Recently, MSCI Mingsheng, an international authoritative index agency, released a batch of latest ESG rating results. The ESG ratings of several well-known domestic enterprises such as Vipshop, Ideal, Xiaopeng, and Tebu have been upgraded compared to before.
In fact, in recent years, enterprises in industries such as consumer retail, real estate, steel, internet, and finance have been actively adjusting their strategies and development directions, actively participating in the implementation of China's major strategic goals of "carbon peak" by 2030 and "carbon neutrality" by 2060, and integrating ESG concepts into every aspect of enterprise daily operations.
Meanwhile, with the steady increase in the scale of ESG information disclosure by Chinese enterprises, ESG has become a mainstream investment philosophy and corporate evaluation standard. According to the earnings performance of ESG funds that have emerged in recent years, companies with higher ESG scores have shown significant advantages in both long-term returns and corporate growth.
Transforming Thinking Patterns, Enterprises Quickly Promoting ESG Management
With the increasingly severe forms of global climate change, China is also emphasizing public welfare activities such as energy conservation, emission reduction, and green environmental protection. In September 2018, the China Securities Regulatory Commission revised and increased the responsibilities of listed companies in environmental protection, social environment, and other aspects, emphasizing the guiding role played by listed companies.
But before 2020, it was mostly for enterprises and individual consumers to actively participate and consciously respond. Since September 2020, the Chinese government has officially clarified the "dual carbon" goal, and has also put forward higher and updated requirements for the operation and management of enterprises, which are important socio-economic entities.
ESG management refers to the active adjustment of enterprises to adapt to their own industry in terms of environment, society, and governance, in order to achieve a green, low-carbon, and sustainable business operation model. Most importantly, ESG management is not essentially a cost expense, nor a burden on business operations. On the contrary, improving ESG management can help enterprises achieve efficiency improvement and move towards high-quality transformation and development.
Under the call of the new transformation goals, more and more listed companies are actively taking the first step of disclosing ESG management information. A research report shows that from 2017 to 2022, the number of A-share listed companies disclosing ESG reports increased from 851 to 1812, and the disclosure rate increased from 24.55% to 35.76%.
Since 2023, the number of A-share listed companies actively disclosing ESG independent reports has increased to 1825, with a disclosure rate increasing to 36.02%. The disclosure rate in industries such as banking, mechanical equipment, pharmaceutical biology, computers, and automobiles is relatively prominent. As of the first half of 2023, there are 1930 listed companies in Hong Kong that have released ESG reports, accounting for 74%, and their disclosure rates are constantly improving.
Based on the different focuses of various industries, and around the three dimensions of environment, society, and governance, comprehensive consideration of whether the company's operational practice elements will constitute potential investment risks outside of the financial statements is becoming a topic of increasing concern for investors beyond the cold report data.
At the same time, the disclosure quality and construction determination of ESG management content by enterprises also reflect important content beyond financial data such as their internal operational management model, company culture, and brand reputation, which affects investors and external institutions' evaluation of the enterprise's business resilience and development prospects.
A study by scholars from the International Institute of Green Finance at the Central University of Finance and Economics shows that corporate ESG performance and its three dimensions can significantly improve corporate performance and innovation level.
According to the earnings performance of ESG funds that have emerged in recent years, companies with higher ESG scores have shown significant advantages in both long-term returns and corporate growth. In the past three years, 56.22% of ESG funds have ranked in the top 50% of similar funds; Relaxing to within five years of returns, 63.28% of ESG funds rank in the top 50% of similar funds, with most concentrated in the top 20%, demonstrating excellent performance.
Deepening the construction of high-quality development, still on the way
Behind the growing disclosure of ESG data, companies are actively and efficiently practicing high-quality transformation and development, striving to achieve the desire of "overtaking on curves".
However, in order to achieve long-term sustainable development, information disclosure and proposing new development goals are only the first step. Enterprises also need more institutional and innovative construction, integrating ESG management practices into daily operations and strategic vision planning, and internalizing them into a part of the company's soft and practical capabilities.
For example, from establishing a top-down ESG specialized committee, to actively mentioning ESG management content in financial reports, to organizing and publishing enterprise sustainable development reports, actively participating in the establishment and selection of industry sustainable standards, and promoting common transformation and development of the industry... Some domestic enterprises have established a feasible ESG management system and are moving towards environmental protection, rural revitalization, and other environmentally friendly areas The transformation direction of cultural friendliness continues to advance.
Taking Vipshop as an example, the company has issued ESG reports for two consecutive years, improved its internal ESG governance system, and proposed clear carbon reduction commitments such as "achieving carbon neutrality for its own operations no later than 2030 and reducing category three carbon emissions intensity by 50% no later than 2030". In October of this year, Vipshop MSCI ESG rating was upgraded from "A" to "AA", which is a leading level in the industry.
Expanding to the e-commerce and retail industries where Vipshop is located, as consumers' awareness of green consumption increases, they have higher requirements for the environmental characteristics of their products. Consumption demands such as energy conservation, green packaging, and low-carbon raw materials have become new requirements for brand and e-commerce platform operations.
However, achieving green, low-carbon, and excellent governance within an enterprise is relatively simple, but ESG governance that ensures operational effectiveness, growth rate, and service success, while also taking into account supply chain and other related aspects, poses great challenges for all enterprises.
In the first 10 months of 2023, China's online retail sales reached 12291.5 billion yuan, a year-on-year increase of 11.2%. Among them, the online retail sales of physical goods reached 103010 billion yuan, an increase of 8.4%, accounting for 26.7% of the total retail sales of consumer goods in society. In the face of long-term growth and massive consumer demand, mainstream domestic e-commerce platforms not only shoulder their own profit and revenue needs, but also have a huge responsibility for emission reduction, which is related to the long-term development of the entire society.
At present, the urgent focus in the e-commerce retail industry is the problem of a large number of discarded packaging materials. In response to this situation, including Vipshop, multiple domestic e-commerce platforms and logistics cooperation enterprises have taken the initiative to build a reduced, green, and recyclable packaging system. In addition, by improving the level of digital management, more paperless operations and the use of clean energy in transactions and commodity circulation have become the low-carbon innovation direction practiced by more and more enterprises.
Actively promoting by enterprises can promote consumers to establish more green and low-carbon consumption methods, and achieve sustainable commercial development jointly built by businesses, logistics, platforms, and consumers. Taking this opportunity, brands and platforms can also increase their positive reviews in the minds of consumers, enhance their influence, shape a good reputation, and thereby enhance market competitiveness.
However, it should be noted that for regulatory agencies, enterprises, and investors, the evaluation standards for ESG management level have not yet been unified. Although multiple foreign third-party institutions, such as MSCI, FTSE Russell, Dow Jones, etc., have their own ESG evaluation standards, the evaluation focus varies among each institution.
Similarly, in China, there are significant differences in ESG management indicators and data disclosed by enterprises, making it difficult to compare horizontally within the same industry and unable to fully demonstrate differences. This still requires a long period of time for enterprises and industry organizations to participate in research and co construction, rather than relying solely on the active disclosure of enterprises.
As domestic enterprises in various industries increasingly see that in addition to pursuing economic benefits and legal responsibilities, the high-quality development benefits brought about by social responsibility and green innovation are feeding back the enterprises themselves, forcing them to improve their internal management systems and operational control capabilities. The era of only pursuing financial growth is coming to an end, and a new era of embracing long-term sustainable high-quality development has arrived.