The Effect Of Globalisation On Corporate Social Responsibility

This study will discuss the effect of globalisation on corporate social responsibility and interpret the current situation of the practice of corporate social responsibility in China. First, this study will give the comprehensive understanding of

The Understanding of Corporate Social Responsibility and Globalisation

Most firms take ethical and moral behaviours and activities expressing the concerns of consumers’ and shareholders’ interests or increase the investment in the corporate social responsibility projects. However, the previous aspects are not the true understandings of corporate social responsibility. Baker (2003) proposed that corporate social responsibility is about how firms employ and control their business activities and processes producing a positive outcome for the whole society. Moreover, the definition from the European Commission (2011) is more comprehensive and meaning, which is that companies incorporate social and environmental concerns into their business activities and the interaction with their shareholders and consumers to benefit the whole society. These definitions on corporate social responsibility concentrate on the improvement of social welfare and society. However, the definition from the European Commission further indicates that environmental, social and ethical issues are embedded in the business processes. In this study, the true meaning of corporate social responsibility is that firms integrate environmental, social and ethical issues in business processes and decision making process with the motivation of benefiting the stakeholders.

The concept of globalisation is described as one of the most leading thoughts considerably affecting modern business theories and practices. This concept significantly make most scholars and practitioners concentrate on its influences on every aspect of human living and modern business, such as economic restructure, firm’s business operation, environment sustainability, culture, technology and governance (Bhagwati, 2004). Scherer and Palazzo (2008) proposed that globalisation is defined as a process of amplification and acceleration of social activities and economic cooperation across areas and countries. This process makes multinational corporates gain more free space and flexible to employ international business and trade for more profits. However, without more restricts on law, regulation and social influence in a specific area or country, new global problems and challenges are produced during this process, such as climate change, distribution of income and welfare and terrorism (Scherer and Palazzo, 2008).

In early stage, globalisation involves the transformation and development of technologies in host countries, information sharing in different economies or continents, human resource mobility, and foreign investment from developed economies to less developed countries. However, both developed economies and developing economies have critically encountered religious, environmental and social issues resulting from globalisation (Elizabeth, 2005; Miles, 2007; Lauder et al., 2006). Under the influence of globalisation, economic liberalization, international cooperation between different countries and the previous aspects, such as the transformation of technologies and others, considerable countries have experienced the benefits from globalisation. Furthermore, these countries also need more efforts to be encountered with the challenges and threats created by globalisation.

The Impact of Globalisation on Corporate Social Responsibility

For multinational corporates, globalisation not only brings more opportunities and benefits for multinational corporates, but also makes multinational corporates adapt to the changing environment and accept the unprecedented challenges in the global level, industrial level and other levels. Corporate social responsibility is considered as one of the most significant aspects facing firms employing international business. In other words, multinational corporates reconsiders the fact that the moral, ethical, environmental and social issues should be incorporated into the process of decision making on business strategies and operations.

Globalisation to a great extent promotes this evolution of corporate social responsibility all over the world. In one hand, globalisation further makes the public and organizations recognize and understand the negative consequences, such as the increasing income inequality, the exploitation of labour, and environmental unsustainability (Thomson, 2002). Since multinational corporates and their business further deepen this trend of the negative consequences, corporate responsibility is paid more attention to by the public and international community. However, on other hand, the development of international business and the activities of multinational firms are considered as the solution of global problems, such as the supplier of public goods and the protection of citizenship rights and human rights (Matten and Crane, 2005). Corporate social responsibility is to some extent viewed as one of the considerable forces to solve the negative consequences of globalisation and the existing global problems. The following will give the specific discussion on globalisation and its effect on corporate social responsibility.

In accordance with the theoretical perspective, there are two aspects of the effect of globalisation on corporate social responsibility. First, economic growth not only makes the public and national governments concentrate on welfare augmentation and its benefits for the society, but also makes them recognize that economic development is the consequence of the combination of social, economic and moral implications (Friedman, 2006). In ideal environment, economic growth will provide the equal distribution of income and welfare, the respect and protection of human rights and other aspects, which all people will share. However, globalisation to a certain extent further intensifies the phenomenon on inequality. During this process, who to be responsible for the balance between economic growth and inequality is considered as the significant path of coping with the negative consequences of globalisation. This study argues that governments, firms, consumers are described as the principal undertaker. For firms, they are significant undertakers responsible for the public and social interests and moral issues. The firms incorporate social, environmental and moral issues into the process of their decision making and take the rational responsible behaviour and activities, which brings more and more profits for their shareholders and interests for their stakeholders in the long term. However, some firms made some decision and illegal and immoral and were responsible for the bad consequences. For instance, Enron scandal is considered as the most important example on illegal operation and misbehaviour making shareholders responsible for the huge loss (Healy and Palepu, 2003).

Second, during the process of globalisation, the firms can maximize the efficiency and the performance of firms’ business through the worldwide allocation of resources. Nevertheless, the firms encounter the fierce competition beyond the spectrum of country or area. The competition not only brings more value and interests for their consumers, but also makes firms rethink their concerns of social, ethical and environmental issues and decision making process. There is a fact that more and more consumers concern the perception of firms’ environmental and social issues and socially responsible behaviours. Furthermore, the shareholders and stakeholders also focus on the implement of the strategies on environment and social communities. They will invest in the responsible and sustainable companies that produce the benefits and profits in the long term. Based on these facts from consumers and shareholders, more and more companies concentrate on the implementation and development of social responsibility.

In summary, during the process of globalisation, there are the emergence of the global problems and negative consequences, such as global warming and climate change, the increasing unequal distribution of income and welfare, the abuse and invasion of human rights and others. These elements promote the focus and implement of corporate social responsibilities when multinational corporates employ international business and trade. Moreover, the worldwide competition and consumers’ and shareholders’ perception make the firms recognize and rethink corporate social responsibility and decision making process concerning environmental, social and ethical issues.

The Practice of Corporate Social Responsibility in China

China is considered as the second largest economy experiencing the rapid and stable economic growth and development, even in the term of financial crisis. The annual growth of China’s economy is over 9 per cent, which is the worldwide fastest growing economy because of the implement of Open Door policy in 1978. Moreover, the economic development of China to a great extent is benefited from globalisation. Since implementing the trade and finance liberalisation and foreign investment policies, China is described as one of the most significant destinations of foreign direct investment.

However, this process of globalisation results in the increasing pressure on environment and resource, labour relations and work conditions, human rights and community development because of the foreign firms seeking the labour force of cheaper cost and natural resource. Ho and Welford (2006) indicated that environmental pollution and community press in China made local communities and society stop new plants with environmental pollution and other projects. During the past three decades, the leading foreign companies are the dominated drive force to implement corporate social responsibility in China. Today, the Chinese Government recognized and understood the environmental pressure and the effect on the further development of economy and society. In terms of See (2008), a ‘Harmonious Society’ policy proposed by Chinese President Hu Jintao is dedicated to develop a Chinese own development approach. One element of this policy is the sustainable development and social responsibility. Moreover, the Chinese Government has encouraged the private sector to implement corporate social responsibility. The following will focus on the two aspects of corporate social responsibility including the environment and the labour.

In accordance with Liu and Diamond (2005), air pollution, water pollution, severe biodiversity situation and energy waster make China responsible for the worst environment and development pressure. This fact indicates that environmental issues may be considered as the most significant challenge or opportunity facing firms in China. For example, the leading milk production and packing firm-Mengniu cooperating with World Wide Fund for Nature aims to further reduction of carbon emission (China CSR, 2010). Furthermore, the Chinese Government promote corporate social responsibility and environment sustainable and protection from several aspects, such as the supervision and regulation making of the Government’s State Environmental Protection Agency (SEPA) and the environmental requirement of IPO (Initial Public Offering) from the China Securities Regulatory Commission (CSRC).

Referring to the labour, the rights of migrant workers and other labour issues in China cannot be effectively protected and at risk of exploitation (Welford and Frost, 2006). There are a huge number of migrant workers from home to southern cities to obtain better wages and others. Chan (2001) indicated that Shenzhen, as the first city of implementing the Open Door policy, has 12 million migrant workers, which account for over 92 per cent of the total population in Shenzhen city. Although there are some laws and regulation on labour relations and protection, the exploitation of labour exists in many provinces and may worsen. For instance, more than 13 workers employed by Foxconn Company in China committed suicide in 2010 because of labour rights (Pomfret et al., 2010). The severe labour rights and their work conditions are the most significant aspects facing the firms implementing corporate social responsibility.