March 6th, 2020

Source: Shanghai Observer

Since late January, the epidemic has escalated rapidly in China, and medical supplies have been in shortage all over the country. Many enterprises came forward and responded at the earliest time possible. By utilizing their advantages in technologies and resources, enterprises worked hand in hand with relevant government departments and the public to tide over the difficulties. Many internet companies have set up special funds for purchasing medical supplies and donated medical supplies to ensure the needs of medical staff and the general public. According to Quick Aid List of the Listed Companies published recently by China Association of Listed Companies, as of February 4^th, 635 A-share listed companies have been involved in the fight against the epidemic in the first place, and 20% of the listed companies responded in a short period of time, and the number is still rising rapidly.

As the main eneties of the market, enterprises that understand the market can respond quickly to market demands and can effectively allocate various resources required to fight against the epidemic. Since the epidemic outbreak, companies such as Alibaba, Tencent, Baidu, JD, Meituan and Didi have conducted in-depth cooperation with the government and social organizations, and mobilized global resources based on market principles in an open and orderly manner, contributing to the epidemic control work with great efficiency. They have become important complements and driving forces in the fight against the COVID-19.

Enterprises have become key players in disaster governance

For long, government agencies have remained as the only player in disaster governance. Yet global practices have shown that enterprises have become one of the most important players in disaster governance. The problem lies in that: what roles should enterprises take and how to set up an effective mechanism for public-private-partnership to achieve the goal?

After Katrina Hurricane in 2005, the Federal Emergency Management Agency (FEMA) set up a private sector division dedicated to handling public-private-partnership in emergency management. In Japan, small and medium-sized enterprise office is set up in the national disaster prevention organization, specializing in disaster response and participation of enterprises. In 2016, the General Office of the State Council published the National Plan for Comprehensive Disaster Prevention and Mitigation (2016-2020), proposing that market forces should be actively introduced in disaster governance, and the ability of market players’ participation in disaster governance should be fostered and improved.

For enterprises, being involved in disaster governance is a way of fulfilling corporate social responsibility (CSR). According to a global research conducted jointly by PWC and World Economic Forum, among 100 CEOs that surveyed, over 2/3 of them believed that proper fulfillment of CSR is crucial for enterprise profitability and prevention from loss of customers, shareholders and even employees. For examples, HP sets “Making technical contributions to human progress and well-being” as its core mission. SONY defines its core mission as “Feeling the joy of promoting and applying technology for the public good”. Walmart’s core mission is “allowing ordinary people have a chance to buy what the rich can afford”. The core values and missions of these long-lasting companies have gone beyond the goal of merely making profits. The core values of these companies are in line with concepts such as CSR, which are widely advocated nowadays. These companies deliver long-term financial returns to shareholders which will far exceed their counterparts within industry.

Therefore, CSR has become a widely focused and discussed issue by policy makers, the business community and the general public. In order to promote the building of social responsibility system of listed companies in China, regulators and third-party rating agencies have been continuously introducing relevant standards and reporting norms to guide CSR practices. It can be said that CSR is not a list or a set of standards, nor requiring companies to make sacrifice, but encouraging companies to solve social problems and create social values by virtue of their core capabilities.

The motivation mechanism of fulfilling corporate social responsibility

So, what is the motivation mechanism for companies to fulfill corporate social responsibility?

Firstly, fulfilling corporate social responsibility reflects social values. John Elkington, a British scholar, proposed the “Triple Bottom Line” theory for corporate social responsibility, which indicated that corporate social responsibility is an indispensable responsibility other than economic responsibility and environmental responsibility. CSR corresponds with social value, and is mainly reflected by its value to national development, social harmony and employee growth. Such behaviors guided by social values can be morally, economically or socially-driven. In this process, expectations from the public is a navigator synthesized by forces that drive CSR management, determining the directions of CSR behaviors.

As the relationship between enterprises and communities changes from feedback to social cooperation, enterprises respond more actively to social issues, and the motivation of accountability changes from reputation to performance. At the micro level of corporate practice, CSR is no longer manifested as luxury products and services, but provides solutions to those most in need of improving life quality. This makes CSR more creative and responsive.

Secondly, fulfilling corporate social responsibility guarantees high-quality and sustainable development of enterprises. In recent years, disruptive technological innovations and applications, as well as the the evolution of business models, are emerging at a fast speed. They contribute to radical changes in our industries and enterprises. During these changes, a new and sustainable business-society ecology is being shaped. Enterprises are shifting their foothold from simply making economic benefits and prioritizing shareholders’ interests to creating multi-stakeholder values. Meanwhile, the inherent boundaries of enterprises are opening up, and open, integrated, collaborative and cooperative innovation is bringing new vitality to the sustainable businesses of enterprises.

In A Letter to CEOs in 2019, LarryFink, CEO of BlackRock, the world’s largest asset manager, called upon global business leaders to pay attention to CSR and stressed that corporate missions are closely related to long-term corporate development. In August of 2019, the American business community, representing Apple, Pepsi, JP Morgan Chase &Co., Walmart and other listed companies published Statement on the Purpose of a Corporation, stressing that the business community will pay more attention to the fulfillment of social responsibility instead of merely focusing on the interests of shareholders. This statement has been signed by CEOs from over 180 top companies, aiming to encourage more and more companies focusing more on the interests of stakeholders and higher social responsibility instead of short-term interests of shareholders, so as to achieve sustainable development of enterprises and the society.

Thirdly, corporate social responsibility and profit maximization should be balanced. Corporate social responsibility is closely related to business production and operation. Flexible and proper fulfillment of CSR could effectively enhance corporate competitiveness. Experiences of companies who successfully did this have proven that moderate delivery of CSR could bring advertising effects, improve corporate reputation and product popularity, and reduce advertising costs. The benefits can offset or even exceed the cost of fulfilling CSR. Modern corporate system enables companies to participate in social activities while benefiting shareholders through normal production and operation. CSR is not in contradiction with the target of profit maximization.

How to better fulfill CSR?

For Chinese companies, as we are currently faced with COVID-19, actively involving in epidemic control work is an important way of fulfilling CSR, and it is also an important opportunity for companies to show corporate image. For policy-makers, one important part in business decision is to choose a proper way to fight against COVID-19. So, how does a company choose a science-based and appropriate way to fight against the epidemic?

Firstly, while restoring work and production, enterprises should also focus on epidemic control and prevention. According to the arrangement of the CPC Central Committee, enterprises are currently restoring work and production in an orderly manner. However, since the outbreak is not over yet, epidemic control still remains the top priority. This not only has relevance to the sustainable production and operation of enterprises, but also stands as an important part of public prevention, and also is the epitome of delivering CSR.

Secondly, explore social agendas that closely relate to corporate businesses. In fulfilling CSR, enterprises need to focus on finding the crossing fields between businesses and the society and the environment. In the war against the virus, some companies donated money and offered help to Wuhan, some companies worked around the clock to ensure the basic needs of our people, and some small and micro businesses have overcome difficulties and forged ahead with perseverance. Enterprises should prioritize relevant agendas and choose those relevant to their own businesses and helpful to business development. When the topic is set, enterprises should define the topic precisely, that is to say, enterprises should keep a clear understanding of the roles that enterprises need to take in projects, corporate social values, where these values are reflected, and what impact they will have on businesses. Finally, it is necessary to analyze and evaluate the implementation approach. In addition to the above mentioned, enterprises can also start from exterior consumers related to their businesses, and find those topics that are concerned by consumers or are closely related to businesses. Enterprises can explore business opportunities from these social agendas and then link them to their brands through these opportunities, and finally improve brand image and achieve business development.

Thirdly, identify and meet social needs, and bring social influences into corporate value. In 2011, management scientist Porter put forward the concept of Shared Value. He believed that people are too narrow-minded on the judgment of CSR, and often confine the value created by enterprises to short-term financial performances and consider social agendas as marginal rather than central. He offered a solution to this issue, which was: following the principle of shared value. This solution means that enterprises should not only act as good “citizens”, reduce negative impacts, but also need to conduct innovation and realize shared value, making business success and social progress mutually reinforcing. As a result, the concept of Corporate Social Integration was proposed. As the epidemic evolves, social needs will increase, and enterprises are the most important force in addressing the pressing epidemic-related agendas. For enterprises, the most important thing is to identify these social needs, and try to solve social issues through new technologies, new methods and innovative management approaches. In the meantime, enterprises should improve their own productivity and expand the market, so as to create shared value for themselves and the society.

Of course, in the face of major public emergencies, multiple players of social governance should act in a coordinated manner. The government, as the most authentic organizer in our economy and the society, can impact and promote the implementation of CSR strategies and practices by adopting policies and measures, so as to improve the level of CSR management. These policies and measures include: scaling up investment into public services through service-purchasing; improving the building of industrial credit rating system and promote industrial credit and self-discipline, further improving credit database for enterprises, so as to form effective market and industrial constraints; encouraging enterprises to provide institutional support for employees for their participation in volunteer services; etc. In the war against the COVID-19, many people from the business community have taken participation in volunteer work, some companies have also developed their own volunteering projects. The government should take it as an opportunity to call upon enterprises to move further to develop vacation systems for volunteers and encourage employees to take participation in volunteer services based on their business fields. When it comes to social welfare, disaster assistance, international cooperation and environmental protection, employees could apply for a leave to do some volunteer work.