In December 2024, China unveiled the foundational framework for its Corporate Sustainability Disclosure Standards, aimed at helping companies align their sustainability efforts with global ESG (Environmental, Social, Governance) norms. This development marks a significant step toward establishing a comprehensive national ESG reporting system, with full implementation planned for 2030.
The Basic Standards are based on an Exposure Draft released by the Ministry of Finance (MOF) in May 2024. Companies have the option to voluntarily adopt these standards before the final implementation details and requirements are set. This initiative is part of a broader effort to create a unified national framework for corporate sustainability reporting, representing a key move toward standardizing sustainability disclosures across China and aligning them with global best practices.
Through this clear framework, the Chinese government aims to provide companies with guidelines that enable them to report on sustainability in a consistent and comparable manner, in line with international standards. In parallel, China introduced national ESG reporting guidelines, which took effect in June 2024.
Key Information for Your Company
- Launch of Core Standards: China is introducing core standards for corporate sustainability reporting, aligned with global ESG frameworks. Full implementation is expected by 2030.
- Voluntary Phase: Companies can voluntarily adopt these standards before mandatory compliance requirements are finalized, providing some flexibility during the transition.
- Focus on Investors and Credibility: The final standards emphasize transparency for investors and creditors, focusing on data accuracy and aligning with international best practices.
Key Components of the New Basic Standards
- Disclosure Objectives and Principles: Companies are guided by materiality principles to determine which information is most relevant for disclosure, focusing on transparency and reliability to meet the needs of investors, creditors, and other stakeholders.
- Information Quality Requirements: All ESG disclosures must adhere to high standards of accuracy, relevance, comparability, verifiability, and timeliness. These requirements ensure that the disclosed information is not only reliable but also useful for decision-makers.
- Disclosure Elements: The standards outline essential components for sustainability reports, such as governance, strategy, risk management, and measurable targets. These elements are aligned with international best practices to ensure consistency and global comparability.
- Additional Disclosure Requirements: Other guidelines cover reporting periods, ensuring the comparability of information, compliance statements, and error corrections. These ensure that the data remains accurate and up-to-date over time.
- Phased Implementation and Compliance: A voluntary adoption phase allows companies to gradually align with the standards before they become mandatory. Full implementation is set for 2030, providing businesses time to adapt and establish robust reporting systems.
Context and Challenges
Chinese companies are increasingly adopting ESG practices, recognizing their importance for attracting international investment and driving long-term growth.
Key challenges include ensuring data accuracy and balancing local needs with global ESG standards.
China’s efforts, including initiatives like the Belt and Road Initiative, reflect its commitment to transparency, corporate accountability, and global competitiveness in sustainability reporting.
This is a subject that will also affect foreign companies operating in China, for whom active monitoring of these developments will rapidly become a necessity, as they will have to navigate between local requirements and international standards, which may lead to alignment difficulties, particularly in terms of data transparency and comparability.
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