How businesses in China should balance prosperity and ESG

Over the past few decades, customers and consumers have become more environmentally and socially aware of how products and services affect the natural world and society. 

Consumers are becoming selective, choosing products by companies recognised for their environmental and societal protection efforts, and expect producers to share these responsibilities. This is especially apparent in China, where today’s comparatively more vocal younger generation is concerned about the environment and social issues—particularly on social media. 

Across China, a key topic is environmental, social and governance (ESG) factors, which have become necessary for many Chinese consumers who want to ensure their consumption is—and remains—sustainable. ESG is also increasingly vital for Chinese companies to export their products to the European Union and other international markets. 

Accordingly, there is mounting pressure in China, as witnessed during the recent Lianghui or ‘Two Sessions’ in China, for industrial and commercial sectors to integrate ESG into the standard operating procedures for not only the success of their business and trade but also for the welfare of people and the planet. 

How can ESG benefit business?

Consider ESG as critical practices, such as standard operating procedures or policies, implemented by organisations and corporations to alleviate harmful impacts and improve the benefits of a healthy environment and society. 

With origins dating back to the early 2000s, ESG has become the expected norm in recent years. Investors have become more aware of the importance of ESG criteria in their investment decisions, and as a result, many businesses have begun integrating ESG into their operations and business strategies.

ESG and other forms of social approval, such as ‘social licenses’, clearly offer advantages to consumers and communities, who can decide whether the products they buy or their work environment will benefit or harm them. The various forms of environmental and social licenses and governances can allow companies and organisations to develop plans that will reduce social problems and environmental harm, which will attract consumers, customers and employees from the younger generations (who, in turn, may be more loyal to such companies throughout their lives). 

Environmental and social licenses will also reduce workplace health and safety accidents and injuries, thus improving staff welfare. Younger generations, especially investors, are looking beyond traditional financial outcomes and projections to consider ESG. 

Standard corporate social responsibility (CSR) processes, such as recycling waste paper or arranging a charity performance, can be a part of ESG but do not entirely address its obligations. Unlike CSR, an internal initiative that can be used to achieve a corporation’s purpose and which may include company and corporate policies that address social and environmental concerns, ESG reflects a company's external impact and how the company is viewed by investors, consumers and the wider society. 

With investors and consumer purchasing habits becoming savvier, many consumers and stakeholders will know the difference between companies genuinely committed to real long-term sustainability across all stakeholder groups and those claiming to be sustainable yet falling short on ESG. Given this, it would be recommended that companies and organisations integrate both ESG and CSR activities into their annual budgets and work plans for ultimate business success.

Where should Chinese companies begin? 

ESG is becoming a global trend, and Chinese consumers and companies alike are keen to integrate ESG into their purchasing habits and production plans. Moreover, to attract foreign investors to invest in China and thus bolster and diversify the economy, companies are now expected to employ ESG initiatives. Yet this has become a cause for concern among many companies and corporations, especially established ones. 

Despite this, integrating ESG initiatives should not be a daunting task that requires significant structural changes or overhauls to standard business and production protocols. A critical guiding framework that Chinese corporations and firms can employ is the United Nations Sustainable 

Development Goals (SDGs), which can enable business leaders and executives to make necessary changes to address critical sustainability issues. 

To start with, get the conversations flowing. Arrange team meetings to get people to discuss sustainability ideas, such as how they can link their business or organisation’s operations to the SDGs. These conversations should include employees from the younger generations, or millennials and Gen Z. Indeed, younger staff involvement can help foster an environment of staff welfare and care, reducing staff turnover, too. Once staff are aware of the SDGs and the plans to develop ESG initiatives, the following steps can be taken: 

• Develop a focus group or steering committee to examine the SDGs and how different goals can benefit the company or organisation through supply-chain sustainability, leading to positive impacts on the environment and society.
• Define your company’s mission towards ESG and its values and what your approach will be to achieve ESG; ideally, your mission will address all the SDGs that are relevant to your company or organisation.
• Identify how internal structures will be developed and optimised to ensure business and operational efficiency while also achieving the desired ESG outcomes, which, again, can be linked to the relevant SDGs.
• Incorporate the internal structures into annual work plans and budgets and begin implementing the ESG initiatives.
• Monitor and evaluate the ESG initiatives to ensure they benefit both the environment and society and continue to be aligned with the SDGs; if the existing ESG initiatives are insufficient, review, reassess, and adapt the planned initiatives, which can be implemented. The review process should take place at least once every two years.

Building your ESG narrative 

Once you have your ESG initiatives that benefit the environment and society, you must communicate your activities consistently across all relevant internal and external touchpoints. All stakeholders (including consumers and the wider public, as well as all levels of government and internally) will be keen to understand your initiatives and commitments fully. To develop an ESG narrative, the following points should be considered:

• Showcase your successful ESG initiatives currently being implemented. This can demonstrate your commitment to environmental management, social welfare, and long-term sustainability. This information should be presented on your company’s website.
• The website should have a dedicated section for ESG bilinguals in Chinese and English. Photographs of ESG initiatives in action should be included, along with relevant quotes, stories, and anecdotes from employees and the broader community highlighting ESG successes. The website's content should be brief and straightforward, without too much scientific or technical terminology and with no hyperbole. Similarly, the content should be accessible and inspiring for others and written in a humanised tone.
• Produce short videos of the ESG initiatives featuring interviews with employees, environmentalists, and the wider community. The videos should demonstrate the ESG initiatives and contain subtitles to accommodate anyone hearing or hearing. Simple yet compelling graphics, such as basic flow charts, can also be developed to present and post the ESG process on social media platforms.
• In media relations activities, always incorporate an angle that showcases your company’s commitments to ESG initiatives. Make your internal ESG representatives and other senior representatives within your business or organisation available for interview engagements and quotes.  
• Use social media platforms to showcase your initiatives and start conversations about ESG and its importance for a more sustainable future. Engage with stakeholders online to demonstrate thought leadership and willingness to ask challenging questions, as well as to ask about followers’ commitments and experience in ESG.
• Social media content should be broken down into ‘bite-sized’ stories for easy consumption. Leave the longer storytelling for reports (which can be linked to the social media posts).
• Create an internal newsletter or expand an existing one, which should include sections focusing on ESG and ESG-related initiatives, milestones, and other inspirational activities. 
• Be honest and do not make exaggerated claims or unlikely commitments. Responsible investors and consumers will have no interest in a company that relies on misinformation and greenwashing. 

What next? 

ESG and other environmental and social responsibilities may seem daunting, especially for established businesses and firms in China. However, the benefits for business and stakeholder engagement cannot be overstated. Moreover, initiating ESG programmes can also improve psychological well-being due to favourable environmental and societal impacts. 

For further guidance, SPRG can help your business or organisation build a compelling ESG narrative and strategy to position your organisation for success among consumers, investors and public stakeholders. This can help ensure a loyal customer base while reducing staff turnover and ensuring the long-term sustainability of your business or organisation’s future, with benefits for business, people and the environment.  

Arthur R. Hagopian is senior director of global strategy of SPRG Chuhai at Strategic Public Relations Group in Beijing.