Information flows fast in the digital age. What people read about Chinese companies on the web and social media affects both the company’s reputation and its revenues. As such, it has never been a more important time to become a good corporate citizen in the global marketplace. And for many Chinese companies, integrating social responsibility into their organizational culture is both a means of ensure compliance with Chinese law and a smart investment for the future. With that said, the benefits of being a socially responsible corporation do not accrue automatically. Rather, building a corporate culture that embraces the shifting global marketplace requires making intentional investments in developing and implementing policies across the workplace.
Corporate Social Responsibility in China
Over the past decade, advocates have been promoting policies that encourage companies to be socially responsible. This is just as true in China as it has been in the United States and the rest of the world. But as the standard-bearer for many innovations in international business, China has been advancing these prerogatives in a more formalized fashion.
Although Chinese businesses have engaged in philanthropy within the nation for centuries, China has been making legal strides towards mandating socially-responsible behavior for private companies. As early as the 1990s, Chinese officials began performing so-called “social audits” at Chinese facilities owned by multi-national corporations to ensure compliance with socially responsible principles. These audits were carried out under the purview of China’s 1994 Company Law, which provides for enhanced labor rights and includes a requirement that companies “conform to business ethics.” Policies such as these are meant to further the nation’s broader goal of moving towards a more market-based economy while also improving China’s status in the global economy.
For a Chinese company, being a good corporate citizen means establishing and operating by a company culture that considers the wellbeing of people and the planet in addition to profitability. When Chinese companies adopt socially responsible cultures, they improve the international profile of Chinese-made goods sold in international markets. At the same time, the businesses themselves stand to benefit substantially from investing in socially responsible activities.
The Business Case for Investing in Corporate Culture
Corporate culture is becoming an increasingly important aspect of company reputation, which in turn affects how a business performs in the marketplace. In China, building an organizational culture that meets both legal compliance needs and the interests of corporate citizenship pays out dividends to the corporation itself as well as society at large.
In addition to pursuing profit, ethical companies take on causes that benefit others. This can range from advocating for environmental issues to addressing community concerns. And just so that those of us who lean towards a more fiscally conservative ideology do not just stop reading now, it is important to note that building corporate responsibility into your company’s culture is good for business. In fact, there is a significant positive relationship between a company’s ethical behavior and its financial performance.
Many modern companies are building programs, policies, and ideas that benefit society while also boosting their own brands. In addition to being good for a company’s image, this approach helps forge a stronger bond between employees and corporations, boost morale, and help employees and employers feel connected with the world. In fact, responsible corporate citizenship can help companies attract and retain a more talented workforce. In one study, 67% of employees expressed a desire to work for a socially responsible company. These benefits are part of the reason why there has been such a consorted effort to increase corporate social responsibility among Chinese companies.
The push for more socially responsible corporations in China continues to grow. As it does, it is encouraging investors, consumers, and employees to use their power to help the greater good. But how can companies become good global citizens while also maintaining fiscal responsibility and loyalty to invested fiduciaries?
4 Steps to Improving Corporate Culture
Companies can become better corporate citizens by creating and enforcing socially-responsible policies while also training employees to uphold these same values. Using this approach, companies can ensure that everyone contributes to the company’s rule of rising to higher stages of corporate citizenship.
The improved capacity and credibility that comes along with investments in corporate culture begins with a clear understanding of community needs and continues with taking actions aimed at addressing these needs. However, it does not end there. In fact, there are several stages to developing a strong culture of responsible corporate citizenship:
- Elementary Stage – At this early phase, responsible company activities are basic and undefined, if they even exist at all. Corporate awareness is low, and few (if any) senior management figures are involved in socially responsible activities on the company’s behalf. Rather than spending time or resources to develop greater community involvement, the company is strictly focus on compliance with standard health, safety, and environmental laws.
- Engagement Stage – After moving past the Elementary Stage, responsible companies will develop policies that promote the involvement of employees and managers in activities that go beyond rudimentary compliance to basic laws. In this phase, corporate polices become more comprehensive and engagement increases both within the company and between external stakeholders. This often requires increased meetings, consultations, workshops, participation in forums, and other outlets that promote innovative corporate citizenship polices. At the end of this stage, the company will have developed basic polices that are designed to reach slightly beyond legislative demands and task managers with enforcing these new initiatives.
- Integrated Stage – After improvements to corporate culture are identified an initiated through new policies and leadership delegations, socially-responsible activities are formalized in a manner that allows them to blend in with a company’s existing operations. At this stage, a new culture is integrated into the company that encourages beneficial activities in a manner that is drawn into the lines of the business’s existing culture. Performance is monitored during this stage and strategies are refined accordingly.
- Transformational Stage – By this point in the process, companies have grown to understand how corporate citizenship plays a strategic role in their profit-generating operations. They leverage the socially responsible work they do to fuel sales growth, attract investors, and expand into new markets. Economic and social involvement has become a regular part of the company’s daily operations and is ingrained in its culture.
By following this four-step process, good corporate citizens can adopt ethical and social responsibility in every part of their business. Once established, they can leverage these activities to fuel sales growth, expand new markets, drive revenue. And failing to embrace social responsibility in an age where the quality of your business is increasingly reflected by the degree to which your organization understands its role as a corporate citizen can threaten long-term survival. Indeed, in the age of increasing concern over public health and safety, discrimination, and human rights, corporate citizenship is growing increasingly critical for profit. Attempting to skirt these issues raises the risk of being boycotted, rejected by local or global customer bases, and blacklisted by reputation-conscious investors.
Training to Build a Stronger Foundation
While each Chinese company plays just a small part in the nation’s massive domestic and international marketplace, building a culture of corporate responsibility requires taking a proactive approach to positively impacting local and global communities. This is part of the reason why encouraging leadership seminars, workplace education initiatives, and professional audits of workplace activities is key to building a robust workplace culture and ensuring compliance with applicable laws.
Training and development for employees is one effective way of building a robust and healthy corporate culture, an investment that only grows in value over time. Leadership training will help ensure that the supervisors and managers within your organization have the tools they need to be effective in a new workplace culture and support up-and-coming talent to become effective leaders themselves. To ensure that it is ingrained into operations at every level, training and education should cater to company needs, employee interests, and meet baseline requirements for legal compliance.
The workplace training that goes hand-in-hand with becoming a global citizen is an on-going activity far beyond the scope of a single seminar. Still, corporate citizenship initiatives do not require a re-invention of the wheel. Companies can develop and design programs to help improve the well-being of their own workforce, strive to reduce their carbon footprint, or encourage volunteerism to build its reputation as a socially responsible global citizen. No matter how simple or complex the chosen activity may be, dedication to corporate citizenship begins within the culture and structure of a company. Our firm specializes in helping companies do business in China the right way, which includes a focus on good corporate citizenship. If your company could benefit from the reputational and financial benefits of building a corporate culture that includes greater social responsibility, contact us today.
Peter C. Pang* is a Managing Partner of Aliant’s Shanghai member firm, IPO PANG XINGPU LAW FIRM. His expertise includes corporate law and formation, franchising – inbound and outbound, mergers and acquisitions, real estate acquisitions, private placement, technology transfer, joint venture formation and business alliances, and trade secrets and intellectual property protection. This blog was originally posted on IPO PANG’s website
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