SUSTAINABILITY UNIT CONSULTANCY SERVICES ON CSR BEIJING‐CHINA How to contribute to the realization of the “Harmonious Society” trough social responsibility. by Giulia Iemmolo The Chinese 12th Five Year Plan for National Economic and Social Development, released on March 2011, represents the unequivocal sign of the metamorphosis of the Chinese growth strategy: “sustainable development”, “green revolution”, “inclusive growth” are no longer vague concepts but have become a cornerstone of the political agenda. 1 Even in China sustainable development, understood as reaching the right balance between the economic, environmental and social aspects, seems to have no alternatives. Focusing on sustainability, therefore, means focusing on innovation in management models of the various organizations, means implementation of more effective strategies for internal and external communication, means using new technologies. In other words, it means finding new paths towards innovation through a more sustainable approach to business. And the new Chinese growth strategy seems to be going in the right direction. Based on the idea of “inclusive growth”, it is aimed at rebalancing the economy by allocating benefits equally and by alleviating social inequality while protecting the environment.2 This strategy can be seen as a further step towards the realization of a Harmonious Society that integrates Corporate Social Responsibility (CSR) values with economic development and it represents a remarkable shift that will probably have an impact on the behavior of Chinese companies. Before discussing on how to adopt a more sustainable approach to business can be considered a “smart move”, even in China, some background on the definitions of CSR accepted worldwide. According to the definition provided by the World Business Council for Sustainable Development, Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and of their families as well as of the local community and society at large”. CSR is a model of behaviour based on voluntary integration by companies, of social and environmental concerns in their business activities and on relationships with all stakeholders of the company (European Commission definition of CSR, 2001). But despite the growing awareness that adopting a more sustainable business model can bring benefits to companies in terms of risk management, cost saving, access to capital, customer relationships, human resources management and innovation capacity, many Chinese executives are still struggling with nagging doubts over the real possibility that social responsibility can boost productivity and contribute to economic success. This skepticism is still due to a misleading interpretation of CSR and of how it can create value: as a matter of fact, many Chinese companies still consider CSR as a mere cost for business and continue to 1 “China’s 12th Five‐Year Plan. How it actually works and what’s in store for the next five years” on www.chinaviews.files.wordpress.com. 2 “Greening China. Outlook for European SMEs”, Tan Copsy and Isabel Hilton, china dialogue, spring 2011 “Chinese Challenge or Low Carbon Opportunity?”. The implication of China’s 12th Five‐Year Plan for Europe”, Shin Wei Ng, Nick Mabey on www.e3g.org. 1 SUSTAINABILITY UNIT CONSULTANCY SERVICES ON CSR BEIJING‐CHINA seek only short‐term financial returns, ignoring social and environmental impacts of their business. The purpose of companies should, instead, be redefined as creating “shared values”, both for the companies and for society. Based on the theory that social and not only economic needs define markets, the idea of “shared values” focuses on the connection between societal and economic progress, enhancing the competitiveness of a company, while mutually advancing economic and social condition in the community in which the company operates. 3 In the past few years, the increasing stakeholders’ attention on environmental and social footprints of business has put a lot of pressure on Chinese companies and has forced them to find a new path to innovation. Chinese companies have been required to become more accountable, increasing for instance reporting activities; to adopt long‐term strategic approaches in order to make profits; to develop innovative products and services that can contribute to societal and environmental well‐ being. As a direct consequence of this new scenario, Chinese companies’ performances are no longer measured on the basis of their financial achievements, but rather on their capability to contribute to a sustainable development, and integrate environmental and social needs into their growth strategy. It is clear that there is no more time for doubts whether investing in CSR is the right choice or not; it is time to address CSR in the interests of the company and of society as a whole. Obviously, such changes are never easy to implement because they require substantial investments in time and resources, but they must not be postponed anymore. Chinese companies have quite a tough mission to accomplish: achieving the right balance between “external factors” (stakeholders’, such as employees’, suppliers’, consumers’, local community’s needs, etc.) and “internal factors” (shareholders’ needs/economic achievements). In order to achieve this balance, Chinese companies that want to be “socially responsible”, therefore, voluntarily adopt a long‐term strategic approach based on the management of relations with various stakeholders, and put ethical, social, environmental values at the heart of its decision‐making process. These values include promoting transparency, protecting the environment and workers, respect of human rights and commitment to contribute to sustainable development. In other words, it is necessary that Chinese companies formulate a strategy on corporate social responsibility and then translate it into action. But how can they do that? And, which are the guidelines that can help them in this process? The new voluntary standard ISO26000, that is gaining momentum worldwide, can be the answer to the above questions: it represents the most comprehensive framework on social responsibility and a practical guidance to companies (and to any other organization) that want to differentiate themselves finding sustainable paths to innovation, with the aim of creating “shared value”. Chinese companies, of course, can choose different ways to express their commitment to CSR, according to their size and their priorities, such as: adoption of forms of social awareness and accountability, adoption of management systems and forms of certification, pursuit of activities in the field of so‐called sustainable finance. 3 “Creating Shared Value”. “How to reinvent capitalism‐and unleash a wave of innovation and growth”, Porter and Kramer, Harvard Business Review, January‐February 2011. 2 SUSTAINABILITY UNIT CONSULTANCY SERVICES ON CSR BEIJING‐CHINA ISO26000 helps companies identify which aspects of business activities have a direct impact on sustainability; it helps them formulating the sustainability strategy that includes company’s values, commitment and goals, designing also appropriate structures and management systems across the whole company and it underlines the urgency of continuous improvement of the adopted SR measures. As claimed before, any substantial change requires a lot of efforts and companies that are relatively new with the concepts of CSR, might find this process particularly hard, especially if they are at the early stage of formulating the company’s CSR strategy. A “neophyte” who approaches ISO26000, despite its clear approach to social responsibility, could easily get lost among it and might need to be guided by external consultants. In fact, CSR strategies, if not properly formulated, implemented and communicated can create damages in terms of the company’s reputation, stakeholders’ reaction (consumer’s sabotage, for instance) and waste of money. CSR does represent “the only way” a company can contribute to a sustainable development and, for this reason, should constitute a priority for each company. ABOUT THE AUTHOR Ms. Giulia Iemmolo has a Bachelor Degree in Chinese language and culture and a M.Sc. in Global Management: institutions and society of contemporary China. As post‐graduate researcher of “Roma Tre” University in Beijing, she studied the development of CSR in China and the Chinese characteristics of it. Specialized in CSR trends and strategies in China, NGO and Chinese local authority engagement, Chinese community involvement projects, she is now responsible for the “Sustainability Unit” of Pirola Pennuto Zei & Associati tax and legal services and Officina Etica Consulting, in Beijing. ABOUT THE SUSTAINABILITY UNIT OF PIROLA PENNUTO ZEI & ASSOCIATI The Sustainability Unit of Pirola Pennuto Zei & Associati tax and legal services was established in 2009, in Beijing, in collaboration with Officina Etica Consulting, a consulting firm specialized in CSR, sustainability and philanthropy. The “Unit” guides companies operating in China, in implementing a more sustainable business model through practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the community where the company operates. The “Unit” is specialized in the main following areas: governance and transparency, reporting and accountability, HR engagement, community outreach programs, CSR communication tools. 3