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ESG and Sustainability Toolkit (China)
Practical Law UK Toolkit w-034-8313 (Approx. 9 pages)
A toolkit to guide counsel working across jurisdictions through Practical Law's content on environmental, social and governance (ESG) factors and regulation in China. The terms corporate responsibility (CR), corporate social responsibility (CSR) and sustainability are also used to refer to ESG matters.
This Toolkit links to the main Practical Law resources on common environmental, social and governance (ESG) factors and regulation under the law of China (PRC).
For a guide to Practical Law's global content on ESG factors, including links to key Practical Law materials on common ESG factors in Australia and New Zealand, Canada, the EU, the UK, and the US, see Global ESG and Sustainability Toolkit.
What is ESG?
ESG is an umbrella term for a broad range of environmental, social and governance factors against which investors can assess the behaviour of the entities they are considering for investment. ESG is the term often preferred by the investment world when using these types of factors to assess corporate behaviour, evaluate the future financial performance of companies (particularly in the long term) and to manage risk.
The terms corporate responsibility (CR), corporate social responsibility (CSR) and sustainability are also used to refer to ESG matters, and sometimes used to refer to a broad range of environmental and social responsibility behaviours demonstrated by businesses.
The following diagram illustrates the types of factors that are commonly included in the concept of ESG. However, the ESG factors that are relevant to a particular business will differ depending on the sector and the countries in which the business operates and its supply chain. The later sections of the note list key Practical Law materials on the legal aspects of these factors.
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For a general explanation of the differences between the terms, and related work for lawyers, see:
Practice Note, Environmental, social and governance (ESG) guidance: tools for companies and investors links to the key frameworks and guidance for organisations to develop their CSR and CR, the key tools for investors to use in integrating ESG issues into their investment decisions, and the key ethical indices and lists that compare businesses according to their ESG performance.
Practice Note, A guide to key resources: sustainable finance includes an explanation of the meaning of sustainable finance, a summary of key sustainable finance initiatives, and details about how to use Practical Law to track sustainable finance developments.
Environment
Environmental factors relate to how a company performs as a steward of the natural environment. For more information, see:
Social
Social factors relate to how a company manages relationships with its employees, suppliers, customers, and the communities it operates in.
Employee Rights and Protections
This encompasses issues affecting employees such health and safety, diversity and inclusion and equal pay. For more information, see:
A list of further resources can be found at Practice Note, Foreign Investment in China Toolkit: Employment.
Governance
Governance factors relate to the company's leadership, executive pay, audits, internal controls and shareholder rights.
General
For key resources, see:
A list of further resources can be found at Practice Note, Foreign Investment in China Toolkit: Formation of Business Entities and Company Law Amendment Collection.
Bribery, Corruption and Anti-Money Laundering
Bribery is illegal under international law. However, the risk of corruption, money laundering and bribery is higher in some countries and sectors than others. For information on the Chinese legal regime, see:
A list of further resources can be found at Foreign Investment in China Toolkit: Anti-Bribery & Anti-Corruption.
Cybersecurity and Data Protection
China's cybersecurity and data protection system is rapidly evolving and is becoming one of the most stringent in the world, with significant updates arriving frequently since 2016 and expected to continue in the near future. For detailed coverage, see:
A list of further resources can be found at Foreign Investment in China Toolkit: Cybersecurity and Data Privacy.
Economic Sanctions
Economic sanctions can be imposed by national governments or by international bodies (for example, the UN). They are a tool for exerting political and economic pressure on states through restrictions on trade relationships or travel.
Practice Note, World Bank Group Investigations: a Chinese Perspective provides a detailed analysis of WBG investigative measures and the sanctions process, analyses the sanctions framework and the key actors responsible for implementing it, and explores how sanctions investigations are conducted with a particular focus on the process as applied in China.
Article, China Enacts Export Control Law provides an overview of China's Export Control Law regime and gives practical guidance for enterprises doing business in or with China in respect of export compliance.
Russia Sanctions and Related Considerations Toolkit is a toolkit to help counsel working in the US, UK, EU, Canada, Australia, and New Zealand guide their clients through the business interruptions caused by the Ukraine crisis, including key sanctions imposed on Russia and other countries, persons, and entities. It covers a wide range of resources, including on business operations, crisis management and disaster preparedness, cybersecurity, employment matters, financial services, fundraising, insurance, oil and gas, sanctions compliance, supply chain disruptions, and social governance.