Identifying ESG types of Chinese solid waste disposal companies based on machine learning methods

Abstract

In the context of China's efforts to combat climate change and promote sustainable development, the solid waste treatment industry's environmental, social, and corporate governance (ESG) performance is receiving significant attention. To comprehensively assess the ESG performance of the solid waste treatment industry and identify company types, this study constructs a targeted ESG evaluation index system based on existing literature, SASB industry standards, and company reports and utilizes a random forest approach combined with K-means clustering to determine indicator weights. Based on this index system, the paper evaluates the ESG performance of 71 solid waste disposal companies (SWDCs) from 2013 to 2021 and identifies their ESG types from static and dynamic perspectives. In the static view, company types are determined based on annual ESG performance, while the dynamic view considers time-series changes to observe the evolution of company ESG types. The results show that the overall ESG performance of SWDCs falls within the 2-8-point range, indicating a noticeable high-low imbalance. Key initiatives to improve ESG performance in this industry include enhancing waste management measures, developing emergency plans, and reinforcing ESG disclosure. From a static perspective, this paper can identify companies into three categories: delayed development, single-wheel-driven, and coordinated development. Finally, from a dynamic perspective considering the time factor, companies are further subdivided into five types: continual leading, growth catch-up, slow progress, fluctuating change, and retrogressive inertia. This study not only provides targeted recommendations for different types of ESG companies but also helps various sectors of society better understand the ESG conditions of this high environmental risk industry, thereby enhancing the regulation and support for its sustainable development.

Keywords: ESG; Evaluation index system; Machine learning; Solid waste disposal companies (SWDCs); Type identification.