China's rapid economic growth and modernisation since its 1978 open-door reforms have powered the country to the status of second biggest economy in the world but it has come at an environmental and social cost.
But there are signs the country is making progress towards a more sustainable future that benefits all.
In tandem with the significant boost in its economy in the past 40 years, there has been a severe deterioration in the environment and it has raised significant social issues.
While the boost in economy has attracted both domestic and international investors, growing public concern about environmental protection, work safety and the associated social issues has become one of the most serious problems facing Chinese companies.
A classic example is the serious milk powder corporate scandal in mainland China that raised extreme concerns about companies’ social responsibilities.
In this particular case in 2008, Sanlu Group added melamine to the formula of milk powder to boost the protein content.
The revelation of the scandal caused the failure and bankruptcy of Sanlu, and destroyed people’s confidence in the Chinese milk powder industry.
The 300,000 victims triggered considerable social pressure, which consequently affected thousands of workers who lost their jobs and who were redistributed in the labour market.
In terms of environmental concerns, more than 90 per cent of rivers close to cities are heavily polluted.
Air pollution in many cities is so serious it leads to health consequences. China’s greenhouse gas emissions are also a concern.
Companies have been increasingly pressured by numerous stakeholders and by the public to engage in social and environmental sustainability actions.
The notion of sustainable development was first formulated by the International Union for Conservation of Nature in 1980.
The concept flowed from ecology and referred to a management strategy for resources. Rather than solely related to economic responsibility to shareholders, sustainability included also the inter-relationship among environmental and social perspectives.
The Chinese government adopted this concept after the 1992 United Nations Conference on Environment and Development. It was later included in the national strategy, and has been comprehensively promoted for implementation since 1994.
The development of the idea on corporate sustainability was further carried on in 2002 by the inclusion of it as part of the company law.
In 2006 and 2008, the two stock exchange markets in the country established ‘Corporate Environmental Responsibility Reporting Guidelines’ and ‘Corporate Social Responsibility Guidelines.’
A series of controls were later announced in 2010 particularly about the mandatory requirements for sustainability reporting.
We did a study recently to investigate corporate stakeholders’ perceptions about the importance of corporate sustainability and sustainability information in China.
We found that corporate stakeholders rated the importance of environmental issues and information higher than social and economic issues and information.
Interestingly, companies’ responsibility towards shareholders was perceived to be the least important.
These perceptions might have been influenced by the successful implementation of the Chinese government’s efforts to ensure sustainable development and in building a harmonious society.
In particular, environmental information on energy consumption, water waste, carbon emissions, effluent treatment, and compliance were ‘highly weighted’ due to the impact of industrialisation. CO2 emission was also listed as the primary pollution to be reduced.
Social responsibility, product responsibility, customer health and safety, customer privacy, and compliance were also perceived as important.
This suggests consumers and investors have increased their awareness on maintaining personal rights, particularly on the ‘post-sale product services’ and privacy.
In all, our study shows some indications the traditional idea of sustainability based primarily on the long-term economic goals in China is now perceived as less important.
This is a positive sign, which is also in line with the national policies on sustainability.
China still has a long way to go, and Chinese companies are working to meet the expectation of the stakeholders in terms of sustainable development, but the first steps in the right direction appear to be working.
--with Alex Zhang