Sustainable Column | ESG Disclosure Comparison of Three Major Urban Clusters: Surprisingly, the Yangtze River Delta Ranks Last?

Who has the highest level of ESG information disclosure among listed companies in the Yangtze River Delta, Pearl River Delta, and Beijing-Tianjin-Hebei city clusters? The "China Listed Companies Environmental Responsibility Information Disclosure Evaluation Report (2022)" jointly released by the China Environmental Journalists Association and Beijing University of Chemical Technology in February attempts to answer this question.

It is reported that the China Environmental Journalists Association (full name "China Environmental Journalists Association") is a national social organization voluntarily formed by news units such as national newspapers, radio, television, news agencies, and environmental journalists. It is a member of the Asia-Pacific Environmental Journalists Forum, and its superior supervisory unit is the Ministry of Ecology and Environment.

Among all listed companies, the "Report" evaluated two "five-star" companies and 16 "four-and-a-half-star" companies. The five-star companies are mainly distributed in the Beijing-Tianjin-Hebei and Pearl River Delta regions. There are 13 companies rated four-and-a-half stars or above, with 5 of them in the Pearl River Delta. However, in terms of score rates for various indicators, the environmental information disclosure level in the Yangtze River Delta region is relatively lagging behind.

According to analysts from Wall Street News, the "excellence" of Beijing-Tianjin-Hebei is likely due to a higher number of state-owned enterprises, while provinces with developed private economies such as Zhejiang and Jiangsu have a lower proportion of state-owned enterprises. Overall, the Yangtze River Delta only performs well in a few dimensions of social governance.

Driven by "National Champions"

The "Report" found that the level of environmental responsibility information disclosure of Chinese listed companies steadily increased in 2022, with a disclosure index of about 40.57, an increase of 1.7% compared to the previous year. The overall level is at the "two-star" stage of development, and two-thirds of listed companies have not disclosed environmental responsibility information.

Among the 5,078 listed companies in the Shanghai and Shenzhen stock markets, a total of 1,675 companies released effective samples of social responsibility reports, ESG reports, sustainable development reports, environmental reports, and corporate citizenship reports in 2022. This accounts for 32.99% of all listed companies, an increase of 387 companies compared to the previous year, with a growth rate of 25.42%.

Regional data shows that the average environmental responsibility information disclosure index in the Pearl River Delta region is 42.59, 42.24 in the Beijing-Tianjin-Hebei region, and 36.61 in the Yangtze River Delta region (the average of the three regions is 39.89). In terms of score rates for primary indicators, the three regions have similar rates. Among them, the Beijing-Tianjin-Hebei region has the highest score rates for environmental management and environmental performance, which are 48.10% and 39.33% respectively. The Pearl River Delta region has the highest score rate for stakeholder indicators, which is 51.36%.

The "excellence" of Beijing-Tianjin-Hebei is likely related to its larger number of state-owned enterprises. Under the influence of the top-level design that strongly promotes the "dual-carbon" policy, state-owned enterprises have become the vanguard driving ESG development.

In December 2021, the State-owned Assets Supervision and Administration Commission issued the "Guiding Opinions on Promoting High-quality Development of Central Enterprises and Doing a Good Job in Carbon Peak and Carbon Neutrality". It clearly defines the goals of optimizing the industrial and energy structure of central enterprises and strives to achieve significant results in comprehensive green and low-carbon transformation by 2030. By 2060, a green, low-carbon, circular development industrial system and a clean, low-carbon, safe, and efficient energy system will be fully established for central enterprises. This puts higher demands on central enterprises to coordinate and utilize resources and strengthen green guidance in key industries. The improvement of environmental information disclosure is an important part of assisting all central enterprises in promoting the "dual carbon" transformation.

In March 2022, the State-owned Assets Supervision and Administration Commission (SASAC) established the Social Responsibility Bureau, emphasizing the need to "focus on the construction of the social responsibility system of central enterprises, and guide and promote enterprises to actively practice the ESG concept." In May 2022, the State Council SASAC issued the "Work Plan to Improve the Quality of Central Enterprises' Holding Listed Companies," which clearly requires further improvement of the environmental, social responsibility, and corporate governance (ESG) mechanisms, and promotes the continuous improvement of ESG professional governance and risk management capabilities of central enterprises' holding listed companies. It also encourages more central enterprises' holding listed companies to disclose ESG special reports, striving for "full coverage" of relevant special report disclosures by 2023.

In July 2023, the SASAC Office issued a notice on forwarding the "Research on the Preparation of ESG Special Reports for Central Enterprises' Holding Listed Companies," aiming to provide reference for ESG information disclosure of central enterprises' holding listed companies, which is conducive to their high-quality completion of the "full coverage" work requirements and fully utilizing the market pricing function to guide capital services to the real economy.

According to statistics from the Green Finance Institute of Central University of Finance and Economics, the disclosure rate of ESG/social responsibility reports of central state-owned enterprises has maintained a steady upward trend in the past four years, with a significant growth rate since 2021. As of July 31, 2023, among the 450 central state-owned enterprises listed on the A-share market, a total of 347 have disclosed ESG/social responsibility reports, with a disclosure rate as high as 80.70%. In addition, among the 929 local state-owned enterprises listed on the A-share market in 2023, 478 have disclosed ESG/social responsibility reports, with a disclosure rate of 51.45% for the current year. These proportions are higher than the average disclosure level of listed companies nationwide.

In terms of regional distribution, the provinces with the highest proportion of state-owned enterprises are Shanxi (80%), Shaanxi (73%), Anhui (65%), the Beijing-Tianjin-Hebei region (64%), as well as Yunnan (63%), Jiangxi (62%), and other provinces in the central and western regions. In provinces with a developed private economy such as Zhejiang (20%) and Jiangsu (25%), the proportion of state-owned enterprises is relatively low.

More than one research analysis shows that in important planning areas, the overall performance of the Beijing-Tianjin-Hebei region is excellent. For example, a previous report by the Golden Roundtable Rating pointed out that the Yangtze River Delta region scored lower than the national average in terms of environmental dimensions, and the overall ESG score was slightly lower than the national level. In terms of social dimensions, the Yangtze River Delta performed well in terms of production safety and product quality and safety, surpassing the Beijing-Tianjin-Hebei region. However, it performed poorly in terms of social investment, supply chain, and peer management, lower than the national average. The Beijing-Tianjin-Hebei region scored above the national average in all attributes, with most of them outperforming the Yangtze River Delta region. In terms of governance dimensions, the Yangtze River Delta has developed more maturely in terms of top management structure and behavior, with higher scores. The scores for party building in the Yangtze River Delta and the Beijing-Tianjin-Hebei region are slightly lower than the national level. However, the Beijing-Tianjin-Hebei region has implemented more comprehensive supervision and evaluation, as well as outstanding quality of ESG-related information disclosure by enterprises. In terms of specific attributes, companies in the Yangtze River Delta region are most lacking in terms of pollution emissions, environmental information disclosure, social investment, executive behavior, and regulation and evaluation. Only one attribute (product quality and safety) scored higher than the national average. In contrast, the Beijing-Tianjin-Hebei region is relatively lacking in terms of executive structure, while the performance of other attributes is better than the national average.

It is worth noting that among the top 20 companies, 8 companies from the tertiary industry appeared for the first time, and one of them reached a five-star level. The disclosure of environmental responsibilities in the tertiary industry is increasingly improving. The top ten companies in this year's ranking are China Merchants Port, Sinopec, Yao Kangmingde, Zhejiang Business Zhongtuo, State Power Investment, Zhejiang Fu Holdings, China Merchants Bank, Bank of China, China Mobile, and Changfei Optical Fiber.

The report classifies listed companies into six categories: state-owned enterprises, private enterprises, public enterprises, foreign-funded enterprises, collective enterprises, and other enterprises, based on ownership, with significant differences in disclosure levels. Among them, collective enterprises have the highest disclosure index score (47.03 points), followed by public enterprises (42.28 points), and state-owned enterprises (42.02 points). These three types of enterprises are all higher than the average score.

Although the overall disclosure level is steadily improving, there are still some companies with weak disclosure awareness. According to the information released by the Ministry of Ecology and Environment in 2022, some listed companies have not disclosed the ecological and environmental issues after being reported or punished on their official websites or related reports. For example, Nantong Yaolong Metal Manufacturing Co., Ltd. in Nantong City, Jiangsu Province changed its management category without a permit for discharging pollutants; Tianjin Wujing District Faste (Tianjin) Energy Management Co., Ltd. modified the upper limit of particulate matter range to evade regulatory emission of air pollutants; Nanjing Hongtaiyang Biochemical Co., Ltd. falsified the environmental impact assessment documents; Yuxi City, Yunnan Province dealt with cases of excessive emissions of air pollutants and guided assistance to help companies achieve standard emissions.

For the first time, the report classifies listed companies by industry into seven categories: agriculture, forestry, animal husbandry, and fishery; mining; manufacturing; public utilities; construction; services; and high-tech industries. The overall performance of all industries needs to be further improved. Among them, in the manufacturing, public utilities, construction, services, and high-tech industries, the disclosure level of most companies is in the development and initial stages, accounting for 68.7%, 69.9%, 72.2%, 75.6%, and 59.0% of the companies in these industries, respectively. As a highly resource-intensive industry, the mining industry has a moderate performance, with 58.3% of companies in the catching-up and development stages, facing many challenges in terms of disclosure. The agriculture, forestry, animal husbandry, and fishery industries lack outstanding and excellent-rated companies, with great potential for improvement in environmental information management.

In the current year, 1,584 listed companies disclosed carbon information to varying degrees. Among the 1,675 companies that released valid samples, the proportion was 94.57%, an increase of 11.32% compared to the disclosure rate in 2021 (83.25%). Among them, 1,124 companies (70.96%) are from the primary and secondary industries, and 460 companies (29.04%) are from the tertiary industry. The remaining 91 companies did not disclose carbon information, accounting for 5.43%. The disclosure rate of carbon information by various companies has significantly improved. The overall average disclosure rate of greenhouse gas environmental performance for 1,675 listed companies is 32.55%. Among them, there are a total of 770 companies that have a disclosure rate higher than the average, accounting for 45.97% of all companies.

In terms of industry analysis, the average disclosure rate of carbon information for 1,177 companies in the primary and secondary industries is 33.63%, while the average disclosure rate for 498 companies in the tertiary industry is 32.26%. The carbon information disclosure quality of the primary and secondary industries is still better than that of the tertiary industry.

In addition, the overall level of carbon information disclosure in the Shanghai and Shenzhen stock markets has significantly improved compared to the previous year. In 2022, the average disclosure rate of carbon information for Shanghai-listed companies is 32.53%, and for Shenzhen-listed companies is 32.60%, both showing a significant increase compared to the previous year.