Assessing business and sustainability in China

INTERESTS of Chinese companies in environmental, social and governance (ESG) issues are of comparatively recent origin. Between 1991 and 2005, Chinese companies issued only 22 reports on corporate social responsibility (CSR). The situation changed dramatically when the concept of CSR was incorporated into China's company laws in 2006. CSR considerations were further strengthened when the Shanghai and Shenzhen Stock Exchanges issued guidelines for disclosing CSR performance. The two stock exchanges targeted specific businesses.

Following these developments, many major Chinese companies started considering seriously their ESG issues. Large companies such as CNPC, Sinopec and State-Grid started to publish their first CRS reports. Between 2006 and 2009, Chinese companies issued nearly 1,600 reports.

While this was a good beginning, only limited number of companies issued such reports for two reasons. First, publication of such reports was not mandatory. Second, there were no penalties for not issuing these reports.