Nature Positive Role of the Automotive Sector China Deep dive

Introduction Globally (and within China specifically), society and the economy are deeply interlinked with the natural world. According to the 2022 Forum report, Seizing Business Opportunities in China’s Transition towards a Nature-positive Economy, over half of global gross domestic product (GDP) and 65% of China’s total GDP is at risk due to nature loss. Tackling nature loss and achieving net-zero emissions are increasingly recognized as twin priorities globally, and nature action is gaining momentum alongside climate action. Nature-related considerations are being integrated into guidance and standards setting, financial institutions’ strategies and the expectations of customers and employees.1 As the world’s second-largest economy and a global manufacturing hub, China is witnessing evolving efforts around nature across societal and economic sectors. This report is based on analysis presented in the Nature Positive: Role of the Automotive Sector insight report. It is highly recommended to review the global report before delving into this specific analysis of China’s automotive sector. Why China’s economic sectors should act for nature Business and biodiversity as a priority action in China’s National Biodiversity Strategy and Action Plan 2023-2030 As the presidency of the 15th Conference of Parties (COP15) to the United Nations Convention on Biological Diversity (CBD), China is committed to leading the global implementation of the Kunming-Montreal Global Biodiversity Framework. China published its updated National Biodiversity Strategy and Action Plan (NBSAP) in January 2024, becoming the first developing country to do so post-COP15. The updated version prioritizes business and biodiversity, encouraging businesses to assess and manage nature-related impacts and dependencies and to disclose associated risks and opportunities.2 Biodiversity-related indicators in China’s unifying sustainability reporting requirements In April 2024, China’s three major stock markets – the Shanghai Stock Exchange SSE), Shenzhen Stock Exchange (SZSE) and Beijing Stock Exchange (BSE) – officially released their guidelines on corporate sustainability reporting, which came into effect on 1 May 2024. These guidelines require the disclosure of material impacts on biodiversity. In May 2024, China’s Ministry of Finance began soliciting feedback on a draft set of guidelines for unifying corporate sustainability disclosures, with the goal of establishing a nationwide standard by 2030.3 These initiatives urge Chinese businesses, especially listed companies, to thoroughly assess the guidelines, rethink their business strategies and operations, and adopt a proactive approach to compliance. By setting strategies that integrate systematic consideration of nature’s four realms – land, ocean, freshwater and atmosphere – with climate strategy, businesses can champion comprehensive environmental sustainability and lead a systematic transformation. State-owned enterprises taking action for green and high-quality development The 2023 white paper China’s Green Development in the New Era4 outlines strategies for reducing pollution and promoting circularity. In June 2024, the State-owned Assets Supervision and Administration Commission (SASAC) of the State Council of China issued directive input urging state-owned enterprises (SOEs) to prioritize social responsibilities. A key component of this guidance is the enhancement of ecologically and environmentally friendly actions under the broader theme of compliance and ethical operations.5 These top-down directives are expected to bolster the sustainable development strategies and practices of SOEs, which contribute about one-third of China’s total GDP6 and significantly influence economic trends. Significant business opportunities from implementing nature-positive transitions China is proactively pursuing an innovation-driven development strategy.7 Currently, about 39% of its total GDP is derived from secondary industries (which is higher than in most other developing countries).8 Throughout the world, these sectors are generally resource- and energy-intensive, posing significant stress on nature. The impact of these sectors – such Given how dependent China’s economy is on nature, urgent actions from policy- makers and the private sector are needed to halt and reverse nature loss. of China’s total GDP is at risk due to nature loss.65% Nature Positive: Role of the Automotive Sector – China Deep-dive 7