibility.

Given this widespread antipathy toward environmental offenders—and with top government leaders making moves to promote social responsibility—there's a chance that we may be witnessing the birth of a new era in Chinese CSR history.

Given China's immense size and economic importance, that's a great sign for the prospects of social responsibility—and the betterment of the global environment.

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