Susan Li
CEO of International Business Department, Brighture, China
Susan Li is a highly experienced solicitor and barrister with a wealth of legal expertise in China and Australia. Susan is also a member of several law societies and associations, including the ACLA, Qingdao Law Society of Shandong, and Queensland Law Society. A native speaker of Chinese Mandarin and highly fluent in English, Susan’s experience includes working as a legal and public affairs director for a US Fortune 500 company in South East Asia and Greater China, as well as serving as a senior partner and administrative board chairman at Beijing Jingsh Law Firm. She is currently serving as an International Business CEO at Brighture Tax and Accounting.
China embraces ESG
August 2, 2024
There has been a seismic shift toward ESG in Chinese corporate culture of late. Few other countries find the ESG concept dovetails perfectly with government policy, as it does with China’s social modernisation goals.
Aligning ESG with China’s social modernisation goals
‘The carbon goal of improving environmental quality, the focus of rural revitalisation on social equity, and the emphasis of governance modernisation and efficiency, all provide a broad development space and diversified practice methods for ESG practice in China,’ said Susan Li, VP of Kreston Brighture. ‘Implementing ESG is a practical strategy for more and more Chinese corporates. Meanwhile, ESG outstanding enterprises are more likely to win the favour of investors, which helps to improve corporate financing ability and overall value in the capital market.’
State-owned enterprises and ESG
The high rate of state-owned enterprises (SOE) in China means the government is able to force through ESG adoption. The Chinese government has made ESG compliance a priority and SOEs have to align closely with national strategies and regulations, which can drive their ESG initiatives.
But the way SOEs approach ESG can be very different from their privately-owned counterparts. SOEs are accountable not only to shareholders but also to the government and the public. Their ESG efforts are closely watched by regulators and the general populace, which can result in a stronger emphasis on transparent reporting and accountability in their ESG practices.
They can also afford to have a long term view by focusing on objectives that align with national goals, rather than short-term profit maximisation. The emphasis on aligning with governmental priorities, means that market demand is a long way down the list of considerations. Best of all, they have considerable budgets, thanks to their government backing.
Challenges in ESG implementation within Chinese corporates
However, this does not mean that ESG is an easy sell within China. ‘Some SOEs might experience a slower pace of change in implementing ESG practices compared to private companies,’ said Li. ‘They often have an established bureaucratic process, and they can be resistant to shifting organisational culture.’
There is also a considerable skills gap within Chinese companies for developing and implementing ESG. Although awareness has increased, many employees and management teams in Chinese companies may still have a limited understanding of what ESG entails and its implications for business operations.
Building ESG competency in China
Implementing effective ESG practices often requires specialised knowledge in areas such as sustainability reporting, environmental management, social impact analysis, and corporate governance, which many companies do not have. There is often a difficulty in integrating ESG considerations into core business strategies and operations, and as regulations around ESG evolve, employees may not have sufficient knowledge of relevant laws and standards.
Strategies for overcoming ESG implementation barriers
Effective ESG implementation relies heavily on data collection, analysis, and reporting. Many companies may lack the technical skills necessary to gather, process, and analyse data, and then they may not be able to communicate their ESG strategy to various stakeholders, including customers,
‘Implementing ESG initiatives often involves multi-disciplinary approaches and cross-functional teams, requiring strong project management skills,’ said Li. ‘To address these gaps, it is essential for companies to invest in training and capacity-building programs, bring in external expertise, and foster a culture that values sustainability and social responsibility. Collaboration with ESG consultants and implementation partners can also help bridge the skills gap and facilitate the effective integration of ESG practices within their operations.’
Navigating government regulations and local laws
Implementation partners must understand and address several core demands and needs unique to the Chinese market, according to Li.
‘Chinese companies are increasingly subject to government regulations regarding ESG practices,’ she said ‘Implementation partners must ensure that their strategies align with local laws and guidelines, such as the Green Development Goals and various environmental protection laws.
‘Chinese firms are looking to enhance their competitiveness through improved ESG practices,’ she continued. ‘Implementation partners should help companies leverage ESG as a differentiator in both domestic and international markets.’
Tailoring ESG to Chinese business practices
The cultural adoptation of ESG within Chinese companies is one that partners have to get a handle on right from the start if they want to meet client’s needs and have a good working relationship.
‘Partners must tailor their ESG frameworks and recommendations to resonate with local business practices and societal norms,’ said Li. ‘Chinese firms increasingly appreciate the need for a sustainable business model that supports long-term growth. Partners should assist in embedding ESG into overall corporate strategy rather than a standalone initiative.’
It can be quite a cultural shift for partners to get their heads around the concept that the market is not the boss of Chinese companies. But if they can make that alignment with Chinese companies, a booming market awaits them.
If you would like to speak to an expert in China, please get in touch.
