Private enterprises are actively embracing the transformative era
The term 'ESG' first officially appeared in the report by the United Nations in 2004, titled 'Who Cares Wins.' It represents an investment philosophy and corporate evaluation standard. ESG focuses on a company's performance in environmental (E), social (S), and governance (G) aspects, rather than just financial performance.
In specific terms, the environmental aspect primarily encompasses issues related to environmental protection and sustainability. The social aspect involves matters concerning social responsibility, while governance mainly pertains to topics such as corporate management structure, compensation, and compliance. ESG is gradually becoming a new standard for measuring brand governance, sustainable development, and long-term profitability. Major corporations are also considering it as one of their core focus areas. Particularly in the secondary market, many publicly traded companies have started disclosing ESG reports as a 'second financial report.'
From 2017 to 2022, the number of ESG reports disclosed by A-share listed companies increased from 851 to 1,812, with an annual growth rate of 16%. The disclosure rate rose from 24.55% to 35.76%. And private enterprises played a significant role in this trend. They are a vital driver of the market's dynamism. From a macro perspective, private enterprises contributed over 50% of tax revenue and more than 60% of the domestic GDP. They also accounted for over 70% of technological innovations and more than 80% of urban employment. Moreover, they constituted over 90% of the total number of enterprises.
Recently, ZePing Macro released a comprehensive market assessment of ESG performance among private enterprises in China. The evaluation covered eight major industries, including electric equipment, electronic semiconductors, non-banking financials, household appliances, machinery equipment, beauty and healthcare, pharmaceuticals and biotechnology, and non-ferrous metals. It selected the top 20 companies with the highest composite evaluation index.
Notably, more than half of the selected companies belonged to the electric equipment and pharmaceuticals and biotechnology sectors, with 13 of them concentrated in the Yangtze River Delta, the Pearl River Delta, and the Beijing-Tianjin region. Prominent companies such as Longi Green Energy(601012:SH), Haier(600690:SH, 6690:HK), Midea(000333:SZ), Sany Heavy Industry(600031:SH), and CATL(300750:SZ)were among the selected enterprises.
According to ZePing Macro's research methodology, it utilizes the disclosed content and related data of Chinese listed companies in 2022. It prioritizes ESG sub-indicators with higher market recognition and balance the ESG ratings provided by mainstream rating agencies. This approach allows for a more comprehensive, holistic, and objective assessment of the overall ESG performance of listed companies.
In our effort to provide a comprehensive analysis of the foundational profiles and advancements in the ESG domain for the companies featured in the aforementioned shortlist, we have initiated a series of review articles. This is the first part, where we will collectively review eight noteworthy companies.
Sungrow Power Supply Co., Ltd. (300274:SZ) is the world’s most bankable inverter brand with over 405GW installed worldwide as of June 2023. Founded in 1997 by University Professor Cao Renxian, Sungrow is a nationally recognized high-tech enterprise in the research and development of solar inverters with the largest dedicated R&D team in the industry and a broad product portfolio offering PV inverter solutions and energy storage systems for utility-scale, commercial & industrial, and residential applications, as well as internationally recognized floating PV plant solutions, NEV driving solutions, EV charging solutions and renewable hydrogen production systems. In the first half of 2023, SunPower achieved a revenue of CNY 28.6 billion, with a net profit of CNY 4.35 billion, marking a remarkable year-on-year growth of 368%. Its second-quarter revenue witnessed a substantial 108% year-on-year increase.
Offering a wide range of solutions and services, Sungrow is committed to providing clean power for all and is steadfast in its efforts to become the global leader in clean power conversion technology. With a strong 26-year track record in the PV space and support from six global R&D centres, Sungrow maintains a leading market share in major global markets, including Europe, America, Asia-Pacific, and the Middle East, contributing to the green transformation of over 150 countries and regions.
By the end of June 2023, Sungrow achieved the global ranking of the highest shipment volume in the photovoltaic inverter industry, with an impressive 77GW. And its cumulative installed capacity of inverter and converter equipment across the world has been above 405GW.
Contemporary Amperex Technology Co., Ltd. (300750:SZ), established in 2011 with its headquarters in Fujian, China, went public in 2018. The company's primary focus is on the research, development, production, and sale of new energy vehicle power battery systems and energy storage systems. It has strategically expanded globally by establishing wholly-owned subsidiaries in Germany, France, the United States, Japan, Canada, and other regions, covering the entire industry chain through acquisitions and equity participation. This comprehensive approach spans from upstream mineral resources and raw material suppliers to downstream vehicle manufacturers, covering the entire industry chain from power batteries to energy storage and recycling. In the first half of 2023, CATL achieved an operating revenue of CNY 189.246 billion, a year-on-year increase of 55.86%. In the second quarter, their net profit reached CNY 20.717 billion, marking a 122.06% year-on-year increase.
CATL has formulated a green development strategy and implemented multiple measures to reduce carbon emissions throughout the product lifecycle. In terms of practical achievements, in 2022, the company's comprehensive energy consumption intensity remained largely stable compared to the previous year. They achieved a cumulative carbon reduction of 447,200 tons for the year, with a carbon emissions rate of 10.5 tons of CO2 equivalent per GWh per unit product, marking a nearly 25% decrease from the previous year. Additionally, photovoltaic power generation reduced greenhouse gas emissions by 47,700 tons of CO2 equivalent, and the use of green electricity increased to 26.6%. Water resource consumption density also decreased to 62.11 tons per hundred million yuan in revenue, representing a year-on-year decrease of over 20%.
Goldwind Science & Technology Co., Ltd. (002202:SZ) provides products and solutions in the fields of energy development, energy equipment, energy services, and energy applications. They assist cities and enterprises in meeting their comprehensive sustainable development needs in economic, ecological, and social responsibilities. The company's operations span across six continents and 38 countries. Goldwind Science & Technology has a global workforce of over 10,000 employees, including more than 3,000 research and technical professionals. It has established eight overseas regional centers in North America, South America, Europe, Africa, Australia, Asia, the Middle East and North Africa, and the Central Asia and Russian-speaking region, achieving internationalization in capital, markets, technology, talent, and management. In the fiscal year 2022, the company achieved an operating revenue exceeding CNY 46.4 billion, with a net profit of over CNY 2.38 billion. As of the first quarter of 2023, the company's total assets exceeded CNY 129.7 billion.
In order to reduce electricity generation costs and enhance power generation efficiency, Goldwind Science & Technology has established a dedicated Sustainable Development Management department to align with the trends of wind turbine unit large-scale and intelligent development. Through collaboration with China Three Gorges Corporation, they have overcome technical challenges related to ultra-long flexible blades and downsizing of high-capacity generators, earning recognition as one of the 'Top Ten Heavy Machinery of the Year 2022' in China. They have implemented a comprehensive carbon reduction initiative throughout the production chain, achieving carbon emissions for wind turbines that are less than 1% of those produced by conventional thermal power generation. Additionally, by developing technologies such as light and shadow flicker control, bird protection devices, and low-noise technology, they aim to prevent or minimize adverse environmental impacts.
Longi Green Energy
Longi Green Energy Technology Co., Ltd. (601012:SH), founded in 2000, is dedicated to technological innovation in five major business segments, including monocrystalline silicon wafer production, solar cell modules, industrial and commercial distributed solutions, green energy solutions, and hydrogen equipment. In its 23 years' journey, Longi Green Energy has also established a global presence with manufacturing bases in countries such as Vietnam, and Malaysia, as well as branches in the United States, Japan, Germany, India, Australia, the United Arab Emirates, Thailand, and more. And their business spans across over 150 countries and regions worldwide. In the first half of 2023, Longi Green Energy achieved an operating revenue of CNY 64.652 billion, a year-on-year increase of 28.36%. In the second quarter, their net profit exceeded CNY 5.5 billion, marking a historical quarterly high.
As the only Chinese company to join international initiatives such as RE100, EV100, EP100, and SBTi, Longi Green Energy actively addresses climate change. From 2012 to 2022, they cumulatively generated over 1,148,287 GWh of clean electricity, equivalent to reducing 536 million tons of CO2 emissions, accounting for 1.46% of the global energy-related carbon emissions in 2022. In 2022, Longi used over 4.2 billion kWh of green electricity, accounting for 47.18% of their total electricity consumption and reducing approximately 2.643 million tons of greenhouse gas emissions that year.
Founded in 1997, Sunwoda Electronic (300207:SZ) is a leading enterprise in the global lithium-ion battery sector. Sunwoda has established six major business segments, namely 3C consumer batteries, electric vehicle batteries, energy technology, smart hardware, smart manufacturing with industrial internet, and third-party testing services. With a vision rooted in Shenzhen and serving the global market, the company has set up multiple manufacturing bases in Guangdong, Jiangsu, Zhejiang, Shandong, Jiangxi, Sichuan, Hubei, as well as in international locations like New Delhi in India, Bắc Giang in Vietnam, and Nagyigmand in Hungary. Additionally, Sunwoda has established branches in countries including the USA, France, Germany, Israel, India, South Korea, and Japan. In the first half of 2023, Sunwoda disclosed a total revenue of CNY 222.36 billion, accompanied by a net profit of CNY 4.38 billion. This financial performance underscores a remarkable year-on-year net profit escalation of 368.40%. The second quarter saw a revenue growth of 5.96% compared to the previous year.
Since 2008, Sunwoda has formally ventured into the electric vehicle battery business, with the electric vehicle battery system (including cells, modules, BMS, and PACK) at its core. The company has expanded upstream into key areas such as mineral raw materials and positive and negative electrode materials for cells. Downstream, it has branched out into industries like electric vehicles, energy storage stations, and the secondary use of power batteries, crafting an integrated full-industry-chain business blueprint. Simultaneously, leveraging its strengths in lithium battery energy storage system integration and application technology, Sunwoda focuses on areas like portable energy storage, home energy storage, grid energy, power storage, and smart energy. With the aim of catering to diverse energy needs of customers, Sunwoda offers a comprehensive energy service model that includes lithium battery energy storage products, integrated solutions for various scenarios, and energy investment and operation services.
On one hand, Sunwoda is undergoing automation line upgrades and core equipment research and development, actively exploring comprehensive solutions for intelligent manufacturing and digital factories in the new energy industry. On the other hand, the company is building an industrial internet platform to empower its digital transformation. Additionally, Sunwoda has established a third-party testing service platform, focusing on enhancing product quality, refining common industry technologies, and actively participating in the formulation of national industry standards.
Flat Glass Group
Incepted in June 1998, Flat Glass Group (601865:SH, 6865:HK) stands as one of the world's preeminent photovoltaic glass manufacturers, amalgamating glass R&D, manufacturing, processing, and sales. The group's main offerings encompass four significant domains: solar photovoltaic glass, high-quality float glass, engineering glass, and home glass. Additionally, the company delves into the construction of solar photovoltaic power stations and quartzite mining. Through persistent endeavors in core technology research and product evolution, the company has sculpted a comprehensive industrial chain. At present, the company commands a market share of roughly 30% in the photovoltaic glass industry. In the initial six months of 2023, the company reported a revenue totaling CNY 96.78 billion and a net profit amounting to CNY 10.85 billion. This reflects a 10.85% year-on-year increase in net profit and a 13.64% rise in revenue for the second quarter.
With a global perspective, Flat Glass Group has actively set up production bases in locations such as Zhejiang Jiaxing, Anhui Chuzhou, Jiangsu Nantong, and Vietnam, never ceasing its development momentum. The company remains steadfast in the photovoltaic glass industry, vigorously driving the structural upgrade of the photovoltaic sector and its transition to low-carbon processes. Through its endeavors, Flat Glass Group contributes significantly to the global shift towards clean energy and the realization of carbon neutrality goals.
Tongwei Co., Ltd. (600438:SH) began its operations in Chengdu in 1995, primarily engaged in the research, production, and sales of aqua feed, livestock and poultry feed, as well as the development, production, and sales of high-purity polysilicon and solar cells. The group currently boasts over 300 subsidiaries and branches spread across various regions in China and overseas, employing nearly 50,000 people. In the first half of 2023, Tongwei booked a revenue of CNY 740.68 billion, marking a year-on-year increase of 22.75%; and a net profit of CNY 170.83 billion in the second quarter, up 20.00% from the previous year.
Tongwei has independently established an Energy Management Committee. This committee, along with the Execution Workgroup, is required to report their progress to the higher-level ESG management entity at set times each month. The Energy Management Execution Workgroup is also mandated to hold monthly meetings to strategize for the upcoming phase, playing a crucial role in bridging ESG decision-making and its practical implementation.
Founded on the ideals of green ecological manufacturing, that is G for green, E for eco and M for manufacture), GEM (002340:SZ) was established by Professor Xu Kaihua on December 28, 2001, in Shenzhen. With an annual output value exceeding CNY 30 billion and a workforce of over 10,000 employees, GEM has grown into a leading enterprise in China's circular economy, a global frontrunner in waste recycling, and a top supply chain enterprise in both the global hard alloy industry and the new energy sector. For the first six months of 2023, the company posted revenues amounting to CNY 12.94 billion and a net profit of CNY 413 million.
GEM was a pioneer in China to advocate the green, low-carbon philosophy of 'limited resources, infinite recycling.' The company champions the business model of 'mining urban mines' to 'eliminate pollution and recreate resources.' Adhering to a dual-track development approach driven by 'new energy material manufacturing + urban mine extraction,' GEM promotes carbon peak and carbon neutrality goals through establishing a resource recycling model and a clean energy material model. Its green development footprint spans the globe, covering over 40% of China's land area. GEM has constructed 19 waste recycling and new energy material manufacturing plants across 11 provinces and cities in China, as well as in countries like South Africa, South Korea, and Indonesia. The company has established waste management collaborations with a population exceeding 500 million.
GEM boasts dual national-level innovation platforms, namely the National Engineering Technology Research Center for Electronic Waste Recycling and the National Enterprise Technology Center. The company has successively overcome global technological challenges, including the recycling technology for spent batteries, green processing technology for electronic waste, comprehensive resource recycling technology for scrapped vehicles, and the ternary "core" technology for power battery materials. Through these advancements, GEM has established China's core technology and intellectual property system for green processing and recycling of typical waste resources, such as spent batteries, electronic waste, and scrapped vehicles.