Findings and suggestions from the ESG Insights into China's Auto Industry

On December 30, 2022, the 11th Annual Ceremony of JRJ Navigation China and 2022 "GoldenWis" Award Ceremony was successfully held online.

Lin Bo, Vice President of GoldenBee Consulting, was invited to share the latest research results of GoldenBee Consulting and ESG Research Center of JRJ in the field of corporate social responsibility (CSR) of listed auto companies.

Lin Bo said that the auto industry is a pillar industry for China’s high-quality development, and an important practitioner and contributor of major national strategies such as China's "30·60" Decarbonization Goal and sustainable development. The insight and analysis of the ESG development trend of listed auto companies can help governments, regulators, industry organizations, investors, media and other stakeholders to have a deeper understanding of the sustainable development status and trend of the industry, and make valuable references for auto companies to improve the ESG management and development. In view of this, GoldenBee Consulting and JRJ ESG Research Center jointly compiled Riding the Momentum, Exploring the Future - ESG Insight into China's Auto Industry (hereinafter referred to as the Insight).

According to Lin Bo, based on China's first social responsibility report evaluation system, GoldenBee CSR Report Assessment System, the Insight conducts research and analysis on the ESG reports released by 75 Chinese listed auto companies in 2022, sorts out and summarizes the ESG trends and characteristics of the auto industry, and makes suggestions for the sustainable development of auto companies.

The Insight finds that

1. The overall quality of reports has improved, and the number of reports is not commensurate with the industry scale

The Insight collects 104 CSR reports, including social responsibility reports, sustainability reports, and performance reports, of auto companies published from January 1, 2022 to December 20, 2022. Among them, 50 reports are from A-share listed automakers, including OEMs and parts companies. The quality of CSR reporting in the autom industry has improved overall, and is higher than the average report score of China's enterprises. However, the number of reports is not commensurate with the scale of the auto industry, and the report issuance rate is low in such a industry.

2. More than 70% of the reports prepared with reference to ESG guidelines

The relatively low overall number of reports indicates that the industry as a whole is not paying enough attention to the management. The proportion of reports that refer to stock exchange guidelines is relatively high, accounting for 72.98%. Among them, 35 reports referred to the guidlines of Shenzhen Stock Exchange, 12  referred to that of the Shanghai Stock Exchange and 20  referred to that of the Hong Kong Stock Exchange.

3.Taking "30·60" Decarbonization Goal as the starting point, ecological protection has become an emerging issue

The information disclosure of CSR reports of the auto industry focused on the "30·60" Decarbonization Goal, and the coverage rate of ecosystem protection issues increased from 6.40% to 13.51%, a large increase year on year.

4. Supply chain has become a new hot topic of disclosure by auto companies 

Supply chain is a new hot spot for the disclosure of auto companies, 58% of auto companies disclosed the assessment of the ethical environment of suppliers. Listed auto companies have become more stringent in the audit of suppliers' social responsibility qualifications, and the coverage rate in their reports for the audit cost sharing rate of suppliers' relevant qualifications has increased from 0 to 7.58%.

5. Customer data security awareness improved and multiple measures taken to implement data responsibility

Auto companies attach great importance to customer information and privacy protection. 45.95% of automakers disclosed the establishment of a system for acquiring, using and protecting customer information, a year-on-year increase of 8.74%; 32.43% of automakers obtained customer information through legal and fair means, a year-on-year increase of about 16% . 

6. More than half of auto companies attach importance to sustainable technological innovation

Nearly 60% of auto companies values the sustainability of technological innovation, which is also a core of the relevant standards for social responsibility in the auto industry. Auto companies attach great importance to the disclosure of information on the development of sustainable innovative products, and the vast majority of them organically integrate sustainable concepts with technological innovation.

7. Raising awareness of traffic safety becomes a key community action

It is a core issue for auto companies to focus on improving traffic safety awareness and ensure traffic safety in public welfare activities, and advocating the concept of traffic safety and building a harmonious society for people and vehicles are also the key concerns of the industry.

Based on the above seven findings, the Insight puts forward corresponding suggestions for auto companies——

First, it is recommended that auto companies pay attention to the communication of stakeholders and take the initiative to release social responsibility reports or performance reports.

Second, it is recommended that auto companies actively apply the industry's social responsibility standards, i.e. Guidance on Social Responsibility of China Automotive Industry, and Evaluation Index System on Social Responsibility Governance Level of China Automotive Industry.

Third, it is recommended that OEMs continue to play a leading role in promoting the industry to create a model of CSR practice.

Fourth, it is recommended that auto companies continue to focus on the "30·60" decarbonization strategy and actively disclose measures to address climate change and ecological protection.

Fifth, it is recommended that auto companies actively demonstrate their determination to promote the safety and stability of the industrial chain and supply chain, and actively respond to topics of technological innovation and privacy protection that society is concerned about.

The last, the Insight recommends that auto companies build diversified communication channels to make it more fun for information disclosure and enhance peer communication on social responsibility.

Lin Bo said that for enterprises, the disclosure of ESG-related information plays a very important role both internally and externally. Internally, it can promote the spread of ESG concepts within the enterprise, help enterprises establish a new mechanism for internal dialogue, and improve the early warning function, the evaluation ability of management and the financial stability of the enterprise. Externally, it can increase new means of communication, and can promote the participation of stakeholders. For auto companies, they should join hands with stakeholders to enhance the happiness of the people and help Chinese companies move from a big auto country to a powerful auto country.