CDP China Launch: Green Development Through Environmental Disclosure

In March, representatives from ADEC ESG Solutions attended CDP’s 2018 China Report Launch, “Facilitating Green Development Through Environmental Disclosure.” The meeting brought together voices from CDP, Chinese government agencies, climate NGOs such as IPE and the Carbon Trust, and other participating companies. Keep reading to find out what we learned from the event.

Current Trends

Consistent with the goals laid out by the Paris Agreement, CDP China identifies a number of key goals that are crucial to understanding the current situation around green development in China:

• The Chinese government has set a goal of reducing carbon emissions by 60-65% of 2005 levels by 2030, when it expects China’s carbon emissions to reach their peak and begin to decline.
• It has also set goals to have at least 20% of primary energy consumption drawn from non-fossil fuel sources by 2030, and to increase the volume of China’s forest stock by around 4.5 billion cubic meters compared to 2005 by the same year.

CDP China also recognized trends among its responding organizations, including:

• Worldwide, more than 7,000 companies responded to the 2018 CDP questionnaire, 618 of which were Chinese companies.
• Of those 618 companies, the vast majority were supply chain members, making up the roughly 80% of suppliers responding to requests for disclosure.
• In 2018, five Chinese companies responded to the CDP Forestry questionnaire, becoming the first companies within China to do so.

Insights & Findings

The report reached a number of notable findings that give a more detailed picture of green development in China in 2018. Key insights include:

• Current Chinese government policy is encouraging the development of green finance in a variety of ways, including encouraging the creation of new green finance products, by offering green loans and green insurance, and by reaching out internationally to share best practice with other nations.
• Most Chinese companies report climate change-related issues to their boards. However, this is not always sufficient to ensure that appropriate action is taken. By clarifying the responsibilities of different employees and departments and creating management-level incentives, many companies will be able to improve their ability to develop strategy around these issues.
• Most companies develop financial impact analysis for climate related risks through cross-departmental management. For example, the governance of climate-related risks is typically a concerted effort, involving the cooperation of multiple departments, including finance, R&D, production, and supply chain. Currently, due to current lack of information or information asymmetry among departments, many companies have room to improve their risk and opportunity evaluation.

Looking to the Future

Over the coming year, CDP hopes to continue to play a positive role in the Chinese green development landscape. In preparation for the 2019 and 2020 reporting seasons, CDP will work to help Chinese companies further develop their governance in relation to ESG issues, to encourage investors to increase their contributions to ESG research and green finance initiatives, and to prepare even more Chinese companies to report to CDP. The 2018 CDP China Report is an important landmark in the development of environmental reporting in China, and all the stakeholders that it has brought together are keen to see the successes of 2018 built on into the future.

ADEC ESG Solutions is a leading provider of ESG solutions, including fully-integrated industry expertise, software solutions, and data management. Contact us to learn more about how we can work with you to design custom solutions for your sustainable supply chain.