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According to a just-published report in collaboration with PwC China, environmental, social and governance (ESG) reporting in China is seeing a surge in activity from regulators, investors and corporate leaders.

The white paper, A Leapfrog Moment for China in ESG Reporting, was released on 25 March by the World Economic Forum (WEF).

“Having experienced increasing demands for ESG reporting from investors, as well as several years of ESG reporting requirements from the Hong Kong Stock Exchange (HKEX), China’s listed companies are increasingly familiar with both the challenges and benefits of ESG reporting,” the report states.

“The conditions are right for a leapfrog moment for ESG reporting in China.”

It’s a desirable trend. ESG metrics can guide capital flows, help regulators make timely policy decisions and enable customers to make informed supply-chain management decisions that foster sustainable growth.

Also read: Nearly a third of employers in APAC set to include employee measures in ESG planning this year

“China’s ambition to reach peak carbon emissions before 2030 and achieve carbon neutrality by 2060 will require companies to transform to a lower-carbon business model. Quality ESG reporting that makes emissions data visible, comparable and accountable, is a key ingredient for this transition.

“In the search for new solutions to climate change and other environmental challenges, ESG measurement and reporting will help harness the power of innovation, entrepreneurship and the capital markets,” said Raymund Chao, PwC Asia Pacific and China chairman.

The white paper reveals six key insights from China’s ESG development and identifies the main drivers behind the improvement.

These six key insights include:

#1 Board-level commitment is a primary and indispensable key to a company’s effective reporting and management of ESG issues.

#2 High-growth companies must graduate from a focus on near-term revenue to a purpose-driven strategy that considers a wide range of stakeholders and their interests. 

#3 The integration of ESG factors into business strategy formulation fosters better management of ESG-related risks and opportunities and provides more meaningful information for investors than the traditional corporate social responsibility (CSR) approach.

#4 Successful companies focus their ESG efforts on the issues that are most relevant to their business, as identified in their materiality assessment.

#5 As Chinese companies ramp up their ESG reporting they often find a shortage of ESG professionals and a lack of ESG knowledge across their business units and supply chains.

#6 There are increased demands for supply-chain sustainability practices and disclosure, particularly from global brands.

“Investors know that companies who integrate ESG factors into their strategy and operations are better equipped to identify risks and capture opportunities, improving their prospects for long-term profitability and value creation,” said Thomas Leung, markets leader at PwC China.