Climate change: Chinese companies must improve emissions disclosures from supply chains to aid national net-zero goal

Asset managers say disclosure of so-called scope-3 emissions is critical to assessing climate-change business risks

About 75 per cent of carbon risk in global equities sits within scope-3 emissions, according to one analyst

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A photo taken on November 15, 2021 shows the coal-powered Datang International Zhangjiakou Power Station in Zhangjiakou, in China’s northern Hebei province. Photo: AFP

Published: 11:30am, 5 Apr 2023Updated: 1:32pm, 6 Apr 2023

Chinese companies need to improve their disclosures of carbon emissions, especially along their value and supply chains, for investors to properly assess business risks stemming from climate change and support the nation’s push to reach its dual carbon goals, according to asset managers.

The complexity of reporting indirect greenhouse-gas emissions from a companies’ suppliers or value chain – known as scope-3 emissions – has been particularly challenging for firms in China and other emerging-market economies that are relatively early in their sustainability journeys, according to Graeme Baker, sustainable equity portfolio manager at asset manager Ninety One.

“When we speak to some companies [in China] who don’t report scope 3 at the moment, they could have a supply chain that includes 1,000 companies all across the world or in different regions,” Baker said. “It is highly complex to try and pull together all of that information.”

He added that about 75 per cent of carbon risk in global equities sits within scope-3 emissions. “If you’re not understanding the carbon intensity of a supply chain or the entire value chain, you may be missing some carbon risk within a company or associated with a company,” Baker said.

Employees work on an assembly line producing speakers at a factory in Fuyang, in China’s eastern Anhui province, on March 31, 2023. Photo: AFP

President Xi Jinping announced China’s dual-carbon goals – to reach peak emissions before 2030 and net-zero emissions by 2060 – at the United Nations General Assembly in September 2020.