Corporate Social Responsibility on the Belt and Road
The Belt and Road Initiative offers opportunities for China to take the high road on corporate social responsibility.
The Belt and Road Initiative (BRI) has attracted much fanfare, scepticism, and concern since its official launch in 2013. The BRI generally focuses on infrastructure, energy, and transportation projects from Asia to Europe along an overland Silk Road Economic Belt and a 21st Century Maritime Silk Road. There has been an estimated US $1 trillion of Chinese investments committed and over 70 countries have signed up so far. The concept of the BRI – as well as the direction of its strategy, agenda and its implementation – is malleable and ever-evolving. Such flexibility is reflected in an expanding patchwork of BRI projects that have proliferated across diverse sectors and other parts of the world including Africa and the Americas. The BRI’s temporal scope is as ambiguous as its functional and geographical scale. Even infrastructure projects before 2013 have been rebranded as BRI projects.
The BRI is fraught with considerable obstacles and risks, despite the opportunities and benefits infrastructure development can bring to host countries. There are growing concerns over the impact of poorly conceived or executed projects on host countries with issues such as the local environment, workforce, fiscal health and political stability. These concerns have been especially acute with BRI projects and investments in countries the OECD terms “weak governance zones”, in which “governments are unwilling or unable to assume their responsibilities.”
At the same time, some are wary of China’s ambitions to expand its regional and global influence through the BRI. This may include playing a more prominent role in shaping the rules of the game in international economic, political and legal structures and institutions. In the Fourth Plenary Session of its 18th Central Committee, the Chinese Communist Party clearly stated its desire for China to “vigorously participate in the formulation of international norms” and “strengthen our country’s discourse power and influence in international legal affairs.” How Chinese firms are engaging with, defining and implementing international norms under the BRI will have important implications. It will impact transparency and governance, debt sustainability, labour, and environmental standards, both in host countries and worldwide.
In a recent podcast for Chatham House, I examined some of the key regulatory and normative challenges concerning transnational labour standards under the BRI. Based on my ongoing research on corporate social responsibility (CSR) and Chinese multinational firms, especially in the labour context, I would like to highlight three points.
First, the internationalisation of Chinese firms investing and operating abroad has been a more recent phenomenon when compared to their Western counterparts. The Chinese government adopted a “Going Out” policy in the late 1990s to promote outbound foreign investments. Since then, Chinese firms have encountered a variety of labour problems and disputes in their overseas operations, which have attracted global media attention. More controversial aspects have included the large-scale dispatch of Chinese workers for construction and infrastructure projects as well as significant violations of local laws or management practices that have led to (sometimes violent) disputes with trade unions and workers in the host country.
Second, as the conduct of Chinese companies becomes subject to greater international scrutiny, Beijing has introduced a flurry of policies and guidelines in recent years that are directed at Chinese firms to act as good corporate citizens abroad. The Chinese party-state has sought to exert influence on the operating environments of Chinese firms abroad, particularly in sectors where many of these firms are state-owned or state-connected. For example, the Ministry of Commerce and the Chamber of Commerce of Metals, Minerals and Chemicals Imports and Exports issued guidelines directing Chinese firms in outbound mining operations to strictly “observe the United Nations Guiding Principles on Business and Human Rights during the entire life-cycle of the mining project”. However, it is difficult to measure the actual effects of these measures and other pressures from the Chinese government or host countries on Chinese firms to take the high road instead of a race to the bottom. Furthermore, in many BRI countries, legal and institutional frameworks may be quite weak to start with, both on paper and in practice. Host countries’ dependence on foreign investments may undermine regulatory attempts to enforce and improve social, labour and environmental standards.
Third, labour, social and environmental standards under Chinese-invested BRI projects can have flow-on effects on domestic approaches to CSR and business and human rights (BHR). CSR and BHR issues, especially in relation to the BRI, have become more prominent in China. Some universities have launched courses on CSR and BHR for students as well as specific training programmes for professionals and managers of Chinese companies with overseas operations. Nevertheless, there is potentially a widening gulf in practices between Chinese firms operating abroad that are increasingly aware of CSR and BHR-related issues (with varying understandings of and approaches to such issues) and domestic firms in China that seldom engage with CSR and BHR discourses.
Further empirical research can shed crucial insights on whether Chinese firms will become standard-makers in the context of BRI, the type of standards that will emerge and the implications for existing international norms and standards in a range of areas. Given the pliability of the BRI, there is an opportunity for all stakeholders to advocate for institutionalising best practices and adopting the high road approach to social, labour and environmental standards under BRI projects. Such an approach will help to mitigate a variety of challenges and risks associated with BRI projects and foster more sustainable and equitable development outcomes for host countries.
Dr Mimi Zou is the Fangda Fellow in Chinese Commercial Law at the University of Oxford. The Asia Society Policy Institute recently appointed Dr Zou as one of 12 distinguished international experts on its Belt and Road Initiative Taskforce.
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