1. Information Disclosure Strategy for Enhancing Corporate Environmental Management Dr. Xianbing LIU Senior Policy Researcher Kansai Research Centre, IGES

2. 13 July, 2010 ISAP2010, Yokohama, Japan 2 Target Countries of CEM Project at KRC (FY2007-2009) 2006 2007 Projections Actual Prev New Japan2.2% USA3.3% Euro-zone2.8% World5.5% China11.1% India9.7% Thailand4.2% 0 2 4 6 8 10 Economic Growth (Source: IMF) Environmental Performance Japan 81.9 China 56.2 India 47.7 Thailand 66.8 (Source: Yale ) Project Title: Proactive Policies and Business Strategies for Strengthening Corporate Environmental Management in Developing Asia

3. 13 July, 2010 ISAP2010, Yokohama, Japan 3 Overall Policy Frame for Enhancing CEM Focused by our CEM project

4. 13 July, 2010 ISAP2010, Yokohama, Japan 4 Components of CEM Project at KRC/IGES Objectives: ✓ Overview CEM practices in three target countries (China, Thai & India); ✓ Examine strategies enhancing proactive CEM efforts. Discussed in this presentation

5. 13 July, 2010 ISAP2010, Yokohama, Japan 5 Research Outputs of EID Part

6. 13 July, 2010 ISAP2010, Yokohama, Japan 6 Functions of EID Strategy Process & disclose environ. information make the companies to be self-critical of its environ. performances Firms anticipate the reactions of information recipients and alter their activities Pressures due to actual reactions of information recipients Quantity and quality of information Interventions: 1. No action; 2. Market pressure; 3. Complain to the government; 4. Both 2 an ｄ 3.

7. 13 July, 2010 ISAP2010, Yokohama, Japan 7 Voluntary EID in China Factors of voluntary EID Source: (Guo, et al., 2007) Number of companies with environ. reports (As of Apr., 2007) Source: www.syntao.com Highly motivated by social factors Very limited number of leading State-owned companies

8. 13 July, 2010 ISAP2010, Yokohama, Japan 8 Voluntary EID of Indian Companies Inf. ItemsManufacturingService/OthersIn total PrivatePublicTotalPrivatePublicTotalPrivatePublicTotal Green supply chain initiatives11.709.110.505.711.207.5 Green operations86.776.584.455.325.041.474.542.964.0 Climate change initiatives11.75.910.410.56.38.611.26.19.5 Renewable energy initiative21.741.226.07.934.420.016.336.723.1 SectorNo. of firmsSectorNo. of firms PrivatePublicTotalPrivatePublicTotal Manufacturing601777Service/Others383270 Automobile606Banking and financial services62026 Automobile ancillaries303Computer software808 Cement707Hotel and tourism202 Chemicals18220Securities and stocks202 Cosmetics and toiletries505Telecommunication314 Food and beverages404Construction718 Machinery8513Electricity generation325 Metal and metal products639Media202 Refinery279Storage and distribution033 Textiles101Trading101 Diversified459 Environ. information on the web or annual report of 147 most valuable companies from 23 sectors was qualitatively monitored (Source: Indian CEM report) Observations: ◈ Higher EID level of manufacturing sectors than service sectors; ◈ Private companied are active in EID than the public ones; ◈ Unable to judge the information quantity and quality as just data of occurrence frequency; ◈ Marginal voluntary EID in India.

9. 13 July, 2010 ISAP2010, Yokohama, Japan 9 Criteria of Mandatory EID Program in China Pilot projects in Jiangsu and Inner Mongolia As of June, 2008, 16,464 companies participated in the program in Jiangsu Shortage in daily CEM Can not comply with emission standards Good CEM Proactive CEM

10. 13 July, 2010 ISAP2010, Yokohama, Japan 10 Behavioral Changes of Participating Firms Rating results of 2005 Rating results of 2006In total BlackRedYellowBlueGreen Black000000 Red719203049 Yellow076027094 Blue002129151 Green001247 In total726102615201 Sector20052006 NumberPercentageNumberPercentage Dyeing and textile9043.910743.1 Chemicals3316.13714.9 Metal processing209.8228.9 Pulp and paper73.472.8 Power plant83.9104.0 Sewage plant146.8176.9 Others3316.14819.4 In total205100.0248100.0 Promoted: 51 Demoted: 38 Maintained: 56% 70% shared by top three sectors Distribution of program participating firms (Sourced from local EPB) Changes of rating results of 2005 and 2006 (Sourced from local EPB)

11. 13 July, 2010 ISAP2010, Yokohama, Japan 11 Monitored Functions of EID Program Function itemsObs.MeanStd. dev.Min.Max. Panel A: Program effects perceived by the firms a. Enhanced enforcement by environmental bureaus323.221.1315 b. Complaints and protest of neighboring communities322.691.2615 c. Complains and boycotts from environmental NGOs302.311.3815 d. Boycotts of individual consumers302.161.5315 e. Decreased trust and cooperation of business partners322.591.0414 f. Reduced investment from the investors312.381.3915 g. Stricter checking or suspend of the loan from banks292.941.6415 Panel B: Actual pressure felt by the firms after the disclosure a. Enhanced enforcement by environmental bureaus313.451.2615 b. Complaints and protest of neighboring communities312.681.4015 c. Complains and boycotts from environmental NGOs302.191.3015 d. Boycotts of individual consumers302.191.3315 e. Decreased trust and cooperation of business partners322.941.2915 f. Reduced investment from the investors322.721.4415 g. Stricter checking or suspend of the loan from banks313.591.5815 Panel C: Role of the program to firm’s internal modifications a. Better processing of internal environmental information313.190.9514 b. More aware of the environmental compliance status313.611.1215 c. Better coordination of internal organizational units313.261.1215 d. More self-critical of environmental performance313.321.1115 e. Making environmental efforts proactively313.611.0915 A moderate response anticipated by the firms for environ. bureaus The firms do not think the other stakeholders would seriously react Moderate Weak Help the firms be clearer of environ. compliance status and performance improvement Due to green credit Policy ?

12. 13 July, 2010 ISAP2010, Yokohama, Japan 12 Major Findings and Policy Implications Marginal level of voluntary EID in India and China; The statistical summary shows the efforts of mandatory EID program participating companies; The worse environmental performers would more likely improve their environmental performances; Lack of CEM capacity and poor daily environmental maintenance are problems for worse rated companies; Interviews confirm a major objective of CEM in China to be compliance of regulations; The EID program has generated less pressures from external stakeholders other than the government for enhancing CEM; EID strategy could work effectively in combination with other policy tools; Due to the sensitivity of firms to market stakeholders, further efforts shall be made to provide the market actors with easier access to environmental information of companies.

13. 13 July, 2010 ISAP2010, Yokohama, Japan 13 Thank you for your attention! Contacts: Xianbing LIU KRC/IGES Tel: +81-78-262-6634 Fax: +81-78-262-6635 E-mal: liu@iges.or.jpliu@iges.or.jp URL: http://www.iges.or.jphttp://www.iges.or.jp