Policies and Guidelines with Social and Environmental Requirements
While various policies and guidelines mentioned in this guide refer to companies’ environmental and social responsibilities, several focus specifically on these aspects. These include two sets of joint guidelines issued by China’s commerce and environment ministries on “green development” and “ecological environmental protection” in overseas projects. These were issued in 2021 and 2022, respectively. Additionally, as discussed in the section on The Belt and Road Initiative, the National Development and Reform Commission and three other ministries issued Opinions on Jointly Promoting Green Development of the Belt and Road in 2022.
As the National Development and Reform Commission and the Ministry of Commerce are the two most important government bodies overseeing Chinese overseas investment, these more detailed policies are potentially an important step forward. They indicate that the government increasingly expects companies to follow higher standards overseas. In particular, through these policies, they have begun to encourage companies to follow international standards and best practices, or higher Chinese standards, when host country environmental standards are inadequate. This marks a shift from older policies that simply require compliance with host country standards. Although not mandatory for companies, these documents include plans for strengthening monitoring and supervision.
Although these guidelines are framed around the environment and green development, they also include provisions related to social aspects of projects, as well as requirements to follow host country law, operate in a transparent manner, and follow best practices. As such, the term “green” in this context covers both environmental and social issues.
Guidelines for Green Development in Overseas Investment
In 2021, the Ministry of Commerce and Ministry of Ecology and Environment issued the Guidelines for Green Development in Overseas Investment and Cooperation (MOFCOM [2021] #309). The guidelines are addressed to all the relevant departments of the ministries of commerce and environment at national and subnational level and central state-owned enterprises (SOEs), and are also copied to the China Development Bank, China Eximbank and Sinosure.
The “key tasks” covered by the guidelines are to:
- Adhere to green development
- Promote green production and operation
- Build green infrastructure
- Establish green overseas economic and trade cooperation zones
- Advance green technology innovation
- Promote the green transformation of enterprises
- Prevent eco-environmental risks
- Follow green international rules
- Optimize green supervision services
- Improve the reputation of green development
You may consult the text of the guideline for full detail of each of these key tasks.
Guidelines for Ecological and Environmental Protection in Foreign Investment
In 2013, the commerce and environment ministries issued the first guideline on environmental protection in overseas projects. This was updated in the 2022 Guidelines for Ecological Environmental Protection in Foreign Investment Cooperation and Construction Projects (MEE [2022] #2). This is now the most comprehensive state-issued environmental guideline regarding overseas projects. Compared with other more aspirational policies, these guidelines provide additional detail on environmental risk management throughout the project lifecycle from planning to decommissioning, including specific provisions for high-risk sectors including energy, transport and mining.
The guidelines state that companies must follow host country environmental standards, or when they are inadequate, follow international best practice or higher Chinese standards (Article 3). Below is a summary of key articles of the guideline as they apply to the stages of a project lifecycle.
Project Planning
- Companies should conduct environmental impact assessment (EIAs) according to local regulations. If local standards are inadequate, follow higher Chinese or international standards (Article 7).
- Companies should conduct biodiversity surveys. If high biodiversity risks are identified, the company must justify its decision for the project site and consider alternative locations (Article 6).
- Companies are encouraged to choose competent EIA consulting services that have local experience and provide international standard services (Article 5).
- When companies are acquiring an existing project, they should conduct due diligence to evaluate environmental impacts and risks of the project, and the historical activities of the company or project that they are acquiring (Article 5).
Project Construction
- Companies should reduce negative environmental impacts of construction, control pollution (air, water, noise, vibration, radiation and solid waste) and reduce greenhouse gas emissions (Article 8).
- Adverse impacts on ecosystems should be restored after construction work is complete (Article 8).
Project Operation
- Companies should implement environmental monitoring and management systems
(Article 9). - Companies should have response plans for environmental emergencies, including early warning systems and emergency support, as well as emergency reconstruction. When environmental incidents occur, they should be reported to the local Chinese embassy/consulate and local authorities in a timely manner (Article 16).
Project Reporting and Information Disclosure
- Companies shall report ecological and environmental protection compliance information in accordance with relevant regulations (Article 22).
- Companies should strengthen information sharing and regularly disclose information on the project’s compliance with environmental laws and regulations, environmental measures and their effects (Article 24).
Decommissioning
- Companies shall ensure environmental protection during decommissioning, demolition and closure of projects (Article 25).
Throughout the project lifecycle, companies are encouraged to engage with local communities and listen to suggestions regarding environmental impact through forums, hearings, and other channels (Article 23). Companies should also appoint dedicated personnel to be responsible for ecological and environmental protection work (Article 4).
The guidelines also include provisions for four specific sectors:
- Energy projects: Companies should give priority to clean and renewable energy projects. Hydropower projects should avoid protected areas and nature reserves as much as possible, with adverse impacts on habitats and aquatic biodiversity reduced (Article 10).
- Petrochemical projects: Companies should pay special attention to pollution control, greenhouse gas emissions, strengthening environmental risk prevention and control. (Article 11).
- Mining projects: Companies should pay special attention to pollution control measures and waste disposal, paying close attention to management of tailings disposal and storage. They should also reduce ecological damage and land occupation and carry out ecological restoration and biodiversity protection (Article 12).
- Transportation infrastructure projects: Infrastructure should strive to avoid nature reserves and important wildlife habitats. When this is not possible mitigation and offsetting measures must be implemented (Article 13).
Practical Advice: Using the environmental protection guidelines
If you believe that a Chinese investment project is failing to comply with the guidelines, communicating this to the Ministry of Commerce may be useful. It is one of the key institutions responsible for promoting, approving, recording and monitoring overseas investment. The Ministry of Ecology and Environment does not have a mandate for reviewing, approving or overseeing overseas investment. However, as it is co-author of the environmental guidelines, major problems related to “green development” will be reported to both ministries. Therefore, it may also be useful to share concerns with this ministry, which has an interest in tracking implementation and communicating concerns with the Ministry of Commerce.
In addition, part of the mandate of the Ministry of Ecology and Environment is to lead international cooperation on environmental issues. This includes coordinating the implementation of international conventions regarding the environment and participating in the global governance of the environment. This is led by the ministry’s Department of International Cooperation, which you should copy on any correspondence.