The CSR Research Center of the China Academy of Social Sciences released the second benchmarking research report, which compares the CSR performance of Chinese state-owned enterprises (SOEs) with 100 small and medium enterprises (SMEs) and 100 multinational corporations (MNCs) operating in China. Three takeaways from the report are for MNCs are to:
- Increase country-specific disclosures. The findings show that SOEs outperform the SMEs and MNCs by 28.9 to 13.9 and 8.1, respectively. If these surprising numbers are right, then why do local companies rank higher than MNCs? It appears that MNCs in China are simply not making sufficient disclosures including compliance against international and local standards, such as the discharge of chemicals or heavy metals during the production process, labor protection, and environmental health and safety. In addition, most MNCs only issue one global report, with limited country-specific data. A way to address this is to develop a China-specific CSR report and to leverage the opportunity of reporting to engage local communities and to build a shared vision for sustainability.
- Build the capacity of Chinese companies. China is growing fast, and it can be difficult for international and local companies to find qualified suppliers that can comply with their organizational or industry-imposed codes of conduct. MNCs cannot expect compliance from their suppliers without providing the tools, skills, and capacity building to enable them to meet these requirements. MNCs can work with their suppliers to provide coaching and share best practice with their Chinese suppliers in targeted ways which drive operational excellence. MNCs can also make a larger impact by sharing these efforts, demonstrating to industry peers how they are strengthening their supply chains to ensure long-term sustainability in China.
- Push your suppliers to disclose environmental data. With China’s rapid economic growth, environmental pollution is a huge challenge. With the majority of the pollution coming from industry, there is a call for greater environmental transparency, including disclosure on how second-tier or third-tier suppliers are managed and whether they comply with company or industry standards. What are the solutions if they cannot meet the standards? Ma Jun, director of the Institute of Public and Environmental Affairs—the organization that produces the China Water Pollution Map website—formed the Green Choice Alliance with a group of local NGOs. They benchmark MNCs operating in China and are creating the momentum and pressure to penetrate deep into MNCs’ supply chains and to hold them responsible and accountable for their environmental impact. Increasingly, Chinese stakeholders expect MNCs to take the lead to make companies accountable for their environmental practices.
So for MNCs operating across borders, capacity building within supply chains and increasing country-specific disclosures are ways to grow together with China—and to be viewed as a reliable partner from the inside.