Coming clean on carbon - China Dialogue
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Coming clean on carbon

A new study shows that Chinese companies need to improve their awareness of climate-change issues and carbon emissions reporting. Sun Xiaohua investigates.

Chinese companies lag far behind their international peers in the annual global scheme for reporting carbon emissions data. As global warming continues and the world must figure out a way to make low-carbon development a reality, China must strive to catch up.
 
The Carbon Disclosure Project is a scheme to invite the world’s biggest companies to report their carbon emissions and make them public. This year, for the first time, it sent its information request to the 100 largest listed Chinese companies in industries such as iron, steel, oil, gas, auto-making, real estate development and finance.
 
Only five companies from the original 100 answered the questionnaire, with 20 providing related information. There were 17 companies that declined to participate; the rest of 58 companies did not provide any response, according to the CDP China Report 2008.
 
The five companies that submitted the CDP questionnaire were the Industrial and Commercial Bank of China, China Shenhua Energy Co Ltd, Great Wall Automobile Holding Co Ltd, Huaxin Cement Co Ltd and Foxconn Technology Group.
 
Among the 25 Chinese companies that provided some information to the CDP, 80% believed that climate change would be associated with business risks from the establishment of regulations and amendments.
 
In addition, 40% fear that natural disasters caused by climate change will impact corporate operations. Other risks from climate change include customers’ demand for eco-friendly products, a sharp increase of energy expenses and the impact of inflation.
 
But on the question of addressing these risks, the companies’ performance is poor. According to the survey, only two companies had clearly established carbon reduction targets. Only 10 companies — less than half — say they have created a designated management team to take care of climate-related issues.
 
Apart from the risks, the Chinese economic players also see another positive side of global warming. According to the survey, 80% of respondents mentioned business opportunities resulting from climate change, including research-and-development on environmental products, market potential of Clean Development Mechanism (CDM) projects, energy efficiency raising and related technologies and facilities.
 
New energy investment and CDM projects are the focal point of climate-related finance in Chinese market. 
 
Many companies have begun to consider the carbon trading business. Two responses said that they have started or are about to engage in carbon trading. The Industrial and Commercial Bank of China also said that carbon-related financial products and services would become more popular with the fast development of the CDM market in China.
At 5%, the Chinese companies’ response rate was among the lowest for the project. The European and North American companies had response rates of 83% and 82% respectively. The Chinese response rate is even lower than the 50% of Asian Global 500 companies that responded.
 
There were many reasons that lead to the Chinese companies' sluggish response. These include a lack of full understanding about the project, a lack of language proficiency, cultural differences and immature legislation addressing climate change, the report says.
 
Since the Chinese government has set a five-year target of cutting energy intensity by 20% from 2006 to 2010, raising energy efficiency provides the most direct approach to climate change by Chinese companies.
 
As a result, large companies are busy establishing internal carbon management systems. But they are still quite weak in terms of data collection systems, and hence cannot disclose much information at this time.
 
For example, many companies surveyed have not yet established a carbon data collection system, and have little knowledge about how to calculate their carbon emissions, with no idea about the tool used in the accounting: the Greenhouse-Gas Protocol ().

Although Chinese companies are developing their climate change awareness, they still have limited knowledge, especially concerning the overall relationship between climate change and business operations. Consequently, many see their activities related to climate change as something to be done occasionally, and not as systemic strategies.
  
However, the CDP’s CEO, Paul Dickinson, believes that progressive "Chinese companies will increasingly understand the importance of participation".
 
The CDP is the largest investor coalition in the world on climate-change issues. It is supported by 385 signatory investors, representing US$57 trillion assets.
 
Since 2002, on behalf of signatory investors, CDP has sent yearly information requests to large listed companies for information on their greenhouse gas emissions and climate change strategies.
 
In 2008, the CDP requested information from more than 3,000 listed companies from over 20 countries and regions. The overall number of respondents reached a record high of 1550 this year.
 
This year the CDP invited the corporate social responsibility website SynTao to organise the CDP China information request among the largest 100 Chinese listed companies.

China Industrial Bank (CIB) and China Investment Corporation (CIC) joined the CDP in 2008 as the first Chinese signatory investors. This report summarises the key findings of the CDP China expansion.

Sun Xiaohua is a senior journalist at China Daily, China's only national English-language newspaper. She has reported environmental issues for many years, including attending several conferences of parties of the United Nations Framework Convention on Climate Change and travelling to the Arctic and Tibet to report on climate-change issues.