Pathways to Achieving Sustainable Development and Green Governance in Chinese Companies

Hua Li and Qin Xia

Sustainable Development, 2025, vol. 33, issue 5, 7714-7730

Abstract: Under the objectives of “carbon peaking and carbon neutrality”, green and low‐carbon development has become a guiding principle for social and economic process. The new Company Law explicitly stipulates the company's obligation to protect the ecological environment, which is also the legislative embodiment of the green principle enshrined in the Civil Code. The construction of an ecological civilization with harmonious development of man and nature requires that the corporate operations consider environmental protection as a crucial factor, which is specifically manifested in green governance by companies. In the context of sustainable development, the stakeholder theory deepens the duty of diligence for directors. The pathway to achieving green governance in Chinese companies involves, on the premise of adhering to “director‐centric governance”, establishing green governance provisions in company charters through corporate autonomy, strengthening the directors' duty of environmental care, integrating this duty into fiduciary obligations, granting directors discretion in implementing green governance within business decisions, and protecting such decisions under the business judgment rule. In pursuing ESG performance, directors need to balance shareholders' interests and environmental public interests in corporate governance, resolve dilemmas in environmental decision‐making, enhance obligation for ESG information disclosure, and promote the incorporation of social and environmental objectives into business decisions to realize corporate green governance.

Date: 2025
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