Corporate Social Responsibility in China: Analysis of Key Drivers for the Implementation of CSR and Assessment of the Impacts on Company Performance

Bachelor Thesis, 2020

138 Pages, Grade: 1,0 (German system 1,0 best)


Table of Content

Index of Figures

Index of Tables

Index of Appendices

Index of Abbreviations

1 Introduction
1.1 Relevance of the topic
1.2 Problem statement and purpose of the thesis
1.3 T ermino logy
1.3.1 Definition of CSR
1.3.2 CSR and business ethics
1.3.3 Company performance in context of CSR
1.4 Structure and approach of the thesis

2 Literature review
2.1 Selection criteria of literature
2.2 Corporate Social Responsibility
2.2.1 Theoretical frameworks
2.2.2 CSR reporting and standards
2.3 CSR development in the US
2.3.1 CSR regulations in the US
2.3.2 Perception of CSR in the US
2.3.3 Drivers of US companies’ CSR implementation
2.3.4 Impacts of CSR on US companies’ performance
2.4 CSR development in China
2.4.1 CSR regulations in China
2.4.2 Perception of CSR in China
2.4.3 Drivers of Chinese companies’ CSR implementation
2.4.4 CSR development in China
2.5 Intermediate results

3 Methodology
3.1 Research approach
3.2 Research design and strategies
3.3 Data collection and sample selection
3.4 Limitations and solutions
3.5 Interview design and analysis
3.5.1 Interview design and analysis
3.5.2 Classification of interview questions

4 Empirical findings
4.1 Interpretation of CSR
4.1.1 Personal understanding of CSR
4.1.2 Personal understanding of CSR
4.2 Implementation of CSR and key drivers
4.2.1 CSR projects and reasons for selection
4.2.2 Managerial roles and techniques
4.2.3 CSR reporting and measurement
4.2.4 Challenges of CSR implementation
4.2.5 Key drivers of companies’ CSR implementation
4.3 Impacts of CSR implementation on corporate performance
4.3.1 Expected and actual benefits from performing CSR
4.3.2 Impact on company performance and the larger environment
4.4 Summary of interview findings

5 Discussion, implementation, recommendation
5.1 Comparison of literature review results and selected empirical findings
5.2 Answers to the research questions
5.3 Recommendations
5.4 Limitations and future research

6 Conclusion




In the course of China’s rise to a significant player in the global economy, concerns are voiced regarding individual Chinese companies’ irresponsible behaviors among the international communities, resulting in the Chinese government’s introduction of strict regulations on social responsibility for companies operating in China. However, due to the decisive government interventions, further potential underlying reasons for Chinese companies’ corporate social responsibility (CSR) involvement remain uncertain.

The goal of this thesis is to provide insights about CSR and its key drivers and the potential effects of CSR on Chinese companies’ performances as well as to offer recommendations for managers of companies in China. The thesis first addressed CSR development in the US and in China by using relevant literature. The results of the literature review showed that legal requirements, government influence, and financial profitability were key drivers for both US and Chinese companies, and CSR had a positive impact on firm performance in both countries. Subsequently, eight semi-structured key informant interviews were conducted. The selected informants were all upper-level managers in their respective companies who were aware of China’s CSR strategy and were performing related practices in their firms. The interview results indicated that while legal requirements and government involvement were still the driving forces behind companies’ CSR implementation in China, financial profitability is an additional predominant factor for companies’ decision-makers. Furthermore, both theoretical and empirical insights displayed a positive relationship between CSR and corporate social and economic performance, indicating that CSR practices benefit both companies and the society.

Index of Figures

Figure 1: The diagram of stakeholders

Figure 2: The Pyramid of Corporate Social Responsibility

Figure 3: Deduction, induction, and abduction: from reason to research

Index of Tables

Table 1: Search results on four online academic databases

Table 2: Key drivers of CSR implementation by country

Table 3: Impact on company performance by country

Table 4: Background information of interviewees and companies

Table 5: Key informants’ perception of CSR

Table 6: Key drivers for companies’ CSR implementation

Table 7: Impacts of CSR implementation on company performance

Table 8: Literature filtering process

Table 9: Sources for the formation of interview questions

Table 10: Companies’ Specific CSR Projects and Reasons for Selection

Table 11: Expected and actual benefits of CSR to the selected companies

Index of Appendices

Appendix I: Table 8: Literature filtering process

Appendix II: Figure 3: Deduction, induction, and abduction: from reason to research

Appendix III: Table 9: Sources for the formation of interview questions

Appendix IV: Interview 1: CEO - Jingzhi Duan

Appendix V: Interview 2: Marketing Manager - Jun Yang

Appendix VI: Interview 3: CEO - Rui Liu

Appendix VII: Interview 4: Sales manager - Liang Su

Appendix VIII: Interview 5: CEO - Dasheng Fang

Appendix IX: Interview 6: Former business development manager - Jian Su

Appendix X: Interview 7: CEO - Haiqiang Wan

Appendix XI: Interview 8: Spokesperson (representing vice-CEO: Chao Wu) - Dashan Zheng

Appendix XII: Table 10: Companies’ Specific CSR Projects and Reasons for Selection

Appendix XIII: Table 11: Expected and actual benefits of CSR to the selected companies

Index of Abbreviations

Abbildung in dieser Leseprobe nicht enthalten

1 Introduction

As the country ranked second in terms of gross domestic product (GDP) and with the largest population worldwide in 2019, the People’s Republic of China1 has caught global attention and improved its status among international communities (Liao, Lin, & Zhang, 2018; Urmersbach, 2020). Since the 1970s, an increasing number of Western corporations, namely multinational enterprises (MNE), have either moved production sites to or are headquartered in China due to cheaper labor costs and looser regulatory restrictions (Miska, Witt, & Stahl, 2016). While Chinese economic development has undergone exponential growth within the three decades, public concerns regarding Chinese businesses’ ethical behaviors have increased in domestic and international contexts.

In 2008, a scandal of a Chinese infant formula manufacturer had stirred up heated discussions among the Chinese media and society, which triggered the Chinese government to enact stricter rules and requirements on the scope of social responsibility of Chinese companies (Zhu & Zhang, 2015). The Sanlu Group was among the most famous producers for infant formulas in China until the news revealed Sanlu’s usage of melamine, a chemical for industrial use, in infant formulas. Consequently, more than 300,0 infants and young children were diagnosed with kidney-related health issues and got hospitalized in the same year. The incident led to the bankruptcy of the Sanlu Group and its suppliers on a large scale, damaged young consumers’ health, and disrupted Chinese customers’ trust in other manufacturers in the food industry (Zheng, Luo, & Wang, 2014). The fraud demolished Chinese companies’ reputations, and the credibility of Chinese enterprises, as well as the quality of products manufactured in the country, were doubted. As a result, the scandalous event has raised the Chinese government’s awareness and catalyzed its intervention in Chinese enterprises’ corporate social responsibility (CSR). The topic of CSR in China has further stimulated the interest of Chinese companies’ management boards (Zhang & Rezaee, 2009).

1.1 Relevance of the topic

CSR has been relevant for the core business strategies of various sizes of companies (Spence, Crane, & Matten, 2014). Due to the continuous public and administrative appeals to global enterprises’ involvement in legal and ethical businesses, the implementation of CSR has become prevalent worldwide since the 1970s (Carroll, 1991). By adopting CSR practices, a firm has accepted its obligation to account for stakeholder groups’ well-being regarding environmental and societal goals rather than focusing solely on maximizing financial returns to its shareholders (Goel & Ramanathan, 2014). Based on a survey regarding consumers’ expectations on CSR conducted by Nielsen in 2015, a positive correlation exists between CSR implementation and increasing consumer demands (Nielsen, 2015). CSR engagement strengthens an enterprise’s social recognition and reputation, leading to higher customer advocacy and loyalty (Latif, Pérez, & Sahibzada, 2020). Thus, the cause-effect relationship encourages corporations to implement CSR. A company’s social performance further contributes to its ecological and economic performance, such as public recognition and financial achievements (Li, Pinto, & Diabat, 2020). Therefore, enterprises worldwide have started to invest in CSR programs and integrated professional management and strategies (Utz, 2018).

According to a KPMG survey regarding corporate responsibility from 2017, 93% of the 250 largest corporations worldwide reported their CSR progresses in the same year, which is more than double compared to 35% in 1993 (Blasco, King, McKenzie, & Karn, 2017). Furthermore, the 17 Sustainable Development Goals (SDGs), launched by the United Nations (UN) in 2015, have encouraged global companies’ engagement in environmental and socially responsible programs (United Nations, 2020). The UN SDGs are commonly used as a guideline to carry out companies’ CSR objectives, aiming to improve people’s life quality and the planet’s condition (Li et al., 2020; Cheema, Afsar, & Javed, 2020). Thus, the recent trend of global corporations’ active engagement in CSR activities has indicated a growing significance of CSR worldwide (Utz, 2018).

Although the modern CSR concepts have been widespread in North America since the mid 20th Century, the development of CSR in emerging markets is still in the work-in­process phase (Lo, Egri, & Ralston, 2008). The ideas of corporate social activities did not popularize in China until the late 1990s, which was three decades later than average Global North nations (Zhang, Wang, & Zhou, 2020). Based on the search result of the term “corporate social responsibility” on Google Scholar, a search engine that generates free academic resources, more than 1,380,000 publications and research papers are collected and presented on the platform between 1950 and November 2020 (López-Cózar, Orduña- Malea, & Martín-Martín, 2017). Within the total results generated, only 131,000 publications focused on CSR in China compared to approximately 464,000 studies on CSR in the United States of America2. Therefore, academic studies on CSR in China are still relatively insufficient and need further research to gain more in-depth insights (Waheed, Zhang, Rashid, & Khan, 2019).

1.2 Problem statement and purpose of the thesis

Since the Chinese economic reform in 1978, its national economy has been skyrocketing, and China was ranked as the second-largest GDP in 2019 (Liao et al., 2018; Plecher, 2020). However, the Chinese government and enterprises have been criticized by the public for conducting unethical behaviors when pursuing economic prosperity at a fast pace, which resulted in severe environmental and social consequences such as air pollution and damage to consumers’ health. These emerging issues have raised Chinese enterprises’ awareness and facilitated them to be socially responsible (Liao et al., 2018). Resultantly, the Chinese government enacted relevant laws and regulations regarding CSR in 2006, and CSR has become a mandatory obligation for companies in China, with the government taking full control of supervising and scrutinizing CSR activities (Lin, 2010; Lin, 2019).

In conjunction with the mandatory act for Chinese companies to undertake CSR activities, scholars’ interest in the topic of CSR in China has increased significantly during the last decade (Luo & Liu, 2020). There has been a growing number of business studies focusing on factors that motivate companies in China to implement and report CSR, as the number of Chinese companies’ CSR initiatives has been rising (Cumming, Hou, & Lee, 2016; Chen, Hung, & Wang, 2018; Feng, Chen, & Tang, 2018; Liao et al., 2018; Liao, Liao, Wu, Wu, Zhang, & Ma, 2018; Li, Khalili, & Cheng, 2019; Latif et al., 2020; Li et al., 2020; Luo & Liu, 2020).

However, most global CSR studies, including literature about Chinese CSR focus particularly on external factors, and intrinsic reasons are less frequently mentioned (Muller & Kolk, 2010; Luo & Liu, 2020). Although this indicates the importance of external forces that drive companies’ CSR activities, internal pressures such as managerial motivations are still relevant, as the CSR is carried out throughout the enterprise. Furthermore, the studies evaluating CSR implementation’s impacts on corporate performance mainly examine a single aspect’s success, such as assessing financial indicators, rather than on the overall performance of company.

Therefore, to have a thorough understanding of CSR in China, both extrinsic and intrinsic drivers resulting in companies’ CSR implementation are analyzed, and the impacts of CSR practices on general company performance are assessed in this thesis. The thesis intends to provide extensive knowledge and offer recommendations to managers of companies in China, who are interested in identifying key motivational factors for their CSR implementation and the potential effects that CSR enactment would have on their companies’ performances. The results of both theoretical and empirical studies are compared in chapter 5, where the research questions listed below will be answered:

1. What are the key factors that drive companies in China to initiate their own CSR programs, and to what extent are these causes relevant to their CSR implementation?
2. What influences do CSR implementation have on companies ’ performance in China, and how are they related to one another?

1.3 Terminology

In this section, the main terminologies used in this thesis are defined and explained in detail, namely CSR and company performance. Other phrases that share similar yet different concepts with these terms are also determined and distinguished in the following subchapters to prevent confusion for the audience and foster a more fluent presentation.

1.3.1 Definition of CSR

Before the modern concept of CSR emerged in the 1970s, a company’s accountability was initially deemed solely as achieving financial gains for its shareholders within the scope of the respective country’s laws (Friedman, 1970). Friedman’s shareholder theory suggests that the only responsibility an organization with a commercial purpose needs to fulfill is maximizing wealth for stockholders, and social duties should be accomplished by the community and individuals. However, due to the progressive social activists’ movements in the second half of the 20th century, the general definitions of CSR were formed, which became a framework for global corporations to adopt (Carroll, 1991).

CSR is defined as a strategic decision that urges companies to engage in business activities complied with laws or pursue financial prosperity for the companies’ shareholders and yield benefits for the stakeholder group (Lin, 2010). There are three categories of social responsibilities identified by the literature, namely social, environmental, and communication CSR. The former two areas emphasize direct interfaces between a company and nature, whereas the latter is related to establishing connections with stakeholders (Contini, Annunziata, Rizzi, & Frey, 2020).

Freeman defines a stakeholder as anyone, either an individual or a group, that affects or is affected by a legal entity’s pursuit of goals (Freeman, 1984; Freeman, Harrison, Wicks, Parmar, & Colle, 2010). The legitimate stakeholder group associated with CSR involves internal individuals, such as shareholders and employees, as well as external parties, such as customers, suppliers, government, communities, and the environment. According to the normative stakeholder theory, an organization needs to consider the potential consequences it might cause while making decisions, and the final decisions must abide by moral and ethical principles (Donaldson & Preston, 1995). Not only should the business owners’ or shareholders’ demands be fulfilled by organizations, but the interests of all related stakeholders also should be taken into account. Based on the arguments of the current literature on CSR’s origination, stakeholder pressure further facilitates companies to implement CSR (Li et al., 2019).

1.3.2 CSR and business ethics

The comparison between CSR and business ethics remains controversial among academics since the late 20th century. There have been scholars arguing that both terms are based on similar ideas, while others striving to reveal the distinctions between these two concepts (Zheng, Luo, & Wang, 2014). The division of ideas caused debates over CSR and business ethics’ relationship, where particular scholars perceive CSR as a component of business ethics, and the remaining suggest that business ethics is based on the idea of CSR (Schwarz & Carroll, 2007). Nevertheless, researchers tend to find common grounds and combine both terms when investigating companies’ ethical behaviors (Goel & Ramanathan, 2014; Ferrell, Harrison, Ferrell, & Hair, 2019).

As explained in the previous sections, CSR urges companies to consider a broad stakeholder group and pursue environmentally sustainable and socially responsible actions (Lin, 2010). In addition, Carroll’s Pyramid of CSR suggests that four responsibilities of CSR co-exist, in which an ethical component is included (Carroll, 1991). When a company implements CSR, it has to perform business activities compatible with ethical and moral norms expected by the society. In short, the definition of ethics is determined by “doing good” to the whole ecosystem, which applies to CSR. On the other hand, scholars identify business ethics as “avoiding harm” (Schwartz & Carroll, 2007).

Even though the concepts of both frameworks have interrelated characteristics, they focus on different stakeholder groups (Lin, 2010). While CSR represents an organization’s moral commitment to all its stakeholders’ groups, business ethics formulates employees’ ethical behaviors (Tay§ir & Pazarcik, 2013). More specifically, business ethics emphasizes the moral principles, norms, and values for a company’s internal decisions. By adhering to business ethics, companies apply codes of conduct for employees and ensure they decide based on what the ethical codes determine as right or wrong (Ferrell et al., 2019).

Therefore, CSR and business ethics are similar yet distinct in scholars’ theories. According to the findings of Joyner and Payne (2002), as quoted in Schwartz and Carroll (2007), academic researchers use CSR more frequently in management literature than in business ethics journals (Joyner & Payne, 2002; Schwartz & Carroll, 2007). As this thesis aims to offer a more in-depth insight into CSR and provide recommendations to managers by identifying critical drivers on CSR implementation and the relative impact on company performance in China, the author lays particular emphasis on CSR studies.

1.3.3 Company performance in context of CSR

Due to the positive outcome that CSR brings to the companies and the broader environment, as identified by academics, business organizations worldwide have recognized the necessity to disclose their financial as well as non-financial performances in the final company performance reports (Ramzan, Amin, & Abbas, 2021). Specific indicators are used for examining different aspects of organizational performance. For instance, short-term performances can be evaluated by reviewing the company’s current financial status and calculating the employee turnover rate (Liao et al., 2018). In comparison, long-term performances can be examined through corporate legitimacy, company reputation, and competitive advantages to other rivals (Zheng et al., 2014). These indicators are summarized into two main categories, which are corporate social performance (CSP) and corporate financial performance (CFP).

The emergence of both terms in management literature has stimulated scholars’ interest in uncovering the relationship between CSP and CFP (Gras & Krause, 2018). While CSR remains a general concept, CSP reflects the state of an entity’s comprehensive social performance at a particular point in time and discloses its accumulated CSR efforts from the beginning to this date (Muller & Kolk, 2010). The framework of CSP developed by Wood in 1991 suggests that CSP is “a set of descriptive categorizations of business activities focusing on the impacts and outcomes for society, stakeholders, and the firm itself’ (Wood, 2010). CSP examines a firm’s external and internal operations and determines whether the results are beneficial or destructive for the broader environment. Wood (2010) argued that the statistical relationships between CSP and CFP have been misguided by other scholars such as Carroll’s CSR Pyramid model since a firm’s financial performance derives from its general social performance.

According to Carroll’s Pyramid of CSR, the foundation of CSR starts with economic responsibility, and the other three components, namely legal, ethical, and philanthropic responsibility, are derived from the basis of a firm’s financial profits (Carroll, 1991). Thus, Carroll (1991) argued that a company’s financial performance is the predominant CSR domain, directly determining the corporation’s success or failure. When a company has high financial returns, it further contributes to the economic development in society by lessening the unemployment rate and enhancing the community’s prosperity. Without the survival and economic contribution of companies, both internal and external stakeholder groups will suffer from the consequences.

Since this thesis evaluates the impact of CSR implementation in China on general company performance, the outcomes of both CSP and CFP are discussed. However, as CFP is perceived as the most essential and fundamental component to carry out CSR practices in the Pyramid of CSR model, the author follows Carroll’s framework and focuses stronger on the influence of CSR on CFP.

1.4 Structure and approach of the thesis

First, the determinants of companies adopting CSR practices and the outcome the companies receive from the implementation are addressed. Both extrinsic and intrinsic drivers that lead to the companies’ CSR implementation decisions are analyzed, and the identified factors are ranked according to the level of significance. The influence of CSR on organizational performance is discussed based on previous researchers’ findings. In the second chapter, a literature review on CSR and its implementation in the US and China is conducted. CSR theoretical frameworks and models are reviewed first. The CSR development and implementation in the US and China are discussed and compared, as both countries have differentiated understanding of social responsibility practices due to different governmental systems, laws and regulations, and culture (Fransen, 2013). This chapter is used as the foundation for qualitative research in the next chapters.

The third chapter discusses the research methodology, design, and data collection for this thesis. Both advantages and drawbacks of the selected research method are mentioned, and a concrete plan for the empirical approach is presented at the end of chapter 3. A qualitative research approach is chosen for this thesis and takes forms in key informant in-depth interviews. Chapter 4 illustrates the empirical findings of the qualitative interviews in three parts. The first part analyzes the informants’ CSR perception, followed by key drivers of Chinese companies’ CSR implementation identified in the second part and CSR impacts on the overall corporate performance in the third part.

In chapter 5, the results from both literature review and research are summarized, discussed, and compared, which are used for answering the two research questions proposed in section 1.2. Based on the findings, final recommendations are made to the target audience of this thesis, namely managers and executives of companies in China. A general conclusion of this thesis is summarized in chapter 6.

2 Literature review

While business concepts generated in Western developed countries facilitated the formation of social responsibility concepts in the 20th century, the understanding of CSR varies in different countries due to their distinct institutional environments (Fransen, 2013). Since CSR is a newly integrated concept in China, there have been relatively fewer studies regarding Chinese CSR than publications about CSR in Western developed countries (Liao et al., 2018). On the contrary, the discussion of CSR in the US academy has existed since the late 1950s, and thus the relevant CSR research and studies have entered into a mature stage (Zhu & Zhang, 2015). Therefore, as the representative of Western developed countries, CSR in the US is compared with CSR in China in this chapter, where the literature regarding CSR concepts and implementation in both countries are analyzed.

The filtering and selection processes of literature used for the review are explained in the first subchapter. Since the paper’s audience is determined to be managers or executives of companies in China, the literature selected for analysis in this section consists mainly of management studies and business ethics papers. Then, the theories and models relevant to CSR are interpreted in detail. To illustrate a comprehensive view of CSR’s critical determinants, models proposed by the pioneers in CSR studies were selected.

The frameworks explained in this chapter are based on Luo and Liu’s review in their recent study on managerial connections’ and social attention’s relationship to CSR disclosure in China (Luo & Liu, 2020). The researchers mainly focused on the stakeholder theory, the agency theory, and the resource-based view. However, Luo and Liu’s analysis of these frameworks remains limited, as the theories are only used as a brief comparison to the prospect theory. Since their paper has similar research topic to this thesis, a detailed analysis of the three theories mentioned above is conducted. In addition, each responsibility illustrated in Carroll’s Pyramid of CSR is presented since the qualitative research in this thesis refers to the model.

Subsequently, CSR developments in the US and China in terms of its historical background and advancement process, the respective country’s CSR perception, predominant drivers of the nation- and company-wide implementation, and the impacts of CSR practices on firm performance are discussed. Lastly, the author compares and contrasts the reviews on CSR in the US and China and generates the research questions and empirical studies based on these results in the following chapters.

2.1 Selection criteria of literature

The author conducted literature research via reliable academic databases, mainly on Google Scholar, EBSCO, ScienceDirect, and SpringerLink. Relevant search terms such as “Corporate Social Responsibility/CSR,” “CSR” + “the United States/US,” and “CSR” + “China/PRC” were applied to fulfill this thesis’s purpose. In Table 1, the search results of relevant terms on four academic search engines are presented. On Google Scholar, a platform offering extensive search for scholarly articles, the results for “CSR in the US” are 4.3 times more than for “CSR in China,” while on EBSCO, ScienceDirect, and SpringerLink, the former’s amounts of literature exceeded the latter by 3.3 times, 1.3 times, and 2.5 times, respectively. Hence, there are significantly more academic publications about CSR in the US than about CSR in China. However, an important note regarding Table 1 is that all search results of these four online databases are in English. Hence, this table does not apply to literature that is written in Mandarin. In addition, only journals representing management literature and business ethics writings were selected during the searching process. Nevertheless, the outcome proves that the amount of research on CSR in China is significantly less than in the US on Western online academic databases.

Table 1: Search results on four online academic databases (Compiled by the author, 2020)

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Resulting from the large result sets available online, search filters were applied to limit the results to the most relevant ones for this thesis. By adopting search filters, the author was able to narrow down the results by combining several search terms (Bak, Mierzwinski-Urban, Fitzsimmons, Morrison, & Maden-Jenkins, 2009; Beale, Duffy, Glanville, Lefebvre, Wright, Mccool, Varley, Boachie, Fraser, Harbour, & Smith, 2014). To guarantee the quality and credibility of the literature, a minimum of eighty percent of the journals cited selected in this section are rated as A-plus, A, and B by the German Academic Association of Business Research (VHB), meaning the scientific journals used for the review are crucial and notable in the business studies field (VHB, 2020).

The primary process of the filtering is to select specific types of journals. As this section reviews CSR in the US and China, the language of selected literature is predominantly English. However, as the research subject is CSR in China, the author also selects literature that is written in Mandarin, especially publications presented on the Chinese version of Google Scholar. The citations of articles and journals in Mandarin are translated into English in the bibliography. To serve the research purpose of this thesis, the author selects both management studies and business ethics journals, such as the Journal of Business Ethics, The Academy of Management Review, Business & Society, and Corporate social responsibility and environmental management (Bhatia, 2012).

As stated in Table 1, the author started by searching literature about “Corporate Social Responsibility/CSR” to discover the background and general understanding of CSR. The first filter was applied by adding certain keywords such as particular country names and geographical locations to the original search term, which led to “CSR in the United States/ US” and “CSR in China/ Mainland China/ PRC”. Due to the large quantity of literature, the author limited the source types to academic journals and research papers only, and the results to be presented in the order of relevance. In order to compare the history of CSR in both countries and the way different social responsibility concepts developed through decades, no limitation was applied regarding the publication years. After the first screening, the initial sample consisted of 633 publications, including literature written in English and Chinese. Subsequently, the quality and suitableness of the chosen literature were examined and revised in terms of accessibility, duplications, and relevance to the thesis topic by reviewing article titles. During the second screening, the author retained the literature that solely focused on companies’ CSR implementation in China and the US to build a foundation for comparisons at the end of this chapter. As a result, 513 articles with relatively less relevant research topics and duplications were excluded, and the intermediate sample was thus left with 122 publications.

As the amount of literature was significantly reduced after the application of two filters, the author checked both titles and abstracts of each publication in the next step and chose only the literature that interpreted the key factors driving companies’ CSR implementation and engagement in China and the US as well as CSR’s effects on company performance. The number of remaining publications was 75, which was the final number of studies that is eligible for this chapter. The filtering process is presented in Appendix I.

2.2 Corporate Social Responsibility

CSR is used to assess if and how a corporation is acting accountable for the effects its business activities have on the market, the workplace, the society, and the ecological environment (Skrzypczynska, 2014). According to the United Nations Industrial Development Organization’s (UNIDO) statement of CSR, it is understood that CSR is the way where companies reach a balanced “Triple Bottom Line” (TBL) and fulfill the needs of shareholders and stakeholders concurrently (UNIDO, 2020). The TBL approach was primarily proposed by John Elkington in his publication, Cannibals With Forks: The Triple Bottom Line of 21st Century Business, and the framework sets a basis for sustainable business (Tschopp, 2005).

The TBL provides three dimensions for businesses to measure their performance: people, planet, and profits (Elkington, 1999). In sustainability and social responsibility discussions, TBL is associated with economic prosperity, environmental quality, and social justice, where the three pillars are interlinked to each other (Bryson & Lombardi, 2009). The researchers point out that a company must simultaneously achieve three priorities, which usually lead to conflicts of interest due to distinct needs from the companies’ shareholders and stakeholders. Thus, businesses need to reach a balance to achieve the maximum benefits in each section (Elkington, 1999). Hence, the three pillars contribute to the composition of CSR. By engaging in socially responsible actions, firms not only can gain reputational advantages among employees, consumers, and investors but also can prevent potential scandals that might affect the company’s performance negatively (Jizi, Salama, Dixon, & Stratling, 2014).

2.2.1 Theoretical frameworks

In this section, three theories related to CSR and one model regarding the composition of CSR are interpreted. The three frameworks were chosen based on Luo and Liu’s research on Chinese CSR, namely Freeman’s stakeholder theory, Ross’s and Mitnick’s agency theory, and Barney’s and Hart’s resource-based view (Luo & Liu, 2020). Additionally, Carroll’s Pyramid of CSR was chosen as in order to set a foundation for data analysis of the research in chapter 4. Stakeholder theory

Freeman (1984) introduced the stakeholder theory and insisted that a company is accountable for internal and external groups with a stake in their business activities. Executives are responsible for managing relationships with stakeholders, creating values for them, and taking their benefits into account. If there is a conflict of interest, managers are expected to satisfy the demands and maintain trade-offs (Freeman et al., 2010; Zhang, Chong, & Jia, 2019). The theory suggests that companies create a win-win situation by meeting stakeholders’ needs to optimize profits (Harrison, Bosse, & Phillips, 2010).

Figure 1: The diagram of stakeholders (Freeman, 1984)

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In the context of the influences on corporate disclosure policies, the stakeholder theory considers the expectations and demands of various stakeholders in society (Reverte, 2009). Deegan and Gordon (1996) compared the stakeholder theory to the legitimacy theory and discovered the differences between their characteristics. Even though both theories' rationales are considered overlapping, the legitimacy theory acts more within the scope of the social contract as it only discusses society’s general expectations. In contrast, the stakeholder theory addresses the impact of particular stakeholder groups on organizations, indicating that certain groups can be more potent than others.

Cormier et al. (2005) recognized the stakeholder theory as a social-political theory for its thorough acknowledgment of the societal context from which organizations develop and advance, which results in companies’ disclosure on social and environmental issues. To enhance stakeholder relationships, companies continuously communicate with their stakeholders to mitigate misinterpretation and disclose financial and social performance information to acquire trust from the society (Deegan & Gordon, 1996; Zhang et al., 2019). Hence, the stakeholder theory facilitates corporations to conduct CSR activities and disclose relevant information. Agency theory

Although the agency theory was proposed by Stephen Ross and Barry Mitnick separately in the 1970s, their studies complement one another. Ross’s study focused on the economic perspective, while Mitnick emphasized institutional aspects (Mitnick, 2011). The economic agency theory has evolved to be a crucial logical basis for social and environmental disclosure after being integrated into financial reporting (Belkaoui & Karpik, 1989). Cormier et al. (2005) interpreted the theory as focusing mainly on companies’ monetary return or wealth considerations among agents. Reverte (2009) mentioned that agency theory reckons the economy as a bond of contracts among numerous economic agents who act opportunistically within efficient markets.

The agency theory covers the problems created when an agent acts for a principal. According to Mitnick (2015), issues arise from both sides. From the agent’s perspective, the problem is to identify and provide services for the principal, while from the principal’s side, the problem is to control the agent’s actions, leading and keeping him on the right track. Jizi et al. (2014) illustrated such issues with examples. They showed that managers are likely to incorporate their private interests, either intentionally or unconsciously, into their decisions on companies’ involvement in CSR activities and reporting. As a result, stakeholders, predominantly investors, expect extra safeguards to prevent executives and managers from abusing their power. Resource-based view

The resource-based view illustrates that companies can achieve competitive advantages by accessing resources and capabilities in various performances (Jung, Lee, & Dalbor, 2016). Barney published one of the preparatory works about the resource-based view in 1991, in which he proposed that companies should obtain and manage valuable, rare, inimitable, and non-substitutable resources and put them into practice to acquire sustained competitive advantage (Kraaijenbrink, Spender, & Groen, 2009). In his 2001 paper, he recognized the types of resources that companies should gain in order to shine in a competitive business environment, namely human capital, organizational capital, customer capital, and stakeholder capital (Barney, 2001; Zhang & Rezaee, 2009). For example, if a company wants to exceed its rivals, it needs to recruit employees with shared value and mindsets to create distinctive firm-specific products and services (Taylor & Oinas, 2008; Bryson & Lombardi, 2009).

Hart (1995), one of the pioneers in the firm’s natural-resource-based view, developed a comprehensive conceptual framework based on firms’ relationships with the natural environment. The model consists of three interconnected strategies: pollution prevention, product stewardship, and sustainable development. He stated that the biological environment would exert restrictions on the most crucial drivers for new resources and sustainable development. Additionally, Garriga and Melé (2004) interpreted the natural- resource-based view of the firm and its capabilities to be a set of theories identifying the way to attain long-term social goals and gain competitive advantage by allocating resources efficiently. Russo and Fouts (1997) agreed with this viewpoint and demonstrated that a firm’s competitive advantages result from its intangible resources, such as corporate reputation and organizational structure, and that these are long-term efforts. Once a firm achieves these capabilities, it could reach sustained financial profits. Pyramid of CSR

As explained in Chapter 1.3, Carroll’s Pyramid of CSR illustrates that companies are obliged to fulfill four predominant responsibilities simultaneously in order to be recognized as socially responsible (Carroll, 1991). The aim of Carroll’s model is to provide business executives with a systematic and practical approach to their new obligations derived from governmental bodies and regulations to a broader set of stakeholders (Latapí Agudelo et al., 2019).

The economic responsibility is presented as the first and foremost component and the foundation for the other three responsibilities, which is why it is located at the bottom of the pyramid (Carroll, 1991). The next layer is legal responsibility, which is related to the mandatory law standards the companies are obliged to. Ethical responsibility is placed at the third level, where it describes the obligation of companies to conduct activities based on moral norms and to keep the harm to stakeholders at a minimum level. Lastly, the philanthropic responsibility is located on the top of the pyramid, which includes companies making financial and human resources contributions to improving the community's well-being. To sum up, companies participating in CSR are obligated to maximize financial profits, abide by mandatory laws and regulations, be morally right and fair, and act as a good corporate citizen by actively promoting goodwill (Carroll, 1991).

Figure 2: The Pyramid of Corporate Social Responsibility (Carroll, 1991)

Abbildung in dieser Leseprobe nicht enthalten

2.2.2 CSR reporting and standards

Existing studies suggest that companies can generate a better corporate image and reputation among stakeholders as well as higher firm values by disclosing social and environmental information on a timely basis, resulting in increasing financial profitability and less cost of capital (Cormier, Ledoux, & Magnan, 2011; Jizi et al., 2014). Reporting CSR regularly also lowers firm risks and diminishes potential distrust and conflicts between managers and other stakeholders such as shareholders and consumers, resulting in more sustainable business practices (Cormier et al., 2011). However, due to the reduction in firm risk profiles resulting from CSR disclosure, it is also argued that executives may recognize CSR reporting as a factor that restrains them from realizing higher earnings (Jizi et al., 2014).

Large corporations tend to dominate the market and acquire a broader range of stakeholder groups due to their powerful stances in society (Reverte, 2009). They frequently catch the public’s and media’s attention and are expected to be socially responsible, which means their reputation can be easily affected by two extreme dimensions. By disclosing CSR information voluntarily, they are able to deduct political costs and avoid relevant regulations (Gray, Kouhy, & Lavers, 1995). Furthermore, both mandatory and voluntary CSR disclosure can compensate for their low corporate performance and image, which is used to distract stakeholders from the companies’ weaknesses and focus more on their strengths (Zhang et al., 2019).

The international standards used for reporting CSR follow the 3Ps defined in the TBL approach, emphasizing achieving prosperity in economics, society, and the natural environment concurrently (Ksiqzak & Fischbach, 2018). For instance, the International Organization for Standardization (ISO) launched the ISO 26000:2010 as guidance and assistance for global corporations to pursue sustainable development and to encourage companies to voluntarily engage in socially responsible actions regarding wealth achievement, stakeholder satisfaction, and law compliance (ISO, 2020). However, it is notable that the ISO 26000 is not used as a management system, but rather a social responsibility guideline for organizations worldwide. In addition, this standard is used to support the implementation of UN 17 SDGs.

In 2000 the UN’s Global Compact listed the Ten Principles, where global companies should fulfill when operating business to enhance corporate sustainability (UN Global Compact, 2020). The principles are categorized into four fundamental responsibilities: human rights, labor, environment, anti-corruption. By enacting these principles, companies are entitled to support people’s well-being and the planet’s sustainability, which further leads to success in the long run. An example of non-governmental organizations (NGO) that significantly influence CSR reporting is the Global Reporting Initiative (GRI), an authoritative organization established in 1997 to set global standards for sustainability reporting (GRI, 2020). Since the launch of the UN SDGs in 2015, GRI has adopted and integrated the framework into sustainability reporting standards. Due to common objectives, GRI and the UN Global Compact have been working collaboratively to help the UN achieve the 17 goals (United Nations, 2020).

2.3 CSR development in the US

According to Carroll, one of the pioneers of CSR studies in the US, the modern concept and definition of CSR did not emerge until the 1950s, even though the idea of corporations act as social enterprises can be traced back to the ancient Roman Laws (Carroll, 2008; Latapí Agudelo, Jóhannsdóttir, & Davídsdóttir, 2019). In his publication in 1999, he proposed that the “Father of Corporate Social Responsibility” should be Howard Bowen, an American economist and the author of the landmark book Social Responsibilities of the Businessman published in 1953 (Carroll, 1999).

Bowen defined his publication’s title as businessmen’s obligations to pursue policies, make decisions, and follow actions that fulfill society’s expectations (Bowen, 2013). He noted that the range of a businessman’s responsibility should go beyond the financial profitability of one’s company. Even though Bowen did not explicitly use the term “corporate social responsibility”, Carroll argued that Bowen’s explanation of businessmen’s social responsibilities sets an initial definition of CSR, a consistent guideline for academic research and writings on CSR studies in the US (Carroll, 1999).

Except for Bowen, who provided initial definitions for social responsibilities, other active scholars in the 1950s, such as Peter Drucker, who is known as the father of modern management, also acknowledged the need for managers to consider the consequence of their business decisions on the public and whether their actions promote the stability, strength, and harmony of the society (Hamidu, Haron, & Amran, 2015). As stated in his publishing, The Practice of Management, released in 1954, the prerequisite to have a society with functioning organizations is to have professional managers who pay attention to society’s actions (Drucker, 1954). Furthermore, he suggested that managers should offer financial aid to society voluntarily. Thus, the primary impression on CSR among academics in the US lies more often on managers’ and executives’ accountability, and the principle of CSR is explained more from a philanthropic perspective.

Ever since the 1950s, the CSR development in the US accelerated among both academics and society (Carroll, 1991). During the early stages of development, former scholars strived to provide a universal definition and explanation for CSR. They generated information based on contemporary societal events and public awareness during their research in the US, meaning most of their findings were based on the situations in the US rather than in the world. CSR did not gain attention and recognition globally until the 1990s, where the preliminary ideas spread out from the US to other regions as a result of rapid globalization (Latapí Agudelo et al., 2019).

In the following subchapters, the US CSR regulations, the modern definitions, and traits of CSR portrayed by American scholars, the factors of the transformation of CSR nationwide, and the factors leading to US firms’ voluntary CSR implementation as well as the relevant impacts on their corporate performance are discussed.

2.3.1 CSR regulations in the US

The combination of an increasing amount of CSR literature, contemporary social movements, and economic recession caused by the oil crisis in the US in the 1960s and 1970s facilitated the US federal government’s actions to address the social and environmental issues by enacting new regulatory frameworks (Latapí Agudelo et al., 2019). The CSR regulations are used to affect companies’ behavior and impose additional responsibilities on them. As a result, organizations such as the US Environmental Protection Agency, the Equal Employment Opportunity Commission, the Consumer Product Safety Commission, and the Occupational Safety and Health Administration were established to carry out the rules (Carroll, 1991). The purpose of creating new organizations was to set national standards for businesses operating in the US and enforce them with legal power.

Additionally, during the same period, the US Committee for Economic Development (CED) published official guidelines on the scope of CSR for an enterprise and reports of the latest societal expectations on the companies. The most remarkable publications, A New Rationale for New Corporate Social Policy and Social Responsibilities of Business Corporations, recognized the business sector’s need to serve society’s demands and meet public expectations (Committee for Economic Development, 1971). The CED rationale contributed to the CSR development in the US through re-defining the duties and roles business corporations play in society (Carroll, 1999; Lee, 2008). As a result, CSR began to blossom across the country from the early 1970s, which led to a transformational change of CSR in the US (Latapí Agudelo et al., 2019).

2.3.2 Perception of CSR in the US

The understanding of CSR varies in different publications and categorizes into various dimensions. Although modern CSR concepts emerged in literature in the 1950s, early research referred more commonly to social responsibility than CSR (Carroll, 1999). Inspired by former scholars, Carroll suggested in his 1979 paper that a business’s social responsibility should fulfill economic, legal, ethical, and discretionary duties expected from societies at a particular time. He used his CSR explanation to develop the CSR Pyramid in his later publication (Carroll, 1991). Carroll (1979) thus provided a comprehensive definition and understanding of CSR for modern literature, which set a revolutionary foundation for future researchers.

Elkington’s TBL approach plays a significant role in CSR implementation since the theory helps enterprises sustain their businesses for shareholders while maintaining the right environment and society for large stakeholder groups. TBL’s three pillars further inspire different aspects of socially responsible actions portrayed among US corporations (Elkington, 1999). Dahlsrud (2008) analyzed the 37 definitions he selected from 1980 to 2003 and categorized it into five dimensions: environmental, social, economic, stakeholder, and voluntariness. The outcome of his research is that the most frequently used definition of CSR in 2001 explained the term as “a concept whereby companies integrate social and environmental concerns in their business operations and their interaction with their stakeholders on a voluntary basis,” and it incorporated all five dimensions identified by the researcher (Dahlsrud, 2008). Based on the common grounds of the modern CSR meanings defined by scholars selected for this thesis, CSR is considered as a company’s voluntary obligations in the US.

2.3.3 Drivers of US companies’ CSR implementation

The combination of arguments among scholars, social protests against large corporations' unethical behaviors, and the establishment of organizations supporting CSR's development sparked the US companies' interest in implementing CSR practices. An increasing number of companies have begun to establish an ethical company and brand image by setting up campaigns to protect the environment and society and satisfy stakeholders in the meantime (Latapí Agudelo et al., 2019). Starting in the late 1960s, when the US government first addressed CSR in a legal context due to public concern and movements, US firms became obliged to meet compulsory legal requirements. However, disclosing business activities to the public remained voluntary for the companies. As a result, CSR reporting became a trendy marketing campaign for firms in the US in the 1990s, especially when they faced scandal and public accusation (Tschopp, 2005).

Since the US is the originator of CSR, companies based there tend to perform their business activities in alignment with CSR's norms more frequently than companies from other countries (Chu, Chen, & Gan, 2020). Moreover, US companies have been identified to engage in CSR practices more vigorously than enterprises originated in other countries or regions. Not only do US firms report and state their CSR status more explicitly, but they also invest financially more in socially responsible projects (Matten & Moon, 2008).

The reasons behind US companies' proactive participation in voluntary CSR activities are mainly mutual benefits or destructions. Scholars have suggested that CSR provides a two­way situation for the firm and society since the 20th Century (Latapí Agudelo et al., 2019). In 1960, Davis proposed in his literature that “businessmen” should be obliged to economic and human values in society, and in return, the firm could also receive economic profits. On the other hand, if businessmen refuse to be responsible to society, their companies will receive lessened social power (Davis, 1960). Burke and Logsdon (1996) demonstrated that managers can yield higher total payoffs by implementing strategic CSR, leading to collective benefits for both the companies and their stakeholders. Furthermore, Waddock and Graves (1997) interpreted that CSR engagement can efficiently diminish the negative performance a firm might receive due to potential fraud and scandals. Thus, the key drivers of US companies to implement CSR are mainly based on public concern, damage control, legal requirements, and profitability.

2.3.4 Impacts of CSR on US companies’ performance

Prior studies have pointed out the positive correlation between CSR implementation and performance improvement (Waddock & Graves, 1997; Becchetti et al., 2008; Lo et al., 2008; Scholtens, 2008; Sun & Stuebs, 2013; Zhu & Zhang, 2015). Waddock and Graves (1997) examined the linkage between CSP and CFP among the S&P 500 firms in the 1990s and concluded that a positive correlation exists between the two variables. Their research shows that financially sufficient companies who allocate their spare resources on “doing good” generate better CSP. Furthermore, CSP leads to improved return on assets (ROA), return on equity (ROE), and return on sales (ROS).

Lo et al. (2008) concluded that US firms could generate better financial performance by engaging in more investor-related CSR practices. Such responsibility includes taking investor’s demands into consideration in strategic business decisions and offering an attractive return on investment ratio. Sun and Stuebs (2013) proved that participation in CSR activities results in higher firm productivity and more competitive advantages through their studies on US chemical companies. Scholtens (2008) examined the causality between CSR and CFP by using a sample of 289 US firms and proved that the interaction between both terms is positive and significant. Furthermore, the success in CFP tends to generate improved CSP as there are sufficient funds to be invested in.

Becchetti et al. (2008) examined the influence of socially responsible programs by attaining information from US-listed corporations. Their findings suggest that companies’ CSR behavior boosts employees’ work involvement and motivations, which leads to higher productivity and an increase in total profits from sales. However, shareholders received lower ROE due to increased investment costs on laborers and intermediate output meanwhile. Nevertheless, the reduced return to shareholders can be compensated by positive organizational performance.

On the other hand, a substantial part of studies proves neutral or negative relationships between CSR and corporate performance (Mcwilliams & Siegel, 2000; Makni, Francoeur, & Bellavance, 2009; Chou, Chang, Darcy, & Yan, 2017). Mcwilliams and Siegel (2000) proved that when companies invest intensively in its research and development, the influence of CSR on CFP is insignificant. Makni et al. (2009) examined the evidence of the relationship between CSR and CFP among North American firms. They stated that companies implementing and participating in environmental CSP initiatives experience fewer short-term profits in ROA, ROE, and market returns. The companies’ costly environmental projects led to lessened wealth for shareholders and reduced further investment funds for CSR projects.

2.4 CSR development in China

The evolution of CSR in China, on the other hand, is still in the primary phase (Zhu & Zhang, 2015; Chu et al., 2020). As mentioned in section 2.1, CSR has become a popular topic among managers in the US and later expanded to companies globally since the 1970s. Meanwhile, the increasing number of researches, literary work, and organizational supports helped to flourish its concepts (Latapí Agudelo et al., 2019). Resulting from ongoing discussions and debates about CSR, its meaning has been continuously changing both in the US and worldwide. Thus, when the Chinese government and companies started to discuss social responsibility in the 1990s and introduced CSR’s regulatory requirements in 2006, their CSR understanding derived from theories suggested in Western societies (Lin, 2010).

Nevertheless, there have been studies arguing that the ideas and principles of CSR already existed in China since Confucius’ time even though the concepts are named differently from CSR (Lin, 2010; Vermander, 2013; Wang & Juslin, 2009; Zhang, Morse, Kambhamptati, & Li, 2014; Zheng et al., 2014). Lin (2010) and Vermander (2013) noted that Confucianism, Taoism, and Zen Buddhism have significant impacts on Chinese thought, which are deeply rooted in Chinese cultural values and every citizen’s mind. The philosophical ideas further motivate companies to conduct businesses within their cognition of morality. Wang and Juslin (2009) analyzed CSR’s historical development in China under the influence of the Confucian philosophy. Chinese merchants who implement the Confucian theories by pursuing a harmonious and responsible business relationship are known as the Confucian traders. They not only integrate the principles by maximizing profits, but also maintain their integrity and righteousness and contribute to society while performing business activities. Zhang et al. (2014) stated that the Confucian value has similar traits to Western CSR concepts, as the core principle of Confucianism is to promote ethics and morality.

However, the Confucian value was condemned and forbidden by the Chinese Communist Party (CCP) after the establishment of the People’s Republic of China, especially during the Cultural Revolution phase. Meanwhile, all Chinese companies were owned by the state, so they acted both as an enterprise and part of the government. Thus, their responsibilities to the society were not defined as CSR due to these state-owned enterprises’ (SOE) mixed roles. CSR ideas in China did not reappear until the mid-1990s, when Chinese companies started to passively accomplish CSR requirements from the Western contractors and consumers (Wang & Juslin, 2009).

The differences between countries’ CSR systems depend on external factors such as different forms of government, financial systems, cultural background, and the nature of the firm (Matten & Moon, 2008). Similar to other emergent economies, China has distinct geographic, political, and economic situations from Western developed countries, mainly the US (Fransen, 2013). Even though CSR originated in the US, CSR in China tends to combine Western ideas and Chinese elements. Chinese companies primarily learned the modern CSR concepts from MNEs operating in China and then developed its own CSR framework and mechanism combining both western CSR ideas and the Confucian values (Miska et al., 2016). The increasing trend of CSR amongst the global economy urged the Chinese government to introduce its own CSR regulations and guidelines to reach the same level as other developed countries (Lau, Lu, & Liang, 2016).

2.4.1 CSR regulations in China

Compared to the US, where social activist groups’ movements triggered the federal government to advance CSR laws, the driving force behind the Chinese government’s implementation of administrative regulations is due to social transformation after the economic reform in 1978 (Liao et al., 2018). The phenomenon of migration in China ordinarily resulted from rapid national economic development, as workers from rural areas were incentivized by higher wages and better education in first- or second-tier cities. Among the migrants, gender inequality in the labor market existed in some urban regions in the 20th century, where women were discriminated against during the job recruiting process (Pun & Chan, 2013). As a result, the Chinese government imposed stricter regulations in the Labor Contract Law in terms of labor rights to prevent companies’ exploitation of migrant workers (Tang, 2012).

Another factor that facilitated the Chinese government to enact more stringent CSR regulations for companies operating in the country is due to certain MNEs’ unethical behaviors towards local Chinese consumers (Tang & Li, 2009). For example, IKEA’s business practices in China have been controversial as the corporation is criticized for taking advantage of China’s looser policies on product quality inspection. In 2016, people’s concern on IKEA’s product and consumer safety was addressed worldwide, causing IKEA to initially recall chests and dressers in the US and later on extending to China due to the criticism addressed in Chinese media both by the government and by citizens (Feng, 2016). The scandal triggered Chinese consumers’ awareness of MNEs’ behaviors, and the public started to demand companies in China to publicize their CSR information. To enhance and secure Chinese consumers’ interests, the government thus established further rules and supervision on CSR implementation.

In 2006, the Chinese government altered the contents of the Company Law and made social responsibility mandatory for all companies in the territory of Mainland China. The predominant motive of the law modification is based on China’s increasing role in the global economy, especially after joining the World Trade Organization (WTO), where the country is requested to comply with the international standards that are mostly aligned with Western mindsets and values (Lau et al., 2016). Unlike in the US, where CSR implementation remains voluntary for companies, CSR reporting activity in China is an obedient obligation, especially for SOEs (Liao et al., 2018). The Chinese government acted as a dominant force and established legislations to help companies carry out CSR.

Article 5, Chapter I: General Provisions of the 2018 revision of Chinese Company Law states that when a company is performing business activities, it is obliged to “comply with the laws and administrative regulations, social morality, and business morality” as well as “act in good faith, accept the supervision of the government and general public, and bear social responsibilities.” In return, companies’ rights and interests are also under legal protection (Company Law of the People’s Republic of China, 2018). However, the law has not offered an in-depth illustration of the scope of social responsibilities that companies are required to fulfill. Thus, the government’s interpretation of Chinese CSR is understood as a company’s legal obligations and ethical behaviors.

After 2006, the mandatory law was followed by new guidelines set by the Chinese government, regulatory bodies, and NGOs to promote CSR among Chinese enterprises and encourage them to report CSR (Shahab & Ye, 2018). Shahab and Ye (2018) presented three organizations that introduced CSR guidelines in China, which are the Open Government Information (OGI), the Shenzhen Stock Exchange, and the Shanghai Stock Exchange. The government issued the OGI to provide the first guidance on information disclosure in 2007 (Yang, Craig, & Farley, 2015). Both stock exchanges with significant impact on the Chinese economy published instructions for listed companies’ social responsibility and regulations on their environmental information disclosure between 2006 and 2008. The purpose is to promote CSR reporting among listed companies (Noronha, Tou, Cynthia, & Guan, 2012). In addition, the Research Center for CSR, the Chinese Academy of Social Sciences (CASS), was established with an aim “to be a world- class social responsibility think-tank with Chinese characteristics” (Sino-Swedish CSR Website, 2014). The main responsibilities of CASS were conducting research on Chinese CSR, developing guidelines for Chinese companies, offering consulting services and trainings, and publishing annual reports such as the Blue Book of CSR to monitor and track Chinese companies’ CSR progress (Chen, Huang, Peng, & Zhong, 2011).

Moreover, Chinese SOEs play a significant role in enhancing CSR regulations imposed by the government, setting examples for private enterprises in China. In 2008, the State- owned Assets Supervision and Administration Commission of the State Council (SASAC) publicly announced twenty official CSR instructions and outlines for SOEs (SASAC, 2011). The follow-up documents state that all SOEs directly under the government’s control are entitled to enhance the sustainable development of companies, society and environment and are required to report their CSR or sustainability status. The SASAC also created a CSR indicator system that is integrated into every SOE’s annual CSR evaluation system (Zhu, & Zhang, 2015; Liao et al., 2018).

2.4.2 Perception of CSR in China

Although Western enterprises in China initially introduced the CSR concept during the globalization stage in the 1990s, the country did not acquire Western developed countries' CSR standards but established its own CSR understanding and rules (Gugler & Shi, 2008; Wang & Juslin, 2009). The former Chinese president, Hu Jintao, enacted the Harmonious Society policy in 2005, and the CCP put forth the concept (Zhang et al., 2014). Serving as a guiding principle for CSR implementation in China, the protocol was expected to raise Chinese companies' awareness of their businesses' impacts on the environment and society and further facilitate their engagements in CSR practices (Miska et al., 2016).

The rubric of Harmonious Society is interlinked with the Western CSR concept, for not only its tackle of economic growth but also its aims to balance social and environmental targets in the meantime (See, 2009). The term "harmonious" or "hexie" in Chinese originated from the Confucian philosophy, has been advocated by Chinese people, and is adopted by the CCP to promote CSR implementation in China. Wang and Juslin (2009) analyzed the impact of traditional Chinese culture on CSR in China and proved that Chinese people’s understanding of CSR matches with the Confucian belief, where it states that a person in the society needs to be virtuous and morally disciplined. As a result, it is understood by the Chinese people that maintaining society peacefully is equivalent to being socially responsible. Meanwhile, from a legal perspective, Chinese corporations are required to perform business activities in good faith, lessen the unemployment rate in societies, and devote themselves to maintaining society's stability (Xu & Yang, 2010). Therefore, in general, the Chinese perception of CSR differentiates from the CSR understanding of Western societies by closely integrating the Confucian mindsets and emphasizing self-cultivation and societal welfare.

However, individual Chinese companies, especially those operating in an international context, still have obsolete CSR viewpoints regarding the concurrent development among Chinese academics. According to the China International Contractors Association (CHINCA) report in 2011, the Chinese international contractors view CSR as public welfare donations only (CHINCA, 2011). Companies in China still tend to view philanthropic actions as their foremost social responsibility, which is insufficient to claim that the corporations are socially responsible, according to American academics (Carroll, 1991; Zhu & Zhang, 2015). Thus, the inadequate perception of CSR concepts results in Chinese corporations' inability to sustain CSR performances, further leading to loss of international contracts (Zhu, 2006; Wu, Fang, Liao, Xue, Li, & Wang, 2015).

2.4.3 Drivers of Chinese companies’ CSR implementation

Ever since CSR implementation became mandatory after the Company Law’s modification in 2006, Chinese enterprises, especially SOEs, strictly followed the rules by actively engaging in socially responsible programs and reporting their CSR progress on an annual basis. Correspondingly, the discussions on critical drivers of Chinese companies’ CSR implementation has escalated among Chinese academia (Vermander, 2013). Over the past decade, there have been studies interpreting either a specific factor or various extrinsic and intrinsic reasons that facilitate CSR development in China (Fombrun & Pan, 2006; Maurin & Yeophantong, 2013; Cumming et al., 2016; Du, Du, Zeng, Pei, & Chang, 2016; Miska et al., 2016).

Research assessing one or two most crucial factors concentrates on providing more detailed insights and analysis on the identified reasons. The results show that government involvement and corporate reputation are considered to be the most significant drivers (Fombrun & Pan, 2006; Moon & Shen, 2010; Maurin & Yeophantong, 2013; Miska et al., 2016). Miska et al. (2016) concluded that state influence and global CSR associations such as the UN Global Compact are key antecedents of Chinese MNEs’ global CSR integration. In addition, Fombrun and Pan (2006) argued that the Chinese government’s decision to promote CSR practices among Chinese companies on a national scale was due to the damage of corporate reputations, mainly large SOEs. Responding to consumers’ concerns and distrust in these corporations, the government decided to intervene and reinforce Chinese companies’ CSR implementation. Moon and Shen (2010) demonstrated the primary driver as the country’s engagement in the global economy through participation in international institutions, and the motives for companies result from the Chinese government’s endorsement. Similarly, Maurin and Yeophantong (2013) also argued that one of the main driving forces behind the Chinese government’s CSR efforts is companies’ loss of reputation both in China and abroad.

Moreover, specific studies focus on examining several drivers of various aspects (See, 2009; Wang & Juslin, 2009; Cumming et al., 2016; Du et al., 2016). Cumming et al. (2016) divided and categorized CSR implementation drivers in China as internal and external pressures. The internal pressure results from individual companies’ inefficient and ineffective performance, whereas external stresses are determined to be exerted by companies’ shareholders, competitors, and stakeholder groups. Wang and Juslin (2009) classified CSR’s essential drivers in China into domestic and international drivers and analyzed them from multiple perspectives, namely social, political, economic, legal, market, natural environment, and stakeholders. The scholars concluded that of all the factors listed, Chinese companies’ primary reason to engage in CSR is the domestic driver, in which the enterprises initiate to cultivate virtue and strive to become a leading enterprise to help China build a harmonious society. See (2009), on the other hand, focused only on intrinsic drivers and stated that managerial motivation is crucial contributors to CSR implementation among companies with the concentrated ownership structure.

Du et al. (2016) suggested that both law enforcement and religious atmosphere have a significant influence on Chinese CSR. Formal institutions, such as the government, introduce and mandate corporate CSR behavior and interact with informal systems, such as the social norms defined in the Confucian values, to stimulate Chinese companies’ self­consciousness for implementing CSR. To sum up, the critical determinants of Chinese companies to introduce CSR are government involvement and legal obligations, corporate reputation and damage control, financial profitability, pressure from global standards, and impact from religions.


1 China will be used as an abbreviation for the People’s Republic of China in this thesis. Due to differences between government policies, languages, and culture, China’s geographic region covers only Mainland China and excludes HongKong, Macau, and the Republic of China (T aiwan).

2 US will be used as an abbreviation for the United States of America in this thesis.

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Corporate Social Responsibility in China: Analysis of Key Drivers for the Implementation of CSR and Assessment of the Impacts on Company Performance
Munich Business School University of Applied Sciences
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business ethics, CSR, China, US, CSR implementation, CSR driver, company performance, corporate social performance, corporate economic performance, strategy, key informant interview, CEO, managers, CSR theories, CSR development, corporate social responsibility, corporate responsibility, mainland china, CSR evaluation, expert interviews, qualitative research
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Li-en Lin (Author), 2020, Corporate Social Responsibility in China: Analysis of Key Drivers for the Implementation of CSR and Assessment of the Impacts on Company Performance, Munich, GRIN Verlag,


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