China has Published the Sustainability Disclosure Standards for Businesses

This blog was originally posted on 28th January, 2025. Further regulatory developments may have occurred after publication. To keep up-to-date with the latest compliance news, sign up to our newsletter.

AUTHORED BY LYNN CHIAM, REGULATORY COMPLIANCE ANALYST, COMPLIANCE & RISKS

On 17 December 2024, the Chinese Ministry of Finance, along with other government departments, published a notice on the Chinese Sustainability Disclosure Standards for Business Enterprises— Basic Standards (Trial). The notice can be accessed here.

What is the Background of the Standards?

The requirement for sustainability disclosure in businesses is becoming increasingly prevalent globally. However, China has yet to formulate a unified national standard for the sustainability disclosures for enterprises. Since the 18^th National People’s Congress, China has progressively promoted corporate sustainability in some areas and adopt disclosure practices. 

Since April 2024, China (the Stock Exchanges in Shanghai, Shenzhen, and Beijing) issued the Sustainability Reporting Guidelines for Select Listed Companies, which require major issuers in China to disclose on a wide range of ESG/sustainable development topics. The issuers are among those of the 180 biggest companies on the Shanghai Stock Exchange (SSE), the 100 biggest companies on the Shenzhen Stock Exchange, the 50 biggest companies on the Shanghai Science and Technology Innovation Board Index, the 100 biggest companies on the Shenzhen Stock Exchange’s ChiNext board, as well as companies simultaneously listed in China and overseas stock markets. Under this new guidelines, certain issuers would have to publish their first 2025 sustainability report by 30 April 2026.

Subsequently, the reports should be submitted within four months after the end of each financial year but no earlier than when the annual financial report is published. The Guidelines can be accessed here.

What is the Objective of the Standards?

The Basic Standards aligns with the International Sustainability Standards Board (ISSB) to create a unified system for sustainability reporting by 2030. The Standards also serve as a foundation for the basic sustainability-related and climate-related disclosures by 2027. 

The objectives of the standards also include: 

• Ensure the quality of sustainability information to investors, creditors, regulators, and other stakeholders.
• Acting as a guidance to lead Chinese companies apply the requirements on sustainability reporting uniformly; 
• Facilitate the standardised disclosure of environmental, social, and climate-related risks, opportunities and impacts;

What are the Main Provisions?

• Chapter 1 specifies the general provisions regarding sustainability information disclosure requirements, application guidance, reporting entities, concepts of sustainability information and value chains, sustainability information linked to financial disclosure and data control requirements;
• Chapter 2 stipulates the objectives for disclosing sustainability information, identifies users of such information, principles of materiality and conducting assessments based on sustainability-related risks and opportunities and information on sustainable impacts; 
• Chapter 3 prescribes the requirements for disclosing reliable and accurate information by enterprises;
• Chapter 4 mandates that the disclosures must contain information about four elements (governance, strategy, risk/opportunity management, indicators/targets) and provides details on the content to be disclosed;
• Chapter 5 addresses the other disclosure requirements including reporting period, disclosure locations, etc.

Voluntary Adoption: What Would it Mean for Companies?

The Basic Standards should not be implemented under a “One-Size-Fits-All” principle. Instead, enterprises will adopts these requirements voluntarily basis while following a strategy that emphasises on gradual progression and phased advancement before the requirements become mandatory. 

Additionally, the reporting period for sustainability disclosures of an enterprise should coincide with the reporting timelines for financial statements and enterprises should disclose sustainability information annually. Sustainability-related information must be disclosed in a stand-alone sustainability report. The report must be drafted in clear and structured language and may be disclosed to the public at the same time as the financial statement. Enterprises should ensure that their sustainability reports are accessible on their official websites or through other appropriate channels.The Ministry also published FAQs on the basic standards and provided an overview of the basic standards.

The FAQs can be viewed here.

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