ESG Certification (Environmental, Social, and Governance Certification) refers to a systematic assessment and recognition of an enterprise’s sustainable development performance across Environmental (E), Social (S), and Governance (G) three dimensions. Adopting a standardized indicator system, it measures enterprises’ achievements in fulfilling environmental responsibilities, social responsibilities and optimizing governance structures. It serves as critical evidence of an enterprise’s sustainable development capability, as well as a core reference for investors, customers and all sectors of society to evaluate the long-term value of enterprises.

Core Connotation of ESG

The three dimensions of ESG focus on responsibilities and performance at different levels of enterprises respectively. The detailed contents are as follows:

1. Environmental

It evaluates enterprises’ impacts on the natural environment and capacity for environmental risk management. Core indicators include:

• Resource Consumption and Pollution Control: Utilization efficiency of energy (e.g. fossil fuels, electricity) and water resources; emission volume and treatment rate of wastewater, waste gas and solid waste;            

• Carbon Emissions and Climate Action: Greenhouse Gas (GHG) emissions (Scope 1/2/3); carbon neutrality / carbon emission reduction targets and implementation roadmap; participation in carbon market trading;            

• Ecological Conservation: Biodiversity conservation measures; green supply chain (e.g. environmental compliance of suppliers); eco-friendly product design (e.g. recyclability, low energy consumption).            

2. Social

It assesses enterprises’ fulfillment of responsibilities to stakeholders (employees, customers, communities and supply chains). Core indicators include:

• Employee Rights and Interests: Fair compensation; occupational health and safety (e.g. work injury rate); staff training and development; diversity and inclusion (e.g. gender equality, employment of persons with disabilities);            

• Product Responsibility: Product safety and quality (e.g. recall rate); consumer privacy protection; after-sales service and complaint handling;            

• Community and Public Welfare: Community donations (funds / materials); participation in public welfare projects (e.g. education, poverty alleviation); social responsibility of supply chain (e.g. prohibition of child labor and forced labor);            

• Pandemic / Crisis Response: Employee protection and supply chain stability guarantee during public health incidents.            

3. Governance

It evaluates enterprises’ internal governance structure and compliance. Core indicators include:

• Governance Structure: Independence of the board of directors (e.g. proportion of independent directors); transparency of equity structure; mechanism linking senior management compensation with performance;            

• Compliance and Ethics: Anti-corruption measures (e.g. internal reporting mechanism); code of business ethics; compliance of data security and privacy protection;            

• Shareholder Rights: Protection of minority shareholders’ interests; transparency of general meeting of shareholders’ decision-making;            

• Risk Management: Identification and response mechanism for ESG-related risks (such as climate risk and reputational risk).