Private companies and organizations in the public and non-profit sectors have begun to embrace the idea of sustainability: How to operate in ways that reduce consumption of water, energy and other resources, and help keep from depleting the planet’s natural resources. But how do we measure progress? Reliable metrics are needed – to understand what works, how we can report on it, how it affects the bottom line, and how to incorporate sustainability into strategic goals and investments.
The Earth Institute’s Research Program on Sustainability Policy and Management is working to identify a core set of generally accepted sustainability metrics. Led by Steven Cohen and Satyajit Bose, the project is supported by a team of nine, including five masters-level research assistants. This is the second in a series of posts in which the research assistants share some of their findings.
By Wen Qiu
In China, measuring sustainability is in a preliminary but progressive stage, and the government is playing a leading role in driving Chinese companies to go green. Behind the encouraging numbers, however, lie some less attractive facts.
In 2008, the state-owned Assets Supervision and Administration Commission of the State Council set a requirement for all state-owned enterprises to publish sustainability reports by the end of 2012. According to the China Sustainability Reporting Resource Center’s annual report, “A Journey to Discover Values,” 1,001 Chinese corporations released sustainability reports in 2011, of which 603 were state-owned enterprises. The number increased by nearly 40 percent from 2010, and over 700 percent from 2008. The Shanghai Stock Exchange and the Shenzhen Stock Exchange also included in their “Guidelines of Disclosing Nonfinancial Information” the necessity of publishing environmental impact data in companies’ annual reports.
Unfortunately, with few regulations or instructions about the reporting process, companies are filling many of their sustainability reports with rhetoric, rather than meaningful measures of progress on sustainability, which is typically assessed using quantitative (or sometimes qualitative) indicators or metrics.
Based on year 2011 data, companies, on average, used less than two metrics that actually measure sustainability in each report. Over 50 percent of the reports didn’t use any metrics. The centrally administrated state-owned enterprises performed the best out of all reporting companies, with an average of 5.6 metrics applied per report. Almost all metrics adopted were environmental metrics on emissions and energy use. Social metrics regarding safety of employees were sometimes examined as well.
Not surprisingly, most of the reports focused on positive information and avoided negative impacts and disclosures. It is, however, understandable since coercive regulations and concerns over reputation are the main driving forces of sustainability reporting in China to date. The Chinese private sector is new to sustainability management and thus lacks the ability and motivation to respond more proactively.
Since the business of sustainability reporting in China’s private sector has just begun, academic studies on metrics and frameworks are delayed compared to academia in other nations. However, government-led research centers have started to collaborate with international organizations to develop practical guidelines for sustainability reporting in China.
For example, in 2011, the Shanghai Stock Exchange collaborated with the International Finance Corporation to develop a guideline that standardizes the reporting process and use of metrics among companies listed on the exchange.
Overall, with a determined government, the future of sustainability in China seems promising. However, uncertainty remains about whether or not their top-down approach can leverage the long-term development of standardized sustainability metrics in both the academic field and for practical use in the private sector. The title of the China Sustainability Reporting Resource Center’s report sums up the discussion well, pointing out the nature of sustainability metrics development in China: It has been, and always will be, “A Journey to Discover Values.”