ESG priorities in China: How companies in China are approaching ESG is a report commissioned by Fidelity International and written by Economist Impact. The report reflects the findings of a survey of 262 C-suite and director-level corporate executives based in China. It encompasses those who work at listed organisations of different sizes and ownership structures across a range of industries.
The survey finds that Chinese companies are in a state of transition from largely domestically driven priorities emanating from China’s unique period of breakneck industrialisation to a set of goals more aligned with international ESG practice. Whereas companies were more likely to follow government regulation in the past, the current drivers of this change are primarily demands from investors and customers.
The main findings of the survey as follows:
- Levels of ESG adoption and awareness are robust among listed Chinese companies, although still lagging their Western counterparts. Fifty-three percent of surveyed firms claim to have announced an ESG, sustainability or corporate social responsibility (CSR) strategy and 71% employ staff dedicated to implementing ESG goals.
- Signalling that market concerns are increasingly taking a front seat in shaping corporate behaviour, 47% and 44% of firms cited demands from customers and investors, respectively, as leading drivers of ESG adoption. The third most cited factor was government initiatives, with 37% of firms naming these as a key driver.
- A controlled analysis reveals several firm characteristics associated with ESG adoption. Chinese firms listed on overseas stock exchanges are more likely to adopt ESG (measured by whether the firm has published an ESG strategy) than those solely listed on domestic ones. Larger firms are also more likely to adopt.
- Areas of ESG focus for Chinese firms are different from those of their Western counterparts. Climate change and diversity, for example, take a secondary position to issues such as product and workplace safety. This likely reflects the differing priorities created by the regulatory, social and economic context that Chinese firms operate in.
- There will likely be convergence in ESG goals between Chinese firms and their global counterparts in the future. While not the top priority areas for current action, climate change and gender diversity on company boards were listed by respondents as leading priorities for future action.
- While Chinese listed companies tend to follow a compliance-driven approach to board independence, progress is being made on the establishment of board committees such as remuneration and nomination committees. Survey results indicate these committees are now nearly universal, exceeding what current regulations require.
