China CSR Report: A New Low in Statistical Analysis

November 9, 2011

I’m not sure whether it’s a coincidence that the news about Johnson & Johnson, which I wrote about last night, also had to do with Corporate Social Responsibility (CSR), but today’s news had plenty more of the same. Today it was all about the new report by the China Academy of Social Science (CASS), the “Corporate Social Responsibility Blue Book.”

Disclaimer: I do not have a copy of the report, so my criticisms here reflect reports in the (State) media only. However, the media reports seem to agree on the basics, and I’ll stick to those.

What’s the big takeaway here? That companies in China suck when it comes to CSR. One wonders why we needed an academic report to tell us that. Anyway, here’s how the report was put together:

The report investigated the top 100 State-owned, private and foreign companies in China and scored them on a 100 points scale by comparing them to international CSR indices, the Domestic CSR Initiative and the CSR Evaluation Package of the World’s Top 500. (China Daily)

So far, so good. The benchmarks were based on bribery, quality control, environmental protection and philanthropy.

The suspense is probably killing you. Here are the results: the average score of all companies came out at an abysmal 19.7. This is atrocious, and surprisingly low, even though I certainly didn’t expect high scores.

But here’s where it gets interesting:

The report revealed that SOEs are the best CSR performers among the three groups, with an average score of 31.7, much higher than private businesses at 13.3 and foreign companies at 12.6.

A total of 26 companies scored zero, including foreign giants such as Daimler Chrysler and Coca-Cola. Adidas (China) brought up the rear of list with minus 4 points. (Global Times)

At this point, you might be thinking WTF? Good instinct. Note that this story is prominent in today’s local news, with headlines that scream about how horrible Adidas is (among others). Some of the accompanying commentary has been hilarious, claiming that SOEs are better supervised and are more committed to CSR than foreign multinationals. I’m sure that’s true for some (e.g. I’m sure that SOEs scored very high in the money-given-to-earthquake-relief category), but we are talking about aggregate numbers on a variety of issues here, so I’m at best amused by these statements.

Anyway, as usual, there is a reasonable explanation for this weirdness, and it lies in the bizarre methodology of this report that is unfortunately being taken very seriously by the press.

Basically, the researchers compiled data on these companies, which included requests of their CSR policies/activities:

“We mainly collected CSR data from the companies’ own coverage of their social activities, as well as their websites and annual reports,” said Zhai, an employee of the CASS’ CSR Research Center, told the Global Times.

“To balance their own CSR information, we also collect negative reports about their activities,” Zhai said.

Fair enough, but what happened if CASS didn’t receive any information from a company? Naturally, these companies were not included in the statistics, right? Uh, unfortunately that’s not the case.

Believe it or not, if there was no information on the CSR activities of a company, they scored that firm zero! And if their search of negative reports uncovered anything, then the company ended up with a negative score. That’s how Adidas wound up with a minus-four rating.

Gee, you think that scores of zero and lower might have something to do with those low averages?

I’m not the only critic:

Liu Baocheng, director of the Center for International Business Ethics at the University of International Business and Economics, said that the CASS report was encouraging as it tried to promote CSR in China, but called its rating method questionable.

“Their research oversimplifies quantitative data analysis, is not very representative in its sample selections and its scientific approach to data is questionable. From an academic standpoint, they still need to improve their systematic analysis,” Liu said.

I think Liu is being charitable here. I could end here with a comment on CSR in China, but I think most of you who read this blog are already aware of the challenges. Alternatively, I could say something about lies, damn lies, and statistics, but it’s probably not necessary at this point.