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Corporate Citizenship in China

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title Corporate Citizenship in China: CSR Challenges in the

‘Harmonious Society’

author(s) Kristian H. Darigan and James E. Post

available in The Journal of Corporate Citizenship

issue 35
date Autumn 2009
pages 39-53
issn 1470-5001
more details www.greenleaf-publishing.com/jcc35

© 2009 Greenleaf Publishing Limited

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jcc35darigan.qxd 2/12/09 16:29 Page 39

Corporate Citizenship in China

CSR Challenges in the ‘Harmonious Society’*

Kristian H. Darigan
Cone Inc., USA

James E. Post
Boston University, USA

The turbulent state of the global economy threatens the financial stability, economic
well-being and social contract between business, government and society. In China,
where economic and social transformation has been the defining theme of the past
decade, emerging social structures are at risk of succumbing to waves of financial
hardship and change. In this environment, corporate commitments to socially
responsible practices assume heightened importance. By 2008, the confluence of l Business ethics
political changes, business pressure and natural disasters created a new watershed l China
of dialogue, ideas and progressive thinking about corporate social responsibility in l Corporate
citizenship
China. But as the ‘Great Recession’ takes hold, doubts arise as to whether corporate
l Corporate social
citizenship programmes will continue. Based on our field study and related research, responsibility
however, we conclude that a tremendous opportunity now exists for companies to (CSR)
positively contribute to China’s societal welfare and to become an integral part of l Global financial
crisis
that country’s socioeconomic evolution by advancing CSR and citizenship commit-
l Confucian
ments. In this paper, we discuss developments in corporate citizenship and corpo- principles
rate social responsibility in China and address a number of critical questions about l Stakeholder
its role in the current era for practising managers and scholars of Chinese business management
culture. l Transparency

Kristian Darigan is Vice President at Cone Inc., Boston, Massachusetts, which

specialises in cause branding and corporate responsibility. She has
u Cone Inc, 855 Boylston Street,
Boston, MA 02116-2622, USA
contributed to several publications; her work has received many awards and
has featured in three Harvard Business School case studies and in Bill ! kdarigan@coneinc.com
Clinton’s Giving. She holds an MBA degree from Boston University and
regularly blogs at www.doyoustandforsomething.com. She is completing a
book on building non-profit brands with Jocelyn Daw and Carol Cone due to
be released in January 2010.

James E. Post is The John F. Smith Jr Professor in Management at Boston

University where he teaches courses in strategy, corporate social responsibility,
u Boston University School of
Management, 595 Commonwealth
governance and professional ethics. He is the author or editor of more than Ave., Boston, MA 02215, USA
20 books, including Redefining the Corporation: Organizational Wealth and
Stakeholder Management, co-authored with Lee Preston and Sybille Sachs ! jepost@bu.edu
(Stanford University Press, 2002). He is frequently quoted in the international
business press on issues of corporate citizenship and accountability.

* The authors wish to thank Mr Joe Fong, Professor Amin Yan and Dr Jean Wu for their expertise and
assistance.

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kristian h. darigan and james e. post

C orporate social responsibility (csr) and corporate citizenship have

become an integral part of business strategy and practice in China. CSR and cor-
porate citizenship create important social capital that helps communities adjust
to the harsh realities of global change and enables business to interact with gov-
ernment and non-profit organisations for the purpose of assisting people and
building constructive community relationships. CSR provides a conceptual framework,
and corporate citizenship a practical approach, to harmonising business and society
interests in modern China.
Recent events have done much to turn the concepts of corporate social responsibil-
ity into reality through active corporate citizenship in China. Several important mile-
stones marked 2008 as a watershed year for business engagement with government
and society around issues that demonstrate the kind of cooperation that China is seek-
ing to foster between business and society. Four examples stand out: (1) the 2008 Sum-
mer Olympics in Beijing provided massive opportunities for highly visible commercial
and community partnerships; (2) the tragic and devastating earthquake in Sichuan
Province highlighted business participation in the nation’s massive relief efforts; (3) a
major product quality failure involving infant formula and milk products spotlighted
industry failures and the need for regulatory reform; and (4) both business and gov-
ernment demonstrated heightened responsiveness to a series of environmental crises.
All of these developments took place amid continuing economic and social transfor-
mation of one of the world’s most economically dynamic and important nations. As
important as these developments were, however, they were dwarfed by the financial cri-
sis that affected China as it swept through the global economic system by the end of
2008. In this article, we suggest that the global financial crisis will force companies,
expert observers and business scholars to confront four major challenges that will ulti-
mately define corporate citizenship progress in 2009–2010:
1. China must cope with a global economic downturn and the related financial dis-
ruption that is occurring across the global economy. China’s international economic
role is rapidly evolving as a global reordering of power and influence takes place.
Concurrently, China must also contend with the domestic effects of slowing GDP
growth, unemployment and related social consequences
2. The ‘citizen’s voice’ will continue to intensify and take new forms as Chinese soci-
ety evolves into a more politically sophisticated and technologically adept populace.
The availability of communications technology will propel change within a more
politically and socially complex setting
3. The pressures of openness and transparency will continue to press on multinational
corporations, leading to greater transparency and disclosure, while counter-pres-
sures towards secrecy will be exerted on a selective basis by government
4. Traditional obstacles of government regulation, bureaucracy and corruption will
continue to affect the rate of progress and modernisation. As the recent case of con-
taminated baby milk tragically illustrates, ‘old ways’ will continue to conflict with
China’s progress by throwing sand into the economic machine
Corporate citizenship activities produce benefits for a variety of corporate stakeholders.
With approaches that range from strategic philanthropy to ‘shared value’ (Porter and
Kramer 2006), investments in corporate citizenship can drive positive returns for com-
panies in the form of permission to operate, reputation lift, improved employee morale
and increased customer preference, among others. From a governmental perspective,
corporate citizenship activity can also: produce new public awareness of and engage-
ment in social issues; create replicable social and process innovations; and provide finan-

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corporate citizenship in china: csr challenges in the ‘harmonious society’

cial support to non-profit organisations and worthy causes. Given the Chinese govern-
ment’s endorsement of CSR principles as a core element of foreign business practice,
expansion of corporate citizenship practice is a logical follow-on.
Since the 1980s, corporate citizenship has been an integral dimension of foreign busi-
ness activity in China. Following decades of vigorous growth, China is now one of the
world’s largest and most important economies. Recent political changes, business pres-
sures and natural disasters have shaped new dialogue, ideas and progress towards inte-
grating CSR into this growth paradigm. While corporate citizenship as understood in
the United States or Europe may take years to evolve to a comparable level in China, sig-
nificant opportunities now exist for companies to develop a unique and distinct form of
CSR that contributes to societal welfare as part of China’s continuing transformation.
Developing this new paradigm of CSR within China’s high-growth economic model is
the challenge that corporate citizenship professionals now face.
The global financial crisis that began in 2008 promises to affect national economies
well into 2010 (perhaps beyond) and has thrown the global trade regime of the first
decade of the 21st century into considerable doubt. The economies of many nations have
been severely impacted and what is being called the ‘Great Recession’ presents busi-
nesses in China with a number of structural and policy challenges. Rising unemploy-
ment, declining social welfare and heightened political distress are manifestations of
the deep impact of this recession. Whole industries and regions of the nation have been
seriously affected.
No company can stem the tide of dislocation that flows from a global recession, and
corporate citizenship programmes are strained beyond capacity in such circumstances.
Discretionary spending is being curbed, priorities re-examined and belts tightened in
corporate philanthropy, community relations and other aspects of corporate citizenship.
Despite these problems, we believe that there are emergent opportunities for making
corporate citizenship a vital part of China’s development equation during these chal-
lenging times.

Contemporary corporate citizenship

The concept of corporate citizenship, as understood in China, is entwined with related
concepts of CSR, sustainability, stakeholder management and business ethics. These
terms have been used by various organisations and experts in China, as in other nations,
to describe a vision of corporate activity that maximises positive social effects and min-
imises negative externalities of pollution, unemployment and abuse of workers. The
conceptual arguments do not change the fact that many companies have adopted poli-
cies and developed programmes that are intended to achieve some aspect of the larger
CSR vision. While there is no universally accepted definition, corporate citizenship typ-
ically integrates a company’s community commitment with its brand identity by:
t Extending corporate action beyond philanthropy and volunteerism

t Taking responsibility for the impacts that business activities have on the company’s
stakeholders and the environment
t Voluntarily extending socially minded activities beyond that which is required by
legislation
Research from the Center for Corporate Citizenship at Boston College, an organisation
composed of dozens of corporate members, describes four ‘domains of the business’ to
be considered in corporate citizenship management that can be applied in assessing the
maturity of corporate citizenship:

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kristian h. darigan and james e. post

t Corporate mission, values and governance: integration and accountability. Here,

corporate citizenship is embedded in the governance and management structure
of the company. This dimension addresses how a company’s core values, mission,
vision and governance structures support or prevent the company from under-
standing and managing corporate citizenship as an integrated part of business strat-
egy
t Community engagement: addressing social challenges. Mobilising the company’s
assets to address social issues and support social well-being (beyond creating jobs
and paying taxes). This can range from simple philanthropy to participation in
multi-stakeholder social issue partnerships engaging a range of corporate resources
t Operations: responsible business practices. Utilising responsible business prac-
tices to minimise potential negative impacts on society and maximise positive
impacts. This dimension addresses how a company manages and reports to inter-
nal and external stakeholders on a broad range of issues, from health and safety to
sustainable environmental practices to respect for human rights in the supply chain
t Products and services: market strategy. This involves addressing societal needs with
marketplace solutions that return a profit to the company. This can range from adap-
tation of existing products and services to be more eco-efficient or socially benefi-
cial, to a fundamental reinvention of a company’s product line or services (Boston
College Center for Corporate Citizenship 2009).
The practice of corporate citizenship is anchored in the application of stakeholder the-
ory which connects ‘doing well’ with ‘doing good’ (Freeman 1984; Post et al. 2002). In
this context, corporations benefit from corporate citizenship in multiple ways, includ-
ing: permission to open and operate their business activity; improved reputation,
employee recruitment, morale and retention; consumer preference, sales and switch-
ing; and supplier and manufacturing cost savings. From a governmental perspective,
corporate citizenship can drive essential economic, social and/or environmental gains
for both developed and developing nations, producing public awareness of and engage-
ment in social issues; the creation of replicable process and systems innovations; and
expanding the availability of financial support to non-profit organisations.
Some critics still argue that citizenship activities distract from the primary economic
role of businesses and their fiduciary responsibilities (Friedman 1970). They assert that
citizenship is too often merely window-dressing meant to appease critics via an artifi-
cial facade of public service. Finally, they have warned that it can undermine the role of
governments as legitimate regulators of corporations. But these arguments tend to be
weak, or ineffectual, in the context of modern socioeconomic development. More com-
pelling, by far, are the arguments in support of win–win outcomes that can be forged
by progressive companies (Googins et al. 2007).
Proponents of a shared value theory (Porter and Kramer 2006), for example, argue
that positive corporate citizenship constructs are essential to managing economic and
social development. The health of business and society are co-dependent: that is, one
cannot prosper without the success of the other. Advocates of this approach contend that
businesses must focus on social issues that have logical connections to their activities;
where the given support is sustainable and grounded in significant, evidence-based
need. Although the shared value approach does not fully address the merit of citizen-
ship activities done outside of a company’s value chain, nor does it examine the case for
stronger government controls if companies do less than their share as seen by others,
it does provide a basis for understanding the role of multinational corporations (MNCs)
and the societal contexts in which they can contribute as corporate citizens.

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corporate citizenship in china: csr challenges in the ‘harmonious society’

Contemporary corporate citizenship in China

The economic transformation that has taken place in the People’s Republic of China
has also produced an ethical refashioning of ‘citizenship’ based on the state goals of eco-
nomic development (Keane 2001). The Western concept of the citizen as an individual
actor with civil and political rights has been transformed into a Chinese concept of con-
sumerism, at the individual level, and collective responsibility, at the corporate level. It
is not surprising, therefore, that the preferred language of corporate citizenship in China
emphasises use of ‘corporate social responsibility’.
In 2008, ahead of the Summer Olympic Games in Beijing, China’s Ministry of Com-
merce (MOFCOM) developed a set of ‘Guidelines on Corporate Social Responsibility;
Compliance by Foreign Invested Enterprises’. These guidelines set forth a framework
of roles and responsibilities for foreign investors and corporations. Other initiatives
include formation of the China Corporate Citizenship Committee of the China Associ-
ation of Social Workers. The committee organises an annual forum, recognition of ‘best
practice’ through awards, and other CSR activities designed to ‘arouse the awareness of
social responsibility’ among enterprises and to promote sustainable development of
Chinese corporate citizenship through enterprise engagement in CSR activities. Well-
known multinational business members include IBM, Intel, Coca-Cola, Microsoft and
Samsung among others.1
The MOFCOM guidelines are intended to provide a frame of reference to foreign enter-
prises for the purposes (as stated in the document) of fully implementing the ‘scientific
outlook’ on development, building a harmonious society, encouraging responsible busi-
ness conduct among foreign enterprises, reinforcing CSR compliance on the way to sus-
tainable growth, mobilising the exemplary and leadership role of foreign invested
enterprises in the realisation of business growth, social progress, economic prosperity
and environmental protection.
CSR is broken down into three levels. First, companies are obliged to obey laws, reg-
ulations and business ethics standards to meet operational needs. Second, companies
have to actively balance the interests of relevant stakeholders while enhancing compet-
itiveness and pursuing organic and sustainable growth. Third, companies are expected
to undertake voluntary activities that bear less relevance to business growth but are in
the interest of social progress, economic growth and environmental protection. Hence,
there are ‘obligations’, ‘areas of judgment’ and arenas of ‘discretionary and voluntary’
action.
Each of these areas is amplified, in turn, to provide greater specificity in areas such
as bribery, environmental reporting and community activities. In April 2008, 11 indus-
try associations issued CSR guidelines for their respective industries aiming to encour-
age corporations to formulate CSR reports on performance in these areas.
According to Chinese experts, relatively few people care about the fine differences
between the two conceptions of CSR and corporate citizenship. Some prefer the former,
some the latter. What is most important in policy discussions, however, is the clear oblig-
ation that each enterprise has—individually and collectively—to society. The purpose is
refined and made more precise by the guidelines, but it is the underlying obligation of
promoting social harmony that is the central requirement of citizenship.
Corporate citizenship activities reflect a corporate understanding of how the specific
business is expected to behave in a local culture. Corporations face unique pressures in
determining the appropriate mix of corporate citizenship activities in the cultural con-
texts in which they operate from country to country. The challenge of deploying a global

1 See www.chinacsrmap.org (accessed 11 June 2009).

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social strategy that addresses the aforementioned considerations means that corpora-
tions often function as global change agents, bearing the associated risks and costs of
mapping uncharted corporate citizenship waters.
Multinational business enterprises must respect the local customs, traditions and
authority, which can often be at odds with those of the country in which the company
has its headquarters or conducts its major business. And they must balance localisation
with appropriate focus on critical global strategies. To accomplish this, many firms focus
on the general celebration of universal human values and search for mutually benefi-
cial opportunities to tie the core competences of their business to meaningful social ser-
vice that aligns with the developmental goals of the local government, as they do today
in China. With thousands of years of Confucian philosophy and a deeply rooted com-
munitarian mind-set, China’s notion of corporate citizenship—Harmonious Society—
is at once both a well-established and a newborn construct (Idemudia 2008).
The turn of the 21st century has brought significant change to China, which was
stymied by the economic isolation of the Maoist era (1949–76). The 1980s were fuelled
by the opening of commerce to Western business that set off an evolution from a
‘planned’ to a ‘market’ economy. The 1990s were distinguished by the redevelopment
of Shanghai as a modern, global business epicentre and new benchmark to which other
Chinese cities would aspire. It is what Vice Minister Jiyang Fu of China’s Ministry of
Commerce characterised as ‘5,000 years of history living with modern technology’ (Fu
2008). The 2000s, in turn, have ushered in China’s joining of the World Trade Organ-
isation, engagement with the United Nations Global Compact and transformation of
the country and its people. Major contributing factors to this recent evolution include:
t An economic boom driven by an effective central government that has made con-
stitutional amendments to ensure the adoption of a market economy and provided
essential supports to speed growth
t A new reflection on China’s renewed commitment to creating a harmonious soci-
ety through the adoption of increased corporate social responsibility standards, new
forms of cross-sector collaboration and prioritised efforts to close the gap between
the country’s haves and have-nots
t An unprecedented opening of the government, allowing increased communica-
tions and a relative free-flow of information, fuelled by the rampant rise of blog use
among the Chinese
This is being driven by adoption of the following concepts, described to us in these terms
by Jiyang Fu, Vice Minister of China’s Ministry of Commerce:2 putting people before
development; achieving harmony between human beings and nature; fostering a cir-
cular economy; and conserving Chinese culture and society.
Yin–yang, the Taoist concept of bipolarity, suggests that everything has its opposite
and that these opposites are necessary and complementary to each other. In China, we
note that, as new advances are made, there are also regressions. Although many com-
panies and people are adopting new behaviours and beliefs, there are those who will not
change.
During our field research in China, we witnessed this dichotomy at work and became
convinced that corporate citizenship is a ‘blossoming flower’ in China. Many changes
in consumer, corporate, government and non-profit organisation behaviour are taking
place. Multiple indicators, trends and ‘signs of the time’ point to an increase in demand
for improvement in corporate citizenship based on the introduction of Western stan-

2 Vice Minister Jiyang Fu, Ministry of Commerce, Beijing, 11 June 2008, personal welcome to a dele-
gation of foreign visitors including author Darigan.

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corporate citizenship in china: csr challenges in the ‘harmonious society’

dards of excellence. They also point to the country’s potential to evolve the concept of a
harmonious society in ways that can be applied to both economic and social change,
bringing China’s rich history and years of philosophy to bear in teaching other nations
how to ‘live their values’.

Doing business in a harmonious society

China’s history, politics and culture form the foundation for understanding how cor-
porate citizenship has taken root. China is shaped by its historical ties to communism
and its hope for a classless, stateless utopian society where the Marxist credo ‘from each
according to his ability, to each according to his need’ is applied to provide essential eco-
nomic, social and environmental development. Indeed, for many Chinese, being part
of the Communist party, especially in the past 30 years, has symbolised caring for oth-
ers. That is, membership implies a shared willingness to give financially to help close
the gap for those in need and a collective ‘belief that helping people is the right thing to
do’.3 Deep roots in Confucian tradition have also buttressed popular belief in the mer-
its of respecting and caring for the community as part of one’s ‘big family’. Moreover,
Confucius taught that the application of the function of the family should be extended
to include one’s relatives, community and country. In this belief system, duty to one’s
nation-family is morally espoused and an integral component to achieving the greatest
possible good—a harmonious society (Burns et al. 2004).
This mind-set began to extend to corporations and their role in supporting China as
early as the 1980s, when Motorola retained cultural advisers who helped the company
build business relationships using the harmonious society construct. The company’s
history of CSR was an influential factor in its selection to be a pioneer in China’s new
economy. In 2006, in receiving the 2006 China Business Leaders’ Award, Ruey Bin
Kao, President of Motorola (China) Electronics Ltd, made a strong connection between
corporate citizenship and harmonious society, saying ‘Our purpose is to share our CSR
concepts and practices, and to encourage more companies, foreign and local, to join our
efforts. Our purpose is to help build a harmonious society’ (Motorola 2006).
More recently, these concepts have extended further to include support of non-profit
organisations and national causes. With the unprecedented, government-supported
relief efforts following the Sichuan Province earthquake, and renewed global scrutiny
leading up to the Beijing Olympic Games, Chinese consumers are increasingly vocal
about their renewed nationalism, concern for social harmony and expectations of cor-
porations. As a result, there is rising interest in corporate social responsibility and cor-
porate citizenship as critical elements of a harmonious society.
Government priorities have also dovetailed with societal needs and consumer inter-
ests. Manifest in its historical provision of food, shelter and retirement security for state-
owned enterprise (SOE) workers, as well as in a renewed commitment to education and
economic advancement for all, China’s ability to maintain one-party, communist con-
trol is dependent on social well-being. With the end of the Maoist era and advancement
of economic reform, the government offered reassurance that it would allow some indi-
viduals to ‘get rich first and then redistribute the wealth’4 as it opened up its systems to
neoclassical economics (Gunde 2003). Throughout the course of the last 30 years, the

3 This view was expressed by a Beijing University student in an interview conducted by the author on
9 June 2008.
4 This view was confirmed in our interviews of Chinese students in Beijing and other cities in August
2008.

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kristian h. darigan and james e. post

Party has struggled to permit this economic freedom while closing the country’s widen-
ing wealth gap.

Corporate citizenship challenges in China

The political-social environment has a marked effect on corporate citizenship pressures
(Cramer 2006) for any company in any country. Such is the case in China today.
Although recovery from the Sichuan Province earthquake and management of China’s
reputation and image during the Beijing Summer Olympics was top of the list of recent
priorities, China’s long-term critical issues are centred on providing social stability,
reducing corruption and protecting the environment.

Social stability
The gap between the rich and poor continues to grow in China. Intensifying the situa-
tion is the growing aversion of newly prosperous workers to sharing earnings with the
less fortunate, as is the increasing access to information and subsequent power of
choice, protest and revolt of both classes. Correspondingly, creating a balance and main-
taining social harmony is of the highest concern to the government (Le Mons Walker
2006).
The open communication surrounding the Sichuan earthquake was reported to be
instrumental in demonstrating the Party’s inability to provide a safety net for all of soci-
ety as in the past. With this, new hope and expectations are emerging for the role that
corporations and philanthropic individuals can play in building China’s harmonious
society.
One example of meaningful activity towards this end is workforce training. These
programmes are a popular means by which companies collaborate with the Chinese
government to help it achieve stability via improved competitiveness (with advanced
manufacturing hubs around the world) and the creation of higher personal wealth for
greater numbers of citizens. Since 1990, Motorola has worked with government offi-
cials to provide education for senior and mid-level managers from the company’s sup-
pliers, strategic partners, state-owned enterprises and customers through Motorola
University ‘in exchange for business privileges’. Motorola University now prepares an
annual report demonstrating the company’s market and social impact (Borton 2002).

Reducing corruption
Bribery, embezzlement, extortion, favouritism and smuggling are among the illicit prac-
tices that are prevalent in traditional SOEs and local government today (Wederman
2004). This lawlessness also threatens China’s communist rule, both with its people
and on the world stage, because the management of all of these activities is the ultimate
responsibility of the Party. In addition, this corruption creates a significant barrier to
investment as Chinese companies seek to go public. Without transparency and gover-
nance structures that work in concert with government regulation, it is difficult to make
the case for sustainable business enterprise.
Although it is largely a central government issue, the infusion of Western governance
ideas could lend new support to reform efforts. In 2006, for example, 38 foreign phar-
maceutical companies operating in China, including Pfizer, Novartis and Roche, began
coordinating efforts to ban bribery and promote transparency in the market (Shu-Ching

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corporate citizenship in china: csr challenges in the ‘harmonious society’

2006). It seems certain that heightened forms of transparency will be demanded of for-
eign corporations and subcontractors as a result of the current global financial crisis.

Environmental protection
During the economic reforms of the past three decades, a myopic and singular focus on
encouraging business has had dire consequences for China’s environmental health and
sustainability. In the fervent quest for economic growth, local governments have over-
looked the negative ramifications of unrestrained growth. The resulting situation has
been disastrous. China now produces approximately 14% of global CO2 emissions and
a third of China’s waterways are unsuitable for industry, agriculture or drinking water
thanks to the untreated industrial, municipal and agricultural waste that flows directly
into them. This has left more than 300 million rural Chinese without access to potable
water and has resulted in so-called ‘cancer villages’ in Guangdong Province and other
manufacturing hubs where up to 23% of residents have died.
In addition to the severe loss of natural resources and human life, the government
has estimated that it lost US$200 billion in 2005 alone, in dealing with the fallout from
and clean-up of environmental degradation. In response, a Ministry of the Environment
was created to enforce legislation and allow non-profit organisations greater freedom to
report and fight abuses (Turner and Ellis 2008). Punishment for violations, however,
remains inconsistent, as is compliance. Consequently, this is a critical challenge for
which the government is eager to involve business in designing solutions. Samsung has
used its corporate sustainability report (Samsung 2009) to describe steps it has taken
to understand, comply and communicate business operational changes that can posi-
tively address China’s environmental crisis. The new model of behaviour is well illus-
trated by PepsiCo, which recently opened a state-of-the-art ‘green’ beverage manufac-
turing plant in the western city of Chongqing that will use 22% less water and 23% less
energy than other PepsiCo plants in China (Greenbiz.com 2009). CEO Indra Nooyi
describes such initiatives as ‘performance with purpose’ (Nooyi 2009).

Citizen voice and engagement

A new appreciation for what the government can and cannot provide has prompted Chi-
nese consumers to raise their voice and take action that both punishes and rewards com-
panies for their anti- or pro-China activities.
In the aftermath of the Sichuan earthquake, Chinese citizens flooded the Web to crit-
icise China Vanke, one of the country’s largest property developers, for the 2 million
yuan (US$293,000) donation it made to aid in relief efforts. This donation was viewed
as too low in comparison to its corporate earnings. Following what was deemed an inad-
equate apology, stockholders were called on to dump China Vanke stock and stop pur-
chasing homes from the company. Although many factors may have contributed,
bloggers claimed to have influenced the first-time loss of the company’s number one
capitalisation ranking on the Shenzhen exchange and a share valuation collapse from
25 yuan to 19.58 yuan on 3 June 2008. Bolstering this claim, a subsequent survey by a
research centre of the Chinese Academy of Social Sciences found that 70% of respon-
dents would buy shares of listed enterprises that had made generous donations to help
earthquake disaster relief and 65% said they would consider selling shares of ‘miser’
companies (Zhong 2008).
Another example of China’s new citizen voice occurred when actor Sharon Stone
implied that the Sichuan earthquake was a result of the country’s maltreatment of the

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kristian h. darigan and james e. post

Dalai Lama. Once again, angry consumers called for a boycott of Dior, the fashion house
Stone represents and all of Stone’s films. China’s official Xinhua News Agency
denounced Stone as a ‘public enemy of all mankind’ (Coonan 2008).
In contrast, when MSN China encouraged instant messenger users to put a red heart
on their signatures to show support of China and the Olympics, 3 million Chinese chat-
ters immediately adopted the icon. And, when the earthquake hit, MSN responded with
a rainbow icon that, when downloaded, triggered a donation to victims from both MSN
and Toyota (Schwankert 2008). More than 6 million impassioned users have adopted
the icon (MSN Rainbow Action 2008).
Wang Lao Ji iced tea became an overnight sensation when it announced a 100 mil-
lion yuan donation, which was considered to be very generous based on the company’s
size, to support earthquake victims. China’s citizens not only cheered the company, but
some vowed to buy as much of the tea as they could even if they didn’t need it. Con-
versely, others criticised Coca-Cola, which did not widely communicate its charitable
contribution to earthquake relief and, as a result, was viewed as not doing enough (Feng
2008). These examples illustrate the benefit of exceeding expectations on the one hand
and the risk of not meeting public expectations on the other.
This outpouring of nationalistic passion has implications for what consumer-oriented
companies choose to do in the name of corporate citizenship:
t Companies should appropriately tap into ‘China Pride’ and the popular Confucian
notion of harmony in making corporate citizenship decisions
t Companies should communicate citizenship efforts, provided they are substantial
and relevant
t Companies should contribute at levels relative to the size of the company’s con-
sumer base and business operations
t Companies should monitor online discussion threads and become part of the dia-
logue
In addition to voice and activism, Chinese consumers are also becoming more engaged
through volunteerism and philanthropy. Modern notions of volunteer service are built
on the legacy of Lei Feng, a soldier of the People’s Liberation Army and a national hero,
based on his commitment to communism and selfless public service. His legendary
spirit of cheerful contribution to society is commemorated on ‘Learn from Lei Feng Day’
held on 5 March of each year. To honour the memory of Lei Feng, who died in 1962, the
government encourages individuals to offer pro bono services such as free haircuts,
appliance repair and blood pressure screenings to people in need.5 This spirit of vol-
untarism is embodied in the accolade, ‘living Lei Feng’, for anyone seen as selfless or
willing to go out of their way to assist others.
Volunteerism is often a prestigious activity, especially for university students. The Red
Cross Society of China is a popular non-profit organisation with which to serve in assist-
ing victims of disaster. Volunteerism can extend from the distribution of reusable shop-
ping bags at grocery stores to participation in tree planting days. Single day of service
opportunities are promoted by large companies, such as Deloitte, which hosts an annual
China IMPACT Day ‘where all members of the firm have an opportunity to get involved
with service opportunities in local communities where the company is represented’
(Gromely 2008).
While some have claimed that individual philanthropy has played a minor role in the
past (Cramer 2006), our field observations suggest that imaginative forms of individ-

5 Interview with Fenghua Weng, Shanghai Stock Exchange senior economist, 24 June 2008.

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corporate citizenship in china: csr challenges in the ‘harmonious society’

ual giving are on the rise in China. For example, ‘donation parties’ on television (tele-
thons) offering opportunities for individuals to make financial contributions and send
daily text messages of support for earthquake relief and recovery were prominent. Col-
lection containers were in frequent use in hotels, banks, restaurants and other busi-
nesses asking consumers to contribute spare change for a variety of causes, with the
majority focused on the earthquake relief assistance.
Although lower- and middle-class Chinese are likely to reserve special philanthropic
gifts for local catastrophic events, we noted that upper-income Chinese, especially in
Shanghai and Hong Kong, regularly donate to a wide array of causes, generally in the
form of admissions fees to upscale charitable events. We also learned that ‘walk-a-thons’
are growing in popularity as a means of encouraging all classes living in first-line cities
to ‘give back’.
These indicators point to new opportunities for companies to engage with consumers,
including consumer ‘cause promotions’ (donation with purchase or solicitation for
donation) tied to popular causes and communicated via television broadcast, Internet
or point of purchase. There are also new ways to connect employees and other stake-
holders via national days of service, charitable events (such as walk-a-thons) and local
disaster relief.

MNC perspective
Many corporations are working to develop shared-value approaches to assist the gov-
ernment with priority social issues, as well as to build deeper, trusted relationships with
consumers and their employees. In addition to addressing these concerns, multina-
tional corporations face many pressures from abroad regarding supply chain manage-
ment, human rights protection and sustainability standards, among others. As such,
they rely on expert partners such as the Chinese Business Council for Sustainable Devel-
opment (a sub-organisation of the World Council for Sustainable Development), World
Economic Forum, Corporate Responsibility Coalition and the United Nations Develop-
ment Programme to help point them in the right direction to the most likely neutral
common ground. Through these efforts, successful corporate citizenship constructs and
engagement paradigms can be designed that take into consideration all of the business
domains.
It is evident that companies are integrating corporate citizenship in each of their busi-
ness domains with local strategies. HSBC China, for example, has focused attention on
topics such as ethical banking and corporate governance, support for the environment,
education and social development as a means of showcasing its ability to think globally
and act locally. Other companies have comparable lists of priority issues (reflected in
their CSR reports).
Companies are also learning how to respond when crises occur in China. In 2007,
Mattel recalled more than 18 million Barbie toy sets that contained tiny magnets that
could be dislodged and swallowed by young children. Rather than pointing to a negli-
gent subcontractor culture in China, Mattel’s Executive Vice President, Thomas A.
Debrowski, publicly apologised, saying, ‘Mattel takes full responsibility for these recalls
and apologises personally to you, the Chinese people and all of our customers who
received the toys’ (Haley and Haley 2008). By protecting the ‘China brand’, Mattel was
able to stave off potential government retribution for releasing damaging data and
accomplish its goal of convincing the world that it took the supply chain breach seri-
ously.

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kristian h. darigan and james e. post

The massive recall of contaminated infant formula products that took place after the
Beijing Olympics in 2008 provides a point of contrast. As the story unfolded, it became
clear that greedy farmers and ‘milk collectors’ diluted the milk of dairy cows with water
to expand volume, then added melamine to artificially increase the protein levels to meet
quality control tests. The melamine created kidney stones in infants whose digestive
systems could not process the chemical, resulting in illness, hospitalisation and deaths.
The scope of the problem was made worse by the complicity of government officials and
safety inspectors who covered up the problem. Once exposed, the government’s response
was to arrest and punish perpetrators, while promising a more vigilant safety inspec-
tion system.
One clear lesson from the Mattel and dairy milk cases is that where modern business
practice intersects with supply chains involving local subcontractors, MNCs have a spe-
cial responsibility to ensure that the ‘China brand’ is protected. This corporate respon-
sibility is based on the company’s ability to design its commercial systems, oversee and
monitor performance and intercede when failures occur. The well-governed company
will be vigilant and committed to quality products and quality processes.
Corporate citizenship is effecting positive change in the ‘natural’ development pro-
cess in China through a wide range of corporate citizenship activities. Progress in the
areas of economic development, social benefits and environmental protection stand out.
In the area of economic development, for example:
t The provision of new skilled and unskilled employment opportunities is creating
new jobs in China’s emerging service and financial sectors
t Foreign direct investment provides support for the development of China’s infra-
structure and promotion of Shanghai as the financial hub of the Far East
t There is an expanding business presence in local communities with associated tax
contributions
t Knowledge and technology transfer is helping to inspire innovation and entrepre-
neurship as China develops its own MNCs
Social benefits are also promoted. For example:
t New educational goals are being attained through the philanthropic support of non-
profit organisations such as UNICEF who are teaching on the ground and helping
to close the wealth gap
t Job skills training initiatives, put together through strategic partnerships with the
government, improve China’s competitiveness
t The introduction of supply chain management helps to ensure worker safety, fair
wages, equal opportunity and anti-slavery practices
t Improved life expectancy through measures to improve safety, raise individual
wealth and provide access to quality healthcare via clinics at facilities
Environmental objectives have been promoted as well:
t Sustainable production via compliance with mandatory national standards set by
China’s government and world standards set by United Nations agencies and con-
sortia
t Environmental messaging in advertising and on packages to raise awareness and
promote sustainable consumption

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corporate citizenship in china: csr challenges in the ‘harmonious society’

Final thoughts: CSR and corporate citizenship in China

There are many opportunities for businesses to translate official CSR expectations into
creative and socially useful corporate citizenship activities in China. The vision of a ‘har-
monious society’ includes expectations of corporate activity and performance that
extend beyond financial returns. China’s government is actively engaged with business,
regional and local officials and a growing ‘citizen’s voice’ movement to shape a growing
economy and a great society. But these goals are now being challenged by the global
financial crisis, the cascading effects of a worldwide recession and pressures for open-
ness and transparency in a society that is still resistant to modern corporate governance
and institutional accountability.
The financial turbulence that confronts economies across the globe will surely affect
corporate citizenship activities. Global companies that are category leaders or in reces-
sion-proof industries will probably continue to prioritise reputation management and
continue to invest in traditional corporate citizenship activities: for example, strategic
philanthropy, employee volunteerism, gift-matching programmes, socially sensitive
supply chain management (e.g. Wal-Mart announced new global supplier standards in
October 2008 as the recession was taking hold), issue advocacy leadership and con-
sumer cause promotions. Business vitality will slow, however, as world economic growth
declines, making every decision more challenging.
For the many companies that are vulnerable to macro-economic pressures, the first
priority will be reducing costs; this may lead to cutbacks on corporate citizenship activ-
ities and, in turn, the goodwill bank that they have built over time. Activities that help
avoid legal action and enhance a company’s licence to operate will be the logical areas
to try to maintain. As such, worker safety, environmental regulatory compliance and
consumer quality standards monitoring may outweigh other initiatives such as philan-
thropic, fair wage, issue leadership and volunteerism.
Because consumer package goods companies are focused on low-cost, high-volume
sales, China will be positioned to help deliver cost-effective manufacturing solutions.
But China will surely struggle with balancing its ambitious goals to clean up and mod-
ernise with the desire to maintain and create jobs and to compete with nations that offer
less regulation and lower wages.
This global recession is truly unprecedented, which makes it difficult to predict to
what extent consumer interest in corporate citizenship will affect purchasing decisions
along with price, quality and service. We do know that building a strong brand reputa-
tion leads to increased equity and loyalty over time. Because the world is more trans-
parent and online, we think it likely that corporate social responsibility and corporate
citizenship will remain important factors in consumer—and government—decision-
making.
It will take great leadership from China and its partners across the world to meet these
challenges. This is a role that creative corporate citizenship can play. China needs com-
panies whose leaders recognise the challenges, as well as opportunities, in the current
environment and the pivotal role of business in China’s near-term as well as its long-
term success in building the harmonious society.

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Appendix: key points for managers

t Never waste a crisis. Think about the opportunities for positive change that exist in
China during the global economic recession. The risk of economic decline opens
doors to constructive discussions with government officials, NGO leaders and
important community actors. Work to turn a ‘lose–lose’ situation into a ‘win–win’
outcome through imaginative citizenship thinking.
t Prioritise risks. It is not enough to identify the risks of doing business in China.
Managers must set priorities for turning risk into opportunity, hardship into advan-
tage. Citizenship investments in communities, schools and mutual assistance
organisations need not be great in size to be great in impact. Risks, once prioritised,
enable a company to leverage limited resources into meaningful investments.
t Institutionalise CSR. Drive CSR thinking throughout your organisation. Every busi-
ness unit, employee and business partner is a potential ambassador for your com-
pany. Teach them how to become citizen-leaders whose actions communicate a
positive image and enhance the reputation of your organisation and its members.
t Use your moral compass. Navigate the cross-currents of tough business conditions
with your moral compass in full view. Your personal values as an executive and the
values of your company are on full display in China. Integrity and consistency are
closely observed and remain fundamental to your success.

JCC 35 Autumn 2009 53

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