Recently, with the support of the “Yixin Huatai One Yangtze River” environmental protection project, Shan Shui Conservation Center and Peking University Nature and Society Center along with several other institutions have jointly released the ” Corporate Biodiversity Reporting Evaluation (2021)” (hereinafter “the Report”). Our 2021 evaluation sampled 188 Shanghai and Shenzhen stock exchange listed companies that may pose significant impacts on biodiversity. Specifically, we targeted companies from 7 industries including cement manufacturing, mining, and power and so on, using related information extracted from the companies’ 2020 annual reports, sustainability, and/or other in-kind reports. By establishing an evaluation system and introducing a third-party perspective, the report evaluates and quantifies the presence of biodiversity in corporate disclosure.

According to the estimation of the World Economic Forum, more than half of the world’s economic output is moderately or highly dependent on the health and stability of ecosystems. The sustainability of substantial economic activities and the value of related financial assets are dependent on biodiversity and the ecosystem services. If undermined, financial system could be at great risk.

The reporting evaluation framework in the Report assesses the five main impacts of human activities on biodiversity: changes in land and sea use, direct exploitation of organisms, pollution, invasive species and climate change. The framework is designed with 40 scoring indicators that can be grouped into 2 perspectives: management response and conservation effectiveness. The companies are further assigned into four levels of reporting according to their scores, where “Level 1” indicates that the company fails to fully comply with mandatory environmental reporting regulations; “Level 4” indicates that the company’s biodiversity reporting is informative and demonstrates a science-based biodiversity management process.

The evaluation result shows that among all the 188 companies assessed, only 15 companies (8% in total) explicitly mentioned the keyword “biodiversity” in their annual reports or social responsibility reports; and only 6 (3%) reached the fourth level, while 97% companies were in the second or third level, indicating that nowadays listed companies have insufficient awareness of biodiversity, and the mainstreaming of biodiversity in economic activities is still in its infancy. Overall, the Report has a few key findidngs:

From the perspective of reporting quality, most companies have insufficient awareness and thus disclosure of biodiversity issues. Only a few reports deliver and articulate a comprehensive understanding and thoughtful biodiversity-related risk management; from the perspective of format, the disclosure of biodiversity information lacks uniformed and standardized norms and descriptions, making it difficult to quantitatively compare disclosed information; from the perspective of corporate performance reflected from reporting, the information available reflects the lack of targeted and systematic framework for companies’ biodiversity actions, and companies tend to restore after the impact rather than to prevent it in advance. For example, the examination shows that 119 (63%) companies disclosed that the conservation actions they carried out were related to the biodiversity impacts of their business activities, but only 10 of them have additionally disclosed their biodiversity-related vision strategies, target actions and target management systems. This reflects that although most companies have taken actions, the effectiveness and motivation behind their action remains in a question mark.

Aiming at the problems and deficiencies in the disclosure of biodiversity information of the companies, the Report also comes up with corresponding suggestions, such as relevant government departments should include biodiversity indicators into the requirements of corporate environmental disclosure as soon as possible, and provide a clear guidance on the standardization of disclosure; for corporations, the ideal biodiversity reporting should include disclosure of the 4-stage-process that consists of interface identification, governance and strategy, target and action, and performance management; finally, the capital market should establish a biodiversity risk evaluation system for investment behaviors as quickly as possible to promote scientific research and information disclosure for biodiversity conservation.

Shi Xiangying, executive director of Shan Shui Conservation Center, says that this research is only based on self-disclosed data from corporate, so there are still many inadequacies at present. However, through the release of the report, we hope to build a platform of dialogues for regulators, investment and financing institutions, corporates, social organizations and the public, joint forcing to reduce economic activities’ impact on biodiversity risks in and prompt the exploration of biodiversity mainstreaming.

During the writing of the Report, Shan Shui Conservation Center received support from Huatai Securities Co., Ltd., Shanghai Minhang District Qingyue Environmental Protection Information Technology Service Center, Guangzhou Green Network Environmental Protection Service Center, Beijing Chaoyang District Friends of Nature Environmental Research Institute and Wande Information Technology Co., Ltd., and other partners’ support.

Read the full report in Chinese with English abstract:

http://en.shanshui.org/wp-content/uploads/2022/08/2022081503472233.pdf

(Financial Times, Author: Zhang Modong,
Editor: Yunyang
Chinese-English translate: Li Jingting，Jazzy Song )