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

Core Connotations of ESG

The three ESG dimensions focus on distinct levels of corporate responsibilities and performance, with specific contents detailed as follows:

1. Environmental (E)

It evaluates enterprises’ impacts on the natural environment and environmental risk management capabilities, with core indicators including:

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

• Carbon Emission and Climate Actions: Greenhouse Gas (GHG) emissions (Scope 1/2/3); carbon neutrality and carbon reduction targets plus implementation roadmaps; participation in carbon market trading;

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

2. Social (S)

It assesses enterprises’ fulfillment of responsibilities to stakeholders including employees, customers, communities and supply chains, with core indicators covering:

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

• Product Liability: 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 programs (e.g., education, poverty alleviation); social responsibility of supply chains (e.g., prohibition of child labor and forced labor);

• Pandemic & Crisis Response: Staff protection and supply chain stability guarantee amid public health emergencies.

3. Governance (G)

It evaluates enterprises’ internal governance structure and compliance performance, with core indicators including:

• Governance Structure: Independence of the board of directors (e.g., proportion of independent directors); transparency of equity structure; linkage mechanism between executive compensation and performance;

• Compliance and Business 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 resolutions;

• Risk Management: Identification and response mechanisms for ESG-related risks (e.g., climate risks, reputation risks).