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Home > Brief News > 2014

2014

Observations & Measures on CSR Performance of Overseas Chinese Enterprises (3)

 
  1. Initial CSR Practices of Overseas Chinese Enterprises
Since the beginning of national strategy of Going-Abroad in 2000, many achievements have been made. A number of overseas Chinese enterprises are capable of using civil diplomatic philosophy in their performance of social responsibilities from experiences and lessons learned from developed transnational companies and tailoring for their own application, which is exactly practice of scientific development concept. Taking the opportunity of a business trip, the author of the article visited some overseas Chinese enterprises and collected three typical cases of successful CSR practices, including SINOPEC Addax (Switzerland), LENOVO and COSCO. The details are as follows.  
  1. The first case is to establish independent corporate foundation abroad to carry out CSR activities in cooperation with local civil groups, which is the case of SINOPEC Addax (Switzerland). SINOPEC Addax (Switzerland) included CSR work in its corporate international strategy and has taken three measures based on the local situation accordingly. The first measure is the internationalization process of strategic management. In order to manage its corporate strategies according to international criteria, SINOPEC joined the UN Global Compact and became member of the World Business Council of Sustainable Development (WBCSD). The second is the international process of human resources. The senior management of SINOPEC Addax is composed of members from 34 countries, including representatives from China, UK, the United States, and also Africa countries. Thirdly and finally , SINOPEC Addax really performs its social responsibilities by carrying out charity activities. SINOPEC Addax Foundation was registered in Geneva and now carries out non-for-profit charity activities globally.
 
  1. Including CSR in overall corporate strategy and carrying out charity activities in creative ways and innovative methods. The LENOVO international development path in the past ten years was actually a process of practicing its social responsibilities. As a transnational company totally growing up from China, the LENOVO experiences of internationalization are worth to learn from, not only for overseas Chinese enterprises, but also for Chinese NGOs. 1. The company has to be clear about the relationship between its purpose of internationalization and corporate social responsibilities, which will ensure a correct positioning in the internationalization process. 2. An efficient and clear-oriented team will guarantee the success of CSR performance. 3. LENOVO includes CSR in the overall corporate development strategies and carries out charity activities with creativity and innovation. The venture philanthropy idea is a real innovation that LENOVO brought out to support non-profit organizations by teaching methods and providing starting resources to disseminate the effect of charity activities. This is an innovative and effective attempt that LENOVO contributes to the non-for-profit sector. The CSR performance and the venture philanthropy are not only helping LENOVO in its own charity practices, but also building up the international brand image for LENOVO.
 
  1. The third is COSCO’s case of performing social responsibilities by joining international organizations and using the influence of international alliances. COSCO internationalization strategy and CSR performance include: 1) Self-diagnosis: Setting up strategies with accurate position and tackle development obstacles from the inside-out. 2) Learning from different experiences: Emphasizing expertise and learning from professionals enabled COSCO to act efficiently. 3) Innovative ideas: Business structure and human resources development should keep the same pace with social development. 4) Internationalized development path: Immersing the organization in multi-cultural backgrounds and diversified ideas and always using win-win principles guarantee the internationalized development of COSCO. 5) Pro-active communication and cooperation: Becoming member of international alliances strengthen the international reputation and influence of COSCO.
 
Mr. Diao Chunhe, President of the China Contractors Association, believes that with the development of international contracting industry and the further understanding of social responsibilities, the overseas Chinese contracting enterprises will include CSR in their corporate operation strategies and implement it in their practices. First of all, they should pay attention to employment management and workers’ rights protection, trying to foster better working conditions and living environments for their employees. This is not only for the rights protection of employees, but also for assurance of human resources development. For instance, the China Metallurgical Group has designed and carried out training programs for employees from project locations to address the lack of technical staff in the project location. The program includes on-site training, sending some local employees to China and training them with Chinese language, cultural background and metallurgical technologies. 
 
Next, the sense of environmental protection was improved obviously to construct environmentally friendly projects by consciously abiding the local laws and regulations regarding environmental protection and meeting the local criteria regarding environmental protection. For example, in a reconstruction project of the local road, the China Road & Bridges Engineering Co. carried out research in cooperation with the local Road Research Institute of the Transportation Ministry to find out a better way to protect cultural relics and natural landscapes along the road. Through a survey on the environmental situation and geographical disasters, they redesigned parts of the road construction plan and proposed a set of environmentally friendly measures in combination with the design philosophy and construction technologies.
 
Last but not least is that the overseas Chinese enterprises emphasize rewarding the local community and participating in the local social charities, which enables both a long-term economic development in the region and finally reaches to a win-win situation. For example, a road construction project of the China Geo-engineering Group (hereafter referred to as CGEG) in Tansania took place in a very dry area. The local economy is very backward and living conditions are very poor, even the drinking water is a big problem. The CGEG project team tried to combine the project plan with the local needs and build-up water supply facilities near to the local villages, which solved not only the water supply for the project, but also the drinking water of local villagers and their livestock. CGEG also used its own funds and equipment to recover a well, disposed long time ago, and solve the water supply for about one thousand local people at once. The wells made by CGEG are open and free to local villagers nearby and local people along the road project brought an end to the time of drinking unhygienic water. The road condition near the CGEG project location Camp Mikva by the church was in very poor condition and people could walk through in raining seasons. In this case, CGEG constructed a new road of about 200 meters length which made it very convenient for the local people to go to church. 
 
Although many achievements have been made, problems also appear. Research carried out by Mr. Zhong Hongwu and others in 2007 shows that overseas Chinese enterprises’ CSR performance are poor and they lack of social responsibilities, which is increasingly revealed, criticized and condemned. Overseas media continuously point out that the overseas Chinese enterprises bring out the problems of resources, environment, human rights, safety, social governance, etc. This arouses the resentment and resistance from the local people. According to a statistics the author collected from UPI, one of the biggest four media agencies in the western society, by June 12, 2007, there were 2,147 press stories on human rights violation regarding Chinese enterprises in African countries, 1,582 on labor issues, 1,408 on corruption, and 1,655 on environmental issues. The lack of social responsibilities of overseas Chinese enterprises caused a negative impact on the national image, corporate reputation and brand building, and set obstacles for the going-abroad strategy. Moreover, it influences the global strategy of Chinese enterprises. The lack of social responsibilities has become the first urgent and most significant strategic issue to address for Chinese enterprises investing abroad.  
 
Mr. Diao Chunhe’s research also shows that, although much progress has been made, the overseas Chinese contractors’ performance to undertake social responsibilities is not satisfactory as well. For example, many enterprises have only superficial and unsystematic understanding on their social responsibilities, such as social donations. In their overseas operations, they lack the capacities to localize their business and integrate into the local culture, take initiative for environment protection, and competences for promotion and public communication. 
 
To sum up, there are both achievements made (such as including CSR as part of international strategy, setting up independent foundations, interaction with local employees, publishing of CSR reports, etc.) and urgent problems to be solved (including labor relations, environmental protection, safe and healthy working conditions, lack of communication with local community and business honesty). Two aspects are the cause for the appearances of above problems. One aspect are the political and ideological reasons. Some western countries, to address the need of country strategy, intend to broaden social responsibilities that overseas Chinese enterprises should undertake, eventually to reach their political purpose. The other is that problems really remain in overseas Chinese enterprises. Therefore, it is necessary to remain calm and carry out objective analyses and research on the reasons why overseas Chinese enterprises should undertake social responsibilities.
  1. Future Development Strategies for Overseas Chinese Enterprises
We need to have a clear understanding on the future development of overseas Chinese enterprises. What we have from materials and research so far is only a tip of an iceberg. The composition of overseas Chinese enterprises is complicated. There are state-owned enterprises from Mainland China (including central government-led enterprises and their subsidiaries), private enterprises, and for sure, enterprises from Taiwan, Hong Kong and Macau. Due to the limitation of references and materials, the cases and statistics in this article are mainly from state-owned enterprises of Mainland China. Enterprises from Taiwan, Hong Kong and Macau are not included. With the strong development of China’s economy, overseas Chinese investment will be further expanded. Six aspects of strategies are proposed for overseas Chinese enterprises in their consideration of performing social responsibilities. The detail contents are as follow. 
  1. An evaluation system should be established on CSR of overseas Chinese enterprises to push their SCR implementation and application. A government agency should be appointed as the administration of CSR performance of enterprises. Together with industry associations, research academies, NGOs and volunteers, this special government agency can establish a set of CSR criteria to monitor and evaluate CSR performance of overseas Chinese enterprises. Those who have serious deficiencies on CSR will be put on a blacklist. This will enforce the overseas Chinese enterprises to undertake their social responsibilities. As for state-owned enterprises (both central government and its subsidiaries), CSR should be pointed as key performance indicator and a veto vote policy should be applied. This will ensure a thorough implementation of CSR from top to the bottom and make CSR performance an important part of corporate reputation. A specific CSR department should be set up in the enterprises to release the corporate annual CSR report to ensure the daily implementation of CSR work.   
  2. An overseas Chinese enterprises federation should be established to play a leading role. Industrial regulations can be set up to regulate the operation of Chinese enterprises, including performing CSR, strengthening self-disciplines, preventing vicious competition, communicating with local people, community and government, as well as religious groups and trade unions. This federation can instruct overseas Chinese enterprises to hold public hearings on the projects they invested in. The local community, NGOs and stakeholders should be invited to join the consultation mechanism. The project design should be transparent and project feasibility study strengthened. A risk analysis should be included in project design as well, in order to monitor the project impact in the long-term and to set up a traceability mechanism to ensure effective management of the industry.  
  3. The overseas Chinese enterprises are encouraged to join together and register their own chamber of commerce in the country they are based in. The overseas Chinese enterprises should take into consideration interests of their host nation and set up an association of their own according to the local laws and regulation. This association needs to invite private enterprises and companies to become their members in order to form up real association of Chinese enterprises in all forms. In this case, the association can combine the specific contents of CSR with project biding, information sharing, risk management, fundraising, human resources training of all member companies.
  4. Joining in UN Global Compact will strengthen the communication and cooperation with other transnational corporations. As known to all, Chinese enterprises have joined the international market and competition for only a short period of time and lack experiences and network support. Therefore, it is necessary for them to strengthen communication among corporations and international cooperation. They need to study advanced ideas and successful experiences and to improve their own work to better undertake their social responsibilities. The overseas Chinese enterprises need to strengthen their dialogue and communication with international organizations as well, and participate actively in the process of setting up international CSR standards. Their rights to speak should be emphasized for overseas Chinese enterprises to enhance their participation in international affairs and thus expand their influences in international affairs.
  5. Communication and interaction between local NGOs and overseas Chinese enterprises should be encouraged to in order to hear suggestions and comments from local NGOs. The overseas Chinese enterprises should strengthen their dialogue with the local NGOs in the country/region they operate in and try to establish partnerships at the proper time. This will enable the overseas Chinese enterprises to better understand the mission and operation of local NGOs, to share their own information and experiences of corporate operation, and, therefore, to gain more consultancy and comments for overseas Chinese enterprises, as a whole, from local communities. It will help overseas Chinese enterprises to improve their efficiency of CSR investments by making use of local NGOs as an important strength in project design, funding input, project implementation and project monitoring. The partnership with local NGOs will help overseas Chinese enterprises to better combine its corporate internationalization strategy with CSR projects and result in a standardized operation and sustainable development of the overseas Chinese enterprises. 
  6. Finally, overseas Chinese enterprises are encouraged to set up their own CSR department in order to set up a communication platform with local communities, consumers and staff members. With the high-speed development of information technology, the overseas Chinese enterprises should better publish and communicate with the public their CSR philosophy and practices through setting up of a CSR department. This department is an important information platform to interact, communicate and share information between the enterprise and local communities, local consumers, and staff members. The enterprise can also consider registering its own charity foundation and taking care of local disadvantaged groups and addressing reasonable needs of the local community.
In summary, CSR performance of overseas Chinese enterprises is a significant composition for the process of internationalization, standardization, and professionalization of Chinese enterprises. It is important to set up a platform for communication, interaction and cooperation with the local stakeholders, according to different laws and regulations, cultural backgrounds and customs, religious backgrounds and beliefs, as well as the environmental changes. The partnership with the local NGOs and the implementation of social responsibilities are of special importance for the healthy development of overseas Chinese enterprises to make a step forward.