Corporate social responsibility: a legal framework for socioeconomic development in Tibet.

Author:Fletcher, Chris
Position:III. Applying CSR to Tibet through Conclusion, with footnotes, p. 151-179

    In the Tibetan context, using all of the above-mentioned CSR tools is vital, but two tools in particular deserve special focus: stakeholder engagement and community investment.

    a. Stakeholder Engagement

    When a company, whether State-owned, private, or foreign, wishes to start a new investment or improve upon an existing operation, stakeholder engagement is crucial. It allows the company to understand how the business opportunity will be received in the community in which it will take root and the associated benefits and challenges. If done properly, it can allow the investment to occur in ways that meet the concerns and desires of both the company and the community of stakeholders with the end result of maximizing social value while minimizing societal harm.

    Tibet is no different than any other locale in that Tibetans want to have agency and a voice in determining how business investments where they live will transpire. Therefore, companies seeking to do business in Tibet must engage Tibetans around the best ways to approach the business opportunity in each local Tibetan area. The goal is to create a space in which Tibetans can be active, ongoing participants whose consultation and consent (184) is a prerequisite to the creation, implementation, and monitoring of any business opportunity which affects them. The key is to produce mechanisms for stakeholder engagement that focus on the importance of utilizing local knowledge to create successful business ventures. (185) As noted above, (186) Ruggie states that conducting human rights due diligence (by utilizing stakeholder engagement) must be context-specific, and must take into account differences in local language. (187) Therefore, a business plan designed in Lhasa for a Tibetan community will not work for a Chinese community in Shanghai; similarly those plans developed in Beijing will not work in Shigatse. Rather, successful plans must grow out of the area in which they will later operate and must therefore be location-specific. For many companies in China this is a new concept; (188) for others there is a desire to learn how to use international best practices to respect human rights. (189) In either case, utilizing this concept is vital for business ventures to maximize the chance for success.

    The promotion of stakeholder engagement can be found in numerous sources, but those most applicable to Tibet are found in both Chinese and international law and norms.

    i. Chinese Legal Sources for CSR and Stakeholder Engagement

    The emergence of Chinese CSR law must be understood within the context of socioeconomic challenges associated with economic development, cultural values and norms, and China's desire to be part of global economic norms. These challenges (including, among others, land confiscation by companies and local governments, the release of unsafe products into the marketplace, illegal labor practices, and uncontrolled pollution) have led to increased protests and unrest throughout the country. (190) According to Chinese data, these "mass group incidents"--which include all types of group protests from sit-ins, strikes, group petitions, rallies, demonstrations, marches, traffic-blocking and building seizures, public melees, riots, and inter-ethnic strife--have ballooned from about 8,700 incidents in 1993, to 32,000 in 1999, to about 50,000 in 2002, surpassing 58,000 in 2003, (191) and to 87,000 in 2005. (192)

    In an effort to alleviate this social tension, the government (in addition to passing new legislation and promoting economic and social programs) began a public campaign for Social Harmony in 2005. (193) From a cultural perspective, this campaign signaled a desire to restore order and balance within the country by drawing on the traditional Confucian values of social harmony. (194) Toward this end, Chinese business leaders began to view CSR as a central tool to utilize in this effort. (195) Also at play was Chinese awareness about the need to align China with global business developments or else risk diminishing China's competitive advantage, as failing to embrace CSR could result in a variety of sanctions. (196)

    Out of this confluence of forces came two sources (197) of Chinese law that promote CSR principles in general, and stakeholder engagement in particular. The first source applies to those companies that are listed in the Chinese Securities Market, while the second applies to Chinese State-owned companies.

    The first source, Chapter 6 of the Code of Corporate Governance for Listed Companies (198) requires that companies respect the interests of stakeholders. The English translation reads:

    Chapter 6. Stakeholders

    1. A listed company shall respect the legal rights of banks and other creditors, employees, consumers, suppliers, the community and other stakeholders.

    2. A listed company shall actively cooperate with its stakeholders and jointly advance the company's sustained and healthy development.

    3. A company shall provide the necessary means to ensure the legal rights of stakeholders. Stakeholders shall have opportunities and channels for redress for infringement of rights.

    4. A company shall provide necessary information to banks and other creditors to enable them to make judgments and decisions about the company's operating and financial situation.

    5. A company shall encourage employees' feedback regarding the company's operating and financial situations and important decisions affecting employees' benefits through direct communications with the board of directors, the supervisory board and the management personnel.

    6. While maintaining the listed company's development and maximizing the benefits of shareholders, the company shall be concerned with the welfare, environmental protection and public interests of the community in which it resides, and shall pay attention to the company's social responsibilities.

      While this code contains broad pronouncements that are vague as to implementation, it is encouraging because all companies listed in China must not exclusively focus on shareholder primacy, as western countries often demand, but instead also engage with the full range of their stakeholders, including Tibetans for those companies operating in Tibet.

      The second source of law is the revision of the Company Law of the People's Republic of China, which took effect on January 1, 2006. Article 5 (199) requires companies to comply with "social morality and business morality" and to "bear social responsibilities." On January 4, 2008, this general CSR prescription was strengthened through implementation guidelines issued by the State-owned Assets Supervision and Administration commission (SASAC), the Chinese oversight organization for State-owned enterprises. (200) The guidelines reinforce the overarching need to develop a harmonious society through the use of CSR. Section 2(7) states that integrating CSR into business practices will help "build a harmonious relation between the enterprise and its employees ... [and] ... contribute to the China's [sic] undergoing program of building a harmonious society." (201)

      Stakeholder engagement is placed at center stage in sections 3(9) and 4(18). Section 3(9) states that corporate governance should be improved through "democratic decision-making" and section 4(18) requires "... a regular communication and dialogue mechanism concerning CSR ... [to] ... be established, so that the enterprise can have feedback from its stakeholders and give its response quickly. All the information and feedback should be publicized to receive supervision from stakeholders and society." (202)

      It goes without saying that what will give the above legislation value and meaning is proper implementation and enforcement, and it is unclear to what extent this has occurred. (203) Widespread problems are frequently encountered in factory settings in China, suggesting that implementation and enforcement will be challenging. For example, CSR codes of conduct are normally used, "but double-bookkeeping, fraud, and audit manipulation and evasion are common". (204) At the same time, however, having the outer parameters of the legal framework in place is a significant first step toward CSR promotion and practice and something that very few western countries have achieved. (205) The existence of these Chinese laws should allow for a harmonization with the international legal concepts of stakeholder engagement discussed below, and thus utilization in the Tibetan context.

      ii. International Law: Free, Prior, and Informed Consent

      In human rights terms, stakeholder engagement is often referred to as Free, Prior, and Informed Consent (FPIC): the principle that a community has the right to give or withhold its consent to proposed projects that may affect it. (206) "Consent must be freely given, [acquired] prior to implementation of activities and be [established] upon an understanding of the full range of issues implicated by the activity or decision in question." (207) FPIC is found in several international regulatory instruments, some of which China has ratified and others to which China is not yet a party.

      International Convention on the Elimination of All Forms of Racial Discrimination

      FPIC is addressed in the International Convention on the Elimination of All Forms of Racial Discrimination, to which China is a member country. (208) Like other conventions, this treaty has a committee body--the Committee on the Elimination of Racial Discrimination (CERD)--that offers general recommendations and comments as authoritative interpretations of the treaty's meaning. Although these do not have binding legal effect, they are nevertheless instructive as to the ways the treaty should be utilized and implemented. CERD therefore provides a legal basis for the obligation of China, Chinese companies, and foreign investors to adopt an FPIC approach to investment in Tibet.

      In 1997, CERD offered general recommendations on State...

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