‘Strategic’ CSR in China

Why should a company ‘do’* CSR? Because it is in its own benefit to do it.

What CSR should it ‘do’? That which benefits the company the most.

The word strategy always sound good, and in a CSR sense, it means doing something that is of maximum, long-term, benefit. Strategic CSR is not, necessarily a strategy in itself, but a commitment leading to a direction identifying certain areas a company will focus on which will improve itself and society (either at the same time, or at a later date). Thus an investment in staff makes it easier to attract new staff, reduces staff turnover (and hence recruitment costs), increases staff morale and productivity etc. An investment in the supply chain improves partnerships with suppliers, increases their efficiency, reduces risks from being associated with suppliers who break the law etc.

In the last few years, a new are has developed focusing on strategic CSR within a company; normally including a team crossing the functions of sales, marketing, research & development and corporate affairs. The objective: to develop products that fulfill a societal need, and to deliver that product to those who need it, profitably. Simple examples would be a company that makes soap that has tremendous hygiene benefits. Thus by improving the distribution a company can get soap to more people who need it and by reducing costs poorer people can afford it. It might not be easy to do either of these, but it can be possible and should be attempted because if it can be done, sales can be increased.

Many multinational companies are now focusing on this area; though not so much in China (as they are still obsessed with the higher margin middle and upper class customers), but i am sure it will be an area to watch for more. Interestingly though, China’s very open capitalist market economy has led to many companies employing these kinds of strategies anyway, without having a dual goal of helping society AND making a profit. They just want to make a profit; but the side-effect is to help society. It is easy to buy things like soap in even the most remote areas of China.

What is next, is the products and services that are harder to distribute en masse and harder to profitably sell to the poor; such as water purification systems, education, sanitary toilets, advanced farming tools, good quality roads and so on. The list of possible products and services the poor do not have in China, but need to improve their lives is a long one. The challenge is to develop a needs-based product, get it to customers and sell it to them profitably (yet at a price they can afford -or possible along with micro-loans).

China, with a huge market offers significant opportunities to do this by achieving economies of scale and scope. It is, of course, also a country with 20 million people in absolute poverty and around 200 million in poverty -second only to India. However China also offers numerous challenges, such as Intellectual Property Rights and logistics. The challenge to entrepreneurs (and of course, current businesses) out there is look for the needs that poor people have and try to serve that need profitably.

*I dislike the use of the word ‘do’ but ‘do’ is the simplest word that everyone will understand. To explain how to ‘do’ CSR is not possible in a simple blog post; though use of the word ‘do’ does imply something very simple, it is indeed definitely not.