sustainability in China

Sustainability in China: What are the drivers and benefits of going green in the Middle Kingdom?

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As the latest IPCC report on climate change highlights an ever-growing environmental emergency, governments and private actors have mobilized around the globe to try and reduce their carbon footprint. China, which is the largest greenhouse gas emitter in the world, has taken a pledge at the UN General Assembly in 2020 to be carbon neutral by 2060 and hit peak emissions by 2030. In cohesion with this commitment, China has imposed itself as a world leader in the renewable energy industry and has launched several eco-friendly structural changes through policies, subsidies and programs such as their new carbon trading market. However, coal and other fossil fuels remain the main energy sources in China. While the Chinese government is slowly turning towards more sustainable policies, what about the private sector?

 A 2021 report on environmental sustainability by Deloitte polling over 750 executives across multiple countries, including China, has highlighted a shift towards more environmentally conscious management. According to the report, 82% of executives polled said their business was concerned about climate change and 25% of them planned to step up environmental sustainability initiatives despite any economic downturn brought by the Covid-19 pandemic. How does this willingness to improve corporate sustainability in China and what actions are company taking to set up these changes? 

Environmental awareness in China leads companies to take environmental actions sustainability in China
Source: Wunderman Thompson. Environmental awareness in China leads companies to take environmental actions.

What are the drivers for corporate environmental sustainability in China?

One major driver for corporate environmentalism in China is of course the economic toll natural disasters are taking on the economy.  According to the Chinese National Bureau of Statistics, natural disasters caused in China just over 327 billion RMB in economic losses, which is 46 billion RMB over the last 5 years’ average. Agriculture and transports are by far the most impacted sectors, and damages to the infrastructure network caused by natural disaster have consequences for a wide array of manufacturing industries. The impact of climate disasters on operations and resource shortages are among the main environmental concerns from company executives listed by Deloitte. 

Another driver for going green in China is public relations: as Chinese consumers are ever-increasingly environmentally conscious, especially the younger generations, sustainability is becoming more trendy in China. Finally, government incentives and subsidies have largely contributed to a shift toward sustainability in China. Energy transition and emissions reductions being at the core of China’s 14th Five-Year plan, the Chinese government has renewed continuous efforts to favor the development of green industries such as the electric vehicle market.

Impact on operations and costs are top climate-related concerns for companies sustainability in China
Data source: Deloitte. Impact on operations and costs are top climate-related concerns for companies.

What actions are companies taking towards environmental sustainability in China?

According to Deloitte, actions have mainly focused on education and raising awareness over the past decade, but more proactive actions have emerged in recent years. Facilitated by covid 19 restrictions, remote work is on the rise both worldwide and in China. Globally, the three major trends in corporate sustainability actions revolve around public policy initiatives, encouraging suppliers to meet sustainability standards, and using more sustainable materials.

There are many examples of Chinese companies partaking into environmentalism. In the Agtech industry, Chinese C2M online platform Pinduoduo launched in 2021 a smart agriculture competition hoping to boost agricultural innovation in a sector that still struggles with heavy pollution. Logistics company Cainiao jointly developed with courier companies in 2019 a network of recycling bins in Shanghai. Many Chinese groups have also started to integrate environmental action into their corporate identity. Semiconductor manufacturer Rohm has, for example, laid down an environmental action plan for 2050  with an emphasis on going carbon neutral, employees’ environmental awareness training, and recycling resources.

What are the benefits of corporate environmental sustainability in China?

Companies that have been implementing environmental actions have, according to Deloitte, reaped various benefits ranging from HR improvements to better public image and even profitability. Both customer and employee satisfaction seem to be the main positive impact of implementing corporate environmental initiative.

Environmental awareness keeps growing in China, partly thanks to awareness campaigns led by the government but also because the impact of climate change have been felt ever more strongly in the country. Consequently, Chinese people, and especially younger generations, are taking a growing interest for climate issues and are also slowly taking an active part in environmental actions according to a 2020 survey realized by the China Youth Climate Awareness Network. As a result, both Chinese consumers and employees have had mounting expectations towards companies taking an active stance towards environmental sustainability in China. A benefit for those taking action and a challenge for the others failing to adapt.

Environmental initiatives have a wide variety of benefits for companies that implement them. sustainability in China
Source: Deloitte. Environmental initiatives have a wide variety of benefits for companies that implement them.

What future for corporate environmental sustainability in China?

The growing environmental awareness of the Chinese public, the soaring green economy in China and the commitment of the Chinese government towards carbon neutrality by 2060 all seem to bode well for the future of corporate sustainability in China. However, although environmentalism is getting traction in China, one must temper their expectations for significant short-to-medium term change.

Indeed, the Covid-19 pandemic has taken a toll on the Chinese economy and as a result many environmental projects were scaled down, cancelled, or shifted toward more social actions according to a research paper published by MDPI. Several previously closed coal mines have also reportedly been reopened in China in order to support the economic recovery from the pandemic and meet rising demand. Despite these setbacks, China is still on track with its’ sustainable development strategies, taking, as it is often the case, a long term approach and banking on a slow but steady government-backed energy transition.

China’s green industry has ramped up the number of new projects in recent years. sustainability in China
Source: Merics. China’s green industry has ramped up the number of new projects in recent years.

Takeaways about the state of environmentalism in China

  • As consequences of climate change are starting to take a serious toll on society and with the help of awareness campaigns from the government, the Chinese public has been increasingly environmentally conscious in recent years.
  • Business executives are aware of the impact of climate change and the public’s expectations and are progressively implementing actions to promote corporate sustainability.
  • Many Chinese companies have started to take environmental initiatives and the green economy in China has, thanks to government backing, developed tremendously in recent years.
  • However, the economic downturn caused by the Covid-19 pandemic has made a dent in the push to implement green policies in China, and it will take time for Chinese companies and institutions to get back on track to achieve China’s carbon neutral ambitions.

Author: Camille Gaujacq

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