"ESG to Reality" Seminar Series: From 1 to Many, Digitalization is the key

A collection of guest speeches at the first event of the "ESG to Reality" series of seminars, "Digital and Practical ESG". (03:51)

With the intensification of global warming, we have entered a "boiling era", and the severe climate crisis is closely related to human activities and energy use. In order to achieve the "dual carbon" goal, we need a greener and low-carbon production mode and lifestyle, and carbon dioxide emissions have become a sword hanging over economic development. At the enterprise level, ESG performance is a key element to measure the sustainable development performance (CSP) of enterprises, and how to use ESG as the driving force of the company's own development requires not only a comprehensive consideration based on the main business capabilities and development strategies, but also the use of digital means to implement each link.

The first event of the "ESG to Reality" series of seminars, "Digital and Practical ESG", was moderated by Jiang Yuanyuan, an associate researcher at the Institute of Applied Economics, Shanghai Academy of Social Sciences.

On October 25th, the theme seminar of "Digital and Practical ESG" was held in the surging news world meeting room of Magnolia Plaza on the North Bund. This is the first event of The Paper's "ESG to Reality" series.

Panelists believed that ESG has gone through the stage of "from 0 to 1", not just a concept. To implement ESG, we should start from the core concept of "carbon", do a good job in carbon management through digital means, achieve full-link carbon reduction in the supply chain, embed ESG into the operation and management process of enterprises, and make ESG itself sustainable by combining it with business value.

How to do a good job in digital carbon management

The core concept of "E" (Environmental) in ESG is carbon, so to implement ESG, we must first consider the relationship between digitalization and carbon management. Li Zhiqing, Director of the Environmental Economics Research Center of Fudan University, delivered a keynote speech on "Digital Carbon Management and a Low-Carbon Future", clarifying the concepts of carbon accounting, carbon disclosure, carbon account, and carbon market, as well as the relationship between these concepts.

Li Zhiqing said that the first thing to solve in carbon management is the question of where and how much carbon there is, so carbon accounting is very important. To solve this problem, we can build a carbon emission factor library and use digital technologies such as the Internet of Things. After the carbon accounting is clear, it will enter the carbon disclosure process, and enterprises need to inform the society and investors about the climate risks they face in the process of operation, and how to deal with them, solve and manage them.

Li Zhiqing, Director of the Environmental Economics Research Center of Fudan University, delivered a keynote speech on "Digital Carbon Management and Low-Carbon Future".

He pointed out that the biggest challenge is how to communicate with society through carbon disclosure. On the basis of carbon accounting and carbon information disclosure, the establishment of carbon accounts, accurate tracking of carbon emissions of enterprises, institutions, production units and consumption units, and then through carbon trading, to find value outlets for all early investment is the most important link in the entire ESG value closed loop.

In Li Zhiqing's view, whether it is a carbon account or a carbon market, digital technology is an important starting point to ensure the authenticity and traceability of data. If data is used as a factor of production, then a complete data supply chain system can be organically combined with the carbon market, investment and financing, environmental protection, and energy markets. For example, the data supply chain can be combined with the calculation of the carbon footprint of products, or it can empower the carbon market, collect data from the supply side, the demand side and the third party to operate on the same platform, and build a financial service platform based on the data supply chain, and embed energy-saving and low-carbon related standards to support the combination of green supply chain and green finance. He emphasized that carbon management must ultimately have a value closed loop, and use digitalization to efficiently connect the supply and demand of funds and promote the development of green finance.

Li Zhiqing believes that the relationship between digitalization and carbon management is inseparable from three elements – innovation, policy and investment. In order to achieve a low-carbon future, we must not only promote the innovation of green technologies, but also create a good ecological environment through policies and systems, so that market players can feel the real benefits brought by green development to enterprises, and at the same time, we must solve the funding gap and risk problems through green investment and financing.

Shi Yichen, Senior Academic Advisor and Chair Professor of the International Institute of Green Finance, Central University of Finance and Economics, participated in the roundtable discussion on "Digital and ESG".

Shi Yichen, senior academic advisor and chair professor of the International Institute of Green Finance at the Central University of Finance and Economics, said in the roundtable discussion that CSR reports are full of stories and cannot be quantified, while ESG reports are full of numbers and need to be quantified. The process of quantification requires data. Data and technology are also the two main levers for achieving the "dual carbon" goal, because technology can not only drive emission reduction, but also collect data. This is the importance of forcing companies to disclose ESG information. Data, ratings, and then to investment and financing decisions, forming a closed loop to serve investment and financing decisions.

How to achieve carbon reduction in the whole chain of the supply chain

For many companies, there is greater pressure to decarbonize their supply chains. According to a report released, the average carbon emission of a company's supply chain is 5.5 times that of direct emissions. Therefore, to achieve ESG, digitalization should also grasp the supply chain, which is a key link in carbon emissions, so that digitalization can empower the whole chain of carbon reduction.

Lu Sha, an associate researcher at the School of Environmental Science and Engineering, Tongji University, at the seminar on "Digital and ESG".

Lu Sha, an associate researcher at the School of Environmental Science and Engineering at Tongji University, analyzed the current problems faced by the supply chain in reducing carbon emissions from three aspects.

The first is supply chain transparency. Due to the lack of public trust platform monitoring of the digital chain, it is worth thinking about whether the transmission process is credible and traceable.

The second is the stability of the supply chain. The challenge of reverse supply chains, for example, is that it is difficult to predict how much waste can be used for recycled production, and companies need large inventories to cope with supply chain stability issues. This also requires digital monitoring.

Finally, there is the ownership of the supply chain, and companies need to use digitalization to clarify how much carbon reduction they are making and at what point. This involves the translation of economic benefits, for example, by which financial institutions can estimate the value of a company and make investment decisions.

Sun Xiang, head of the Cainiao Sustainable Development Project, was at the seminar on "Digital and ESG".

Sun Xiang, head of the Cainiao Sustainable Development Project, took green logistics as an example to introduce his understanding of green and digital collaboration. Cainiao provides merchants with a full-link green carbon reduction solution from warehousing, distribution to recycling, including packing algorithm, original box delivery, electronic billing, green packaging, intelligent path planning, green distribution, and intelligent warehousing. Taking the packing algorithm and original box delivery as examples, enterprises not only make a scientific assessment of whether the goods need to be shipped in the original packaging through digital means, but also estimate the product volume before warehousing and intelligently match the appropriate box type.

In addition, the installation of solar photovoltaic panels on the roof of warehouses, the promotion of the use of new energy vehicles in transportation, and the independent recycling of express packaging on the consumer side are all carbon reduction practices embedded in the company's main business. It is understood that during the "Double 11" period in 2021, rookies sent more than 90 million packages using green packaging, reducing the length of tape by more than 84 million meters. Lu Sha took packaging waste in the express delivery industry as an example and shared a set of research data - the use of recycling boxes can not only help express delivery companies reduce costs by 30%, but also increase environmental benefits by 70%. This also shows that business innovation in the field of circular packaging can reduce carbon emissions in the supply chain.

In the process of decarbonizing the supply chain, it is also crucial to unify the data of all logistics links into a single carbon system and carbon account. Cainiao has developed a corresponding carbon accounting system to accurately determine the carbon emissions of each logistics link, and which links can be further optimized, or adopt more advanced and clean technologies to ultimately achieve targeted carbon reduction. It is reported that in order to help businesses make better carbon asset management, Cainiao has explored and developed a carbon asset management system, covering carbon emission statistical forecasting, carbon grade industry reports, carbon inventory statistics, carbon emission third-party certification and other corporate carbon asset services.

At the same time, Cainiao also pays attention to digital measurement in the process of transportation and warehousing, so that the overall carbon emission measurement of each link is more accurate and supported by methodology. In order to encourage more people to participate in the green recycling of express packaging. During this year's "Double 11", Cainiao launched the express packaging recycling and recycling activity, consumers can participate in the activities at the Cainiao Post Station across the country, and the recycling of used clothes can also be picked up by express delivery for free.

Hu Qifan, deputy director of the Carbon Neutrality Special Committee of the China Energy Conservation Association, was at the seminar on "Digital and ESG".

Hu Qifan, deputy director of the Carbon Neutrality Committee of the China Energy Conservation Association, suggested that the first is to use unified standards to quantify green, and the second is to update data in real time through digital technology to truly reflect carbon emissions, so as to form a positive feedback mechanism. At the same time, it is important to recognize the importance of carbon data in the supply chain. For enterprises, on the one hand, they should use the corresponding standards to calculate their carbon emissions, and on the other hand, they should use the time and economic costs they have invested to obtain higher benefits.

ESG should not only be realistic, but also sustainable

From the perspective of the overall development of ESG, it has reached a turning stage. Li Zhiqing believes that after years of development, ESG has achieved a leap from "0 to 1", but it only solves the cognitive problem. In the future, to achieve "from 1 to many", we must do better.

Li Zhiqing said that to implement ESG, on the one hand, we can use digital technology to improve the accuracy, transparency and traceability of data; On the other hand, it can also be bundled with financial investment to see what value ESG can bring to corporate operations, brands, costs, etc.

"For a long time, we have looked at ESG from the perspective of technology and human ecology, and now we need to look at it from the perspective of capital market or finance, what value ESG can bring to corporate operations, brands, costs, etc. Only in this way can we make ESG sustainable. If ESG itself is not sustainable, how can it help this society become sustainable? Li Zhiqing said.

Shi Yichen pointed out that first of all, it is necessary to change the perception, enterprise managers should not only care about ESG reports and ratings, but also embed ESG into their operation and management processes. ESG should be embedded in KPIs, executives' compensation should be combined with corporate ESG performance, and employee evaluations should be linked to ESG, only in this way will ESG business value be generated. In addition, for ESG to be embedded in the management process, it requires a separate management system.

He emphasized that enterprises should pay attention to the path and method of doing ESG, and make a plan for at least one to five years to see how ESG improves the management performance of the enterprise, what the improvement does to the financial performance of the enterprise, and what improvement the brand value of the enterprise is, rather than looking at the increase in the report from 100 pages to 150 pages, nor the rating from 2B to 3B.