The Rise of Reporting in China: How State-Owned Companies Can Dig Deeper

Chengbo Wang, Director, Advisory Services

In May 2011, the State-Owned Assets and Administration Commission (SASAC) mandated that all Chinese State-Owned Companies (SOEs) publish an annual corporate social responsibility report in an effort to increase their competitiveness. According to a report by leading Chinese news site "Renmin Online," the number of SOEs publishing CSR reports increased from 1,006 to 1,337 between October 2011 and 2012. Since the release of this mandate (also known as Guide 2.0), many Tier 1 cities—the most affluent, populous, and competitive cities in the country including Beijing, Chengdu, Shanghai, and Tianjin—have also hosted numerous events and seminars to help educate and train people from business, government, and civil society on the reporting process. 

The results of all this activity are, on the one hand, very positive. Most reports are well-designed and contain information that meets both local and international standards. On the other hand, many of the reports exist to meet SASAC requirements only—to perhaps show “face” rather than reshape a company’s long term business goals and sustainability strategy. More importantly, what appears to be missing in this rush to report is evidence of the process itself: how a company has demonstrated engagement with internal and external stakeholders, or an assessment of its strategy and integration of the topics most important to a company’s business model, such as supply chain management, local community development, human rights, and climate change.

To ensure a strategy beyond the reporting process exists, SOEs may need to consider institutionalizing their in-house CSR function and providing the resources needed to carry out related activities. CSR in Chinese companies often sits in the human resources or public relations functions, and even when a CSR unit does exist, many still fail to perform well due to budget constraints, shortages of skilled staff, and unclear or undefined responsibilities and scope. Secondly, SOEs also need to consider developing a medium and long-term strategy so staff can engage with a wider stakeholder group—such as local communities, business units, employees, and suppliers—and prioritize their needs combined with the material issues that the company wants to address. Finally, companies need to educate internal staff to solve sustainability issues through training, sharing, and peer learning among senior and mid-level management to ensure buy-in and longer-term success.

CSR reporting should not be considered a public relations exercise. In our experience, CSR strategy and performance are both equally important to enhancing a company’s competitiveness. What a company values most or believes is material to its business should be the markers by which sustainability plans are drawn up—it doesn’t stop at the report.

Note: In January 2013, the Ministry of Industry and Information (MIIT) formally released China’s first localized CSR standard, called DZCSR3000, which was developed by Dingzun Business Consulting in association with the Chinese Academy of Social Sciences (CASS), MIIT, China Enterprise Confederation-China Enterprise Directors Association (CEC-CEDA), and local government leaders including representatives from State Grid Corporation of China (SGCC), Daimler AG, and Gelly. China Daily reports that the standard meets global ISO26000 standards and is also designed to appeal to local Chinese CSR culture. BSR will share details of this standard as soon as they are available.

This blog first appeared on www.bsr.org.