ESG Empowers Chinese Enterprises Going Global | Xie Haixia: Beware of "Overemphasizing E While Neglecting S" Tendency, Do Not Underestimate the Hard Binding Force of Soft Rules

Why do Chinese companies often overlook social dimension ESG risks when going global?

The narrative of Chinese enterprises expanding abroad is turning a new page.

On this new course, what determines a company’s survival is not only overcoming technological barriers or competing for market share but also a deep understanding and strategic play of global governance rules.

Is cross-border ESG scrutiny a regulatory barrier designed to block Chinese companies, or a necessary step toward becoming a top-tier global enterprise? To explore this, we interviewed Professor Xie Haixia from Capital University of Economics and Business Law School. From an international legal perspective, she points out: instead of passively defending in compliance quagmires, companies should turn crises into opportunities, actively co-construct rules, and regain their voice in global discourse.

“Pure formal compliance has already failed”

Southern Weekly: From an international law perspective, how do you assess current global ESG regulatory trends?

Xie Haixia: The main trend in global ESG regulation is very clear: the rule of law is tightening, and responsibility is becoming more transparent and integrated. In the past, many companies viewed ESG as just a PR tool or a bonus point, but now compliance requirements have evolved from a legal “minimum red line” to higher expectations with binding international constraints.

For companies going abroad, the most direct impact is that superficial compliance is no longer enough. For example, last year, a Chinese non-ferrous mining subsidiary in Zambia experienced a tailings dam collapse. Although the company quickly fulfilled repair and remediation obligations according to local government directives and compensated affected farmers, it still faced a massive $80 billion claim for damages.

Setting aside the reasonableness of the amount, this incident shows that environmental accidents can lead to more than local administrative penalties—they attract international scrutiny from public opinion and human rights organizations, triggering potentially unmanageable chain lawsuits.

Moreover, the dynamic nature of ESG rules is evident. International frameworks like the UN Sustainable Development Goals (SDGs) are continuously evolving with climate and human rights issues. Companies cannot rely on a one-time compliance; they must establish dynamic ESG governance mechanisms.

Underestimated “Soft Law” and Transparent Accountability

Southern Weekly: Based on your observations, what are the most common misconceptions Chinese companies have about ESG compliance when going abroad? What risks are they currently severely underestimating?

Xie Haixia: This is a very core issue. When Chinese companies expand globally, there is a widespread structural cognitive bias I summarize as “overemphasizing E (environment), underestimating S (social), focusing on hard indicators, neglecting soft rules.”

Companies tend to underestimate the effectiveness of international “soft law” in its “hard enforcement.” When going abroad, Chinese firms often excel at using capital and technology to address quantifiable environmental metrics but habitually overlook social responsibilities related to human rights and labor protections. Rules like the OECD Guidelines for Multinational Enterprises, while not legally binding in host countries, serve as moral benchmarks for the international community. Ignoring local labor cultures in Latin America, Africa, and other regions can lead to severe reputation damage, with repair costs far exceeding preventive investments.

This is a crucial lesson balancing current benefits and long-term development. Companies should turn social responsibility into a competitive advantage and ESG investments into sustainable, ongoing returns.

Southern Weekly: But some companies might argue that these are subsidiaries they can’t control directly.

Xie Haixia: That underestimates the risks of full supply chain accountability. In traditional legal thinking, companies believe they are responsible only for directly related subsidiaries. But under current global value chains, especially with new ESG directives in the EU, transparent accountability has become the norm. ESG responsibilities can be embedded throughout the supply chain via contractual clauses, enabling full-chain responsibility. Even if your tier-three or tier-four suppliers violate labor or environmental standards locally, responsibility can be traced back directly to the core purchasing company.

Southern Weekly: Once ESG negative publicity is exposed, it often becomes deeply linked to national image.

Xie Haixia: Exactly. Chinese companies abroad are not isolated business symbols. A single ESG scandal involving a Chinese firm can be amplified by local media and exploited to escalate into a crisis affecting the entire industry or even national reputation. Therefore, companies must view going abroad not just as short-term financial gains but also consider the long-term “soft value” of ESG.

Striving for Discourse Power During Regulatory Vacuums

Southern Weekly: What international ESG rules can companies leverage or influence to improve their position?

Xie Haixia: Achieving the internationalization of Chinese standards is a long-term journey. However, in emerging fields, there is a “vacuum” of rules. While Europe and the US dominate traditional manufacturing and energy sectors, China’s advantages in lithium batteries, ultra-high voltage, photovoltaics, and energy storage have yet to see unified global ESG standards.

Currently, there is no uniform regulation on supply chain accountability; different jurisdictions have varying standards for multi-tier subcontractor responsibility, and international consensus is lacking.

Additionally, the intersection of ESG and geopolitics complicates matters: some countries link ESG to geopolitical considerations, imposing differentiated requirements on Chinese companies. These lack clear legal regulation and fall into a gray area of “not explicitly prohibited nor permitted” under international law.

Therefore, proactive participation in international rule-making is essential: through platforms like G20, BRICS, and the Belt and Road Initiative, China should incorporate its ESG practices into global standards, propose Chinese solutions, and strive for greater influence.

Southern Weekly: You mentioned geopolitics—do different ownership types of companies face different risks?

Xie Haixia: For central and state-owned enterprises, core risks are highly concentrated in “geopolitical review, international public opinion, and national image.” These companies often have strong advantages in capital, policy support, and overseas resource integration, mainly in infrastructure, energy, and mineral sectors vital to national interests. Their ESG compliance is driven by national policies and social responsibility, making them proactive but also vulnerable to strict security reviews. They must skillfully use third-party mechanisms to avoid every decision being labeled as a state action.

For private enterprises, the main concern is the risk of individual violations and transnational lawsuits caused by neglecting local labor rights or community protections—“soft law” rules.

Siemens compliance system, source: Siemens compliance information for business partners

Looking at this historically, the early 2000s Siemens bribery scandal, which spanned Europe, Asia, and Africa over more than a decade, severely damaged Siemens’ nearly 200-year reputation and finances. But it also became a compliance rebirth. In 2009, Siemens issued a strict Anti-Corruption Compliance Policy, restructuring its standards for employees worldwide. Within two years, Siemens emerged from its darkest chapter.

Getting stronger through adversity is not a bad thing. For Chinese companies, the frequent cross-border ESG reviews and compliance pains can be seen as a “good crisis”—a necessary push to move from reckless growth to modern multinational governance and institutional upgrades.

Southern Weekly: Many Chinese companies initially prefer to go it alone, but this is very passive in international business and public opinion. Do you think they can leverage industry associations or NGOs?

Xie Haixia: Going abroad is a process of利益博弈 (interest negotiation) and standard adjustment. If companies can use such organizations to voice and coordinate, transforming internal standards into recognized neutral standards, they can effectively reduce the “state action” label. For example, CATL actively participates in the Global Battery Alliance (GBA) pilot projects and rule-making, launching the CREDIT sustainability assessment tool covering environmental, labor, and responsible procurement issues, thus establishing some influence over global lithium battery ESG standards. When investing and building factories in Africa, collaborating with local NGOs can facilitate smoother community engagement. The “Regulations on the Protection and Assistance of Chinese Citizens Abroad” also encourage social forces like insurance companies, emergency rescue agencies, and law firms to participate in consular protection. Companies should seize this policy opportunity, engaging with NGOs when necessary, and build a diversified governance system.

Cultivating Chinese companies’ awareness of global rules

Southern Weekly: From a legal and corporate governance perspective, what are your top strategic recommendations for Chinese companies’ ESG capacity building?

Xie Haixia: As China integrates into global markets, we have experienced firsthand the importance of modern labor protections and compliance when hosting foreign companies. Today, as Chinese firms become the “foreign enterprises” in host countries, we need to develop empathy and a global rules mindset.

Companies should cultivate global rules awareness and bear moral responsibility. This is a long-term accumulation. Going abroad is not just about capturing markets. Companies must comply with local laws, align with international soft law standards, and proactively fulfill corporate social responsibilities, including human rights. China’s “National Human Rights Action Plan” and white papers clearly state our commitment to human rights. We should adopt a modern rule-of-law approach, providing decent jobs and respecting every individual legally recognized.

Rebuilding the internationalization of compliance departments and deepening their capabilities is crucial. Compliance abroad cannot be superficial. As “hard rules” strengthen ESG legislation worldwide, and “soft rules” expand the responsibility scope, legal teams must understand international law and the underlying logic of cross-border jurisdiction. Without this, they cannot anticipate legal risks. Companies need to build elite teams proficient in foreign ESG rules and international law, with top-level strategic design at the board level, integrating ESG considerations into every stage of investment, production, and operation. Furthermore, companies should promote ESG standards within their industries and shape China’s voice in the global industrial chain.

Reference materials

1. China Discipline Inspection and Supervision Daily, “German Bribery Scandal Accelerates Anti-Corruption Reform,” June 6, 2014

Researcher Hu Qiyuan, Southern Weekly

Editor: Sun Xiaowen