The manufacturing industry, as the cornerstone of the national economy and a core component of industry, has played a crucial role in promoting China to become the only country in the United Nations Industrial Classification that has all industrial categories. Improving the quality of manufacturing is undoubtedly the core task of China's economic development.
The 20th National Congress report emphasized the strategic goals of "accelerating the construction of a manufacturing powerhouse" and "promoting the green transformation of the manufacturing industry", making sustainable development the core issue of manufacturing development.
Under the unified guidance of the China Securities Regulatory Commission, the Shanghai, Shenzhen, and Beijing stock exchanges jointly released the "Guidelines for Self discipline Supervision of Listed Companies - Sustainable Development Report (Trial) (Draft for Comments)" on February 8, 2024, which systematically regulates the disclosure of ESG information by listed companies and publicly solicits public opinions. This measure marks a new historical stage in ESG information disclosure in the A-share market and heralds the arrival of the era of mandatory disclosure.
According to the requirements of the draft for soliciting opinions, sample companies listed on the Shanghai Stock Exchange 180, Sci Tech Innovation 50, Shenzhen Stock Exchange 100, ChiNext Index, as well as companies listed both domestically and internationally, are required to disclose ESG reports. For manufacturing companies that meet mandatory disclosure requirements, ESG has become a challenge that must be faced.
ESG reports provide investors and regulatory agencies with more comprehensive data support, helping them gain a deeper understanding of a company's operating conditions and future potential, thereby attracting more socially responsible investments, expanding financing channels, reducing financing costs, and enhancing the company's financial flexibility.
Meanwhile, ESG practices can also bring long-term competitive advantages to businesses. By enhancing the company's reputation and increasing market appeal, companies no longer view ESG solely as a social responsibility, but integrate it into their overall strategy. This comprehensive strategy helps enterprises better meet market demand, adapt to changes, and gain competitive advantages.
Against the backdrop of steady economic recovery in China, the green transformation of the manufacturing industry has become an important part of high-quality development. On December 21, 2023, the 2024 Caijing Sustainable Development Summit Forum was held in Beijing. Peng Huagang, former member of the Party Committee and Secretary General of the State owned Assets Supervision and Administration Commission of the State Council, pointed out that ESG promotes "business goodness" through "capital goodness", pursues the maximization of comprehensive economic, social, and environmental value, and better fulfills social responsibility.
The IMA Institute of Management Accountants, in collaboration with industry experts and scholars, conducted in-depth research on ESG practices in the manufacturing industry and released the "Analysis Report of the ESG Practice Survey Questionnaire for Chinese Enterprises on the Sustainable Survival of China's Manufacturing Industry". The report shows that manufacturing companies pay more attention to organizational culture and employee work environment when practicing ESG. Intelligence/digitization, energy conservation and emission reduction, as well as a fair and diverse organizational culture, are ESG practices that have received high ratings from the surveyed companies.
The "ESG Series Research on Industrial Chain (Part 1): ESG Rating Situation and Practical Cases in Manufacturing Industry" released by Guoxin Securities points out that the leading enterprises in the power equipment, automotive, and home appliance industries are mostly those with excellent ESG performance in the manufacturing industry on the A-share market. These enterprises exhibit significant commonalities in environmental management, social responsibility, and governance.
In terms of environmental management, enterprises reduce carbon emissions through technological upgrades, control the negative impact of production processes on the environment, and achieve significant reductions in energy consumption and emissions. In terms of social responsibility, leading ESG companies in the manufacturing industry shape their own image in terms of supply chain, product responsibility, investor rights, employee rights, and social response. In terms of governance, enterprises establish multi-level ESG governance structures, and some companies' ESG governance structures are independent of their management structures.
Taking Hisense Group as an example, the group digitally manages the production, manufacturing, transportation and other aspects of Huangdao Information Industry Park through data management monitoring screens, and builds a smart industrial park. At the same time, Hisense Group actively responds to the goals of "carbon peak and carbon neutrality", expands the scale of distributed photovoltaic power plants, and reduces greenhouse gas emissions and carbon footprint. In addition, Hisense Group uses air compressors with waste heat recovery control systems in various industrial parks, which can recover a large amount of heat every year and save electricity costs.
In terms of employee training and development, Hisense Group has developed a comprehensive and systematic training and career development plan, cooperated with excellent resource providers in the industry, jointly built joint laboratories, and promoted exchange, learning, and talent cultivation. In terms of supply chain assessment and management, Hisense Group attaches great importance to the quality of supplier products, resolutely resists bribery and serious violations of business ethics, establishes a sound supplier training system, and jointly achieves the optimization of product quality.
However, the "Sustainable Survival of China's Manufacturing Industry - Analysis Report of ESG Practice Survey Questionnaire for Chinese Enterprises" shows that Chinese enterprises are still in the early stage of understanding the concept of ESG, and improving ESG knowledge and skills is the key to current local ESG practices in China. Most companies acknowledge the significant impact of ESG on financial work, but also point out that the main difficulties in implementing ESG include a lack of ESG professionals, a lack of upstream and downstream support, and a lack of policy/economic support. In the manufacturing industry, due to the significant impact of upstream and downstream supply chains, manufacturing companies also face challenges such as insufficient support for ESG practices from upstream and downstream enterprises, as well as inconsistent opinions on ESG within the organization when implementing ESG measures.