Lack of Corporate Social Responsibility Behind Recent China Accidents

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In the past month alone, China has suffered from two very serious human-caused disasters. Less then two weeks after a November 13 chemical plant explosion in Jilin province released a flood of toxins into the Songhua River, a blast at Dongfeng coal mine in the northeastern province of Heilongjiang killed 171 miners. While authorities in the central government have made considerable efforts to prevent such disasters, including releasing circulars on safety awareness, making regular spot checks, and increasing funding to improve safety facilities, a key contributor to these preventable incidents remains the lack of effective social responsibility in Chinese enterprises.

As China undertakes a rapid restructuring of state-owned industries, an emerging sense of corporate social responsibility (CSR) should eventually result in significant changes. But CSR, a practice that requires companies to address social and environmental considerations alongside the drive for profits, remains unfamiliar to most Chinese businesses. The main cause of the Jilin chemical explosion appears to have been botched handling of equipment by workers. In the case of the Dongfeng blast, mine managers did not even know about the central government's emergency instructions on mining safety and could not tell how many workers they dismissed immediately following the blast. Such ignorance of work safety, pollution, and educational needs—the underlying cause of thousands of tragedies—exists widely in Chinese industries.

Some people argue that it is too early for Chinese companies to embrace the CSR concept, since most businesses are still at the early stages of developing technological know-how and are struggling for their survival. However, as Gary Dirks, president of BP China, has noted, CSR goes beyond simply "charitable efforts" and addresses more fundamental questions of profit-making; therefore, it should be mainstreamed into a company's business model from the get-go, not considered a luxury to add on later.

Although diverse definitions exist, CSR generally embodies two basic elements: rigorous compliance with financial and legal rules, and the embrace of ethical or other actions that go beyond formal requirements. Given the absence of laws relevant to CSR in China, to embrace the concept companies should make a basic commitment to the work safety and welfare of their employees, augmented by a secondary commitment to the public and to the environment. Regrettably, Chinese companies have scored poorly on both levels, focusing almost exclusively on profit maximization. Occupational accidents, food-poisoning incidents, and industrial pollution events occur frequently. As businesses make the transition from a planned economy to a market-oriented economy, social responsibility needs to become an essential element of Chinese corporate strategy.

China's accession to the World Trade Organization has changed the playing field for domestic Chinese industries, bringing greater competition from their international counterparts. To comply with international norms and to increase their competitiveness on the world stage, Chinese private enterprises would be wise to integrate CSR from the beginning.

Worldwide, a growing number of businesses are embracing CSR practices, including rigorous work safety standards, environmental reporting requirements, and more "responsible" investment patterns. In 2003, investments using socially responsible criteria exceeded $2.63 trillion worldwide, reports Worldwatch Institute researcher Erik Assadourian in Vital Signs 2005. Many multinational companies that operate in China, including IBM, BP, Ford Motor Company, and HP, have begun to take social and environmental responsibilities seriously. In contrast, in 2004 only 11 Chinese companies filed reports disclosing their environmental and social performance, often the first step towards increasing responsibility.