ESG WHITE PAPER

Environmental, Social and GovernanceGuest Editors
Wang, Hong

President; Professor of Management, CEIBS; Hengdian Group Chair in Management; Chairman of the Academic
Committee of the CEIBS Social Security and Aging Finance Institute; Recipient of the Special Government Allowanceof the State Council; Programme Co-Director of Smart Healthcare Startup Programme

Turpin, Dominique V. President (European), Professor of Marketing, CEIBS

Executive Editors
Wang, Yajin

Professor of Marketing, CEIBS; Research Area Director of ESG; Programme Co-Director of CEIBS-Branding Boot
Camp; Programme Co-Director of CEIBS-Tencent Joint Programme

He, Ziqing

Assistant to the Editorial Board; ESG Research Area Research Assistant

Editorial Board Members
Bournois, Frank

Vice President and Dean; Professor of General Management and Leadership, CEIBS

Lee, Siew Kim Jean

Professor of Management; Michelin Chair Professor in Leadership and Human Resources Management; Associate
Dean (Research); Co-Director, CEIBS Centre for Family Heritage

Chen, Shimin

Professor of Accounting; Zhu Xiaoming Chair in Accounting; Associate Dean (Case Centre), CEIBS

Rui, Meng

Professor of Finance and Accounting; Parkland Chair in Finance; Director of CEIBS Centre for Wealth Management;
Co-Director of CEIBS Centre for Family Heritage; Programme Director of Family Office Diploma ProgrammeSustainable development is not only an intrinsic driving force for business growth but also acommon language facilitating global communication and collaboration. Within today's complex
business environment, organizations are facing unprecedented challenges and opportunities. In
this context, ESG has emerged as an essential strategic asset for firms to navigate risks, enhancecompetitiveness, and accelerate growth.
CEIBS has long been committed to advocating and implementing ESG. Leveraging China
Depth and Global Breadth, we integrate ESG into teaching, case development, and research. Overthe past year, we introduced both mandatory and elective courses focused on ESG, along with acollection of ESG-related teaching cases designed to empower students to understand ESG
concepts comprehensively, tackle practical challenges, and devise solutions. Furthermore, the ESG
Research Area consistently promotes interdisciplinary dialogues among faculty members andactively seeks collaborative projects with industry partners. By integrating academic research withreal-world business practices, it lays the foundation for further advancing ESG practices.
As a significant step towards the green campus initiative, in 2023, we released the first "CEIBS
Carbon Disclosure Report." Through a systematic examination of current carbon emissions andexisting measures across our five campuses, we have outlined concrete steps for energy
conservation and carbon reduction over the next three years, along with medium to long-term
action plans. In operational practices, we are committed to consistently monitoring and evaluating
our carbon management performance to ensure the orderly and efficient attainment of our carbon
neutrality goals.
The CEIBS community always pursues goals beyond mere business success. We aredelighted to see more CEIBS alumni and alumni-led enterprises empowering others by passing on
their practical experiences while pioneering sustainable development. Collaborating with partners,
they exchange opportunities and creating shared value, thereby promoting ESG principles acrossdiverse business contexts.
30 Years and Beyond. 2024 marks the 30th anniversary of CEIBS. Looking back, we havealways upheld the pursuit of excellence and continuously forged ahead. In the future, we lookforward to closer collaboration among CEIBS community in promoting quality development,collectively shaping a better and more sustainable future.

Wang, Hong

Turpin, Dominique V.

CEIBS President

CEIBS President (European)

CONTENTS
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CHAPTER ONE: ESG AND VALUE CREATION

01

Global Trends and Chinese Practices: Value Creation through ESG Practices
Collaborating to Create ESG Value

03
33

CHAPTER TWO: CORPORATE ESG PRACTICES

45

Budweiser APAC: Integrating Sustainability into Business for Continuous
Value Creation

47

CEIBS ALUMNI COMPANIES CASES:JD Logistics: Technology-Driven, Leading Global Efficient Circulation andSustainable Development

53

Carl Zeiss Vision China: Empowering Customers through Education toCreate Shared Value

59

CHAPTER THREE: STUDENT PROJECTS

65

Integration of Green Governance and Retail Excellence: Exploratory
Research on New World Department Store's “Green Retail” System

67

Business Actions for Social Impact: Promoting Sustainable Fashion with
Recycled Marine Plastics
From Good to Excellent – Organization design for CanSinoBio 2.004

CHAPTER FOUR: PERSPECTIVES OF CEIBSFACULTY ON ESGCEO Decisions on the Appointment of Chief Sustainability Officers
Do Good Companies Attract Good People?
Investing in High ESG Stocks and Outperforming the Market During Crisis?

05

CHAPTER FIVE: STUDY ON THE ESG REPORTS OF
A-SHARE LISTED COMPANIES (CONDENSED)

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We believe that regardless of a company's stage of development, it is essential to identify key points for
integrating ESG topics with business operations and co-creating value with partners.
CEIBS 2024 ESG White Paper focuses on the theme of value creation and comprises five chapters. We hopethat the theoretical framework, concepts, and valuable practical experiences outlined in this white paper will
provide guidance and support for firms to better create ESG value and achieve sustainable transformation.
The first chapter consists of two review articles. The article "Global Trends and Chinese Practices: Value
Creation through ESG Practices" by Professor Yajin Wang and Researcher Geng Liu presents the central roleof value creation in ESG practices and outlines a series of industry and policy development trends. The article also
discusses the current challenges and explores how these challenges can be addressed through innovative
collaboration. The article "Collaborating to Create ESG Value" by Professor Lydia Price and Laurie
Underwood introduces two important conceptual models. Through case studies, this article demonstrates how
companies can find the most suitable ESG value creation collaboration models based on assessing their own
situation. Additionally, by analyzing the characteristics and advantages of different collaboration approaches, theysummarize some "best practices" to help companies avoid common problems and challenges.
The chapter on corporate ESG practices includes 3 cases. In this chapter, we intend to present how threedifferent types of firms in different industries collaborate with partners to create ESG value. The key focuses ofthese three cases are: integrating sustainability into operation, technology innovation as the driving force, andempowering clients to improve cooperative relationships. Through summarizing the practical actions of thesecompanies, we hope to inspire readers to reflect and act, promoting better ESG practices.
At CEIBS, ESG considerations and reflections have become important components of group project in many
programmes. This year's ESG White Paper has added a new chapter, specifically dedicated to showcasing
student group projects, demonstrating how 3 groups of students have integrated ESG concepts in their projects.
By exploring research methods adopted by each project group in dealing with ESG issues, as well as the
progress and experiences they have gained, we hope to provide valuable reference for companies.
The chapter on academic research on ESG by CEIBS faculty includes 3 academic studies: Professors
Taiyuan Wang and Meng Rui focus on corporate internal management, examining the motivations andmechanisms behind the appointment of Chief Sustainability Officers by CEOs, demonstrating how management
attitudes shape the implementation of sustainable strategies within organizations. Professors Jian Han and Bala
Ramasamy focus on the relationship between companies and employees, specifically studying how a company's
performance in social responsibility affects its attractiveness to potential talents. Professor Renxuan Wang andcollaborators investigate the dynamic of ESG investing by studying the stock performance of companies withhigh ESG scores during crises.
CEIBS Centre for Wealth Management led by Professor Meng Rui presents the new annual " Study on
the ESG Reports of A-share Listed Companies," and this White Paper selects a condensed version of thereport. Through detailed data analysis and comparisons, the report comprehensively showcases theperformance of A-share listed companies in the dimensions of environment, society, and corporate governance.

ESG ANDVALUE CREATIONINTRODUCTION
Starting from highlighting the role of ESG in corporate operations, this chapter focuses
on global trends and China's practices, exploring the connection between ESG and value
creation. By reviewing theoretical frameworks, cases, and policy trends, the authors
demonstrate how to integrate ESG into strategy and operations, as well as best practices
for successful cooperation in value creation.
Below are the key points summarized from the chapter:· The ESG concept serves as a comprehensive framework for fostering sustainable growthwithin companies, influencing their strategies, operations, and internal governance. ESG
practices not only reflect corporate social responsibility but also promote sustainable
development and create value during the process.
· By implementing environmentally friendly operations, positive social relationships, androbust governance structures, companies can enhance market reputation and customer
loyalty, thereby driving sales and profit growth.
· ESG practice is a dynamic and interactive value creation process.
· No matter the size or stage of the sustainability journey, all companies can find value
creation opportunities within the framework.
· ESG aims to drive transformation, and the difficulties and challenges brought by thistransformation require companies to collaborate and leverage synergies.

ESG AND VALUE CREATION

03

Global Trends and Chinese Practices:
Value Creation through ESG Practices
Yajin Wang, Geng Liu

Collaborating to Create ESG Value
Lydia J. Price, Laurie Ann Underwood

33

Global Trends and Chinese
Practices: Value Creation
through ESG Practices

Yajin Wang and Geng Liu

Yajin Wang

Professor of Marketing, CEIBS
Research Area Director of ESG
Programme Co-Director of CEIBS-Branding Boot Camp
Programme Co-Director of CEIBS-Tencent Joint Programme

Geng Liu

Case Researcher, CEIBS Case Center

Introduction
In today’ s globalized business environment, ESG standards have emerged as critical benchmarks
for measuring corporate sustainability and social responsibility. This report explores how ESG practices
drive value creation globally and within the specific context of China. With a primary emphasis on theirimpact across economic, environmental, and social dimensions, we analyze the mechanisms andpathways through which ESG practices foster value creation. To substantiate our analysis, we present a
series of case studies that spotlight effective ESG adoption across various businesses and industries.
First and foremost, this report underscores the fundamental significance of value creation in ESG
practices. It explores how these practices contribute to the enhancement of economic, social, andenvironmental value, and the interactions and synergies between these dimensions. Building upon thisfoundation, we then turn our focus to the global landscape, investigating the diverse mechanisms driving
ESG value creation. Our examination encompasses cross-sectoral collaborations involving privatecompanies, governmental bodies, and non-governmental organizations, as well as the pivotal role of
ESG practices in areas such as technological innovation, stakeholder communication, and supply chain
sustainability.
Transitioning to the specific context of China, our analysis zooms in on the experiences andadvancements of Chinese companies in environmental stewardship, social accountability, and corporate
governance. We further explore the influential roles played by government entities, local communities,
and social organizations in shaping China’ s ESG landscape. Moreover, this report conducts acomparative examination of ESG value co-creation between China and the West, elucidating thecultural, political, and economic factors that contribute to disparities in approach and outcomes.

Global Trends and Chinese Practices

Finally, we address the challenges inherent in ESG practices at both the Chinese and global levels.
From issues of data transparency to aligning stakeholder demands and navigating regulatory
uncertainties, we confront these challenges head-on, recognizing their potential to serve as catalysts forinnovation and value creation. By projecting future ESG trends, this report offers actionable insights andrecommendations for businesses and policymakers seeking to navigate the evolving landscape of ESG
practices and unlock opportunities for sustainable value creation.

ESG, Value Creation, and Value Co-creation
ESG, standing for Environmental, Social, and Governance, represents a set of standards used to assess a company’ s
operations. It evaluates the organization’ s impact on social and environmental factors, along with its governance practices.
Under this framework, the “E” category encompasses aspects such as energy efficiency, carbon footprint, climate change
mitigation, and pollution reduction. The “S” category covers labor standards, workplace diversity, human rights, andcommunity relations. Meanwhile, the “G” category focuses on governance, including board composition, executives’compensation, and political contributions.1
Value creation in a business context involves the creation of products or services that customers consistently findvaluable. It emphasizes innovation in products and processes to meet unique customer needs effectively and efficiently. This
concept is critical for businesses of all sizes, emphasizing the importance of building a loyal customer base by consistently
delivering significant value.2
Value creation and value co-creation are closely intertwined concepts. While value creation emphasizes meetingcustomer needs through innovative products and services, value co-creation extends this notion further. It emphasizes thecreation, delivery, and exchange of value among different stakeholders throughout the process of creating, delivering, andexchanging goods and services.3 This process aims to achieve mutual benefits through symbiotic relationships, making it adynamic and interactive value creation process.
ESG practices embody corporate social responsibility and directly facilitate value creation. By implementing
environmentally friendly operations, fostering good social relationships, and establishing robust governance structures,companies can enhance their reputation and customer loyalty, thereby boosting sales and profitability. Additionally, adopting
ESG standards can help businesses reduce operational risks, attract investors, and strengthen their innovative capabilities.
Thus, ESG practices are not solely philanthropic endeavors but strategic approaches that deliver tangible economic benefits.
Within the ESG framework, interactions between companies and their stakeholders (customers, suppliers,
communities, and governments) are not just one-way value transfers but bi-directional value co-creation processes. Throughcollaboration with stakeholders, companies can create social and economic value while addressing environmental and social
issues. For example, partnerships between companies and environmental organizations can lead to the development of
more sustainable products while simultaneously enhancing brand image and market share.
ESG practices, value creation, and value co-creation reinforce each other. ESG practices not only contribute tovalue creation but also serve as crucial avenues for co-creating value with stakeholders.

ESG-Driven Value Creation
Over 2,000 studies have demonstrated that focusing on ESG issues does not detract from financial returns; instead, it
can enhance them. Sixty-three percent of these studies have shown positive stock returns for companies that prioritize ESG,
while only 8% have reported negative impacts.4 Based on the 2022 ESG ratings of companies listed on the China Securities004

2024 ESG White Paper

Index, sample companies from the CSI 300, CSI 500, and CSI 1000 indices can be categorized into four groups. Analysis
reveals that companies with higher ESG scores tend to demonstrate a higher Return on Assets (ROA) one year after thereporting period, underscoring their strong and lasting profitability.
This trend is also evident within the reporting period itself. For instance, during the reporting period, companies within
the CSI 300 index that scored highly on ESG metrics had an average ROA of 8.17%, compared to 5.16% for those withlower ESG scores.5 The IBM Institute for Business Value has observed that organizations with robust ESG data management
capabilities tend to significantly outperform others in terms of profitability. This underscores a direct correlation between theeffectiveness of ESG data management and a business’s financial performance.6 In the long term, robust ESG strategies candeliver superior returns in the A-share market and help reduce portfolio volatility.
Companies excelling in ESG often have better information disclosure, which reduces information asymmetry forinvestors, builds ethical and reputational capital, and provides an “insurance effect” for their market performance.7 According
to Thomson Reuters, companies with strong ESG performance typically enjoy higher credit ratings. Such companies havelower credit risks, which often translate to stronger market performance and higher investment returns.8 Data from Deloitte
Risk-X indicates that between 2015 and 2024, the average credit bond default rate of A-rated Chinese companies in the
agriculture, forestry, animal husbandry, and fishery industries is significantly lower than D-rated ones, with a difference ofabout 1.90%.9
Chinese asset owners, such as the National Social Security Fund (NSSF) and major pension funds, are increasing the
proportion of ESG assets in their portfolios, gradually investing more in green bonds and sustainable investment projects. By
2020, the NSSF had significantly increased the share of ESG-related investments in its total portfolio.10 A survey found that
83% of traders conduct ESG due diligence when investing in and acquiring target companies. A 2021 report shows that
60% of respondents would cease investments due to negative assessments of potential target companies’ ESG issues.11 A
2022 survey of ESG investments among 184 asset owners across 26 countries reveals that 86% of asset owners
incorporate ESG considerations into their investment strategies.12
Beyond generating financial returns, robust ESG practices afford companies enhanced recognition among criticalstakeholders, thereby elevating non-financial aspects such as reputation and societal impact. This elevation manifests inseveral beneficial outcomes, including favorable policy considerations, and heightened customer and employee satisfaction.
For instance, businesses that stand out for their ESG performance often foster stronger relations with governments, securing
preferential policy support. Furthermore, commendable ESG practices are instrumental in cultivating a positive perception of
a company’ s products or services, culminating in elevated consumer trust and satisfaction. Additionally, a significant
proportion of millennials, 76%, consider a company’ s ESG credentials when deciding where to apply for employment.13 The
evidence is clear: organizations that dedicate themselves to ESG initiatives and actively involve their workforce not only boost
employee engagement and productivity but also notably decrease staff turnover rates.14

ESG Value Creation Mechanisms
Robert P. Sroufe characterizes this process as “integrated
management” , which entails incorporating ESG performance into thefundamental activities and responsibilities of business processes,
functions, teams, organizations, and systems. Value integration evolves
from business practices, including ethics, environment management,
and sustainability, with the objective of augmenting their overall efficacy
rather than supplanting existing methodologies. By translating ESG
endeavors into business jargon, such as performance enhancement,
revenue growth, operational excellence, waste and cost reduction,
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The ESG concept serves as acomprehensive framework for
fostering sustainable growthwithin companies, influencing
their strategies, operations, andinternal governance, thereby
contributing to value creation.

Global Trends and Chinese Practices

improvement of operating margins, EBITDA, and asset utilization, ESG concepts become more relevant and compelling to
executive leadership. There is a noticeable inclination among Fortune 500 companies to disclose the social andenvironmental impacts of their operations, and these entities are increasingly integrating sustainability considerations into
financial reporting.15
McKinsey outlines a framework delineating five primary ways ESG contributes to value creation.16

Driving top-line growth
ESG initiatives play a key role in attracting both B2B and B2C customers, particularly those who prefersustainable products. Positive engagements with communities and governmental bodies can improve
resource access and unlock new growth opportunities. A notable example is a significant public-private
infrastructure project in Long Beach, California, where the winning company was selected based on its
commendable sustainability practices.

Cost reductions
Adopting robust ESG strategies can lead to operational cost savings related to raw materials, water
usage, and carbon emissions. There is a significant correlation between resource use efficiency andfinancial outcomes. For instance, 3M’ s Pollution Prevention Pays (3Ps) project, initiated in 1975, hasresulted in savings of USD 2.2 billion through product redesign and improvements in manufacturing
processes.

Reduced regulatory and legal interventions
A compelling external value proposition linked to ESG can enhance strategic flexibility for companies
and reduce regulatory burdens. Advancing ESG practices often leads to a lower risk of government
intervention and may even attract governmental support.

Employee productivity uplift
A strong ESG proposition helps in attracting and retaining talent, thereby increasing employee
motivation and productivity. There is a positive correlation between employee satisfaction and shareholder
returns. Companies with higher employee satisfaction often experience superior stock performance.
Research by Alex Edmans of the London Business School indicates that firms featured in Fortune’s list of 100
Best Companies to Work For enjoy annual stock returns that outpace their competitors by 2.3% to 3.8%.

Investment and asset optimization
A robust ESG proposition can enhance investment outcomes by directing capital towards moresustainable and promising ventures, thereby mitigating potential losses associated with long-term
environmental challenges. For example, China’ s air pollution mitigation efforts are expected to unlock over
USD 3 trillion in investment opportunities by 2030.

ESG Value Creation: Evolution and
Perspectives Worldwide and in China
The evolution of ESG concepts
The development of ESG concepts worldwide has gone through several key stages, beginning with ethical investment
practices in the 18th century. During that time, religious groups guided their followers and the foundations they managed to
avoid investing in industries that clashed with their moral values, such as tobacco, arms, and the slave trade. In the 1960s

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2024 ESG White Paperand 1970s, amid rapid economic growth in developed countries, concerns about significant environmental pollution andresource scarcity emerged. This period saw the rise of environmental movements in Europe and the United States,
advocating for sustainable development, environmental conservation, and shifts in consumption patterns.
Entering the new millennium, the ESG framework quickly gained momentum. In 2004, Kofi Annan, then
Secretary-General of the United Nations, initiated discussions on ESG-related topics. In 2005, the Who Cares Wins report
was produced by 18 financial institutions, introducing the concept of ESG to the financial world. In 2006, the United Nations
launched the Principles for Responsible Investment (PRI). Since then, numerous global organizations and agreements,
including the Sustainability Accounting Standards Board (SASB), the Paris Agreement, and the United Nations Sustainable
Stock Exchanges (UNSSE), have contributed to the advancement and global recognition of ESG principles.
In China, the evolution of ESG practices has occurred in three major phases. The journey began in 2001 when China
joined the World Trade Organization (WTO), prompting increased awareness and adoption of social responsibility among
Chinese companies. The second phase followed the 18th National Congress of the Communist Party of China in 2012,
particularly with the introduction of the “Innovation, Coordination, Green, Openness, and Sharing” development principles in2015. This solidified high-quality, sustainable growth as a key pillar of China’ s national development strategy. The third phasebegan in 2020 with the establishment of the “Dual Carbon” goals as a national strategy. This spurred a focus on low-carbon
transition, leading to a surge in ESG practices related to low-carbon issues and greater integration with the capital market.
As a result, a growing number of listed companies and asset management firms are prioritizing ESG considerations.17

Perspectives of value creation
Internationally, the development of the ESG concept represents a shift from prioritizing short-term profits to focusing on
generating long-term value. Originally rooted in ethical investing and environmental activism, early ESG efforts emphasized
protecting the environment and promoting social responsibility. However, these principles were not initially integrated into
mainstream business and investment strategies. As global challenges like climate change and resource depletion became
more pressing, the acceptance and application of ESG principles expanded significantly. This shift gained momentum
following the establishment of the United Nations Principles for Responsible Investment (PRI) in 2006, marking a turning
point in how ESG considerations were viewed within global capital markets and corporate governance. This evolution
underscores a growing consensus among investors and businesses that integrating ESG factors is fundamental tocreating sustainable, long-term value beyond fulfilling social and environmental obligations.
In China, the progress of ESG practices reflects a shift towards innovative value creation. Initially, Chinese companies’
focus on social responsibility was driven primarily by the need to meet international standards after China joined the World
Trade Organization (WTO). As China’ s development strategy progressed, it introduced the “Innovation, Coordination, Green,
Openness, and Sharing” principles, along with the “Dual Carbon” goals. Consequently, Chinese businesses have been
integrating ESG principles more thoroughly into their corporate strategies. This shift marks a departure from a purely
growth-oriented business model towards one that values sustainable development and long-term value creation. By
adopting ESG practices, Chinese companies not only address global environmental and social challenges but also explore
new opportunities for growth and competitive advantage.
Thus far, our discussion has focused on understanding ESG from a theoretical perspective and its role in fostering value
creation. Grasping these theoretical aspects is essential for appreciating its broader impact on both the business sector andsociety as a whole. In the following section, we will shift our focus to real-world ESG value creation practices, both worldwide
and within China. This next part aims to present a broader picture of global ESG trends before delving into China’ s practices.
This separate discussion does not imply disconnection or significant differences between global and Chinese practices; rather,
China’ s ESG strategies are a crucial part of the worldwide movement, contributing unique insights and leaving a substantial
impact on the global stage. In examining the global narrative of ESG value creation, we will incorporate case studies from
China to highlight its proactive engagement in the international arena. As we narrow our focus to China, we will explore the007

Global Trends and Chinese Practices

country’ s regulatory framework, policy directives, and distinctive socio-economic landscape that shape its ESG initiatives. Our
discussion aims to shed light on the dynamic evolution of ESG practices, reflecting both global patterns and China’ s specificexperiences and innovations. We also aspire to underscore China’s role as a pioneer and leader in the ESG domain.

Global Trends
Global governance and international cooperation
In an increasingly interconnected world, global governance and international cooperation play a crucial role in advancing
ESG value creation. By collaborating across borders and aligning policies, the global community addresses urgent
challenges such as climate change, advocates for sustainable development, and enhances corporate social responsibility.
This concerted effort strengthens global commitment to environmental stewardship while establishing a robust framework forachieving social and economic sustainability. Four key trends emerge within this global context:(1) Consensus on energy transition: The crisis in Ukraine has exposed vulnerabilities in energy dependency, prompting
a worldwide shift toward renewable energy sources. In response, the United States introduced the Inflation Reduction Act,
allocating USD 369 billion to clean energy and climate initiatives. By 2030, electric vehicles are expected to account for 50%
of new car registrations in the U.S. Similarly, the European Union’ s Green Deal Industrial Plan aims to accelerate thedevelopment of net-zero technologies and ease state aid rules to advance clean energy development.18 The EU’ s plan aims
for two-thirds of the Net Zero Emissions Scenario heat pump installations by 2030.
China is also pivotal in the energy transition, leading the way in clean technology adoption. In 2022, China accounted
for nearly half of the global growth in wind and solar power and led in electric vehicle sales. China projects a further threefold
increase in solar photovoltaic and offshore wind power installations. This rapid ascent of the global clean energy economy,
particularly in photovoltaics and electric vehicles, illuminates the path forward. Clean energy investments have surged by
40% since 2020. In 2020, one in 25 vehicles sold was electric; by 2023, that ratio improved to one in five. To ensure asmooth transition to renewable energy, increased investments in clean energy infrastructure are essential worldwide. In
emerging and developing economies outside China, investments in energy transition need to increase fivefold by 2030 toalign with the Net Zero Emissions Scenario.19(2) ESG-linked performance and compensation: Incorporating ESG criteria into executive compensation systems has
become a key consideration for investors’ decision-making. This integration suggests that ESG performance is gaining
importance among business executives, influencing a company’ s overall performance. Approximately half of the companies
listed on the FTSE 100 have set quantifiable ESG goals for their CEOs and are incorporating these targets into executive
compensation packages. This trend reflects a broader corporate acknowledgment that ethical business practices are integral
to successful operations, and just as important as conventional performance metrics.Royal Dutch Shell set a precedent in2018 as the first major oil company to integrate ESG factors into compensation packages. In 2021, the company raised its
long-term net carbon footprint reduction goal from 10% to 20%. Rio Tinto Group adjusted its Short-Term Incentive Plan
(STIP), reducing the emphasis on personal achievement from 30% to 15% and redistributing the remaining 15% to ESG
criteria. This change complements the 20% already allocated for safety measures, expanding the company’ s STIP to coverbroader ESG metrics. Apple has also implemented a policy that can adjust executive bonus payouts by up to 10% based onalignment with “Apple Values,” including accessibility, education, environment, diversity and inclusion, privacy, and supplier
responsibility.20 By embedding ESG benchmarks within executive pay frameworks, companies are motivated to prioritize
sustainability objectives, creating long-term value for shareholders and stakeholders.
(3) Litigation-driven changes: Around the world, regulatory bodies and companies face an increasing number ofclimate change-related litigation cases. These lawsuits, often driven by activists, non-governmental organizations (NGOs), or
individuals directly impacted by climate change, call for stronger actions from companies or governments to reduce0082024 ESG White Paper

greenhouse gas emissions. These litigations present legal and financial risks to companies, potentially leading tocompensation claims and reputational damage. Activists initiating these lawsuits may also face risks such as litigation
costs and public scrutiny.
Shareholder activism remains a significant force in influencing corporate ESG policies, particularly in the oil and gas
sector. Despite a recent decrease in court support for such actions, shareholder activism persists as a method to impact
corporate ESG strategies. Though these litigations and activist actions occur primarily in specific countries or regions, theireffects often transcend borders, fostering international dialogue and cooperation on ESG issues. This collaboration reinforces
stricter norms for environmental protection and social responsibility.
(4) Co-governance against greenwashing: Greenwashing, or making deceptive claims about the environmental
benefits of products, services, or strategies, poses a significant challenge. In 2023, RepRisk reported a 70% surge ingreenwashing incidents among global banks and financial service companies compared to the previous year. The analysis
found that 106 of the 148 greenwashing cases stemmed from European financial institutions, with most cases occurring in
the fossil fuel industry. Social greenwashing, where companies obscure fundamental social issues such as human rights
violations or negative community impacts, also emerged as a trend. Greenwashing is associated with one in four
climate-related ESG risk occurrences, with one in three implicated companies also exhibiting social greenwashing
behaviors.21
To combat greenwashing, the European Commission has proposed initiatives requiring companies to independently
verify and substantiate their “green claims” with scientific data before presenting them to consumers. These measures aim toenhance the accuracy and trustworthiness of environmental assertions, empowering consumers to make more sustainablechoices and motivating genuine corporate commitment to environmental stewardship.
Addressing greenwashing requires global collaboration and unified efforts within an international governance structure.
There is growing demand from the global financial community and investors for collective initiatives to boost corporatetransparency and integrity. Regulatory institutions and international organizations are working to establish consistent
standards and regulations to define and combat greenwashing behaviors effectively.

Emblematic ESG-related policies
In 2023, there was a noticeable increase in comprehensive ESG policies issued by countries around the world,
showcasing a growing global commitment to sustainable value creation. These policies play a critical role in promoting
environmental protection and social responsibility while providing new growth opportunities for corporations and investors.
(1) United States: The United States has been working on enhancing climate-related risk disclosures to increase market
transparency and provide investors with more precise information. This effort is part of a broader strategy to guide theeconomy towards sustainability and unlock new avenues for corporate growth. Besides financial statement disclosures, theSecurities and Exchange Commission (SEC) proposed new rules requiring public companies to disclose their Scope 1 andScope 2 emissions, as well as major climate-related risks. Additionally, the Federal Trade Commission (FTC) is updating its
Green Guides. California Governor Gavin Newsom signed three bills mandating climate-related disclosures from businesses
operating in California, requiring them to report their Scope 1, Scope 2, and Scope 3 greenhouse gas emissions and comply
with the Task Force on Climate-related Financial Disclosures (TCFD) reporting framework or other equivalent frameworks.22(2) Canada: Canada plans to introduce mandatory ESG reporting in 2024, focusing on major banks, insurancecompanies, and federally regulated financial institutions. This initiative aims to promote the sustainable development of thefinancial market and encourage value creation. The mandated disclosures will cover climate-related financial risks andexposures, in line with the guidelines established by the TCFD framework.
(3) European Union: The European Union’ s Corporate Sustainability Reporting Directive (CSRD), implemented in
January 2023, marks a significant milestone in European ESG policy. This directive requires companies to report009

Global Trends and Chinese Practices

sustainability-related information according to the newly established European Sustainability Reporting Standards (ESRS).
Around 50,000 companies will need to comply with the directive, making it Europe’ s most extensive ESG regulation to date.
The CSRD aims to enhance sustainability practices and foster value creation throughout the EU.23(4) Japan: Japan is focused on developing the transition bond market to support companies in shifting towards moresustainable business practices. In 2023, Japan announced plans to issue JPY 20 trillion worth of “GX Transition Bonds”
within FY 2023 to promote industrial decarbonization. This makes Japan the first sovereign issuer to adopt a transition bondframework.24 Japan supports value creation in the green economy by providing financial backing for companies transitioning
to low-carbon, sustainable models.
(5) China: China is advancing policies to promote both domestic and international green growth, aiming to create
sustainable value for companies and the broader economy. In February 2024, the Shanghai, Shenzhen and Beijing Stock
Exchange released guidelines on corporate sustainability reporting for public consultation (Guidelines), enhancing theconsistency and transparency of corporate ESG reporting. Additionally, China has engaged in high-level discussions with theEuropean Union to strengthen collaboration on global green transformation. The proposed “1+N” policy framework offers acomprehensive strategy to reach emissions peak across various sectors by 2030. This includes a range of action plans andpolicy measures. Furthermore, the Hong Kong Stock Exchange has proposed requiring all listed companies to include
climate-related disclosures in their ESG reports, shifting from the current “comply or explain” approach. It also suggests
introducing new climate-related disclosures aligned with the IFRS S2 Climate-related Disclosures Standards (ISSB Climate
Standard), promoting a more reliable and sustainable investment environment for investors and stakeholders.

Finance(1) Investment: ESG investments differ from traditional investments that primarily focus on financial metrics. ESG
investments emphasize the impact of businesses on the environment and society, as well as their internal governancepractices. In recent years, non-financial risks such as climate change, labor compliance, and supply chain vulnerabilities havepropelled the ESG framework to the forefront of global investment trends, garnering significant attention worldwide. From2014 to early 2018, ESG-mandated assets in the United States grew at an average annual rate of 16%, compared to 6% in
Europe.25 Between 2017 and 2019, the proportion of retail and institutional investors incorporating ESG principles surged
from 48% to 75%. It is anticipated that by 2025, ESG investments worldwide will exceed USD 53 trillion, representing a thirdof total global assets under management (AUM).26
Europe leads in sustainable investment assets, totaling USD 14.1 trillion, with the United States close behind at USD 12
trillion. A 2022 survey by JP Morgan Asset Management revealed that European investors are at the forefront of sustainable
investment demand, with ESG allocations exceeding 20% across Europe. Although the flow of funds may slow down, they
are expected to remain positive.27 Deloitte forecasts that in the United States, ESG-mandated assets will grow nearly threetimes faster than non-ESG assets by 2025, making up half of all professionally managed investments.28
China’ s commitment to carbon neutrality is driving rapid growth opportunities for ESG investments as the country
advances economic and social green transformation. China’ s green bond market, a key aspect of ESG investment, hasexperienced substantial growth. By 2025, China’ s ESG investment volume is expected to reach RMB 20 to 30 trillion,
accounting for about 20% to 30% of the country’s total AUM.29(2) Funds: ESG funds integrate ESG metrics with traditional financial data to provide a comprehensive assessment ofinvestment opportunities. These funds take into account companies’ ESG performance in areas such as energy efficiency,
community engagement, and corporate governance. Since 2019, global AUM in ESG funds has seen significant growth. By
the end of 2021, the global sustainable fund AUM had reached USD 2.74 trillion, marking a 53% increase within that year
alone. According to BCG, during the COVID-19 pandemic, ESG funds showed resilience and performed well across various
market cycles. ESG indices outpaced market benchmarks in 78%, 75%, and 94% of cases in 2015, 2018, and during the
COVID-19 pandemic, respectively.30

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Europe remains the leader in the global ESG market, holding 81% of sustainable fund assets. This dominance is partly
due to the EU’ s Sustainable Finance Disclosure Regulation (SFDR), which has significantly increased disclosure requirements
for ESG financial products, expanding the reach of sustainable investments globally.31
The main driver for financial professionals to gravitate toward ESG investments is customer demand. In 2021, over USD
500 billion was invested in ESG-integrated funds, leading to a 55% growth in AUM.32 The appetite for sustainable investment
funds is set to grow further, with expectations of an unprecedented number of new ESG funds launching in the next three
years. Deloitte projects that the United States will introduce around 200 new ESG funds within this period, more than double
the launch rate of the previous three years.33 However, between 2020 and 2023, the number of newly launched ESG funds
in the United States did not increase significantly as expected. Instead, for the first time since 2020, there were more ESG
fund closures than new launches. Reasons for this include waning investor interest in this asset class overall, regulatory
scrutiny of the marketing practices of these funds, and political opposition, particularly from Republicans who claim thesefunds are detrimental to retirees' savings.34(3) Insurance: The global insurance sector plays a unique role as a risk manager, risk taker, and significant investor in
the economy, positioning it to advance economic, social, and environmental sustainability. As ESG continues to evolve andbe integrated into risk assessment practices, the insurance industry faces both significant opportunities and challenges.35
According to a global survey by KPMG in 2022, 44% of insurance company CEOs acknowledged that ESG practices
positively impacted their financial performance.36 Additionally, 85% of global insurers believe ESG will affect all business
functions. They identified investments as the area most impacted (91% of respondents), followed by risk and internal audit(90%) and underwriting (88%). Global insurers noted that the main drivers for pursuing ESG are to minimize the impact ofclimate change (26%), improve the firm’ s reputation (11%), and minimize risk (11%).37 Insurance companies enhance theirbrand image by supporting renewable energy initiatives and other ESG-related activities. For instance, Hiscox plans tolaunch an ESG-focused syndicate in the Lloyd’ s insurance market to tap into the growing interest and investment in green
technology.38
As global risks like climate change and cybercrime increase in frequency and severity, the insurance industry is
recognized as a vital safety net for the public, gaining attention for its risk management capabilities and comprehensive
coverage. Insurers understand the importance of addressing risks at their source to minimize potential losses. This isparticularly crucial in regions like Asia, where insurance coverage is less widespread, leaving a substantial protection gap.
This situation presents opportunities for the insurance industry to revise its offerings and introduce innovative solutions tomeet emerging needs and serve underserved communities.
For example, Jintai Property & Casualty Insurance has introduced a weather index insurance product for Sichuan
pepper growers, using scientific data to facilitate claims based on specific weather conditions affecting crop production,such as freeze or hail events. This type of insurance, which triggers claims based on predefined weather indices, streamlines
the claims process, making it efficient and fully online. This initiative bolsters agricultural risk management while fosteringcollaboration among various stakeholders, including local government bodies, businesses, and farmers, providing significant
support to local agricultural sectors.39
Insurance companies are undergoing multidimensional transformations in product services, channel marketing,operational models, digital capabilities, and ecosystem partnerships. In the Asia-Pacific region, a growing number of insurers
are investing in technology platforms and ecosystem partners to offer low-cost and customized insurance products. 40 A
PWC report indicates that 93% of global insurers are likely to consider working with industry groups to advance ESG
initiatives, followed by 70% seeking partnerships with other companies. Additionally, 60% are likely to consider working withacademic groups.41(4) Banks: The banking sector plays a pivotal role in the global ESG ecosystem. Amidst the global push towards green
transformation, banks are key players due to the substantial funding gap in sustainable development efforts. Banks drive011

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sustainable development, foster shared prosperity, and promote inclusive finance while also navigating heightened
regulatory scrutiny and increased disclosure obligations. Banking practices are increasingly centered around green financeand digital transformation strategies, integrating ESG principles into governance structures and management processes.
Leading banks such as Citibank and Barclays have established sophisticated approaches and comprehensive practices
addressing substantive issues, strategic planning, organizational structure, and risk management.
International commercial banks are advancing their business transformation by continuously enhancing green financeefforts, expanding green financial assets, and innovating green financial products such as carbon quota pledge financing,green bonds, and green auto loans. Banks are also refining financing policies to support environmental sustainability. For
instance, Citibank plans to gradually reduce financial support for thermal coal mining companies and cease providing
financing services for new ventures or projects in high carbon emission industries, including thermal coal mining andcoal-fired power generation.
In China, six major banks - Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China
Construction Bank, Bank of Communications, and Postal Savings Bank of China - have made significant progress in ESG
innovation and advancement. They have joined the United Nations Environment Programme Finance Initiative (UNEP FI) andsigned the Principles for Responsible Banking (PRB), demonstrating their commitment to actively addressing climate change
and other environmental challenges while contributing to sustainable development goals. In the realm of green finance, thesesix banks had issued green loans totaling approximately RMB 8.68 trillion by the end of 2021, marking a 39% increase fromthe previous year. This positions China as the world’ s largest green loan market, making green loans a foundational elementof the international green finance landscape.42

Science and technology(1) Digital technologies: Accenture’ s survey of 560 companies, each with revenues exceeding USD 1 billion, revealed
that all companies view digital technologies as “important” or “very important” for achieving sustainable development
goals.43 This highlights the potential for companies to harness digital technologies not only to optimize their core operations
but also to meet sustainability objectives.
The year 2023 marked the rise of generative AI, as exemplified by ChatGPT. McKinsey’ s report, The State of AI in 2023:
Generative AI’ s Breakout Year, notes that, despite its recent debut, generative AI is being rapidly adopted across various
sectors, such as marketing and sales, product development, and customer operations. According to the report, 79% ofparticipants have encountered generative AI applications at least once in their work or personal lives, and 22% use thesetools frequently at work. Moreover, one-third of respondents indicated that their organizations routinely incorporate
generative AI tools into at least one business function.44 For example, IBM and NASA have partnered to release a generative
AI geospatial model to analyze vast amounts of satellite data, enabling forecasts of floods and forest fires and assessing theirimpact on crops. Additionally, AI technologies are helping visually impaired individuals better navigate physical and digital
environments, enhancing their quality of life.45
Big data technology offers a comprehensive understanding of ESG factors, allowing for the analysis of returns andforecasting of business fundamentals for informed investment decisions. It also sheds light on how various industries
navigate the transition to a low-carbon economy through innovation.46
Cloud computing facilitates the integration and analysis of ESG-related data, thereby improving management efficiency.
By embedding ESG principles into the traditional QCDS management framework (Quality, Cost, Delivery, Service), cloudcomputing assists companies in enhancing their global competitiveness and building stronger connections with international
markets, all with a focus on sustainability.47
Blockchain technology plays a critical role in gathering and processing ESG data. Its features - such as distributed
networks, multi-party consensus, and transparent rules - make it well-suited for facilitating complex collaborations within the
ESG sphere. The WeBank Blockchain project, led by WeBank, aims to establish a reliable ESG infrastructure that promotes

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fairness and sustainable development. Such initiatives are essential for building trust among various stakeholders, including
governments, the public, and businesses.48(2) Green technologies: Green technologies are designed to minimize environmental impact, improve resource
utilization efficiency, and promote sustainable growth. These technologies play a pivotal role across various sectors, including
the adoption of renewable energy, waste reduction, energy efficiency improvements, and the development of green materials
and production processes. Central to the “Environmental” pillar of ESG, green technologies are crucial for transitioning fromfossil fuel dependency towards clean energy sources such as wind and solar power. They also encompass cutting-edge
recycling methods and sustainable packaging solutions. The push for electric vehicles and fuel cell technology aims to lower
carbon emissions, while innovations in precision agriculture and sustainable irrigation practices help mitigate environmental
degradation.49 Recent advancements in green technology showcase a diverse array of innovations, including biomimicry(imitating nature’ s sustainability solutions), molten salt energy storage (utilizing the thermal energy storage capacity of salt),
artificial photosynthesis (using sunlight and carbon dioxide to produce usable energy), smart meters (reducing householdenergy consumption), and carbon capture and storage (CCS) technology (preventing carbon emissions from entering theatmosphere).50
Leading companies like Cisco Systems, Verizon Communications, NVIDIA, Apple, PayPal, Bank of America, Salesforce,
Microsoft, Intel, and Alphabet (Google) are at the forefront of integrating green technologies into their operations to achieve
ambitious ESG objectives. For instance, NVIDIA has committed to sourcing or producing enough renewable energy to offset
its global electricity consumption entirely. Its H100 GPU, leveraging the advanced Hopper architecture, has proven to be 26
times more energy-efficient than conventional CPUs in benchmark tests. In November 2022, NVIDIA was recognized on theGreen500 list for possessing the most energy-efficient supercomputer.Apple has successfully avoided 23 million metric tonsof carbon emissions. The company focuses on eco-friendly product design, as seen in the Apple M1 chip in the 13-inch
MacBook Pro, which has decreased the product’ s carbon footprint by 8%. Apple has also increased the use of recycledmaterials in its products, with about 20% of the materials now sourced from recycled content. Apple aims to reach carbon
neutrality by 2030. Overall, green technologies offer solutions to environmental challenges while creating green jobs andguiding corporate governance towards sustainable practices.
(3) Information security technologies: Achieving ESG goals while upholding stringent cybersecurity and privacy
standards poses significant business challenges. Although the environmental aspect of ESG initiatives often garners
significant attention, cybersecurity and privacy require further emphasis and development. This gap becomes increasingly
problematic as the frequency of cyber threats increases, posing risks to companies’ operations, continuity, and reputations.51
By effectively managing cyber risks, organizations not only safeguard their operations, customers, and reputation but alsoalign with broader ESG commitments. ESG rating agencies often include cybersecurity and privacy in their ESG scores,
which many investors use as a shorthand for assessing companies’ ESG status. For instance, cybersecurity and privacy canconstitute nearly one-third (29%) of the ESG score for retail companies, 28% for telecom companies, and 20% for healthcare
providers.52
Nasdaq integrates the National Institute of Standards and Technology (NIST) Cybersecurity Framework into its ESG
reporting guide. This framework is widely adopted by both public and private entities globally, facilitating improved cybergovernance and beneficial advancements for the global capital markets. 53 Ericsson, a leader in information andcommunications technology (ICT) services that handles 40% of the world’ s mobile traffic, emphasizes its commitment to
information security and privacy. The company’ s Audit and Compliance Committee receives updates on cybersecurity atleast twice a year and integrates security measures into its annual training programs. This ensures that security and privacy
principles are embedded throughout its product and service lifecycle.54 Wells Fargo, a diversified financial services company
with assets of USD 1.97 trillion and serving one-third of all United States households, manages billions of customer
interactions annually. The company adopts proactive strategies in information security and cybersecurity. It implements an
information security program aimed at enhancing cybersecurity awareness. Additionally, Wells Fargo has initiated a013

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Third-Party Information Security Risk Management Program. The company also trains employees on protecting customer
data, educates customers on digital security, and facilitates data protection in open banking environments.55

Media(1) Explosion in media coverage of ESG topics
In recent years, there has been a noticeable uptick in media coverage of ESG topics, with the focus shifting fromhighlighting issues to emphasizing solutions. For example, coverage of the carbon market has gained prominence, andmentions of ESG in newspaper articles grew by 54% from 2020 to 2021. Notably, solution-oriented reports by Bloomberg
and the South China Morning Post increased by 228% and 330%, respectively, in 2021. Cision’ s 2023 Overseas ESG
Communication Trends Report examines the challenges and opportunities for ESG and value creation in the wake of the
COVID-19 pandemic. It tracks media trends and data from European and American markets, noting fluctuations in ESG
coverage in response to economic and political changes. For instance, in the latter half of 2021, there was a heightened
focus on sustainable growth and resilience, leading to an increase in traditional media coverage of ESG topics. However, theeconomic challenges brought on by the Russia-Ukraine war in 2022, such as rising energy prices and inflation, caused a
reduction in ESG discussions and led some organizations to postpone or retract their ESG initiatives. Despite these
setbacks, the importance of ESG topics remains strong, leading to a revival in related media coverage in 2023.56(2) Diversification of ESG coverage
Media coverage of ESG-related issues has become more diverse, particularly in business media, which now closely
examines how different sectors are addressing climate change challenges. This includes areas such as the burgeoning
carbon market, financing sources, responsible asset management, professional providers of climate solutions, and scrutinyof ESG data and ratings. Hydrogen energy is one of the most frequently reported solutions, with the Japanese businessmedia, Nikkei, significantly increasing its coverage of hydrogen energy in 2021. 57 Between 2019 and 2020, global media
coverage of ESG investments surged by 75%. However, there remains a disconnect between the narratives companies aim
to promote and media coverage, as only a third of financial news delves into companies’ specific ESG investments or
actions. The rest spans a broader spectrum, including topics such as greenwashing, portfolio management, performance,risks, and the overall growth of the ESG domain.58 This diverse approach to reporting not only reflects the complex andmultifaceted nature of societal and environmental challenges but also encourages corporations to innovate and integrate
ESG strategies across different areas. This approach helps companies enhance their market competitiveness and support
long-term viability.

(3) Rise of the gaming industry
The gaming sector plays a critical role in the global entertainment and media landscape. By 2024, the worldwide gamer
population - spanning smartphones, tablets, consoles, and PCs - is expected to surpass 3.3 billion individuals. Projectionsfor 2025 indicate that the global online gaming community will exceed 1.3 billion people. In the United States, gaming isprevalent in 74% of households, with 76% of individuals under 18 and 67% of adults participating in gaming activities; even
7% of those aged 65 and above enjoy video games.59 From 2023 to 2027, the global gaming industry’ s revenue is projected
to rise from USD 227 billion to USD 312 billion, with a compound annual growth rate of 7.9%.60 The gaming industry’ s
connection to ESG considerations is most evident in its social dimension, impacting young individuals’ behavior, social
abilities, and academic achievements. The industry also faces the challenge of addressing content diversity, inclusion, andgaming addiction. As the gaming sector rapidly expands, it presents opportunities for discussing and tackling social issues
and places a responsibility on companies to foster an inclusive and sustainable societal framework.

(4) Adjustment of brand communication strategies
More than 200 firms have committed to achieving net-zero emissions by 2040, but skepticism exists about theverifiability of these pledges due to a lack of accountability frameworks. This could hinder stakeholders’ ability to ensure014

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brands fulfill their ESG commitments. Thus, branding directors need to clearly articulate their ESG ambitions with explicit
roadmaps and definitions to address potential criticism and accusations of greenwashing. 61 Branding directors should also
recognize that media focus is shifting from specific events to broader trends. This shift requires brands to adjust theircommunication strategies to resonate better with media outlets by emphasizing major themes and providing in-depth
insights. Improved presentation and clarification of ESG efforts can help brands strengthen their reputation and build trustwith consumers and investors, laying the foundation for long-term value creation.

(5) The politicization of ESG
In the United States, ESG considerations have increasingly become a subject of partisan politics. Conservative
politicians have criticized companies for engaging in “woke capitalism,” accusing them of prioritizing trendy environmental
and social issues over the “core purpose” of maximizing shareholder profits.62 During the Trump administration in late 2020,
the U.S. Department of Labor introduced a rule to scrutinize ESG investments. However, this stance was revisited under the
Biden administration, which decided not to enforce the rule. Since 2019, at least 15 states have actively integrated ESG
considerations through laws and regulations. For instance, a law in Illinois requires state and local government entities
managing public funds to consider sustainability-related factors. On the other hand, at least 19 states have taken steps tolimit or discourage various kinds of ESG investing through new regulations or legislation. For example, Texas passed
legislation in 2021 requiring the listing and possible divestment of financial institutions that are found to have ceased
financing fossil fuel energy companies.63
The politicization of ESG issues highlights their importance and influence in modern society. Businesses andpolicymakers must navigate interests and perspectives to ensure that ESG investments and practices effectively promotesustainable development and societal well-being.

Supply chains(1) Global supply chain challenges and ESG management
The COVID-19 pandemic has had a significant impact on global supply chains, creating challenges and uncertainties forbusinesses. Some companies have responded by increasing the number of their suppliers, while others have worked tostrengthen upstream and downstream resilience to protect their supply chains.64 For example, Tesla, the electric vehicle
manufacturer, has taken the innovative approach of producing critical components in-house, such as car chips. This
self-manufacturing strategy, although not feasible for all companies, demonstrates the potential for innovation and flexibility inovercoming supply chain hurdles. For entities that cannot manufacture essential parts themselves, expanding the supplierbase serves as an alternative strategy. However, engaging more suppliers introduces new risks and increases workloads tomaintain the integrity of each business line.
Beyond logistical challenges, global supply chains can also expose companies to ESG-related issues such as thedepletion of natural resources, human rights violations, and top-level corruption. These factors can severely impact a
company’ s efforts to maintain ESG compliance. The supply chain often represents the most substantial area of ESG
compliance risk for global brands. Therefore, effective management of suppliers and other third-party entities within the
supply chain is imperative for large organizations.65(2) Global regulatory oversight of supply chain ESG management
Several developed countries and regions, including the European Union, the United Kingdom, and the United States,
have established regulatory frameworks for managing supply chains. For instance, the German Supply Chain Due Diligence
Act requires companies to assess and disclose their suppliers’ environmental and human rights compliance, including thosein China. Similarly, the European Commission’ s Corporate Sustainability Due Diligence Directive enforces due diligence on
environmental protection and human rights within supply chains, significantly affecting companies operating in the EU
market, especially Chinese ones.

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China’ s Standardization Administration has introduced the Green Manufacturing - Guidelines for Green Supply Chain
Management of Manufacturing Enterprises, marking the country’ s first set of standards to promote green supply chains.
These guidelines set requirements for green supply chain management for manufacturers, covering the entire productlifecycle, including design, material selection, production, procurement, recycling, and environmentally safe disposal ofwaste. They also outline green management practices applicable to both upstream and downstream activities in the supply
chain.66
As the world’ s second-largest economy and a pivotal manufacturing hub, China’ s engagement with and adaptation to
global ESG norms and trends in supply chain management are critical. The ability of Chinese businesses to quickly align withthese evolving international standards and fully integrate into the global division of labor is crucial for sustainable
development and global prosperity.

(3) ESG influence and synergy in supply chains
Managing extended supply chains beyond first-tier suppliers has become an important trend, particularly in addressing
issues such as climate change, labor and human rights, and the management of essential raw materials. The influence of
ESG criteria is permeating the entire industry chain through the supply chain, affecting operational and strategic decisions at
every tier.
In 2022, the automotive sector experienced intensified demands for carbon reduction throughout its supply chain due
to revisions to the European Carbon Border Adjustment Mechanism (CBAM) and the release of China’ s Carbon Peaking
Implementation Plan for the Industrial Sector. In response, suppliers, including raw material providers and original equipment
manufacturers (OEMs), are actively seeking ways to decarbonize the automotive supply chain and promote green supply
chains.
Initiatives such as the “Drive Sustainability” project, co-hosted by CSR Europe and GoldenBee China, aim to strengthen
the automotive industry’ s ability to adhere to ESG standards along its supply chain, with a particular focus on carbon
reduction and sustainable growth.67
Companies often have limited visibility into or control over supply chains, particularly the segments located in emerging
markets. This opacity results in limited awareness of the negative effects of their supply chains on the environment,
employees (especially those indirectly employed), and broader society. To address this, businesses are encouraged tocultivate transparency within their complex supply chains, identify ESG risks, assess these risks, and implement appropriate
strategies as needed.68

Diversity, Equity, and Inclusion
Businesses worldwide are increasingly emphasizing the social dimension of ESG, recognizing the importance ofDiversity, Equity, and Inclusion (DEI) principles. DEI is essential to ESG value creation because it enriches corporate social
responsibility and governance by introducing a broader range of perspectives, fostering innovation, and enhancing
decision-making quality. This, in turn, boosts business performance and sustainability. Moreover, a strong commitment to
DEI significantly influences a company’ s reputation and the trust it garners from stakeholders, crucial for creating
long-term value.
(1) Diversity: The 2023 Manager ESG Survey by Russell Investments highlights the proactive steps many managers
take to foster diversity within their organizations. According to the survey, 49% of managers have implemented specificpolicies aimed at increasing gender or racial diversity among senior management and investors. Additionally, 32% of thosesurveyed reported having female representation of 30% or higher in their teams, and 11% have achieved a minority
representation of 30% or greater - an increase of 23% and 8%, respectively, from 2022.69
Studies from McKinsey and Grant Thornton further corroborate the business advantages of diversity in corporate
governance, revealing that companies with greater gender diversity among their executive teams tend to have higher financial

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performance. Many firms now see women occupying a significant share of senior management roles. Regulatory authorities
are increasingly scrutinizing aspects such as the gender pay gap and other non-financial disclosures related to diversity.
Consequently, many companies are implementing specific gender diversity metrics - covering aspects like pay, recruitment,
retention, promotion, and representation - to monitor and report on their progress over time.70
In Asia, both Malaysia and India have made significant strides toward improving board gender diversity in recent years.
Malaysia has recommended that all boards include at least 30% women directors. India tightened its gender diversity
mandates in 2020, requiring the top 1,000 companies by market capitalization to appoint at least one female independent
director. The inclusion of more female directors enriches the board with diverse perspectives and experiences, positively
contributing to human capital management (HCM).71
The role of women in the ESG sector is also becoming increasingly prominent, with women controlling a growing
portion of wealth. Female investors often lean towards impact-driven investments, prioritizing causes and social justiceissues they hold dear. This preference is particularly evident in the Nordic region, where there is a noticeable inclination
among women for ESG investments, especially those emphasizing gender equality.72
Research indicates that investment products managed by women or minorities, as well as those from diverse-owned
firms, often perform on par with or better than those managed by mainstream firms. Despite these findings, as of 2021,
diverse-owned firms represented only 1.4% of assets under management in the United States.73(2) Equity: Since 2022, the focus of societal concern has expanded beyond environmental issues like climate change
and biodiversity to encompass social concerns, including equality and employee welfare. A survey by PwC indicates that
48% of consumers believe companies should do more to tackle social issues, specifically focusing on HCM matters such as
hiring practices and fair pay.74
The increased demand for action has led to pressures for more accountability, stricter regulatory scrutiny, and credible
disclosures supported by better data.75 Global regulators have significantly hastened the development of intricate and highly
detailed legal obligations related to ESG. These regulations are designed to promote increased disclosure, transparency, andaccountability. While primarily focusing on environmental issues, they also extend to HCM and other ESG-related concerns.76
The United States Securities and Exchange Commission (SEC) is updating its human capital disclosure regulations.
Companies that neglect ethical and responsible business conduct are increasingly at risk of financial repercussions. For
example, Hyundai Motors, the South Korean automotive manufacturer, divested its subsidiary factory in Alabama due toallegations related to child labor.77
DiversityInc has released its 2023 ESG Leaders ranking based on a survey of American employers with a workforce of
750 or more, spotlighting companies that excel in fostering workplace equity. This recognition is based on their talentstrategies, commitment to supplier diversity, and philanthropic efforts. Topping the list is Hilton, followed by U.S. Bank,
Mastercard, and Walmart.78
A McKinsey survey highlights that companies like Walmart, Schneider Electric, Shiseido, Tata Steel, and Randstad havelaunched effective initiatives to promote equity. These initiatives focus on enhancing social mobility, bridging pay disparities,
advancing gender equality, and supporting at-risk women.79
There’ s a growing interest in investing in enterprises that prioritize social welfare, education, and healthcare. Moreover,firms that tackle societal challenges, including income inequality and ensuring access to basic necessities, are viewed as
appealing investment prospects.80 HarbourVest, a private equity firm, is dedicated to ensuring more equitable access to
private capital. The firm has a longstanding commitment to investing in emerging and diverse managers as well as inunder-resourced markets. This approach is driven by the recognition of the untapped potential in deserving managers who
have historically been bypassed by conventional investment avenues. A notable example of HarbourVest’ s commitment is its
support for the LightBay Foundation, a fund designed to contribute positively to the community.81

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Global Trends and Chinese Practices(3) Inclusion: Given market and investor demands, companies are beginning to prioritize inclusion and sustainability
strategies. This reflects a shift in mindset, encouraging leaders in the business and investment spheres to proactively andinnovatively reassess their operations. This reevaluation is aimed at unlocking new avenues for value creation.
For example, in the transition to clean energy, the Council for Inclusive Capitalism is advocating for companies to follow
its private sector guidelines. These guidelines highlight the importance of social impact in ensuring a smooth transition anddriving business growth.82 Led by Lynn Forester de Rothschild, the Council for Inclusive Capitalism is dedicated to engaging
the private sector in building a more inclusive, sustainable, and trustworthy economic system. This system aims to generate
profits that benefit not only shareholders but also employees, communities, and the planet.
Since its first public debut in December 2020, the council has expanded from 25 founding members to a vibrantcommunity of over 550 global executives, asset owners, managers, and other influential figures. These members havecommitted to more than 780 specific, actionable, and measurable pledges to foster inclusive capitalism.
For many companies, Diversity and Inclusion (D&I) is intrinsically linked with and driven by ESG. Under this backdrop, in
2023, the emphasis on social value has notably increased. There’ s a mounting expectation for transparency regarding how
large organizations are fostering D&I and the specific initiatives they are implementing at the local level.
Employers are exploring how to effectively measure inclusion within their organizations. While past efforts predominantly
centered on quantifiable diversity metrics, such as demographic data of employees, the focus is shifting towards a morenuanced approach. Measuring inclusion now encompasses not only hard data but also qualitative assessments that capture
employees’ sentiments and experiences within their work environments.83

Consumer awareness and behavior(1) Rise in sustainable lifestyles
Consumer awareness and behaviors are increasingly shaping ESG value creation worldwide. According to research by
McKinsey, many consumers are willing to pay more for “green” products. Surveys across various sectors reveal that over
70% of consumers are open to spending an extra 5% on green products if they perform as well as non-green alternatives.84
Deloitte’ s four-year study of British consumers’ sustainable behaviors shows a shift towards more sustainable lifestyles.
In 2023, more consumers are purchasing second-hand items and investing in longer-lasting goods. Many are opting for“repair instead of replace” and reducing car usage. For instance, 76% of consumers are open to using repair services, anincrease from 73% in 2022. Additionally, 39% are selling more unwanted items, up from 32% the previous year, and 34% arebuying more second-hand products, compared to 29% in 2022.85
Simon-Kucher’ s annual sustainability study revealed that in 2022, 94% of respondents actively incorporated sustainable
practices into their lifestyle and purchasing decisions, and 62% valued sustainability more than a year earlier.86
According to Bain & Company’ s report, 90% of Asia-Pacific consumers are willing to pay a premium for sustainableproducts, and over 60% are more inclined to buy from companies with strong ESG performance.87
The 2021 China Sustainable Consumption Report found that over 70% of consumers believe low-carbon consumption
is a shared responsibility. Consumers are more willing to pay a premium for durable goods such as home furnishings andelectronic appliances.88(2) Positive response from major companies
As consumer attitudes shift, companies face increasing pressure to offer eco-friendly products and services.
Businesses that lag in sustainable practices risk losing their competitive edge. For instance, Apple has been urged to reduce
electronic waste and its carbon footprint by young consumers and environmental activists. In response, Apple uses recycledmaterials in its products and aims to be carbon neutral by 2030.
In Europe, consumer and environmental groups closely monitor corporate carbon emissions. In response to consumer018

2024 ESG White Paperand investor calls, Intel aims to reach net-zero emissions by 2040, a major commitment within the manufacturing industry,
which is a major source of direct carbon emissions.89
Samsung Electronics is addressing concerns about the environmental impact of its products and operations. To
improve its global brand perception and meet consumer expectations, Samsung plans to power all its operations with 100%
renewable energy by 2030 and aims to cut greenhouse gas emissions.
In China, as environmental awareness increases, consumers demand sustainable actions from companies. Alibaba
Group introduced the “88 Carbon Account,” a system that incorporates carbon points into software applications such as
Cainiao, Xianyu (Goofish), Ele.me, and Tmall.

(3) Discrepancies between awareness and behavior
Nielsen IQ reports a gap in sustainable living: while 70% of global consumers consider it important, almost two-thirds ofthe global population lack the awareness, motivation, and action to live more sustainably. The main barriers to greener habits
are cost and limited access to sustainable options.
Despite acknowledging the value of sustainability, factors such as affordability often take precedence over eco-friendly
considerations in brand choice. Nearly all consumer groups prioritize affordability, particularly those adopting or consideringgreen practices.90
For companies, achieving ambitious sustainability goals is challenging. They must understand and influence consumer
behavior to effect real change. Given economic uncertainty and rising inflation, companies should focus on how sustainablechoices can help consumers save money. Consumers are buying more second-hand goods and are willing to pay more fordurable items; they are also opting for repairs over replacements and minimizing car usage.
Additionally, as energy costs rise, consumers are saving energy wherever possible, such as reducing heating times.
However, they are hesitant to adopt costlier energy-saving measures, like improving home insulation or solar panel
installation.
A growing trend is for consumers to consider sustainability in their buying decisions, focusing on product longevity andrepairability and preferring responsibly sourced or produced items.91
Understanding these consumer priorities is crucial for businesses aiming to promote sustainable consumption. Offering
more affordable sustainable options or emphasizing additional benefits, such as health advantages, could significantly
influence purchasing decisions.

China’s ESG Practices
China has adopted a distinctive approach to value creation based on its policy frameworks, cultural traditions, andbusiness innovation, setting itself apart in the global surge of ESG development. The country's ESG practices not only
China has adopted a distinctive approach to value creation based on its policy frameworks, cultural traditions, and business
innovation, setting itself apart in the global surge of ESG development. The country's ESG practices not only demonstrate aproactive response to international standards but also emphasize a sustainable development strategy that integrates
local characteristics.

China's policy framework(1) The "1+1" ESG framework
The "1+1" ESG framework combines universal indicators from international ESG standards ("1") with China-specific
ESG indicators based on national conditions and strategic priorities ("+1"). For example, China prioritizes areas such asenergy conservation, pollution prevention and control, resource conservation and recycling, clean transportation, clean019

Global Trends and Chinese Practices

energy, ecological protection, and climate change adaptation as part of its macro strategy for "ecological civilization
construction."92
The efforts of brewer Budweiser APAC demonstrate this approach through the creation of carbon-neutral breweries andinvestments in solar energy. As the cost of solar power in China approaches that of non-renewable energy sources, thecompany has installed solar panels in seven breweries nationwide and established China's first third-party-certified
carbon-neutral brewery in Wuhan, taking advantage of China's position as a global leader in the solar energy industry.
Additionally, Budweiser prioritizes regenerative agricultural practices, collaboration, technological innovation, and reducing
greenhouse gas emissions worldwide. These initiatives highlight the company's ability to adapt strategies to diverse regional
contexts, effectively addressing local environmental and resource dynamics. By combining international standards with local
nuances, Budweiser APAC demonstrate global responsibility and better serve the domestic socio-economic landscape,supporting long-term sustainable development and value creation.
(2) Aligning national and corporate narratives
ESG aligns closely with the theory of Chinese-style modernization, making it a "mission of the times" and a "sharedvalue consensus" for Chinese enterprises. In terms of environment (E), ESG is consistent with national policies like the"Five-sphere Integrated Plan," "carbon neutrality," and "carbon peaking." In terms of society (S), ESG supports the long-termgoals of rural revitalization and common prosperity. For governance (G), ESG aligns with China's focus on "high-quality
economic development."
In the environmental dimension, which is the most prominent, China emphasizes promoting the "dual carbon" goals,
transitioning towards low and zero carbon, adjusting energy structures, and implementing green finance. Social dimension
indicators reflect national macro strategies such as rural revitalization, common prosperity, agricultural development, disaster
relief, and public health. These indicators bring broader social issues like human rights and equality into the corporate realm,
examining how companies interact with stakeholders such as employees, customers, and suppliers. When it comes togovernance, China’ s indicator system takes into account the role of state-owned and central enterprises, blending
international best practices with China's unique national conditions and systems. For example, indicators related to structuralreform, governance structure, and independent directors of state-owned enterprises include aspects of "party building."93
By aligning ESG with national strategic priorities, companies can effectively respond to government policies, enhancetheir market competitiveness, and improve their social reputation, achieving a win-win outcome between social responsibility
and business interests.
(3) ESG evaluation system development
China is actively creating a locally distinctive ESG evaluation system that refines top-level design, improves policy
coordination, establishes mandatory ESG disclosure standards and regulatory requirements for enterprises, and fosters local
ESG rating agencies. These efforts aim to enhance the quality of evaluation systems while ensuring the security of corporate
information and the stability of the national economy and society.
However, China faces significant challenges, including a lack of ESG evaluation tools and methods, mismatcheddomestic and international standards, and insufficient integrity and reliability in disclosed information. Discrepancies in social
responsibility reporting among Chinese listed companies make the ESG evaluation process challenging, underscoring theimportance of unified disclosure guidelines.
To enhance the quality of the ESG evaluation system, China is refining top-level design, strengthening policy
coordination, and setting mandatory ESG disclosure standards and regulatory requirements for enterprises. The goal is todevelop a comprehensive ESG evaluation system based on national conditions to prevent greenwashing.94
This holistic approach not only boosts the international competitiveness of Chinese enterprises but also attracts more
attention from global investors, fostering the international integration and development of China's capital markets.

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Indigenous Chinese culture(1) Traditional culture
Traditional Chinese culture promotes a harmonious relationship between humanity and nature, emphasizing the conceptof "unity between heaven and humanity." This philosophy aligns with ESG principles of environmental conservation.
Confucian values of "benevolence" and "social harmony" also support corporate social responsibility. The cultural focus on
long-term planning and collective interests guides businesses to consider lasting environmental and social impacts indecision-making. Additionally, the pragmatic tradition in China favors practical solutions to challenges, leading to direct policy
interventions and technological innovations when addressing environmental issues like pollution and climate change.
However, rapid modernization in China can sometimes overshadow these environmental principles, contributing toenvironmental issues. Moreover, an excessive emphasis on social stability may conflict with individual rights and social
justice, which are crucial to ESG's social responsibility framework. Bureaucratic culture in China can influence management
styles and decision-making processes in ways that differ from Western practices, potentially compromising transparency anddiversified governance. Although collectivism fosters teamwork and collective action, it may suppress individualism andinnovation. In China, people often look to the government and businesses to take the lead on ESG issues, contrasting with
Western individualistic approaches that emphasize personal responsibility.95 While strong interpersonal networks facilitatebusiness activities and resource sharing, they may also lead to conflicts of interest and unfair competition.
These cultural attributes shape ESG practices in China, presenting both opportunities and challenges. To effectively
implement ESG strategies in China, understanding and adapting to these cultural features is essential.
(2) Modern governance
Balancing cross-cultural borrowing and autonomous discourse rights is a significant challenge in modern governance.
Global ESG disclosure standards are gradually unifying, and as Chinese companies expand internationally, adhering torecognized ESG standards is crucial for maintaining competitiveness. Given China's unique social, economic, and politicalcontext, the country must balance its influence in global ESG discussions while ensuring that standards reflect its domestic
realities and priorities.
For instance, the China Enterprise Reform and Development Society (CERDS) established the nation's first corporate
ESG disclosure guidelines. These guidelines draw on international best practices while incorporating Chinese ESG laws andregulations. They include a social metric for "employee protection," evaluating opportunities for employees of public
enterprises to join labor organizations and access unique entitlements such as social security and housing provident funds,
key aspects of China’ s social welfare system. Additionally, the guidelines integrate national strategies such as rural
revitalization, innovation development, and common prosperity, underscoring the responsibility of Chinese companies tosupport national development objectives.96
The Western model of a purely market-driven approach to ESG standards has proven to be less effective in China.
While financial institutions in the West aim to include a company's ESG performance in investment decisions, thismarket-driven strategy has had limited success in China. This emphasizes the need for the government to play a key role inmarket regulation and oversight. In response, China is bolstering its ESG investment infrastructure and promoting thedevelopment of ESG investment standards with distinctly Chinese characteristics. This involves establishing disclosure andevaluation systems, improving regulatory frameworks, and encouraging collaboration among diverse stakeholders.
In March 2022, the Postal Savings Bank of China and Deutsche Börse jointly launched an ESG index that combinesinternational standards with Chinese-specific indicators. This effort aims to explore "Chinese standards" for ESG
investments. The index methodology blends international indexing practices with China's unique ESG databases, offering
investors innovative investment options.97
Chinese enterprises are increasingly integrating ESG principles in their activities within the Belt and Road Initiative and021

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across Africa, adopting ESG investment standards tailored to China's characteristics. These practices demonstrate Chinesecompanies' ability to recognize and adapt to international ESG principles while also incorporating China's uniqueperspectives and approaches in advancing the Belt and Road Initiative and local development.
For instance, China Petrochemical Corporation, within its Belt and Road projects, not only boosts energy cooperation
but also supports green, clean production and circular economy practices, emphasizing ecological preservation. Moreover,
China Petrochemical prioritizes improving people's well-being by providing job opportunities and engaging in philanthropic
initiatives to enhance the socioeconomic development of host nations.98
However, mainstreaming ESG investments in the Belt and Road Initiative faces challenges, including differing views on
ESG development among participating countries and the lack of unified ESG investment standards and analytical tools.99

Business practices with Chinese characteristics(1) ESG action reports by Chinese listed companies
Listed companies play a central role in China's capital market, making the development and enhancement of their ESG
systems crucial for the overall stability and long-term prospects of China's ESG market. Since 2022, Chinese listedcompanies have accelerated their participation in ESG practices, spurred by both regulatory initiatives and market dynamics.
In terms of policy regulation, the China Securities Regulatory Commission (CSRC) issued the "Guidelines on Investor
Relations Management of Listed Companies" in April 2022. Additionally, the State-owned Assets Supervision and
Administration Commission (SASAC) released the "Work Plan for Improving the Quality of Listed Central SOEs" in May 2022,
and the China Banking and Insurance Regulatory Commission (CBIRC) introduced the "Green Finance Guidelines for
Banking and Insurance Industry" in June 2022. On 8 February 2024, Shanghai, Shenzhen and Beijing stock exchanges
released the sustainability reporting guidelines for public consultation. These policy initiatives have progressively standardized
and strengthened China's ESG development policies, raising the bar for listed companies' ESG capabilities and information
disclosure.
In market investments, by the end of October 2022, 119 Chinese institutions had joined the United Nations Principles
for Responsible Investment (UN PRI), marking an increase of approximately 43.4% from the 83 institutions at the end of
2021. Leading institutions are becoming more aware of ESG investments, resulting in the sustained growth of ESG-related
products' scale and diversity.
In terms of corporate practice, there has been a noticeable increase in the number of A-share listed companies issuing
independent ESG and CSR reports. Data analysis from 2007 to 2022 shows that the disclosure rate of independent
ESG/CSR reports has stayed around 20% to 25%, indicating that about one-quarter of listed companies voluntarily disclose
ESG-related information in the market. In 2022, 1,455 A-share listed companies released ESG or social respon sibility
reports, with a disclosure rate of 28.65%.100 By the end of July 2023, the ESG information disclosure rate for A-shares hadrisen to 34.85%, covering about three-quarters of the total market value of A-shares. 101 Moreover, international rating
agencies have expanded their ESG ratings coverage for Chinese listed companies, highlighting the companies' increased
focus on ESG regulatory policies and their own management practices.
The Chinese Listed Companies ESG Action Report (2022-2023) by the International Institute of Green Finance (IIGF) of
the Central University of Finance and Economics (CUFE) and National Business Daily (NBD) examines the ESG performanceof seven key sectors: finance, healthcare, real estate, transportation, internet, daily consumption, and new energy. Eachsector has specific substantive issues reflecting its unique characteristics and challenges. For instance, the real estate sector
focuses on green engineering, construction, emissions, and waste management, while the transportation sector prioritizes
safety, road management, product safety, and quality. ESG ratings vary across sectors; for example, the real estate sector
excels in environmental performance, while the transportation sector scores well in both environmental and governancedimensions. For more details, please refer to Table 1.

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Table 1: ESG value creation within seven key sectors of listed companies in China
SectorSubstantive issues

Characteristics of value creation

Corporate governance, humancapital, privacy, and data
security.

Improve corporate governancequality, optimize human resource
management, safeguard customer
privacy, and ensure data security.

483 listed companies; most in
B and C grades, with 30.43%
in the B grade range.

Corporate governance, productsafety and quality, humancapital, carbon emissions, andwaste management.

Strengthen product safety andquality management, optimize
corporate governance structure.

Real estate

114 listed companies;
majority in A and B grades;
excellent performance in theenvironmental dimension.

Green engineering andarchitecture, emissions andwaste management, climatechange adaptation.

Increase energy efficiency andreduce environmental impact, focus
on employee welfare and working
conditions.

Transportation

121 listed companies;
38.02% in A grade range,
28.93% in B grade range.

Transport safety and roadmanagement, product safety
and quality, occupational healthand safety, information security
and privacy.

Internet

331 listed companies;
primarily in B and C grades.

Strengthening social
responsibility, improving ESG
capabilities.

Strengthen data security andprivacy protection, enhance user
trust, increase social responsibility,
and improve ESG practices.

consumption
Daily

267 listed companies; mostly
in B and C grades.

Product safety and quality,
human capital, carbon
emissions, and waste
management.

Enhance product quality and safety,
achieve circular economy andgreen packaging.

New energy

117 listed companies;
67.52% in A grade, 42.74%
in A+ grade.

Corporate governance, humancapital, energy management,
and ecological impact.

Drive energy management andecological impact assessment,
strengthen corporate governance,and optimize human capital.

Finance

Healthcare

ESG rating overview
123 listed companies;
34.15% in the A grade range,
18.7% in the A+ grade range.

Improve transportation safety
management and product quality,
enhance service quality and safety.

Source: Organized by the author based on the Chinese Listed Companies ESG Action Report (2022-2023) by the International Institute ofGreen Finance (IIGF) and Daily Economic News (NBD).

(2) Examples of ESG value creation in Chinese enterprises
An in-depth analysis of Chinese enterprises' value creation in ESG practices reveals a series of innovative and impactful
cases. These cases not only highlight companies' deep understanding and adept execution of sustainable development but also
demonstrate significant progress through strategic transformations and innovations. They showcase a diversity of approaches
to integrating ESG principles into corporate culture, strategic planning, and daily operations, leading to multidimensional
improvements in economic, social, and environmental value.
(1) Strategic leadership for value creation
China Mobile exemplifies how integrating sustainable development principles into corporate governance and operations
can yield significant benefits for a company. By focusing on sustainability, the company has enhanced its operational
efficiency and transparency while reinforcing its commitment to environmental and social responsibilities. This strategy has
resulted in notable improvements in corporate governance and market competitiveness.
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Since 2006, China Mobile has systematically implemented strategic corporate social responsibility management basedon global standards and best practices. One key aspect of this implementation is the establishment of a Sustainable
Development Guidance Committee and a strong ESG management structure. These frameworks enable effective executionof ESG strategies, with active participation from senior management and coordinated efforts across different departments.
To guide its ESG initiatives, China Mobile adopts mainstream ESG evaluation systems and creates a normalized
management system for benchmarking key sustainable development issues. The Development Strategy Department leads
various units in benchmarking management, gap analysis, and improvement tasks. This approach involves using third-party
assessment systems such as MSCI and Sustainalytics to continuously refine its management practices.
As a result of these measures, China Mobile's comprehensive value creation capabilities and influence continue toexpand. The company has maintained the highest A-grade evaluation in the performance assessment of Central
State-Owned Enterprises (SOEs) by the State-owned Assets Supervision and Administration Commission (SASAC) for 19
consecutive years.102(2) Innovation-driven value creation
Lenovo Group is an exemplary model of innovation-driven value creation within the context of ESG (Environmental,
Social, and Governance) practices. The company integrates ESG concepts with technological innovation to create
meaningful impact in areas such as scientific carbon reduction and diversity and inclusion. Through its ESG initiatives,
Lenovo enhances its competitiveness and helps other companies achieve their own ESG transformations, reflecting its role
as a leader in value creation through innovative approaches.
Lenovo's journey with ESG practices began in 2009 when the company joined the United Nations Global Compact
organization. Since then, it has actively pursued various ESG-related initiatives, setting emission reduction targets andenforcing its Supplier Code of Conduct. This commitment to global ESG requirements established a solid foundation for thecompany's global development.
A pivotal moment for Lenovo's ESG development occurred in 2017 when the company closely integrated its businesswith ESG strategies by combining ESG with digital productivity. Lenovo's self-developed warm water-cooling technology andintelligent production scheduling system, along with other innovative solutions, have effectively reduced carbon emissions indata centers. These innovations have not only helped the company reduce its environmental footprint but have also added
value to its business practices.
In order to ensure the comprehensive integration of ESG principles across its entire value chain and functional system,
Lenovo established an ESG Executive Oversight Committee (EOC). By 2022, Lenovo's ESG practices had become one of
the core pillars of the company's overall strategy. That year, Lenovo's ESG performance was recognized by MSCI, which
upgraded its rating from AA to the highest AAA.
In addition to its existing ESG initiatives, Lenovo has also begun exploring new areas such as carbon-related services
and solutions. For example, the company launched the Lenovo Enterprise Carbon Accounting Platform, aimed at supporting
manufacturing industry customers in their low-carbon transformation efforts. Moreover, in 2023, Lenovo introduced theenterprise-level ESG solution LeGreen, which integrates multifunctional modules such as product carbon footprint andenvironmental compliance. This solution not only promotes ESG data-driven decision-making and closed-loop management
processes within organizations but also empowers companies to pursue low-carbon transformation and contribute tosustainable development.103(3) Value creation in supply chain management
JD Logistics' practices and innovations in green supply chain management embody a comprehensive approach toenvironmental responsibility. The company has introduced around 20,000 new energy vehicles across over 50 cities
nationwide, particularly in Beijing, where all its urban distribution vehicles are now powered by new energy sources. This024

2024 ESG White Paperchange helps reduce carbon emissions by approximately 400,000 tonnes annually.
JD Logistics is also a pioneer in developing distributed photovoltaic power generation systems in China. The company
has installed a rooftop distributed photovoltaic system at its Shanghai Asia No. 1 Warehousing Center and plans to establish
the world’s largest network of rooftop photovoltaic ecosystems by 2030, measured by installed capacity.
Other sustainable initiatives include using reusable delivery boxes, thermal insulation boxes, and alternative packaging
to cut down on disposable plastic usage. Additionally, the company’ s "Asia No.1" Smart Logistics Park in Xi'an has achieved
carbon neutrality, marking a first for China. JD Logistics employs advanced technologies such as fully integrated intelligent
packaging systems, ADAS intelligent driving assistance, and big data planning routes to improve transportation efficiency
and minimize environmental impact.
By reducing carbon emissions and maximizing energy efficiency through innovation and application of new technology,
JD Logistics demonstrates its commitment to green supply chain management, allowing it to make significant environmental
and sustainability contributions while also delivering commercial value. JD Logistics sets a standard for potential green
transformation across the logistics industry, ultimately benefiting its sustainability, society, and the environment as a whole.104(4) Value creation shared among stakeholders
In Carl Zeiss Group's ESG practices, both internal and external stakeholders are key contributors to the company's
strategy and operations. Internal stakeholders such as employees, managers, and board members help shape and guidethe company’ s ESG policies. Concerns from employees about sustainability, ethical operations, and governance prompt
internal discussions and inspire the development of new ESG policies.
External stakeholders - including investors, shareholders, creditors, suppliers, customers, local communities, activist
groups, non-governmental organizations, media, and regulatory bodies - also play a pivotal role in shaping and implementing
ESG policies. The Carl Zeiss Group’ s ESG strategy emphasizes the importance of connecting value creation with all
stakeholders to drive long-term sustainable success. Its ESG metrics and targets are specifically tailored to enhance
stakeholder value, rather than just serving as superficial goals.105
In its operations in China, Zeiss focuses on localizing its business practices to meet market-specific needs. For
example, the company develops products for presbyopia and cataracts and supports eye health education activities atsenior universities in China. These efforts demonstrate Zeiss's responsiveness to consumer demands and help build positive
relationships with consumers.
Furthermore, Zeiss’ s establishment of innovation and research centers in China highlights its commitment to theChinese market and fosters collaboration with local businesses and research institutions. This approach facilitates smootherintegration into the local market.
Zeiss Group is also dedicated to achieving carbon neutrality worldwide, including in China, where the company
procures green electricity and increases the use of renewable energy sources. These environmental protection efforts
enhance Zeiss's reputation in Chinese society and address concerns about environmental conservation from both thegovernment and the public.
(5) Value creation in evolving business models
Industrial Bank's ESG practices have significantly transformed its business model. As China's first bank to adopt theEquator Principles - a risk-management framework for assessing and managing environmental and social risks in projects the bank has placed sustainable development at the core of its corporate strategy, emphasizing green finance. By
establishing ESG strategic planning and management systems, Industrial Bank has evolved from offering traditional banking
services to providing comprehensive financial solutions.
Industrial Bank plays a major role in supporting the national "dual-carbon" strategy by offering essential financial

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services for the carbon market, innovative carbon financial products, and loan products that facilitate carbon reduction.
These initiatives significantly support the national "dual-carbon" strategy's implementation.
In addition, Industrial Bank actively promotes a range of ESG products, such as green trusts, green public funds, and
ESG wealth management products. These products provide accessible opportunities for small and medium-sized investors
to participate in green investments.
The bank also backs inclusive finance and rural revitalization plans by introducing financial services for agriculture andrural development. These efforts aim to improve the competitiveness of rural industries and the quality of basic public
services while promoting financial literacy and risk awareness.
Industrial Bank is accelerating its digital transformation, focusing on building service platforms using advanced
technology. For instance, the bank developed a system that leverages AI, GIS, and big data technology to measure theenvironmental benefits of low-carbon economy-related industries accurately. Digital transformation is a key part of the bank's
business model, enhancing service efficiency and customer experience.106
From strategic management to innovation-driven practices, green supply chain transformation, stakeholder
engagement, and evolving business models, these areas illustrate the foresight and creativity of Chinese enterprises in
ESG practices. These examples reflect businesses' efforts to address global sustainability challenges and highlight China's
leadership and influence in global ESG practices.
Through these cases, we gain a deeper understanding of how Chinese companies align their development needs with
global sustainability objectives in a dynamic global economic landscape, thereby generating new business value and societal
impact.

(3) Practical methods for integrating ESG into strategy and operations
Integrating ESG into corporate strategy and operations requires a thoughtful and structured approach. Based on theanalysis of ESG value creation in domestic and international enterprises, several key factors have emerged as crucial for
successful integration:

2 Leadership support and commitment:

1 Develop a clear ESG strategy:
Define precise environmental, social, andgovernance objectives that align with thecompany's business model and stakeholder
expectations. Establish measurable
performance metrics and timelines for achieving
each ESG goal.
3 Integrate ESG intobusiness operations:
Apply ESG standards to
product development, supply
chain management, and operational processes. Allocate thenecessary financial and humanresources to achieve ESG
goals and embed sustainability
into daily operations.

Secure the support and involvement of top
management in driving the ESG strategy.
Communicate the significance of ESG internallyto foster understanding and buy-in across alllevels of the organization.

4 Employee training andparticipation:
Provide ESG-related
training to employees toincrease awareness andunderstanding of ESG issues.
Develop incentive mechanisms
to encourage employee participation and engagement in
ESG practices.

5 Stakeholder engagement
and communication:
Collaborate with stakeholders such as investors,
customers, and communities
in shaping and assessing ESG
strategies. Maintain transparency by regularly reporting
ESG performance to stakeholders and incorporating their
feedback.

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6 Continuous monitoring and improvement:
Regularly evaluate ESG performance toensure it aligns with established goals. Use
feedback and assessments to refine ESG
strategies and practices, ensuring continuous
improvement.

7 Public reporting and disclosure:Publish regular ESG reports detailing thecompany's performance and future plans.

By following these steps, companies can effectively integrate ESG into their strategies and operations, achieving
business success while fulfilling their social responsibility goals.
• Clear ESG Strategy: Serves as the starting point, where specific environmental, social, and governance objectives are
established as the base for all ESG practices.
• Leadership Support and Commitment: Extends from the ESG strategy, underlining the essential role of senior
management in endorsing and driving the ESG strategy throughout the organization. Leadership ensures alignment with
ESG goals and fosters internal communication.
• Integrating ESG into Business Operations: Follows from leadership support, translating ESG objectives into practicalaspects of business operations, such as product development, supply chain management, and other operational processes.
• Employee Training and Engagement: Stems from business operations, emphasizing the need to equip employeeswith knowledge and understanding of ESG issues. This ensures active employee participation in ESG initiatives andpractices.
• Stakeholder Engagement and Communication: Builds on employee training and engagement, highlighting thesignificance of maintaining transparent and open interaction with stakeholders such as investors, customers, and communities.
• Continuous Monitoring and Improvement: Arises from stakeholder engagement, feeding back into the ESG strategy.
This continuous assessment allows for ongoing evaluation and improvement of ESG practices, ensuring they remain effective
and aligned with goals.
• Public Reporting and Disclosure: Shares the results ofcontinuous monitoring and improvement with the public, enhancing
transparency and accountability. This feedback loop helps ensureongoing alignment with the initial ESG strategy.

Each element of the ESG process is interdependent and influences the others, forming a dynamic system rather than a linear
path.

Common challenges and a shared future
We are at a pivotal moment in exploring ESG value co-creation. While globalization presents complex cross-borderchallenges - such as differing standards for ESG disclosure, supply chain intricacies, and increased demands fortransparency - it also brings opportunities to shape a shared, sustainable future. By collectively addressing these challenges
and aiming for shared goals, we can collectively work towards a more sustainable, equitable, and prosperous world.
1. Information disclosure and transparency
Countries and regions have varying requirements for ESG reporting, leading to inconsistent standards across global
companies. This lack of consistency hinders effective comparisons and decision-making for investors and otherstakeholders. Companies need to align reporting with global standards, which requires substantial investments in systems,
processes, controls, and governance.107027

Global Trends and Chinese Practices

Additionally, inconsistencies in ESG data across industries and regions challenge effective comparisons and collective
progress in ESG practices.108 The surge in the adoption of ESG ratings has highlighted challenges related to the complexityand lack of transparency in rating methodologies. These challenges make it difficult for companies and institutions tointerpret ESG ratings and their underlying algorithms. This lack of transparency can limit the effectiveness of ESG ratings inaddressing sustainability-related risks and opportunities.109
Given that companies operate globally with diverse value chains, risks, and capital sources, there is a pressing need toestablish a unified standard for sustainability reporting. A consistent approach to ESG reporting will improve communication
between investors, companies, and other stakeholders, allowing for better comparability and reliability of information.110
Furthermore, leveraging big data and AI technology is becoming an important trend for improving data quality andauthenticity, which supports ESG development. To address the challenges posed by globalization and diverse ESG
reporting requirements across regions, companies must focus on strengthening cross-regional cooperation andcommunication while enhancing information disclosure and transparency. By doing so, companies can work toward
unifying standards and promoting collective progress in global ESG value creation.
2. Integrating growth, profitability, and ESG
Increasingly, studies emphasize the interconnectedness of sustainability and financial health, leading to a closer
integration of the two. This trend is captured in triple bottom line accounting, which considers economic benefits alongsidesocial and environmental impacts.111 Integrating ESG into a company's overall business strategy goes beyond traditional risk
management and is also seen as an opportunity for growth. This means companies must embed ESG factors in areas suchas product strategies, internal audits, and leadership to uphold their ESG commitments.112
Leading companies do not treat ESG-related measures as add-ons; instead, they weave them into the overall company
strategy. When implementing ESG strategies, important steps include defining a clear ESG vision and mission that aligns
with the company's goals and priorities; identifying synergies between ESG goals and business objectives - such as metals
and mining companies focusing on decarbonization to unify growth, profitability, and ESG targets; developing strategic ESG
initiatives that bolster organizational goals and address significant ESG concerns; and establishing short-term and long-term
ESG objectives that align with business targets and industry standards. These goals should be ambitious yet attainable,
supported by concrete action plans and resource allocation.113
Integrating ESG strategy into a business's core operations not only enables synergies between financial
performance and sustainability but also represents an investment in the company's long-term growth and profitability,reflecting the integration of modern corporate social responsibility and sound business practices.
3. Strategic importance of supply chains and ESG value creation
The strategic importance of supply chains in ESG value creation is increasingly recognized worldwide. Labor shortages
and inflation pose significant risks to supply chain management, causing potential production slowdowns, inventory
imbalances, distribution interruptions, and customer dissatisfaction. Additionally, environmental changes and geopoliticaltensions impact global supply chains, leading organizations to reconsider how to construct more resilient supply chains.114
Meanwhile, supply chains play a crucial role in ESG value creation, providing an opportunity to address environmental
and social issues. Supply chain activities, such as transportation and manufacturing, often result in significant environmental
impacts, including carbon emissions, waste generation, and excessive resource consumption. Labor issues within the
supply chain, including unfair wages, unsafe working conditions, and child labor, are concerning challenges globally.
Transparency and compliance challenges in supply chain management can lead to corruption and illicit activities.115
In recent years, global supply chains have faced heightened risks of disruptions. To mitigate the impact of unforeseen
events such as natural disasters, geopolitical tensions, or public health crises, many companies are diversifying their supplierbase, leveraging local procurement, and establishing robust contingency plans. As environmental concerns grow, companies

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adopt more sustainable practices, such as responsibly sourcing materials and optimizing transportation routes to reducecarbon footprints.
Digitization has become a standard in supply chain management, ranking as the top industry trend for 2024. Manycompanies are leveraging advanced analytics and predictive modeling to gain real-time insights from data, allowing for more
precise demand forecasts, effective inventory management, and accurate risk assessment. This proactive approach enables
companies to enhance the overall agility of their supply chains. Additionally, using blockchain and other digital technologies
can improve the tracking and management of supply chain activities, ensuring transparency and compliance.116
As companies manage global supply chains, integrating ESG values throughout every aspect of the supply chain isessential. This integration ensures that the entire process, from raw material procurement to product delivery, adheres toenvironmental and social responsibility standards, fostering a more sustainable business model.
4. Legal definition and increased scrutiny of greenwashing
The concept of greenwashing, which refers to the misleading portrayal of sustainability efforts and disclosures bycorporations, is expected to become more legally defined in 2024 and beyond. This clearer legal definition will bring greater
repercussions for companies, including reputational, regulatory, and litigation risks. As there is currently no consistent legal
definition of greenwashing, the interpretation of this concept can vary by product, service, regulator, and jurisdiction.117
The EU is developing new rules to limit false advertising and improve consumer information, making significant strides intackling greenwashing. This heightened scrutiny now requires companies to demonstrate their commitment to sustainability
with verifiable data and actions.118
By introducing new mandatory disclosure requirements globally, such as the EU's Corporate Sustainability Reporting
Directive (CSRD) and the International Sustainability Standards Board (ISSB) standards, corporate transparency isundergoing major change. Publicly and privately held companies must now comply with stricter sustainability measurement
and reporting standards. The shift toward mandatory disclosure is expected to integrate sustainability more deeply into corebusiness strategies and risk management functions.119
As awareness of greenwashing grows, companies must prioritize the authenticity and verifiability of their ESG
commitments. This is crucial not only for fulfilling external responsibilities but also for aligning with a company’ s internal
culture and values for overall sustainability.
Reflecting on the journey of ESG value creation, it serves as a guiding light in a rapidly changing world, paving the way
for businesses and society. ESG is more than a set of standards; it’ s a commitment to a responsible future for society andthe environment. True value goes beyond numbers and profits; it encompasses our respect for the planet and its inhabitants.
ESG value creation opens up infinite possibilities, where every decision shapes our shared future. Environmental harmony,social progress, and improved governance are achievable goals, and each step forward contributes to a better world.

029

Global Trends and Chinese Practices

Endnotes
1 Posted by Mark S. Bergman, Ariel J. Deckelbaum, and Brad S. Karp, Paul, Weiss, Rifkind, Wharton & Garrison LLP.Introduction to ESG. Harvard Law School Forum on Corporate
Governance. August 1, 2020. https://corpgov.law.harvard.edu/2020/08/01/introduction-to-esg/
2 Rhema Hans. What is Value Creation? https://www.deskera.com/blog/value-creation/
3 Sumit Saxena. Emerging Ecosystem-Centric Business Models for Sustainable Value Creation. 2022:31. DOI: 10.4018/978-1-7998-4843-1.ch002
4 Tim Koller, Robin Nuttall, Witold Henisz. Five ways that ESG creates value. McKinsey Quarterly. November 14, 2019.
https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/five-ways-that-esg-creates-value
5 中证指数 . 丰富上市公司 ESG 价值内涵，助力中国特色估值体系建设 .2023 年 6 月 .
6 IBM 商业价值研究院 .2023 年 ESG 数据难题研究报告 .2023 年 4 月 .
7 海通国际 . 借鉴海外看 ESG 在中国的运用 .2023 年 8 月 .
8 MSCI.ESG and Climate Trends to Watch for 2023.November 2022.
9 上海数据交易所 & 德勤风驭 .2022 年 ESG 农林牧渔行业白皮书 .2023 年 10 月 .
10 财新智库、中国 ESG30 人论坛 .2023 中国 ESG 发展白皮书 .2023 年 11 月 .
11 英格兰及威尔士特许会计师协会 (ICAEW)、德勤 .2023 年 ESG 并购投资白皮书 .2023 年 9 月 .
12 中证指数 .ESG 投资理念、机制与实践 .2023 年 10 月 .
13 灼鼎咨询 .2022 年 ESG 发展白皮书——全球 ESG 发展持续升温，中国进入 ESG 发展快车道（ESG 生态圈、ESG 政策，ESG 评级，ESG 投资，ESG 实践）.2022 年 5 月 .
14 KPMG. How to Determine Where ESG Can Create Value. https://kpmg.com/us/en/home/insights/2022/06/2022-issue2-article1.html.
15 Sroufe R P. Integrated management: How sustainability creates value for any business. Emerald Publishing Limited, 2018.
16 Tim Koller, Robin Nuttall, Witold Henisz. Five ways that ESG creates value. McKinsey Quarterly. November 14, 2019.
https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/five-ways-that-esg-creates-value
17 安信证券 .ESG 理念与价值投资 .2023 年 11 月 27 日 .
18 Posted by Marc S. Gerber, Greg Norman, and Simon Toms, Skadden, Arps, Slate, Meagher & Flom LLP. ESG Mid-Year Review: Key Trends in 2023 Thus Far. July 31, 2023.
https://corpgov.law.harvard.edu/2023/07/31/esg-mid-year-review-key-trends-in-2023-thus-far/
19 IEA. The energy world remains fragile but has effective ways to improve energy security and tackle emissions. World Energy Outlook 2023, Paris,
https://www.iea.org/reports/world-energy-outlook-2023.
20 Phillippa O’Connor, Lawrence Harris, Tom Gosling. Linking executive pay to ESG goals. June 29, 2021. https://www.pwc.com/gx/en/issues/esg/exec-pay-and-esg.html
21 Brian Canup. Greenwashing incidents up 70% globally in 2023. December 1, 2023. https://www.tradefinanceglobal.com/posts/report-greenwashing-incidents-up-70-globally-2023/
22 Amy Antoniolli , J. Michael Showalter , Daniel J Deeb , Meera Gorjala. Top 10 ESG Developments for 2023. December 8, 2023.
https://www.natlawreview.com/article/top-10-esg-developments-2023
23 Amelia Zimmerman. 2023 Global ESG Policy Update: What’s Happening and Why it Matters. April 17, 2023. https://eqm.ai/insights-trends/2023-global-esg-policy/
24 Latham & Watkins LLP. Regulatory Updates in Asia ESG. August 26, 2023. https://www.lw.com/en/insights/regulatory-updates-in-asia-esg-august-2023
25 Sean Collins. Advancing environmental, social, and governance investing: A holistic approach for investment management firms. February 20, 2020.
https://www2.deloitte.com/us/en/insights/industry/financial-services/esg-investing-performance.html
26 杨晔 . 填补 ESG 数据鸿沟，突破 ESG 投资发展瓶颈 . 2022 年 4 月 13 日 . https://www.bloombergchina.com/blog/esgdata/
27 J.P. Morgan Asset Management. The ESG landscape in Europe: Investment trends 2022.
https://am.jpmorgan.com/us/en/asset-management/institutional/investment-strategies/sustainable-investing/esg-investment-trends-2022/
28 Sean Collins. Advancing environmental, social, and governance investing: A holistic approach for investment management firms. February 20, 2020.
https://www2.deloitte.com/us/en/insights/industry/financial-services/esg-investing-performance.html
29 刘均伟、周萧潇、张文琦、王汉锋 . 中金 | ESG 投资系列（1）：ESG 的兴起、现状与展望 . 2021 年 9 月 7 日 .
https://finance.sina.com.cn/esg/investment/2021-09-07/doc-iktzqtyt4511765.shtml
30 波士顿咨询刘冰冰 . 全球 ESG 基金规模加速增长 三层生态体系共同推动 . https://www.chnmc.com/wisdom/Insights/2021-12-07/16964.html
31 黎思思 . 全球 ESG 投资基金发展现状与趋势研究 . 中国投资 ( 中英文 ).2022 年 6 月 .
32 Jennifer Wu. ESG Outlook 2022: The future of ESG investing | J.P. Morgan Asset Management. January 2, 2022.
https://am.jpmorgan.com/us/en/asset-management/institutional/investment-strategies/sustainable-investing/future-of-esg-investing/
33 Sean Collins. Advancing environmental, social, and governance investing: A holistic approach for investment management firms. February 20, 2020.
https://www2.deloitte.com/us/en/insights/industry/financial-services/esg-investing-performance.html
34 Isla Binnie. ESG fund closures in US outpace launches for first time since 2020 - Morningstar. October 24, 2023.
https://www.reuters.com/sustainability/esg-fund-closures-us-outpace-launches-first-time-since-2020-morningstar-2023-10-23/
35 KPMG. 保险业 ESG 重大行业趋势 .2021 年 10 月 .
36 KPMG China.ESG 保险：战略与转型 .2023 年 9 月 .
37 PWC. Next in insurance: Top insurance industry issues in 2022-ESG: A growing sense of urgency.
https://www.pwc.com/us/en/industries/financial-services/library/next-in-insurance-top-issues/esg-insurance-industry.html
38 Deloitte Center for Financial Services(Karl Hersch, James Colaço, Michelle Canaan). 2024 global insurance outlook.
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39 华夏基金 .2022 中国 ESG 发展创新白皮书 .2022 年 12 月 .
40 德勤 .2024 年全球保险行业展望 .2023 年 12 月 .
41 PWC. Next in insurance: Top insurance industry issues in 2022-ESG: A growing sense of urgency.
https://www.pwc.com/us/en/industries/financial-services/library/next-in-insurance-top-issues/esg-insurance-industry.html
42 德勤 . 中国大型商业银行 ESG 实践的观察与建议 .2022 年 9 月 6 日 .https://www2.deloitte.com/cn/zh/pages/risk/articles/esg-practices-of-large-commercial-banks-in-china.html
43 埃森哲（杜保洛、彭莱、桑杰 · 波德、沙拉博 · 库玛 · 辛格、于雅）. 技术推动可持续：双擎驱动，融合发展 . 2022 年 11 月 .
44 麦肯锡 .2023 年人工智能发展概况：生成式 AI 的爆发之年 .2023 年 8 月 .
45 财富中文网 . 负责任的 AI：ESG 视角下的人工智能 .2023 年 12 月 4 日 .https://www.fortunechina.com/shangye/c/2023-12/04/content_444001.htm
46 贝莱德 BlackRock. 大数据为 ESG 如虎添翼，打造双底线投资保障 .https://finance.sina.com.cn/esg/investment/2021-06-03/doc-ikqcfnaz8960895.shtml
47 Chris Tsai. 全球化带动 ESG 浪潮，如何运用数位科技落实企业永续发展？.2021-09-02.https://www.thenewslens.com/article/155854#
48 张开翔 . 在 ESG 领域，区块链究竟怎么用？.2022-07-22. https://blog.csdn.net/fiscobcos/article/details/125932098
49 Seneca ESG. Clean Technology: ESG's Answer to a Green Revolution. September 20, 2023. https://senecaesg.com/insights/clean-technology-esgs-answer-to-a-green-revolution/
50 Tom Swallow. Top 10 green technology innovations. July 1, 2022. https://sustainabilitymag.com/top10/top-10-green-technology-innovations
51 KPMG.Cybersecurity in ESG: It's time to view ESG and cybersecurity through the same lens.https://kpmg.com/xx/en/home/insights/2023/08/cybersecurity-in-esg.html
52 PWC. Want to advance on ESG? Cyber and privacy can help, while boosting trust in your brand.
https://www.pwc.com/us/en/tech-effect/cybersecurity/building-trust-with-esg-cybersecurity-and-privacy.html
53 Posted by Jonathan R. Everhart, Global ReEnergy Holdings. Cybersecurity + ESG for the Global Capital Markets. September 15, 2022.
https://corpgov.law.harvard.edu/2022/09/15/cybersecurity-esg-for-the-global-capital-markets/
54 SustainCase. Case study: How Ericsson promotes information security and privacy. June 25, 2019.
https://sustaincase.com/case-study-how-ericsson-promotes-information-security-and-privacy/030

2024 ESG White Paper

55 SustainCase. Case study: How Wells Fargo promotes cybersecurity. November 25, 2020. https://sustaincase.com/case-study-how-wells-fargo-promotes-cybersecurity/
56 Cision.2023 海外 ESG 传播趋势报告 .2023 年 7 月 .
57 Robin Hicks. As media coverage of ESG grows, climate doomism is making room for solutions journalism. July 1, 2022.
https://www.eco-business.com/news/as-media-coverage-of-esg-grows-climate-doomism-is-making-room-for-solutions-journalism/
58 Consultancy.eu. Global media coverage of ESG investment has exploded. April 29, 2021.
https://www.consultancy.eu/news/6109/global-media-coverage-of-esg-investment-has-exploded
59 Susan Laborde. 29 Amazing Video Game Industry Statistics (2023). July 23, 2023. https://techreport.com/statistics/video-game-statistics/.
60 PWC.Perspectives from the Global Entertainment & Media Outlook 2023–2027. June 21, 2023.
https://www.pwc.com/gx/en/industries/tmt/media/outlook/insights-and-perspectives.html
61 Judith Rowland. Three Trends Guiding ESG Communications in 2022. February 22, 2022. https://fleishmanhillard.com/2022/02/esg-trends-communications-2022/
62 Shannon O’Shea, Courtney Urban. The Top ESG Trends We're Watching in 2023. https://www.we-worldwide.com/blog/posts/the-top-esg-trends-were-watching-in-2023
63 David Cifrino. The Politicization of ESG Investing. January 24, 2023. https://www.sir.advancedleadership.harvard.edu/articles/politicization-of-esg-investing64 朱核、倪天伶、孙吉萍、杨雅婷 . 解构 ESG 之供应链管理 .2022 年 6 月 16 日 .https://www.junhe.com/legal-updates/1831
65 Nadya Britton. ESG and the global supply chain. October 14, 2021. https://www.thomsonreuters.com/en-us/posts/tax-and-accounting/esg-supply-chain/
66 王晓蒙、展思博、张艺冉 . 全球供应链 ESG 管理多元化 . 2022 年 9 月 5 日 . https://finance.sina.com.cn/jjxw/2022-09-05/doc-imqmmtha5972729.shtml
67 责扬天下 . 供应链中的 ESG 传导——ESG 竞争力进展观察报告 2022 之供应链专题 .2023 年 2 月 .
68 Ingrid Cornander, Michael Jonas, Daniel Weise. Bringing ESG Accountability to Global Supply Chains. October 30, 2023.
https://www.bcg.com/publications/2023/managing-esg-issues-in-global-supply-chains69 Kris Nelson. Diversity in investment management: What are the latest trends and insights? November 29, 2023.
https://russellinvestments.com/us/blog/diversity-investment-management-esg-survey
70 Maddie Wollerton Blanks, Rashada Whitehead. Measuring diversity and inclusion: part of the ‘G’ in ESG. Jul 6, 2022.
https://www.grantthornton.global/en/insights/articles/measuring-diversity-and-inclusion-part-of-the-g-in-esg/
71 MSCI.ESG and Climate Trends to Watch for 2023.November 2022.
72 Aline Reichenberg Gustafsson, Barbara Stewart. ESG Matters: Global Trends and Transitions. February 25, 2021.
https://blogs.cfainstitute.org/investor/2021/02/25/esg-matters-global-trends-and-transitions/73 Kris Nelson. Diversity in investment management: What are the latest trends and insights? November 29, 2023.
https://russellinvestments.com/us/blog/diversity-investment-management-esg-survey
74 PWC(Gena Sullivan, Kevin O’Connell). Human capital disclosures are key components of your ESG reporting
strategy.https://www.pwc.com/us/en/services/esg/library/diversity-equity-inclusion-reporting.html
75 S&P Global Market Intelligence. The Big Picture: 2023 ESG Outlook. November 21, 2022.
https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/the-big-picture-2023-esg-outlook-72802090
76 Posted by Leah Malone, and Emily B. Holland, Simpson Thacher & Bartlett LLP, ESG: Trends to Watch in 2023, March 4, 2023.
https://corpgov.law.harvard.edu/2023/03/04/esg-trends-to-watch-in-2023/
77 Serena Dibra. The 2023 State of Corporate ESG: How companies are embracing ESG for resilience and growth.
https://www.thomsonreuters.com/en-us/posts/esg/state-of-corporate-esg-report-2023/
78 https://www.fair360.com/top-50-list/2023/
79 McKinsey(Kweilin Ellingrud, Diana Ellsworth, Stephanie Madner, Raya Musallam, Ishaa Sandhu, Lareina Yee).Diversity, Equity and Inclusion Lighthouses 2023. January 13, 2023.
https://www.mckinsey.com/featured-insights/diversity-and-inclusion/diversity-equity-and-inclusion-lighthouses-2023
80 KnowESG. Top 5 ESG Investment Trends in 2023. August 15, 2023. https://www.knowesg.com/featured-article/top-5-esg-investment-trends-in-2023
81 https://www.harbourvest.com/insights-news/insights/harbourvest-esg-report-2023-diversity-equity-inclusion/
82 James Bourne. 2023 sustainability outlook–ESG strategies, inclusivity, and regulation. January 18, 2023.
https://sustainablefuturenews.com/esg/2023-sustainability-outlook-esg-strategies-inclusivity-and-regulation/
83 David Marsden Pearson. Emerging trends for diversity and inclusion in 2023. January 13, 2023.
https://www.pinsentmasons.com/out-law/analysis/emerging-trends-for-diversity-and-inclusion-in-2023
84 Tim Koller, Robin Nuttall, Witold Henisz. Five ways that ESG creates value. McKinsey Quarterly. November 14, 2019.
https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/five-ways-that-esg-creates-value
85 Deloitte (Emily Cromwell, Anne-Marie Malley, Céline Fenech). The Sustainable Consumer 2023.
https://www2.deloitte.com/uk/en/pages/consumer-business/articles/sustainable-consumer.html
86 Shikha Jain. Are businesses responding to the ever-growing sustainable demands of US consumers? April 19, 2023.
https://www.simon-kucher.com/en/insights/are-businesses-responding-ever-growing-sustainable-demands-us-consumers
87 贝恩. 亚太区可持续消费趋势洞察. 2022年6月.
88 商道纵横，界面新闻. 2021中国可持续消费报告. 2021年12月.
89 Lucy Buchholz. Top 10: ESG Strategies from the World’s Largest Companies. July 7, 2023. https://sustainabilitymag.com/top10/top-10
90 NIQ. How to turn green consumer intentions into sustainable actions. September 26, 2023.
https://nielseniq.com/global/en/insights/report/2023/how-to-turn-green-consumer-intentions-into-sustainable-actions/
91 Deloitte (Emily Cromwell, Anne-Marie Malley, Céline Fenech). The Sustainable Consumer 2023.
https://www2.deloitte.com/uk/en/pages/consumer-business/articles/sustainable-consumer.html
92 黄宗彦. 中国特色“1+1”ESG框架逐步成型，纳入“乡村振兴”等特色指标. 2023年8月16日. https://new.qq.com/rain/a/20230816A052RG00#
93 财富（中文版）.始于微光，终成灯塔：中国企业 ESG 领航者白皮书.2023年11月.
94 李德尚玉. 构建中国特色ESG评价体系，统一国际ESG标准日益迫切. 2021年8月5日. https://new.qq.com/rain/a/20210805A06LPA00
95 Lauren Demar. The cultural dimensions of Environmental, Social and Governance (ESG) in China. November 20, 2023.
https://www.warc.com/newsandopinion/opinion/The_cultural_dimensions_of_Environmental_Social_and_Governance_ESG_in_China/6455
96 Seneca ESG. China's first ESG disclosure guidance. November 16, 2023. https://senecaesg.com/insights/insights-chinas-first-esg-disclosure-guidance/
97 邮储银行携手德交所发布“STOXX邮银ESG指数” 助推中国ESG市场高质量发展. 2022年3月3日. https://www.psbc.com/cn/gyyc/ycfm/ycdt/202203/t20220303_169027.html
98 中央广播电视总台财经节目中心. “一带一路”ESG行动报告. 2023年9月.
99 王遥，施懿宸. 推动“一带一路”ESG投资主流化发展. 2019年7月28日. http://iigf.cufe.edu.cn/info/1012/1250.htm
100 中央财经大学&每日经济新闻.中国上市公司ESG行动报告.2023年7月.
101 财新智库、中国 ESG30 人论坛.2023中国ESG发展白皮书.2023年11月.
102 中国移动.连续19年！A级！2023年7月16日. http://www.10086.cn/aboutus/news/groupnews/index_detail_46426.html
103 财新智库、中国 ESG30 人论坛.2023中国ESG发展白皮书.2023年11月.
104 https://www.jdl.com/en/innovation#
105 https://www.zeiss.com/corporate/en/about-zeiss/present/sustainability.html
106 陈锋. 兴业银行：打造ESG特色实践样本|ESG绿色发展报告. 2022年12月13日. https://i.ifeng.com/c/8LiZsS7VedX
107 Larry Bradley. Challenges and opportunities in ESG reporting and assurance. December 22, 2022.
https://kpmg.com/xx/en/blogs/home/posts/2022/12/challenges-and-opportunities-in-esg-reporting-and-assurance.html
108 Renée Morin. Evolving beyond disclosure: 2024’s ESG trends, opportunities and challenges. January 12, 2024.

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https://www.irmagazine.com/esg/evolving-beyond-disclosure-2024s-esg-trends-opportunities-and-challenges
109 Nitesh Mehrotra, Damandeep Singh Ahluwalia. As ESG reporting becomes mainstream, complex challenges persist. August 25th, 2023.
https://www.ey.com/en_in/climate-change-sustainability-services/as-esg-reporting-becomes-mainstream-complex-challenges-persist
110 Deloitte Global (Neil Stevenson, Kyra Kaszynski). Globally Consistent ESG Reporting.
https://www.deloitte.com/global/en/about/people/social-responsibility/globally-consistent-esg-reporting.html
111 APLANET. Sustainability Trends 2024: What Companies Should Know. November 2, 2023. https://aplanet.org/resources/sustainability-and-csr-trends/
112 Jane Lawrie. ESG: Moving from risk to value creation. February 27, 2023. https://kpmg.com/xx/en/blogs/home/posts/2023/02/esg-moving-from-risk-to-value-creation.html
113 Wastebits. Integrating ESG goals into core business strategy: the road to a sustainable. April 22, 2023.
https://blog.wastebits.com/sustainability/integrating-esg-goals-into-core-business-strategy-the-road-to-a-sustainable-future/
114 Maria Ng, Marisa Brown. 2024 Predictions for Supply Chain. https://www.apqc.org/blog/2024-predictions-supply-chain
115 Natalie Runyon. Six predictions for ESG in 2024: The year ESG emerged from fad to essential business. January 3, 2024.
https://www.thomsonreuters.com/en-us/posts/esg/esg-predictions-2024/
116 EDS. Top key trends impacting global supply chains in 2024. November 27, 2023. https://eds-international.com/blog/top-key-trends-impacting-global-supply-chains-in-2024/
117 Natalie Runyon. Six predictions for ESG in 2024: The year ESG emerged from fad to essential business. January 3, 2024.
https://www.thomsonreuters.com/en-us/posts/esg/esg-predictions-2024/
118 Amelia Zimmerman. Top 5 ESG Trends to Watch in 2024. October 17, 2023. https://fiscalnote.com/blog/top-esg-trends-2024
119 Natalie Runyo. Six predictions for ESG in 2024: The year ESG emerged from fad to essential business. January 3, 2024.
https://www.thomsonreuters.com/en-us/posts/esg/esg-predictions-2024/

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Collaborating to Create ESG Value
Lydia J Price and Laurie A. Underwood①

Lydia J. Price

Professor Emeritus, CEIBS

Laurie A. Underwood
Head of International Marketing Major,
IÉSEG School of Management

Introduction
The theme of the 2024 World Economic Forum was “rebuilding trust.” As European Commission
President Ursula von der Leyen addressed the forum, she commented that it is “time to drive global
collaboration more than ever before.” Von der Leyen was reacting in particular to the WEF’ s annual
Global Risk Report, which she called “stunning and sobering” for its emphasis on the harmful impacts ofsocietal polarization and misinformation, and for the impacts of climate change and geopolitical conflict.
The best medicine for all of these ills, she asserted, is a spirit of collaboration built upon trust.
This message can serve as a useful theme, as well, for business leaders addressing today’ s
daunting ESG issues. When companies collaborate, they can leverage synergies to design value
propositions that each would be unable to offer alone. Collaborations have potential, therefore, to solve
many of the complex, systemic and multi-faceted problems of sustainable development, but this will only
happen if profitable collaboration models can be identified and scaled. In this chapter, we share insights
into gainful business sector engagement in sustainable development through collaboration. Goingforward, as the global economy transforms to become more equitable and nature-friendly,
sustainability-linked value pools are forecast to reach USD hundreds of billions1 Collaboration is key tounlocking that potential. Below, we compile compelling recent research findings on value creation via
collaboration, and we showcase two highly effective models now used to support business strategies.
To make these conceptual frameworks tangible and actionable for managers, we also highlight six realcase examples of the models in use. Our goal: to inspire business leaders to access the benefits ofcollaborative value creation in their own companies while avoiding the most damaging pitfalls.
➀ Lydia J Price is Professor Emerita of Marketing at CEIBS. Laurie A Underwood is Head of International Marketing Major, IESEG School of Management

Collaborating to Create ESG ValueESG Partnerships and Ecosystems
Collaborations can be simple or complex, ranging from two-party resource-pooling agreements to complex synergistic
ecosystems comprised of multiple public and private, for-profit and non-profit institutions. As more companies andorganizations form complementary collaborations, the potential for complex problem-solving similarly grows, but so does thedifficulty of managing the network of relationships. Successful collaborations tend to rely on a leading party, or orchestrator,
to establish and enforce the rules of participation as well as the mechanisms of value capture and sharing. In the digitalcommerce space, an orchestrator such as Alibaba or Amazon controls the networking technology and the correspondingtransaction data that ultimately endow the owner with superior insight into profitable value creation opportunities. In thesustainability space, by contrast, the orchestrator tends to be the participant with the most insight into the problem, or pain
points, that the collaboration seeks to alleviate.2 When practiced well, these problem-solving collaborations expand
opportunities for all participants by offering shared benefits including: attracting new customers, identifying new
product/service ideas, or opening access to innovative technologies. Two conceptual models, explained below, illustrate
how these ideas work.

EoM Model
Researchers at think tank and advisory EoM Solutions posit that visualizing an ecosystem with a clear social purpose atits core will help networked participants to identify value-creation opportunities. As an example, pet food maker Royal Caningrew the market for its own products by first identifying “healthy pets” as the motivating purpose underlying its ecosystem,
then helping veterinarians to identify and fulfill an unmet need in the healthy pet ecosystem. Based on deep-dive research
into the problems faced by pet owners and the challenges of operating veterinarian clinics profitably, Royal Canin realizedthat cat owners were an underserved market and cats were less healthy than dogs in general. The company found that 53%
of feline pets in the US were not taken regularly to the vet for two primary reasons. First, unlike dogs, cats do not clearly
express discomfort. Second, most cats greatly dislike visiting
veterinarian clinics due to the pervasive smells and sounds ofdogs. Thus, not only were half of pet cats not receiving proper
medical care, but many vets were missing business from catowners.
To address this issue, Royal Canin began collaboratingwith US vets to create a certification process for cat-friendly
clinics. The company then launched a “Take your cat to thevet” information campaign featuring online articles, videos andlinks assisting cat owners to determine if and when their petneeded a vet visit, then finding a certified “cat friendly” clinic.
Today, the #Cat2Vet program is operating in 35 countries
worldwide and has formed a new collaboration with Uber tomake transport of pet cats less stressful, removing anothercommon obstacle to the goal of cat health.
Through this program, vets were able to grow theirclientele and associated profits. Royal Canin similarly boosted
the sales of nutritious cat food being prescribed by the vets.
Most importantly, cats and their owners enjoyed a healthierhome life. By taking up the challenge of researching ecosystembottlenecks and stakeholder pain points, then coordinating thedevelopment of solutions, Royal Canin fulfilled the

Mutuality Explained
Since 2007, the EoM model has served as acatalyst for Mars Corp - owner of Royal Canin andoriginator of EoM research -- to refocus its entire
operations to realign vision, mission, and values.
The company launched an Economics of Mutuality
Foundation as an independent management
think-tank and consultancy that assists othercorporations to make a similar purpose-led
strategic shift. EoM research has mapped theevolution of “responsible business” models throughthree stages from 1) increasing shareholder value
while delegating “responsibility” primarily to CSR
departments, to 2) adding value for all key
stakeholders while building “responsibility” into all
strategic business units, to 3) investing in theoverall health and growth of ecosystems with asocial purpose at the center (see Figure 1). Mutual
value creation (stage 3) emphasizes measurement
and management of four interconnected capitals
that underpin ecosystem health -- financial, natural(environment), social (communities) and human(individual well-being).

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orchestrator’ s role of growing opportunities for all ecosystem participants. Moreover, new growth opportunities can be foundwhenever pain points vary across markets. As an example, China has a serious shortage of vets qualified to care for the
expanding number of small household pets. Following the principle of mutual value creation, Royal Canin China can offer
training and certification programs that increase the qualified vet population, thereby helping partner clinics to attract clientsand grow their incomes, while simultaneously increasing Royal Canin’s potential sales of pet food at these clinics.
EoM Solutions Director Alastair Colins-Jones explains : “Mutuality is about proximity to a social problem. The value ismutual to all stakeholders in the sense that value is defined by how well the problem is addressed. As the problem is solved,
value is distributed to all material stakeholders. Thus, value is not filtered through the lens of the company but through thelens of purpose.”
The EoM model is operationalized in four steps: First, Evolution of value creation business models
redefine the role of the firm and all key stakeholders to determine which social, human or environmental issue should
serve as the central purpose. Next, conduct a detailed “eco-Shareholder Valuesystem mapping” to discover how each stakeholder is connected to all others and to audit the pain-points faced byeach key stakeholder. Then, collaborate to find solutions to
the pain points and weak spots. Finally, establish accounting
mechanisms to measure and maintain balance not only for
financial gain but also human, social and environmental

Company

Shareholders

gains. In the Royal Canin #Cat2Vet project, success is measured in terms of overall health gains for cats, but also as
increased knowledge and stronger peace of mind of pet
owners, augmented revenues for Royal Canin, and financial
gains for veterinarians.
Corporate Social Responsibility (CSR)

Stakeholder Value

Mutual Value Creation

Company

Shareholders

Shareholders

Shareholders

Shareholders

PurposeCompany

Shareholders

Shareholders

Shareholders

Sustainability
Environmental, Social, and Governance (ESG)
Creating Shared Value (CSV)

Source: Economics of Mutuality Foundation
035

Shareholders

Shareholders

Shareholders

Shareholders

Economics of Mutuality (EoM)
Doughnut Economics

Collaborating to Create ESG Value

Royal Canin, as ecosystem orchestrator, actively connects the individual stakeholders and maintains the purpose-led
focus. Colins-Jones explains: “There are three critical elements needed in an ecosystem orchestrator. First, the role is notbought; it’ s earned. Second, it’ s earned through knowledge of the situation of all players. Third, it’ s reinforced bybehaviors that grow the whole pie.” For companies seeking a role model, Royal Canin’ s actions as ecosystem orchestrator
in this project offer a useful guide.

Five Stages Model
The notion of creating and capturing value by “growing the pie for all” works for simpler forms of collaboration as well.
Harvard Kennedy School researcher Jane Nelson was commissioned by the Business and Sustainable Development
Commission, in 2017, to determine how business, government and civil society can collaborate to accelerate and scaletransformative solutions to sustainable development challenges. After reviewing the literature and 100-plus ESG
collaborations, Nelson identified five pathways for business sector engagement in sustainable development, as well as noting
the key principles for collaboration success. Although her research emphasized the importance of public-private
collaborations, her concepts and caveats hold equally well for business collaborations. To follow, we detail five ongoing,
successful business collaborations which illustrate the main features and benefits of Nelson’ s five engagement pathways. As
Figure 2 illustrates, these pathways offer progressive levels of commitment and complexity. As companies shift to higher
levels, they cede individual control in order to grow the collaboration’ s scale and impact. Companies working to improve
traditional industries operate at levels 1 and 2 while those driving large-scale industry- or sector-level transformations canoperate at levels 3 to 5 of the framework. No matter the size or stage of the sustainability journey, we believe that allcompanies can find value creation opportunities within the framework.
Collaborative pathways to scale business engagement in sustainable development
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Cooperation withbusiness partners
along value chains

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Project-level,
financing andimplementation
partnerships

Industry-level,
precompetitive
businessalliancesl4Multi-stakeholder
institutions,platforms andnetworks

company

5

Coordination between different levels and types of partnership to drive systemic change

Source: Harvard Kennedy School

Level 1: Cooperation with business partners along value chains
Level 1 companies use their resources and influence to improve practices within their existing value chains.
Orchestrators first identify pain points, then leverage relevant company strengths -- including purchasing power, brandreputation, technologies and even executive charisma -- to entice upstream and downstream partners to jointly improveupon traditional practices. Reports abound on global MNCs that have successfully transformed their value chains, but evensmall companies can galvanize meaningful change using this model. When Level 1 initiatives are conceived in order to build
consumer brand equity and boost professional relationships, the resulting reciprocal value creation can be substantial. In our0362024 ESG White Paper

example, a newcomer to the Chinese market, Oatly, leveraged its resources and network in China to improve employment
opportunities for a segment of the disabled population, thereby improving diversity and inclusion as well as making “decent
work” more accessible. Since its founding, Oatly has championed low-carbon farming methods and healthy eating. This
new initiative is part of the company’s global campaign for continuous improvement in all three aspects of ESG.

Oatly China’s “Silent Barista” Initiative
SDG/ESG issues
Diversity Equity & Inclusion; Decent Work (including prospects for fair income, personal development, social
integration, and equal treatment by gender)
Background
Swedish oat milk maker Oatly expanded rapidly in China by partnering with premium coffee and tea retailers suchas Starbucks, Pacific Coffee, Tim Hortons, and Heytea. Five years after entering China, Oatly had attained “near cultstatus” among targeted upscale urban consumers who resonate closely with the brand’ s socially conscious
positioning as a good tasting, healthy and eco-friendly plant-based dairy alternative. Strong social media buzz fromenthusiastic buyers continuously sent the company’s revenues soaring.
Against this backdrop, Oatly China launched an initiative in 2020 to address the disproportionate unemployment
and underemployment of people with hearing disabilities (PWD), who number more than 20 million in the country. The“Silent Barista” initiative offered training and certification in gourmet coffee-drink preparation specifically for hearing
impaired individuals, and then supported them to secure employment in partner retail shops. The first trained Silent
Barista was certified by China’ s Specialty Coffee Association (SCA) and hired by Unibrown Coffee in November 2020.
As of late 2023, nearly 260 “silent baristas” had been trained. In addition, retail partners had expanded to include
Hinichijou and other coffeeshops as well as non-coffee retailers including IKEA and Hyatt hotels. Several Silent
Baristas have gained substantial social media followings, and others have opened entrepreneurial coffee shops of theirown. Another positive outcome of the program: the creation, in 2022, of a sign language dictionary for Chinese
baristas, now in use nation-wide.
How partners create value
Characteristic of Level 1 partnerships, the Silent Barista initiative sets standards, creates support materials andbuilds capacity for the retail coffee and tea industry to develop a more inclusive model of growth. Benefits accrue for
Oatly as well as its retail partners and People With Disabilities.
• Retailers gain access to an expanding pool of certified baristas at a time when China’ s coffee market is booming,
causing a severe need for staff. Participating retailers who hire PWD enjoy differentiation from competitors on asocial issue of widespread public interest (employment and job security) following the global Covid pandemic.
• As the program matures and expands, both sides benefit from media buzz surrounding high-profile Silent Barista
events such as latte art contests and drink-making speed competitions. Oatly organized and participated in 64
such public events from 2020 to 2022 including the annual Lujiazui Coffee Festival in Shanghai (attracting 200+
exhibitors) and a 20-day national online latte art contest in 2022 (drawing 2.59 million views and 2000 comments).
• Public awareness and support for PWD populations has grown and Chinese PWDs have gained inspiring rolemodels. As participating retailers proliferate and prosper, Oatly’s market presence and visibility grows.
• A final, but important benefit: the initiative helps both Oatly and its partner retailers to align with recent Chinese
government policies incentivizing companies to employ PWDs.

Level 2: Project-level, financing and implementation partnerships
Level 2 companies increase the scale of their impact but sacrifice some control in order to develop new goods,
technologies or business models that stretch beyond the company’ s existing network to benefit wider communities. Level 2
projects often are done in collaboration with research institutes, investors, NGOs or government units and can range fromlarge-scale PPP infrastructure developments and branded global alliances like UN’ s Partnerships for SDGs or Business
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Collaborating to Create ESG Value

Fights Poverty to smaller-scale rural development programs. The aim is to remove barriers (money, resources, knowledge,
access) that impede community development. Projects often set specific, measurable goals (such as cutting GHG emissions
or reducing unemployment), then track progress over time and continuously identify areas for improvement. Partnering
boosts the resources available for application while reducing unilateral development costs and risks.

Mars Wrigley China’s Rural Youth Employment Project
SDG/ESG issues
Decent Work (including fair income, workplace security, social protection for families, participation indecision-making); Diversity, Equity & Inclusion; Sustainable Communities; Corporate Purpose
BackgroundIn 2019, Mars Wrigley China identified the issue of “rural revitalization and youth employment” as its central social
purpose for operations in Yunnan province. The trend of 20-somethings leaving China’ s rural communities to seek
work in cities was causing a brain drain which left rural communities impacted by split families and a hollowing out ofsociety. Meanwhile, the urbanized young people themselves often struggled with loneliness, isolation, and the difficultyof finding meaningful well-paid jobs in cities. China’ s Rural Revitalization policies are intended to improve local
economic conditions and simultaneously activate the consumption economy that is critical to the country’ s ongoinggrowth.
Mars Wrigley addressed these pain points by training and incubating young rural entrepreneurs who launch
professional retail businesses. The company provides access to on- and off-line training, a broad portfolio of products(mainly candies, chocolates and chewing gum), a digital sales support system, a network of potential B2B and B2C
customers and an experienced Mars mentor. Participating entrepreneurs are encouraged to expand their offerings
beyond Mars Wrigley brands to include other popular brands, thereby boosting the entrepreneur’ s financial viability as
well as the appeal for potential B2B clients.
By late 2021, nearly 100 rural youth in 16 provinces in China had joined the program, and graduates were
earning an average of RMB 3,500 per capita. As of early 2024, the program had trained 350+ youth in 22 provinces.
Long term, Mars aims to train 10,000 rural youth and to also train rural women seeking part-time entrepreneurial work.
One factor in the project’ s success is the close alignment of the project’ s rural employment goals with China’ s central
and local governments - including working with Mianning County, an autonomous prefecture of the Li minority in
Sichuan Province.
How the partnership creates value
As a Level 2 partnership, this project helps entrepreneurs to reduce costs and risks, and catalyzes Mars’ inhouse
resources to enhance the chances of business success. In addition, Mars regularly monitors key metrics and adjusts
operations to overcome entrepreneurial challenges. The company uses innovative metrics to balance four different“capitals” (financial, natural, social, and human) that are critical to ecosystem health and growth potential. By investing
financial capital and access to company resources, Mars grows each participant’s human, financial and social capitals,
for the benefit of all.
• Entrepreneurs benefit from a proven training curriculum and the full support of Mars’ established retailtechnologies and human networks. Thus, human capital -- as measured by work satisfaction—increases.
• Rural communities enjoy financial capital growth from a boost in retail transactions, as well as growth intrickle-down consumption• Communities see an increase in social capital -- i.e., community trust - which correlates with reduced poverty andincome inequality• Mars Wrigley China expands its market presence and penetration in China’s growing rural provinces

Level 3: Industry-level, “precompetitive” business alliances
At Level 3, companies partner within and across sectors to jointly address systemic challenges that impede industry
transformation. Direct competitors cooperate - for example by pooling resources and purchasing power -- in order to038

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accelerate, scale and bring innovative solutions to market at affordable prices. They also partner to set standards andreporting guidelines that level the playing field for early innovation adopters. And they collectively advocate for policy change
while actively working to change the mindsets of key decision makers. Transformative models including circular economy,
regenerative agriculture, and responsible investment are gaining momentum as executives across sectors recognize thegains to be made when this level of cooperation succeeds. Given the growing risks and potential payoffs as partners moveto higher levels of the Nelson framework, the orchestrator plays an increasingly critical role by keeping partners committed
to cooperating for the greater good.

Carbios’ Plastic Recycling Consortia
SDG/ESG issues
Responsible Consumption and Production; Circular Economy; Plastics; Corporate Purpose
BackgroundIn 2017, Carbios (a green biotech company focused on advancing the circularity of plastics and textiles) joined
forces with L’ Oreal (the world’ s largest beauty conglomerate) to launch a consortium aiming to accelerate the global
transition to a circular economy for plastics. Fast forward to 2023, when the duo won a “Pioneer Award” from theSolar Impulse Foundation for developing and putting to use the world’ s first plastic cosmetic bottle that can be fully
recycled “enzymatically”. Compared against traditional recycling, the benefits of Carbios’ enzymatic technology include
a “circularity rate” four times higher (assessed by the Ellen MacArthur Foundation), an ability to process a wider rangeof PET types (including multilayer, colored and textile), and the capability to create recycled PET of “virgin” and “foodcontact” quality. Enzymatic recycling also emits 57% less CO2 emissions than conventional virgin plastic production
and uses 1.3 tons less petrol to produce each ton of recycled PET.
During its six-year existence, as its technology evolved, the consortium has expanded into the sectors of food &beverage (attracting Nestlé Waters, PepsiCo and Suntory Beverage & Food Europe) and textiles (gaining Patagonia,
On, Puma and Salomon). To meet the growing demand from consumer goods companies, Carbios also recently
teamed with world leading enzyme producer Novozymes to ramp up industrial deployment of the technology including
operating the world’s first PET biorecycling plant. Now under construction in France, when launched in 2025, the plant
will process 50,000 tons of PET waste annually. Carbios has also been co-creating with Technip Energies to improve
its technologies, as well as collaborating with academic institutions including TBI Laboratory and INSA Toulouse, bothin France.
How the partnership creates value
By scaling a promising solution to a massive waste management and carbon-reduction problem faced by all
FMCG companies, this Level 3 collaboration is tapping into one of the huge value pools linked to the global net-zerotransformation. Carbios plays a critical role as orchestrator, granting access to its breakthrough technologies andattracting independent but modular businesses that cooperate to reduce the risks inherent in co-innovation and new
product adoption. As seen in many business ecosystems, the value creation potential grows along with the number ofcomplementary members. Unlike digital platforms, which gather and mine proprietary data to better understand themarket’ s pain points, the members of this network must work together to improve the underlying technology, thendesign and develop workable applications and scale productivity. No single member of the network could achievethese outcomes alone.
• Through these FMCG consortia, Carbios gains increased credibility as a solutions provider, as well as accessing
production resources and knowledge from Novozymes, and technical research support from academic
laboratories.
• Novozymes wins B2B clients with high potential for future growth and ongoing co-innovation, as well as
accessing partners which are equally committed to achieving sustainability goals.
• Academic partners realize their potential to improve knowledge and innovation capabilities, and to test early-stageideas for practical applications.
• FMCG companies reduce risks and challenges in pursuing sustainability goals, while adding the valuable featureof sustainable packaging, which increasingly is linked to consumer choice.

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Collaborating to Create ESG ValueAs the consortia goals shift from recycling to achieving a fully “circular economy” for consumer packaging, thisindustry-level collaboration moves toward a Level 4 multi-stakeholder ecosystem. Already, members are working on
solutions for recovering and processing post-consumer packaging and textiles. New members with additional skills
and resources will be required to scale and monetize that business. The already-advanced stage of this emerging
circular economy ecosystem will make it an attractive alternative for all.

Level 4: Multi-stakeholder institutions, platforms and networks
Level 4 collaborations bring together groups of companies along with other institutions to drive large-scaletransformational change when current governance and market systems are insufficient for the purpose. One familiar type ofLevel 4 collaboration is a “technology-enabled open collaboration platform.” Individual companies relinquish a great deal ofcontrol at this level in order to maximize the scale and impact of the collaborative’ s work. Mindsets shift from competition tocooperation, and from information protection to knowledge dissemination for the greater good. The orchestrator brings
highly diverse participants together in settings that break down barriers and rigid thinking patterns. Though partnering at thislevel is challenging, the potential to gain first mover advantages -- in totally new markets or with breakthrough technologies
and business models -- keeps participants engaged and motivated.

Thought For Food’s (TFF) Next-Generation, Open-Innovation Platform
SDG/ESG issues
Zero Hunger; Sustainable Land Use; Biodiversity; Water; Corporate Purpose
BackgroundSelf-described as a “decentralized, community-powered movement of … change-makers,” with a mission to“transform our world’ s food systems to become nourishing, resilient and regenerative through next generation
entrepreneurship,” TFF got its start in 2011 as the brainchild of a young executive at Swiss agribusiness firm Syngenta
Crop Protection AG (now owned by ChemChina). Christine Gould, then head of Next-Gen Innovation andEngagement for the company, had a passion for the power of open-source innovation to improve food security. With
the support of Syngenta, Gould launched a “Thought for Food Challenge” which invited university students from all
disciplines to submit solutions that improve food security. By 2022, the contest had soared in popularity to attract
3000 people (including non-students) from 139 countries. Now reigning as the “world’ s largest and most diverse
agri-food-tech innovation challenge,” the contest - along with TFF’ s other projects -- seeks to offer “creative, impactful
solutions” to the question “How do we feed 10 billion people on a hotter planet?”
TFF, which spun off from Sygenta in 2013 to become a 501 (c) non-profit, now offers content and programs that
attract 8 million+ visitors annually, while its competitions and forums generate 700+ discussion topics, 200+ learning
modules, and 400+ videos advancing food security. In 2019, TFF launched Digital Labs as an incubator andaccelerator for food-related startups. As of 2023, the initiative had raised US$300 million and helped to launch 100+
startups. Corporate sponsors include The Rockefeller Foundation, Google, Cargill, Danone, DSM, and DHL. In
addition to holding open innovation competitions, TFF assists sponsor firms to arrange competitions on themes of
their choosing. An example is the Food Logistics Challenge sponsored by DHL in 2023.
Moving toward a true community-led ecosystem, founder Christine Gould, who had been serving as CEO,replaced her position in 2023 with a Transition Committee that includes leaders from the North, Central and SouthAmerica, Europe, Asia, and Africa who have pledged commitment to the platform’s motto of “Make no small plans.”
How the partnership creates value
Built to benefit all partners as it scales up and expands, the platforms creates and shares value with a variety of
individuals and institutions. As a non-profit orchestrator, TFF applies the revenues from its various activities to growing
the platform and its reach. The direct benefits sought by participants are many and varied, but ultimately all parties are
dedicated to improving global food security. Pursuit of that goal confers value in its own right.

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2024 ESG White Paper• Startup businesses and entrepreneurs gain access to professional training, coaching and mentoring in pitching,business models, storytelling, social media, impact measurement, intellectual property and more. Select startups
receive prize money and access to venture capital investment.
• Investors and food-related businesses get early access to innovative ideas, products and services, as well as
opportunities to pose challenges and ask questions on themes they find relevant. At the annual competition festival,
companies also can open booths to illustrate and receive feedback on their latest developments. The festival is also
an opportunity for employer branding with a highly targeted audience of enthusiastic young people.
• Policy makers and public institutions have opportunities to learn the needs of the market and to educate themarket about their own issues and priorities.
• As the platform expands, TFF gains access to highly skilled, knowledgeable, and committed professionals who
serve as contestants, coaches, judges, speakers, and sponsors. Individuals or companies which participate in a
TFF event are invited to continue as members of the platform, thus contributing to the transformation offood-related industries for the good of all.

Level 5: Coordination between different levels and types of partnerships to drive
systemic change
Level 5 collaborations recognize that ESG challenges are interconnected in ways that require systemic solutions.
Problems are mapped across geographies, along value chains and among different aspects of the Sustainable Development
Goals (SDGs) to determine feasible pathways for corrective action. Since no single entity can drive change at such a grandscale, Level 5 participation consists of memberships within and leadership of many interconnected coalitions at different
levels of the 5-step framework. Nelson and colleagues show how global initiatives launched by the United Nations (e.g.,
Global Alliance for Improved Nutrition) or World Economic Forum (e.g., New Vision for Agriculture), for example, areimplemented in cascades of programs, initiatives and projects each addressing issues which fall within its purview. As one
aspect of participating in such global movements, companies are starting to connect the dots among various commercial
parts of their business.

New Energy Blue Biomass Refining
SDG/ESG issues
Affordable and Clean Energy; Climate Action; Sustainable Land Use; Biodiversity; Water; Circular Economy;
Corporate Purpose
Background
New Energy Blue (NEB) is a bio-technology company and member of the Renewable Fuels Association that
produces ethanol - a low-carbon renewable fuel - from farm residue. Most ethanol is produced from corn kernels,
pitting fuel against food in competition for farm output. NEB, by contrast, uses the corn stalks remaining after corn
harvest as its feedstock, thereby eliminating the competition with food and offering farmers a second revenue stream
from the same land. To amplify the benefits for farming writ large, NEB partners with farmers who use regenerative
practices to sequester carbon in the earth while improving soil quality and reducing wind and water erosion. Hence,
NEB fuel production has positive links to sustainable land and water use.
To assure reliable commercial-scale operations, NEB recently partnered with farmers to launch a biomass
aggregation company that procures, collects and bales excess corn stalks using innovative methods and machineryfrom six different farm equipment suppliers. The new methods increase bale weights, which lowers the costs oftransportation and storage.
Downstream, NEB has entered an alliance with global materials supplier Dow to produce bio-based ethylene
feedstocks for the production of bio-plastics. Dow in turn will reduce its sourcing of fossil fuel feedstocks to produce
recyclable packaging for consumer goods from low-carbon renewable inputs. The alliance is thus part of Dow’ s

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Collaborating to Create ESG Valuecontribution to a circular economy for materials. Furthermore, Dow and NEB are working with the internationalsustainability certification program ISCC to provide Dow’ s customers with certified documentation of the bio-basedmaterials in their supply chains, a part of scope 3 emissions mapping. Hence, NEB fuel production has positive links tosustainable consumption and production.
In the future, NEB plans to grow the list of downstream alliances to include producers of textiles, auto and jet
fuels, lubricants and carbon fiber among others, expanding the company’ s positive links to sustainable fashion andtransportation. Like other advocates of systems change, NEB has set up a knowledge center to collaborate with business partners and academic institutions on research and the cultivation of a skilled workforce for creating energy fromcrop waste.
How the partnership creates value
New Energy Blue’ s biomass conversion technology opens the path for all partners to advance on inter-related
ESG targets while growing commercial business opportunities. As a viable replacement for fossil fuels, bioenergy
products are poised to capture enormous profits in the coming years if they can be scaled reliably and without causing
new types of negative externalities. The potential gains are evident for NEB itself, but also for the diverse set of partners with whom it can grow its business prospects and its impact.
• Farmers attain a unique additional revenue source while lowering their waste- management costs and simultaneously boosting crop yields as the quality of their soil improves.
• Downstream application partners, beginning with Dow, gain access to traceable low-carbon, renewable feedstocks that will boost their appeal with their own downstream B2B customers.
• UN, WEF and other organizations committed to sustainable transformation of the economy gain viable proofs ofconcept for business models that are good for shareholders and society.

Best Practices for Partnering Successfully
ESG collaboratives seek transformative change, which by nature is controversial and hard to accomplish. Whenentering such arrangements partners should prepare to encounter setbacks, diversions and even failures alongside victories.
At times, cooperation will feel strained. Scholars and consultants agree that a few best practices can help participants toavoid the most common partnering pitfalls.23, 24, 25

Establish a Common Vision or Purpose
Whether you visualize your North Star at the center of an ecosystem map (EoM) or the pinnacle of a cascading
institutional pyramid (UN and WEF), take time to agree on the future your collaborative seeks to realize. Because ESG iscomplex and transformation takes time, it is easy to lose motivation along the way. The old adage about brick makers
cherishing their role in building a cathedral is a fitting analogy. Sharing a common “grand vision” can keep parties
moving forward even when individual steps seem small. Carbios and its FMCG partners, for example, envision a futurein which plastic stays out of waterways and landfills. Enzymatic recycling is only one promising solution among many,and it is too early to predict if it will become a dominant solution over the long run. It is easier to persist if the work isviewed as an important step in a necessary and inevitable economic transformation that requires many players in orderto progress.

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Don’t Predefine “Success”
Although it is essential to share a common vision, it is equally important to allow flexibility and discovery regarding
how to achieve success. Royal Canin and its partners see many paths toward a world with healthy pets. Veterinarians
knew their clients were more likely to own dogs than cats, but it took careful stakeholder research and a mapping of thepet ecosystem to realize that a new product -- cat-friendly clinics -- would open immediate opportunities for businessgrowth. Those who study ecosystems and partnerships note that growth opportunities follow when companies shift
from an inside-out search for competitive superiority to an outside-in search for new problems to be solved. Keeping an
open mind is a prerequisite for success.

Establish Concrete Strategies and Targets
Strategies determine the path toward the shared vision, while targets identify critical milestones toward the final
goal. In combination, they align the contributions of individual partners and determine the required resources. As TFF
works toward a vision of global food security, its strategic path of open-source innovation sets boundaries andexpectations for all members. One critical commonality is a spirit of sharing and cooperation as opposed to competition.
TFF members cooperate to cultivate entrepreneurial talent and to bring the most promising technologies and businessmodels to market. By hosting its annual challenge (as well as regularly repeating trainings and festivals), TFF keeps theideas and resources flowing and makes it easy to set annual targets. Though the platform’ s individual activities have
evolved over time, the strategic direction and drive for annual results remain constant, supporting the organization’ s
impressive rapid growth and expansion of impact.

Agree on Metrics to Track and Adjust Progress
Partnerships require transparency and regular reports about progress. Pre-agreement on what will be measured,
who will track the data, and who will take corrective action helps to avoid conflicts as relationships mature. Mars Inc.
and EoM have spent years to develop reliable measures, with the aid of domain experts, for the four capitals (financial,social, human and environmental) which they manage within each product division’ s ecosystem. Improvements in thefour metrics assure Mars that its investments are in fact growing ecosystem health -- and hence, business opportunities-- over time. That knowledge helps Mars, as system orchestrator, to keep individual members engaged and motivatedto achieve agreed upon goals.

Send Your Best Team
Collaboration is a collective effort and failure to ‘pull one’ s weight’ will bring friction and tension into relationships.
Resources include human capital, and partners are advised to assign staff who are both qualified and motivated by thepartnership’ s long run vision. It is a mistake to reserve your best talent for proprietary initiatives while sending to thepartnership those who lack the power and influence to drive change. New Energy Blue is careful to select farming
partners who are willing to adopt regenerative agriculture innovations. In reality, any corn residue can fulfill NEB’ s
resource requirements, but by working with forward-looking farmers, the company can amplify its overall environmental
impact. What’ s more, the company is investing in local talent development to remove possible bottlenecks for its future
growth. The more ambitious a collaborative’s transformation agenda, the more critical the role of talent will be.

043

Collaborating to Create ESG Value

Define Partner Roles and Responsibilities
By attracting members with complementary skills and resources, collaborations increase the possibility of designing
unique value propositions. The leading player, or orchestrator, typically owns or dominates the design process on thebasis of superior problem understanding, trustworthiness, or willingness to invest whatever resources are needed for thecollaborative’ s launch and ongoing viability. In its Level 1 partnership, Oatly played an outsized role in designing andfunding the Silent Barista initiative, leveraging its retail connections to arrange employment opportunities, and organizing
events to grow public awareness and interest. Without the support of coffee retailers, however, Oatly’ s efforts would
amount to naught. Hiring the certified new baristas and assuring their ongoing success is thus a critical responsibility ofeach participating retail partner.
In closing, with the above six recommendations in mind, we seek to embolden managers leading corporate
ESG efforts to develop more and better partnerships. As ESG-focused companies replace traditional silo-ed andprotective business strategies with cooperation and mutual effort, trust in the power and effectiveness of collaboration
will grow. Turning back to the theme of this year’ s WEF for inspiration, our examples show clearly that solutions to theworld’ s most urgent and critical issues can be found by unlocking the power and potential born from partnering, joint
innovation and collaboration.

Endnotes
1 Birshan, Michael, Stefan Helmcke, Sean Kane, Anna Moore and Tomas Naucler, “Playing offense to create value in the net-zero transition”, McKinsey Quarterly, April 2022,
https://www.mckinsey.com/capabilities/sustainability/our-insights/playing-offense-to-create-value-in-the-net-zero-transition
2 Collin Jones, Alastair (Director EOM Solutions), live interview, November 23, 2023.
3 SAID Business School, “After hour case study session: Royal Canin”, University of Oxford, 2020. https://www.youtube.com/watch?v=NI1Hr33BqcQ
4 https://www.royalcanin.com/au/take-your-cat-to-the-vet
5 Luo, Yahan, “China’s Vet Shortage by the Numbers,” Sixth Tone, February 2, 2024.
6 Collin Jones, Alastair (Director EOM Solutions), live interview, November 23, 2023.
7 Nelson, Jane (COMMISSIONED BY THE BUSINESS AND SUSTAINABLE DEVELOPMENT COMMISSION), “Partnerships for Sustainable Development: Collective Action by business,governments, and civil society to achieve scale and transform markets”, Business and Sustainable Development Commission, and Corporate Responsibility Initiative, Harvard Kennedy
School, 2017, https://www.hks.harvard.edu/sites/default/files/centers/mrcbg/programs/cri/files/PforSD(Exec_Summary).pdf
8 Touchstone, Ellen and Laurie Underwood. “Addressing the Full 3 Ps: A Study of Oatly China’s “Silent Barista” Programme Promoting Planet, People & Profitability,” China Business
Casebook, Ethics International Press, April 2024.
9 Custom Market Insights, Global plant-based milk market size likely to reach a CAGR of 9% by 2030 to reach USD 30 Billion share (with COVID-19 Analysis), January 2023,
https://www.custommarketinsights.com/report/plant-based-milk-market/
10 Oatly.com, “ Project Silent Barista: One Oat Drink Company’s Quest to Train a New and Inclusive Class of Chinese Baristas,” 2022, https://www.oatly.com/en-hk/things-we-do/initiatives/silent-barista
11 “Mars Wrigley in China and the Economics of Mutuality Foundation: Supporting retail-sector employment and entrepreneurship in China’s countries and rural areas,” Report on Rural
Revitalization (2022). AmCham China, Social Impact Initiative
12 Our World in Data, accessed February 5, 2024. https://ourworldindata.org/grapher/interpersonal-trust-vs-income-inequality
13 Carbios.com, “Carbios and L’Oreal win Pioneer award for the world’s first enzymatically recycled cosmetic bottle.” November 14, 2023. https://www.carbios.com/en/carbios-and-lore\ al-win-pioneer-award/
14 L’Oreal. 2023, https://www.linkedin.com/posts/lor%C3%A9al_worldalliancesummit-recycledplastic-lor%C3%A9alforthefuture-activity-7130195388833124353-vnGq/
15 Carbios.com, “Carbios and L’Oreal win Pioneer award for the world’s first enzymatically recycled cosmetic bottle.” November 14, 2023. https://www.carbios.com/en/carbios-and-loreal-win-pioneer-award/
16 Birshan, Michael, Stefan Helmcke, Sean Kane, Anna Moore and Tomas Naucler, “Playing offense to create value in the net-zero transition”, McKinsey Quarterly, April 2022,\ https://www.mckinsey.com/capabilities/sustainability/our-insights/playing-offense-to-create-value-in-the-net-zero-transition
17 Jacobidis, Michael G, Carmelo Cennamo, and Annabelle Gawer, “’Towards a Theory of Ecosystems”, Strategic Management Journal, 39, 2018, pp. 2255-2276.
18 Nelson, 2017.
19 thoughtforfood.org “Thought For Food Announces its Brave New Future as a Globalized, Decentralized, Community-led Movement”, 2024. https://thoughtforfood.org
20 Price, Lydia and Haitao Yu, “Sygenta and Thought For Food: A Food-Security Innovation Platform,” Ivey Publishing & CEIBS, December 12, 2018.
21 https://newenergyblue.com
22 https://newenergyblue.com/nef-formation/
23 Dow, “Dow and New Energy Blue announce collaboration to develop renewable plastic materials from corn residue”, 2023, https://corporate.dow.com/en-us/news/press-releases/dow-and-new-energy-blue-announce-collaboration-to-develop-renewa
24 Albani, Marco and Kimberly Henderson, “Creating Partnerships for Sustainability”, McKinsey & Company, July 2014, https://www.mckinsey.com/capabilities/sustainability/our-insights/creating-partnerships-for-sustainability
25 Nelson, 201726 Pidun, Ulrich, Martin Reeves, and Balazs Zoletnik, “What is Your Business Ecosystem Strategy?”, BCG Henderson Institute, March 2022, https://www.bcg.com/publications/2022/what-is-your-business-ecosystem-strategy

044

CORPORATEESG
PRACTICESINTRODUCTION
When it comes to sustainability, businesses in different industries face uniquechallenges and opportunities, each requiring different strategies and approaches. These
differences are not only from industry characteristics and competitive environments but also
related to the different value positions within the supply chains and product lifecycles.
In this chapter, we select three corporate case studies to further discuss this topic. We
will see how these companies not only integrate sustainable development principles in theirown business operations but also drive the sustainable transformation agenda forward
through innovation and collaboration with other stakeholders.
In this chapter, we will explore the following three key questions:· How do businesses integrate sustainability into their operations to ensure comprehensive
execution of sustainability strategies while creating societal and industry value?
· Facing decarbonization challenge, how do businesses promote the internal practice of
ESG principles and lead supply chain sustainability through technological innovation?
· How do businesses enhance consumer experience through service excellence, embody
the concept of empowering partners, and co-create shared value?

CORPORATE ESG PRACTICES

47

Budweiser APAC: Integrating Sustainability into
Business for Continuous Value Creation

CEIBS ALUMNI COMPANIES CASESJD Logistics: Technology-Driven, Leading Global Efficient
Circulation and Sustainable Development

59

53

CEIBS ALUMNI COMPANIES CASESCarl Zeiss Vision China: Empowering Customers
through Education to Create Shared ValueBudweiser APAC: Integrating
Sustainability into Businessfor Continuous Value Creation
By Yanan Lin①

Chen, Shimin

Professor of Accounting;
Zhu Xiaoming Chair in Accounting;
Associate Dean (Case Centre), CEIBS

Faculty Comments

Budweiser APAC has devised and implemented a systematic approach to crafting sustainable development strategies,
with three key components clearly delineated. Firstly, establishing realistic, measurable, and specific strategic objectives.
Secondly, designing explicit, step-by-step action plans grounded in on-site investigations. Thirdly, it involves the effective andcomprehensive assessment of sustainable development performance through timely monitoring of various data indicators.
While actively promoting sustainable practices and achieving tangible results, Budweiser APAC also faces a series ofchallenges: How to improve data collection and accounting in supply chain emissions reduction? How to address various
constraints in beer packaging recycling industry? How to further enhance the quality of sustainable practice information
disclosure? How to clarify the impact of sustainable development performance on financial performance? How to embedsustainable development indicators into financial reporting frameworks?
These complex issues cannot be addressed by one company. They require the involvement of upstream anddownstream partners, local recycling systems, the entire industry, and regulatory systems. Confronting these challenges
requires collaboration, in-depth research, and joint efforts from companies, industry associations, academic and research
institutions, as well as regulatory authorities and other sectors of society.

Introduction
As firms create economic value, contributing to societal value has become a common expectation
and a benchmark for many firms. Indeed, for most companies, financial value is crucial as it directly
impacts the survival of the business. However, this perspective often sees the social value as an added
feature rather than an integral part of a company's core operations. Few companies can integrate thetwo and articulate the underlying logic clearly. Budweiser APAC (Bud APAC) stands out as an exception.
Operating under the philosophy "Sustainability is our business," Bud APAC is a subsidiary of theworld's largest brewer, AB InBev. It is also the largest beer company in the Asia Pacific region, operatingin 35 countries with 47 breweries and 51 distribution centers, focusing on markets such as China,➀ Yanan Lin is a case researcher at the China Europe International Business School Case Center.

Budweiser APAC

Vietnam, South Korea, and India. Emphasizing localized production, the company sources raw materials
locally, employs local talent, establishes breweries, and sells beer to local consumers. The localized
production reinforces the company's belief that business success is intricately linked to the prosperous
local community. Without access to high-quality water sources, it is impossible to produce excellent
beer. Likewise, the absence of thriving agriculture would not provide great raw materials. This forms therationale behind Bud APAC's deep integration of ESG , (Bud APAC uses SUSTAINABILITY ) principles
with its business.

Systematic Sustainability Strategy: Adding Management Value
The Materiality Assessment serves as the starting point for Bud

Bud APAC follows a scientific,
systematic, and clear methodology in setting Sustainability strategy goals, tracking performance,and evaluating outcomes.

APAC's Sustainability strategy. Through rigorous steps and on-site
research, the company identifies key Sustainability focus. In 2020,
the company initiated a Materiality Assessment to identify the key
Sustainability topics most relevant to its business and stakeholders,
analyzing risks and challenges. The process includes Identification,
Prioritization, and Validation. As the first step, the company
systematically reviewed corporate documents of the company and

AB InBev, peer practices and sector-specific standards, sustainability assessment questionnaires by ESG rating agencies,
and other publicly available information. Then, based on the strategic importance to the company, legal requirements,
stakeholder expectations, and standards from rating agencies such as MSCI, CDP, and Sustainalytics, the company further
assessed the relevance and importance of each Sustainability issue. Building on these, the company prioritized
Sustainability issues related to long-term value creation and approved by the Board. As a result, 23 key issues emerged as
top priorities shown in the latest Sustainability Report.1
Once the key topics are identified, the next step is to translate them into specific actions. Gap analysis, aimed atassessing the current situation, analyzing differences, and identifying weaknesses, becomes the subsequent stage. Afterconsulting with professional organizations and reviewing feedback from Sustainability rating agencies, Bud APAC initiatedthe evaluation of Sustainability risks associated with each topic. The company clarified issues that require improvement,
explored preliminary approaches for enhancement, and assessed the difficulty of implementing improvements.
Bud APAC has developed a clear roadmap, outlining short-term, mid-term, and long-term action plans. It alsoestablished a set of quantifiable, specific, and measurable detailed objectives. Taking "Climate Action" as an example, using
2017 as the baseline year, Bud APAC has committed to reducing absolute greenhouse gas emissions from Scope 1② andScope 2③ by 35% by 2025. The company also extended carbon reduction efforts from its operations throughout the entire
value chain for emissions reduction in Scope 1,2 & 3④ 25% of carbon intensity2.
To track progress, Bud APAC adopted the Voyager Plant Optimization (VPO) global management system, monitoring thecompletion of targets and progress in key performance indicators including water resource usage and carbon emissions
reduction 3 . Since 2020, the company has established the Sustainability Committee, directly reporting to CEO and
Co-Chairman of the Board, Jan Craps. The committee includes an Sustainability Working Group dedicated to formulating
goals, taking actions, and monitoring progress related to Sustainability issues4. The cross-functional team consists of 25
members from departments such as Sustainability & Procurement, Supply Chain and Legal and Corporate Affairs teams, each
responsible for a specific area, such as green logistics, sustainable procurement, employee diversity, and corporate inclusion.
➁ Scope 1 (Direct Emissions) refers to direct greenhouse gas emissions generated from fuel combustion activities and physical-chemical production processes under the direct control ofthe enterprise. Typical Scope 1 emissions include greenhouse gas emissions from coal-fired power generation, in-house vehicle use, chemical material processing, and equipment.
➂ Scope 2 (Indirect Emissions) refers to greenhouse gas emissions generated from the purchase of external energy sources, including electricity, heat, steam, and refrigeration.
➃ Scope 3 (Indirect Emissions from Upstream and Downstream Activities in the Value Chain) covers a wide range of activities both upstream and downstream in the value chain.

0482024 ESG White Paper

Bud APAC embeds Sustainability into its corporate governance, internalizing Sustainability as an integral part of company management and operations by establishing a dedicated working group. At Bud APAC, Sustainability is not treated as astandalone "extra project" separate from the company's core operations, nor is it only a " favorable tool" used for branding.
The formulation of Sustainability strategy, selection of issues, establishment of objectives, implementation of plans, and progress tracking all adhere to a scientific, rigorous, and systematic process. These practices ensure the comprehensive, systematic, and sustainable implementation of the Sustainability strategy, but also contribute to refine the company's internal
governance system. This integration genuinely incorporates Sustainability into every aspect of decision-making and corporate management.

Localized Sustainability Actions: Creating Social Value
Beer is composed of four key ingredients: water, barley, hops, and yeast, with water accounting for 90% to 95% of
beer. Water Stewardship is a crucial part of Bud APAC's Sustainability strategy. In some regions of India, water resources areseverely scarce. The 2020 gap analysis identified 5 breweries at high risk, constituting 9.8% of the company's facilities in the
Asia-Pacific region. Bud APAC initiated watershed programs in these areas, supporting local communities in constructing
reservoirs in regions with weak infrastructure. These reservoirs store excess rainwater during the monsoon season for use
during dry periods.
Apart from being a raw material, water is also extensively used in every step of the brewing process, as regular cleaning
is required for almost every stage. Typically, it takes seven gallons ⑤ of water to produce one gallon of beer in a brewery. In
less efficient ones, this ratio may be as high as 10:1. For Bud APAC, it implemented water conservation plans across all
breweries, presenting targeted water solutions. The company's overall water-use ratio is 2.03 hl per hectoliter (hl), a 32%
reduction from 2017 baseline, placing Bud APAC at the forefront of the industry 5 . In China, the company initiated the"Community Water Replenishment" program, recycling reclaimed water⑥ for landscaping and artificial lakes.6

Figure 1：Budweiser APAC India WaterAid Program
Source: Budweiser APAC, '2021 Environmental, Social, and Governance Report.
The brewing process of beer generates carbon dioxide. Bud APAC is unwaveringly committed to creating value fromcarbon reduction. In 2020, China introduced the national "dual carbon” (carbon peaking and carbon neutrality) goals,
encouraging carbon emission reduction efforts. In 2021, Bud APAC achieved China's first third-party certified carbon-neutral
brewery in Wuhan, marking it as the first carbon-neutral brewery under the AB InBev Group. In this brewery, biomass boilers
replace natural gas boilers, 100% renewable energy is procured through power purchase agreements, purchasing zerorefrigerants as cooling agents, switching to electric shuttle buses from vehicles that consume gasoline or diesel, andrecycling carbon dioxide from the brewing process.7➄ One gallon is approximately equal to 3.79 liters.
➅ Reclaimed water refers to sewage that, after undergoing appropriate recycling processes, meets the required (specified) water quality standards and can be beneficially reused withincertain parameters.

049

Budweiser APAC

China leads the world in solar energy industry8, providing opportunities for renewable energy investing. With the national“dual-carbon” (carbon peaking and carbon neutrality) policy, Bud APAC has observed that in various provinces, the cost ofsolar power is gradually approaching that of non-renewable energy sources. Consequently, Bud APAC has installed solar
panels in 14 breweries across China for renewable energy generation by end of 2023. 9 Additionally, the company has
initiated projects such as green logistics, procurement of
renewable energy, efficiency improvement, and the use ofrecyclable materials, creating value from the breweries toevery process in the value chain.

Figure 2: Beers with 'Carbon Neutral Label
Source: Budweiser APAC, '2021 Environmental, Social, andGovernance Report.

Case Study: Further Decarbonization in
Our Brewery with Industry-first Electric Boiler Installation(Reference: Budweiser APAC Sustainability Report 2023: We Dream Big to Create a Future with More Cheers)10
Our Ziyang Brewery in Sichuan, China became the China beer industry’ s first to install electric boilers usinghydropower in 2023. The electric boilers replaced the natural gas ones to generate steam with a newly constructed
power generation and storage system. Leveraging the peak-valley power pricing to achieve cost-effectiveness, thesystem generates and stores the heat by the off-peak hours electricity (the price is 72% lower than peak hours) tomeet the brewery’s steam production needs throughout the day.
In addition to the power cost-effectiveness, we strategically took a sustainable project model, “Energy as aService (EaaS)” , to capture the transition opportunity with financial benefits. We have formed a partnership with theselected service provider for a 20-year procurement contract who invested approximately RMB40 million in theinfrastructure and equipment for the whole system, with a building area of around 3,000 square meters within Ziyang
Brewery.
The project includes the construction of a new 25 MW electric steam boiler, two 1,000 m³ high-pressure energy
storage tanks with a daily steam supply capacity of 250 tons, a new 25.5 MW high-voltage distribution system, a new
purified water system, and an intelligent energy management platform. The project is expected to realise a reduction of
approximately 7,000 tons of CO2 emissions.

SUSTAINABILITY Empowerment Acrossthe Supply Chain: Contributing Industry Value
The value chain of beer industry is long and complex, with upstream activities such as crop cultivation providing raw
materials for brewing, and downstream processes including packaging, transportation, refrigeration, retail, and waste
management. Bud APAC sources raw materials from 172 direct suppliers and distributes beer through 4,000 direct
wholesalers and 2,000 indirect wholesalers. So, the execution of Sustainability strategy goes beyond its internal operations,involving the entire value chain of beer production11. For instance, in terms of carbon emissions, less than 6% are generated
inside the breweries, while the remaining 94% come from the value chain.
In the upstream, farmers provide raw materials for brewing beer. Bud APAC assists growers in enhancing profitability
while preserving biodiversity, promoting sustainable agricultural practices.
Initiatives such as the Soil Program, Biodiversity Program, and Training Program have been launched. The Soil Program050

2024 ESG White Paper

helps growers understand and improve soil quality practices through ongoing communication, timely information collection,and targeted advice. In the Biodiversity Program, Bud APAC collaborates with external partners to explore and formulate
standardized solutions tailored to each market, actively participating in industry conferences related to the Convention on
Biological Diversity. Recognizing the impact of biodiversity on soil composition, water quality, and the yield and quality ofpurchased crops, Bud APAC integrates Sustainability into business operations. The Training Program aims to enhance
farmers' skills through cooperation with agricultural research institutes, covering trainings of agricultural principles, industrial
mechanization, pest management, and harvest storage. Currently, 100% of Bud APAC direct farmers are skilled, connected
and financially empowered.12
In the downstream, packaging is a critical link in the supply chain and an important component of Budweiser's Sustainability strategy. Packaging represents the highest carbon-emitting segment in the entire beer production chain, accounting
for 47.9%13. Every year, Bud APAC have a Champion program, encouraging employees to share, discuss and add initiatives
to utilize innovative, cost-effective, and sustainable packaging materials 14. The company is committed to reducing the thickness of film packaging to minimize the usage of plastic film and implementing lightweight packaging materials, thereby
reducing the weight of bottles and aluminium cans. In China, Bud APAC have rolled out a lightweighting project, reducing theweight of aluminium cans and saving approximately 135 tons of aluminium. Huaxing Group is Bud APAC's largest glass supplier. With the influence and empowerment of Budweiser, Huaxing has begun utilizing renewable energy for power generation. Since March 2021, Huaxing has incorporated solar panels as the key energy source in its Zhejiang factory, subsequently expanding the solar energy project to seven other factories.15 In 2023, Bud APAC launched its lightest aluminum can forbeer in China, with its 330ml can weighing only 9.57g, 4% lighter than the industry average. The average carbon footprint
per can is only 185g, nearly 100g lower compared to the 2017 baseline. Bud APAC’ s aluminum packaging has helped toreduce more than 40,000 tons of carbon emissions, compared to the 2017 baseline, through continuous efforts, with carbon
emissions per can down by over 30%.16
For logistics operation, in 2020, Bud APAC deployed 216 alternative energy vehicles in China, including 180 liquefied
natural gas trucks, 31 electric trucks, and 5 newly-deployed hydrogen fuel cell vehicle trucks, all utilizing advanced technology to reduce carbon emissions. By 2023, the total number of "green vehicles" increased to401, further reducing Scope 3
emissions. In 2023, the company continued to implement Green Logistics Program and constantly assessed the greenhousegas emissions of the logistics supply chain.
Regarding the recycle process, with a focus on enhancing the research and development applications of recycled materials,
in 2022 Bud APAC have developed a new technology to achieve 55% recycled content in glass bottles in China17. The Taizhou
Brewery has become the first "zero waste" brewery in the Asia-Pacific region. To transform Corona into the first plastic-neutral
beer brand, the company initiated a plan to protect marine biodiversity, recycling approximately 155 tons of plastic waste.18

Figure 3: Corona Plastic Fishing Tournament Campaign
Source: Budweiser APAC Environmental Social and Governance Report 2022: We Dream Big to Create a Future with More
Cheers051

Budweiser APAC

Conclusion
Bud APAC has integrated Sustainability initiatives into its operations and the entire value chain, collaborating withpartners upstream and downstream. This approach not only builds the company's competitive advantage but also
generates management value, social value, and industry value. Significant progress has been made towards its 2025
Sustainability Goals, with some targets achieved ahead of schedule, and the ambition of achieving net-zero emissions
across the entire value chain by 2040 is being pursued.
Reflecting on the progress of Budweiser's Sustainability strategy: its operations in India achieved an impressive
199% water replenishment rate, effectively returning 20million hectoliters of water to local communities facing highwater stress19. End of 2023, carbon intensity per hectoliter across the entire value chain has decreased by 23.8%
compared to 2017. Following the Wuhan brewery, the Jinzhou brewery has become Bud APAC's second
carbon-neutral brewery20. In green logistics, there are a total of 401 green trucks. 64.8% of its total beer volume inreturnable or made from majority of recycled material. All partnering farmers in China and India have access to barleyvarieties and technical training suitable for their regions...
Only by truly integrating Sustainability principles into the company's business can the systematic, economical,
long-term, and sustainable nature of Sustainability actions be ensured. Bud APAC sources natural ingredients for its
beer, contributing not only to the quality of its brewing but also adding value to the natural environment in the regions
where it operates. With brewing taking place in various local communities, the company's contributions act as aprotective net for the sustainability of local communities, promoting prosperity and stability. Given the complexity of thebeer supply chain, Budweiser's empowerment of both upstream and downstream stakeholders ensures businesssecurity and contributes to the ecological well-being of the beer industry. Budweiser's strategic integration of businessand Sustainability will continue to create more value for communities, industries, and regions.

References
1 Budweiser APAC 2020 Environmental Social and Governance Report; Budweiser APAC Sustainability Report 2023: We Dream Big to Create a Future with More Cheers
2 ibid.
3 ibid.
4 Budweiser APAC Environmental Social and Governance Report 2021
5 Budweiser APAC Environmental Social and Governance Report 2022: We Dream Big to Create a Future with More Cheers; Budweiser APAC Sustainability Report 2023: We DreamBig to Create a Future with More Cheers
6 ibid.
7 Budweiser APAC Environmental Social and Governance Report 2021
“20 Years of Transformation in China's Photovoltaic Industry: Holding Trillion-Yuan Output, Hundreds of Billion-Dollar Listed Companies, How Did It Achieve World
8 The Time Weekly，
Number One?”，Tencent，2023-11-01【2024-01-12】，https://new.qq.com/rain/a/20231101A07XRK00.
9 Budweiser APAC Environmental Social and Governance Report 2022: We Dream Big to Create a Future with More Cheers
10 Budweiser APAC Environmental Social and Governance Report 2021
11 ibid.
12 Budweiser APAC Environmental Social and Governance Report 2022: We Dream Big to Create a Future with More Cheers
13 ibid.
14 Budweiser APAC Environmental Social and Governance Report 2021
15 ibid.
16 Budweiser APAC Sustainability Report 2023: We Dream Big to Create a Future with More Cheers
17 Budweiser APAC Environmental Social and Governance Report 2022: We Dream Big to Create a Future with More Cheers
18 ibid.
19 Phoenix TV，“Budweiser APAC Advances into Shanghai International Carbon Expo, Playing the Leading Role of the Dual Carbon Era with 'Green' rhythm”, Finance Headlines，
2023-06-13【2024-01-12】，https://cj.sina.com.cn/articles/view/1643971635/61fd04330010103tg.
20 Budweiser APAC Environmental Social and Governance Report 2022: We Dream Big to Create a Future with More Cheers; Budweiser APAC Sustainability Report 2023: We DreamBig to Create a Future with More Cheers

052

CEIBS Alumni Companies Cases

JD Logistics: Technology-driven
to Lead Global Efficient Circulationand Sustainable Development
By Ziqing He①

Zhao, Xiande

Professor of Operations and Supply Chain Management;
JD.COM Chair Professor in Operations and Supply Chain Management;
Associate Dean (Shenzhen Campus);
Director, CEIBS Institute of Supply Chain Innovations;
Director, CEIBS-ZKH Centre for Innovation in Supply Chains and Services;
Programme Co-Director of The Digital Intelligence Transformation of Enterprises
As an important component of corporate ESG initiatives, JD Logistics has introduced theSupply Chain Emission Management Platform (SCEMP). Through the utilization of digitaltechnology and big data applications, JD Logistics can continuously monitor carbon emissions
across various stages of the logistics process, including warehousing, transportation,
distribution, and packaging. By leveraging technology-driven sustainable practices, thecompany not only delivers more efficient and eco-friendly logistics services to its customers, butalso creates innovative business opportunities in carbon management. This case exemplifies
how digital technology-driven low-carbon services generate value for multiple enterprises!

Faculty Comments

Hu, Wei

Comments

CEO of JD Logistics, CEIBS EMBA Alumnus

For supply chain companies, ESG represents both a challenge and a wealth of development opportunities.
Incorporating the ESG concept into development is a gradual process for all companies. JD Logistics has always adhered tothe business philosophy of "long-termism," consistently pursuing challenging yet vital endeavors to create long-term value.
Together with all stakeholders, we are committed to driving the development of a green integrated supply chain, bridging
resources between consumption and production, and achieving long-term sustainable growth.

Introduction
As the urgency and importance of decarbonization become increasingly evident, businesses face challenges in
the complexity of supply chain processes, difficulties in accounting for Scope 3 emissions, managing supply chain
carbon emissions, and high decarbonization costs. As a leading technology-driven supply chain solution provider
and logistics service provider in China, JD Logistics' mission is not only to lead global efficient circulation but also topromote sustainable development. Besides being a trusted provider of supply chain infrastructure services, JD➀ Ziqing He is research assistant at the CEIBS ESG Research Area.

JD Logistics

Logistics is the first logistics company in China to establish science-based targets (SBTi), actively promoting theimplementation of ESG principles within the organization. So, in practice, what does JD Logistics' commitment to"long-termism" involve? How does it collaborate with supply chains partners to address decarbonization andpromote sustainability across the industry? JD Logistics' case will demonstrate how to fully leverage the expertiseand resources of a company to solve problems and create growth opportunities during the process.

Adhering to "Long-termism", Pursuing
Challenging yet Vital Endeavors
Originating from JD Group's in-house logistics, JD Logistics was officially established as a business group in 2017,
opening up its logistics infrastructure. In May 2021, JD Logistics was listed on the Hong Kong Stock Exchange. Transitioning
from corporate logistics function to a logistics service provider, JD Logistics' warehousing network has become one ofChina's largest, covering nearly all cities, towns, and populations in China. Throughout its development over the past
decade, adhering to "long-termism" and building a "responsible supply chain" has remained a critical topic for JD Logistics.
Is there a conflict between the long-term goal of sustainable development and the short-term goal of achieving
operational efficiency? How does a firm balance these two or make trade-offs? Hu Wei, CEO of JD Logistics, answers, "JD
Logistics' long-termism is about pursuing challenging yet vital endeavors to create long-term value. For us, ESG is not just a
cost but brings sustainable 'long-term value', including intrinsic value, investment value, brand value, and social value."
When formulating and implementing goals, JD Logistics does not only focus on short-term profits but also considers theinterests of various stakeholders, adjusting its business strategies. For JD Logistics, practicing ESG is not simply a means tomeet regulatory requirements or pass compliance checks; it also embodies a comprehensive consideration of businessvalue, industry value, and social value.
To begin with, enhancing internal management serves as a significant driving force for ESG initiatives. In the process of
formulating and executing ESG goals, analyzing and addressing risks, as well as innovation, will enhance efficiency andboost sales for the company. This further drives
improvements in ESG information disclosure and brandimage, bringing direct business value to the company.
Secondly, JD Logistics has always been committed toproviding customers with efficient and convenientservice experiences, and its ESG strategy is also an
important manifestation of creating value for customers.
By optimizing warehousing, transportation, distribution,and other processes to reduce costs and improve
efficiency, while also prioritizing green and low-carbon
development, JD Logistics can offer customers a higher
quality and more reliable service experience.

Action-oriented and Efficient Governance Mechanism
Adhering to the down-to-earth philosophy of long-termism, JD Logistics has also established mechanisms from theformulation to the execution of ESG strategies, starting with the enhancement of its internal management. This efficiently
drives the integration and implementation of ESG goals with business objectives.
In November 2022, JD Logistics upgraded the company's ESG governance structure based on its ESG taskforce,
formally establishing the ESG Management Committee . The committee is headed by the Chief Executive Officer (CEO), with054

2024 ESG White Paper

heads of various business functional departments serving as members, jointly responsible for supervising and deciding on
ESG-related issues. At the same time, an ESG taskforce has been established, composed of representatives from various
business functional departments, responsible for the implementation of ESG. In addition to setting goals, the ESG
Management Committee also links goals to business assessments and clarifies the short-term, medium-term, and long-termgoals of each business line to participate in by 2030.
Board of Directors

CEO of JD Logistics

ESG Management Committee

Heads of Deppon

Heads of Business Units andFunctional Departments

Heads of Kuayue Express

ESG Taskforce

Marketingand Public
Affairs
Department

Finance
Department

Human
Resources
Department

Figure 1 JD Logistics ESG governance structureInternal
Control andComplianceDepartment

All Business
Departments

···

···

···

Source: JD Logistics

JD Logistics also regards the implementation of ESG goals as a key to improving corporate governance andpromoting business innovation and development. Taking carbon emissions reduction as an example, JD Logistics has
pledged to reduce Scope 1, 2, and 3 carbon emissions by 50% compared to 2019 levels by 2030. In terms of specificimplementation, JD Logistics has set specific targets for each business link such as warehousing, sorting, transportation,and distribution based on different characteristics of processes, and distinguishes between short-term, medium-term, andlong-term goals. The corresponding goals are broken down into specific annual and quarterly key performance indicators(KPIs) and allocated to the heads of various business lines. Not only for specific business departments, but also for
coordinating departments such as Marketing and Public Affairs, the achievement of detailed ESG-related objectives will also
become key performance indicators for the responsible personnel. For example, by increasing the number of new energy
charging vehicles, fast-swappable vehicles, and liquefied natural gas (LNG) vehicles, JD Logistics has achieved the target of
replacing new energy vehicles under ESG guidance in the transportation department, not only reducing carbon emissions
but also improving its operational efficiency.
By employing a target-oriented approach, JD Logistics' efficient ESG governance mechanism also provides clear
timelines and plans for different business departments to participate in the ESG goals, ensuring the orderly and efficient
implementation of ESG goals. From the company's perspective, the ESG governance mechanism has been deeply
integrated into its internal management system, and ESG governance has truly been integrated into all aspects of thecompany's operation and development.

Technology-Driven Sustainable Development
Sustained investment in research and development is a key manifestation of JD Logistics' commitment to"long-termism." The application of technological innovations not only enhances the effectiveness of the company's ESG
management but also creates new business growth opportunities.

055

JD Logistics

Real-time monitoring and emission management of various emission sources through adigital management platform.
Digital scheduling and coordination of warehousing and transportation to enhance operational efficiency.

Warehousing

Introduction of mechanized and intelligent
equipment for "last-mile" delivery to reduceenergy consumption.

Transportation

Distribution

Improve vehicle efficiency through digital management, algorithm optimization of transportation routes, and optimization of warehousenetwork planning.

Packaging

Reusable packaging, intelligent recommendation of packaging materials.

Figure 2 Examples of technology-driven decarbonization measures2

Since the beginning of 2023, JD Logistics has continuously improved its ESG database. Through digital integration, it
has achieved online monitoring and management of 20 data sources in five major scenarios including transportation,
warehousing, office operations, travel, and services. While enhancing its own carbon management through the carbon
footprint monitoring system, JD Logistics' upstream customers often face challenges in monitoring and calculating emissions
from mobile sources. In response to this issue, JD Logistics has opened up its carbon management system, originallydesigned for internal use, to external customers and developed tailored solutions based on customer needs.
In April 2023, JD Logistics, in collaboration with the Green Supply Chain Committee of the All-China Environment
Federation, officially launched the Supply Chain Emission Management Platform (SCEMP).

056

2024 ESG White Paper

As an example, Hu Wei shared that, within one month of the system's launch, JD Logistics assisted a large customer incalculating the carbon emissions of over 200,000 B2B waybills, providing fundamental data for carbon reduction andenabling the calculation of verifiable greenhouse gas emission reductions.
Through technology-driven sustainable transformation, JD Logistics has not only improved its own operational efficiency
and service competitiveness but also provided other companies with more efficient and environmentally friendly logistics
services. Moreover, it has established innovative product business in carbon management, driving the sustainabletransformation of the entire industry.

Empowering Industry Collaboration for Sustainable Value Creation
While an increasing number of firms have recognized the importance of emissions reduction in Scope 3 activities(including transportation and distribution), the associated costs of data accounting and emission reduction measures havedeterred many, especially for small and medium-sized enterprises. As a provider of transportation and distribution services,
JD Logistics, while ensuring effective internal management, also broadens its perspective from individual enterprise toindustry-wide, persistently exploring this challenging yet vital endeavor.

CO2

CH4

N 2O

HFCs

PFCs

SF6

Scope 1

Scope 2

DIRECT

INDIRECT

Scope 3

Scope 3

INDIRECTINDIRECT

purchased
goods andservicespurchased electricity,
steam, heating &cooling for own use

capitalgoods

leased assets

businesstravelwaste
generated inoperations

Upstream activities

investments

company
facilities

employeecommutingfuel andenergy related
activities
transportationand distribution

transportationand distribution

franchises

processing ofsold products
company
vehiclesReporting company

use of soldproducts

leased assets
end-of-life
treatment ofsold products

Downstream Downstream

Figure 3 GHG Protocol scopes and emissions across the value chain 3
Shared Carbon Footprint in Supply Chain. When accounting and disclosing carbon emissions data, emissions fromtransportation and distribution in the upstream and downstream processes are regarded as indirect emissions in the Scope
3 category, which are closely linked to the direct emissions of supply chain enterprises. This situation may result in duplicate
calculations of emissions and diminish the incentive for emission reduction by businesses. To address this issue, JD Logistics
has proposed an innovative concept of “Shared Carbon Footprint in Supply Chain” . Firms can utilize the Supply Chain
Emission Management Platform (SCEMP) to collaborate with supply chain partners upstream and downstream, sharing
carbon footprint data. After establishing a unified carbon emission baseline, the carbon emissions in different segments ofthe supply chain can be accurately calculated to identify key areas for improvement. Subsequently, the focus will be on
applying decarbonization technologies, using data-based cost-sharing mechanisms to reduce carbon emissions with fewer
resources. This initiative drives collaboration among supply chain partners, resulting in a combined effort to reduce carbon
emissions, achieving an outcome greater than the sum of its parts.
057

JD Logistics

Green Supply Chain Technology Sharing. In 2023, JD Group, Lenovo Group, and BOE Technology Group jointly
launched the “Green Supply Chain Technology Sharing Platform” . In this shared platform (patent pool), companies such as
JD will offer patents related to green supply chain technology to small and medium-sized enterprises (SMEs) for freelicensing, reducing cost pressures for SMEs while accelerating the promotion and application of green supply chain
technology.
In engaging brand partners, JD Logistics initiated the green supply chain project, “Green Stream Initiative” in 2017. Thisinitiative aims to enhance resource utilization throughout the entire chain of goods packaging, transportation, and delivery.
Reduction and recycling are two important principles for the green transformation of packaging. If the logistics company
implements a circular packaging initiative itself, standardizing logistics boxes is relatively easier to achieve in B2B operation
scenarios. However, achieving the implementation of recycling packaging in direct interaction scenarios with end consumers
requires broader coordination and cooperation. Given the customized demands of brands and the vast variety of packaging
types and specifications, how can a supply chain company achieve scalable implementation while ensuring packaging quality
and transportation safety? In 2022, marking the fifth anniversary of the "Green Stream Initiative," JD Logistics released its
original packaging standard, the DWOP (Delivered with Original Package) certification. Starting from the design process, thisapproach integrates product and packaging into a unit, thereby avoiding extra packaging during transportation and delivery.
In doing so, while meeting safety standards, minimizing excess packaging, and using environmentally friendly materials,
JD Logistics ensures the customization needs of brand clients are met. Presently, tens of thousands of product SKUs havetransitioned to DWOP (Delivered with Original Package), saving over 2 billion single-use disposable packages annually for theindustry. JD Logistics also collaborates with multiple partners to set new goals: by 2030, over 80% of products sold throughe-commerce channels will apply DWOP standard. This initiative is expected to drive a reduction of disposable packaging by
10 billion units across the entire industry.
Unclear and disjointed actions cannot effectively lead and guide the sustainable development of the entire industry.
What's necessary is the integration of fragmented innovations and the collective utilization of resources across the green
supply chain, thereby collaboratively driving the industry's sustainable transformation and high-quality development.

References
1 JD Logistics, 2022 Environmental, Social and Governance Report https://www.jdl.com/esgreport
2 Environmentally Conscious Supply Chain Professional Committee, JD Logistics, Schneider Electric, Carbon Neutral Guide for Logistics Parks.
3 GHG Protocol, Corporate Value Chain (Scope 3) Accounting and Reporting Standard https://ghgprotocol.org/corporate-value-chain-scope-3-standard
4 JD Logistic,《推进行业绿色技术开放！京东集团联合多企业发起绿色供应链技术共享平台（专利池）》https://mp.weixin.qq.com/s/tYMqei0cKmpfRVfC-iK7kA

058

CEIBS Alumni Companies Cases

Carl Zeiss Vision China:
Empowering Customers through
Education to Create Shared Value
By Ziqing He①

Xin, Katherine Rong

Professor of Management;
Bayer Chair in Leadership;
Associate Dean (Europe);
Director of Hospitality EMBA Programme;
Director of DBA Programme, CEIBS

Faculty Comments

ZEISS empowers corporate clients and partners greatly by offering various forms ofprofessional training and management training. This company goes above and beyond to offer
first-rate service and exceptional experiences to its consumers. These corporate practices
fundamentally represent a form of service innovation.
The company's commitment to service excellence drives value creation across all
aspects, fully embodying the inherent logic of the service-profit chain and the corporate ethosof “shared value” . ZEISS’ s win-win philosophy is also reflected in its empowerment of theentire industry, thus bringing profound impact to the industry's development. This win-win
approach to value creation and social responsibility sets a valuable example for othercompanies to follow.

Xiaoguang Yang

Comments

General Manager of Carl Zeiss Vision China Sales Company
CEIBS CMO/HEMBA/DBA Alumnus

Innovation, precision, and social responsibility are the brand genes of ZEISS. While continuously driving technologicalinnovation, we also consistently empower the training and development of industry talents. Within the ZEISS Elite College,
we integrated various high-quality education resources, providing clients with cutting-edge systematic management training.
Throughout the journey, we continuously expand and enrich our training content, enhancing the end consumer experience
while also fostering value co-creation with partners.

Introduction
As a leading brand providing lenses and vision-testing equipment and products, Carl Zeiss partners withentities like optical centres, eye clinics, and eyewear retailers to deliver products and services to consumers. In
addition to prioritising affordability and functionality in products, consumers now place growing importance on thein-store experience, seeking professional advice and personalized service during the glasses and lenses purchaseprocess. Given these shifting market dynamics, how does ZEISS navigate these challenges and meet theincreasingly high expectations of consumers?
➀ Ziqing He is research assistant at the CEIBS ESG Research Area.

Carl Zeiss Vision China

Service Transformation Strategy:
Transition from the 4Ps to S.A.V.E
In 1846, ZEISS was founded in Germany. The company gradually expanded its business around optical equipment,
evolving into a leading global technology group in the optical and optoelectronic industries. As a crucial segment within the
ZEISS Consumer Markets, Zeiss Vision focuses on products along the value chain of ophthalmic optics. In 1995, Zeiss
Vision entered the Chinese market, establishing a sales company in Guangzhou and introducing resin lenses to China for the
first time.
Traditionally, marketing strategies under the 4Ps model primarily focused on Product, Price, Place, and Promotion,
mainly from a sales perspective. However, ZEISS was facing challenges, relying heavily on a few key customers while lacking
brand recognition among end consumers. After thorough analysis of these issues, Xiaoguang Yang shifted the focus fromtraditional product marketing to providing solutions, he aimed to explore empowering customers and breaking through thelimitations of traditional B-to-B marketing. Instead, transitioning to a B-to-B-to C model to significantly enhance marketing
effectiveness.
Between 2013 and 2014, Xiaoguang Yang attended the CMO program at the China Europe International Business
School, where a marketing professor introduced the S.A.V.E. model. In the traditional 4P model, marketing strategies
primarily focus on Product, Price, Place, and Promotion, emphasizing sales-centric approaches. However, at that time,ZEISS was facing challenges with heavy reliance on a few key customers and low brand recognition among end consumers.
After thorough analysis of these issues, Xiaoguang began considering whether to draw inspiration from the S.A.V.E. model,
shifting the emphasis from traditional product marketing to providing solutions. He wanted to see if empowering customers
could break the limits of traditional B2B marketing, leading to a shift to a B2B2C model and greatly improving marketing
efficiency.

4P

S.A.V.E.

Product

Solution

Product-centric, can only provide lenses to consumers through distributors

Enables consumers to experience comprehensive solutions,considering individualized needs during fitting

Place

AccessPrimarily relies on retail stores operated by offline
distributors, relatively limited

Combines online and offline channels, guiding stores and consumers to join online platforms. This not only allows consumers to choose stores more conveniently but also addresses thepain point of low foot traffic in offline stores

Price

Value

Faces disorganized low-price competition in themarketStandardizes high-quality services, explores brand and service
value that resonate with consumers

Promotion

Education

Short-term discounts, rebates, and incentives aimed
at boosting short-term sales

Systematically empowers customers to enhance consumerawareness060

2024 ESG White Paper

Exploring Training Empowerment: Specialized Programmes
Leveraging Management Experience for Lean Healthcare. In 2014, as a newcomer to the market, ZEISS faced
challenges in establishing partnerships with hospitals, including eye hospitals, despite being a crucial channel client. Prior to
his role as General Manager of ZEISS China Sales, Xiaoguang Yang had nearly a decade of experience at ZEISS, holding key
positions in various areas such as supply chain, operations, strategic management, and manufacturing. At that time, ZEISS's
two production factories in Guangzhou were leading globally in lean management, ranking first and second respectively in
ZEISS’ s global review. This prompted Xiaoguang to think whether to leveraging the advantage of "lean management" formarket entry strategy. After that, a small-scale training initiative called "ZEISS Lean Management Course" was launched. In
eye hospitals at the time, patients typically endured long waiting queues, resulting in low efficiency. Drawing on theexperience of lean management, ZEISS trained on-site personnel at these hospitals, redesigning processes to improve
operation efficiency and achieve the goal of "zero waiting." This training initiative later extended to the other functional
departments and the entire hospital. Promoting lean healthcare marked ZEISS's inaugural attempt at providing external
training.
Strengthening the Proficiency of Frontline Optometrists. In the eyecare industry at that time, there was a shortage ofexperienced and specialized optometrists. While some held optometry qualifications, the majority had only received basic
training and lacked comprehensive professional development. Meanwhile, eye hospitals hold the most professional
resources. Therefore, ZEISS decided to collaborate with hospitals to establish specialized training programs tailored tofrontline optometrists from non-hospital channels. This aims to enhance their professional skills and address the shortage ofprofessional optometrists within the industry.
Advancing Sales and Service at Retail Stores. As the training for lean management and optometrists progressed,
Xiaoguang also realised that the distributor teams were facing a transformational challenge in sales. In the past, the training
provided by ZEISS as a brand focused more on the products, emphasizing the advantages and technological advancements
of products. However, from a consumer-centric perspective, consumer experience and service quality have become crucial.
Especially for high-end and personalized products, solely emphasizing product features is no longer sufficient to meet
consumer demands. Therefore, ZEISS has also embarked on developing a series of sales skills training aimed at helping
retail stores enhance their service and promoting the sales of high-end products.

Innovative Business Model:
Establishing ZEISS Elite College to Create Shared Value
Over time, ZEISS has continued to update the design of its training programs annually. After four years of development,by 2017, ZEISS Vision China decided to integrate its existing training programmes and formally establish the ZEISS Elite
College. This initiative not only streamlines internal management but also provides a unified platform for external
communication and collaboration.
As of now, the ZEISS Elite College has over 100 staff members, including both internal employees and external trainers.
Combining online and offline training, it is able to reach over 200,000 trainees annually, covering nearly half of the industry's
total workforce. The College's curriculum, centred on marketing strategy and knowledge creation, is forward-thinking.
Tailored to the needs of different groups, seven different types of classes have been offered to meet the needs of various
levels and professions. Additionally, an online learning platform has been launched, offering over 700 online courses.

061

Carl Zeiss Vision China

ZIESS Elite College
MissionIntegrating top-tier management education resources from within and outside the industry, providing
clients with comprehensive management training, empowering their success, and cultivating leaders in
China's optical industry.

VisionCentred on marketing strategy and knowledge creation, our innovative curriculum aims to lead theoptometry industry into a new era with academic and brand influence.

Target Trainees: Management, operation, and technical staff in optical industry
Management Teams
GeneralReserving
Supervisors and Technical Experts

ManagerTalentsSales
ZEISS-CEIBSManagement
Class

OpticalClass

ExcellentManagement

LEAN ClassClass

ExcellentServiceClass

Reserving
Professional
Craft Class

TalentsClass

ZEISS Blue ClubZIESS Elite College Online Learning Platform

Values: Integrity, Excellence, Innovation, Responsibility062

2024 ESG White Paper

Programmes

Content

Target Audience

Excellent Service Class

Standardization and Enhancementof Excellence Service

Top Management, Middle
Management, Frontline Service
Staff

ZEISS-CEIBSManagement Class

Integrating Management Education
Resources, Customizing Course
Development

Top Management, Middle
Management

Collaboration with Professional
Optical Organizations, Sharing
Management Knowledge andLatest Industry Trends

Middle Management,
Supervisors and TechnicalExperts, Store Frontline Staff

Excellent Management Class

Providing Trainees with
Comprehensive Management Skills
and New Retail Knowledge
Empowerment

Middle Management, StoreManagers, Key Talent
Development

LEAN Class

Collaboration with Lean
Management Experts from Inside
and Outside the Industry to Assist
Clients in Improving Internal
Process Efficiency

Top Management, Middle
Management

Professional Craft Class

Training on Glasses Processing and
Prescription Skills

Opticians, Quality Control Staff,
Sales Assistants

Reserving Talents
Class

Industry-Education Collaboration to
Enhance Students' Job Skills

Students, Reserving Talents

Optical Class

Table: Training Programmes at ZEISS Elite College

Source: ZEISSChallenges and Rewards:
Transformation of Customer Relations
Reflecting on the challenges along the way, Xiaoguang stated that the biggest challenge was actually launching the firstclass of training. On the one hand, potential competition among distributors made the process of promoting the course fullof uncertainty. Gathering clients for training inevitably leads to their comparisons of ZIESS’ s support for sales across different
channels. On the other hand, internal doubts within the company arose regarding the investment in the training program,questioning whether the expenditure would boost sales as anticipated. Therefore, the initial 30 students were mostly
personally invited by Xiaoguang through one-on-one communication.
However, these concerns were gradually dispelled as the training programme evolved. Xiaoguang believes that theeffectiveness of training is not only reflected in the improvement of the professional capabilities of clients, but also, more
importantly, in the development of a healthier industry ecosystem. Taking the initial LEAN management class as an example,
the relationship between ZEISS and its clients has shifted from the original “sales-purchase” dynamic to a “partnership”
dynamic, further enhancing trust and expanding the possibilities for cooperation.
Through a series of classes about strategy and branding, the management teams of distributors have also gained a063

Carl Zeiss Vision China

deeper understanding of ZEISS's brand philosophy. They have moved the focus away from low prices, now emphasizing
effective market collaboration, and delivering quality consumer service.
As the number of clients participating in the education program continues to increase, ZEISS has also gradually madeits market policies more transparent and uniform. As a result, the education program has enabled ZEISS to engage more
effectively with clients, fostering trust not only between ZEISS and its clients but also among the clients themselves.
Additionally, it has promoted internal governance improvements within ZEISS.
The ZEISS Elite College, through its innovative business model of empowering client success and creating shared value,
has gained recognition from the ZEISS Group, and was honored with the Zeiss Global Innovation Award in 2019.
However, looking towards the future, Xiaoguang believes that the ZEISS Elite College, as an independent profit centre,
still needs further development of its curriculum.
Currently, the management team has not comprehensively tracked the effectiveness of the training, resulting in a limited
understanding of performance changes pre- and post-training. Through a deeper analysis of the industry value chain,
Xiaoguang aims to address this challenge while creating new growth opportunities, thus better identifying and meetingclients' needs.

References
ZEISS. About Carl Zeiss Vision. https://www.zeiss.com.cn/vision-care/about-us/about-carl-zeiss-vision.html
1 Li, Huaqing. The Importance of the Chinese Market Highlighted: Zeiss's Chinese Processing Center Positioned as “Extremely Important”. Economic Observer Online. https://ww2 w.eeo.com.cn/2023/0217/578501.shtml
Ettenson, R., Conrado, E., & Knowles, J. (2013). Rethinking the 4 P's. Harvard Business Review, 91(1), 26-27.
3064

STUDENTPROJECTSINTRODUCTION
As CEIBS incorporates ESG and sustainable development topics into the curriculum, discussions related to ESG
have become a mandatory component of student group projects.
In these projects, students must focus on real issues and challenges facing their businesses, conduct systematicand in-depth analyses based on the actual situation of the enterprise. Building upon this foundation, students need toconsider constraints such as resources and time and propose targeted and feasible solutions. Therefore, discussions
on ESG topics in these group projects also reflect current business considerations in addressing relevant issues.
Some of the student projects focus on the specific connection between ESG issues and businesses, examining
related risks and opportunities. For example, under new policies and guidelines, how should companies incorporate
these issues into strategic consideration?
Additionally, some projects address sustainable business transformation and business model innovation. For
instance, how can companies find a Second Curve, balancing the needs of various stakeholders, while establishinglong-term business models?
Finally, some projects focus on ongoing "sustainable development transformation" practices, emphasizing thesystematic implementation of ESG initiatives, including implementation of strategy and organizational structure in new
scenarios.
In this chapter, we showcase three groups to illustrate the practical application and outcomes of ESG in student
projects.

STUDENT PROJECT

67

74

Integration of Green Governance and Retail Excellence:
Exploratory Research on New World Department Store's “Green
Retail” System
EMBA2021 Huifang Xie, Guodong Li, Yudong Shen, Han Zhang

Business Actions for Social Impact: Promoting
Sustainable Fashion with Recycled Marine Plastics

71

EMBA 2021 Shujun He, Guang Zeng, Weiyu Sun, Weihua Xiong

From Good to Excellent - Organization design for CanSinoBio 2.0
GEMBA 2019 Gerard Vongsady, Rosa Tao, Jingqi Li, Nisa Ni, Jan Heinz, Jeanne Wang

Integration of Green Governanceand Retail Excellence: Exploratory
Research on New World Department
Store's “Green Retail” System
EMBA2021 Huifang Xie, Guodong Li, Yudong Shen, Han Zhang

Currently, green and low-carbon initiatives are not only a focal point of international and societal concern but also asignificant emphasis for businesses to fulfill their social responsibilities. As hubs for residential consumption activities,
shopping centers and malls have become important channels for promoting green consumption. This project, starting fromthe application of the green retail theoretical framework in the shopping mall sector, explores the feasibility of integrating
green governance with retail performance. The aim is to achieve a sustainable development model that prioritizes
environmental protection, social responsibility, and retail performance simultaneously.

Research Question and Objectives
Energy conservation, emissions reduction, and sustainable development are not just challenges faced byproduction-side enterprises; they should also extend to consumption-side enterprises and consumers. For retail enterprises
like New World Department Store, it plays a crucial role in bridging production and consumption.
Despite promoting clean energy use and advocating eco-friendly consumption becoming important topics andpractices in department store operations, the lack of a unified definition, guidelines, and evaluation system for green retailposes a pressing issue. Therefore, the objective of this project is to research and establish a tailored "green retail" theoreticalframework suitable for New World Department Store, which will be used to monitor and guide the implementation of green
retail practices within the enterprise.

Integration of Green Governance and Retail Excellence

Research Design and Highlights
1) Research Scope and Perspective: Previous studies primarily focused on green assessment within traditional
manufacturing industries, paying less attention to the service sector. This project investigates the feasibility of integrating
green governance with retail performance, offering a fresh perspective on the green development of the retail sector.
2) Application of Evaluation Indicators: Past research tended to simplify green evaluation indicators, predominantly
focusing on environmental aspects. They often relied on metrics such as electricity consumption, overlooking other issues
like resource recycling and material usage. While these traditional indicators may suit external evaluations, they lack thedepth required for internal management. Additionally, this project also addresses the challenge of balancing sustainability
with retail performance. By refining multi-level indicators, the study provides a more detailed and comprehensive assessment
for internal management, enabling a more accurate identification and resolution of practical issues.
3) Research Methods and Data Collection: In addition to literature reviews, the project team employed data collection
methods such as in-depth expert interviews and offline surveys at stores. By conducting on-the-ground assessments at
multiple stores of New World Department Store, the study gains deeper insights into the green retail practices of different
sites. This approach provides a more specific and comprehensive practical foundation for the indicator system.

Summary and Outlook
The research team has developed the "Green Retail Theory " indicator framework. Under the primary indicators of green
governance and retail performance, it includes 8 secondary indicators and 21 third-level indicators, corresponding to the
responsibilities and values of firms to different stakeholders such as shareholders, the environment, employees, consumers,
and society. Meanwhile, this framework has also been adopted in evaluating five stores under the New World Department
Store. In terms of the operational feasibility, New World Department Store has maintained active exploration. Looking backover the past three years, there has been approximately a 22% reduction in energy consumption indicators in 2023
compared to 2021.

Energy Consumption Indicator

DDeeccrreeaass
eedd bbyy

700,000

Energy Consumption (GJ)

600,000

572,889

500,000

aapppprro
oxxiimmaatteelyly2222%%
469,137

447,128400,000
300,000
200,000
100,000
0
2021

2022

2023

Fiscal Year

Figure: energy consumption for all stores over the past three fiscal years
0682024 ESG White Paper

In the implementation process, the project team has also identified some challenges. For instance, certain sites of New
World Department Store have been operating for over a decade. Retrofitting these stores with new environmentally friendly
equipment may face constraints such as construction difficulties. Additionally, the initial investment required for venue andfacility upgrades could impose significant financial pressure on the operation side. Therefore, evaluating and monitoring
progress, as well as summarizing the experience learned will be crucial. It will also be an important part of reflecting on the
project's outcomes.

Appendix: Green Retail Practices at
New World Department Store
1. Energy-saving Equipment and Emissions Reduction(corresponding to material consumption and emissions
indicators)
Examples：Adoption of more efficient and environmentally friendly infrastructure systems such as windenergy, temperature control, water conservation, etc.
Introduction of natural light from the top of the ceiling.
Introducing natural light

2. Green Power (corresponding to renewable energy utilization indicator)
Example: Actively promoting rooftop photovoltaic
construction, planning to establish a distributed photovoltaic power generation system at the Chengshan store in
Shanghai, and gradually expand to other cities' multiple
stores.
Rendering of the rooftop photovoltaic project

3. Paperless Operations (corresponding to material consumption, customer value, and operational profit indicators)
Example: New World Department Store has initiatedmany paperless operational practices including digitalization of membership card vouchers, invoices and receipts,
and membership. These practices optimise the customer
experience while significantly reducing paper usage.

069

Online member management system,
promoting paperless operations
through multiple channels

Integration of Green Governance and Retail Excellence

4. Volunteer Teams for Social Welfare (corresponding toemployee development and social responsibility indicators)
Example: Since its establishment in 2013, the New
World Department Store Volunteer Team has been actively providing services in education assistance, elderly care,poverty alleviation, environmental protection, and assistance to the disabled.

Volunteer Team's charity event at the nursing home

5. Promoting Environmental Awareness (corresponding
to resource recycling and food saving indicators)
Example: Various shops are launching green initiatives
such as bottle recycling and trade-in programs, while alsocollaborating with artists to organize thematic environmental exhibitions, aiming to promote the concept of green
consumption and sustainable lifestyles to customers.

Collaborative event with Coca-Colapromoting charity walks and bottle
recycling

6. Supply Green Products (corresponding to operational
profit and renewable energy utilization indicators)
Example: In terms of the supply chain, streamlining
product packaging and adopting more environmentallyfriendly packaging materials.

Self-operated stores selling eco-friendly
bags made from apple peels

070Business Actions for Social
Impact: Promoting Sustainable
Fashion with Recycled Marine
Plastics
EMBA 2021 Shujun He, Guang Zeng, Weiyu Sun, Weihua Xiong

The goal of sustainable fashion is to comprehensively consider the sustainability of the environment, society, andeconomy, aiming to mitigate the negative impacts of the fashion industry on these fronts. By utilizing marine recycled plastics
in polyester fabrics and products, it promotes resource circulation, protects marine biodiversity, reduces plastic andmicroplastic pollution, and boosts consumer consciousness of protecting the ocean. Based on the collection andmanagement of marine plastics and recycled fabrics, this project proposes a systematic solution. After conducting
comprehensive industry and market analysis, this group introduces a business plan centered on a closed-loop sustainablebusiness model. This model tackles social issues through OBP certification and transparent digital traceability systems.

Research Question and Objectives
The ocean, is the world's largest "commons” . Although international efforts have been made to tackle marine plastic
pollution, progress has been slow due to various challenges. In the fashion and textile industry, while major brands are
increasingly using recycled materials for their products, the overall adoption remains limited, primarily focusing on individual
items rather than a systematic sustainable fashion initiative. The project team has extensively studied the collection andreuse of marine plastics, identifying several key challenges. Firstly, coastal regions lack dedicated management systems andtrading systems for plastic. This results in challenges in terms of collection difficulty, low efficiency, and relatively low
collection rates.

Business Actions for Social Impact

Secondly, marine plastics, after exposure to the natural environment, are often contaminated or broken down, making
them difficult to collect and clean. This reducing their value for recycling and rendering existing waste management systems
ineffective. Additionally, the textile industry and product manufacturing processes face obstacles. Certified recycled plastic
manufacturers are limited domestically, and there is relatively low transparency in the supply chain, making it difficult toestablish trust among stakeholders. Moreover, importing raw materials incurs tariffs and transportation costs, along withincreased carbon footprint from non-local sourcing, which limits the widespread adoption of recycled plastics despite theirsignificant attention and recognition.

Research Design and Highlights
Designing Systemic Solutions. Recognizing the complexity of the environmental issue of plastic pollution, it's clear thata single approach is insufficient. Addressing the challenges identified above, a systematic solution has been designed fromfour dimensions: raising awareness, promoting circularity, reducing leakage, and cleaning the oceans.
Firstly, supporting the establishment of a more comprehensive plastic collection system in coastal areas toensure effective management and collection of materials. This includes establishing suitable plastic collection andpackaging sorting centers, introducing price leverage mechanisms to appropriately increase subsidies for collectors andthe prices of marine recycled plastics, developing marine plastic modification technology, and promoting the reactivationof market collection systems.
Secondly, ensuring the authenticity and credibility of marine recycled plastics through International Ocean
Bound Plastic (OBP) certification. The strict certification process of OBP focuses on substantially preventing plastic
waste leaking into the sea, ensuring products maintain reasonable premiums to establish a sustainable business model.
Thirdly, integrating the plastic recycling fashion industry chain. Through a digital traceability platform, digitizing
and transparently managing the supply chain system, bridging the service links to ensure high-standard collection andmanagement processes while achieving high-value productization of marine recycled materials.
Fourthly, creating a fashion brand for recycled plastics. By developing high-quality recycled fabrics and designing
fashionable products, further guiding consumers and society in their awareness of marine environmental protection andsustainable development, encouraging consumers to engage in more actions to protect the oceans.

Figure 1: Handbags made from marine recycled materials

Figure 2: Attires made from marine recycled materials

Creating ESG indicators for sustainable fashion products from recycled plastics. The project team, in collaboration
with fashion brands such as KAVON and HONGGU, has introduced traceable recycled sustainable fashion products,
including sustainable bags and clothing.

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2024 ESG White Paper

These products are equipped with QR codes that allow consumers to scan and view the entire process from raw
material collection to the transformation into fashion items. This not only ensures transparency and credibility along the
supply chain but also strengthens consumers' awareness of marine environmental protection.
According to team’ s calculations, for every ton of sustainable fashion products made from marine recycled plastics, it isequivalent to reducing 3.3 tons of carbon dioxide emissions, saving approximately 2 tons of petroleum extraction, andconserving 5 tons of water usage. Avoiding the leakage of 1 ton of plastic into the ocean is equivalent to protecting one
billion cubic meters of seawater from plastic pollution.

Summary and Outlook
The project team members co-founded Ocean Cloud Environmental Technology Co., Ltd. The startup has achieved
significant progress, establishing an effective system for collecting marine plastics and transforming them into sustainablefashion products, collaborating with dozens of upstream and downstream companies in the industry chain. In November
2022, Ocean Cloud obtained the first OBP collector certification in China, followed by the first OBP recycler certification in
March 2023. Their collection management and certification cover over 85% of beaches in China at risk of plastic leakage,
making them the only Chinese company involved in the development of the Social+OBP international standard.
Looking ahead, the project team aims to further implement plans to address social issues through commercial actions
and achieve the goal of "changing consumer behaviour through consumption." By promoting awareness of ocean protection
and plastic recycling through fashion products made from recycled marine plastics, the team hopes to inspire and guideconsumer behaviour changes, thereby generating positive social impact.
The key to solving social issues sustainably through commercial activities lies in profitability. Only when these problems
are turned into profitable business opportunities can they be resolved sustainably. Guided by this principle, the team seeks toleverage the market to allocate resources and use social tools to close the loop of plastic pollution value chain. Ultimately,
the team aims to establish a sustainable cycle of "social issues-business actions-awareness enhancement," achieving value
co-creation in green innovation and business development.

073

From Good to Excellent Organization design for
CanSinoBio 2.0
Global EMBA 2019 Gerard Vongsady, Rosa Tao, Jingqi Li, Nisa Ni, Jan Heinz, Jeanne Wang

Established in 2009, CanSinoBio is an A+H listed biopharmaceutical company focus on the R&D and supply of
innovative and high-quality vaccines. With the sudden surge in market demand triggered by COVID-19 pandemic, its
operational mode and startup mindset can no longer meet the growth demands of the company, putting it into a constantfirefighting operation mode. In response to this challenge, the goal is to shift the leadership team's focus away from
firefighting and towards capturing long-term value, designing a commercially driven, highly integrated new organizational
structure, to drive CanSinoBio towards sustainable growth.

Research Question and Objectives
Founded by four senior scientists with extensive experience from MNCs Pharmaceutical industry, CanSinoBio’ s mission
is to develop, manufacture, and commercialize high quality, innovative and affordable vaccines. At the outset, the founders
devoted almost all their efforts to research and development, and the company achieved a series of successes andbreakthroughs. However, over time, the rapid growth of the company has significantly increased the complexity of internalmanagement. The management model where founders collectively make decisions on all details is no longer practical.
Therefore, CanSinoBio urgently needs to establish a future-oriented organizational structure that aligns with the company's
strategic vision.

2024 ESG White Paper

Research Design and Highlights
In response to this question, the project team has identified several key objectives. In terms of research methodology, in
addition literature reviews, the project team also integrated theoretical model frameworks with practical business scenarios
to conduct comprehensive primary data collection.
Key Steps

Main Contents

Methodology and Frameworks

Strategic
Objectives Review

Strategic context confirmation including industry
trend, business model, priorities

Questionnaire and In-depth Interview withFounders, SWOT Analysis, Desktop Research“As-Is” Structure
Diagnosis

Diagnostic of the current organization structure,conclude successes and challenges

Congruence Model, Value Chain Analysis

External
Benchmarking

Benchmark leading enterprises in the industry,summarize experiences in different operation
mode

Benchmarking Analysis

New Structure
Proposal

Clarify organizational design principles, compare
the advantages and disadvantages of different
options, and promote the implementation

Change Management Theory, Organization
Design Theory, RASIC Model

The project includes ESG and CSR in discussion. CSR is an essential aspect of the founders’ vision of CanSino. To
better integrate organizational design with social responsibility goals, particularly regarding the supply of Innovative andaffordable vaccines, the project team also devoted special consideration to this aspect.

1

A dedicated function to enhance external communication and internal coordination.

Within its organizational structure, there was no dedicated position responsible for this, and all related decisions weremade by the founders. The project proposes adding a function specific to ESG in Board office directly reporting to Chairman.
This new position, together with HR, would initiate and drive all ESG/CSR initiatives, to better engage with external
stakeholders and coordinate internal resources.

2

Integration of ESG/CSR into strategy and operations.

Through the redesign of the organizational structure, CanSinoBio is better able to focus on making innovative vaccines
more affordable. This allows the firm’ s responsibilities within the value chain to be more efficiently distributed. For example,
vaccine accessibility in underdeveloped regions has been one of the social responsibility practices for CanSinoBio.
Integrating ESG/CSR principles into strategy and operations has led to collaborative efforts such as affordable vaccine
supply, clinical and medical research partnerships, technical transfer to empower local production, and public healtheducation initiatives. These collaborations not only effectively enhance the accessibility of company products, but also
address unmet public health needs in local communities.

3

Change management for organizational restructuring.
Implementing a new organizational structure is a challenge for any firm. The project utilizes change management

theories and systematic design methods to guide the team in smoothly adapting to the changes. On the one hand, themanagement team needs to communicate with employees, motivating them to better understand the reform goals andparticipate in the change. Simultaneously, necessary training and support are provided to help employees adapt to newtasks and processes. Additionally, during the implementation, it's important to actively pay attention to team feedback andmake timely adjustments to ensure the stability of outcomes.

075

From Good to Excellent

ESG Working Group

Audit Committee

The Board

ESG Governance Structure

Governance
Level

R&D Center

Information System
Management Department

Human Resources
Department

Legal and ComplianceDepartment

Business Supply andDistribution Department

Medicine Department

Clinical Operation
CenterStrategic Marketing
Department

General Manager's
OfficeProduction Center

Operational Excellence
Department

Other Functional
Department

Technology Operation
CenterBrand and Publicity

Supply Chain
Department

Office of the Board

Executive Level
Figure 1: Current ESG Governance Structure Source: CanSinoBio 2022 ESG & CSR Report

Summary and Outlook
Based on the research findings of the project, the team has presented the recommendations for the new organizational
design to all founders and the HR department. The implementation of the new organizational design began gradually in
2021, assisting CanSinoBio in establishing a stronger and more adaptive organizational structure. Additionally, the project
has focused on feedback during the organizational transformation process and has summarized a series of follow-up
recommendations. This ensures that the transformation continues to sustainable impact and tangible business outcomesover time. The implication of the new organizational design also provides insights for other enterprises undergoingdevelopmental transitions.

076

PERSPECTIVESOF CEIBSFACULTY ON ESG

INTRODUCTION
ESG Research Area is one of the four cross-disciplinary research areas at CEIBS, bringing together over 30 facultyfrom five academic departments, providing academic research and teaching support for the school's “moving to theforefront of educating responsible leaders" strategic goal.
ESG Research Area’ s mission is to investigate the essential question of how businesses, respond to the increased
expectations to reduce adverse impacts on society and the natural environment and to become a pioneering force forsustainable developments. The Vision is to become the “go-to place” in China and Asia for the generation anddissemination of cutting-edge knowledge related to sustainability and corporate social responsibility.
In this chapter, we select three research articles covering different disciplinary perspectives. Through the researchoutcomes resulting from interdisciplinary collaboration among faculty members, we gain a more comprehensive
understanding of how businesses perceive ESG-related topics, providing essential references and guidance for related
decision-making.
The three studies investigate the following questions:· Why do some CEOs appoint CSOs while others do not? What are their motivations and decision-making mechanisms?
· How does employer brand signals, particularly in terms of social responsibility performance, affect a company's attractiveness to potential employees?
· During crises, can investing in stocks of companies with high ESG ratings yield outperforming returns?

PERSPECTIVES OF CEIBSFACULTY ON ESG

79

CEO Decisions on the Appointment ofChief Sustainability Officers
Taiyuan Wang, Meng Rui

Do Good Companies Attract Good People?
Jian Han, Bala Ramasamy

86

83

Investing in High ESG Stocks and Outperforming
the Market During Crisis?
Renxuan Wang

CEO Decisions on the
Appointment of Chief
Sustainability Officers
Taiyuan Wang, Meng Rui

Wang, Taiyuan

Professor of Entrepreneurship;
Deputy Director of DBA Programme, CEIBS

Rui, Meng

Professor of Finance and Accounting;Parkland Chair in Finance;
Director of CEIBS Centre for Wealth Management;
Co-Director of CEIBS Centre for Family Heritage;
Programme Director of Family Office Diploma Programme

Why do some chief executive officers (CEOs) appoint chief sustainability officers (CSOs) for their firms while others
do not? We answer this question by examining CEOs' attention allocation to competition for stakeholders' approval,
which can be triggered by both industry peers' corporate social responsibility (CSR) and corporate social irresponsibility(CSiR). CEOs' attention allocated to industry peers' CSR and CSiR can increase their perceived importance andurgency of appointing CSOs for their firms to "catch up with the good" (responsible peers) and to "stay away from thebad" (irresponsible peers). We also theorize the moderating roles of CEOs' motivational attributes, such that
predominantly prevention-focused CEOs are more (less) likely to appoint CSOs as peers increase CSR (CSiR) andfuture-oriented CEOs are more (less) likely to appoint CSOs as peers increase CSiR (CSR).

This is adapted from Wang, T., Fu, YZ., Rui, M., & De Castro, J. (2023). Catch Up with the Good and Stay Away from the Bad: CEO Decisions on the Appointment of Chief Sustainability
Officers. Journal of Management Studies. https://doi.org/10.1111/joms.12926

CEO Decisions on the Appointment of Chief Sustainability Officers

Findings and Implications
After DuPont appointed Linda Fisher as its chief sustainability officer (CSO) in 2004, some leading corporations (e.g.,
AT&T, UPS, and Coca-Cola) designated similar positions in their top management teams (TMTs). CSOs' presence andimportance have been increasing, as is evidenced by a survey showing that 30% of companies capable of profiting fromsustainability practices had appointed CSOs. However, not only have most business enterprises still not appointed CSOs,
but also ‘many corporate sustainability TMT positions are being removed despite having only relatively recently been
introduced’ (Strand, 2014, p. 687). This contradiction suggests that firms differ substantially on whether they should appoint
CSOs to their TMTs.
Research interest in CSOs, in parallel, has been growing. Since Strand (2013, 2014) identified and traced CSO
positions of large corporations, more researchers have joined this scholarly conversation. Three limitations, however, haveconstrained the development of CSO research. First, the antecedents to CSO appointment are largely unknown. Second,
little is known about how CEOs make decisions about CSO appointment. Third, limited knowledge is generated about CSO
appointment in non-U.S. business contexts. Extant studies of CSOs have largely focused on samples of large corporations
drawn from the S&P 500 and the Fortune 500 indices. While these large corporations publicly traded in the United States are
pioneers in CSO appointment, after almost 20 years since DuPont appointed the first CSO, it is surprising that still little
research has yet been conducted to examine whether and how CEOs in other business contexts have considered CSO
appointment for their organizations.
To fill these gaps, we first conceptualize CSO appointment as a CEO decision to make a strategic commitment tosustainability by restructuring the firm's TMT. We then draw on the attention-based view (ABV), arguing that CEOs' attention
allocation to competition for stakeholders' approval is triggered by both the CSR and the CSiR of industry peers, but throughdifferent mechanisms. An increase in peers' CSR draws their attention to a comparison effect: peers’ improvement has
threatened their own firms. A rise in peers' CSiR draws their attention to an association effect: peers’ retrogression should
intensify stakeholders’ demand for sustainability and thus place higher sanctions on their own firms in the future. Either
mechanism will increase CEOs' perceived importance and urgency of appointing CSOs, to catch up with the good
(responsible peers) or to stay away from the bad (irresponsible peers). Therefore, the decision to add a CSO to the TMT isbased on CEOs’ comprehensive consideration of both peers’ CSR and their CSiR.
Because people pay attention to what they care about, attention allocation also depends on their motivations. We
extend the ABV by examining the moderating roles of regulatory focus and temporal orientation—two motivational attributes
that often affect CEOs' decisions. An increase in industry peers' CSR (CSiR) can trigger a perceived loss (nonloss) situationin the short run for the focal firm. Because predominantly prevention-focused CEOs tend to perceive situations in a
loss–nonloss framework, they are more (less) likely to appoint CSOs as industry peers have increased CSR (CSiR).
Furthermore, because the competitive threat of peers' CSR has already occurred while the association effect of peers' CSiR
takes time to happen, future-oriented CEOs, who emphasize future situations and consequences over present ones, aremore (less) likely to appoint CSOs as peers have increased CSiR (CSR). We analyzed 7,882 decisions made by 758 Chinese
executives in two conjoint experiments, interviewed 8 CEOs who decided to appoint a CSO in one conjoint experiment and2 CSOs of large corporations, and found evidence for these tenets.
This study makes three key contributions. First, we reveal the comprehensiveness of CEOs' decision-making about
CSO appointment by distinguishing their attention allocation to the comparison effect of peer firms' CSR and to theassociation effect of peer firms' CSiR. Second, we advance research on how regulatory focus and temporal orientation
shape CEOs' decisions in sustainability commitment. While researchers have extensively examined the effects of CEO
attributes on business decisions, their broader implications for CEOs' worldviews and values toward sustainability are less
known. Third, we report CEOs' decisions on CSO appointment in China through two studies with large executive samples.
Although the CSO position was introduced by U.S. corporations, the diffusion of this sustainability commitment into otherbusiness contexts deserves further investigation.

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2024 ESG White Paper

Key References:
Fu, R., Tang, Y., & Chen, G. (2020). Chief sustainability officers and corporate social (Ir) responsibility. Strategic Management
Journal, 41(4), 656–680.
Kanashiro, P., & Rivera, J. (2019). Do chief sustainability officers make companies greener? The moderating role of regulatory
pressures. Journal of Business Ethics, 155(3), 687–701.
Peters, G. F., Romi, A. M., & Sanchez, J. M. (2019). The influence of corporate sustainability officers on performance. Journalof Business Ethics, 159(4), 1065–1087.
Strand, R. (2013). The chief officer of corporate social responsibility: A study of its presence in top management teams.
Journal of Business Ethics, 112(4), 721–734.
Strand, R. (2014). Strategic leadership of corporate sustainability. Journal of Business Ethics, 123(4), 687–706.
Wiengarten, F., Lo, C. K., & Lam, J. Y. (2017). How does sustainability leadership affect firm performance? The choices
associated with appointing a chief officer of corporate social responsibility. Journal of Business Ethics, 140(3), 477–493

Appendix: A summary of CSO appointment rationales

CEOs

Comparison effectIf industry peers do a good job
in CSR, it means that they have
paid a lot of attention to social andenvironmental issues. They havereceived positive feedback fromA

not doing enough [compared withpeers], we must keep up with them,and keep up with them quickly. Thisis the reason for my decision [toappoint a CSO].

B

081

C

I will pay close attention to myindustry peers. If they are doing
good things, I want to chase them.
But if they are doing bad things, I
don't think I need to compare orimitate them.

D

If other companies have donesome good things, such as taking
good care of their employees orcommunities, we will thank them
but also want to compete withthem to show that we can do good
as well.

Association effect

Other rationales

If industry peers have been socially
irresponsible, we should also set
up this position [CSO]. We need a
CSO to avoid the related negative
impact.

I think my decision on CSO
appointment is a result ofconsidering a combination ofvarious factors.

If an industry peer gets worse insocial performance, then in myperception, it would cause some
negative impact on the wholeindustry such as an overall negative
image.

We will learn from industry peers ifthey are doing good, and we will
also analyze the reasons for themdoing bad things. [Appointing a
CSO helps us analyze and learn
from industry peers.]
When my company is doing well,I might be able to spend a large
portion of spare funds every yearon sustainability, and we are likely
to need a CSO to do that. But
when my company is not doing
well, I could not pay attention tothis [CSO appointment].

We will pay attention to peers' CSiR
because it will have a negative
effect on our company indirectly.
For example, our competitors haddamaged the ocean in the past
years, and insurance companies
will increase premium for mostCEO Decisions on the Appointment of Chief Sustainability Officers

CEOs

Comparison effect

Association effectIndustry peers' CSR and CSiR will
attract my attention, but the mostimportant thing is that I will look atwhat they want to achieve, how
they think, and what has caused
their changes in CSR and CSiR. I
will then decide whether to appointa CSO for my own company byconsidering all these.

E

F

If industry peers have done goodthings, we will analyze them.
For example, if they participate
more in public welfare and havepositive impact on society, we
will analyze whether this is thecause or the consequence. We
want to understand what kind of
relationship is between their CSR
and competitiveness in the market.
If this thing [CSR] can add acompetitive edge, I will be inclined
to consider appointing a CSO.

G

Those responsible peers are
not only my opponents but also
positive role models. When I see
that they are doing the right thing, I
will accelerate the synchronizationof the decisions and actions that I
have learned from them. Certainly,
appointing a CSO will help me doso effectively.

H

Other rationales

We can't follow the trend or
just imitate others to appoint a
Peers' CSiR will certainly have anegative effect on the industry;
in fact, this has already occurredin our industry. And I believe thathaving a CSO should help mitigate
this effect.

are doing the wrong thing, I needto establish distance from them [byappointing a CSO].

competitive advantage is different,
the logic of doing things is different,
and the business model is also
different. Therefore, even if industry
peers have appointed CSOs, we
may not necessarily do the same.
I will consider many factors to
see whether we need to do this[appointing a CSO].

From a long-term perspective,
I believe that any responsible
company, or a company that
has its own mission and plans tobecome a sustainable organization,
will do it [appointing a CSO].

Our opponents have caused a lotof harms on society, and we are
deeply concerned with them. Theirbad deeds will not do us any good,
because the public and otherstakeholders tend to think that weare similar.

082

Do Good Companies
Attract Good People
Jian Han, Bala RamasamyHan, Jian

Professor of Management;
Programme Director of Chief Human Resources
Officer (CHRO) Programme
Programme Co-Director of Advanced Management Programme

Ramasamy, Bala

Professor of Economics,
Associate Dean;
Director of GEMBA Programme, CEIBS

Building an employer brand is a crucial initiative in the field of human resource management for companies. In
theory, it is widely understood that when consistent brand signals are conveyed both internally and externally, thebrand's impact becomes stronger. However, in reality, due to differing goals and interests among various company
departments, management measures and external communications often exhibit inconsistencies. These conflicting
signals can significantly influence an organization's external audience, especially the perceptions of potential job
applicants, thereby hindering the establishment of a consistent and positive employer brand.
This issue is particularly pronounced in the field of talent recruitment, as at this stage, potential job seekers
typically have limited knowledge about the company, resulting in information asymmetry. Consequently, anorganization's employer brand and the messages it conveys become even more critical. Additionally, our understandingof how job applicants comprehend and respond to these internally conflicting employer brand signals remains limited,
thereby impeding companies from effectively planning their investments and implementation strategies concerning
employer branding.
In this study, we focused on three elements of the employer brand: corporate ability, Corporate Social
Responsibility (CSR), and Corporate Social Irresponsibility (CSiR). Corporate ability encompasses various attributes
related to business, such as manufacturing capability, management proficiency, specialized resources, and profitability.
CSR, on the other hand, involves a company's consideration of stakeholder expectations and its performance ineconomic, social, and environmental aspects during its strategic and operational processes, with the deliberateintention of contributing to societal well-being. Conversely, Corporate Social Irresponsibility (CSiR) signifies a company's
actions conducted in an irresponsible manner towards society and stakeholders, such as environmental harm or
involvement in tax disputes.
This is adapted from Wang, L., Han, J., Ramasamy, B., & Peng, S. (2022). Incongruous employer brand signals and organizational
attractiveness: Evidence from multinational companies in China. Human Resource Management, 61(5), 563-584.

Do Good Companies Attract Good People?

Corporate ability and CSR are regarded as positive signals that enhance the employer brand, while CSiR represents a
negative signal that damages the company's image. The various combinations of these three signals and their strengths andweaknesses give rise to different permutations, resulting in "imbalanced" or "contradictory" employer brands. We collectively
refer to these scenarios as "inconsistent" employer brands.
Our research primarily focused on an important question: how do inconsistent employer brand signals affect acompany's attractiveness to job seekers? To address this question, we conducted a series of studies:
We firstly conducted interviews and surveys with 900 multinational company employees in China. Participants wereasked to evaluate the corporate social responsibility and corporate ability aspects of influential multinational companies in
China and select a real multinational company as their ideal employment choice. This study aimed to explore how employees
naturally balance corporate social responsibility and corporate ability and to test the impact of employer brand when these
two factors are imbalanced. We then conducted an experiment involving 811 participants. The purpose of this experiment
was to test how inconsistent or contradictory employer brand signals influence organizational attractiveness. Finally, among
these 811 participants, we invited 721 individuals to reflect on their real job-seeking experiences and assess their willingness
to join a real multinational company to retest our hypotheses. This approach allowed job seekers to evaluate personalized
employment choices.
Our study reveals that if a company excels in social responsibility but is relatively weak in corporate
competitiveness, its outstanding performance in social responsibility will enhance its attractiveness to potential job
seekers. Conversely, if a company excels in corporate competitiveness but performs poorly in social responsibility, insuch cases, the company's shortcomings in social responsibility are magnified. Specifically, when an employer
demonstrates a higher level of corporate ability (such as financial performance), the lack of social responsibility becomes
more likely to be the focal point of evaluation. At this point, negative signals regarding social responsibility may undermine theaudience's high expectations of the company, increasing their disappointment in the organization.
In the current landscape, many businesses are paying significant attention to the tension between fulfilling corporatesocial responsibility and achieving economic performance, such as efficiency and profitability. In this context, we have placed
particular emphasis on studying how prospective employees react to incongruent employer brand signals, which encompass
a combination of corporate ability, CSR, and CSiR. Our research has yielded new empirical evidence, indicating that when
corporate ability is relatively weak, the positive impact of CSR on organizational attractiveness is strengthened. Furthermore,
within the realm of employer branding, our study represents one of the pioneering investigations into negative signals like
Corporate Social Irresponsibility (CSiR) and conflicting employer brand signals. We have found that, compared to the
combination of weak corporate ability and CSiR, the combination of strong corporate ability and CSiR is less attractive. Thisis likely because conflicting and inconsistent brand signals can undermine the employer brand, leading to potential
employees' feelings of disappointment, mistrust, or cynicism.
Additionally, our research advocates for a holistic perspective on employer brand construction, an aspect often
overlooked in prior studies. We propose that an integrated approach to brand building, requiring horizontal synergy among
a company's public relations, human resources, and marketing functions, is essential for employer branding. Our findings
further underscore the significance of CSR for multinational corporations (MNCs) operating in China in attracting potential
employees. This aligns with calls for more CSR research in specific cultural contexts and is consistent with international
business literature suggesting that MNCs should promote CSR in local markets to align with host-country institutions andgain local legitimacy. Of course, there have been criticisms that CSR is mere window dressing and that MNCs have beenslow in fulfilling ethical responsibilities in China. Undoubtedly, these criticisms even highlight the increasing importance of
CSR in the employer brand portfolio of MNCs.
Our research findings have several practical implications. Firstly, in a highly competitive environment, companies seek
ways to leverage limited resources for optimal outcomes. Balancing investments in profit-oriented initiatives and Corporate
Social Responsibility (CSR) can be challenging. Our research suggests that if a multinational corporation has relatively
weak corporate ability, it can use CSR-related brand signals to compensate for the deficiency in corporate ability. Thisfinding is particularly important in the digital age, where the internet empowers stakeholders to express their values more
effectively and influence a company's business.
For example, ERKE, a Chinese sportswear brand, faced bankruptcy rumors after being delisted from the Singapore
Exchange following years of suspension in 2020. The company announced a donation of 50 million RMB in funds andmaterials to the flood-stricken Henan province, which experienced a "millennium flood" in July 2021. These CSR actions084

2024 ESG White Paper

garnered approval from 20 million netizens who flooded ERKE's Tmall live streaming sessions with fervent consumption. The
company's Weibo page also received over 800,000 likes. Similar to this story, our research provides evidence of CSR's
advantages in attracting potential employees. As workplaces in China become increasingly diverse, with employees fromdifferent generations, cities, and social backgrounds having varied values and preferences, investing in positive CSR signals
can be an effective way to attract talent, in addition to emphasizing a company's business strength.
Our research also highlights that companies should be more sensitive and vigilant to signals of Corporate Social
Irresponsibility (CSiR). While we widely acknowledge the negative impact of CSiR on organizations, we should also recognizethat not every company intentionally neglects corporate responsibility. Unethical business decisions can result from cognitive
blind spots among executives, such as biases, lack of knowledge and experience, peer pressure, confusion, and lack of
courage. However, the consequences of CSiR are significant and can even backfire on a company's previously earned
reputation for corporate social responsibility. Our findings further indicate that when potential employees evaluate an
employer brand based on CSiR signals, they may make rapid decisions based on intuition in situations of incomplete
information, unable to distinguish between intentional and unintentional CSiR. Therefore, corporate managers should not
only invest in positive signals regarding corporate ability and social responsibility but also enhance awareness of CSiR
within the organization, conduct extensive training, and foster coordination to reduce discordant employer brand signals
across different departments.

085

Investing in High ESG
Stocks And Outperforming
the Market During Crisis?
Renxuan Wang

Wang, Renxuan

Assistant Professor of Finance, CEIBS

ESG investing has increasingly become mainstream. A popular argument for this new style of investing is thatfirms with high ESG scores are safer investments due to their more resilient fundamentals, and their stocks should
perform better than the market during crises. Our research comprehensively examines the fundamental and financial
market performance of high vs. low ESG stocks in the last three market crises and finds that this conventional wisdom
does not completely hold true. While high ESG firms do have relatively better fundamentals, their stock returns do not
outperform the market, and sometimes perform worse. We delve deeper into the forces that may drive this empiricalphenomenon and provide our outlook for the expected returns and risks of ESG investing going forward.

This paper is based on a working paper by Renxuan Wang (CEIBS), Russ Wermers (U Maryland) and Ruoke Yang (U.S. SEC), 2023

2024 ESG White Paper

Background
ESG investing, which integrates environmental (E), social (S), and governance (G) factors into the investment process, isprojected to reach $50 trillion by 2025, accounting for a third of all assets under management in developing countries. The
growing popularity of ESG investing stems from investors’ ideal of “doing well by doing good” — outperforming the stock
market while improving the ESG practices of companies through the power of their capital. A popular belief is that firms
adhering to higher ESG standards have inherently solid fundamentals due to their long-term vision and better governancestructure, and therefore, their stock prices should be more resilient during market crises, such as the Great Financial Crisis of2008. Surprisingly, academic literature has not provided a clear answer to whether this belief is true.

Better Fundamentals but No Outperformance During Crisis
We conducted a comprehensive empirical study into firms’ fundamental and stock market performance during therecent three crisis periods in the U.S. when ESG investing was potentially relevant, including the dot-com bubble (2000 2002), the Great Financial Crisis (2007-2009), and the Covid Crisis (2020).
We paid particularly more attention to the Great Financial Crisis (GFC) due to its depth and long-lasting impact on theeconomy. In sum, if you are an investor who religiously buys the top 10% highest ranked stocks according to popular ESG
ratings, such as the MSCI ESG rating, you lose on average about 0.20% per month, or 2.4% per year in risk-adjusted
returns during the GFC, when compared to stocks ranked as the lowest 10% on ESG. Simply put, for two stocks similar in
their riskiness, such as their sensitivity to the market, market capitalization, valuation, the one with higher ESG scores ended
up having 2.4% lower returns during the GFC. We find this number to be close to zero during the dot-com bubble, butslightly positive during the recent Covid crisis. Overall, the belief that holding stocks of higher ESG scores would deliver
better risk-adjusted returns does not hold true.
On the contrary, we do find that high ESG firms exhibit better fundamental or operating performance than their low ESG
counterparts, and these differences are significant even during the GFC period. For example, high ESG firms have a 5.2%
higher gross margin, 4.9% higher sales growth, 0.53% higher operating return on assets, and $16,000 higher sales per
employee. These findings are consistent with the conventional belief on ESG investing.

Why? Two Forces Driving the Stock Returns
The seemingly puzzling empirical findings can be reconciled by potentially two opposing forces that drive the realized
returns of high vs. low ESG stocks. A firm’ s stock price can go up because it delivers better fundamental performance, e.g.,
the firm’s earnings are better than what the market expected, leading to a positive realized stock return. On the other hand, afirm’ s stock price can also go up because a big investor suddenly believes the stock is worth more than its current market
prices for reasons potentially unrelated to the firm’ s fundamentals. We see many investors exhibit such behavior in reality:
they bought a stock without doing much fundamental analysis and made the decision perhaps because they had just won a
Mahjong game. The second force is often termed the investor sentiment channel and is known to drive short-term stock
price movements.
Indeed, these two forces together could lead to the puzzling pattern that high ESG stocks do not outperform eventhough their fundamentals tend to be more resilient during crises. Indeed, if investors’ sentiment changes over time and they
prefer to buy more of high-ESG stocks during the good times and sell them during crises, this force could potentiallyoutweigh the fundamental channel and lead to the empirical phenomenon we find. Our leading hypothesis for why investors
have this type of sentiment dynamic is that they view high ESG stocks as highly prized luxury goods: they buy morehigh-ESG stocks when times are good to satisfy their ideal to do good to the world, while they sell these stocks during crises
when they need to pay their bills. We use funds’ stock holdings to verify our hypothesis and find supporting evidence.

Lessons for ESG Investors Going Forward
Knowing the facts in history is important for decision-making going forward. Our findings highlight the importance ofunderstanding the sober reality for investors who want to “do well by doing good” . Furthermore, our research reveals the
dynamic nature of ESG investing and highlights the need to understand the evolving investor demographics: with the fast
adoption of ESG investing, it is important to also understand who are becoming the main ESG investors going forward. If thenext generation no longer views ESG investing as a luxury good but rather a necessity, high ESG stocks potentially will
exhibit more price resilience and outperform the market due to the strong hold of these investors during the next crisis.

087

2023 STUDY ON THE ESGREPORTS OF A-SHARE
LISTED COMPANIES (CONDENSED)INTRODUCTION
ESG information disclosure is an important channel for listed companies to convey their ESG development
achievements and engage in transparent communication with stakeholders, also offering decision-making references
for investors. With the continuous improvement of ESG disclosure requirements for Chinese listed companies, thequality of ESG-related information disclosure have also been gradually enhanced.
This report conducted by the CEIBS Centre for Wealth Management led by Professor Meng Rui, showcases thepractices and performance of A-share listed companies in environmental, social, and governance aspects. A distinctive
corporate social responsibility indicator system is used that integrates Chinese and international methodologies, ESG
reporting guidelines from authoritative bodies, key societal concerns in China.
Through data analysis, the research also demonstrates the performance of A-share listed companies across different
ESG dimensions:· Overall, A-share listed companies are showing an upward trend in ESG composite scores.
· There is a growing emphasis on environmental protection, with increased investment in energy conservation, emission
reduction, and waste reduction.
· Companies are increasingly prioritizing their responsibility towards employees, with a focus on enhancing safety management systems and occupational health.
· More companies are striving to improve corporate governance capabilities, choosing to operate their businesses withintegrity and intensifying efforts on anti-bribery and anti-corruption.

Meng Rui

Professor of Finance and Accounting,Parkland Chair in Finance,
Director of CEIBS Centre for Wealth Management,
Co-Director of CEIBS Centre for Family Heritage,
Programme Director of the Family Office Diploma Programme,
China Europe International Business School

ESG has a long-standing history in the Western world, evolving through four stages: ethical investment, socially
responsible investment, sustainable investment, and ESG investment. In recent years, there has been a burgeoning
global interest in ESG investment, leading to rapid expansion in both the number and scale of ESG public fundproducts in China. The rising demand for ESG investment aligns with companies' willingness to disclose ESG reports,
fostering a mutually reinforcing dynamic that emphasizes environmental, social, and governance factors in investment
decision-making.

We owe a special thanks to Sichuan Swellfun Co., Ltd. for its support in compiling this report.

2023 Study on the ESG Reports of A-share Listed Companies

Introduction
说 明Research subjects
2022 annual environmental, social, and governance (ESG) reports and corporate social responsibility (CSR) reports
published by A-share listed companies listed in 2022 or earlier.

Methodology
A distinctive corporate social responsibility indicator system is used that integrates Chinese and international
methodologies, ESG reporting guidelines from authoritative bodies, key societal concerns in China, and big data technology.

Data sources
Most data used in the study was derived from digital ESG reports, CSR reports, and the annual reports of listedcompanies published on cninfo.com.cn. Other sources include the ESG Database, Internal Control Database, Green Patent
Database, and Environmental Governance Database of the Chinese Research Data Services Platform (CNRDS); the Basic
Information of Listed Companies, Actual Controllers of Listed Companies, and CSI Industry Classification sections of the
WIND database; and relevant news stories from Baidu and the Genius Finance database.

Data processing
Various big data techniques were employed to derive the indicators in this study, including data collection, data
cleaning, data mining, and data cross comparison. Manual corrections were also made where necessary:(1) Data collection: Large volumes of raw data were gathered from company websites, regulatory authorities, andpopular search engines using big data techniques.
(2) Data cleaning: Data underwent cleansing procedures based on predefined rules to rectify errors, eliminate
duplicates, and remove outliers to ensure consistency.
(3) Data matching: The required information was accurately matched from numerous sources such as social
responsibility reports, news reports, and announcements.
(4) Data mining and visualization: A combination of manual processing and machine learning techniques was utilized to
extract and mine information from vast datasets, including textual information, and to visualize relevant findings effectively.

About说 明 the authors
Center for Wealth Management, CEIBS
Established with the approval of CEIBS, the CEIBS Center for Wealth Management ( “TheCenter” ) is dedicated to the creation and dissemination of financial knowledge, as well as
advancing exploration and innovative research in the fields of finance and wealth management,
all while upholding the highest academic and pedagogical standards. The Center’s mission is topromote industry standardization and specialization, and to generate sustainable value for the
global financial sector. Moreover, the Center aims to equip high-net-worth individuals andfamilies, financial advisors, and wealth management professionals with the knowledge andresponsibility needed to act as conscientious stakeholders, thereby empowering people,
capital, and society to contribute positively to the world.

We would like to thank the following authors for their contributions to this study:
Meng Rui, Professor of Finance and Accounting; Parkland Chair in Finance; Director of the CEIBS Centre for WealthManagement; Co-Director of the CEIBS Centre for Family Heritage; Programme Director of the Family Office
Diploma Programme
Ming Gong, Research Fellow at the Center for Wealth Management, CEIBS

090

2024 ESG White Paper

Abstract说 明
ESG (Environmental, Social, Governance) has become a prominent investment philosophy in recent years, reflecting
investors’ growing recognition of the significant impact that environmental, social, and governance factors have on
investment portfolios. ESG investing aims to incentivize companies to improve their environmental, social, and governancepractices by directing investments towards those with strong performance in these areas. This approach contrasts withtraditional financial analysis methods, which primarily focus on companies’ financial performance without considering
broader social responsibility and sustainability factors.
ESG has a well-established history in the Western world, evolving through four stages: ethical, socially responsible,
sustainable, and ESG investment. In recent years, there has been increasing global interest in ESG investment, leading to acontinued increase in global sustainable investment assets. According to the latest data from the Global Sustainable
Investment Alliance (GSIA), by the end of 2022, sustainable investments in the world's five major markets—Europe, theUnited States, Japan, Canada, Australia, and New Zealand—reached $30.3 trillion, representing 37.9% of global asset
management. This marked a 32.56% increase since the beginning of 2016.
This year's report maintains the upgraded analysis system from last year, expanding the study’ s scope to include both
CSR and ESG reporting of A-share listed companies. The report focuses on three main indicators: environmental, social, andgovernance, with two, three, and three topics under each, respectively. Each topic includes 4–9 sub-indicators, totaling 50.
Overall, A-share listed companies demonstrated further improvement in their ESG disclosure practices in 2022 compared tothe previous year.
In 2022, a total of 1,535 A-share listed companies published CSR reports (ESG reports are referred to as CSR reports
for consistency with previous reports), an increase of 192 compared to the previous year, including four companies listed on
the Beijing Stock Exchange (BSE) for the first time. Over the past 16 years, there has been a general increase in the numberof disclosing companies. In 2022, the overall disclosure rate reached 30.04% (excluding data from BSE), surpassing 30% for
the first time.
By sector, the manufacturing sector continued to lead in the number of disclosing companies, while the financial sector
maintained the highest disclosure rate. In terms of region, East China had the most disclosing companies, while westernregions exhibited higher disclosure rates, with significant progress observed in the northeastern region. By province, there
was strong correlation between the number of disclosures and economic development, with Guangdong, Zhejiang, Beijing,
Shanghai, and Jiangsu ranking at the top of the list. In terms of business type, non-SOE (State-Owned Enterprise)
disclosures far outnumbered SOE disclosures, which increased to 52.3% in 2022, surpassing 50% for the first time. In termsof exchanges, which included BSE for the first time, all boards demonstrated a clear upward trend.
The study yielded the following significant findings:
Environmental:
1. Regarding environmental management, approximately 47.6%, 43.4%, and 52.8% of the sampled listed companies
either developed or utilized environment-friendly products, equipment, or technologies, achieved the Environmental
Management Systems (EMS) standard (ISO14001), or disclosed their participation in environmental protection and publicwelfare activities.
2. Concerning energy conservation and emissions reduction, 65.5% and 68.3% of listed companies disclosed theirpolicies and measures aimed at energy conservation and reducing three types of waste (gases, water, and residue), showing
a notable improvement compared to the previous three years.
Social:3. In 2022, disclosing companies continued to enhance the quality of products and services, with an increasing number
receiving quality awards or certification. The proportion of R&D personnel in the sampled companies remained steady orslightly increased compared to the previous year.
4. Regarding employee wellness, 1,020 companies disclosed their remuneration incentives, while 1,173 companies
disclosed supplementary benefits for employees. Moreover, 1,455 companies provided on-the-job training for employees,
representing an increase of 210 compared to the previous year.

091

2023 Study on the ESG Reports of A-share Listed Companies

5. In terms of charitable activities, 1,338 companies disclosed their engagement in social welfare programs in 2022, up
200 from the previous year to an impressive 87.2% of the total. Total donations amounted to RMB 26.2 billion, showing a
notable increase of approximately RMB 12 billion compared to the previous year.
Governance:
6. Concerning CSR management, listed companies addressed a wider range of issues in their CSR reports, with asignificantly higher number referencing international authoritative standards. They stepped up external ESG promotion
initiatives, with over 80% of them featuring ESG or CSR columns on their websites, indicating a further increase from theprevious year.
7. In terms of company operations and management, more companies allocated additional resources to cross-industry
collaboration, resource sharing, and partnership strengthening. However, attention should be given to the rising trend inaccounting irregularities and financing disputes from the previous year.
8. Regarding diversity and equal opportunities, 986 companies disclosed having at least one female executive, with 224
featuring at least one female director, marking an increase from the previous year. Additionally, 391 companies proposed
inclusive policies targeting vulnerable groups, such as individuals with disabilities or those who have been released fromre-education centers, more than triple the number from the previous year.
In summary, in 2022, the 1,531 reporting A-share listed companies (excluding the four companies listed on the BSE)
achieved a weighted average score of 51.15 (out of 100) and median score of 52.2 for all ESG indicators, marking an
increase of 0.31 or 0.6% from the previous year. Looking at data from 2018 to 2022, there is an overall upward trend in ESG
composite scores.
In terms of economic value, we compared the composite scores with the scores for various topics, dividing them into
five groups, with approximately one fifth of the number of stocks in each group, and then calculated their weighted returns
by group. We assume that the investment strategy begins on the first trading day of May each year with a buy order andends on the last trading day of the year with a sell order. The five groups based on the ESG composite scores achieved
weighted average returns of -4.59%, -3.28%, -4.75%, -7.56%, and -10.47% in 2023, respectively, showing a certain
hierarchical progression. The top fifth relative to the bottom fifth had excess returns of 5.88%.

1 https://www.gsi-alliance.org/members-resources/gsir2022/

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2024 ESG White Paper

Overviewof ESG disclosures by A-share listed companies说 明
Total disclosures: ESG disclosures by A-share listed companies continued to show steady growth. In 2022, thenumber of companies that disclosed CSR reports reached 1,535, representing 30.04% of the total (excluding data from theBSE), marking the first time it surpassed the 30% threshold. Notably, four BSE-listed companies made ESG disclosures forthe first time. Overall, there is still significant potential for future growth in this area.

Total number of CSR disclosures by A-share listed companies, 2006–2022
1535

1500

1343

1000

500

0

369
19

42 23

459

327
90

530

71

2006 2007 2008 2009 2010

582

52

642

60

671

704

29

33

743

39

792

49

856

64

942

86

992

1106

114

50

2011 2012 2013 2014 2015 2016 2017 2018 2019

237

192

2020 2021 2022

Year-on-year growth

Number of CSR disclosures

Over the 17-year period from 2006 to 2022, the number of disclosing companies witnessed a steady increase. In 2022,
a total of 1,535 A-share listed companies made CSR disclosures, marking a 14.3% increase or 192 more companies thanthe previous year. On average, between 2018 and 2022, approximately 27.75% of A-share listed companies made CSR
disclosures each year, with the disclosure rate climbing to 30.04% in 2022.
Per-company disclosures: In 2022, the number of companies that disclosed only once did not rank highest for the
first time since 2006, with a total of 239 such companies. This shift is attributed to additional requirements imposed by the
China Securities Regulatory Commission (CSRC) and stock exchanges regarding ESG report disclosures. Once listedcompanies disclose an ESG report, they are encouraged to continue doing so in the future. In summary, the per-company
disclosure count displayed a u-shaped distribution when visualized on a chart. The most prevalent category consisted ofcompanies that disclosed twice during the period, totaling 286 or 16.57% of the total. Following closely behind werecompanies with 15 disclosures, numbering 243 and representing 14.08% of all companies. The number of companies
consistently disclosing CSR reports annually remained steady at 4. Moreover, the total number of disclosures in 2022
exceeded that of the previous year, indicating a rising awareness and emphasis on CSR among A-share listed companies.

Number of CSR disclosures by A-share listed companies, 2006–2022
300

286
243

250

239

200
150
111
100

459

50
0

4
1

96
70

50

61

47

60

55

9

10

65

123
87

22
2

3

4

5

6

7

8

11

Number of companies

093

107

12

13

14

15

16

17

2023 Study on the ESG Reports of A-share Listed Companies

Length of CSR reports: In the CSR reports
disclosed by A-share listed companies, there was anotable uptick in the total number of pages compared
to previous years. The average report length stood at
41.6 pages, with a median of 37 pages, representing
an increase of 7 pages from the preceding year.
Nonetheless, there remained a substantial variance
between the shortest and longest page counts, withthe majority of reports spanning below 40 pages,
encompassing over 55% of the total reports.

Length of CSR reports by A-share listed companies, 2022
3.71%
4.95%

0-20pages

25.15%

21-40pages

12.77%

41-60pages
61-80pages

22.48%

81-100pages
101pages+

30.94%In 2022, the shortest CSR report disclosed by the 1,535 reporting companies was two pages long, while the longest
was 177 pages, representing a significant gap of 175 pages. Approximately 25.15% of the reports were between 0 and 20
pages, while 30.94% totaled 21–40 pages, both showing a sharp decline from the previous year. On the other hand, 8.66%
were over 80 pages long, more than double the 4.24% recorded the previous year. Overall, the quality of disclosures
improved compared to previous years. Reports with longer page lengths tended to be more detailed, well-structured, andfeatured more visually appealing designs.

Length of CSR reports by A-share listed companies, 2018–2022
600

500

400

300

200

100

0

0-20
pages

21-40
pages

41-60
pages

61-80
pages

81-100pages

101
pages+

Most
pages

Least
pages

Averagepage countMedian

2018

430

243

2019

413

251

109

97

39

22

170

3

32.4

23

140

105

55

28

183

3

35.3

2020

423

383

183

25

66

31

20

191

1

32

27

2021

412

508

267

99

37

20

246

1

34.2

30

2022

386

475

345

196

76

57

177

2

41.6

37

From 2018 to 2022, there were about 400 reports annually, ranging from 0 to 20 pages each year. The count of reports
with 21 to 40 or 41 to 60 pages increased steadily each year. Additionally, there was a notable rise in the number of reports
with 61 to 80, 81 to 100, or over 101 pages in 2022, representing a significant shift from previous years. During this period,
the median number of pages also showed a significant upward trend, indicating a growing emphasis placed by A-sharelisted companies on CSR reports.

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2024 ESG White Paper

Analysis of CSR reporting companies in 2022
I. Sectoral distribution of reporting companies: All sectors exhibited a notable increase in
the number of annual CSR disclosures from 2020 to 2022. In 2022, every sector
experienced positive growth, with the manufacturing sector leading with 406 disclosuresand the financial sector boasting the highest percentage of disclosures at 87.7%.
Distribution of CSR disclosures by industry for 2020–2022
92
79
68

Consumer staples

406
350

Manufacturing
289
230
191

Materials
158
129
116

Health care
88

139
118
103

Information technology

99
91

Communication services
74
30
27
23

Energy165
143

Consumer discretionary
96
114
111
102

Financials

73
64
52

Utilities

58
53
53

Real estate

0

50

2022

095

100

150

200

2021

250

300

2020

350

400

450

2023 Study on the ESG Reports of A-share Listed Companies

In 2022, the manufacturing sector led with the highest number of CSR disclosures at 406, marking an increase of 56 or
16% from the previous year. The materials sector experienced the most significant surge, with a total of 230 disclosures, up
by 39 reports or 20.4% compared to the previous year. Across all sectors, there was an average of 140 reports, representing
a rise of 18 from the preceding year.

Rate of CSR disclosures by sector in 2022
33.9%

Consumer staples
25.9%

Manufacturing

33.9%

Materials

27.7%

Health care
19.3%

Information technology

32.4%

Communication services

38.5%

Energy26.2%

Consumer discretionary

87.7%

Financials
Utilities

52.9%

Real estate

51.3%
0%

20%

40%

60%

80%

100%

While the manufacturing sector had the highest number of disclosures in absolute terms, its disclosure rate wasrelatively low at just 25.9%. In contrast, the financial sector, with only 114 reports, had the highest disclosure rate at 87.7%,
primarily driven by mandatory disclosure requirements from regulatory agencies. The utilities and real estate sectors achieved
the second and third-highest disclosure rates at 52.9% and 51.3%, respectively.

II. Regional distribution of reporting companies: In absolute terms, East China led with thehighest number of disclosures, totaling 1,070. Meanwhile, West China maintained thehighest disclosure rate at 35.7%, followed closely by Northeast China at 33.7%,
experiencing a rapid rise to second place.
In 2022, East China reported the highest total
number of CSR disclosures, constituting 69.7% of thetotal that year, surpassing the combined totals ofCentral, West, and Northeast China. All regions
experienced growth in the number of companies with
CSR disclosures, with the fastest growth occurring inNortheast China at 27.5%, propelling it to the second
rank with a 33.7% share. However, disclosure rates
varied by region, with West China boasting the highest
rate at 35.7%, while East China, despite leading in thenumber of disclosures, had the lowest rate at 29.1%.

Regional distribution of CSR disclosures in 2022
1200
1000
800

1070
29.1%

33.7%

35.7%

30%

29.7%

20%

600
400

198

200
0

40%

East

Central

Number202

65
Northeast

West

10%
0%

Disclosure rate096

2024 ESG White Paper

III. Distribution of companies by municipality/province: Guangdong, Zhejiang, Beijing,
Shanghai, and Jiangsu had the highest number of disclosures, with each region boasting
more than 100 companies that published CSR reports. Furthermore, there was a notable
increase in the overall number of disclosures across all localities.
Distribution of CSR disclosures in 2022 (by municipality/province)
Guangdong
Zhejiang
BeijingShanghai
JiangsuFujianShandong
Anhui
Sichuan
Henan
Hunan
Hubei
Liaoning
Chongqing
Tianjin
Hebei
Xinjiang
YunnanShaanxi
Jiangxi
Jilin
Guangxi
HainanShanxi
Guizhou
Inner Mongolia
Gansu
Ningxia
Heilongjiang
Qinghai
Tibet

222
176
170
163
117
77
76
48
47
42
36
36
31
27
27
27
25
24
23
22
17
16
15
14
13
9
9
8
8
6
4
0

50

150

200

250

In 2022, the majority of municipalities or provinces in China (excluding Tibet, which remained unchanged from 2021)
witnessed an uptick in the number of CSR reports disclosed by A-share companies compared to the previous year.
Guangdong led this trend with an increase of 40 reports, marking the most disclosures among all municipalities/provinces
and surpassing 200 for the first time. Overall, Guangdong, Zhejiang, Beijing, Shanghai, and Jiangsu maintained theirpositions at the top of the list in 2022, with Guangdong recording 222 reports, followed by 176 in Zhejiang, 170 in Beijing,
163 in Shanghai, and 117 in Jiangsu.

IV. Distribution of companies by business type: The number of reporting SOEs saw anotable increase, with over half of listed SOEs making disclosures.
2022

724

750

54

2021

608

675

51

2020

532
0

10%

SOEs

097

20%

536
30%

Non-SOEs

40%

50%

60%

70%

Foreign-Funded Companies

32
80%

90%

Others100%

2023 Study on the ESG Reports of A-share Listed Companies

Of the 1,535 CSR reports published in 2022, 724 reports originated from SOEs, including both central and local SOEs,
marking a notable increase of 116 or 19.1% from the previous year. Non-SOEs contributed 750 reports, maintaining the top
rank despite a modest increase of only 75 or 11.1% from the previous year. Additionally, 54 reports were filed byforeign-funded companies, reflecting an increase of 3 from the previous year. Statistics from 2020 to 2022 indicate that
non-SOEs consistently led in terms of the number of reports.
Among all A-share listed SOEs, 52.3% made CSR disclosures, surpassing 50% for the first time. This was followed byforeign-funded companies at 29.5% and non-SOEs at 21.4%.

V. Distribution of companies by board: In 2022, Main Board listed companies made themost CSR disclosures, representing over 80% of the total. Additionally, four companies
listed on the BSE made ESG disclosures for the first time.
Distribution of CSR disclosures by board for 2018–2022
1400

1276

1200

1130
983

1000
800

709

736

600
400
200
65
0

2018 2019 2020 2021 2022
Main Board

76

102

136

167

2018 2019 2020 2021 2022
ChiNext

0

8

21

77

88

2018 2019 2020 2021 2022
STAR Board

Of the 1,535 CSR reports released by A-share listed companies in 2022, 1,276, or more than 80%, were from Main
Board listed companies. Over the period from 2020 to 2022, the number of reports by listed companies from all threeboards showed a steady upward trend. Specifically, Main Board listed companies disclosed 146 more CSR reports, marking
a 12.9% increase from the previous year, while ChiNext listed companies disclosed 31 more reports, up by 22.8%, andSTAR Board listed companies disclosed 11 more reports, reflecting a 14.3% increase. Additionally, it is noteworthy that the
BSE Board made its debut in ESG disclosure, with four listed companies releasing their reports.

Analysis of ESG indicators in 2022
The 2023 Study on the ESG Reports of A-share Listed Companies maintained the adapted indicator system from theprevious year, encompassing three main dimensions: environmental, social, and governance. Each dimension comprises
several topics aimed at providing comprehensive insights into the companies’ sustainability practices.
2. Social dimension:
1. Environmental dimension:· Product quality and innovation· Environmental management· Energy conservation and emission reduction · Employee wellness· Social contributions and charity

3. Governance dimension:· Information disclosure and management· Company management· Diversity and equal opportunity

Each topic is comprised of 4–9 sub-indicators. The data and information pertaining to these indicators undergo rigorous
processes, including the collection of big data using web crawlers, data cleaning, data mining, and thoroughcross-comparison. Further detail on the indicator system is provided below:

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2024 ESG White Paper

ESG research indicator system

A. Environmental
management(1) Environmental benefits(condensed)(2) Environmental certification(condensed)(3) Environmental protection andpublic welfare(4) Environmental recognition(condensed)(5) Environmental penalties

B. Energy
conservation andemission reduction(1) Energy conservation(condensed)(2) Reduction of three types ofwaste (condensed)(3) The circular economy(4) The green office

C. Product quality
and innovation(1) Quality management(2) Quality reputation(3) After-sale services(condensed)(4) Customer satisfaction(5) Patents(6) R&D expenditure(condensed)(7) Share of R&D personnel(8) Share of technical personnel(condensed)

D. Employee
wellness(1) Remuneration incentives(2) Supplementary benefits(3) On-the-job training(condensed)(4) Communication with
employees (condensed)(5) Employee care (condensed)(6) Safety management system(7) Training on production safety(8) Occupational health andsafety certification(9) Disputes over staff healthand safety

E. Social
contributions andcharity(1) Donations (condensed)(2) Social contribution value pershare(3) Contribution to education(4) Charitable activities(condensed)(5) Volunteering(6) International aid(7) Job creation(8) Contribution to economic
growth(9) Layoffs

F. Information
disclosure andmanagement(1) CSR report reliability(2) CSR reportcomprehensiveness(condensed)(3) ESG website columns(condensed)(4) ESG education and training(5) ESG leadership teams

G. Operations andmanagement(1) Strategic cooperation andsharing (condensed)(2) Anti-bribery andanti-corruption(3) Business integrity(4) Accounting irregularities(condensed)(5) Financing disputes

H. Diversity andequal opportunities(1) Female executives(2) Female directors (condensed)(3) All-male directors,
supervisors, and executives(4) Vulnerable groups(condensed)(5) Equal opportunities(condensed)

Environmental（E）

Social（S）

Governance
（G）

099

2024 ESG White Paper(4) Environmental recognition: In 2022, a total of 401 companies, constituting 26.1% of the total, disclosed that they
had received environmental recognition, including for being exemplary energy-saving and emission-reduction companies,
green companies, or for other government awards. This marked a notable increase of 60 companies or 17.6% from theprevious year. Among these, the manufacturing sector had the highest number of disclosing companies, with 105 in total.
The real estate sector led in terms of disclosure rate, with 44.8%.

50%

120
44.8%

105

100
34.2%

40%

36.7%

80
30%

68
60
21.9%

40
26

25

20.1%

45

28

25

te

Re

29

27
10%

12

y
g
re
ls
ls
ry
es
es
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urin
eria
olog alth ca
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ncia
tapl
iona
Ene
fact
Mat
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e
er s
n se
Fina
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cret
e
s
H
o
t
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m
i
i
t
a
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d
s
M
ica
er
tion
Con
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mun
sum
Info
Con
Com

s

tie
Utili

20%

12.1%
11

sta
al e

25.9%
22.5%

20

0

29.3%

29.6%

27.3%

Number0%

Disclosure rate

Analysis of the social contributions and charity topic
In 2022, a total of 1,338 or 87.2% A-share listed companies disclosed their involvement in social contributions andcharity activities, marking an increase of nearly 200 from the previous year. These companies collectively donated RMB 26.2
billion, representing a significant increase of approximately RMB 12 billion or 85.3% from the previous year. Other
sub-indicators, such as contributions to education, charitable activities, volunteering, international aid, job creation, andcontribution to economic growth, also showed improvement compared to the previous year. However, adverse social
impacts also grew during this period, with substantial layoffs reported by 24 companies, a rise of 2 from the previous year.
Among them, the real estate sector disclosed the most layoffs, accounting for more than half of the total due to an industry
downturn. Despite these challenges, overall, social contributions and charity can have a positive impact on social
development by narrowing the wealth gap, alleviating social tensions, and promoting social harmony.

Energy conservation and emission reduction
This topic comprises 4 sub-indicators:
1. Energy conservation
2. Reduction of three types of waste
3. The circular economy
4. The green office.
(1) Energy conservation: In 2022, approximately 65.5% or a total of 1,006 companies disclosed their policies,
measures, or technologies for energy conservation, marking a notable increase of 167 companies or 19.9% from theprevious year. The communication services sector saw the most significant rise at 41.7%. Within these disclosures, themanufacturing sector led with 255 disclosures, while the energy sector boasted the highest disclosure rate at 76.7%, andthe communication services sector had the lowest at 51.5%.

1012023 Study on the ESG Reports of A-share Listed Companies

300

80%

76.7%

72.4%

70.4%

69.1%

250
63.0%
200

68.5%

65.1%

61.4%
51.5%

255

69.6%

70%
60%

62.8%

50%

162

40%

150
113

30%

96

100

84

70
50

64

51

46

42

10%

23

0

l

Rea

te
esta

s
tilitie

U

ls
ncia

C

y
g
re
ls
es
es
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urin
eria
olog alth ca
rvic
tapl
Ene
fact
Mat
chn
e
er s
n se
u
e
H
o
t
n
m
i
t
a
u
a
s
M
tion
unic
Con
rma
omm
Info

0%

nary

io

et
Fina
iscr
er d
m
u
ons

20%

C

Number

Disclosure rate(2) Reduction of three types of waste: In 2022, approximately 68.3% or a total of 1,049 companies disclosed theirpolicies or measures for reducing three types of waste (gases, water, and residue), reflecting an increase of 129 companies
or 14% from the previous year. The largest increase came from the communication services sector (76%). The
manufacturing sector had the most disclosures at 294, while the energy sector and materials sector boasted the highest
disclosure rates at 90.0% and 83.5%, respectively.
294

300
250

90.0%
79.8%

75.9%
67.1%

200

68.5%

83.5%
73.9%
192

113
100

44.4%

35.1%
49

44

50
0

tate

es
eal

40

60%

68

44

ls
gy
les
are
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ary
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ials
ces
ncia
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nolo ealth c
tion
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stap
Ene
ater
s
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n
Fina
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Man
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Con
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f
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ties

Utili

40%

103
75

27

Number

80%

72.4%

54.0%

150

R

100%

20%
0%

Disclosure rate

Analysis for the energy conservationand emission reduction topic
In 2022, A-share listed companies made significant strides in investing in energy conservation and emission reduction.
Specifically, 65.5% of companies disclosed their policies and measures for energy conservation, while 68.3% revealed
strategies for reducing three types of waste (gases, water, and residue). Moreover, the number of companies embracing
circular economy practices and implementing green office initiatives has surged to 688 and 687, respectively. As corporate1022023 Study on the ESG Reports of A-share Listed Companies

I. Environmental dimension
Environmental management
This topic comprises five sub-indicators:
1. Environmental benefits
2. Environmental certification
4. Environmental recognition
5. Environmental penalties

3. Environmental protection and public welfare(1) Environmental benefits: In 2022, 730 companies, accounting for 47.6% of the total, disclosed that they had
developed or adopted products, equipment, or technologies beneficial to the environment. This represented an increase of
82 companies or 12.6% from the previous year. Among these, the manufacturing sector led with the highest number of
disclosing companies, totaling 206. In terms of disclosure rate, the financial sector ranked the highest at 77.2%, while thehealthcare sector had the lowest disclosure rate at 22.5%. Notably, the utilities sector witnessed significant growth, with 45
companies engaged in environmentally beneficial initiatives, marking an 80% increase from the previous year.
250

90%
77.2%

200

80%

206

70%

63.8%
61.6%

150

48.5%
100
50

88
37

24.2%

45

te

sta
al e

Re

45.7%
105

80

12
0

46.8%

40.0%

60%

50.7%

50%
42.4%

30%

65
22.5%
29

24

39

y
g
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ices
ples
nary
urin
eria
olog alth ca
ncia
Ene
serv
r sta
fact
retio
Mat
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e
e
n
Fina
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s
H
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i
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a
su
M
ica
er d
tion
Con
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mun
sum
Info
Con
Com

Number

20%
10%

s

tie
Utili

40%

0%

Disclosure rate(2) Environmental certification: In 2022, approximately 649 companies, accounting for around 43.4% of the total,
disclosed that they had achieved the Environmental Management Systems (EMS) standard, ISO 14001. Among these, themanufacturing sector had the highest number of disclosing companies, with 182 in total. The consumer discretionary sector
led in terms of disclosure rate, with 56.4%. Compared to the previous year, the real estate sector experienced the mostsignificant increase, with a growth rate of 42.1%, compared to the overall increase of 11.3% across all sectors.
200

56.4%
51.1%

46.6%

49.6%

150

50%
44.8%

38.0%

60%

182

114

41.3%

93

100
24.7%

23.7%

50
27
0

te

Re

sta
al e

18

30%

20.0%

27

24.2%

71
49

24

20%
38

6

y
g
re
ls
ls
ry
es
es
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eria
olog alth ca
rvic
turin
ncia
tapl
iona
Ene
Mat
chn
e
er s
n se
Fina
ufac
cret
e
s
H
o
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m
i
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ica
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Con
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sum
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s

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Utili

40%

Number10%0%Disclosure rate100

2024 ESG White Paper

environmental disclosure policies continue to advance, data on energy conservation and emission reduction has become
more transparent. This transparency has facilitated the implementation of circular economy practices and green officeinitiatives, providing a robust foundation for China to achieve its “30-60 Dual Carbon target” , to peak carbon dioxide
emissions by 2030 and reach carbon neutrality by 2060.

II. Social dimension
Product quality and innovation
This topic comprises 8 sub-indicators:
1. Quality management
2. Quality reputation
3. After-sales services
4. Customer satisfaction
5. Patents
6. R&D expenditure
7. Share of R&D personnel
8. Share of technical personnel
By aggregating the above indicators, this topic assesses the overall performance of A-share listed companies regarding
product development and services.
(3) After-sales services: Among the 1,535 reporting companies in 2022, 1,042 (67.88%) disclosed the steps they hadtaken to enhance after-sales services, marking an increase of 155 from the previous year. Across sectors, financials andconsumer discretionary exhibited higher disclosure rates, at 81.58% and 76.97%, respectively. Conversely, the energy
industry (46.67%) ranked at the bottom in this regard.

Percentage of disclosures about after-sales services from 2018–2022
70

66.05%

67.88%

2021

2022

60
50

44.94%

41.93%

4030

22.88%

20
10
0

2018

2019

2020
After-sales services

Percentage of disclosures about after-sales services by sector in 2022
100%
81.58%

80%

76.97%

60%

68.35%
53.45%

49.32%

55.56%

72.09%

71.74%

68.23%

60.87%

46.67%

40%
20%
0%

tate

l es

Rea

ls
gy
les
are
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ials
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ncia
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Ene
ater
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Fina
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Man
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After-sales services(6) R&D expenditure: According to available statistics, A-share listed companies disclosed a total of RMB 1148.1 billion
in R&D expenditure in 2022, marking a 39.0% increase from the previous year. Overall, R&D expenditure witnessed asignificant rise from 2018 to 2022, with growth peaking at 50.78% between 2018 and 2019, followed by a 39.0% increase
between 2021 and 2022.

1032023 Study on the ESG Reports of A-share Listed Companies

R&D expenditure disclosed from 2018–2022
114807111

120000000
50.8%

100000000

50%82576189

80000000
61358819

60000000

49615764

40000000

30%

23.7%

32907138

20000000

40%
39.0%

34.6%

20%
10%

0%

0

60%

2018

2019

2020

2021

Amount (¥10,000)

0%

2022

Growth rate

In 2022, the energy sector led in R&D expenditure with RMB 2.59 billion, representing a threefold increase from theprevious year's RMB 860 million. This surge can be attributed to additional disclosures from large energy companies that
had not previously reported their specific R&D expenditure. The information technology sector and the manufacturing sector
ranked 2nd and 3rd, respectively, at RMB 1.17 billion and RMB 1.1 billion, while the consumer staples, financials, and realestate sectors ranked at the bottom of the list.

Average R&D expenditure by sector disclosed in 2022 (RMB 10,000)
300000258692250000200000150000116756
100000110386

92067

91883

72806
47554

50000
0

ls
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28276

14821

12663

11694

ls
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Utili
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Fina
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(8) Share of technical personnel: In 2022, the average percentage of technical personnel reached 22.4%, indicating a
0.9% increase from the previous year. This growth reflects a consistent upward trend over the past five years.

Average percentage of technical personnel from 2018–2022
25%

20%

15%

20.0%

2018

20.5%

21.5%

22.4%

18.5%

2019

2020

2021

2022

Percentage of technical personnel

1042024 ESG White Paper

By sector, the information technology sector recorded the highest percentage at 48.7%, followed by the communication
services sector at 32.3%. Conversely, the financials sector had the lowest percentage at 8.3%.

Average percentage of technical personnel in 2022 (by sector)
48.7%

50%
40%

32.3%
30%

24.1%

23.9%

23.7%

22.8%

20%

17.1%

14.8%

14.7%
10.6%

10%

8.3%

0%

g
re
gy
es
rvic
turin
h ca
nolo
n se
ealt
ech
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t
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H
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M
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Info
Com

rgy
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Rea

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Mat
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By province/municipality, Shaanxi surged to first place in 2022, boasting an average percentage of 34.3%. Following
Shaanxi, Beijing, Shanghai, and Tianjin ranked closely at 30.7%, 30.4%, and 26.5%, respectively.

Average percentage of technical personnel by province/municipality in 2022
35%

34.3%
30.7%

30%

30.4%
26.5%

25%

23.3%

23.3%

23.1%

22.3%

20.6%

20%

20.4%

15%
10%

i

anx

Sha

ing

Beij

ai

ngh

Sha

jin

Tian

ong

ngd

Gua

Jilin

an

Fuji

uan

Sich

u

zho

Gui

gsu

Jian

Analysis for the product quality and innovation topic
In 2022, several sub-indicators related to product quality and innovation witnessed significant improvements. This
underscores the prioritization of product quality within these companies. Factors such as quality management, quality
reputation, after-sale services, and customer satisfaction all experienced notable increases. In terms of research anddevelopment, corporate disclosures in 2022 indicate a decrease in the number of patents developed, totaling 96,368. Thisdecline is partially attributed to some companies disclosing only newly acquired patents for the year, rather than the total
number of existing patents. As a result, this change makes it difficult to compare the total figure to previous years. The
average percentages of R&D and technical personnel remained stable or slightly increased from the previous year, ranging
from 15% to 20%. Meanwhile, R&D expenditure surged to RMB 1.1481 trillion, marking a substantial 39.0% increase overthis period. This surge signals China's strong push towards high-end intelligent manufacturing.

1052023 Study on the ESG Reports of A-share Listed Companies

Employee wellness
This topic comprises nine sub-indicators:
1. Remuneration incentives
2. Supplementary benefits
3. On-the-job training
4. Communication with employees
5. Employee care
6. Safety management systems
7. Training on production safety
8. Occupational health and safety certification
9. Disputes over staff health and safety(3) On-the-job training: In 2022, out of all reporting companies, 1,455 disclosed their provision of on-the-job training for
employees, marking an increase of 210 compared to the previous year. Data from 2018 to 2022 reveals a steady rise in thenumber of companies offering on-the-job training, with an average annual growth rate of 12.4%. This trend indicates thatcompanies are placing greater emphasis on developing employee skills.

Disclosure of on-the-job training, 2018–2022
1455

1500
1235

1200
900

919

935

2018

2019

1003

600
300
0
2020

2021

2022

By sector, the manufacturing sector disclosed the highest provision of on-the-job training at 383, with its disclosure ratefalling somewhere in the middle. Although all sectors boasted high disclosure rates exceeding 90%, the healthcare andfinancial sectors led the pack with rates of 98.4% and 98.2%, respectively.

Disclosure of on-the-job training by sector in 2022
400

98.4%

350

97.0%

300

98%

96.6%

97.1%
94.6%

200
127

112

100

135

0

93.3%

160

94%

91.3%

92%

y
ls
les
rgy
ing
ials
ces
tate
nary
ncia
olog
Ene
stap
ctur
ater
ervi
l es
etio
s
a
r
a
r
f
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chn
e
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e
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s
t
R
i
io
sum
Man
icat
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sum
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m
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o
Con
C

Number

90%

90.4%
66

88%

28

are
lth c

Hea

210
91.9%
91

87
56

50

96%

94.3%

250

150

100%

383

98.2%

s

86%

tie
Utili

Percentage(4) Communication with employees: In 2022, a total of 941 companies disclosed the availability of communication
channels between employees and senior management, including chairman's mailboxes, suggestion boxes, employee
interview systems, and more. This marks an increase of 113 companies, or 13.7%, compared to the previous year.

1062024 ESG White Paper

Disclosure of employee communication channels, 2018–2022
1000

941
828

800
600

543

509

455

400
200
0
2018

2019

2020

2021

2022

By province, Guangdong, Beijing, and Shanghai had the highest number of companies that disclosed communication
with employees, with 145, 106, and 105 companies, respectively.

150

145

Disclosure of employee communication channels in 2022 (by sector)

120

106

105

96

90

81

60

48

37

34

Fujian

Anhui

30

27

25

Henan

Sichuan0
Guangdong

BeijingShanghai

Zhejiang

JiangsuShandong(8) Employee care: In 2022, a total of 1295 companies disclosed employee care policies or measures, including
leadership outreach, physical examinations, childcare services, employee mental health seminars, and more. This represents
an increase of 159 companies, or 14%, compared to the previous year.

Disclosure of employee care policies and measures, 2018–2022
1500
1295
1136

1200
900

870

837

861

2018

2019

2020

600
300
0
2021

2022

By sector, the manufacturing sector had the most disclosures at 341, while its disclosure rate ranked in the middle ofthe pack. All sectors boasted high disclosure rates, mostly over 80%, with the information technology sector leading at
88.5%, and the energy sector at the bottom with 76.7%.
1072023 Study on the ESG Reports of A-share Listed Companies

Disclosure of employee care policies and measures in 2022 (by sector)
341

350

100%

300
250

85%

88.5%

200

87.7%

150

123

86.2%

100

100
0

tion

I

84.0%

84.3%

83.7%
108

50

50

ma
nfor

84.8%
140

194

tech

gy
nolo

83.7%

82.2%

77

60

76.7%

79

75%

23

g
ls
ry
re
es
les
ties
tate
eria
turin
rvic
iona
h ca er stap
Utili
l es
Mat anufac
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cret
n se
s
Rea
o
m
i
H
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t
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d
s
M
ica
er
Con
mun
sum
Con
Com

ls
ncia

Fina

80%

79.8%

Number

y
nerg

70%

E

Percentage

Analysisof the employee wellness topic
说 明
In 2022, A-share listed companies significantly boosted their investment in employee wellness compared to the previous year. A total of 1,020 companies disclosed remuneration incentives, and 1,173 disclosed supplementary benefits. Moreover, there was a notable increase in attention to communication and information exchange, with 941 companies disclosing
communication channels with employees and 1,295 disclosing employee care policies or measures, representing a 13.7%
and 14% increase from the previous year, respectively. Additionally, 1,455 companies provided on-the-job training for employees, marking an increase of over 200 from the previous year. Furthermore, there were notable improvements in othersub-indicators, such as safety management systems, training on production safety, and occupational health and safety certification. For companies, enhancing employee wellness is a win-win strategy. By prioritizing employee wellness, companies
not only empower workers to exercise their employment rights and realize their potential but also enhance their operating
efficiency.

Social contributions and charity
This topic comprises nine sub-indicators:
1. Donations
2. Social contribution value per share
3. Contribution to education
4. Charitable activities
5. Volunteering
6. International aid
7. Job creation
8. Contribution to economic growth
9. Layoffs(1) Donations: In 2022, 1,338 companies reported their involvement in social welfare activities, which is 182 more than theprevious year. This represents 87.2% of the total, marking a 1.1 percentage point increase. These companies collectively
donated a total of RMB 26.24 billion, reflecting an increase of approximately RMB 12 billion or 85.3% compared to the previous
year. Overall, there was a noticeable rise in the number of companies making charitable donations between 2018 and 2022.

Disclosure of social contributions and charitable donations between 2018 and 2022
1500

1338

1200
900

86.4%
956

86.3%
786

855

1156

87.2%

86.1%

87%
86%
85%
84%

600
300

88%

83%

83.4%

82%

0

81%
2018

2019

2020

Number2021

2022

Percentage

1082024 ESG White Paper

Average size of disclosed donations in 2022 (10,000 RMB) (by sector)
8000

7415.26823.6

7000
6000
5000
4000
3000

2419.82000

1526.61001.9

1000
0

ls

eria

Mat

rgy

Ene

ls

ncia

Fina

ties

Utili

are

lth c

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By board, companies listed on the Main Board
had the highest average donations (RMB 22.606
million), followed by those listed on the ChiNext (RMB
6.041 million) and STAR board (RMB 1.859 million).

983.5

841.5

722.7

546.9

329.2

293.8

les
tate
ices
ring
logy
nary
l es
stap
hno
serv
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actu
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Average size of disclosed donations in 2022 (by board)
3000
2260.6
2000
1000

604.1
185.9

0
Main Board

ChiNext

STAR Board

4.4
BSE

(4) Charitable activities: In 2022, a total of 1,199 companies engaged in charitable donations, marking an increase of
91 from the previous year. Over the past 5 years, there has been a growing number of A-share listed companies participatingin charitable activities, with an average annual growth rate of 36.5%.

Disclosure of charitable activities between 2018-2022
1200

1108

1000

1199

919

800

703

600
400

364

200
0

2018

2019

2020

2021

2022

By sector, manufacturing had the most disclosures at 320, while healthcare had the highest disclosure rate at 88.4%,
and energy had the lowest at 63.3%.

1092023 Study on the ESG Reports of A-share Listed Companies

Disclosure of charitable activities in 2022 (by sector)
100%
88.4%
84.2%
80%

80.0%

77.6%

78.8%
72.7%

72.6%

74.1%

82.6%

73.5%

63.3%
60%

40%

tate

l es

Rea

ls
gy
les
are
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ials
ces
ncia
nolo
ervi
tion
ctur
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ater
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a
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n
Fina
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H
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sum
Man
icat
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atio
Con
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f
m
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o
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Utili

Analysis for the environmental management topic
Measures have been taken by listed companies in the sample to tackle environmental issues. Specifically, 47.6% of thecompanies have developed or used eco-friendly products, equipment, or technologies; 43.4% have obtained ISO 14001
certification for their environmental management systems; and 54.1% have participated in environmental public welfare
activities. In 2022, a total of 401 companies received recognition for their environmental achievements while 21 received
environmental penalties—an increase of 60 and 8, respectively, from the previous year. Corporate investment inenvironmental protection continues to rise, signaling a heightened environmental consciousness among A-share listedcompanies. If companies can sustain or increase their investment in environmental management and integrate it into theircorporate social responsibility strategy, they could enhance their corporate value, brand image, and long-termcompetitiveness.

III. Governance dimension
Information disclosure and management
This topic comprises five sub-indicators:
1. CSR report reliability
2. CSR report inclusiveness3. ESG website columns
4. ESG education and training
5. ESG leadership teams
These five indicators reflect the attention and performance of reporting entities regarding information disclosure and theimplementation of ESG management principles. Below are the focal indicators for 2022:(2) CSR report inclusiveness: To ensure comprehensive information disclosure in the CSR report, a company should
explicitly state its adherence to the G3 Sustainability Reporting Guidelines by the Global Reporting Initiative (GRI) during
report preparation. Alternatively, the company should assess whether the report aligns with the G3 Standards and covers all
six aspects, including shareholders, creditors, employees, customers, communities, and the environment. Founded in 1997
by the U.S. non-profit environmental economic organization CERES and the United Nations Environment Programme(UNEP), GRI aims to provide a universally accepted CSR reporting framework worldwide.
In 2022, 894 out of 1,535 CSR disclosures, accounting for 58.2% of the total, claimed to have referenced the G3 orhigher standard during report preparation. The disclosure rate has shown a significant increase from 2018 to 2022,
surpassing 50% in both 2021 and 2022. The average annual growth rate during this period reached 39.3%, indicating that
A-share listed companies were increasingly prioritizing standardized disclosure practices and fostering stakeholder
relationships in CSR reporting.

1102024 ESG White Paper

Number and percentage of inclusive CSR reports between 2018-2022
1000
52.49%

800
600
400

50%
40%
30%

339

278

218

200

60%

58.24%

705

30.65%

28.02%

23.14%

70%

894

20%
10%

0

0%
2018

2019

2020

2021

Number2022

Percentage

By sector, the comprehensiveness of CSR reports varied across industries, with most ranging between 40% and 70%.
The real estate sector exhibited the highest proportion at 67.2%, whereas the utilities sector had the lowest at 42.5%.

Number and percentage of inclusive CSR reports in 2022 (by sector)
250

80%

230

56.65%

150

55.81%

98100

54.39%

72

50%
40%

42.47%

91

30%
62

61

51

s
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tate
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logy lth care
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stap
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Con mmun
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Con
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Number

20%

39

g

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actu

uf

Man

43.33%

51.52%

50
0

70%
60%

59.39%

146

67.24%

66.30%

65.47%

63.48%

200

31

10%

13

0%

rgy
Ene

ties
Utili

Percentage

By province/municipality, Guangdong, Zhejiang, and Shanghai ranked in the top three, with 155, 95, and 89
companies, respectively.

Number of inclusive CSR reports in 2022 (by province/municipality)
200

150

100

155

95

89

78

69
55

50

46
29

27

24

Anhui

Henan

Sichuan0
Guangdong Zhejiang

111

Shanghai

Beijing

JiangsuFujianShandong

2023 Study on the ESG Reports of A-share Listed Companies(3) An ESG website column refers to sections published on the websites of reporting companies that provide
information about ESG or CSR topics. In 2022, out of all the reporting A-share listed companies, 1,279 (83.3%) had
published a CSR column on their websites where visitors could access ESG information, marking an increase of 6.3% fromthe previous year. Statistics from 2018 to 2022 indicate that both the number and proportion of companies that published
ESG columns on their websites increased, suggesting that A-share listed companies were placing greater emphasis on CSR.

Number and percentage of ESG columns on the websites of companies from 2018–2022
1500
1200

71.16%

900

49.68%

600

468

83.32%

787

41.68%

1279

76.99%

100%
80%
60%

1034

40%

413

20%

300

0%

0
2018

2019

2020

2021

Number
By business type, SOEs and non-SOEs had asimilar number of ESG columns on their websites,
accounting for 44.9% and 46.1% of the total A-sharedisclosure reports in 2022, respectively.

2022

Percentage

Number and percentage of ESG columns on thewebsites of companies (by business type)
800
700
600
500
400
300
200
100
0

44.90%

46.17%

50%

620

40%

603

30%
20%

3.65%
49

10%

Foreign-funded
companies

SOEs

NumberNon-SOEs

0%

Percentage

Summary of the information disclosure and management topic
The changes in the five sub-indicators for information disclosure and management reflect the increasing number andenhanced quality and formatting of ESG disclosures made by A-share listed companies in China. These changes indicate astandard that is increasingly aligned with international norms. Additionally, we have observed a heightened focus on ESG
promotion by companies, with over 80% now featuring ESG or corporate social responsibility columns on their official
websites. This marks a sustained increase from the previous year. Furthermore, there has been a growing trend among
companies to establish dedicated ESG leadership and management teams and departments, along with providing
ESG-related education and training for employees. We believe that ESG disclosures will become standard practice among
Chinese companies over time, fostering more socially responsible enterprises that actively contribute to society.

Company operations and management
This topic comprises five sub-indicators that measure the operational performance, business and social ethics
compliance, and financial management of A-share listed companies, examining both favorable and unfavorable aspects.
They are:
1. Strategic cooperation and sharing
2. Anti-bribery and anti-corruption
3. Business integrity
4. Accounting irregularities
5. Financing disputes

1122024 ESG White Paper(1) Strategic cooperation and sharing
In 2022, 1,230 A-share listed companies disclosed a variety of strategic cooperation and sharing methods in their CSR
reports, constituting 80.1% of the total CSR disclosures. These methods encompassed multilateral technology
collaborations, supply chain expansion, transitioning into digital partnerships with internet companies, co-building data
knowledge repositories, signing strategic trade agreements, and forming strategic alliances. Across sectors, the healthcare
sector boasted the highest disclosure rate at 87.6%, whereas the utilities sector exhibited the lowest at 68.5%.

Disclosure of strategic cooperation and sharing from 2018–2022
1500

1230

1135

1200
900

766

600

738

358

300
0

2018

2019

2020

2021

2022

Strategic cooperation and sharing

Disclosure of strategic cooperation and sharing in 2022 (by sector)
100%
80%

82.76%

80.70%

80.00%

76.67%

68.49%

81.29%

87.60%
78.26%

72.73%

81.53%

82.61%

60%
40%

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ties

Utili

(4) Accounting irregularities: Based on a publicly accessible database documenting corporate violations andpunishments, the accounting irregularities of reporting companies are summarized as follows: In 2022, 156 companies,
accounting for 10.16% of the reporting entities, disclosed accounting irregularities. This represents a significant increase
compared to previous years, trailing only behind the data from 2020.

Number and percentage of accounting irregularities from 2018-2022
20%

200
171

156

150
100

9.55%
90

15.46%

10.16%

90

15%
10%

9.08%
49

50

5%

3.65%
0

0%
2018

2019

2020

Number113

2021

Percentage2022

2023 Study on the ESG Reports of A-share Listed Companies

By sector, of the 156 companies reporting accounting irregularities in 2022, 28.2% were from the manufacturing sector,
followed by the raw materials sector at 14.7%. Conversely, the energy sector exhibited the lowest rate, with only 3.2% ofcompanies reporting accounting irregularities.

Percentage of accounting irregularities in 2022 (by sector)
30%

28.2%

25%
20%
15%

14.7%

10%

9.0%

5%

7.7%

7.7%

7.1%

6.4%

6.4%

5.1%

4.5%

0%

ls
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ry
es
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esta
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3.2%

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In 2022, accounting irregularities were more prevalent in East China, with Guangdong, Shanghai, and Zhejiang leading
the way with 23, 18, and 14 cases, respectively.

Percentage of accounting irregularities in 2022 (by province/municipality)
25
20

23
18
14

15

10

10

10

9

8

7

7

FujianHubei

50Guangdong Shanghai

Zhejiang

Beijing

Liaoning

Henan

Jiangsu

5

Anhui

Summary of the corporate operations and management topic
From 2018 to 2022, we witnessed notable advancements among reporting companies in areas such as strategic cooperation and sharing, business integrity, and anti-bribery and anti-corruption measures. However, it is important to highlightthat during this period, the number of financing disputes and accounting irregularities also experienced increases of 6.51%
and 7.2%, respectively. Today, there is a growing recognition that companies should not solely prioritize profit maximization
but also fulfill social responsibilities, including maintaining business integrity and promoting strategic sharing. These elements
have emerged as fundamental components of corporate values in the modern era.

Diversity and equal opportunities
This topic comprises five sub-indicators:
1. Female executives
2. Female directors
4. Vulnerable groups
5. Equal opportunities

3. All-male executives

1142024 ESG White Paper(2) Female directors: In 2022, 224 A-share listed companies reported having four or more female board members,
constituting 14.6% of the total disclosures for the year. This marked a substantial increase of 108 companies from theprevious year, nearly doubling the number. When categorized by business type, non-SOEs accounted for the highest
proportion of female board positions at 58.5%, whereas SOEs comprised 37.1%.

Number and percentage of female
executives from 2018-2022
250
200
150

7.2%

6.5%

100
50
0

71

2018

2019

15%

224

12%

4.02%

0.45%

37.05%

9%

116

97

61

14.6%

8.6%

8.8%

Disclosure of female executives in
2022 (by business type)6%
58.48%

3%
2020

2021

Number

2022

0%

SOE

Percentage

Non-SOE

Other

Joint venture

Number and percentage of employees in vulnerable groups from 2018-2022
400

391

300

25.5%

200
100
0

30%
25%

18.3%

15%

9.5%

202

9.9%
93

6.0%

10%

127

5%

59
2018

2019

2020

2021

Number

20%

2022

0%

Percentage(4) Vulnerable groups: In 2022, 391 companies, comprising 25.5% of reporting entities, disclosed inclusive policies orpositive employment practices towards vulnerable groups, which include individuals with disabilities or those who haveundergone rehabilitation. This marks an increase of 264 companies or 208% compared to the previous year. When
categorized by sector, the energy sector exhibited the highest proportion of vulnerable individuals employed, accounting for
40%, while the communication services sector had the lowest at 14.1%, which was nonetheless a significant improvementfrom the less than 5% reported in the previous year.

Disclosure of employment of vulnerable groups in 2022 (by sector)
40%

40.00%

35.96%

31.78%

30%
20%

30.14%

29.50%

26.67%

24.35%

22.17%

21.74%
17.24%

14.14%

10%
0%

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115

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2023 Study on the ESG Reports of A-share Listed Companies(5) Equal opportunities: In the 2022 CSR reports, a record high of 646 companies, constituting 42.1% of the total,emphasized equal opportunities for individuals of diverse ethnicities, religions, and nationalities. This represents a significant
increase of 230 companies from the previous year. By province, Guangdong had the highest number of companies
reporting equal opportunities, with 119, followed by Beijing, Zhejiang, and Shanghai, with 89, 68, and 66 respectively.

Number and percentage of companies reporting equal opportunities from 2018-2022
800

50%

42.1%

700
600
500

24.3%

400

18.6%

300

31.0%

28.0%

229

40%

646

30%

416

310

20%

184

200

10%

100
0

0%
2018

2019

2020

2021

Number2022

Percentage

Number of companies reporting equal opportunities in 2022 (by province)
120

119

100

89

80

68

66

60

49

40

32

20
0

Guangdong

BeijingZhejiang

Shanghai

JiangsuShandong

24

20

19

18

Sichuan

Anhui

Henan

FujianSummary of the diversity and equal opportunities topic
The 2022 data suggested that A-share listed companies are increasingly valuing the role of women in senior
management positions. Overall, 986 companies disclosed having at least one female member in their senior management
teams. Additionally, 224 companies, or 14.6% of reporting entities, disclosed having at least one female director,
representing an increase in both number and percentage. In terms of fair treatment of vulnerable groups, 391 companies
proposed inclusive policies, marking a threefold increase from the previous year. Moreover, there has been progress inpromoting equal opportunities, with more companies now focusing on the fundamental interests of vulnerable groups. Thisfocus could contribute to promoting social harmony, alleviating social conflicts, and accelerating shared prosperity.

Year-on-year comparison and analysis
of composite ESG indicators
In 2022, 1,535 reporting companies achieved a weighted score of 51.15 (out of 100) and a median score of 52.2 for all
ESG indicators. This represents an increase of 0.31 points or 0.6% from the previous year. While this score has been steadily
increasing every year from 2018 to 2022, it still falls significantly below the "pass mark" of 60.

116

2024 ESG White Paper

Weighted CSR indicator score for A-share listed companies from 2018–2022
52
50

49.69

48.59

48

50.84

51.15

2021

2022

46.38

46
44
42

2018

2019

2020

In 2022, all sectors exhibited an increase in their weighted composite ESG indicator scores, contributing to a narrowing
gap between sectors. The information technology sector achieved the highest score at 53.64, reflecting a 0.51-point
improvement from the previous year. Following closely, the communication services sector ranked second with scores of
53.13 and 53.09, respectively. Lastly, the financial sector achieved a score of 43.68.

Weighted composite ESG indicator score for A-share listed companies in 2022 (by sector)
60
55

53.64

53.14

52.65

52.36

51.89

50.71

50

50.28

49.35

48.97
47.02
44.08

45
40

rma

Info

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tion

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By business type, in 2022, SOEs achieved a score of 50.6, which remained close to the previous year’ s score.
Non-SOEs recorded a score of 54.3, an increase of 2 points from the previous year. Similarly, foreign-funded companies
achieved a score of 52.1, also up by 2 points from the previous year. Between 2018 and 2022, CSR scores increased forboth SOEs and non-SOEs. Notably, non-SOEs experiencing a significant rise from the lowest score of 45 in 2018 to thehighest score of 54.3 in 2022.

Weighted composite ESG indicator score of A-share listed companies from 2018–2022 (by business type)
60
50

47

45

51

48

48

54

50

50

51

50

52

50

50.6

54.3 52.1

40
30
20
10
0

2018

SOE

2019

2020

Non-SOE

2021

2022

Foreign-funded companies

In 2022, most regions maintained scores similar to the previous year, except for Northeast China. East China achieved
the highest score at 51.8, while Northeast China had the lowest at 48.1, despite experiencing the most significant increaseof 2 points during this period. Between 2018 and 2022, CSR scores for companies across all regions generally rose.
Specifically, scores increased by 5, 7, 3, and 10 points respectively for East, Central, West, and Northeast China.
1172023 Study on the ESG Reports of A-share Listed Companies

Weighted composite ESG indicator score of A-share listed companies from 2018–2022 (by region)
60
50

47

43

50

47

52 50 50

42

38

40

50 51 49
47

47 47

51.8
46

49.7 50.3 48.1

30
20
10
0

2018

2019

2020

Central

East

2021

West

2022

Northeast

Analysis of the economic value of composite ESG indicators
For investors in various capital markets, the economic value of ESG composite scores is a focal point of concern. This
report constructs an investment strategy based on the ESG composite scores of A-share listed companies and examines its
profitability to address this issue. Specifically, we compared the composite scores with the scores for various topics, dividingthem into five groups, with approximately one fifth of the number of stocks in each group, and then calculated their weighted
returns by group. Thus, 1,531 listed companies (excluding the 4 companies listed on the Beijing Stock Exchange) weredivided into five groups of 306, 306, 307, 306, and 306 companies, respectively, and their weighted returns were calculated
per group. Given that ESG reports and CSR reports of A-share listed companies typically accompany the annual report,
which is due for disclosure by April 30 each year, and considering that most companies release their reports toward the endof April, we presume that trading commences on the first trading day of May each year (May 4, 2023) and concludes on the
final trading day of the year (December 29, 2023). In 2023, the five groups achieved weighted average returns of -4.59%,-3.28%, -4.75%, -7.56%, and -10.47% respectively, indicating a certain hierarchical progression. The top fifth relative to thebottom fifth had excess returns of 5.88%. This data suggests that reporting companies with higher composite indicatorscores tend to generate greater excess returns.

Returns of the five groups
0%

top

2

3

4

bottom

-2%
-4%
-6%
-8%

-3.28%-4.59%-4.75%-7.56%-10%-12%-10.47%We also categorized companies within each component indicator into five equally sized groups, observing that thescores generally exhibited a certain hierarchical progression. Significant excess returns were attainable by implementing along-short strategy for the top and the bottom groups within each component indicator. Therefore, based on the actual
excess returns documented in this report, we assert that the CSR performance of companies can serve as a valuable guidefor investors.

118

2024 ESG White Paper

Conclusion
说 明As global awareness of sustainable development grows, more investors are directing their focus towards companies'
social responsibility and environmental practices. In China, ESG mutual funds serve as a significant institutional force
promoting ESG investment principles. Between 2019 and 2023, the number and scale of ESG mutual fund products surged,
with the 818 existing funds totaling RMB 514.324 billion in assets under management. However, the overall market trend
weakened in 2023, causing ESG mutual funds to follow the market downturn and experience poor performance, posing newchallenges to the development of ESG funds. Despite this setback, some ESG funds still demonstrated strong performance,with most showing advantages in the medium to long term, fostering confidence and commitment among investors
dedicated to ESG investment.
This year's report retains the upgraded analysis system from last year, focusing on three main indicators: environmental,social, and governance. Each indicator comprises two, three, and three topics, respectively, with each topic featuring 4–9
sub-indicators, totaling 50. Under the environmental dimension, notable progress was observed in environmental
management, energy conservation, and emission reduction among companies, indicating increased attention toenvironmental protection and investment in energy conservation, emission reduction, and waste reduction by A-share listedcompanies. In the social dimension, companies are concentrating on enhancing product and service quality whileemphasizing innovation, resulting in a surge in patent applications due to increased investment in research and development.
Prioritization of employee wellness, particularly safety management systems and occupational health, is also evident,
alongside increased participation in social welfare activities, leading to notable improvements in social contributions andcharity indicators. In terms of governance, companies are prioritizing their ESG public relations efforts and expanding thescope of CSR reports. At the same time, more companies are striving to enhance their operations and management
capabilities, as evidenced by their business integrity practices, as well as anti-bribery and anti-corruption efforts. Additionally,
there is a growing trend among A-share listed companies to promote diversity and equal opportunity in the workplace,reflecting a heightened recognition of the importance of female executives.
Finally, we evaluated whether our composite ESG indicator score could serve as a basis for investment strategies. The
five groups achieved weighted average increases of -4.59%, -3.28%, -4.75%, -7.56%, and -10.47% respectively in 2023,
exhibiting a certain hierarchical progression. Implementing a long-short strategy by taking a long position for the top group
and a short position for the bottom group resulted in a significant excess return of 5.88%.

1192023 Study on the ESG Reports of A-share Listed Companies

Appendix: Top 50 companies in the 2022 CSR reportNo.

Stock code

CompanyNo.

Stock code

Company

1300308

Zhongji Innolight26

000977

IEIT SYSTEMS

2000100

TCL Technology

27002600

Lingyi iTECH

3600690Haier Smart Home28

002180Ninestar Corporation

4

600066

Yutong Bus

29603992

Xiamen Solex High-Tech Industries

5688183

Shengyi Electronics

30002352

S.F. Holding

6002386

Tianyuan Group

31

002384

Suzhou Dongshan Precision
Manufacturing

7300729Loctek Ergonomic Tech

32000913

Zhejiang Qianjiang Motorcycle

8000786

Beijing New Building

33

600031SANY Heavy Industry

9002459JA Solar

34

000661

Changchun High-Tech

10601992BBMG

35002422

Sichuan Kelun Pharmaceutical

11000001

Ping An Bank

36

688390GOODWE

12002048

Ningbo Huaxiang

37000682

Dongfang Electronics

13002061

Zhejiang Communications
Technology Co., Ltd.

38

300433

Lens Technology

14002773Chengdu Kanghong Pharmaceutical
Group

39

300031

Boton Technology

15300363

Porton Pharma Solutions

40000156

Wasu Media

16002497

Sichuan Yahua Industrial Group

41

300760Mindray17

600089TBEA

42000932

Valin Steel

18000039China International Marine
Containers

43

601088China Shenhua

19002493

Rongsheng Petrochemical

44000717

SGIS Songshan

20300316

Zhejiang Jingsheng Mechanical &Electrical

45000825STSS

21

600022

Shandong Iron & Steel Group

46

002387

Visionox

22

601633

Great Wall Motor

47002648Satellite Petrochemical

23603501

Will Semiconductor

48600346

Hengli Petrochemical

2400070849601966

Linglong Tire

25

00002150

600256

Guanghui Energy

DeepTech120

Nowadays, an increasing number of businesses recognize the importance of ESG issues in theiroperations. These factors are not only crucial for the long-term sustainability of businesses but also haveprofound effects on engaging with stakeholder expectations and enhancing competitiveness. In this light,
ESG is no longer perceived as merely a cost center; instead, it is the core of value creation.
Focusing on this, the China Europe International Business School ESG White Paper 2024 explores
the important topic of ESG practices and value creation. This white paper presents insights throughconceptual frameworks, academic research, and business cases. We firmly believe that discussing thesignificance and practical methods of ESG for value creation will empower businesses to effectively
navigate challenges and seize opportunities.
Throughout the journey, we received invaluable support from the extensive network of CEIBS alumni
and alumni companies. We would like to extend our appreciation to the CEIBS Alumni Association, as
well as all the students and alumni who contributed to the project. Drawing from practical experience,
you have offered valuable suggestions to enhance its content. We are sincerely grateful for everyone's
collaborative efforts.
Finally, we would also like to express our gratitude to everyone who participated in the white paper
project. In particular, we are grateful to the School’ s leadership for the consistent support andencouragement that has brought this project to fruition. Additionally, we would like to thank the faculty
members, case center, and various programme teams for their support in choosing topics and creating
content. Moreover, we extend special thanks to the CEIBS Alumni Relations & Development Office,Marketing and Communications Department, and Translation and Interpretation Department for theirprofessional support.

Editorial Board
May 2024

ESG WhitePaper

DFJCT!XfDibu

DFJCT!FTH!Xijuf!Qbqfs

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