Corporate Social Responsibility in China

The idea of corporate social responsibility (CSR) is intriguing. Consumer attitudes imposing social values upon corporate practice by choosing products made responsibly by principled corporations. In essence: the cruel, nasty, and unforgiving free market making the world a better place through the power of consumer choice. Critics of capitalism have long clung to the idea that the inherent competition leads to conflict, and conflict in capitalism reinforces the unfortunate Hobbesean conclusion that man's life is "solitary, poor, nasty, brutish, and short." And then CSR, the classic liberal's wet dream, comes and spoils the party by showing the world that soaring profits can go hand in hand with doing good.

CSR takes many forms. At the consumer level, consumers have choices between goods such as "Free Trade" coffee, and organic clothes and foods, and recycled goods. In a study (pdf) by Michael Hiscox and Nicholas Smyth, they placed two sets of towels in a store, one with a label describing how the towel was produced under fair and safe labor conditions. Over 5 months, they experimented by raising the price of the towels carrying the label, and even switching which towels carried the label. The sales of the towel that carried the label increased, and demand was "very inelastic" with up to a 20% increase in price. Both sets of towels were already produced under good labor conditions, and this goes to show that showing customers just how socially responsible a business makes those customers willing to pay more for otherwise identical goods.

On the other end of the scale are large companies directing their for-profit arms to doing good. Internet behemoth Google has more going for it in the CSR arena than their negatively phrased informal motto, "Don't be evil." Google is on the CSR warpath with Google.org, a division funded with 1% of Google's equity and annual profits. Google's idea is similar to the Bill Clinton Foundation (with a fine chronicle at The Atlantic)--make profits while doing good on a large scale in areas of the world that need "good done." Not being evil is, presumably, much easier than doing good. The for-profit aspects of these do-gooding schemes makes them a far-cry from straight philanthropy such as Carnegie's libraries.

In the middle, consumer demands mesh with profit-seekers at a higher level than consumer goods. We see the growth of green building, a demand for affordable yet profitable renewable energy, and cleaner manufacturing processes.

Though many corporations apparently believe that China is a fine place to escape social responsibility, an article in The Economist calls China "the new frontier for the CSR industry." The article identifies three areas from which pressure is coming. First, the government is pressuring companies to become more environmentally responsible, which hopefully (likely?) has more to do with the government looking out for the welfare of its citizens than with outside pressure. Second, foreign investors "want to apply their ethical standards across their supply chain," and are doing so by implementing any of the myriad of global standards from ISO to SAI. Third, as Chinese companies go global, they find that potential customers in the developed world do not take kindly to, say, doing business with Sudan. But, growth is currently the primary concern of Chinese companies. Greater CSR will come later, it is just good know that widely implemented CSR is in the back of their minds.