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A man and his dog, both wearing masks, walk along a small alley on a hazy day in Beijing. The country has struggled with lax enforcement and spotty data in the fight against air pollution. (PETER KUJUNDZIC/REUTERS)

The images of pedestrians wearing masks in China’s smog-choked cities tell the story of how serious the environmental problems are in the country.

China is one of the world’s fastest-growing nations, but faces a huge challenge to balance economic expansion with the harmful emissions resulting from rapid urbanization and a rising population.

China’s carbon dioxide emissions have grown at an annual rate of 4.8 per cent since the 1960s, and by more than 17 per cent from 2008 to 2010, according to World Bank statistics. China is the world’s largest carbon emitter, with emissions per capita 45 per cent above the world average, according to the Global Carbon Project.

Together, China and the U.S. account for more than a third of global greenhouse gas emissions.

In response, the Chinese government has declared a “war on pollution,” while promising to reduce its reliance on fossil fuels in future. It has set a target of 2020 to develop a pilot assessment of natural capital around biodiversity. In the meantime, Chinese companies are starting to ramp up their sustainability activity and reporting.

“People think all China cares about is economic growth, but actually that’s not true,” said Robert Eccles, a professor of management practice at the Harvard Business School and co-author of The Integrated Reporting Movement: Meaning, Momentum, Motives, and Materiality.

While China has a long way to go to get its pollution problem under control, Eccles says the country has the political structure and economic might to progress quicker than most other countries.

“It’s partially because they have to and partially because they can,” Eccles said. While some U.S. leaders are still debating whether climate change exists, “the argument is over in China,” he said.

“China really does get it. When you go to China, the environmental problems have become so acute, including natural capital of all different types – water, land, forest, you name it. It’s become a matter of survival.”

A dead fish floats in water filled with blue-green algae at the East Lake in Wuhan, Hubei province. It is unclear whether the billions earmarked to improve filthy water supplies over the next decade will help reverse damage caused by decades of pollution and overuse. (DARLEY SHEN/REUTERS)

In an article co-written with Peijun Duan, director and senior professor of strategic research at the China Central Party School, Eccles argues there’s much at stake for China when it comes to reducing its emissions.

“The potential consequences for China - and the entire world given China’s increasing importance - are enormous,” Eccles and Duan write.

The challenge, they say, is achieving sustainable development amid a growing population and heavy reliance on environmental resources, such as non-renewable energy, water, clean air, and land.

Duan proposes China adopt mandatory integrated sustainability reporting for provinces, cities and companies, which would include indices of economic and environmental performance, as well as criteria for assessing social responsibility.

Based on research of the top 100 companies in China, Eccles and Duan found that China appears to be as committed to sustainable development as their U.S. counterparts. This is important given that they are the two world’s largest economies.

However, the article cites a corporate responsibility reporting study done by KPMG, which ranked countries based on the number of companies issuing reports, the use of reporting guidelines and standards, and how well reported information was and could be verified. Both China and the U.S. were seen as falling behind in quality of reporting.

Out of a score of 100, top-ranked countries such as Italy, Spain, and the U.K. had scores in the 70’s and 80’s, while the U.S. earned a 54. China received just 39.

An electronic screen and buildings are seen amid heavy smog at the financial district of Pudong in Shanghai. (ALY SONG/REUTERS)

Despite this, China does deserve some credit for “going from very limited disclosure to the much higher numbers of companies reporting today in just a few short years,” the KPMG study said.

More participation

The number of Chinese companies reporting on corporate responsibility have risen fairly quickly. 

Setting goals

China's share was at 9.1 per cent in 2013, with a target of 20 per cent by 2030. 

Tim Nixon, director of sustainability at Thomson Reuters and managing editor of its Sustainability publication, said China is investing increasing amounts of money in sustainable development programs, and setting meaningful goals.

An example is a joint U.S.-China announcement made last fall on climate change and clean energy. U.S. President Barack Obama announced a new target to cut net greenhouse gas emissions 26-28 per cent below 2005 levels by 2025, while Chinese President Xi Jinping announced targets to peak CO2 emissions around 2030, and to increase the non-fossil fuel share of all energy to around 20 per cent by 2030. Together, the two countries account for more than a third of global greenhouse gas emissions.

“This is even more significant for the planet given China’s position as the leading aggregate emitter of greenhouse gases, and the significant role played by its two giant energy conglomerates, PetroChina, and China Petroleum and Chemical,” Nixon said in a recent article on sustainability in China.

Nixon said China has a much better chance to achieve this goal through increased transparency, which includes developing a clear set of reporting standards similar to those proposed by the integrated reporting movement, and to be open to innovation with other nations. Lastly, Nixon argues transparency must come from leaders in China.

“It’s about individuals willing to change existing habits on the value of secrecy and the allocation of economic benefit,” Nixon said.

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This content was produced by The Globe and Mail's advertising department, in consultation with Thomson Reuters.  The Globe's editorial department was not involved in its creation.

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