Boston Consulting Group：China’s Pathway to a Sustainable Future- Enabling Social-minded Business and High-level Openness

Boston Consulting Group

Executive Summary

The world is lurching from crisis to crisis: worsening climate change, a once-in-a-century pandemic, and the crumbling geopolitical order—and sustainability promises to be a globally recognized pathway out of these unprecedented challenges. As sustainability gains momentum, how to translate societal issues into economic drivers, reduce negative externalities and encourage positive ones has emerged as a new key topic across the global business ecosystem.

Meanwhile, discerning executives and entrepreneurs are waking up to the trend that sustainability is not only an embodiment of corporate social responsibility (CSR) practice but also an enabler for value creation and long-term growth. Riding this doing-well-by-doing-good trend, leading multinational firms reap handsome profits, manage risks more effectively, and build business resilience in a fast-evolving international business environment to win the future. Along the way, some of them have designed differentiated paths to sustainability based on the industries they operate in and their positions in the corporate life cycle.

As a fast-growing market, China is navigating strong headwinds as it engages with reform and development of the global governance system and drives the domestic implementation of the UN’s Sustainable Development Goals (SDGs). The country is also transforming its development goals from high speed to high quality, and this transformation is expected to gather apace with its proposed carbon peaking and carbon neutrality goals (the “dual carbon” goals). Today, the world’s second-largest economy needs to chart the best course to build its own sustainability business ecosystem, as it seeks to stay ahead of the global sustainability trend and meet its fundamental development needs alike.

To design an innovative approach to building sustainable business ecosystems, China should begin with a holistic assessment of value, key agendas, and stakeholder interactions. Financial profit must be balanced with the social value generated by sustainability. The “dual carbon” goals, common prosperity, sci-tech self-reliance, and other key agendas are more important than ever. In terms of stakeholder interactions, China must consider how best to exert the guiding role of government under a socialist market economy; what aspect of sustainability financial institutions should focus on after the supply-side reform of the “new asset management regulations” and how to scale up their sustainable investing and financing capabilities; and how to harness the leading role of state-owned enterprises (SOEs) in sustainable finance.

Building a reality-anchored, future-proofed sustainable business ecosystem—essential to China’s high-quality development in the long run—is a key lever to enable businesses to do good and elevate openness to the next level.

Undoubtedly, a robust sustainability ecosystem should be built on the synergy of multiple actors, including regulators, financial institutions, and enterprises. Both policy guidance from regulators and investment and financing tools of financial players are a prerequisite for putting sustainability into practice. More importantly, as frontline market participants, Chinese enterprises stand to become the driving force of sustainability transformation.

From the perspective of total societal impact, Chinese businesses can formulate an end-to-end sustainability strategy embedded in their core business. In particular, they need to transform across four areas to speed up the shift towards sustainability. First, define a set of visions, strategies and roadmaps. Second, develop a resilient supply chain in sustainable ways that reshape the process from procurement through production to manufacturing, to move the core business towards sustainability. Third, build new sustainability business through sustainable investing and financing management, as well as business model or portfolio innovation. Finally, optimize sustainability data analysis and disclosure, promote partnerships for collective action, and adjust people and organization structures to enable transformation.

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Boston Consulting Group：China’s Pathway to a Sustainable Future- Enabling Social-minded Business and High-level Openness