Family businesses in Mainland China are placing an increasing value on their environmental, social and governance (ESG) profiles.
According to PwC in its new ‘Global Family Business Survey 2021 – China Report’, 79% of these businesses either “strongly agree” or “agree” that sustainability is at the heart of everything they do. This compared with 50% for equivalent respondents in Hong Kong, and 49% globally.
Further, 67% of respondents in Mainland China said they have a developed and communicated sustainability strategy – another notable difference compared with Hong Kong (39%) and globally (37%).
“Companies that integrate ESG factors into their growth strategy and business decisions are better equipped to manage risks, capture opportunities and deliver long-term profitability,” said PwC partner John Wong, and leader of the firm’s Mainland China and Hong Kong’s family business and private client services practice.
The risk of inaction is more evident than ever. The public health crisis in China and around the world has shown how quickly a high-impact, low-probability event can disrupt business as usual. Family businesses that are not showcasing their commitment to their stakeholders and society will be more likely to get left behind, or even penalised.
The China report covered the views of 129 executives based in Mainland China and Hong Kong. The global survey was conducted between October and December 2020, capturing the insights of 2,801 family businesses from 87 territories and a range of industry sectors.
Setting the ESG vision
Going forward, the survey found that 65% of Chinese family businesses believe there is an opportunity to lead the way in sustainable business practices. Respondents were less bullish in Hong Kong (35%) and globally (55%).
In addition, 71% of Chinese family businesses said businesses will need to deliver greater benefits for the planet and society – again much more than in Hong Kong (41%) and globally (53%).
To promote an ESG and sustainability agenda for family businesses in Mainland China, the research recommended a four-step process:
First, to develop ESG and sustainable investing strategies and execute the families’ philanthropic responsibilities in society; second, to beyond traditional corporate social responsibility (CSR) activities; third, to establish the purpose of family firm in driving ESG agenda; and finally, to use materiality assessment to identify those ESG issues that are most relevant to the company
“Establishing a company’s purpose can help articulate the means by which a business brings solutions to economic, environmental and social needs, and create a tangible link between business strategy and family values,” Wong explained.
“Family businesses should go beyond traditional CSR activities, which, while unequivocally good, are not necessarily integrated into a company’s core operations,” he added.
Making an impact
Family businesses in Mainland China have also been actively supporting various philanthropic activities in a more meaningful way than their counterparts in Hong Kong and globally, according to the report.
Just over one-third (35%) of respondents from China had engaged in impact investing, while only 12% in Hong Kong and 18% globally said the same.
There was less discrepancy when it came to venture philanthropy, although Chinese family businesses have still been more active, at 19%, compared with 15% in Hong Kong and 12% globally.