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This paper aims to explore possible internal and external challenges of foreign multinational enterprises (MNEs) from developed countries to develop sustainable environmental development programs in China.

The research is based on the author's five years' field work (2006‐2010) in China. A total of 30 Chinese executives from 20 different foreign MNEs were interviewed about their companies' corporate social responsibility (CSR) programs.

The focus of 19 companies' environmental programs (95 percent) is internal production and operation efficiency. Only one of 20 companies is committed to increasing the capacity of local Chinese suppliers to comply with the environmental code of conducts listed in their CSR programs and to enable the entire global supply chain to fulfill the international environment standards. The key challenges for foreign companies not to have “holistic and integrated” approaches in their environmental programs are many: keen price competition among Chinese suppliers that are at the low end of global supply chains, some local governments prefer to have economic growth at the expense of environmental welfare, some companies prefer to pay an environmental fee for polluting the local environment as the fee is not high enough to reflect the cost, and the message given by CSR managers to Chinese suppliers are not implemented by their companies' purchasers.

This paper is the first attempt to examine how foreign MNEs balance their CSR requirements internally while managing the performance of their Chinese suppliers to be up to the CSR standards in the global supply chain.