Frost & Sullivan in collaboration with Carbon Trusts releases the 'White Paper on China's ESG and New Productivity Industries: Insights and Practices'

This white paper aims to analyze the underlying logic, long-term goals, benefits for enterprises, and evaluation criteria of ESG concepts and new quality productivity concepts. It seeks to demonstrate the symbiotic relationship between the two in the Chinese market. The white paper focuses on ESG concepts, specifically analyzing the ESG concept system indicators, their development evolution in China, their alignment with China's national development strategies, a comparison of global ESG information disclosure standards, and ESG-related financing tools. It also points out that actively practicing ESG strategies is of great significance to enterprises. At the same time, the white paper also focuses on new quality productivity concepts, specifically analyzing the definition, core elements, development goals, and paths for enterprises to form new quality productivity, and exploring how strategic emerging industries and traditional industries will gain favor from the capital market under the social main tone of developing new quality productivity.

The ESG concept was first introduced in 2004 by the United Nations Global Compact as an important topic for global sustainable development. ESG has become an important concept followed by corporate development in recent years, driving sustainable innovation and development. New quality productivity is a new concept proposed by General Secretary Xi Jinping during his inspections in Heilongjiang and other places in September 2023. Since its introduction, it has received high attention from all regions across the country, with various levels actively formulating 'roadmaps' around developing new quality productivity. At this year's National Two Sessions, new quality productivity was written into the government work report for the first time and listed as the top priority of the ten major tasks for 2024. New quality productivity is highly consistent with the essence of the ESG concept, which is to drive the innovative development of production factors through digital elements as the core, thereby promoting industrial transformation and high-quality economic development.

Developing new quality productivity is an inevitable direction and explicit expression for enterprises to practice ESG:New quality productivity emphasizes the improvement of total factor productivity, the transformation and upgrading of traditional industries driven by advanced technology and innovation, the promotion of high-end, intelligent, and green industrial structure upgrades, as well as the deep integration and development among industries. This aims to drive down resource and environmental costs, enhance overall social and economic benefits, and align with the corporate investment logic under the ESG sustainable framework assessment.

Dual evaluation helps enterprises achieve comprehensive quality improvement and upgrading: The social responsibility aspect of ESG involves employee benefits, community relations, and supply chain management. New quality productivity can directly improve employees' working environment and consumers' quality of life by enhancing the quality of products and services, thereby supporting enterprises in fulfilling their social responsibilities. New quality productivity requires enterprises to maintain transparency, integrity, and a sense of responsibility in the process of improving productivity, which is consistent with the corporate governance objectives of ESG.

Note: Industry authoritative evaluation institutions refer to independent third-party organizations taking Frost & Sullivan as an example; a larger circle indicates a higher level of influence for that party.

ESG evaluation criteria not only require companies to assume social responsibilities but also provide investors with a comprehensive framework for assessing companies from multiple dimensions and in all aspects. With the continuous improvement of dual carbon policies and other top-level designs, ESG is becoming an important guiding force for Chinese enterprises towards green and low-carbon transformation, driving enterprises and industries towards high-quality development. Sound ESG information disclosure is not only a key factor in enhancing corporate valuation and supporting market value but also an important means to increase corporate transparency and credibility. At the same time, a sound ESG management system can help companies effectively identify and respond to 'grey rhinos' and 'black swan' events, providing a solid barrier against potential risks. In addition, a scientific and rigorous ESG evaluation framework is not only a touchstone for market investors to test and measure a company's comprehensive strength but also an important compass for investors to judge and select green future investment opportunities. By fully considering environmental, social, and governance factors, investors can better grasp the long-term value and development potential of companies, thereby achieving more sustainable investment returns.

Whether in the global or China's macro market context, developing new quality productivity is an inevitable direction for enterprises to achieve sustained growth, and it is also a significant manifestation of their implementation of ESG strategies. New quality productivity is, to some extent, more like an ESG strategy that fits China's national conditions. While emphasizing green environmental protection, it places greater emphasis on the importance of using technological means to assist in sustainable development. While vigorously developing strategic emerging industries, new quality productivity also brings new opportunities for transformation and upgrading to traditional industries. This integration and innovation are precisely where the combination of new quality productivity and ESG strategies lies, and they are key to promoting common progress for enterprises and society.

In the capital market, strategic emerging enterprises are favored by investors due to their emphasis on innovation. New-quality productivity can help strategic emerging industries more accurately grasp market potential, prompt breakthroughs in technology, products, or services, and open up new growth spaces. At the same time, new-quality productivity is becoming a powerful engine for strategic emerging industries, driving enterprises to take solid steps in product innovation and business model innovation. Moreover, new-quality productivity is accelerating the integration of green industrial chains by strategic emerging industries to align with the global concept and trend of sustainable development. Finally, strategic emerging industries are actively embracing the policy dividends brought about by new-quality productivity, a trend that is also becoming a key driving force for their rapid development.

Currently, traditional industries are facing the problem of overcapacity at the low end, with rapid expansion leading to supply exceeding demand, product backlog, and price drops. At the same time, there is a shortage of high-end supply, with fields such as precision manufacturing heavily dependent on imports. In addition, the industrial foundation is weak, key materials and technologies rely on foreign sources, lacking independent innovation, which restricts industrial upgrading. With rising factor costs and intensified resource constraints, the comparative advantages of traditional industries are gradually disappearing. Only through technological innovation and deep transformation can new productive forces be generated and competitive advantages reshaped. New productive forces enhance product quality through technology introduction and automation, optimize production processes, reduce errors and waste, and achieve real-time monitoring through big data and artificial intelligence to quickly respond to anomalies. It also focuses on the creation and application of knowledge and information, enhancing the added value of enterprises through intangible assets.

New productive forces have driven product updates, accelerated R&D speed, and shortened product renewal cycles. Technological progress has improved product quality and technical content, making them more reliable and functional. At the same time, production costs have been reduced, making prices more attractive. In addition, new productive forces have changed consumers' purchasing habits, making them more rational and focused on cost-effectiveness.

Enterprises are the main force in developing new productive forces. The advancement of new productive forces depends on innovative technology, efficient management, and keen market insight, where enterprises have significant advantages. The ESG concept emphasizes the harmonious development of the environment, society, and governance, providing important support for the sustainable development of new productive forces. In addition, we call on enterprises to strengthen ESG practices to enhance their long-term competitiveness, thereby effectively stimulating the vitality of production factors, promoting the formation of new productive forces, and achieving a dual improvement in economic benefits and environmental and social responsibilities.

Finally, this white paper also presents a pioneering spirit of corporate examples in ESG and new quality productivity practices through extensive analysis and in-depth research. For instance, CarbonTrace, as a global leader in carbon management software and consulting services, has provided professional services to over 1,200 enterprises. Fuyou Truck, representing the digitalization of road freight, is becoming a model enterprise for new quality productivity in the logistics industry through continuous technological innovation. Meijin Energy, as a coking producer, adheres to a long-term perspective, has fully implemented carbon management and constructed a path towards carbon peak and emission reduction. Duxiaoman actively promotes carbon reduction activities across all links of the industrial chain by leveraging its digital platform's advantages. Yili Group vigorously promotes digital transformation and product innovation, accelerating the leapfrog development of dairy productivity. HuaXi Biotechnology consistently adheres to the concept of green and sustainable development, achieving green manufacturing.