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Interpreting the social responsibility of central SOEs in the new era

source:goldencsr    date:2024-10-11 11:34:30

On June 4, 2024, the State-owned Assets Supervision and Administration Commission of the State Council (SASAC) issued the Guidelines to the Central State-owned Enterprises Directly under the Central Government on the High-standard Fulfillment of Corporate   Social Responsibility in the New Era (hereinafter referred to as the Guidelines). This document follows the milestones set in 2008 and 2016 and represents another significant document by SASAC to promote the social responsibility of central stat-owned enterprises(SOEs). It is also a guiding document for central SOEs to fulfill social responsibilities since the establishment of the Social Responsibility Bureau of the SASAC in 2022.

Currently, the social responsibility management and practices of central SOEs have achieved a significant leap in both "quality" and "quantity." They have accumulated rich practical experience. Overall, they have reached a leading level in China, with some aspects ranking at the forefront internationally. Faced with the new missions, and new tasks in the new era, central SOEs need to "jump and reach higher" to a new level, continuing to lead and set examples among various market entities. Against this backdrop, the Guidelines, with "new era" and "high standards" as the general principles, focuses on the deployment and arrangement of the corporate social responsibility (CSR) work of central SOEs in the new era from the aspects of target requirements, content of CSR fulfillment, and promotion mechanisms. The core focus of this document revolves around the concept of "high standards."

Overall Requirements: central SOEs should focus on enhancing functional value

Noble mission and high sense of responsibility

The new era signifies that China's economic and social development has entered a new historical stage. The 20th National Congress of the Communist Party of China(CPC) has initiated a new journey of comprehensively building a modern socialist country and promoting the great rejuvenation of the Chinese nation with Chinese path to modernization. The Guidelines, emerging in this context, is based on the core philosophy and fundamental principles of the noble missions and high sense of responsibility that central SOEs bear in the new era. This guiding ideology can be deeply interpreted from two dimensions.

Firstly, it is the mission and responsibility to remain true to the original aspiration. Looking at the origin of the corporate social responsibility movement in the West, it developed to address negative externalities and maintain the social ecology on which companies depend for survival. Marxism proposed the concept of replacing capitalist private ownership with socialist public ownership, which systematically resolved the issue of negative externalities in publicly owned enterprises. Therefore, central SOEs are essentially an organic unity of economic, political, and social attributes. They are inherently born to serve the interests of society, and develop for the benefit of all the people. It is their innate duty to be responsible for the country, society, and the people. The Guidelines proposes to carry out social responsibility around the mission and central work, reminding central SOEs to adhere to their original mission.

Secondly, there are new tasks in the new journey of the new era. The new era and new journey have endowed central SOEs with new missions and tasks: central SOEs must firmly grasp the overall goal of strengthening, optimizing, and enlarging state-owned capital and SOEs, adhere to the general principle of the Party's overall leadership over central SOEs, actively serve the overall requirements of national strategies; and always focus on improving core competitiveness and enhancing core functions; they should effectively give full play to their technological innovation, industrial control, and safety support in building a modern industrial system and forming a new development pattern. The functional positioning and new missions and tasks of central SOEs endow them with higher mission and responsibilities, requiring central SOEs to pay more attention to enhancing functional value, achieving a high-level integration of economic, political, and social responsibilities, and ensuring the organic unity of the three. This approach will help maximize the creation of comprehensive economic, social, and environmental values, and better serve the overall Chinese modernization.

High target requirements

The Guidelines clearly proposes two phased targets and tasks for the years 2025 and 2030. By 2025, a more standardized and mature system and deepened integration mechanism for the CSR work of central SOEs will be formed, with a number of outstanding models and typical patterns emerging. Firstly, further improve the CSR work system of central SOEs, including management systems, practice systems, disclosure systems, and evaluation systems; secondly, fully integrate the concept of social responsibility into corporate strategy, major decision-making, and corporate culture building, organically merging it with corporate operation and management. This phase is to consolidate the foundation of CSR fulfillment and solidify the foundation of high-quality development of central SOEs.

By 2030, the functional value of central SOEs will be further enhanced, serving economic and social development and the people's needs for a better life more effectively and comprehensively. It will play a greater role in the process of modernization while achieving better development. This phase can be understood as giving full play to functional value, highlighting the quality and efficiency of serving the overall situation, and better reflecting the status and role in serving national strategic goals and the overall modernization.

The two phased targets take the "functional value" of central SOEs as the core object and link, providing a general grasp to understand the core issues of the motivation, connotation, and scope of central SOEs' social responsibility. The two phased targets and tasks are orderly, steadily advancing, and looking to the future, which not only conforms to the current reality of central SOEs' CSR performance but also complies with the general laws and frontier trends of social responsibility development. They point out the direction of central SOEs to base themselves on their actual characteristics, give play to the functional value of central SOEs, and create a model with Chinese characteristics, putting forward higher requirements for central SOEs to take the lead and set an example among various market entities.

Responsibility content: from self-development to global sustainability

The Guidelines constructs a progressive and mutually reinforcing system of central SOEs' responsibility content from 12 major contents in four dimensions, from corporate self-development to social development and people's needs, and then to global sustainable development. Among them, there are seven places that require central SOEs to "take the lead," "be a model," and "guarantee the bottom line" in fulfilling responsibilities. The content level is richer, and the specific requirements are higher and more practical.

High-quality development

Central SOEs should effectively respond to the expectations and demands of core stakeholders, create a model for CSR fulfillment with the enterprise's own characteristics, and consolidate the foundation of high-quality corporate development.

First is the concern for stakeholders. The stakeholder perspective is the theoretical basis for the development of modern corporate social responsibility and is also the focus and starting point for companies to fulfill their social responsibilities. The clauses, such as, "Compliance, integrity, and honest operation" "Continuously increasing high-quality supply" "Building a solid defense line of safety emergency " "Building a harmonious labor relationship" clarify companies’ responsibilities to core stakeholders such as regulatory authorities, partners, consumers, and employees. These stakeholders are closely related to the daily operation and management activities of a company, forming key links in a company's value chain. Therefore, the aforementioned responsibilities are the statutory obligations and basic responsibilities that central SOEs, as important market entities, must fulfill. They are also the basic premise for promoting the high-quality development and high-standard fulfillment of social responsibilities of central SOEs.

Second is to create a characteristic model for companies. Since the main business types of central SOEs are diverse and the central tasks are different, the expectations and demands of the diverse stakeholders they face are also very different. Therefore, the high-standard CSR fulfillment by central SOEs should also be based on their actual situation and industry characteristics, create a path and model with corporate characteristics, and better coordinate the organic integration and positive interaction between high-standard CSR fulfillment and their own high-quality development.

High functional value

The functional positioning of central SOEs is to actively serve major national strategies and consciously serve the overall work of the Party and the state. The functional value played by central SOEs based on their functional positioning constitutes the CSR content with unique characteristics of central SOEs.

First is to enhance the ability to serve economic and social development. As the "main pillar" of the national economy, central SOEs play a role of technological innovation, industrial control, and security support in building a modern industrial system and a new development pattern. The Guidelines precisely proposes the CSR content of "vigorously promoting technological innovation", "focusing on strengthening industrial leadership" and "providing strong security support" from the perspective of central SOEs’ "three major roles," highlighting the unique functional value and arduous mission of central SOEs in enhancing the strategic support capacity of the state-owned economy and better serving economic and social development.

Second is to improve the capability of serving people's better life. Promoting Chinese modernization and achieving a harmonious coexistence between man and nature are its distinctive features, and achieving common prosperity for all is its essential characteristic. On the one hand, central SOEs are key units of carbon emissions in China and must play a leading and exemplary role in promoting green and low-carbon transformation, developing a green economy, and implementing China’s "30∙60" decarbonization goal. They should actively promote the initiative of building a beautiful China, and ensure the ecological wellbeing of the people. On the other hand, as an important material basis for the Party to lead the people to achieve common prosperity, central SOEs hold the "economic lifeline" and " advanced equipment for the country " and should give full play to their main responsibilities and advantages, creating more social wealth while deeply implementing regional strategies, coordinated regional development strategies, and rural vitalization strategies. They should actively drive employment and income growth for the people, participate in and support public welfare and public service development, and play a greater role in resolving issues of unbalanced and insufficient development and promoting common prosperity. The Guidelines proposes that central SOEs should help improve the standard of people's good life from three aspects: "accelerating green development," "supporting comprehensive rural vitalization and coordinated regional development," and "actively serving livelihood projects."

High sustainability

Central SOEs should actively respond to internationally accepted rules, demonstrate the CSR image with China's characteristic, contribute to global sustainable development, and cultivate new advantages in international competition and cooperation.

The first is to highlight Chinese characteristics. As the national team and mainstay of Chinese enterprises "going global," central SOEs bear the important responsibility of promoting global sustainable development and building a community with a shared future for mankind. On the one hand, the central SOEs overseas should take the lead in implementing global initiatives such as the Global Development Initiative, Global Security Initiative, and the Belt and Road Initiative, as well as the United Nations 2030 Agenda for Sustainable Development, during their overseas CSR fulfillment. They should contribute to an open world economy and actively promote the building of a community with a shared future for mankind. On the other hand, central SOEs should focus on localized operations, respect local laws and culture, contribute Chinese wisdom and strength, promote the development of local social welfare, demonstrate the image of a responsible major country, tell Chinese stories well, and convey the voice of China.

The second is to align with international rules. With ESG becoming the latest "international language" in the field of social responsibility, central SOEs should "effectively strengthen environmental, social, and governance efforts," actively respond to international social responsibility rules, and adhere to responsible dialogues with the international community. They should integrate social responsibility theory with the distinctive CSR practices of central SOEs, and enhance China's discourse power in the field of international social responsibility. The Guidelines further clarifies the relationship between the CSR work and ESG work of central SOEs, requiring them to incorporate ESG work into the overall CSR management, actively grasp the opportunities and challenges brought by ESG development, and continuously improve their competitiveness in the international market.

Guarantee mechanism: a five-in-one coordinated advancement

To ensure effective implementation, the Guidelines clarifies the promotion and guarantee mechanism for the high-standard CSR performance by central SOEs. By establishing a "five-in-one" coordinated advancement mechanism that includes high-position promotion, high-efficiency collaboration, highlighting practice, high transparency, and high-level supervision, a complete closed-loop management is achieved.

High-position promotion

Firstly, to strategically value the new round of economic globalization characterized by sustainable development. CSR, ESG, and sustainable development are increasingly integrated into the development process of the global economy, becoming important features of the new round of economic globalization and giving birth to the development of sustainable economic globalization. Sustainable economic globalization is becoming an important part of a once-in-a-century change, which aligns well with the concept of a community with a shared future for mankind. Therefore, actively responding to sustainable economic globalization is the due course for central SOEs, and it requires the leadership of central SOEs to place great strategic emphasis on social responsibility and sustainable development work.

Secondly, to clarify the role of senior management of central SOEs to provide strong guarantees for sustainable economic globalization. Cultivating CSR competitiveness is a long-term and systematic project that requires the senior management of companies to truly value CSR and sustainable development work, to promote it vigorously from top to bottom, reach consensus, and form a joint force. "Effectively leverage the leadership role of the Party committees (Party groups) of central SOEs, with the main responsible comrades personally taking charge and incorporating CSR work into the important agenda." The Guidelines clearly emphasizes the significant role of the senior management of central SOEs in CSR work. The participation and attention of the senior management will further enhance the momentum of central SOEs in fulfilling their responsibilities, providing the most important guarantee for promoting the comprehensive integration and organic fusion of CSR with corporate operation and management.

High-efficiency collaboration

An efficient collaboration mechanism is a prerequisite for companies to strengthen internal forces and resource integration, and to improve the quality and efficiency of CSR work. It is conducive to coordinating the overall CSR work with specific work in various fields, achieving coordinated and efficient operation of all CSR tasks.

Organizational collaboration emphasizes the establishment of a sound leadership institution for CSR work, to plan and coordinate the promotion of major issues. A working mechanism with clear division of responsibilities, smooth coordination, and efficient operation should be established, and central SOEs with conditions should set up dedicated CSR organizations.

Resource collaboration involves implementing financial guarantees for CSR, strengthening the management of fund expenditures, enhancing the building of CSR talent teams, and providing financial and talent resource guarantees for the efficient collaborative work mechanism.

System collaboration includes establishing and improving a system for holding accountable for CSR initiatives, incorporating CSR work into strategic planning, encouraging the formulation of special CSR plans, and improving the annual planning and summary reporting system for CSR work in key areas.

Highlighting practices

Highlighting practices refers to those with distinctive features.

First, creating distinctive features for oneself. Central SOEs should base themselves on their actual situation, leverage the advantages of their main businesses, and create CSR brand projects and activities. They should build a unique management practice model, explore digital empowerment of management practices, and promote the CSR management practices towards branding, patterning, and systematization. For example, State Grid Corporation of China, China State Construction (CSCEC), China Resources (Holdings) Co., Ltd., and other pioneering central SOEs have launched the "Central State-owned Enterprise Social Responsibility Management Series," which systematically summarizes the distinctive features and models of central SOEs' CSR fulfillment, laying a solid foundation for building the CSR brand of central SOEs.

Second, showcasing the characteristics of central SOEs. Based on the position and role of central SOEs in our country's national economy, central SOEs must play a leading and exemplary role in fulfilling social responsibilities, take the lead and set an example among market entities, and showcase the characteristics of central SOEs. Central SOEs should demonstrate their responsibility and highlight their functional value in serving economic and social development and meeting the people's needs for a better life. They should also leverage the advantages of the industrial chain, act as the leader, drive the entire industrial and value chain to fulfill responsibilities together, and lead the initiative to shape a social responsibility ecosystem.

Third, leading Chinese characteristics. President Xi pointed out that many important elements of China's excellent traditional culture jointly shape the distinctive features of Chinese civilization, such as the social ideals of "pursuing common good for all" and "seeking harmony among all nations," the national sentiments of "cultivating oneself and governing the country" and "being responsible for the rise and fall," the economic ethics of "enriching the people and seeking the wellbeing of all" and "balancing righteousness and profit," and the ecological concepts of "uniting human and universe" and "all living things should flourish." These important elements provide a precious spiritual core for central SOEs to fulfill their social responsibilities and are an important source of wisdom for central SOEs to lead and create a Chinese characteristic CSR model. Central SOEs should leverage their think-tank advantages, actively participate in basic work such as social responsibility research, standard development, and index construction. Based on national conditions, they should inherit excellent traditional culture, draw on international beneficial experiences, and promote the construction of a Chinese social responsibility theory, management, practice, and evaluation system, so as to contribute Chinese wisdom and solutions to global social responsibility and sustainable development.

High transparency

First is communication system. It is necessary to enrich the forms and content of CSR communication, strengthen domestic and international communication on CSR fulfillment, deepen exchanges with stakeholders, and establish a responsible corporate image.

Second is reporting system. A standardized system for the regular CSR reporting preparation and release should be established, and special CSR reports in related fields should be encouraged, gradually forming a CSR reporting system led by CSR reports, supported by special CSR reports. CSR reports, ESG reports, and sustainability reports are comprehensive reports covering economic, social, environmental, and governance issues; special reports are those that deeply disclose the effectiveness of special issue management practices in key areas; there are also innovative disclosure forms of special reports, such as function value reports measured in monetary terms.

High-level supervision

First is supervision by the SASAC. The Guidelines clarifies the "top-down dual supervision" social responsibility work supervision mechanism of the SASAC and central SOEs. The SASAC gradually establishes and improves the functional value evaluation system of SOEs through benchmarking management, typical demonstration, special assessments, and comprehensive evaluations, thereby continuously improving the normalized and long-term supervision mechanism. It can be seen that the evaluation of the CSR work of central SOEs by the SASAC shows the embryonic form of a "1+N+X" evaluation system framework. "1" is the comprehensive evaluation, which measures and evaluates the functional value of companies through the establishment of a functional value evaluation system for SOEs, playing the role of "soft constraint" in setting benchmarks and examples for praise and rewards. "N" is the special assessment, which rigorously selects key issues and indicators, prudently sets assessment standards, and considers the differences in enterprise types by "one enterprise, one policy" assessment, playing the role of "hard constraint" with a bottom-line thinking. "X" is a diversified evaluation method and tool such as benchmarking management and typical leading.

Second is self-supervision and assessment. Central SOEs are required to establish and improve the supervision, management, and assessment and evaluation system for CSR work. They need to strengthen daily supervision, enhance incentives and constraints, and improve their CSR capability. Strengthening the internal assessment and evaluation of central SOEs is an effective means to enhance coordinated management, clarify the work responsibilities of various departments and units, and establish an efficient collaborative mechanism, which helps improve the quality and efficiency of CSR management through assessment, and promotes better functional value.

The author is Mr. Yin Gefei, Founder and Chief Expert of GoldenBee (Beijing) Management Consulting Co., Ltd.