Corruption, Location, Lavatories and CSR

I don’t do anything on CSR’, said the manager when I sat down to have a coffee with him in his office, which overlooked the large factory floor of * BFG (*not the real name of the company). It had been the usual challenge to find the place (as google maps only located the rivers and roads surrounding the factory), but I did have a certain sense that the factory could be down a certain small but well maintained road just outside a town strip.  The office and factory looked clean and well maintained, the building and offices even smelled clean, something the manager pointed out as well; he was keen that the toilets (oh, for American readers, restrooms) were kept clean, and I think I could make a whole CSR blog now on the importance in China of having good restrooms for employees in your workplace, it’s just a basic human right…

CSR from unaware to aware through a walk through the business . Back to CSR in the workplace: the fact that a company is not aware of CSR,  or does not want to consciously work on CSR, doesn’t say it’s not happening at all; as I said, the Factory had a safe working place, the turnover on employees was very low, the training for employees and also for customers to use the machinery was very high and well organized; the whole factory looked like a German workplace, and that is a compliment of course.

Location and Corruption Risks. We talked through the whole business case and the professional life of the manager to get an idea what makes working in China so interesting, what he is proud of in his products and business, and what the right and wrong reasons could be to work in China. The manager had been in China for nearly 20 years, and enjoys the startup of businesses; he specializes in branch specific machinery, and whilst we were walking through the factory, he said something very interesting that struck me. Small and Medium Enterprises who start to invest in China, are often looking at the advantage of the cheap costs of factory locations in China. But there is a catch to choosing a too cheap location in a rural area; once you choose to settle down in a small village, the Major, fire department and all relevant and not so relevant municipal departments show up on your doorstep for ‘inspections’, you have to host parties and hand out Chinese New Year envelops, in short, the chance that you will be constantly at risk of having to bribe, is much higher than in an industrial zone in a town.  The corruption risk and time and hassle it brings to a Startup company is so much higher in small towns than in industrial zones,  that it pays off -even if the location cost is 30 to 50 % higher!!- to start your factory in an Industrial zone.

Government Subsidies on machinery selling. The Focus of BFG from manufacturing in Europe and selling in China to manufacturing (assembling) in China and selling in China, is given by the fact that BFG is servicing the top 5% of the market in China. I am curious what the manager mentioned about the ‘energy’ it cost to convince the Government to lend some subsidies for clients who want to buy their machines. Is this a risk factor for corruption for BFG? A CSR and due diligence policy could help BFG to determine this and consider this..

Overall, I enjoyed the visit, and hope that the advice on lavatories and locations can be of use to others who want to start a business in China.