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A Matching Policy to Address ESG and Non-ESG Risks Impacted by a Relocation Policy in China’s Chemical Industry

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  • Xudong Ren

    (Nicholas School of the Environment, Duke University, Durham, NC 27708, USA
    Environmental Research Center, Duke Kunshan University, Kunshan 215316, China
    Watershed Carbon Neutrality Research Center, Nanchang University, Nanchang 330031, China)

  • Khanh Linh Dong

    (Nicholas School of the Environment, Duke University, Durham, NC 27708, USA
    Environmental Research Center, Duke Kunshan University, Kunshan 215316, China)

  • Jackson Ewing

    (Nicholas School of the Environment, Duke University, Durham, NC 27708, USA
    Environmental Research Center, Duke Kunshan University, Kunshan 215316, China
    Nicholas Institute for Energy, Environment & Sustainability, Duke University, Durham, NC 27708, USA)

  • Jie Zheng

    (Center for Economic Research, Shandong University, Jinan 250100, China)

  • Lei Shi

    (Watershed Carbon Neutrality Research Center, Nanchang University, Nanchang 330031, China
    School of Resources and Environment, Nanchang University, Nanchang 330031, China)

Abstract

China’s chemical industry has faced severe environmental, social, and governance (ESG) issues, such as high safety and environmental accidents and risks. To address these issues and promote industrial upgrading, China’s central government has issued a national relocation and improvement policy targeting its chemical industry. However, its countrywide policy implementation may also lead to other ESG risks during the relocation of chemical enterprises, namely industrial transfer. The typical ESG risks that appear to occur in developed eastern region provinces include a one-size-fits-all solution and unemployment, while less developed central and western region provinces may encounter pollution transfer, carbon leakage, environmental injustice, and health disparities. These ESG risks might overlap with other economic and financial (non-ESG) risks, like stranded assets, industry hollowing-out, and debt sustainability issue. These ESG and non-ESG risks could result from potential mismatches between chemical enterprises and chemical parks, categorized as mismatching errors explained by social-ecological systems, behavioral economics, and information economics. To better manage these risks, we propose an ESG matching policy comprising a national standardized ESG scoring and ranking system, a deferred acceptance mechanism, and a score announcement instrument. Such a policy innovation aims at achieving fair and efficient chemical enterprise–chemical park pairs, which would help manage both ESG and non-ESG risks and provide a just transition toolkit for China and other developing countries.

Suggested Citation

  • Xudong Ren & Khanh Linh Dong & Jackson Ewing & Jie Zheng & Lei Shi, 2024. "A Matching Policy to Address ESG and Non-ESG Risks Impacted by a Relocation Policy in China’s Chemical Industry," Sustainability, MDPI, vol. 16(22), pages 1-30, November.
    • Handle: RePEc:gam:jsusta:v:16:y:2024:i:22:p:9760-:d:1517040
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    References listed on IDEAS

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