From 2008 to 2018, Dr. Jiang served as UNEP China, where he was responsible for global environmental governance. Since 2018, Dr. Jiang's focus has shifted to the recycling of plastics, especially in the field of circular economy. Dr. Jiang's main idea is that in the future, enterprises should pay more attention to the fit between products and sustainable development in the process of going global. In terms of product development, Dr. Jiang emphasized the importance of adapting to current international carbon reduction requirements, including environmental policies such as carbon tariffs. At the moment, this field is still in its infancy in China, and the circular economy offers a solution that makes products more future-proof. Based on this concept, Dr. Jiang established the Qinghe Institute of Circular Economy and Carbon Neutrality, focusing on research and practice in related fields. Despite the challenges it is facing, it still plays a pivotal role in environmental protection. China is the world's largest carbon emitter, and the world's largest producer of plastics and almost all of its products. If China fails to achieve breakthroughs and leadership in these areas, it will have a significant impact on the realization of global environmental governance goals.
Dr. Jiang believes that China needs to benchmark against Western countries and international standards, recognizing that there is still a lot of work to be done in terms of environmental protection and sustainable development, and that there is still a long way to go. This is also the original intention of her dedication to this work, which aims to promote China to play a greater role in global environmental governance and achieve the goal of sustainable development.
1. Why should companies pay attention to ESG?
As a concept system originating from the West, ESG is known as sustainable development at the global level, and has established 17 Sustainable Development Goals (SDGs) to be achieved by 2030. When these goals are specific to the enterprise level, they need a more precise and quantitative evaluation system to measure, that is, ESG. In order to better meet the requirements of the capital market, listed companies must follow ESG standards. Of the three dimensions of ESG, environmental factors are relatively easy to quantify. In terms of ESG standards, the Global Standards Report (GRI) has laid the groundwork, and now the global sustainability standards are gradually adopting the harmonized standards of the International Sustainability Standards Board (ISSB). Under the framework of the standard, there are different institutions responsible for information disclosure and rating, each with different responsibilities, including the participation of many third-party institutions. Institutions such as CDP require companies to disclose carbon emissions according to their standards, and the MSCI rating system, these rating and disclosure requirements are widely recognized in the capital market.
China is also gradually adapting and integrating into the international ESG standard system. Stock exchanges and relevant departments are formulating standards with Chinese characteristics to adapt to the uniqueness of Chinese enterprises, especially in the social dimension evaluation standards, there are differences between Chinese and international standards, and benchmarking work is currently underway. Overall, if companies fail to meet ESG rating requirements, their ratings in the stock market will be affected. Companies that perform well (e.g., with an A rating) will be more likely to issue green bonds and attract more capital investment; Underperforming companies may face capital reductions.
Non-financial factors such as environment, climate, employee well-being and well-being are being internalized as part of the company's internal financial statements, and ESG is extremely important for companies, affecting all aspects of their operations, financial systems, business activities, and other aspects, as well as creating significant challenges for enterprises. Enterprises need to set up a dedicated sustainability leader to coordinate the work of the entire industrial chain and supply chain, including factories, product supply chains, etc. However, environmental, social and governance issues are not fully grasped or implemented by companies themselves, so the role of third parties is particularly important to provide professional support and a comprehensive understanding of sustainability strategies. At present, many enterprises are taking action in energy conservation, emission reduction, new energy, etc., but the understanding at the strategic level and rating level is still insufficient. Chinese companies need to make more efforts on ESG in order to more systematically understand the impact of sustainability on their businesses.
2. The challenge of sustainable supply chain for small and medium-sized enterprises to go overseas
At present, the global supply chain pattern is being profoundly reconstructed, and globalization has entered a new trend. On the one hand, developed countries represented by the United States have promoted the return of manufacturing; On the other hand, emerging economies such as Indonesia and Brazil are beginning to work hard to localize their supply chains. In order to cope with the complex changes in the overseas market, China's supply chain has also begun to actively carry out the global layout, so from China's supply chain to the global supply chain to talk, in the past, we said that going to sea is a simple product to go to sea, and now we have entered a new era of going to sea, which refers more to a business model of enterprises to go to sea, a kind of supply chain to go to sea. This will put forward some higher-dimensional requirements and new challenges for Chinese enterprises at the ESG level.
ESG standards were initially mainly applied to listed companies, but now with the pace of Chinese enterprises going global, more and more small and medium-sized enterprises have begun to pay attention to ESG practices. SMEs are concerned about ESG because it is about how they can successfully enter international markets. At present, the global system and rules are mainly formulated by Western countries, especially European and American countries, with their long-term capitalist accumulation, have established a complete system of laws and regulations, including carbon tariffs and standards related to sustainable development.
These regulations cover the entire life cycle of a product, from design and manufacturing to final disposal and disposal, forming a complete system. In addition to product-specific standards, it also includes sustainability requirements for companies, due diligence and consumer protection, such as green claims. For example, in the first half of this year, the European Union quickly introduced a series of regulations, including the Eco-Product Design Regulation (ESPR), the requirements for building materials under the Building Energy Efficiency Regulation, and the laws and regulations for zero-carbon and near-zero-carbon industries. These regulations have been upgraded from directive to regulation, which means that all EU countries must implement them, which is uniform and mandatory.
As the world's largest supply chain producer, China's products are mainly made in China, and due to overcapacity, China needs to sell products to overseas markets, which has driven significant changes in China's production model. In the past, exporters only had to wait for foreign orders to complete production, but now products must comply with foreign laws and regulations, such as the threshold set by the European Union, if it cannot be passed, the product cannot be exported to Europe. Even if the product is produced locally, it must be done in accordance with the requirements of the European Union.
The meaning of going to sea is not to say that you have to go abroad to set up a factory, but that all products must meet the laws and regulations required by foreign countries. The EU's regulations not only apply to imported products, but also require local products to comply with the regulations. Therefore, even if Chinese companies are homegrown, they must understand and comply with international rules. In addition to the issue of carbon emissions, the EU has also introduced a series of regulations on recycled batteries, automobiles, consumer goods, steel, cement, plastics and other chemical products, covering almost all industrial chains, including the final disposal of products. If businesses do not take these factors into account, their products will face additional costs when exporting to Europe.
For small and medium-sized enterprises, mastering ESG is not optional, it is directly related to whether the enterprise can obtain orders and enter the supply chain of the brand. Since Chinese companies were accustomed to meeting basic requirements, and now Europe and the United States are more demanding, companies need to adapt to this change. SMEs are becoming more aware of ESG and have begun to demand themselves according to the standards of listed companies, as they are part of the supply chain and must meet the requirements of the brand. Whether in the textile, cosmetics or automotive industries, international standards and regulations must be complied with. Small and medium-sized enterprises that have performed well in China have won international orders precisely because they have implemented ESG and understood customer needs. These orders are not only from Europe and the United States, but also from countries along the "Belt and Road".
This requires a third-party organization to provide a better security system for enterprises. China has invested less in this area, and the accumulation of data and standards is relatively weak, especially in the back-end of manufacturing, such as waste disposal. The EU has focused on product disposal, requiring companies to provide relevant information or not be able to enter the EU market. Europe and the United States are well aware of the weaknesses of Chinese companies and exert targeted pressure. China needs to strengthen this area and need the support of third-party institutions to help companies meet the challenges.
China needs to build its own system, and although it is still in the response stage, the ultimate goal is to become the maker of the rules of the game and have more say. At present, China's industry as a whole is in a passive position. ESG is not only a catalyst for corporate transformation, but also a requirement for the EU's green transition. Under the same discourse, Chinese companies need to build their own systems in a solid way, and they need visionary institutions and third parties like Xiaguangshe to work together to ensure the sustainable development of the industry.