Corporate Social Responsibility In Chinese Food Industry Management Essay

With the development of international economic, more and more corporations realized the importance of dealing with relationship with society to have a good reputation, which can benefit the corporation back. Especially in UK, which is the leader in CSR field, has achieved a great success (Maignon & Ralston, 2002). During the ‘anti-sweatshop campaign’, multinationals brought Western CSR into the Chinese market (Pun, 2003).

Several months ago, a documentary series named “China on the tips of tongue” which introduces Chinese food got a big favor around China. However, on the other hand, Chinese citizens show concerns about the quality of Chinese food, “the daily danger of fake and adulterated foodstuffs”. They doubted whether the food in the documentary can still be safely eaten. (Macleod, 2012) The first accident was “Sanlu” baby milk tainted with industrial melamine which leads to 6244 babies’ illness, including 158 renal failure and 3 dead (Lv, 2008). After that, food safety incidences came out one after another, such as gutter cooking oil, salted duck eggs containing cancer-causing dyes, and yogurt that made of leather from old shoes. And the list is still going on (Shuo, 2011).

Facing Chinese food safety crisis, many researchers are trying finding out the reasons for this status. Lu (2008) held the view that, from the incident of baby milk, it reflects the corporations in China nowadays only pursue economic benefit but ignore can’t bear the basic undertake of consumer’s safety, let alone other corporate business ethics. According to Andrew (2007), corporate social responsibility is not consistent with corporations’ primary purpose of earning profit, and it came out to ease conflicts with society and consumers. In China, corporate social responsibility was not discussed until mid-1990s and Chinese enterprises only accept the basic rules of corporate social responsibility but have not realized the essential meaning (Myllyvainio and Virkkala, 2006). As a newly born and even not wide understood concept, to have positive effect on corporations’ behavior is kind of difficult. Some researchers pointed out that, government plays a vital role in promoting corporate social responsibility (Moon, 2004). The view that government can give corporate social responsibility is feasible in UK, US and some other Europe countries (Albareda al et, 2006). If Chinese government gives a stronger monitor power and have more legislations and rules, would China’s corporate social responsibility turn out to be better? How do government to help corporations apply corporate social responsibility better? These are the questions that will be discussed in this dissertation.

In this dissertation, we will firstly have a review of previews research about CSR’s development in China, and its relationship with food safety, and how government affect CSR in other countries. Before the analysis, methodology and data collection will be presented. Then some representative cases will be discussed and end with the conclusion answering the question.

Chapter 2: Literature review

In the literature review part, I will mainly interpret two parts, one is the academic background and the other is a critical literature review. In the background section, I think it is necessary to give an explicit idea of definitions and theories to the research. Since the research question is “discuss the issues of corporate social responsibility in Chinese food industry”, I will first explain the definition and history of corporate social responsibility and what it refers to in this dissertation. Then how corporate social responsibility comes to China and its development there will be reviewed. In order to find the issues of corporate social responsibility in Chinese food industry related to government aspect, the relation between corporate social responsibility and food safety, and the relation government and corporate will be illustrated.

2.1 The definition and history of CSR

Corporate social responsibility is not a new topic, and the research has begun long ago, but it remains intangible for academics and is a challenge for business managers and stakeholders. However the systematically study was not started until the second half of 20th century. The first fundamental conception of CSR is concluded by a British researcher Oliver Sheldon in 1924. (B) He stated in his book that “The cost of building the Kingdom of Heaven will not be found in the profit and loss accounts of industry, but in the record of every man’s conscientious service”. After that, CSR has been marked as an academic subject and became a field of management study in the 1950s (Banerjee, 2007). (I)

In order to explain the definition and nature of corporate social responsibility explicitly, we need to have a historical overview of concepts from different scholars. (D) According to Carroll (1999) the developmental history of the CSR in the Western is usually divided into three steps: rise and extension in 1950s, further expansion from 1960s to 1970s, and full-fledged proliferation from 1980s to 1990s.

During the 1950s, CSR had some limited discourse, and was lack of discussion of connecting CSR with business benefits. The study of CSR was mainly focus on business responsibilities to society and doing good works for society (Carroll and Shabana, 2010). (E) In the 1960s, the corporate responsibility developed very fast. Most scholars considered that during this time, the company responsibilities changed form single economic responsibilities to more complex and more widely, and Steiner (2000) pointed out that the basic reason is the economic growth. Chen (2009) discussed the reasons in details: firstly, in 1960s customs realized that they need to protect their own right, and government offer them some help to support. From inside and outside pressure, many companies change their management opinion and start to improve production quality and custom service. Secondly, in 1960s and 1970s, nature resource discontinued and environment pollution led to a movement focused on protecting environment which brought significant impact on government. During this movement, many organizations had been established and many corporate laws had been published. Thirdly, the stakeholder theory had been considered by many people. (A) In 1961, Eells and Walton discussed what they think corporate social responsibility is: CSR is “the problems that arise when corporate enterprise casts its shadow on the social scene, and the ethical principles that ought to govern the relationship between the corporate and society” (pg.40). (A) In the report of the Committee for Economic Development in 1971, CSR was defined into three circles: the inner circle is the basic economic function, such as growth, products and jobs which are known as profit; the intermediate circle indicates that the economic functions above should be exercised with “awareness of changing social value and priorities”; the outer circle showed some current CSR issues that need companies to pay more attention to and get improved (Crane and Matten, 2008).

In 1975, Sethi developed a three tier model of corporate behavior, which classified the corporate behavior into three stages: social obligation-“respond to legal and market constraint”, social responsibility-“congruent with the social norms, expectations with performance” and social responsiveness-actives are “anticipatory and preventive in nature” (pg.61-63). (C) However, the early definitions of CSR did not give clear point about social obligations that companies should comply to (Carroll, 1999; Schwartz and Carroll, 2003). In 1979, Carroll attempted to provide a definition that includes a full range of responsibilities. He divided CSR into four different categories which need to be paid attention to by the internal decision makers-economic, legal, ethical, and philanthropic responsibilities as showed below:

(I) Pyramid of CSR

E:A&FMDissertationliterature review2.PNG

Carroll’s CSR Pyramid

(Carroll, 1999)

The above diagram reflects the components of CSR and their structure. It shows voluntarism from corporations to act responsibly to all stakeholders which facilitates the management and of businesses globally. This also shows an evaluation and consideration of the effects of businesses on society, beyond the traditional role of making profit (Crane et al 2008).

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A 1) Economic Responsibilities: CSR should specifically relate to the economic aspect which is the original purpose of constructing business. CSR, in general, should comply with the goal of maximizing the earning per share, keeping profitable condition consistently, maintaining a strong competitive position and operating efficiency (McGuire, J, W, 1963).

2) Legal Responsibilities: Companies should perform consistent with the general laws, policies, and local regulations which are the-“social contract” between firms and society, and to be a law-abiding corporate citizen. A successful company can be identified as good fulfillment of legal obligations.

3) Philanthropic Responsibilities: As an essential part of the society, the corporation relies on society and uses resources from the society. In this case, companies should make a contribution to the society for reciprocate the resources they use (Li, 2006). It is important that the company can encourage employees to participate in charitable activities, put effort into creating better quality of life and support the public and private educational institutions (Carroll, A, 1991).

4) Ethical Responsibilities: It cannot be identified as a law in the context of corporate social responsibilities, but still be expected to be concerned. A good corporate citizenship was defined as: acting morally and has the ability to easily identify the decision which follow the rule of ethic and adopt it effectively (Crane, A. and Matten, D, 2008).

D CSR took on a new meaning that went beyond CSR’s social activism and CSR’s philanthropy at the beginning of the 1980’s. A CSR firm could be recognized by the type of ethical climate it displays, the quality of its corporate culture, and the normative principles that guide the firm’s decisions, strategies, and policies. The 1990s and 2000s became the era of global corporate citizenship (Frederick, 2008). E In 1990s, most of the emphasis researches in CSR are splintering into some other related subjects such as stakeholder theory, business ethics and sustainability (Carroll, 2006). B According to Frederick et al (1992), CSR has been connected with accountability. They assumed that “CSR means that corporation should be held accountable for any of its actions that affect people, their communities, as well as the environment” (Frederick et al, 1992, p. 30). D The early 2000s became preoccupied with the Enron Era of scandals, though CSR continued its quest to find business legitimacy, the emergence and preoccupation with business ethics obscured the continued development and growth of the social responsibility theme, though significant advances were made, especially in the UK and continental Europe (Moon, 2005). E Windsor (2001) considered that different company will face on the different responsibility, for example, a multinational company may face on the different culture and religion, so it may give some different institutions in small or medium-size enterprise. Similar, in particular industry such as burn coal to heating, it need more care about the social environmental. On the concept development, Schwartz and Carroll (2003) showed a three-domain approach in CSR, they pointed out that this approach is based on Carroll’s (1979) four categories of CSR, but rather then reducing to three which are economic, legal and ethical. Chiquita (2004) defined CSR as make managers have a socially responsible, such as do fair business and concern all the stakeholders which will be impacted by our decisions, and keep legal interest to ensure the performance of companies. Chen (2008) concluded that all definitions can be divided to 2 types, one called narrow CSR which just focused on ethic and charity responsibility. Another called generalized CSR, which also put economic and legal responsibility into it.

D Corporate Social Responsibility, which has its roots in the west, is a term that has been developed and discussed worldwide, resulting in a wide range of concepts comments and definitions. However, there is still no universally accepted definition of CSR (Wang and Juslin, 2009). In this dissertation, I will focus on one aspect of corporate social responsibility-legal responsibility, which belongs to the context of generalized CSR. Companies should obey the laws and policies that are set by the government and got their production and marketing all under the pale of law.

2.2 History of Corporate Social Responsibility in China

2.3 Corporate Social Responsibility and Food Safety

2.5 CSR in the Food Industry.

According to the underlying aspects of CSR, the food industry is among the businesses that should be held socially responsible towards an expansive array of stakeholders. As far as the social impact of the food industry is concerned, extensive care should be taken into consideration because the end-customers to such industry are mainly human beings (i.e. general public). Such an extensive care is primarily concerned with providing safe and healthy food (Maloni and Brown, 2006). In addition, besides the social responsibilities of the food industry, there are also environmental duties that the food industry should fulfil (Snider et al, 2003). Therefore, CSR appears to be gaining importance in the food industry that is mainly because of the nature, the importance and the sensitivity of the food industry’s products (Maloni and Brown, 2006). As a result of CSR reporting, companies that are perceived to have anti-social practices were brought into attention, and they were forced to have more socially responsible practices. For example Taco Bell and Campbell’s Soup have been forced by NGOs and labourers to improve wage conditions among produce farmers (Terry, 1983; Prewitt, 2002). Campaigns have been in effect against animal welfare and sustainability practices of the food industry which includes inhumane slaughter (Garber, 2005), overfishing (Thorn, 2003), and animal treatment (Ordonez, 2000). In general, Maloni and Brown (2006) have provided a comprehensive framework of CSR dimensions in the food industry as shown below.

2.4 Corporations and Government

China has a different state institution and market regime with many other countries, so as Li and Tang (2009) stated, to study CSR in China, we need to focus on companies’ relationship with the state and NGOs in the context of larger economic, social, and cultural environment. This entails three pairs of relationships: corporate-society, corporate-state, and corporate-NGO (Stohl, Stohl, & Popova, 2007).First, CSR is the product of the specific social and cultural context in which it emerges, as May and Zorn (2003) argued that, “corporate social responsibility is, at its core, about the simultaneously contested and consensual nature of the relationship between organizations and culture”. To understand CSR in China, it is important to situate the analysis in the social and cultural characteristics of China. Second, CSR needs to be understood in view of corporate-state relations. Schwarze (2003) suggested that CSR decisions are often made not within individual organizations, but as a result of inter-organizational relations such as state-corporate interactions. The corporate-state tie is especially important in the emergence and development of CSR in China because Chinese governments at various levels still maintain control over most of economic resources. Finally, the corporate-NGO tie is another dyadic relationship central to the development of CSR (O’Connor, Shumate, & Meister, 2008). NGOs have played a critical role in influencing multinational corporations to adopt code of ethics voluntarily and in enacting legal standards of CSR (Winston, 2003).

As Chinese governments and enterprises are still on their way to have a mature CSR system, they have to face a lot of problems. Li and Tang (2009) pointed out that corporations have been the powerhouse of economic development in China, and sources of many social problems in the country, such as labor condition, environmental pollution, and poor product safety.

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CSR has become a new challenge for Chinese enterprises to compete in the global market. To start with, many Chinese enterprises disliked and resisted this concept. The major claims are that (1) CSR is a luxury which many enterprises can hardly afford, (2) CSR is a trade barrier restricting competitiveness, (3) there are hundreds of CSR standards, criteria, guidelines and management systems established by multinationals and NGOs many of which are inconsistent and difficult to manage, (4) exorbitant labor standards based on the laws and conditions in the developed countries do not accord with Chinese reality and (5) companies also complain that they were exposed to intense price competition, while having to bear the cost of pro-social measures (Chen, 2006; ORSE, 2006)

There are also many other challenges for Chinese corporations. First one is the issue of business ethics, such as emphasizing the role of markets while maintain an important role of government in the economy, keeping a dominant position of public ownership while assuring fair competition, opening labor markets while upholding the predominant role of labor in the country. Second one is issues of corporate ethics, like the separation enterprises and government; many confused ethical issues puzzle entrepreneurs. And also ethical issues of management, issues of international business relations. (Lu, 1997)

The low level of CSR in China has been a wide-accept recognition. The reasons that caused these problems are mostly referred to be the lack of legislation and companies’ attention. There are also some other different views about this. A disregard or skepticism towards CSR was found not only among business owners and managers but also among intellectuals in China. Even though some scholars started to introduce the western notion of CSR and promote it as a model for Chinese companies to emulate in the 1990s (e.g. Li, 2007; Yang, 2007), other Chinese scholars rejected the concept of CSR. For instance, ZhangWeiying, a leading Chinese economist and public intellectual, echoed Friedman in arguing that making profit was the sole responsibility of corporations (Zhang, 2007). Some Chinese scholars remarked that the Western notion of CSR represents a western hegemony and a conspiracy of developed countries to circumvent the growth of Chinese economy and, thus is unfair to China and other developing countries, the growth of which largely depends on labor-intensive and resource-intensive industries such as the manufacturing industry (e.g. Xiao, 2005; Zhang, 2006).

Another study by He and Cooke (2010) suggests that external bodies and value chains are not the main drivers for firms’ CSR activities in China. The majority of companies have not yet developed a working relationship with other companies to share experience and information related to CSR. They have not received sufficient pressure in the value chain to engage in CSR activities. Nor have they become a source of pressure for other firms in the value chain to do the same. This is in line with that of other studies (Frenkel 2001), which highlight the difficulty of international pressure groups and MNCs to exert pressure on Chinese sub-contracting/supplier firms to adopt labor standards as part of their CSR. This is perhaps partly due to the fact that there are few influential CSR organizations in China (Peng et al. 2005).

As to food security, some researchers gave the view that CSR is an important aspect of food quality. (Schro¨der & McEachern, 2005) However, there are also some study suggests that government plays a vital role in implication of CSR. Dellios, Yang and Yilmaz (2009) argued that government influence CSR in many aspects: government can act as mandatory (legal CSR), facilitator (economic CSR), and partner (Philanthropic CSR), endorser (ethical CSR). Institutional theories suggest that states develop formal institutions in the form of laws and regulations to affect order, reduce uncertainty, and influence social actor behavior in coordinating and promoting economic exchange. (North, 1990)

This dissertation will continue with this question to find out between CSR and government function, which give a heavier effect on Chinese food safety problem.

Chapter 3: Methodology

The aim of this study is to investigate the issues of CSR in Chinese food industry and government’s function,

3.1 The Research philosophy

philosophical research method plays an important role in research, because our values of the research and its methods have an important impact on our research, and it is the first step of doing a research just like the most outside skin of onion (Saunders et al., 2009). The philosophies most researchers using nowadays include positivism, interpretivism, realism, pragmatism, and so on. During the last decades, philosophers of science and methodologists have been focus on two approaches, positivism and interpretivism, and these two philosophical approaches are being debated for years and widely adopted in management sciences.

Positivism is an approach which is based on the natural science model in which a belief in universal laws and law-like generalities can be found (Holloway, 2004). Investigators agree with this approach insist the quest for objectivity and neutrality so that distance can be preserved and personal biases avoided, and they searched for patterns and regularities and believed that universal laws and rules or law-like generalities exist. Most researchers who adopted positivism are natural scientist. They prefer to working with an observable social reality and the result of such research can be law-like generalizations. To generate a research strategy with positivist approach, you are likely to use existing theory and knowledge to develop hypotheses. Then you need to test and confirm the hypotheses leading to the further development of theory which then may be tested by further research. Positivism approach insist that the research is undertaken in a value-free way as far s possible, which at the narrow end, it rejects all psychological data and qualitative methods (Hollis, 2010).

Interpretive approach or interpretivism is a direction in social science that focuses on human beings and their way of interpreting and making human sciences (Holloway, 2004). The root of the interpretivism is philosophy and human sciences, particular in history and anthropology. Interpretivism insists that researchers should understand differences between humans in our role as social actors (Saunders et al., 2009). The interpretive approach is the foundation of social research techniques that are sensitive to context that get inside the ways others see the world, and that are more concerned with achieving an empathic understanding than with testing laws such as theories of human behavior (Neuman, 2011). According to Saunders, the challenge of interpretivism is to enter the social world of our research subjects and understand their views from their own point, which leads to an empathetic stance. Interpretive approach are suitable for the case of business and management research, particular in such fields as organizational behavior, marketing and human resource management (Saunders et al., 2009), such as corporate social responsibility.

Positivism certainly has its advantages, as it is still widely used in modern science fields, especially physics, mathematics, chemistry, biology. But these subjects are all, arrived at the scientific stage, while accounts of human mental and social life are still languishing in the pre- scientific, metaphysical stage. The criticized problem of the positivist approach is that researchers treat perceptions of the social world as objective and absolute and neglect everyday subjective interpretations and the context of the research (Holloway, 2004). Just like the topic of this paper, corporate social responsibility is a social phenomenon relates to people’s valu, and changes with the social elements, which can’t be exactly defined by rules or law-like generalities. So in this dissertation, we will use positivism to do the analysis.

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3.2 The Research Progress

The research methods we use in this dissertation are content analysis and case study which are common research methods for social science when using qualitative research.

Content analysis has been defined as “a systematic, replicable technique for compression many words of text into fewer content categories based on explicit rules of coding” (Stemler, 2001). Holsti (1969) offered another definition of content analysis as “any technique for making inferences by objectively and systematically identifying specified characteristics of massages”. Most researchers agree that the distinguishing characteristics of content analysis are that it must be objective, systematic (Kassarjian, 1977).

The process of content analysis includes three main steps-preparation phrase, organizing phrase and reporting phrase (Elo & Kyngas, 2007). In this dissertation, we will use the data of government’s law and regulation, CSR statement of corporations who had food safety incidents, and make comparison between the actual status and statement. We will also compare the difference of status that before and after the government took more action in promoting CSR.

After content analysis, this dissertation will continue with case study. Case study, according to Flyvbjerg (2011) is “an intensive analysis of an individual unit (as a person or community) stressing developmental factors in relation to environment”. In China’s situation, corporations like “Sanlu”, “Mengniu”, “Shuanghui” are representative ones of food industry, analyzing their problems can reflect the status of whole industry.

When doing case study, there are some misunderstanding may occur during the analysis (Flyvbjerg, 2006). For example, researchers may treat theoretical knowledge more valuable than practical knowledge; one cannot generalize from one single case; and it is difficult to summarize a specific case. These problems are also the limit of case study that we need to keep in mind.

3.3 The Data Collection

Chapter 4: Research Analysis

2, CSR statement of some companies

Although the time of CSR’s coming into China is not long, most companies that has comparable scale released CSR statements in recent years. As to food companies, we pick three milk corporations “Mengniu”, “Yili”, and “Bright”, as examples to see how they state about their plan of CSR in food security aspect, for they are most famous food corporations in China.

(1)Mengniu Diary Company

Mengniu Dairy Company was founded in 1999, located in Inner Mongolia, where animal husbandry is fully developed. It is a manufacturing and distribution company of dairy products and ice cream in China. In 2008 Chinese mil scandal, Mengniu Dairy Company was one of those companies named for having milk powders and apologized to the public. At the beginning of the same year, Mengniu released its first and only Corporation social responsibility Report “Mengniu Social Commitment Report” covered from 1999 to 2007.

In Mengniu’ CSR report, the company described the relationship between consumers and itself as integration. They stated that “safety guarantee is the basic commitment of food enterprises towards consumers. Mengniu has always been practicing the quality concept of “products equal moral standing” and pursuing the goal of 100% up-to-standard ratio to all ex-factory products.” Mengniu said that they would guarantee their milk’s safety from 4 steps. First is keeping high-quality milk source. Their key milk source base is located at the Helingeer County, the core district of China’s milk capital. Relying on good natural environment, Mengniu has built 7 large professional pastures, and also provide comfortable condition for cows. Second, Mengniu use advanced international production technique to guarantee product quality. Every drop of original milk is transferred to the world’s intelligence monomer workshop, after 13 timed of processing within a closed and bacteria-free environment, original milk is turned into a bag of qualified Mengniu milk. After that Mengniu give the milk strict quality control, which adopts a strict control system from milk supply, production, packaging, ex-factory to after-sales service, so as to mostly ensure consumers’ safety. Mengniu stated that they also have a lot of professional certification certificated by government and professional international organizations such as the ISO9001, ISO14001, OHSAS18001, GMP and HACCP certification and green food authentication. It is the excellent milk source, advanced technology, strict quality control and professional quality management that have made it possible for Mengniu to become the designated product for Chinese astronauts and the athletes of sport of China.

(2)Yili Group

Yili Group, full named as Inner Mongolia Yili Industrial Group Company Limited, is a privately-owned company of dairy industry in China. It is engaged in processing and manufacturing of milk products, including ice-cream, milk powder, milk tea powder, sterilized milk and fresh milk. Yili had outstanding performance, it was said to be a “Chinese national brand”. In 2008, Yili was implicated in the baby milk scandal after tests found its infant formula contained melamine. Not only in mainland China, Hong Kong and Singapore authorities ordered a recall of Yili products. In June 2012, Yili recalled some of its baby formula products after an “unusual” level of mercury were found by China’s administration of Quality Supervision.

As Yili had scandals in both 2008 and 2012, we will go through the CSR reports in 2007-2008 and 2011.

In 2008’s CSR report, Yili didn’t talk much about its food quality or food safety status but lots about what they do in public welfare programs, and just stated that Yili is the official Olympic corporate corporation, so it has reliable production quality. After milk scandals, Yili seems to be more serious about food safety problem. In 2011’s CSR report, Yili not only talked about its advanced produce technique and strict quality control, the stress of the statement about food safety has changed. From December 2010, Yili Group had their brand upgrade named “New Yili, change for you”, and point out the importance of consumer. Also their target altered to be “world first-rate healthy food group”. In quality control section, Yili said they opened 23 of their workshops and welcome consumers to have visit supervision on their production. Besides, Yili Group added new ways to communicate with consumers, such as SNS and Micro blog.

(3)Bright Dairy

Bright Dairy Company Limited is a diversified ownership by the state-owned assets, foreign investment, private capital stock listed company, mainly engaged in the production and sales of milk and milk products. Bright Dairy has a 50 years history and is one of the biggest dairy companies in China. In 2011, CEO of Bright Dairy put forward the opinion that it is the low standard of Chinese dairy that leads to the low quality dairy products, which caused a sensation. In the same year, it is reported that a boy in Jiangsu Province found several maggots when he drank Bright milk,.

Compared to Mengniu and Yili, Bright Dairy seems to be the dairy company that paid most attention to product quality. Bright Dairy not only uses the quality control standard, but also create a new control system combined with the character of the company itself.

3, Government’s policy and legislation of food safety

4, Scandals of food safety problem these years

Chapter 5: Conclusion

5.1 Summary

5.2 Limitation of the research

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