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China changes everything

The view that China poses particularly difficult challenges for corporate citizenship is widespread in both the academic and practitioner communities engaged in these issues. Concerns are expressed on both social and environmental issues. A report by the US-based NGO Worldwatch Institute reported that China's spectacular economic boom is inflicting a terrible toll on the environment.71 China is in the middle of the largest rural migration in human history, with millions of its people leaving for the cities. About 240 million Chinese people are now in the consumer class, buying the type of goods and services that most people in Western nations purchase. While that number is the same as in the United States, it represents only 19 percent of the total Chinese population, and so growing demand is likely. The World Bank reported that China's economy was growing 8.3% in 2005.72

With factories multiplying and car ownership surging, the cities' air quality has plummeted. Sixteen of the 20 most polluted cities in the world are in China. The number of Chinese workers suffering from pneumoconiosis, which causes lung damage due to the inhalation of toxic materials and dust, was over half a million in 2001, of whom 140,000 have died.73 Meanwhile scores of rivers have dried up in northern China over the past 20 years, with more than 75 percent of river waters are not suitable for drinking or fishing. The damage to the environment is not restricted to China’s borders, with the Worldwatch Institute highlight the county’s growing ecological footprint around the world. "China is becoming the sucking force, taking raw materials from across the planet, because it alone doesn't have the resources it needs to sustain its growth," said Lisa Mastny, the director of the research project. China’s increasing consumption has been cited as one of the factors driving up global prices on a range of products, from oil to wheat. In April the figures on Chinese steel production told of a 25% increase in one year, depleting iron ore stocks so fast that there could soon be shortages.74 Aside from the ecological impact of resource extraction, China is now the second largest emitter of carbon dioxide after the United States, adding to the difficult challenge of addressing climate change. Raising the alarm about China does not reduce the need for rich Northern countries to act. As much of China’s resource consumption and pollution is driven by its export industries, its ecological footprint is heavier due to carrying the West on its back. Nevertheless, the ecological implications of a resource ravenous China make initiatives in the North something of a side-show in the unfolding planetary sustainable development drama. Consequently those global corporations and financial institutions that are seeking to address systemic challenges to future value, such as climate change, need to assess how they are influencing the way Chinese firms fill their appetite for resources.

Aside from environmental issues, China also continues to pose challenges for companies on a range of social issues. Given its totalitarian political system, truly independent trade unions and NGOs are hard to find in mainland China. This social landscape has limited the ability of workers and communities to articulate their views effectively if they differ from those of business executives and Party officials. Chinese labour law does not incorporate international standards on freedom of association, for example, which is part of most voluntary labour standards.

Voluntary efforts by foreign companies to ensure that Chinese suppliers meet basic labour standards have been hampered by this problematic legal and social context. In April more evidence of Chinese factories faking records and coaching workers in how to answer auditor questions came to light.75 Eight out of nine Chinese toy suppliers investigated in a report by Fair Trade Center and SwedWatch were in breach of both national legislation and international conventions on workers’ rights. They argued that seven these suppliers had systematically been cheating during social audits. The International Council of Toy Industries is now working on a global initiative to tackle these problems, but according to the new report, this initiative is not addressing the underlying causes.76  For five years it has been known that to be effective, social auditing requires active participation and ownership of standard setting, monitoring, verification and corrective action implementation by independent representatives of the workers themselves.77  Without change in the social and legal context in China it will be difficult for companies to responsibly source from China.

In 2005 there was evidence of growing domestic concern about the social and environmental challenges arising from Chinese industrialisation. The human face of ecological recklessness appeared in April when thousands of villagers rioted in eastern China after two of about 200 elderly women protesting against factory pollution died during efforts to disperse them.78 Historically, the vocal NGOs have mainly been based in Hong Kong. For example, in April the Justice and Peace Commission of the Hong Kong Catholic Diocese urged people to write to the Chinese Premier Wen Jiabao over conditions in coal mines.79 In mainland China NGOs are beginning to articulate the views of people who are being affected by current developments. In April a new NGO was formed to rally all Chinese people against worsening pollution. The All China Environment Federation, which includes government officials, other environmental and social organizations, enterprises and ecologists, claims it will serve as a bridge linking the public and the government and to rally society to fight China's worsening pollution.80

Meanwhile, the Shenzhen-based Institute of Contemporary Observation, China’s most visible labour rights organisation, won a sustainability award from Shell China and the Beijing Economic Observer. Dr Liu KaimingICO’s Director Dr Liu Kaiming believes that ICO’s success in 2005 is a signal that labour issues are perceived as more important than before. The major factors leading to the award were ICO’s training, education and activities for workers. In the short term, ICO plans more training on infectious diseases, such as AIDS, and will be working with young migrant workers (15 to 18 years old) who travel to Guangdong looking for work.81

A critical media has been recognised as key to creating incentives for greater voluntary corporate responsibility. Therefore government restrictions on reporting in China poses some difficulties for effective information exchange and dialogue about corporate practices. Western-based companies like News International and Yahoo! have been criticised for agreeing to restrictive media regulations in order to access the Chinese market. Even within this context, questions of corporate responsibility have begun to appear in Chinese media. In April the New Beijing News published an article arguing that China’s rich lack social responsibility. It said the rich seek status purely in terms of financial wealth rather than on any social or moral grounds.82 Meanwhile some media commentators have begun to suggest that greater corporate responsibility is an opportunity for business.83 Highlight the success that can be had, China Enterprise News ran a story on the China People’s Electric Appliance Group, which over the past few years has received more than 100 awards from local, provincial and central governments for its corporate responsibility.84

71. China's Boom Is Bust for Global Environment, Study Warns, Stefan Lovgren for National Geographic News, May 16, 2005, http://news.nationalgeographic.com/news/2005/05/0516_050516_chinaeco.html

76. Easy to Manage – a Report on the Chinese Toy Workers and the Responsibility of the Corporations. http://www.fairtradecenter.se

77. TPWA report

81. ICO wins sustainability award, Brian Ho, in CSR Asia, Vol.1 Week 14, http://www.csr-asia.com/

82. 17th April, reported by csr-asia.com

83. Corporate social responsibility in China, Xinhau, 13 May 2005, Accessed at: http://news.xinhuanet.com/english/2005-05/13/content_2952742.htm

84. 18 April

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contents Greenleaf Publishing, apart from the Introduction jem bendell, 2006. site by waywardmedia.com