CSR Research Paper Series No 1
By Elaine Sio-ieng Hui
Abstract: Corporate social responsibility (CSR) gained prominence in the 1990s as a tool of transnational corporations (TNCs) in mediating labour relations in supplying countries interlinked in their global production chains. This article reviews the implementation of CSR from the perspective of grass-root workers in China, one of the largest supplying countries in the south. The major argument of this paper is that CSR in China has always failed to protect workers’ substantial rights, despite the minor improvement of working conditions it has brought about, because many TNCs have taken advantage of CSR to deflect attention away from their exploitative policies. As a result, CSR has become largely counterproductive. And it continues to fail to address workers’ pressing concerns, including demands for decent wages and genuine trade union representation in a new socio-economic and legal context. Recently, labour activism has grown rapidly in China. Workers are fighting themselves for a better workplace, and their efforts have led to some positive results. This shows that CSR should no longer be on the top of the labour agenda and trade unionists, labour activists and scholars should devote more attention to how to support workers activism on the ground, and how to strengthen workers’ rights to freedom of association and collective bargaining, which are the crucial foundations for the effective protection of their interests.
Driven mainly by the concerns of western consumers over corporations’ business ethics in the areas of environment, human rights and labour rights, corporate social responsibility (CSR) has been gaining prominence since the 1990s as a tool of transnational corporations (TNCs) in mediating labour relations in supplying countries interlocked in the global production chain (Yu 2008; Pun 2005; Chan and Siu 2010). CSR is defined by the European Commission as “a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis” (European Commission 2001). Numerous debates and studies have focused on the subject. However, as has been rightly pointed out, these are often dominated by the northern perspectives and the business interests that stress profit making, and win-win situations (Prieto-Carron et al. 2006: 986).
This article aims to review the implementation of CSR from the perspective of grass-roots workers in China, one of the largest supplying countries in the south. It discusses questions such as what do workers, the supposed beneficiaries of CSR, think about this type of soft and non-binding regulation? Is it able to address the most urgent concerns of workers in the changing socio-economic context in China? If not, what alternatives are available to them? The major argument of this paper is that CSR in China has always failed to protect workers’ substantial rights, despite the minor improvement of working conditions it has brought about, because many TNCs have taken advantage of CSR to deflect attention away from the continuation of their exploitative policies.
As a result, CSR has become largely counterproductive and continues to fail to address workers’ pressing concerns, including the demand for decent wages and genuine trade union representation in a new socio-economic and legal context. Recently, labour activism has grown rapidly in China: Workers are themselves fighting for a better workplace and their efforts have led to some positive results. This shows that CSR should no longer be at the top of the labour agenda, and trade unionists, labour activists and scholars should devote more attention to how to support workers’ activism on the ground, and how to strengthen workers’ rights to freedom of association and collective bargaining, which are the crucial foundations for the effective protection of their interests.
In what follows, I first outline the general picture of CSR enforcement in China. Second, I briefly review the current studies on CSR in China to evaluate the scholarly assessment of the effectiveness of CSR in protecting workers’ rights. Third, I examine with an illustration of a Japanese-owned factory producing electronic products in Shenzhen how CSR has continued to fail to meet the urgent concerns of workers. Fourth, I discuss alternative means to advance workers’ rights in China, if CSR is not something that trade unionists and labour activists should put their hopes in.
II. CSR in China
Chahoud has divided the development of CSR in China into four phases (See Chauhoud 2011: 160). The start-up phase was from 1992 to 1995 when CSR was not so widely used and CSR agreements were concluded only between individual western brands and their Chinese suppliers. The period from 1996 to 2000 was the second phase in which social audits became a more commonplace practice to ensure that human rights and labour rights in supplying factories were not violated. The third phase was from 2001 to 2004, and was characterized by the expansion and development of CSR in China. CSR became a widely adopted approach by western corporations as well as international institutions in China, such as the UN, OECD, ILO and the World Bank. The fourth phase is from 2004 to the present wherein the role and attitude of the Chinese government has shifted from a passive observer to an active proponent of the system. As a matter of fact, up until 2005, the Chinese government considered CSR to be a form of indirect protectionism by the West. The reasons for such a change of attitude, from sceptic to promoter, are two fold (See Chauhoud 2011, Weikert 2011). Firstly, CSR as a concept has been co-opted to serve the government’s agenda of promoting the ideology of the “harmonious society”. Secondly, CSR is a strategy pursued by transnational Chinese corporations to attain the goal of “going out, going global” (Chauhoud 2011: 172).
Currently there are four sources of laws, regulations and guidelines on CSR activities in China (see Chauhoud 2011). These are the Company law, enacted in 2006, the Labour Contract Law in 2008, the Instructions for CSR in State-Owned Enterprises issued in 2008 by the State-owned Assets Supervision and Administration Commission of the State Council, and the Guidelines for CSR compliance for Foreign-Invested Enterprises issued in 2008 by the Chinese Academy of International Trade and Economic Cooperation. Apart from domestic CSR initiatives, Chinais also involved in some international initiatives, such as the OECD guidelines, the ILO labour standards and the UN Global Compact. Despite the seeming progress made in terms of CSR regulations, Chauhoud suggests that they are “largely declaratory and their real impact remains unclear” (2011: 173)
III. Does CSR work in China?
A number of scholars have already conducted detailed assessments on some of the more well-known CSR projects in China. The one initiated by Reebok has been given much social and academic attention and has been well analyzed. Yu (2008) concludes that although Reebok’s CSR project has helped reduce serious labour abuses, it leads to a “race to ethical and legal minimum” labour standards (Yu 2008: 525), because while workers were being paid the legal minimum wage, they were driven by management to work faster and harder; this can in no way meet their demand for decent wages. In addition, even though a trade union had been set up in Reebok’s suppliers under the CSR project, it was a union highly influenced by the management, instead of an autonomous union that genuinely represents the workers’ interests. Yu succinctly concludes that CSR can “provide no solution to problems of low wages, long working hours and workers’ rights to freedom of association and collective bargaining” (Yu 2008: 514).
Nike has been another TNC that has actively promoted CSR in China since the 1990s. Despite the fact that media reports of blatant violation of workers’ rights in its supplying factories have been far less frequent than in years past, Nike’s recent CSR report admits that many of its suppliers in China are still not acting in line with Nike’s code of conduct (Chan and Siu 2010). Wal-mart’s CSR project has also been criticized as inadequate to lead to higher real wages for Chinese workers (Chan and Siu 2010). Pun (2005) also argues that although the CSR projects in the two factories she studied had brought about some improvements in labour conditions; they did not have any impact on the protection of substantial labour rights, such as workers’ organizations and representations, and the workers’ complaint mechanism.
Other current studies on CSR in Chinahave also underscored the weaknesses of the CSR approach. They include, first, lax enforcement at the level of suppliers, who often attempt to circumvent the voluntary regulations by paying bribes, cheating, or coaching workers to lie to monitors (Prieto-Carron et al. 2006: 982; also see Yu 2008). Second, workers are not well-informed of the codes of conduct and have limited participation, if any, in the CSR projects; and it is hardly surprising that they have no significant influence over the CSR agenda (Yu, 2009; Chan and Siu 2010). Third, scholars suggest that CSR is a “public relation ploys” by TNCs (Pun 2005; also see Asia Monitor Resource Centre 2010), rather than a tool to protect workers’ rights, since it is mainly driven by market-pressures and thus can be described as a market behaviour to secure a stronger position in the global production chain (see Chan and Siu 2010).
To summarize, although current studies do not completely dismiss the positive impacts of CSR on improving working conditions in factories, they sharply highlight its ineffectiveness in promoting workers’ core rights, such as the rights to collective bargaining, wage negotiation and proper trade union representations.
IV. Labour activism sweeps aside CSR
Shaped by the recent socio-economic and legal developments, labour relations in China have undergone a significant change, which in turn has further crippled the already quite inefficacious CSR initiative in China. In the past 12 months, there has been a wave of strikes in many industries (such as automobile, electronic, taxi and truck, and other service industries) all over the country, sparked off by the Honda strike in May 2010 which lasted for 17 days and involved more than 1,800 workers demanding a wage increase well above the legal minimum wage as well as democratic trade union reform (see Hui 2011, Hui and Chan 2011).
The increasingly intense labour activism on the one hand, has been attributed to the escalating income gap in the country as reflected by its Gini coefficient which reached the level of 0.47 in20102. This has boosted workers’ discontent with social inequality and thus their readiness to safeguard their own interests (Hui 2011). On the other, the mounting labour unrest has been fuelled by the recurring and persistent phenomenon of labour shortage in the country. According to the newspaper report, altogether two million workers were needed in the Pearl River Delta in early 2010 and some factories were compelled to halt production because of a shortage of labour (Chengdu Commercial Daily 2010). This has strengthened workers’ bargaining power in the marketplace, and boosted their confidence in demanding higher wages and better working conditions (Chan 2010).
Analyzing this new social context, scholars have pointed out that while employers’ observance of the legal minimum wage was the major demand of workers in the past, this is no longer sufficient and wage increases above the legal minimum wage level have become a more predominant request. Also demands for greater representation of Chinese trade unions on the shop floor, a thing seldom demanded by workers in the past, has lately become more strongly and clearly articulated in workers’ strikes (See Chan forthcoming).
It is against this changing socio-economic context that this paper aims to re-evaluate the effectiveness of CSR in addressing the urgent demands of workers with a detailed review of the labour issues at the Brother Industries (Shenzhen) Ltd. (Brother SZ) located in the Longgang district in Shenzhen. Women far outnumber men at Brother SZ, with 87 percent of employees female and 13 percent are male. Brother SZ is under the Brother Group which is a Japanese headquartered multinational firm with a global operation producing and selling sewing machines, printers, fax machines and other electronic products. Brother Sales Ltd. was first set up in Japan in 1941 as a sales company and in 1954 the Brother International Corporation (Japan) was established to expand sales overseas. Since then, the Brother Group has also set up manufacturing and sales facilities and as of 2011, had 16 manufacturing factories and 52 sales companies in 44 countries and regions all over the world. The Brother Group has a total of 29, 873 employees, of which 65.1 percent are employed in Asiaand regions other than the U.S, Europe and Japan. In 2010, its’ consolidated net sales were 502.8 billion yen (US$5.028 billion).
The reasons for selecting the Brother SZ as a case study in this article are twofold. First, most, if not all, scholarly examination of the effectiveness of CSR in China focus on the suppliers of multinational corporations, headquartered in the U.S.or Europe, while Japanese firms, which also have substantial investment in China, have been largely neglected. Thus, it is worth evaluating the implementation of CSR in the type of investment that has been under explored. Second, workers have repeatedly gone on strike at Brother SZ, which makes it a suitable case to examine how and why CSR fails to resolve labour conflicts related to wage increases and wage bargaining.
The Brother Group claims to promote CSR and in 1999 developed its own “Brother Group Global Charter” that guides its worldwide corporate activities with different stakeholders, including customers, business partners, employees, the environment, local communities and shareholders. In its 2010 CSR report the Brother Group states that “We have created…a handy size version of the Global Charter Booklets’ which all employees carry while at work”. However, I found from my interviews with Brother SZ workers that they have not received such booklets. And they have not heard about the terms “Global Charter” and “Corporate Social Responsibility”. Neither do they have any knowledge of the CSR structures in the company. This suggests that workers have not been properly informed of the Global Charter and other CSR related operations in the factory. It appears to be a top-down manipulation without any solid foundation at the bottom.
Furthermore, the Global Charter is a guide lacking substance. It is only 592 words long and divided into two parts, Basic Policies and Codes of Practice. Much emphasis has been given to the Brother Group’s management and growth, as well as its relations with business partners, shareholders, customers, local community and the environment. But it only contains a short paragraph that is relevant to its workers, which is as follows:
The Brother Group respects diversity, and provides a working environment that enables our associates to utilize their talents and abilities to the fullest. The Brother Group gives them great opportunity through challenging work assignments, and provides them with fair, attractive financial rewards. In return, our associates are expected to be positive members of society, share the Company's values, continually learn and improve, maximize their capabilities, strive to achieve their goals, and ultimately, contribute to our success (the author’s own emphasis).
Although charters like these often serve only a window addressing purpose, corporate codes of conduct in most TNCs’ CSR projects are based on the core conventions of the International Labour Organization (ILO) and they usually provide terms and conditions on the freedom of association, the right to collective bargaining, and other fundamental principles relating to wages and working hours (Yu 2008). However, as can be seen, the Brother Group’s Global Charter does not give even superficial treatment of the core labour rights.It is therefore not surprising to hear from Brother SZ workers that they have never received any training on these core labour rights, the Chinese Labour Law or Trade Union Law.
Instead of protecting workers, the Brother Group’s CSR initiative is more like a tool to discipline its employees and ensure that they work harder for the company’s interests. First, the Group’s CSR target relating to workers in China in 2009 was to “strengthen human resources development for locally hired employees” while “helped [ing] employees achieve self-development through practical training on internal control” is strangely considered as its corresponding achievement; and in 2010, one of its targets was to encourage employees to participate in voluntary activities. It is clear that none of these CSR targets have anything to do with workers’ rights as they are commonly understood. Instead they are all about strategies of human resources management.
Second, most of the so called CSR activities related to employees as stated in the Group’s CSR report are highly irrelevant to factory workers in Brother SZ or other manufacturing facilities. While decent wages are a key concern of Chinese workers nowadays, the Brother Group sees its major CSR activities as the introduction of a target management rating system to evaluate employees’ motivation and results, “encouraging” employees to participate in volunteer work, and conducting international trainee programs as. Another important point to be noted is that although the Group has set up an “Employee Hotline for Compliance Issues”, most workers in Brother SZ are not aware of it, and naturally have never used it to voice grievances or non-compliance of rights’ issues.
Despite this emphasis by the directors and management of the Brother Group on CSR, no information on expenditure on CSR activities has been given in its CSR report or any company financial report. Therefore, there is no way for the public to verify how much concrete effort and resources have been invested in its CSR activities. Given the poor implementation of CSR activities in Brother SZ as suggested by its workers, it is a fair conclusion that its CSR projects are largely declaratory, if not a fraudulent use of the term CSR.
The failure of the CSR rhetoric in Brother SZ to address workers’ major concern, coupling with the absence of an effective bargaining mechanism and enterprise trade union, explains why Brother SZ workers have to advance their interests by taking collective industrial action. Three strikes took place in Brother SZ last year against the social backdrop of a serious labour shortage and a country-wide wave of labour resistance triggered by the Honda workers’ strike. Workers staged the first strike in March 2010, protesting against excessive daily overtime work. After the strike the factory reduced overtime work from four hours a day to two hours. The cause of the second strike in April 2010 was the difficulty and heavy intensity in machine operations. After this strike more workers were arranged to perform machine operation duties.
The third strike, the biggest of the three, broke out in September 2010. Workers were angry with the management’s decision to reduce the time for each production process from 44 seconds to 39 seconds, a move aimed at boosting labour productivity. Also they were dissatisfied with their low wages which were RMB 1200 at the time and the stagnant welfare benefits provided by the factory. One of the workers said:
“Our workload has increased tremendously and the production time for each process has been reduced. However, our basic salaries have not gone up with the increased work intensity. Now one worker has to perform duties of two and we are all under huge pressure.”
The strikers put forward three clear demands to the management: 1) increase basic salaries; 2) increase living and housing subsidies; and 3) restore the production time back to 44 seconds. As shown previously, the company’s current CSR program in the factory barely dealt with any of these types of issues, therefore workers had to stand up for their own interests.
At first the management insisted on decreasing the time for each production process to 39 seconds and even threatened to further reduce it to 33 seconds. This infuriated the workers who then blocked the entrance to the factory and tried to stop the car of the Japanese CEO from leaving the factory. Later with the intervention of the local labour bureau, representatives from the factory and the striking workers reached an agreement to raise the workers’ basic salaries to RMB 1300 a month (an 8.3 percent increase), restore the production time to 44 seconds, and increase the housing and living allowances.
The three strikes launched by Brother SZ workers are strong signs that labour relations in the factory are highly volatile. This suggests that its CSR project has malfunctioned and can barely meet the main concerns of workers, particularly regarding decent wages and benefits, working time, and work intensity. Quite ironically, in some cases, the policies in the factory contradict the stated aims of its CSR program. Take occupational health and safety as an example. On the surface the Brother Group has put huge emphasis on the issue and starting in 2007 launched a three-year project to raise the standards of workplace safety and health in its factories around the world. However, the attempt at Brother SZ to reduce the time for each production process to 39 seconds in fact could endanger the workers. This is because the workers would have to perform certain tasks within shorter times in ways that the work intensity and repetition of body movement increase significantly. A worker noted that 44 seconds for each production process is already too demanding, and it is impossible to handle the task if it is to be reduced to 39 seconds. She said:
“When we are on duty on the production line, we have to work quickly and continuously. If we go to washroom “too many times”, we will be scolded by our supervisors. And if we work a bit “slowly”, the supervisors will warn us. So, if the production time is to be reduced to 39 seconds, we will really feel the stress. At the end of work, I am always in pain, particularly my legs, because we have to stand all the time along the production line. Sometimes my legs even get swollen.”
Had Brother SZ ever paid the slightest attention to workers’ health and work safety, it would not have decided to reduce the time for production. It is evident that its CSR effort is mainly window addressing and a public relations ploy. There is no substantial, not even superficial, protection for workers’ rights and its factory policies often contradict the rhetoric in its CSR guidelines.
V. What is the next step for the labour movement in China?
As reflected in the demands put forward in the three strikes, the principal concern of Brother SZ workers are decent wages and benefits, reasonable working hours and a manageable workload. However, there is no way that the CSR system implemented in the factory can adequately address these issues, thus workers have to resort to collective action to press for change. The Brother SZ case does not only affirm previous studies that CSR only serves a window addressing purposes, it also clearly demonstrates that, even if it had only limited positive impact on improving working conditions in the past, it now fails completely to respond to the changing labour relations in China as workers become more vocal and ready to take direct action to demand higher wages and, in some cases, democratic trade union reform. The urgent question for all trade unionists’ and labour activists’ consideration is: if CSR is not something we should look upon as a means to safeguard Chinese workers’ interest, what should be the next steps for the labour movement in China?
Discussing how to promote Chinese workers’ genuine interests, Compa (2008) has drawn our attention from CSR itself to the self organizing of workers in the platform of democratic trade unions and their rights to collective bargaining.
“CSR can only create a stable foundation for workers’ rights with two other legs: 1) strong laws strongly enforced by government authorities, and 2) strong, democratic trade unions where workers can improve conditions through self organization and collective bargaining” (Compa 2008: 6, the author’s own emphasis).
His critical analysis has shed inspiring insight on the direction of the labour movement in China, especially when waves of workers’ strikes in 2010 compelled the Chinese government and the All China Federation of Trade Unions (ACFTU) to hasten the democratic trade union reform and the implementation of workplace collective bargaining (See Hui 2011). For instance, trade union reform, however limited, was reported to have been initiated in the Honda factory wherein a 17-day of strike broke out (Nanfang Doushi Bao, 4-07-11). Also, wage bargaining between the trade union and employer’s representatives in Honda and in the Wuhan catering industry have taken place (Guanzhou daily 3-05-11). Moreover, 13 provinces have already issued documents in the name of the Chinese Communist Party committee or local government, promoting collective wage consultation (China News Net, 9-06-10), despite the suspension of the Regulations on the Democratic Management of Enterprises in the Guangdong Province and the Shenzhen Collective Consultation Ordinance due to capital’s opposition (Wenwei Po 2010-09-18).
By quoting these examples, it is not the author’s intention to suggest that the current trade union reform and the implementation of collective bargaining in China are satisfactory. On the contrary, I want to contend that the major arena for class struggle between labour and capital is no longer focused on minor improvements in working conditions or the mere observance of minimum wage, on which most CSR attempts in China are focusing. It is rather critical class struggle which is now taking place around the issues of wage bargaining and trade union reform. As elaborated, due to changes in the labour market and other socio-political developments, workers’ demands for decent wages beyond the minimum wage level and in some cases for democratic trade union reform have become more clearly articulated and workers are now actively pursuing these demands with well coordinated and better organized collective actions.
CSR, as some previous studies suggest, might have contributed to the slight improvement in abhorrent working conditions in China, including non-compliance of minimum wage laws and hazardous working environment in factories. However, it has not been an adequate response to the pressing concerns of workers. Working class resistance in China should be directed to workers’ rights to collective bargaining and democratic self-organization. Given the failure of CSR and growing labour activism in China, it is time for local and international trade unionists and labour activists to re-strategize their support to Chinese workers. It is now of vital significance to find ways to directly support workers struggles as well as to build up a more effective solidarity activism (Asia Monitor Resource Centre 2006). The old CSR is no longer the way to go.
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Elaine Sio-ieng Hui is a PhD student in the Kassel Universityin Germany and a research assistant in the department of Applied Social Studies in the City University of Hong Kong, and research fellow at Worker Empowerment, Hong Kong.
CSR Research Paper Seriesis a collaborative work carried out by AMRC and the labour researchers in Asia. The series is to provide information about the impacts of CSR on workers and labour unions. This action-research is also to provide an analysis to build international solidarity among the working people. For further information about the work, please visit http://amrc.org.hk/taxonomy/term/issue_2/48
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