Top 10 CSR Trends in China 2021

By Syntao 26 March, 2021

Get ahead with SynTao's Top 10 China CSR trends for 2021 including what the recent 14FYP means

This article was first published by Syntao on their website in Feb 2020, you can see the article here.

Trend One: A Better Business Blueprint in the 14th Five-Year Plan

In October 2020, the Fifth Plenary Session of the 19th CPC Central Committee adopted the 14th Five-Year Plan and Vision 2035 proposal, outlining the main ideas for China’s economic and social development from 2021 to 2025. The main objectives of the 14th Five-Year Plan include new achievements in economic development, new steps in Reform and Opening-up, new improvements in social civilization, new progress in ecological civilization construction, new levels of people’s well-being, and new improvement in the efficiency of national governance. Meanwhile, the 14th Five-Year Plan has also made arrangements for rural revitalization, social construction, green development, and other key areas.

The 14FYP (2021-25) has drawn up a blueprint for good business plus 5 focus areas

The 14th Five-Year Plan has drawn up a blueprint for good business. Sustainable development will become a business consensus. Companies can focus on five areas including domestic consumption, rural revitalization, low-carbon transition, the Belt and Road Initiative, and well-rounded human development. We expect that most companies will be involved in rural revitalization. To create shared value, companies will leverage their expertise to help rural areas develop industries.

Trend Two: Internet Platform Economy Moving Towards Orderly Development

Internet platforms that have changed the way people live and work create huge social impacts. The complexity of Internet platforms determines the importance as well as the difficulty of their social responsibility governance. The recent suspension of Ant Group’s IPO and the release of the Draft of Anti-Monopoly Guidelines for the Platform Economy at the end of 2020 have aroused concern and raised alarm for Internet platform companies. We expect that China’s regulation of the Internet platform economy will be strengthened in 2021, guiding the platform economy towards orderly and healthy development.

Regulation of the internet platform economy will be strengthened in 2021

Specifically, platform companies should, firstly, fulfill their responsibility and manage impacts when doing business; secondly, clarify the scope of responsibility and consider both self-discipline and legal requirements; and thirdly, strengthen governance and establish an all-around governance system covering internal compliance, platform supervision, and external partnership.

Trend Three: Continuous Impacts of Covid-19 on CSR Strategies

The Covid-19 pandemic has had a huge impact on the CSR work of many companies, especially on the implementation of charity projects and volunteer activities. The pandemic has brought companies back to square one to think about what they can bring to the society other than donations, who are the stakeholders that are crucial to the company, and how to strengthen their relationships with these stakeholders.

Covid-19 impacts make CSV projects a priority in 2021 with a focus on SDG3, SDG6 & SDG11

The pandemic will continue to affect companies’ CSR strategies in 2021. We expect CSR budgets to be cut down, donations to be reduced and creating shared value (CSV) projects to be increased. Companies will continue to pay attention to the impact of the Covid-19 on stakeholders, with emphasis on good health and well-being (SDG3), sanitation (SDG6), sustainable cities and communities (SDG11), and other issues.

We also recommend that companies make good use of tools such as the Social Return on Investment (SROI) to scientifically measure the social, environmental, and economic impacts generated by their projects when summarizing the achievements of their CSR projects.

Trend Four: Reframing of Supply Chain Responsibility in the Post-Covid-19 Era

The Covid-19 pandemic and international trade frictions have had a profound impact on supply chain responsibility management. The pandemic has caused supply chain disruption and triggered adjustments and shifts. On the flip side, the pandemic will call on suppliers from both upstream and downstream to pay more attention to the construction of responsible partnerships, and further enhance social protection for relevant parties involved at the end of the supply chain. The cancellation of orders that occurred during the pandemic has once again increased the international community’s attention to responsible procurement.

New directives in 2021 from the EU will draw new supply chain requirements

At the same time, following the supply chain due diligence, legislation introduced by the UK, France, the Netherlands, Switzerland, and other countries, in 2021, the European Union will draw up a new supply chain directive, requiring companies to perform mandatory cross-sectoral due diligence on the environmental, human rights and governance impacts in their supply chains. These national and regional legislation, as well as the Draft UN Treaty on Business and Human Rights, are all indications of the significant trend of human rights and environmental due diligence legislation in the supply chain. We have noticed that some Chinese companies are beginning to formulate and publish human rights policies, which we expect will also become a new trend.

Trend Five: The ESG Eco-system Beginning to Take Shape

The past three years have witnessed the growing number of ESG service providers. Academia has become increasingly enthusiastic about ESG research, and several renowned universities in China have established research institutes related to green finance and ESG. International organizations, industry associations, credit rating agencies, fintech companies, and financial media have also continued to increase their attention and investment in the ESG service sector, forming an ESG eco-system of research, evaluation, education, and publicity together with asset owners, asset managers, corporations and regulatory authorities.

ESG in China will enter a stage of rapid development in 2021…ESG ratings will be key

The ESG eco-system in China will enter a stage of rapid development in 2021. We expect that VCs and PEs will pay more attention to ESG and carry out relevant investments. ESG will continue to gain attention in academia, and investment in R&D will increase. ESG rating will be a key node of this eco-system: listed companies will more closely follow their ESG rating result, making it a powerful driver for listed companies to enhance ESG disclosure and improve ESG performance.

Trend Six: Quantitative Targets Driving Digitization of ESG Disclosure

In December 2020, the 17th Meeting of the Central Committee for Deepening Overall Reform adopted the Reform Plan for the Law-based Environmental Information Disclosure System, pointing out that the legal disclosure of environmental information is an important part of corporate environmental management and a fundamental element of the ecological civilization system. We expect that mandatory environmental information disclosure and ESG reporting requirements for listed companies are on the horizon, with the next step focusing on high-quality ESG disclosure and efficient ESG data use.

Mandatory environ disclosure & ESG reporting requirements for listco’s are on the horizon

At the same time, the latest Hong Kong Stock Exchange ESG Reporting Guide has added several disclosure requirements including quantitative performance indicators, which will drive the digitization of ESG disclosure. The introduction of digital management tools such as the HiESG Information Management System developed by SynTao will be one of the solutions to address the problem of efficient ESG data management. We expect that more companies will adopt digital tools to automate their ESG information management and disclosure processes.

Trend Seven: Carbon-neutral Target Pushing for Corporate Climate Ambition

In September 2020 during the UNGA, President Xi said China will aim to peak its carbon emissions by 2030 and achieve carbon neutrality by 2060. In December 2020, the Central Economic Work Conference for the first time made “reaching peak carbon emissions and carbon neutrality” a key task for 2021.

China’s national carbon market will soon be launched = strong constraints on companies’ emissions

To achieve China’s carbon targets, all ministries, provinces, municipalities, and industries will set carbon reduction policy targets soon. The national carbon market will soon be launched, and strong external constraints on Chinese companies’ carbon emissions will take shape. We believe that companies should take the main responsibility in building a net zero carbon country and we expect that the awareness of carbon reduction among companies will be widely awakened. More companies will set net zero carbon targets. Facing the wave of the low-carbon transition, companies should build their capacity, carry out carbon accounting, set science-based targets, transform and upgrade their process and technology, implement energy-saving and emission reduction projects, and achieve high-quality development.

Trend Eight: COP15 Raising Corporate Engagement in Biodiversity Issues

With economic growth, the focus on environmental protection in China will gradually shift from “tangible” environmental issues, such as pollution, to “intangible” environmental issues, such as climate change and natural capital. In 2021, the 15th Meeting of the Conference of the Parties (COP15) to the Convention on Biological Diversity (CBD) will be held in Yunnan, China; putting put a spotlight on biodiversity and natural capital. At present, some companies have already incorporated biodiversity into their daily management and formulated measures to reduce or minimize adverse impacts on biodiversity. We see this trend becoming a new standard.

Environ protection will shift from “tangible” to “intangible” environ issues

Increased attention will be paid to the blue economy as sustainable marine development is seen to be going mainstream. This trend can be combined with green finance to form a new industry highlight. By the end of 2020, China Industrial Bank and Bank of Qingdao signed the Sustainable Blue Economy Finance Principles hosted by UNEP FI. We expect that more Chinese financial institutions will join in 2021.

Trend Nine: New Programs Advancing Well-being of Women and Children

In 2021, the National Program for Women’s Development (2021-2030) and the National Program for Children’s Development (2021-2030) (“the Programs”) will be released and implemented, setting out the overarching requirements for the work of women and children in the next decade.

The Programs add contents related to family, including “women and family building” and “children and family”, which support women and family building and promote the rights of children to participate in family activities to create harmonious families. At the same time, the new draft of National Program for the Development Children’s Development (2021-2030) makes “Children and Safety” a separate section to prevent and reduce children’s injuries caused by accidents such as traffic, drowning and burns, highlighting the importance of children’s safety. Also, the Programs continue to prioritize “women and health” and “children and health”.

Women & children are vulnerable groups that co’s need to pay attention to

For women, it highlights the need to ensure women’s access to high-quality, effective, and affordable medical and health care services throughout their life cycle and focuses on women’s mental health. For children, it focuses on children’s health service systems, health literacy levels, early development, prevention and control of myopia and overweight/obesity, and mental health.

Women and children are vulnerable groups, and they are CSR focuses for many companies. We suggest companies pay close attention to the progress of the Programs especially the new contents, and advance the well-being of women and children.

Trend Ten: The New “Dual Circulation” Boosting Sustainable Consumption

Under the new development pattern of dual circulation, promoting consumption, upgrading traditional consumption, and cultivating new types of consumption are important measures to expand domestic demand and achieve consumption upgrade. In December 2020, the 17th Meeting of the Central Committee for Deepening Overall Reform adopted the Guiding Opinions on Accelerating the Establishment and Improvement of an Economic System for Green and Low-Carbon Circular Development, which proposes to establish an economic system for green and low-carbon circular development, promotes the overall green transformation of economic and social development and advances green consumption.

More companies will focus on the development of sustainable product lifecycle to establish new competitive advantages

We expect more companies will focus on the development of sustainable product lifecycle to establish new competitive advantages; they will also strengthen communication with consumers through cause-related marketing and advocacy activities, to guide the upgrading of consumers’ sustainable consumption concepts and behaviors.

Carbon and plastic reduction will be a centerpiece of sustainable consumption. The Opinions on Further Strengthening the Treatment of Plastic Pollution has stated that the use of disposable plastic products should be prohibited step by step and by sector. We expect that the impact of this policy on relevant sectors and companies will become more evident in 2021.

Acknowledgements: We would like to thank Cao Xuanwei, Guo Yi, Han Bin, Li Li, Li Wen, Liang Xiaohui and Zhang Xubiao for their contribution to this work.

Further Reading

• Top 10 Responsible Investment Trends In China In 2020 – With their finger on the pulse, SynTao Green Finance runs through 10 key trends on responsible investing in China in 2020
• The Evolution Of Chinese Corporate Social Responsibility – Chinese businesses are embedding ESG and CSR issues into their decision-making, but water gurus Prof. Asit Biswas & Dr. Cecilia Tortajada want more – from better reporting to stronger local enforcement
• ESG Doomsday Preppers – Many laughed at Doomsday preppers but who is laughing now as companies integrating ESG outperform during the crisis? ADMCF’s Alison Lee explores why this is & the future direction
• Dirty & Thirsty – Not Just A Paper Tiger – China is the world’s largest paper producer but the industry is a Top-3 polluter. Pollution crackdowns have led to cuts across provinces and water quality has improved. With rising enforcement, is this just the beginning?
• Where Is The E In ESG Disclosure In China? – China is moving to mandatory environmental disclosure with a tentative 2020 deadline, but where are listco’s now? China Water Risk’s Dawn McGregor & SynTao’s Dr. Peiyuan Guo share 8 key takeaways from their newly released joint report, “CHINA PRIORITISES ENVIRONMENT: More Disclosure Needed To Match Rising Risks”
• 5 Trends For China Green Finance – Stay on top of China’s green finance trends & opportunities with China Water Risk YuanChao Xu’s 5 key takeaways from China’s Green Finance Committee Annual Conference. From mandatory disclosure to ERA and One Belt, One Road to green buildings

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