How do you get China suppliers to clean up their acts to prevent melamine or other toxic substances from finding their way into your products?

Plenty of expert advice centers on developing an iron-clad contract, where clauses about quality spell out what you want clearly, and other prose details litigation or arbitration if anything goes wrong. Some suggest grading suppliers’ performance to encourage overachieving, and being empathetic with suppliers under tight financial strains so as not to push them too far.

Meanwhile, it’s a little hard to ask WWJD – what would Jesus do?

But you could ask WWCPD - what would the communist party do?

The answer: demand corporate social responsibility. It’s a little off Marx’ beaten path, but hey, it’s good stuff.

CSR’s fluffy image is, therefore, getting a makeover in China. It’s no longer nice to be a nice company. In some cases, it’s becoming required – although how enforceable those requirements are remain to be seen.

So far, government efforts to promote CSR appear to be limited to bigger companies – ones that it can influence via their interests in, say, listing on stock exchanges. Trickle down CSR could be in effect though, whereby big companies socially responsible methods indirectly benefit the broader supply population. Big business needs suppliers, and suppliers likely will have to fulfill certain expectations to meet the big guys’ CSR needs.

According to China Business Review (CBR), the following groups have created guidelines “that emphasize the importance—and, in some cases, require the incorporation—of CSR standards and principles in Chinese businesses’ plans.”

• Shenzhen Stock Exchange (SSE). In 2006, the exchange created CSR guidelines for listed companies.
• Shanghai Stock Exchange (Shanghai Exchange). In May 2008, the exchange issued a Shanghai CSR notice. It also developed the concept of social contribution value per share (SCVPS) — “a new method of measuring companies’ value creation. SCVPS is calculated by adding the tax revenues paid to the state, salaries paid to employees, loan interest paid to creditors (including banks), and donations to—and other value for—stakeholders, minus any social costs that arise from environmental pollution and other negative factors. The Shanghai Exchange believes that SCVPS will allow the public to understand the value companies create for their shareholders, employees, customers, creditors, communities, and society as a whole. Companies may choose to disclose their SCVPS calculation in their annual CSR reports.”
• China Banking Regulatory Commission (CBRC). It does things like educate farmers and other rural residents about their financial options.
• State Assets Supervision and Administration Commission (SASAC) also has issued CSR guidelines. “Therefore, CSR is not only the mission of SOEs, but a public expectation,” according to CBR.
• China National Textile and Apparel Council (CNTAC). It was first established in 2005 to promote CSR practices in supply chains. It holds an annual conference to highlight best practices. It also monitors CSR implementation.

Clearly, there are a lot of small companies doing business in China, and doing the socially responsible thing will continue to be hard to quantify. But there’s a good lesson to be learned from what the government is emphasizing: CSR is important, and measures can be implemented in companies through persuasion.

Suppliers do read the writing on the wall, and many already have implemented CSR practices. So next time you go looking for someone to make you something, first, make sure they’re good guys, and if they can’t prove it, help them by shining a light on CSR.

    Channel: Local Wisdom     |