China - 8-Responsible Business Conduct China - Responsible Business Conduct
For Chinese companies, Responsible Business Conduct (RBC) is a relatively new concept. The degree of understanding and general awareness of RBC standards (including environmental, social, and governance issues) is extremely low, especially with companies operating exclusively in the domestic market. Chinese laws regulating business conduct are limited in scope, often voluntary, and frequently ignored when other economic imperatives compete with RBC priorities. In general, China suffers from the lack of independent NGOs, investment funds, worker organizations/unions, or other business associations that actively promote or monitor RBC issues.
The recently implemented Foreign NGO Law restricts certain NGO activities and remains a concern to U.S. organizations, especially with respect to its limiting influence on the promotion, development, and implementation of RBC and corporate social responsibility (CSR) practices. It is especially challenging for U.S. investors looking to partner with Chinese companies or expand operations with Chinese suppliers, when few Chinese firms meet internationally recognized standards in areas like labor and environmental protection and manufacturing best practices.
Despite these restrictions, Chinese officials increasingly place emphasis on protecting the environment. This priority was highlighted in the 13th Five Year Plan, which highlighted sustainability as a key area for Chinese companies to enact CSR initiatives.
In 2014, China also signed a memorandum of understanding (MOU) with the OECD to cooperate on RBC initiatives. However, the MOU does not require or necessarily mean that Chinese companies will adhere to the OECD Guidelines for Multinational Enterprises. Industry leaders have pushed to establish a national contact point or RBC center, a key initiative of the OECD guidelines, and in 2016, China’s Ministry of Commerce launched the RBC Platform to raise awareness of RBC issues.
China participated in the OECD’s Global Forum on RBC in 2014 and 2015, including hosting a workshop in Beijing in May 2015. Policy developments from the workshops included incorporation of human rights into social responsibility guidelines for the electronics industry; referencing the United Nations Guiding Principles on Business and Human Rights; mandating social impact assessments for large footprint projects; and agreeing to draft a new law on public participation in environmental protection and impact assessments.
The MOFCOM-affiliated Chinese Chamber of Commerce of Metals, Minerals, and Chemical Importers and Exporters (CCCMC) also signed a separate MOU with the OECD in October 2014 to help Chinese companies implement RBC policies in global mineral supply chains. In December 2015, CCCMC released Due Diligence Guidelines for Responsible Mineral Supply Chains, which draw heavily from the OECD Due Diligence Guidelines. China is currently drafting legislation to regulate the sourcing of minerals, including tin, tungsten, tantalum, and gold, from conflict areas. China is not a member of the Extractive Industries Transparency Initiative (EITI), but Chinese investors participate in EITI schemes where these are mandated by the host country.