A PRC Government body has released draft guidelines with potentially far-reaching ramifications for foreign investors’ Corporate Social Responsibility (CSR) activities.  The guidelines raise the possibility that foreign companies will be required by law to adopt CSR initiatives at a later date.  A subsidiary of the Ministry of Commerce, the Chinese Academy of International Trade & Economic Cooperation (CAITEC), issued the draft document in late August 2008, known as Guidelines on Corporate Social Responsibility Compliance for Foreign Invested Enterprises (CSRC).

CSRC are voluntary guidelines and not law. However, it is possible that they will become legislation at a later date.  At the very least they are an indication that the Government may be favourably disposed towards foreign companies which it considers to be CSR compliant.  This could affect their ability to have their licences renewed when operating as representative offices.  The PRC Government has recently been stressing the need for companies to be socially and environmentally responsible.  These guidelines are the strongest indication yet of the Government’s expectations of foreign investors.  The guidelines are wide in scope and encourage foreign invested companies to play an exemplary role in engaging with stakeholders to contribute to the economic, social and environmental development of the PRC.

The reason that I think the Guidelines are important is because they are completely aligned with the Government’s desire to distribute wealth more evenly and promote a ‘Go West’ policy of enriching the rural west of China with money, goods and services from the rich Eastern coastal cities such as Shanghai.  I have noticed several indicators that the Government is becoming more keenly focused on CSR in China.  The first instance was when I attended a conference at CEIB’s two years ago and the Government asked for my PPT’s etc on CSR.  The second instance was when the law firm where I work was renewing its licence to operate with the Ministry of Justice and we were asked to provide a profile of the firm’s CSR commitment.  The most recent example was at the Government’s Seventh Transnational Corporations Conference where I noticed that two thirds of the speeches were dedicated to CSR related topics.  Whether law or not, the CSR Guidelines are indicative of a trend that will marglinalise companies that stand on the sidelines of issues such as poverty alleviation and climate change in China.  To remain viable in China I believe companies have to engage with the Government via CSR to be seen as part of the solution rather than a source of the problem.

By Clare Pearson

September 2008