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Catalyzing Social Investment in China Catalyzing Social Investment in China Brooke Avory, Manager, CiYuan, BSR Adam Lane, Manager, Advisory Services, BSR November 2011 ciyuan.bsr.org About This Report This report was written by Brooke Avory and Adam Lane, with support from the following staff members from BSR’s global team: Kara Hurst, Jeremy Prepscius, Elissa Goldenberg, Cammie Erickson, and Lewis Xie. The report is based on literature and media reviews as well as interviews with individuals listed in the appendix. The authors would like to thank the interviewees and industry expert Pei Bin for her contribution. Any errors that remain are those of the authors alone. Please direct comments or questions to Brooke Avory at [email protected]. DISCLAIMER BSR publishes occasional papers as a contribution to the understanding of the role of business in society and the trends related to corporate social responsibility and responsible business practices. BSR maintains a policy of not acting as a representative of its membership, nor does it endorse specific policies or standards. The views expressed in this publication are those of its authors and do not reflect those of BSR members. ABOUT CIYUAN BSR’s three-year CiYuan (China Philanthropy Incubator) initiative builds innovative cross-sector partnerships to enhance the value of social investment in China. With guidance from international and Chinese leaders in the field, CiYuan improves the capacity of local foundations and NGOs to serve as durable and effective partners with business. Ultimately, CiYuan will integrate philanthropy with core business strategy, foster collaboration, and inspire innovation. Visit www.ciyuan.bsr.org for more information or to sign-up for the CiYuan newsletter. ABOUT BSR A leader in corporate responsibility since 1992, BSR works with its global network of more than 250 member companies to develop sustainable business strategies and solutions through consulting, research, and cross-sector collaboration. With offices in Asia, Europe, and North America, BSR uses its expertise in the environment, human rights, economic development, and governance and accountability to guide global companies toward creating a just and sustainable world. Visit www.bsr.org for more information. BSR | CiYuan Catalyzing Social Investment in China 2 Contents 1 Introduction 4 2 Executive Summary 6 3 The Changing State of Social Investment in China 7 4 The Key Stakeholders Driving Social Investment 10 Government High-Net-Worth Individuals Companies The Chinese Public Media Nonprofits 5 The Issues Defining Social Investment 13 The Changing Role of the Government and the Regulatory Environment The Regulatory Environment’s Impact on Nonprofits GONGOs’ Influence on the Nonprofit Sector Engagement by Individuals Individuals Championing Private Foundations A Professional Workforce Volunteering Partnerships with Business Role of Business in Social Investment Cross-sector Partnerships Media and Transparency Working with the Media Transparency and the Internet 6 Three Important Factors that Will Shape the Sector’s Future 21 Social Media and Information and Communication Technology Business Models for Nonprofit Sustainability Local Opportunities for Change 7 Opportunities for Action 23 For Government For Companies For Individuals For Media For Nonprofits 8 Visions of the Future 25 9 Appendix: Profiles of Interviewees 28 BSR | CiYuan Catalyzing Social Investment in China 3 1. Introduction In May 2008, an earthquake hit the western Chinese province of Sichuan, taking 80,000 lives and displacing millions of others.1 The disaster, which destroyed 21 million buildings and pushed 10 million people below the poverty line,2 brought global attention to China and the many social and environmental challenges the country faces. The earthquake inspired an increase in donations from RMB13.3 billion in 2007 to RMB76.4 billion in 20083 and highlighted philanthropy as an important approach to addressing these issues. Coupled with this increased focus on philanthropy was a sharp increase in public transparency that manifested in a variety of ways. The public focused not only on donations in generic terms (highlighting companies that responded well) but also on specific international and domestic businesses that, they claimed, were not “doing enough.” After the initial rush of donations had passed, the disaster and the large donations triggered public scrutiny and transparency over the use and impact of charitable funds. Several years later, transparency-related scandals continue to appear in mainstream news. Increased access to the internet and growing use of social media enable the public to both participate in philanthropy and monitor the social investment activities of a range of different actors, including business, nonprofits, and even, at times, local government. 1 Brian Hoyer, “Lessons from the Sichuan Earthquake,” Issue 43, Humanitarian Exchange Magazine, 2009, www.odihpn.org/report.asp?id=3008. 2 Third Report of Session 2008–09, Volume I: 9, House of Commons International Development Committee DFID and China, 2009, www.publications.parliament.uk/pa/cm200809/cmselect/cmintdev/180/180i.pdf. 3 The Statistical Report of Civil Affairs Development in 2008, Ministry of Civil Affairs of the People’s Republic of China, 2009, http://cws.mca.gov.cn/article/tjbg/200906/20090600031762.shtml. BSR | CiYuan Catalyzing Social Investment in China 4 BSR’s CiYuan program serves as a platform to facilitate cross-sector dialogue and invest in a partnerships approach. The program leverages business’s core competencies, foundation’s assets, and the nonprofit sector’s ability to engage the community. In an effort to assess the opportunities for social investment in China, BSR interviewed government, nonprofit, think-tank, media, and private-sector leaders to capture their visions for the future of the country’s social sector. In this paper, we explore these leaders’ views of the defining issues, challenges, and opportunities shaping the growth of social investment in China. BSR | CiYuan Catalyzing Social Investment in China 5 2. Executive Summary In this paper, we analyze the various forces driving social investment in China. We define social investment as the contribution of resources by business, foundations, or nonprofits toward the creation of social, environmental, and economic development (also termed strategic philanthropy or community investment). As China rapidly changes, the expectations for, and implementation of, social investment programs are changing quickly as well. The fivefold growth in donations from 2005 to 20094 and recent surge in volunteering5 means that people are increasingly engaged in philanthropy, while the very wealthy are establishing private foundations as a more direct way to channel their giving. Meanwhile the influence of information and communication technologies drives increased demands for transparency in the nonprofit sector, particularly following a string of recent incidents involving the Chinese Red Cross (officially named the Red Cross Society of China). Government-organized NGOs (GONGOs) have traditionally dominated the sector because regulations have favored them and they have received support from the government, while grassroots nonprofits have struggled to register and to raise funds. However, there is some hope for nonprofits within the current regulatory environment. The government has relaxed their policies in some regions, and some public foundations are awarding grants to grassroots nonprofits or using their favorable registration and fundraising privileges to help them. Yet the nonprofit sector still cannot meet the country’s social, environmental, and economic challenges. While businesses face risks from not understanding local sentiments favoring social investment that is manifesting in wide-scale social media campaigns, they also face opportunities to better engage staff and customers and distinguish themselves from competitors by developing innovative partnerships with nonprofit partners. They can build such partnership by leveraging their know- how, brands, products, and employees’ skills. Social media and ICT, partnerships with business, and the flexibility of local government are the three key factors shaping the future of social investment in China. These factors will help to engage the public and build trust, provide the resources for nonprofits to increase their capacity and scale-up, and create an environment for nonprofits to thrive. Finally, we propose specific roles and actions that the various stakeholders we identify as shaping social investment in China can take. A shared vision and commitment are necessary to boldly address the tremendous social, environmental, and economic challenges facing the country. Undoubtedly progress will be defined by how successfully cross-sector partnerships use each player’s resources. 4 The Statistical Report of Social Services Development in 2010, Ministry of Civil Affairs of the People’s Republic of China, 2011. 5 For example, membership of the China Young Volunteers Association (CYVA) increased from 25 million in 2008 to 31 million in 2010. See “China Volunteer Organization Receives Biggest Donation,” Xinhua, July 11, 2008, http://english.sina.com/china/1/2008/0711/171050.html and The Third Member’s Congress of CYVA, China Communist Youth League Network, December 5, 2010, www.zgzyz.org.cn/content.php?id=71580&cid=21073. BSR | CiYuan Catalyzing Social Investment in China 6 3. The Changing State of Social Investment in China “Thirty years of phenomenal economic
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