Molly Su and Suodi Xi explain China’s efforts to improve carbon data transparency for corporations – and in turn, incentivise cutting emissions.
Over the past three years China has focused on improving environmental disclosures by companies – using both voluntary and mandatory measures. This goes hand in hand with measures to encourage companies to introduce their own initiatives to incentivize customers to cut emissions, too.
In this post, Molly Su and Suodi Xi share the latest shifts in the transparency space in China. They look at five things revolutionising the carbon disclosure landscape in China.
To learn more on China’s carbon markets, see our explainer and insights on its one-year anniversary.
Thing one: How voluntary environmental information disclosure is encouraged
Banks are increasingly taking into consideration environmental reports to encourage sustainable practices when approving loans. Along the same lines, companies are encouraged to voluntarily disclose environmental performance to helps establish a positive social reputation. Here’s how:
- Listed companies are encouraged by third-party organisations. The Shenzhen Stock Exchange (SZSE) and Shanghai Stock Exchange (SSE) promote disclosure of pollutant data in social responsibility reports or individual reports.
- Listed companies controlled by state-owned enterprises (SOE) are encouraged to disclose ESG reports by the State-owned Assets Supervision and Administration Commission (SASAC), aiming for “full coverage” by 2023.
Thing two: How mandatory disclosure requirements have grown
In 2022, regulations requiring the disclosure of environmental information expanded to:
- cover more entities
- introduce a centralised reporting system
- require detailed carbon emissions information, and
- increase the maximum fine to 100,000 yuan. Currently, enforcement primarily relies on administrative penalties and civil liabilities, but a comprehensive system is planned by 2025.
Thing three: Providing guidance for enterprises to disclose environmental information
Companies are increasingly choosing to disclose emissions from operational activities – across scopes one, two and three – and across the value chain under a framework developed by the China Enterprise Reform and Development Research Society. For financial institutions, environmental disclosure is required by guidelines issued by The People’s Bank of China.
“Carbon neutral” or related reports produced by third-party certification bodies are used by some companies.
Thing four: A role for individuals to cut their carbon footprint
Platforms like Ant Group’s “Ant Forest” are incentivising people to cut personal carbon emissions by changing behaviors (whether walking, bike riding or switching to renewable energy for their homes, for example). These programs provide rewards, such as green energy, trees or protected land, based on an individual’s carbon reduction achievements. This lets individuals get involved and promotes sustainable practices.
Want to know more? See other insights from Molly, including from our Carbon Markets Series: