With China’s overseas interests expanding rapidly, its corporations are receiving lessons in a concept still foreign to many: business responsibility

I’ve often moaned in this column that Chinese companies have, by and large, not yet had to face up to adopting corporate responsibility as integral to their business processes.

They are aware of corporate responsibility and they often make claims to be instituting appropriate strategies. However, most of what passes for corporate responsibility in China is actually simply donations – philanthropy – and invariably to one or another cause or organisation favoured by the central government. Companies that stay within the line and donate to “safe” causes and “official” organisations effectively amass house points with Beijing.

Sadly, and especially in these days of economic recession in the west and straitened budgets, many western companies have followed suit and decided that, in China, simply writing a cheque to a local charity or government NGO (the infamous gongos) is the easiest way to both tick the corporate responsibility box and win friends and influence people in high places.

However, as China’s corporations grow, so they are growing increasingly outwards.

Chinese companies are acquiring western assets and brands – Shanghai Bright buying Weetabix or Geely Motor buying Volvo for instance – or becoming involved in projects overseas, mining and construction primarily. According to Beijing, the Chinese invested in 4,425 overseas enterprises in 141 countries and regions in 2012, with a total direct investment of $77bn, an impressive year-on-year growth of 29%.

As Chinese firms continue to do this they are running up against communities and local governments that have corporate responsibility embedded in their culture and expect the newcomers to adapt.

Chinese construction companies have proved surprisingly good at winning contracts and then building in accordance with local specifications and regulations.

The China State Construction Engineering Corporation recently built the University of South Carolina’s west quad living and learning centre. The specifications from the university were tight and the construction team stuck to them. The result? The building has received the silver-level certification of Leadership in Energy and Environmental Design (LEED) from the US Green Building Council. Similar plaudits have been awarded to Chinese constructed buildings in Singapore and elsewhere.

Trouble underground

However, mining has been a much more contentious area, where Chinese companies have found themselves faced with protests from local communities and officials. Away from home – unable to deal with local protests in the way they might in China, unable to control local journalists, bloggers and activists – companies have found themselves far more exposed.

In Chile, for instance, Chinese copper miners have faced protests from the local community accusing the Chinese miners of environmental damage. Similar incidents have occurred at copper mines in Zambia and Burma. China, of course, consumes 40% of the world’s copper, so it’s an important commodity to Beijing.

In virtually all of these cases the Chinese companies have been woefully inadequate in dealing with the media, local activists and the blogosphere. They have simply never previously had to engage with protestors, and they don’t have the skills.

So now Chinese companies going abroad, likely to encounter these sorts of situations, are receiving guidance and training before they leave.

Launching new guidelines in Beijing, Yao Jian, a spokesman for the ministry of commerce, said: “When investing abroad, most Chinese enterprises understand the need to protect the environment, obey the laws of the host nations and actively fulfil social responsibility. However, some enterprises are not experienced in the work of environmental protection, social responsibility and need the guidance of the Chinese government.”

The new guidelines are the product of the commerce and environmental protection ministries – they stress a range of corporate responsibility obligations when operating outside China, including environmental protection, adhering to local labour rights and corporate responsibility.

There are many case studies in the guidelines. For instance, China Metallurgical Group is featured for having provided free medical services to local villagers at its mining project in Saindak in Pakistan. This costs $50,000 a year but has, apparently, greatly improved relations locally. After problems in Zambia, the China Nonferrous Metal Mining Group openly pledged not to lay off workers, a move that immediately eased tensions at the mine.

Everyone involved in the surging number of Chinese investors and companies moving abroad accepts that there will be problems in the future. The Beijing government is now mulling legislation that means that if Chinese companies break local laws abroad, avoid local taxes, or infringe labour rights, they could be punished and fined at home where their major assets are. This would essentially enforce corporate responsibility abroad.

Right now Chinese firms are on a steep learning curve – but then 10 years ago overseas investment by China was close to zero. The curve was never going to be anything but steep.

Paul French has been based in China for more than 20 years and is a partner in the research publisher Access Asia-Mintel.  

business strategy  China column  Paul French  Responsible Business  trends 

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