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Unformatted text preview: Singapore Management University Institutional Knowledge at Singapore Management University Lien Centre for Social Innovation: Research Lien Centre for Social Innovation 4-2013 Contextualising CSR in Asia: Corporate Social Responsibility in Asian economies Bindu Sharma Follow this and additional works at: Part of the Business Administration, Management, and Operations Commons Citation Sharma, Bindu. 2013. Contextualising CSR in Asia: Corporate Social Responsibility in Asian economies. Singapore: Lien Centre for Social Innovation. This Book is brought to you for free and open access by the Lien Centre for Social Innovation at Institutional Knowledge at Singapore Management University. It has been accepted for inclusion in Lien Centre for Social Innovation: Research by an authorized administrator of Institutional Knowledge at Singapore Management University. For more information, please email [email protected] This publication seeks to present a narrative about the practice of CSR in ten Asian economies – China, India, Indonesia, Japan, Malaysia, Philippines, Singapore, South Korea, Taiwan and Thailand. The aim is to present a uniquely Asian perspective on the CSR story in these countries that will inform CSR practitioners, researchers and interested corporate stakeholders. Drawing on historical and traditional notions of business responsibility and engagement, the research looks at modern day drivers of CSR in these countries such as the government, civil society, globalisation and enlightened self-interest. The research also throws light on other underlying influences and looks at frameworks such as ISO 26000 for Social Responsibility. Contextualising CSR in Asia ABOUT THIS PUBLICATION Lien Centre for Social Innovation Social Insight Research Series ABOUT THE LIEN CENTRE FOR SOCIAL INNOVATION The Lien Centre for Social Innovation, a partnership between the Lien Foundation and Singapore Management University, was established in 2006 to advance the thinking and capability of the non-profit sector. Based in Singapore, the Lien Centre seeks to enable global thinking and the dissemination of best practices related to social innovation in Singapore and beyond. The Lien Centre works through the diverse range of stakeholders in the social ecosystem, in particular the Lien Foundation and SMU students and faculty, nonprofits and non-profit leaders, socially responsible corporations, and the community at large. The Lien Centre’s Social Insight Research Series is a series of commissioned research papers which explore topics of contemporary interest. All publications in this series are available on the Lien Centre website at . Contextualising CSR in Asia Corporate social responsibility in Asian economies and the drivers that influence its practice ABOUT THE LEAD RESEARCHER Bindu Sharma is Asia-Pacific Policy Director at the International Centre for Missing and Exploited Children (ICMEC), based in Singapore. Bindu serves on the Advisory Council of the International Centre for Not-for-Profit Law (ICNL), USA. She has previously served on the ICNL Board: from 20042010, during which time she was Vice-Chair from July 2006 to July 2010; and earlier from 1994-1997. Bindu has consulted for a broad range of international and development organisations, Pact, Inc. USA; the Aga Khan Foundation, USA; Canada’s International Development Research Centre; the Foundation for Development Cooperation, Australia and the Lien Centre for Social Innovation, Singapore. Areas of research and consultation included corporate social responsibility and public-private partnerships, regional trends in microfinance; governance and civic accountability of the State; trends in donor priorities in development research in Asia and programme evaluation and assessment. Earlier in her career, Bindu was based in Washington DC with Pact, Inc. a US-based international development organisation, as the Regional Director for Asia. Prior to working in the development field she worked in the corporate sector in India with Vam Organic Chemicals Ltd, now Jubilant Organosis Ltd. Bindu holds Master of Arts degrees, in Public Policy and International Development, from the Sanford School of Public Policy, Duke University, USA, and in Economics, from the Delhi School of Economics, Delhi University, India. Contextualising CSR in Asia Corporate social responsibility in Asian economies and the drivers that influence its practice BINDU SHARMA A research study commissioned by the Lien Centre for Social Innovation April 2013 Copyright © 2013 by Lien Centre for Social Innovation. All rights reserved. Published by the Lien Centre for Social Innovation. No part nor entirety of this publication may be reproduced or transmitted in any form or by any means, or stored in any retrieval system of any nature without the prior written permission of the Lien Centre. The views expressed by the author do not necessarily reflect those of the Lien Centre. Readers should be aware that internet websites offered as citations and/or sources for further information may have changed or disappeared between the time this was written and when it was read. Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this publication, they make no representations and/or warranties with respect to the accuracy and/or completeness of the contents of this publication and specifically disclaim any implied warranties of appropriateness, merchantability and/or fitness for any particular purpose. No warranty (whether express and/or implied) is given. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional, as appropriate. Cover design by Make Design ISSN: 2010-3417 ISBN: 978-981-07-3274-5 Printed and Typeset by Green Prints on Indonesia Woodfree Paper (ISO14001 certified) Contents PREFACE 5 ACKNOWLEDGEMENTS 6 RESEARCH APPROACH 8 EXECUTIVE SUMMARY 9 1 INTRODUCTION 12 • What is CSR? 12 • Why CSR? 14 • Global History and Trends 15 • Civil Society – The Rise of a Countervailing Power? 17 2 THE ASIAN CONTEXT 19 • Cultural Influences 19 • Traditional Philanthropy 20 • State Capacity 21 • Global Supply Chains 23 • Corporate Misdemeanours 23 3 FACTORS INFLUENCING CSR IN ASIA 25 • State Regulation 25 • Policy Guidelines 26 • Institutional Self-regulation 27 • Civil Society 28 • The Informed Consumer 29 • Globalisation – Access to Markets and Investors 30 • Enlightened Self-interest 32 4 CSR CHALLENGES 34 • Corruption 34 • CSR as Cost 37 • Capacity of Business 37 • Civil Society Expectations 37 • Measurement and Impact 38 5 ISO 26000 COUNTRY COMPARISONS 39 • Organisational Governance 41 • Human Rights 43 • Labour Practices 44 • Environmental Management 46 • Fair Operating Practices 48 • Consumer Issues 50 • Community Involvement and Development 52 6 MOVING FORWARD IN ASIA 55 7 CHINA: THE HARMONY APPROACH 57 8 INDIA: DISCOURSE OVER ACTION 84 9 INDONESIA: A GOTONG ROYONG CSR 110 10 JAPAN: THE KAIZEN MEASURE 126 11 MALAYSIA: CSR ON THE WAY 147 12 PHILIPPINES: THE BAYANIHAN WAY 164 13 SINGAPORE: SINGAPORE INC. PRAGMATISM 182 14 SOUTH KOREA: CHAEBOL 2.0 201 15 TAIWAN: RIDING THE CSR SUPPLY CHAIN 222 16 THAILAND: THE SUFFICIENCY ECONOMY 238 ENDNOTES 258 Preface It has long been construed that corporate social responsibility, as a series of principles and practices, is hegemonic in nature, imposing a distinctly Western sensibility upon Asian economies, especially those from developing countries. Which leads us to ask the question – is there an indigenous “Asian” form of corporate social responsibility? While various forms of corporate philanthropy and community investment have been practised by Asian companies, long before it was termed so in the West, can they be said to form a distinctly Asian sensibility towards CSR? Are there particular cultural and societal norms which have influenced its development in this region? And if so, what does this teach us (and especially corporations) about how CSR can be better practised in the different countries that they operate? These are some of the questions that we tried to answer through this commissioned piece of research. The Lien Centre for Social Innovation Acknowledgements This study started as a conversation with the board of the Lien Centre for Social Innovation in 2008. I would like to sincerely thank them, especially then-Chairman Willie Cheng, board member and the then-Honorary Centre Director Robert Chew for initiating this research. From the outset, I was aware that a 10-country study on the Asian context of CSR was an ambitious undertaking and I am grateful for the unstinting support of the Lien Centre. Special mention goes to the team at the Lien Centre – Jacqueline Loh, Jared Tham, Prema Prasad, Sharifah Binte Mohamed and Farheen Mukri - the collegial work place they provided was the most pleasant part of the research project. Others in the SMU family - especially professors Thomas Menkhoff and Eugene Tan - provided valuable input at the design and initial stages. My sincerest thanks go to Jared Tham, at the Lien Centre. One could not have asked for a more diligent and resourceful Research Assistant. Jared’s commendable perseverance in the face of endless web-searches and copy edits was essential to the project and his input and commentary were invaluable as I progressed with my writing. My journey into the CSR space started with Professor Robert Fleming who kindly allowed me to audit his course at the National University of Singapore Business School in 2008, for that I will be ever grateful. Around the same time, the opportunity to be part of the Singapore Compact’s first publication “Corporate Social Responsibility in Singapore: CSR for Sustainability and Success”, a compilation of case-studies on the CSR journey of a select group of Singaporean and Singapore-based MNCs presented itself. For that I would like to thank Thomas Thomas, Executive Director of the Singapore Compact and his thenteam comprising Evelyn Wong and Kim Minju. I benefitted greatly from the many conversations with Singapore Compact and the group that authored the case-studies - Mark Chong, Rajesh Chhabara, Christine Davis, Bob Fleming, Nancy Frohman, Jean-Pierre Dalla Palma and Gilbert Tan. In addition, conversations with Paula Bennett, Erin Lyon, Melissa Ong and others in the small CSR community in Singapore helped shape the research. 6 CONTEXTUALISING CSR IN ASIA Within a few weeks of starting this research, I was offered the position of Asia Pacific Policy Director at the International Centre for Missing and Exploited Children (ICMEC). Sincere thanks to Ambassador Maura Harty, the then-Senior Policy Director at ICMEC and to Willie Cheng and Robert Chew for their foresight in agreeing to my doing both tasks. Others that merit special thanks are Ann Florini, Professor of Public Policy, at the School of Social Sciences, SMU, for reading endless copies of my manuscript, and R. Admiral O.P. Sharma, my father, who diligently supported my research by keeping track of all media reports and research on CSR coming out of India. This research project was the starting point in my journey back to the workplace after having spent several years at home with my daughters in their formative years. I would like to thank my two daughters Gayatri and Geetanjali, and Mani, my husband, whose patience and forbearance saw me through this project. I would also like to thank all my friends for their support and encouragement, and for always being there when I needed them most. Needless to say, the responsibility for errors of fact and interpretation, as well as the inadequacies in the research, evidence and reasoning is mine and mine alone. Bindu Sharma 7 Research Approach This research seeks to shed light on CSR as practiced and reported by companies in the Asia region. The ten countries researched are spread across Southeast Asia (Indonesia, Malaysia, Philippines, Singapore, and Thailand), Northeast Asia (China, Japan, South Korea, and Taiwan) and South Asia (India). Countries were chosen primarily on the basis of availability of relevant CSR research. The study relies on secondary research available in each country. As there is a considerable lack of consistent research on CSR in and across countries in Asia, the study does not make any attempt to measure how each country performs relative to the others. The study also looks at broad-based discussion within civil society actors in each country - industry associations, independent think tanks, centres of excellence in academic institutions, independent consultants, and in some cases in bilateral and multilateral institutions. In addition, the study entailed a review of individual company CSR initiatives as reported in company annual or sustainability reports. In each of the ten countries, the top five companies by market capitalisation were chosen to ensure a random selection (rather than a selection of companies with the best CSR record, which would bias the study) and with the underlying assumption that the CSR uptake among the wellresourced companies would perhaps reflect where on the CSR spectrum companies or countries are placing themselves. 8 CONTEXTUALISING CSR IN ASIA Executive Summary Society’s expectation of responsible behaviour by business, generally referred to as corporate social responsibility (CSR), has become more explicit for Asian businesses in recent years. The 1997 Asian financial crisis moved Asian governments to tighten company law, competition law and corporate governance requirements of listed companies and put new pressures on businesses operating in Asia. In addition, the rise of corporate Asia has taken two forms, both of which have come up against the global expectation of corporate responsibility: first, as growth of Asian-based supply chains to Western multinationals; and second as expansion overseas (especially Westward) by Asian-based firms in order to access larger financial and retail markets. CSR refers to a wide spectrum of activities, ranging from philanthropy, legal compliance, self-regulation and most recently new business models responding to social needs. There is little consensus in Asia about where on this spectrum of social responsibility Asian corporations wish to be. Furthermore, little is yet known about where Asia currently fits in this spectrum, or indeed whether the spectrum needs to be redefined to fit Asian conditions. To help remedy this lack and spur broader debate on Asian CSR, this study provides an overview of results of a two-year inquiry into the status and experiences of CSR in ten1 major Asian countries. The study relies on secondary research available from each country, but remains constrained by a lack of consistent research on CSR in and across countries in the Asian region. The study is organised by starting with several chapters on the general context of CSR followed by country specific reports. Chapter 1 gives a brief synopsis of what is CSR, why it is important today and the Western trajectory of CSR and the rise of civil society as a countervailing power. Chapter 2 looks at factors unique to CSR in the Asian context. Chapter 3 outlines the factors influencing the adoption of CSR in Asia. Chapter 4 briefly deliberates on the challenges faced by the Asian corporate sector in embracing CSR. Chapter 5 presents a cross-country analysis of the CSR efforts of the top five companies, by market capitalisation, in each country studied through the lens of the ISO 26000 core categories. Chapter 6 attempts to capture what Asian governments and industry need to do on the CSR front to meet global expectations. 9 The 10 country chapters each report on the historical or cultural antecedents of CSR, the development of CSR in the last decade or more in the country, the active promoters of CSR, and a snapshot of industry awareness and active implementation of CSR by companies. Asian entities are picking up the conversation upstream by virtue of the discourse on CSR globally being Western-led. In particular, the nascent Asian debate is following the Western model of looking at what corporations should do beyond complying with the laws and regulations already on the books. The Asian debate focuses on philanthropy, voluntary action and new business models. But in much of Asia legal compliance is still in question, and hence deeper questions remain as to the uptake and implementation of CSR. The potential exists to reap formidable benefits from enforcement and compliance of existing legal statutes in Asia. As with many countries across the world, Asia also needs to bring its legal framework into the 21st century to meet the challenges of a globalised and increasingly interdependent business climate. In Asia, socio-cultural features, the business-government relationship and the State’s financial capacity all influence the CSR discourse and action. During the course of the study some highlights emerge: –– Asian tradition has much to offer to guide the CSR discourse. There is much discussion around CSR, in the region, as it gains prominence on the global stage. Yet CSR is not new to the Asian business community, where traditions and cultural practices give CSR a unique identity in some countries. –– Classical philanthropy, for example the giving of funds to establish schools, hospitals and cultural institutions, is already very much a part of Asian business culture. –– Globalisation has played a role in pushing business in Asia up the CSR ladder, from one of charity to that of strategic philanthropy based on a company’s core competencies. In addition, the uptake of CSR in some nations has come in light of the fact that explicit CSR standards could potentially be used as a soft trade barrier in global commerce. –– Asian consumers are still not a force to reckon with, but are increasingly finding their voice, as exemplified by the citizen response to the Sichuan earthquake in May 20082 and consumer response to the Sanlu milk scandal in September 20083, both in China. –– China also stands out as the only country where the financial sector is being 10 CONTEXTUALISING CSR IN ASIA targeted to take on a role in the uptake of CSR in the wider corporate sector. –– Industry associations, most prominently the stock exchanges in more than half of the countries studied, have taken the lead in holding business to higher standards of governance, operational accountability and disclosure or transparency of corporate data. –– As in Europe, governments in Asia are playing a role in drawing up policy guidelines and voluntary codes of conduct. The business community in all countries, with the exception of Japan, has demanded that the state play a role in creating an enabling environment that encourages and facilitates business’ adoption of better CSR. Indonesia, to date, is the only country that has passed legislation mandating CSR among companies operating in the natural resource sector. In India, Malaysia and the Philippines, state bodies are considering regulations requiring CSR action and setting standards for reporting. –– Although the public debate remains muted, there is a realisation among corporations in Asia that taking responsibility for production externalities upfront is beneficial to both shareholders and stakeholders in the longer term. The twin challenges of corruption and compliance however, dog the CSR discourse in Asia. Corruption within many Asian governments and business sectors hampers business’ ability to articulate and implement an uncompromised and thus credible CSR strategy. In addition, state corruption short-circuits compliance and this undermines the very basis of social responsibility required of corporations. Also, often states lack the resources to enforce legal statutes even if the political will to do so exists. In Asia, most importantly, governments need to find their voice and build the capacity to ...
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