Silk Road Headlines_3rd October, 2018

A new report by EY highlights the relevance of corporate social responsibility (CSR) for the Belt and Road Initiative [Shared growth and collaboration over the five-years on the Belt and Road: is China building a better world?]. The authors argue that CSR can help Chinese corporations active in BRI projects to achieve competitive advantages, reduce overseas investment risks and improve China’s image abroad. The report states that Chinese firms are making progress in their CSR performance, and it explains how companies such as CCCC and State Grid practice CSR. While the EY report is by no means an assessment of actual CSR performance, it is important nonetheless. Reports such as this, and Chinese companies’ own CSR reporting, open the door for engagement between them and their stakeholders on standards for issues such as transparent reporting, supply chain responsibility, labour and environmental norms, and dealing with corruption, political instability, debt sustainability, and lack of political representation by local communities. Stimulating Chinese firms to develop, and adhere to, robust CSR standards for BRI projects may be an important way to better align their activities with the interests of host societies, and thus for BRI to move ahead. The fundamental principle for CSR has been widely discussed (but less widely practiced) in Western countries since the 1950s, and is relevant also in the context of BRI. The key principle is that companies prevent as much as possible any harmful impact from business activities on their stakeholders, even if there is no legal obligation or if this obligation is not enforced. Clearly the Chinese government, when it published the 2015 ‘Visions and Actions’ outline for BRI was not ready to fully embrace CSR for its Belt and Road initiative. The document encourages the localisation of economic benefits and environmental sustainability, but the main issue – how to do business in countries with corrupt, weak or repressive governments – is not mentioned.

By Clingendael