China aims to achieve carbon neutrality by 2060. Reducing and removing carbon emissions to reach carbon net zero, or becoming carbon neutral, presents a business challenge but also an opportunity for companies that can integrate environmental, social and governance (ESG) principles into products and services and their business model.
In FM interviews, two business leaders, Christina Zeng, FCMA, CGMA, and Androw Zhu, FCMA, CGMA, described their companies’ progress towards embedding ESG into business strategy and operations.
For Zeng, general manager of the Centre of Excellence of Lenovo Solutions and Services Group China, this has meant incorporating carbon net zero into the full product lifecycle and offering customers a carbon-neutral leasing programme.
Zhu is CFO and managing partner at NewMargin Ventures, a venture capital business headquartered in Shanghai. The company invests in high-potential startup companies in sectors that include technology, fintech, healthcare, and clean energy. NewMargin Ventures focuses on businesses driven by sustainability considerations such as clean technology, renewable energy, and circular economy initiatives.
Here are their responses to FM’s questions, edited for length and clarity:
Please describe your company’s progress towards achieving carbon net zero by 2060.
Christina Zeng: Continuously, we have made noteworthy progress towards achieving the net zero target per Lenovo’s group commitment and product development.
As Lenovo CEO Yang Yuanqing stated in our ESG report, we are very focused and dedicated in our commitment to achieve the net-zero emission targets set by the Science Based Targets Initiative (SBTi) and its net zero standard.
At the operational level, we embedded zero carbon into our products’ full life-cycle management, from design, supply chain to manufacturing, logistics to product end-of-life management.
Lenovo Leasing also released a new offering called Zero Cube that provides our customers with a zero carbon footprint IT device leasing programme to support their own corporate social responsibility (CSR) goals.
Androw Zhu: As a responsible financial institution, NewMargin Ventures is dedicated to aligning with the Chinese government’s net-zero target by 2060. We have been actively integrating ESG principles into our investment strategy. Our approach adheres to global standards, including the UN Sustainable Development Goals (SDGs), International Financial Reporting Standards (IFRS), and the UN’s Principles for Responsible Investment, to ensure comprehensive sustainability considerations.
Which of your business areas are most impacted by ESG regulatory requirements?
Zeng: Naturally, everyone was concerned that ESG regulations would increase costs for companies aiming to keep up with the evolving list of requirements. However, I saw new opportunities by deeply integrating ESG into our business model and product designs.
Embracing this challenge, we created a “triple win” by promoting everything-as-a-service principles:
“Customer wins” by encouraging customers to lease devices rather than own them, or to pay for computing power they require rather than investing in new devices.
“Community wins” when computing devices are fully utilised longer than their normal life cycle, with refurbishment and reintroducing them to new customers resulting in better carbon footprint management. And “Lenovo wins” because we can identify new business growth areas and capture new customers with shared values when leveraging ESG as a new business driver.
Zhu: The ESG regulatory requirements significantly impact our investment decision-making process and portfolio management. We are particularly focused on sectors that play a crucial role in sustainability, such as clean technology, renewable energy, and circular economy initiatives. Aligning our investments with ESG principles ensures that we are not only financially successful but also contributing to a more sustainable future.
Describe three ways in which your finance team is embedding ESG in your company strategy.
Zeng: The company alignment with sustainability provides new opportunities for the finance team to integrate ESG into the company strategy at all levels.
The CFO, as key adviser to the executive team, will take the lead in integrating ESG requirements into all future business strategies, which includes mid-term planning, annual budgeting, KPI setting, and long-term investment planning.
The FP&A leaders will train to acquire essential ESG knowledge and analyse how to integrate ESG into new business models, project evaluation, pricing and costing, and other opportunities.
Zhu: Our finance team plays a pivotal role in integrating ESG considerations into our company strategy.
Firstly, we conduct comprehensive ESG assessments of potential investments, identifying risks and opportunities related to ESG principles. Secondly, we engage with portfolio companies, providing them with ESG guidance and support to improve their sustainable practices.
A successful example is the case of Maple Leaf Car Rental, one of our portfolio companies. Maple Leaf Car Rental voluntarily chose to disclose ESG information, making it one of the first non-listed enterprises to do so. Our finance team collaborated closely with management, assisting in the development of the company’s ESG reporting framework and guiding them on sustainable initiatives.
Lastly, we are continually reviewing and enhancing our internal ESG policies, in line with globally accepted frameworks and industry best practices, to ensure sustainable practices underpin our investment decision-making process.
What three key steps has your company taken to operationalise ESG?
Zeng: First, the board met to set the tone that will steer the direction of the ESG strategy. Then, the management team put into action the strategy by identifying key areas of the business heavily impacted by the ESG requirements and by formulating solutions to address them. Some identified areas relate to product end-of-life, waste from operations, compliance, and innovations.
In addition, we aligned our partners along the same sustainability requirements and work together with them to improve our global partners community. Lenovo’s 360 Circle project was launched in November 2021, with 20 partners joining to create a blueprint and to align on shared objectives to meet the SBTi and the UN Global Compact principles and SDGs goals.
Zhu: Operationalising ESG involves a comprehensive approach across our organisation. Firstly, we have established an ESG committee within our organisation, consisting of senior leaders responsible for overseeing the implementation of our ESG strategy. Secondly, we integrated ESG metrics into our performance evaluation process to ensure that our team’s efforts towards sustainability are recognised and rewarded. Thirdly, we regularly report on our ESG initiatives and progress to our stakeholders, demonstrating our commitment to transparency and accountability.
Describe the ways in which you are developing a culture of sustainability in your finance team and across the business.
Zeng: We initiated the Lenovo ESG monthly newsletter to keep everyone updated on the latest ESG policies and regulations, news, insights, and the latest progress of Lenovo’s ESG activities.
Also, the Lenovo Foundation provides opportunities for all staff to initiate and participate in public welfare activities, allowing them to contribute their time and passion to build a better and more sustainable community.
Zhu: Creating a culture of sustainability is essential in driving ESG integration throughout our organisation. We organise regular workshops and training sessions for our finance team members to enhance their ESG knowledge and understanding. Moreover, we encourage open discussions and idea-sharing to foster a collaborative approach towards sustainable practices. Additionally, we recognise and celebrate team members who proactively contribute to our ESG initiatives, reinforcing the value we place on sustainability.
How is your own role changing to enable your business to become more sustainable?
Zeng: I learned that “seeing the big picture” is essential for recognising risks and opportunities in sustainable growth and I shifted my personal focus from a financial expert to a general manager who fosters culture and community activation.
As a business leader, I learned to expand my perspective on sustainability and identify new market opportunities — once I zoomed out from my normal business financial responsibilities. Seeing the broader picture, I am able to make a more positive and significant impact on my community and at the same time realise a long-term vision of new meaningful opportunities for Lenovo.
I am now more committed to building a more sustainable planet and promoting inclusion. These shared values play a crucial part in shaping the company’s distinctive culture and core competencies, in working with key customers who share the same vision, and in transforming their companies and their local communities.
Zhu: As a leader, I am increasingly focusing on integrating ESG considerations into our investment decisions. I actively engage with our portfolio companies, encouraging them to adopt sustainable practices and align their strategies with ESG principles. Additionally, I play a key role in promoting ESG awareness within our organisation and supporting the implementation of ESG-related policies and initiatives.
What are the differences between ESG implementation in China compared to other countries?
Zeng: Considering China has one of the biggest populations in the world, implementing ESG strategies in China will uncover new challenges and obstacles significantly more complicated than those faced by other nations.
Zhu: ESG implementation in China is often influenced by unique regulatory and cultural factors. The Chinese government’s commitment to sustainable development has led to a strong emphasis on environmental protection and carbon reduction initiatives. Moreover, China’s focus on green finance and sustainable investments presents numerous opportunities for companies and investors to contribute to the country’s sustainable growth. While there may be some variations in ESG priorities and reporting standards, the overarching goal of promoting sustainability remains universal.
— To comment on this article or to suggest an idea for another article, contact Oliver Rowe at Oliver.Rowe@aicpa-cima.com.
Learning resource
Fundamentals of ESG Certificate
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