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Employers Urged to Think Beyond Profits

Researchers are urging society to rethink standards for good companies as the world moves from a traditional industrial economy to a knowledge-based one.

Jin Zhouying, a researcher on enterprise innovation with the Chinese Academy of Social Sciences, has been crying out for change.

"It is high time for us to have second thoughts about what makes a good employer," said Jin, who is trying to introduce a new system to assess enterprises in China.

Jin even challenges such widely accepted enterprise-ranking systems as the Fortune Global 500 and China Top 500, complaining that evaluating organizations only look at economic performance.

"They don't give much consideration to social responsibility," said Jin.

She believes that today's companies serve not just shareholders, but an increasing array of stakeholders -- employees, customers, communities, activists and others who feel they have a stake in the actions of a company.

"So making profits and being responsible to stakeholders and the environment should be basic norms for friendly enterprises." Jin and her team are trying to introduce into China the norms of the Future 500, an enterprise evaluation system formulated in the United States and Japan.

"My team should spare no effort in this endeavor, because it is essential for the country's sustainable development and humanity's well-being," said Jin.

At present, China National Petroleum Corp. (CNPC) is in first place on the list of China's Top 500 enterprises, compiled by the China Enterprise Confederation (CEC.) Its turnover of US$45.8 billion in 2002 earned it that spot. But last year, a gas leak in one of its branches in southwest China's Chongqing Municipality killed more than 200 local residents.

"Is it still qualified to be on the list? We may need to rethink this," said Jin.

Jin stressed that good enterprises on the Future 500 will pay more attention to labor standards and environmental responsibility.

"We have strict labor standards by which enterprises are judged for work conditions, treatment of workers by management, discipline and compensation," said Jin. She added that the traditional economy is based on natural resources, while knowledge-based industries should rely on human resources.

The requirements include prevention of child labor. Enterprises must also provide a safe and healthy work environment, take steps to prevent injuries and offer regular health and safety training. Systems to detect threats to safety, as well as access to bathrooms and potable water are also essential.

"All the requirements are either mandated by or in line with China's laws and regulations, but I'm afraid it is difficult for many of China's enterprises to translate them into concrete action."

Professor Chang Kai of Renmin University of China said that Chinese enterprises should take tangible and practical steps to adopt enhanced labor standards. He warned, however, that care should be taken to prevent abuse of or bias in application of the standards.

Chang asserts that China should take an active role in shaping the standards of enterprise responsibility, which are still being tested and improved on the way to become a set of international norms.

"And the standards should be localized," he said. "We cannot expect China, a developing country with such a big population, to afford the same high-level labor standards as more developed economies."

Extended responsibilities of enterprises to protect their environments are also included in the Future 500 evaluation system. Enterprise targets should be set at zero emissions, no matter whether harmful or not.

"The trend is correct but we need to cater to China's real situation," said Zhang Jianyu, a public policy researcher at Tsinghua University. "For Chinese enterprises, the priority is to make profit, which Chinese laws and regulations allow. Then they can go further to take on extended responsibilities."

Zhang said that the concept of extended responsibility requires an enterprise to be responsible for the social and environmental effects caused by its products beyond the production process.

The idea has been suggested and practiced for quite some time in European industrialized countries, such as in the automobile and battery sectors and in the US electronics sector.

Zhang, also head of the Beijing office for the US-based, nongovernmental organization Environmental Defense, said there is no doubt that environmental requirements will get stricter in the future and a forward-looking approach will eventually benefit companies.

However, environmental protection also comes with costs and it is not practical for an enterprise to take an approach that is much beyond current environmental requirements.

"The demanding task is how to make environmental laws and regulations enforceable," said Zhang, adding that defining the appropriate range of responsibilities is still a matter of debate.

(China Daily August 24, 2004)

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