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Report: Work to Be Done for China CSR

Tough economic times have made it harder for textile and apparel companies in China to boost corporate social responsibility.

BEIJING — Tough economic times have made it harder for textile and apparel companies in China to boost corporate social responsibility, but the industry remains committed to improving, according to a new report from a government-affiliated industry association.

This story first appeared in the June 29, 2012 issue of WWD.  Subscribe Today.

The report, released at a conference in Shanghai on June 22, details countrywide efforts over the past year to improve compliance with labor and environmental laws across China’s textile and apparel industry. The China National Textile and Apparel Council will discuss the report in a day-long conference in the suburbs of Shanghai, where investors are plotting to develop a research and development hub to create cutting-edge innovative products.

The council’s new report details ongoing challenges in working with the industry to improve its corporate social responsibility efforts in real terms with meaningful results, not just on paper.

“In 2011, a complex situation where delightful advancements were mixed with disheartening setbacks continued to feature the social responsibility development in China,” the report said.

“On the one hand, over 1,000 enterprises in China from almost all sectors of the industry issued their CSR reports in 2011, a record high in number; on the other hand, an emerging misconception was that many enterprises began to equate their social responsibility with releasing a delicately made CSR report,” the CNTAC wrote.

The organization began a concerted effort to engage the industry in CSR programs in 2005 and says it has seen steady progress since. That progress apparently slowed, however, with the global economic meltdown in 2008 and stagnant economies worldwide since. Though China’s own economic growth and production continue to grow at rapid rates, demand for products from the U.S. and Europe has remained sluggish, leading to fewer orders, mass factory closures and less attention to details that can be costly for producers.

“Evidently, although CSR has apparently become a keyword in the Chinese economy and society, its development in China unfortunately tended to appear superficial, utilitarian and externalized,” the report noted. “All stakeholders of the Chinese industrial sectors are responsible for reversing this trend, and industrial organizations ought to and are most able to play the pivotal role in guiding enterprises.”

Speaking to the general economic situation, the organization noted that while China’s textile and apparel sectors remain profitable and there are gains in production and sales overall, lost momentum from the international economic slump increased pressure tremendously on companies to stay afloat and make money.

Overall output from more than 35,000 medium and large sized textile production companies increased by more than 25 percent in 2011 compared from a year earlier, but the growth rate was down nearly 5 percent from the previous year, according to the association. It’s a trend of slowed growth that has been witnessed throughout most sectors of China’s economy and one that has worried analysts and investors, although few are predicting a crash.

New investment in textile and apparel production also increased last year, but again, more slowly than before. The report noted particular growth in investment in western parts of China, where the government has fostered policies to promote inland investment. That has drawn businesses away from traditional manufacturing hubs like the Pearl River Delta. At the same time, rising costs of raw materials and labor have pushed up pressure on producers even higher.

The report noted a bright spot economically with new growth in China’s domestic consumer market. As foreign markets continue to slump, China’s homegrown buyers are increasing and textile makers are tailoring their wares to those buyers. The proportion of China’s textile and apparel production for domestic consumption increased by nearly 2 percent last year, “which indicated that the domestic market is playing an increasingly important role in supporting China’s textile industry,” according to the report.

So what does all this mean for creating more responsible production in China? The association painted a somewhat pessimistic picture, noting that, “In 2011, great changes of a series of macro factors brought a profound impact on the development of China’s textile and apparel industry, and meanwhile posed new opportunities and challenges for the social responsibility of the industry.”

Staying innovative and complying with best labor and environmental practices will take hard work and commitment from the industry, the report said. The group is recommending a series of measures, including strengthening disclosure and reporting, sharing ideas for compliance and better education about environmental laws, regulations and enforcement.

On the labor front, a study contained within the report recommended improving working conditions industry-wide, in part by really listening to what factory workers need and taking incremental steps, like finding ways to address the perennial problems of loneliness and boredom encountered by the millions of China’s young migrant workers who staff factory lines. Career development is also key.

“Many young workers think the company only sees issues from its own point of view and not from that of its employees,” the study found.

In closing, the CNTAC association set forth five steps to maintain the momentum on CSR, in spite of tough economic conditions: promoting and improving CSR management; placing more importance on environmentally clean supply chains; more study of the CSR concept; cross-sector cooperation, and more extensive research and work on the issue.