Yin Gefei: Re-conceptualizing the connotation and value of ESG in the Chinese path to modernization

2024-01-25GoldenBee责任编辑0

In 2023, Environmental, Social and Governance (ESG) has rapidly emerged as a mainstream trend in China, receiving unprecedented attention from all sectors of society.

To establish a sound modern corporate management system and build world-class enterprises, companies in China have been implementing ESG paths and actively promoting ESG practices, which is a concrete manifestation of companies’ contribution to promoting the building of a beautiful China and advancing the Chinese path to modernization.

01 Implement a nature-positive economy led by "E" to promote the modernization featuring the harmonious co-existence between human and nature

ESG development in China starts from "E", namely environmental factors, such as green credit, green bond, green insurance, and green industry funds.

Humanity is facing major challenges like increasingly frequent extreme weather events, climate change and urban ecological deterioration. Despite many measures being implemented, there is still a net loss of natural and biological diversity in view of our ability to develop economically.

A number of international institutions have jointly proposed a common goal to protect nature for humanity, that is, to reverse biodiversity loss by 2030 and to promote the gradual restoration of the natural environment until full restoration is achieved by 2050. This requires a zero net loss of nature, or a net impact greater than zero, for every human economic activity.

High ESG competitiveness in the "E" is reflected as its positive impacts on natural and environmental factors outweighing its negative impacts. Therefore, when a company's ESG competitiveness increases, its impact on nature and the environment should become more and more positive.

A group of pioneering companies are exploring business practices that benefit nature and environmental protection, aligning with the unique characteristics of their respective industries and operational contexts.

Taking State Grid Corporation of China (State Grid) and China General Nuclear Power Corporation (CGN) as examples, they have been carrying out natural capital accounting. That is, they focus on the net contribution to nature and the environment in their production and operation, and publish green and low-carbon development reports or biodiversity development reports. In doing so, they are committed to promoting a nature-positive economy and increasing the positive impact of companies on nature and the environment, thus contributing to the modernization featuring the harmonious co-existence between human and nature through practical actions.

02 Fulfill corporate responsibilities at three levels in "S" to promote the modernization of common prosperity for all

In the "S" of ESG, companies are required to focus on the fulfillment of their responsibilities for stakeholders such as the government, employees, customers, suppliers and communities.
How to deal with the interests of employees, the management, suppliers, customers and other partners in business operation is the most important basis for the balance of social benefits.

First, companies should fulfill the responsibility for employees and help them pursue common prosperity. Since employees are the main stakeholders of a company, companies should deal with their relationship with employees, manage well employee relationship, respond to the demands and expectations of employees, so as to help employees pursue common prosperity through corporate development.

Second, companies should strive to build a sustainable supply chain and help supply chain partners pursue common prosperity. Companies should integrate ESG factors into corporate strategy and operational management. By exploring sustainable supply chain innovation, a company can stimulate positive transformations in business management and industry development. This will contribute to the building of a community of common interest and shared future for customers, companies and suppliers and help supply chain partners pursue common prosperity.

Third, companies should actively contribute to society and help achieve the common prosperity for all. Companies can contribute to the realization of common prosperity for all through concrete actions like paying taxes in accordance with the law, actively participating in charitable donations and investing in community development. For example, Tencent promotes sustainable social value creation through innovations on its public welfare model, which has effectively expanded paths for companies to realize common prosperity for all.

ESG competitiveness, to a certain extent, concerns how to well manage the interests and responsibilities for employees, supply chain partners and the community. Through effective management of responsibilities at these three levels, companies will make balanced and effective contribution to the interests of their stakeholders and the society, which essentially contributes to the Chinese path to modernization featuring common wealth for all.

03 Create a corporate culture of sustainability in "G" to promote the modernization in which material civilization and spiritual civilization are coordinated

In the "G" of ESG, companies are required to establish a responsible management and operation mechanism and system, which essentially means to create a corporate culture of responsibility and sustainability.

First, companies should foster ESG concepts and reshape sustainability-oriented corporate values. In recent years, some pioneering companies have compiled and released their ESG strategies and developed ESG models, forming ESG discourse systems with their own characteristics. These companies have gradually shifted from the corporate value of maximizing shareholders' interests into building a core cultural concept that strengthens investment in employees, healthy cooperation with suppliers, and responsibilities for more stakeholders and society as a whole.

Second, companies should structure an ESG system. In ESG, companies are required to take risks and opportunities as their management focus. Companies should establish a sound ESG system, institutionalize precise and efficient communication with stakeholders, and quickly capture, comprehend and deal with ESG risks and opportunities, on which basis they can make quick business decisions to win first-mover advantages in competition, or even get the ESG premium.

A number of listed companies, such as Sinochem International Corporation, have set up sustainability/ESG committees at the board level or clarified ESG responsibilities of relevant committees to promote ESG work in an institutionalized manner from the highest level of corporate governance.

Third, companies should create a culture that encourages ESG behaviors and promote systematic ESG practices in corporate management and operations. Companies should promote ESG awareness, formulate ESG strategy, prepare ESG management manuals and publish ESG reports with indicator management as a handhold and timely response to stakeholders' concerns as a focus, so as to form new ESG management and decision-making behaviors.

ESG competitiveness is in essence the competitiveness of the corporate culture of responsibility and sustainability. Companies can start promoting ESG from the “G”, reshape core corporate values with the “G”, so as to build a corporate culture of sustainability, shape a responsible corporate image that meets the expectations of society and facilitate the internal coordinated development of material civilization and spiritual civilization.

04 ESG supports companies in China to go global to promote the modernization that follows the path to peaceful development

ESG is becoming an important feature of the new round of world economic development and competition. Therefore, it is necessary for companies in China to adopt ESG in the process of going global.

First, companies should prioritize ESG. Before going global, companies should systematically assess social and environmental risks and challenges in local areas to avoid ESG risks as much as possible.

Second, companies should strengthen ESG practices. While going global to expand business, companies in China should actively comply with local regulations and policies, strictly control product quality and safety, respect and protect the local culture, actively implement the responsibility of environmental protection, and give full play to their strengths to promote community development, based on ESG priorities and requirements in local areas, so as to enhance their core competitiveness in these areas through ESG practices.

For example, since 2017, the Brazil branch of the China Three Gorges Corporation (CTG Brazil) has collaborated with the Technical Center of the Brazilian Agency of Biology to launch the "Golden Mussel Control" project that controls golden mussel infestation at local hydropower stations by genetic induction of infertility, which has effectively protected local biodiversity and realized a win-win situation for all.

Third, companies should expand ESG efforts. In seeking to expand business, companies can unblock development opportunities in local areas. Based on their good image and brand reputation as green, responsible and compliant entities, accumulated by following ESG concepts and requirements over a long period of time, they are well-positioned to contribute China's strengths to local development initiatives.

ESG competitiveness is becoming an important component of the new round of competition and cooperation in the global economy. Companies in China should implement ESG concepts and comply with ESG requirements in the whole process of going global and undertake the jointly building of the Belt and Road with high quality by following the principles of joint consultation, construction and sharing, upholding the concept of openness, greenness and cleanliness, and making it high-standard, sustainable and beneficial to public well-being, to improve people-to-people bonds among countries, establish a responsible and green international image of companies in China, and contribute to the modernization that follows the path to peaceful development through ESG practices.

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