This morning, the China Daily reported that China’s Ministry of Commerce yesterday welcomed Carrefour’s statement that it opposes Tibet independence. At the same time, the Ministry of Commerce (MOFCOM) issued a statement that Carrefour currently hires more than 40,000 people in China (99% of whom are locals), has a sales turnover of nearly 30 billion RMB (US$4.29 billion), and 95% of products sold on the shelves are made in China.
When Carrefour entered the China market in 1995, it could not have imagined making such a statement, nor that the French President would personally intervene to protect its interests.
And yet Chinese views on Tibet have been consistent for all that time; nothing has changed since 1995. In fact, Tibet is an issue on which the government has always drawn considerable support from its citizenry. So why has Carrefour (and the world it seems) been caught so off guard?
This article suggests two basic shifts have occurred; i) China is no longer a factory, it is a market as well, and ii) Chinese consumers have a voice beyond China’s borders. Both shifts will have far reaching consequences.
Boycotting Carrefour: Boycotting the products of western companies in Asia is nothing new. Mahatma Gandhi successfully persuaded Indians during the 1920s and 30s to boycott British goods and buy local products instead. In the early 1980s, Prime Minister Mahathir launched a “Buy British Last” campaign in Malaysia over tuition fees. More recently, Indian activists successfully pressured Coca-Cola with a “Quit India” campaign in 2005 over allegations of water misuse.
Boycotts are nothing new in China either. In 1915, 1919 and again in 1931, China initiated campaigns against buying Japanese goods. And in 2005, aided by the Internet, Chinese netizens called for a boycott of all things Japanese. With greater access to the Internet, recent years have seen sporadic calls from netizens for action against mostly foreign companies (although local companies like clothing brand Semir have found themselves on the receiving end of Internet anger too).
So at one level the calls for a boycott against Carrefour over the last few weeks are not surprising. Yet despite our familiarity with such events, this one has induced the feeling that there is a disconnect with previous consumer campaigns; that difference (which has forced Carrefour to reconsider the meaning of responsible business practices) mirrors a truly global market for ideas and influence. This change has the potential to change the way we understand stakeholder relations to responsible business practices because the definition of responsible is contested.
For many years, one of the fundamental – but unspoken – assumptions underpinning ideas about social and environmental responsibility has been that Western companies are responsible (or have the potential to be responsible) and others are not. The definition of responsible was more or less agreed upon.
This is most clearly seen in the supply chain; where most advocates for better business practices believe responsibility lies with companies like Nike, adidas, Reebok, Gap Inc., Levi’s, Wal-Mart, Tesco and Mattel. Foreign stakeholders know that factories supplying goods to brands and retailers don’t comply with law, regulations and codes of conduct, but believe that the best way to ensure they improve conditions is to pressure global brands to leverage their power as buyers to stimulate change.
Outside the supply chain, the view that Western companies are responsible (or can be more easily pressured to be responsible) is evident when companies from the developing world (such as Lenovo or the China National Offshore Oil Corporation) purchase – or attempt to purchase – US or other global companies. An assumption – often stated – is that allowing such purchases is unwise because Chinese companies (in these cases) will export bad or irresponsible business practices. For example, when China Minmetals attempted to acquire Canada’s largest mining company Noranda in 2004, one of the loudest arguments from stakeholders in Canada was that Minmetals would export poor labour and environmental practices that would hurt Canadians.
Even liberal voices (such as those from within the labour activist community, including trade unions) have based their strategies for ensuring more responsible business practices on the assumption that stakeholders need to hold Western companies accountable for their practices at home and abroad. This assumption has proven to be effective for twenty years; ever since Jeff Ballinger started writing about conditions in Indonesian factories in 1988 stakeholders have assumed that to improve workplace practices in Asia it is most effective to pressure factory clients (i.e., Nike and others).
In a world where stakeholders have a common definition for responsible business practices, this strategy makes sense; labour activists or consumer campaign groups in Europe or North America are unlikely to have the influence or reach to force factories in Asia to change their behaviour. The strategy doesn’t make sense, however, in a world where stakeholders of equal importance disagree over what responsibility means.
The view that stakeholders generally agree on definitions of responsibility has underpinned and reinforced a Euro- and US-centred view that Western companies are the solution because they agree (or can be pressured to agree) on what responsibility means. Many stakeholders will disagree, but the unspoken assumption in all of this is that the West is good and the rest is bad (which is ironic because much of the rhetoric from Europe and North America is the complete reverse).
Jin Jing was attacked as she carried the Olympic torch through Paris. (Photo from ESWN)
The reasons for this assumption – that Western companies agree on how to define and have the power to be responsible and should use their power to pressure suppliers and business partners – are complex. First, the market is clearly larger in Europe and the US than elsewhere, so consumer pressure is more powerful there. Second, most investment originates in Europe and the US, so it makes sense to pressure companies investing offshore to be agents of change.
But there is also an assumption that Western companies can be pressured to change whereas others cannot. Even in Hong Kong or other parts of Asia, stakeholders overwhelmingly tend to put pressure on foreign companies to affect change; not their local partners.
My argument above, therefore, is that Western stakeholders have assumed a moral duty to ensure responsible business practices in the developing world (and specifically in China) in the absence of stakeholders in the developing world doing it themselves.
Strategically, this means that responsible practices in Asia (or China) are dependent upon foreigners pressuring foreign companies to in turn exert pressure over their suppliers and business partners. The assumptions underpinning this include the view that foreign direct investment overwhelmingly moves from the West to the East (e.g., from the US or Europe to China), and that the most important markets (where consumers have the most power) are in the West.
Responsibility in a changing world: In this second part I suggest that none of these assumptions make sense any more, and that the implications of this argument are that i) the West can no longer assume agreement on the term business responsibility, particularly in non-Western parts of the world, and ii) the fundamental but unspoken belief driving a lot of discussion and action on CSR (i.e., it is the role of Western stakeholders and companies to build a better world) is no longer relevant. When “cd huakai fugui” started listing French companies on China’s most popular BBS forum (Tianya) on 10 April, there was no hint that Carrefour was the target for consumer action. In fact, the first companies listed were luxury brands like Chanel, Dior and Cartier. The posting was – as is well known now – a response to an attack on Jin Jing (a young Chinese wheelchair bound fencing champion) as she carried the Olympic torch through Paris (see photo left). Pictures of a young man supporting an independent Tibet trying to wrestle the flame from Jin circulated widely in China, particularly on BBS and other sites where condemnation of the protest reached fever pitch.
While commentators in the West penned obituaries for the torch relay and pondered the enormity of China’s public relations disaster over Tibet, inside China the story was completely different. In fact, rather than a public relations disaster, the attack on Jin Jing simply provided more support for the Government’s view on Tibet and hardened public attitudes on i) the West’s perceived biases on China, ii) the Western media’s misreporting on China, and iii) the danger to China of calls for Tibetan independence. As Roland Soong noted on his ESWN blog: the pictures of the attack on Jin Jing set back any moderate discussion within China on Tibet by at least a generation.
The failure by the Western press to understand this reflects a wider malaise in China commentary and understanding. Seeing only frenzied netizens, the media missed a much more important story; that is, the fact that Chinese stakeholders are now in a position to define and shape perceptions on what is responsible. Whereas a free Tibet is a virtually uncontested cause célèbre in the West, it is not in China (in fact, it is just the reverse). Until a month ago, Chinese views on Tibet were mostly written off as inconsequential; this is no longer the case (as the Carrefour statement quoted at the start of this article shows).
I believe that the post by “cd huakai fugui” on Tianya has led to the emergence of different listening to Chinese voices.
Within a day, comments on the Tianya BBS mushroomed to include the names of other French businesses operating in China. Within days, a rumour circulated on Chinese BBS forums that Bernard Arnault, France’s richest man and CEO of LVMH (Moët Hennessy Louis Vuitton), had provided financial support to the Dalai Lama Foundation. Arnault, along with a French investment company, holds a 10% stake in Carrefour, and so Carrefour – with 2 million customers and 122 hypermarkets – was an obvious target of rage.
Carrefour and Arnault have since publicly and strenuously denied any support to the Dalai Lama. Whether they did or not is of little consequence here. Of more importance is the bigger picture; that old assumptions about who gets to determine and define social responsibility have been fundamentally challenged.
The widespread calls to boycott Carrefour and the large protests – sometimes numbering in the thousands – outside Carrefour stores in China is a reflection of a powerful challenge to how we define responsibility. For the first time, a Western company’s responsible business practices are being effectively challenged by people whose view of responsibility is totally at odds with stakeholders abroad; stakeholders whose views have almost always been given primacy over Chinese views.
The slogan reads “Say No to France!” (Photo from Moobol.com)
It is now almost certain that Carrefour and Arnault have not provided support to the Dalai Lama. Yet the truth of the events in China over the past two weeks is that Chinese stakeholders have shaped corporate notions of responsible practice. And they have shaped them in fundamental ways; French President Sarkozy has offered an apology to Jing Jing, as well as sent a special envoy to China to try and calm things down (proof surely of how seriously Carrefour and other French companies perceive Chinese stakeholders’ views).
On not understanding a changing world: The inversion of a traditional view that the West shapes what good practices should be in China has profound implications, which mainstream analysts have yet to understand. Just this week, Francoise Lemoine, of the French economics think-tank CEPII said that Carrefour’s prospects depend more on its “capacity to insert itself in the Chinese industrial fabric” than on “political phenomena”.
Suggesting that a company’s ability to ‘insert itself in the Chinese industrial fabric’ is not related to political phenomena is to ignore that the events in China over Carrefour include the Dalai Lama, Tibet’s future, the Olympics and China’s place in the world and are political at the most elemental level. The view that the protests in China are somehow removed from business assumes that business is somehow apolitical; it may aspire to be so, but surely the case in question here shows that a politically inspired mugging in Paris can spark a fire in China (and one that threatens to consume some of the goodwill and reputation Carrefour has built up over the last decade).
For the first time, the capacity of a company to insert itself into the Chinese industrial fabric relies more on what Chinese stakeholders believe (no matter how wrong or misguided many believe they are) than what companies independently think they should do. There is nothing that Carrefour (or LVMH) can do to salvage the situation now (and the analysts are probably correct when they say that Carrefour’s retail business won’t really suffer), but other companies should be watching very carefully.
Few companies have engaged with Chinese communities beyond a superficial level. Communication of CSR visions and strategies has been generally poor, and Chinese stakeholders have been increasingly asking whether foreign companies do CSR for stakeholders back home or for Chinese themselves. It’s a good question, and many companies would have to admit that it is for (more vocal and important) stakeholders back home. If anything, the anti-Carrefour protests show that the most vocal and important stakeholders may no longer be only in Europe and North America. And if that’s the case, those stakeholders may have entirely different views of what constitutes responsible business practice.
Giving money to charities or causes that make sense in Paris or New York may not only not make sense in other parts of the world (which are now important markets for companies), but might also result in significant actions that damage reputations and market share. It is now possible that in supporting stakeholders’ views and opposing an independent Tibet (which may be good for business in China), Carrefour will enrage stakeholders back home (which may be bad for business in France).
The world has heard Chinese stakeholders, and many have felt uncomfortable with the message. In an earlier time, these views (if heard at all) could have been easily sidelined. China is becoming an important market, but it also home to large and growing enterprises that are starting to purchase their clients, business partners, and brands or retailers. The have started to enter various sectors abroad and the next decade will see more Chinese companies entering major markets, either as brands (such as Li Ning in the sportswear market in the US), or by purchasing existing companies.
The boycott against Carrefour is symbolic of a new era. It is more urgent than ever for Western companies to understand stakeholder concerns globally and at a deeper level than ever before. The world is not a unified market; the views of Chinese and many Westerners over Tibet are incommensurable. And they will be incommensurable over numerous other issues. For companies seeking to be socially responsible, this is a not insignificant issue.
Conclusion: It is a cliché now to say that China (or Asia) matters. This usually means that we want China to think and act like the West. The anti-Carrefour protests are an example of the emergence of a truly global market in ideas and influence. Pressuring companies to be responsible may not be possible in the not too distant future. Major stakeholders are likely to clash more often on how to define responsible practices. Companies and stakeholders that fail to acknowledge this are destined to lose relevance as the focal point for influence shifts. Chinese consumers and other stakeholders have stood up and the Internet has provided them with a voice. Their purchasing power has given them a hearing. Story, as they say, is developing. ■