CSR

Fabulous and Fortunate

“ASIAN FAB 50″

Forbes released its third annual Asian Fab 50 list. India led the pack with a total of 12 companies, ranging in sectors from banking to construction. Taiwan followed with 10 companies, most of them in the tech industry. China made the list with seven entries, more than in any previous year. (To see the full alphabetical list, click here.)

China’s “Fab” Seven:

1. China Minsheng Banking (Banking)
2. China Mobile (Telecommunications Services)
3. China Shenhua Energy (Materials)
4. CNOOC (Oil & Gas Operations)
5. Lenovo Group (Technology Hardware & Equipment)
6. Minmetals Development (Trading Companies)
7. Wuhan Iron & Steel (Materials)

China may be the workshop of the world, but all its companies featured here rely on domestic customers. With a population of 1.3 billion, China has the biggest domestic market in the world in terms of the raw number of consumers.

Of course, having a huge market doesn’t guarantee success. China Minsheng and Lenovo Group still have to convince customers that their products are the better choice.

Although all but one of these companies count the government as an owner, they have shareholders and boards to please as well. Transparency also remains an issue, even at the biggest of the old state-owned outfits.

To compile the list, Forbes looked at long-term profitability, sales and earnings growth, stock price appreciation and projected earnings for Asian companies with revenues or market capitalization of at least $5 billion.

Now I wonder how many Chinese companies are considered “socially responsible”…

Forbes doesn’t say, but FORTUNE does. For the past two years, the magazine has published findings about the world’s most socially responsible businesses, as ranked by AccountAbility, a London-based think tank dedicated to corporate social responsibility, and csrnetwork, a U.K.-based business consultancy. According to the report, which examines the world’s highest revenue-earning companies, Chinese companies are among those that show the least dedication to corporate social responsibility.

“ACCOUNTABILITY RATING 2006″

In 2006, three out of the 64 companies listed in the Accountability Rating were from China: Sinopec, China National Petroleum and State Grid. They were given the following accountability “scores”:

• Sinopec - 10%
• China National Petroleum - 3%
• State Grid - 0%

These numbers are pretty paltry compared to the highest ranked companies–Vodafone (72%), BP (71%) and Royal Dutch/Shell Group (69%).

According to the analysts, the rating is a tool to measure “the extent to which companies have built responsible practices into the way they do business and how well they account for the impact of their actions on their stakeholders.”

For 2006, we examined the accountability of the Fortune Global 50 – the world’s 50 largest companies by revenue – plus 14 other companies so that we were evaluating at least 10 companies in each of the following sectors: automotive; computer, electronics and telecommunications; energy and utilities; financial services; petroleum refining.

• Stakeholder engagement: Does the company engage in dialogue with people who have an interest in, may be affected by, or may affect its business?
• Strategy: Does the core business strategy integrate social and environmental targets with financial ones?
• Governance: Do senior executives and the advisory board properly consider stakeholder issues when setting strategy and formulating corporate policy?
• Performance management: Do the company’s management processes, business standards, incentives and targets seek to achieve social and environmental goals?
• Public disclosure: Does the company provide a detailed report of social and environmental performance?
• Assurance: Does the company secure appropriate independent assurance of its social and environmental management processes and reporting?

  The stakeholder engagement and strategy domains each have a maximum score of 20. The other four domains each have a maximum score of 15. A company’s overall score is out of 100.

  For more on methodology, click here.

“WORLD’S MOST ADMIRED COMPANIES 2007″

This year in March, FORTUNE also compiled a list of the World’s Most Admired Companies, as judged by financial analysts, executives and directors at 347 companies with revenue in excess of $8 billion. Only eight Chinese companies made the cut, as opposed to 135 companies in the United States and 61 in Japan. And even China’s most “most admired” company, China Mobile Communications, received a score of 5.86 on a 10-point scale (compared to General Electric, which ranked #1 with a score of 8.24 out of 10.)

Last year, the same list was broken down even further, ranking companies by different attributes. In the “Social Responsibility” category, China had three companies deemed the “least admired.” They were China Life Insurance, with an overall score of 3.83, and China National Petroleum, with a score of 5.10. The country had no companies considered “most admired.”

RANKINGS SCHMANKINGS

Of course, it’s always important to remember that rankings don’t always paint a full and complete picture. And they are often riddled with bias. But even so, it’s clear that China has a long way to go before it dominates any of these lists. Hopefully, the contenders in the Asian Fab 50 will rise to the occasion.

[tags]Asian Fab 50, accountability, social responsibility, Accountability Rating, World’s Most Admired Companies, Forbes, Fortune, China[/tags]

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