Supply chain management and international trade

The high growth rates of the Chinese economy closely correspond with the gradual expansion of private sector activities especially in export-oriented industries. Chinese owned companies as well as several hundred thousand joint ventures with international partners have created millions of new jobs and contributed to the overall competitiveness of the Chinese economy. China's private sector presently accounts for around 60- 70% of the country's gross domestic product, and private companies funded at least partially by foreign investors make up about 60% of China's total exports. These statistics aptly illustrate the extent of China's integration into global markets and more specifically into global supply chains. Moreover, they help to explain why both Chinese government officials and business representatives primarily view CSR, which is to a large extent preceived as stricter enforcement of labour and environmental standards, as a non-tariff trade barrier and as a potential threat to China's competitiveness and its future development.

CSR in the supply chains

The large scale integration of Chinese enterprises into the supply chains of multinational companies subsequently led to increased public awareness of the working conditions in these enterprises. In light of the widely publicised factory fires and workplace accidents in Chinese suppliers in the early to mid-1990s, foreign brands were faced with strong NGO and media pressure back in their home markets. To protect their brand reputation and to avoid negative press or even consumer boycotts, multinational companies were forced to assume some responsibility for their Chinese suppliers. Similar to developments in other low-cost manufacturing countries, multinational companies in China started to introduced so called company codes of conduct. These codes included detailed requirements on wages, working time, overtime compensation, health and safety, discrimination, and the environment.

Beyond codes of conduct

Several Western companies undertook ambitious pilot projects to test the implementation of their codes. At a later stage, industry-wide model codes served to lower the costs for both multinational companies and their Chinese suppliers who had to abide with sometimes contradicting standards from their international customers. After years of policing codes of conduct with the help of company audits, most observers came to realise that audits may provide a good starting point but that they do not themselves foster much needed change or organisational learning. As a consequence many multinationals initiated capacity building programmes for their Chinese suppliers, for example in the area of occupational health and safety. One early example for such a project is the 'China Capacity Building Project on Occupational Safety and Health' that brought together foreign health and safety professionals, a group of foreign brands including Adidas, Nike, and Reebok, their Chinese suppliers, and a number of international and locally-based researchers and NGO representatives. This 'beyond audit approach' has further been supplemented by projects that directly address the business needs of Chinese factory owners thus trying to strengthen the business case for CSR from a Chinese perspective. One example for this grassroots approach is the 'Factory Improvement Training (FIT5)' undertaken by CSR Asia and TÜV Rhineland. Moreover, the number of local Chinese service providers and consultancies that offer tailor-made programmes to raise resource efficiencies and simultaneously upgrade communication channels between management and workers has literally exploded over the past years. All these initiatives should be welcomed because they can provide a much needed alternative entry point to promote CSR in China.

Chinese-led initiatives

Chinese companies themselves can look back on a long tradition of corporate philanthropy. One nation-wide programme that stands out is the China Guangcai Program. Established in 1994/1995, the programme has helped to shore up Chinese and international business support for developmental projects all across the country. In a fairly recent trend, a number of big mostly state-owned Chinese such as State Grid or PetroChina have also begun to publish sustainability or even CSR specific reports.

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