| State Grid Corporation of China: Leading the Development of CSR in China |
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| 2009-05-13 16:17 CSR in China, China WTO Tribune |
The State Grid Corporation of China (SGCC) was the first large state-owned enterprise in China to publish a CSR report and the first Chinese enterprise to consider its CSR strategy through a process involving all staff members. In so doing, it established a CSR management system, and was one of the first Chinese enterprises to draw up guidance for CSR implementation.
SGCC is a major Chinese state-owned enterprise crucial to providing a safe, cost-effective, clean and sustainable energy supply to the nation: its core business is building and operating power grids. SGCC provides power to over 1 billion people in 26 provinces, autonomous regions and municipalities directly under the jurisdiction of the central government – equivalent to 88 per cent of Chinese territory – and has a work force of 1,486,000 employees. In 2007, SGCC 's core business revenue reached 1.0157 trillion yuan, with total assets of 1.3658 trillion yuan. SGCC ranked the 29th in the Fortune Global 500 in 2007 and is the world’s largest public utility enterprise.
The first CSR report published by a large SOE in China
In March 2006, SGCC became the first SOE to publish a CSR report in China, titled "2005 State Grid Corporation of China Corporate Social Responsibility Report". The report outlined SGCC’s commitment to fulfill its social responsibilities and was well received by leaders from central government. The media also saw it as a pioneering study which would benefit the development of large state-owned enterprises, and Xinhua News Agency was inspired to publish a report entitled CSR commitments of the State Grid Corporation of China and other large state-owned enterprises. Other SOEs soon followed suit and began their own process of reviewing CSR policy and publishing reports, which were discussed at a conference initiated by SGCC in January 2007.
Power grid businesses and CSR
According to China’s situation, SGCC made a series of CSR recommendations:
Firstly, it should be stressed that businesses don’t necessarily need to perform new operations, but rather, they need to conduct normal operations in different ways. In terms of CSR, this means effectively managing a company’s operations on society and the environment to ensure safe, economic and clean power supplies to customers. SGCC’s report analyses CSR in terms of its own operations and in doing so defines its own aims and responsibilities:
* “Safety refers to promoting the whole process of electricity production, transmission and use, ensuring the safety and health of staff and customers” ;
* “Efficiency refers to the efficient development and utilization of energy and the efficient utilization of resources, ensuring the efficient construction and operation of a power grid, and striving to guarantee a reasonably priced electricity supply” ;
* “Green refers to saving energy and resources, the development and use of green energy, and environmentally-friendly construction and operation of the power grid” ;
* “Harmony refers to the harmonious development of society and businesses, achieving sustainable development between businesses and society, and promoting harmony among humans and between man and the nature.”
Secondly, the key to determine the content of CSR is to properly understand a company’s role in economic and social development. SGCC plays a crucial role and therefore bears important responsibilities in Chinese society:
* As the main provider of a national energy strategy, SGCC is responsible for optimizing the allocation of energy resources and ensuring the sustainable development of the economy and the society;
* As the operator of power grids and the main supplier of safe and reliable power, SGCC is responsible for meeting the rapidly growing electricity demands of society, safeguarding the social public security and protecting the social order;
* SGCC is responsible for ensuring that the state assets that it operates and manages (valued at over one trillion yuan) maintain their value to create social wealth and enhance the country's economic strength and competitive position within the industry;
* SGCC is responsible for providing power to urban and rural regions throughout China to boost and facilitate development;
* SGCC is responsible for developing its 150 million employees and inspiring their creativity;
* SGCC is responsible for ensuring open and transparent operations in accordance with the law, adhering to government regulations and social supervision;
* SGCC is responsible for promoting efficient use of resources, energy-saving strategies and environmental protection;
* With such a large workforce and impact on society, SGCC is responsible for promoting an honest and trustworthy approach to its business operations.
Thirdly, a company’s fundamental CSR goals are to promote corporate development with regard to the economy, the environment and society. It's strategy and operation should give full consideration to stakeholder’s expectations and ensure that effective management results in a positive impact on society and reduced impact on the environment. SGCC has outlined six areas to achieve this:
* Strive to provide safe, clean, reasonably-priced energy across China;
* Strengthen management processes to the satisfaction of stakeholders, to minimize damage to the environment and to achieve the aims stated above;
* Promote technological innovation to advance the causes stated above;
* Strive to promote joint development initiatives with stakeholders;
* Improve communication and exchanges with stakeholders, companies and customers to facilitate mutual learning and strategies to deal with social and environmental risks;
* Establish a global vision, drawing on international experience in sustainable development and using global resources to enhance CSR commitments.
Fourthly, CSR is an important mechanism to support learning, innovation and sustainable development. Learning refers to the process of knowledge transfer between companies and stakeholders. Innovation means developing ideas and strategies to deal with the social and environmental risks through stakeholder engagement. Sustainable development refers to the process of devising CSR commitments, in which enterprises focus on the long term, for the benefit of stakeholders, the enterprise and society. For individual enterprises, CSR commitments can result in the transformation of a company. For the sector, these commitments can help to ensure better allocation of social resources.
Fifthly, a CSR strategy can be structured around three basic questions: “What kind of social responsibilities does this business need to fulfill? How can it do this and why should it improve its CSR strategy?” When SGCC applied these questions to its own operations, it realized that there are several key social responsibilities that it needed to fulfill:
Common responsibilities to all stakeholders, including
* Scientific development to promote efficient use of energy and resources;
* Safety in the production process of a reliable, high quality power supply;
* Excellent management processes to promote technological progress;
* Effective communication and exchanges between the company and its stakeholders;
* Exchanges and networking with companies internationally to learn from best practice in the field of CSR and constantly raise CSR commitments.
Specific responsibilities relating to specific stakeholders: as a solely state-owned enterprise, SGCC belongs to the general public. These responsibilities include a customer-service oriented approach, improving developmental opportunities for staff, environmental protection and ensuring that services in rural areas are delivered to an equally high standard as in urban areas.
Figure 1 SGCC’s CSR strategy
SGCC’s CSR Commitments: involving all staff in the process. SGCC believes that enterprises are social cells and that to fulfill their social responsibility is an essential requirement which companies must embrace to survive and develop in the modern global age. Since it was founded in 2002, SGCC has strictly followed its moto of “striving to serve the country, customers and business partners and promote economic and social development through the pursuit of excellence”. In developing the business, SGCC also aims to serve society and promote sustainable, economic growth.
In May 2007, SGCC wrote an additional strategy paper, titled Further Deepening SGCC’s Social Responsibility which was a comprehensive analysis and review of all aspects of the business from financial management and the construction and operation of the power grid to support and development opportunities available to staff. All staff from senior management to junior workers were consulted and involved in the process, raising awareness of individual and corporate responsibilities.
Realising the integration of CSR into corporate operational strategy
In December 2007, SGCC published the first CSR implementation guidance in China, SGCC Guidance for the Implementation of CSR (hereinafter referred to as “The Guidance”). The Guidance provides a systematic summary and theoretical explanation of SGCC CSR practice and important measures to promote CSR standards more widely in companies across China.
The Guidance clarifies key CSR terms, specific meanings, basic principles and management systems. It provides information on what constitutes CSR, why it is in a companies’ interests to fulfill CSR, what kind of CSR policy companies should adopt as well as information on methodology, basic principles and an integrated framework to enable enterprises to establish their own CSR management mode.
The Guidance states that “The implementation of CSR means that an enterprise abides by laws, adheres to regulations, and respects business ethics. It effectively manages its relationship with stakeholders, minimizes impact on the natural environment, and maximises profitability for the social and economic benefit of society’’ Based on this, the Guidance suggests devising a system of CSR key terms, to enable workers to better comprehend CSR by showing how it can be logically integrated into a management process. It outlines a basic strategy to establish and improve management and operational procedures (similar to those stated above) as well as a system to promote indicators and performance evaluation.
Enhancing business competitiveness through effective implementing of CSR management
Considering the effective management of the impacts of a company’s operations on society and the environment as well as its economic development, SGCC actively explored an overall CSR management strategy to enhance the company's core competitiveness.
Developing a scientific orientation
SGCC recognises the importance of managing stakeholders’ expectations in order to continuously deepen, enrich and perfect corporate practice. Only when SGCC fully incorporates its CSR strategy into its operational practice can the following basic questions be scientifically answered:
Why does the company exist?
How should it develop?
Who will benefit from its development?
SGCC recognises and emphasizes the importance of stakeholders to the development of company strategy: that understanding and satisfying the expectations of stakeholder’s needs to be at the heart of a company’s strategy and that company development should aim to stimulate enthusiasm and creativity amongst stakeholders. Company achievements should be shared with employees and effectively communicated to investors, customers, partners and society.
Development that adds value
Having researched and refined its own practice of CSR, SGCC has recognised the value that CSR has added to social and economic development which transcends a business model that focuses purely on profit. One only has to look at the recent sustained and rapid economic growth which have successively out-performed previous achievements. The revenue of the company's main business reached 1.0157 trillion yuan in 2007, a year-on-year increase of 18.9%; labour productivity reached 278 Thousands yuan per person per year, up 16%. From 2003 to 2007, profits increased from 6 billion yuan to 47.1 billion yuan; and the net capital yield increased from 0.57 per cent to 6.66 per cent. SGCC’s achievements were recognised by the State-owned Assets Supervision and Administration Commission (SASAC) of the State Council who gave an award for “Excellence in Performance”.
Smoother communication
A common problem facing Chinese enterprises is their weak performance in communication. Communication at all levels – from internal communication with staff to external communication with shareholders, customers, stakeholders and government – all need to be significantly strengthened and enhanced. Communication helps to build trust; exchanges promote innovation, and cooperation helps to create value. Effective communication is an important driving force in a company’s development. CSR provides the tools, channels and means for companies to improve effective communication through the introduction of common standards.
As an enterprise with a natural monopoly, SGCC should indeed be leading the way in consciously striving to better fulfill its social responsibilities, promote open and transparent operations, establish and improve communication channels at all levels. In this respect SGCC has also been recognised by the government and community, and honours obtained include“Most Responsible Enterprise,” “Award for promotion of CSR,” “People's Social Responsibility Award,” “Chinese Social Responsibility Award,” and “Outstanding Enterprise for CSR in China.”
Continuously striving to improve CSR standards
More recently the Chinese government has increased requirements for enterprises to fulfill their social responsibilities. In 2008 the SASAC of the State Council published The Guidelines on Commitments of Social Responsibilities by Large state-owned Enterprises for all large state-owned enterprises to refer to in devising their own CSR commitments.
SGCC, with its rich and successful experience of implementing CSR policy in its day to day operations is well placed to take the lead in promoting CSR theory and innovation to continue to improve management, research, public welfare, culture and knowledge, which in turn will help with the continued social and economic transformation across China.
About the Company:
SGCC was founded on Dec. 29th, 2002 as a pilot state-owned corporation by the State Council.SGCC was ranked the 24th in the Fortune Global 500 in 2008. It is the world's largest public utility enterprise.
SGCC is a backbone state-owned enterprise that may affect national energy safety and economic lifelines.Its core business is to build and operate power grids and provides safe, cost-effective, clean and sustainable energy power supply for the development of the society. SGCC's service area covers 26 provinces, autonomous regions and municipalities directly under the jurisdiction of the Central Government which equals to 88% of the national territory. It has 1.486 million staff..
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