China's National ESG Reporting Guidelines: A Comprehensive Overview

China has made significant strides in advancing corporate sustainability and environmental, social, and governance (ESG) practices in recent years. China has progressively developed its ESG disclosure framework in recent years, moving from voluntary initiatives to a more structured regulatory system. As part of its commitment to fostering greater transparency and accountability, the Chinese Ministry of Finance (MOF), in collaboration with nine other departments, unveiled the new Corporate Sustainability Disclosure Standards-Basic Standards (hereinafter, “Basic Standards”) on December 17, 2024.

These standards are designed to guide businesses in disclosing sustainability-related information, ensuring that their practices align with global expectations and regulatory frameworks. The release of the Basic Standards is part of a broader initiative to establish a unified national framework for corporate sustainability reporting in China.

Businesses can voluntarily adopt these Basic Standards before the scope of implementation and implementation requirements are stipulated. This marks a significant step towards a unified national ESG reporting system, with full implementation expected by 2030.

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Key Developments in China's ESG Reporting Framework

In April 2024, all three securities exchanges in China issued their respective guidelines on corporate sustainability reporting (each a CSR Guideline), which took effect from 1 May 2024. The CSR Guidelines require (a) each constituent of SSE 180 Index, STAR 50 Index, Shenzhen 100 Index, or ChiNext Index if such constituent was included in such index continuously during the designated reporting term and (b) companies dual-listed in the PRC and abroad (each a Dual-Listed Company) (each a Covered Company) to prepare and publicly disclose a corporate sustainability report covering the calendar year 2025 by 30 April 2026. The CSR Guidelines further encourage other listed companies on these securities exchanges to voluntarily follow the CSR Guidelines. Listed and dual-listed companies must publish their first sustainability reports for the 2025 financial year by April 2026.

In February 2024, the China Securities Regulatory Commission (CSRC) instructed the country’s three stock exchanges to issue ESG reporting guidelines. These rules mandate companies listed on key indexes, including the SSE 180, STAR 50, SZSE 100, and ChiNext, as well as firms listed both domestically and overseas, to begin ESG disclosures in 2026.

In December 2024, the MOF, together with eight other departments, issued the Basic Standards for Corporate Sustainability Disclosure (Trial), hereinafter the“Basic Standards”. These initiatives reflect a phased approach toward building a unified national disclosure system, with full implementation expected by 2030.

The Basic Standards are designed to work in tandem with forthcoming specific standards on climate and thematic topics, as well as application guidelines to support practical implementation. Parallel to disclosure reform, China has continued to expand green finance.

While China is working to harmonize its ESG standards with global frameworks, challenges remain in data accuracy and balancing international standards with local priorities.

The Chinese Sustainability Disclosure Standards (CSDS)

In 2024, China’s Ministry of Finance issued its set of Chinese Sustainability Disclosure Standards (CSDS). While mostly available in Chinese, this draft aims to establish comprehensive guidelines for businesses in China to disclose environmental, social, and governance (ESG) information. It builds on frameworks from international bodies, especially ISSB and CSRD, to make Chinese companies’ sustainability reports comparable with global standards.

The CSDS draft is structured around a basic standard, thematic standards, and guidance on application. Modeled on ISSB Standards, CSDS also integrates unique aspects suited to China’s regulatory landscape.

With a dual focus on financial impacts and broader social and environmental outcomes, the CSDS calls for double materialities, and outlines both fundamental and thematic standards. This phased approach ensures that companies gradually align their reporting practices, culminating in a full transition to CSDS requirements by 2030.

Basic Standard and Thematic Standards

The basic standard establishes core requirements, creating a foundation applicable across industries. It mandates disclosures on governance practices, environmental impacts, social policies, and risk management.

Double Materiality

A distinctive feature of the CSDS is its emphasis on double materiality that is a direct adoption basing ESG disclosure requirements on similar principles than CSRD. This principle requires companies to disclose not only the financial implications of sustainability issues but also how the company’s operations impact society and the environment. In contrast to single-materiality approaches focused solely on financially relevant information, double materiality ensures that the broader societal and environmental impacts are fully captured in the report.

Alignment with ISSB Standards

The CSDS also emphasizes compatibility with ISSB Standards to support cross-border comparability, especially crucial as Chinese companies increase their international reach. By aligning with global norms, the CSDS aims to facilitate investment decisions by providing more consistent and comparable information on Chinese companies.

The following table summarizes the key standards and their applications:

Phased Implementation Plan

To ease the transition for businesses, the CSDS outlines a phased implementation plan aimed at achieving full compliance by 2030. The rollout strategy gradually incorporates different business sectors and scales, starting with larger companies and listed enterprises before expanding to smaller firms.

Incremental Adoption Strategy

The implementation plan targets a gradual shift from voluntary to mandatory disclosures. The initial phase focuses on large corporations and publicly listed companies, as these organizations are often more equipped with the resources and expertise to handle the complexity of ESG reporting. Over time, CSDS will extend to smaller entities, supporting a transition period during which these firms can build their reporting capacities.

Timelines and Milestones

Key milestones in the CSDS timeline include the development of climate-related disclosure standards by 2027. This timeline reflects an awareness of the urgency surrounding climate-related risks, especially in light of China’s ambitious carbon neutrality goals by 2060. By focusing initially on climate, companies can begin addressing some of the most critical issues within ESG frameworks.

Benefits of a Phased Approach

A phased adoption allows time for companies to adapt, refine their data collection processes, and incorporate sustainability goals into their operational strategies. Furthermore, this approach aligns with the Chinese government’s broader green development goals, emphasizing the need for businesses to adopt sustainable practices progressively.

Industry-Specific Adaptation and Guidance

As the CSDS gradually integrates into China’s regulatory landscape, the draft anticipates the need for continuous adaptation and sector-specific guidance. Recognizing the diversity of sectors within the Chinese economy, the Ministry of Finance has emphasized that sector-specific guidance will play a crucial role in the effective implementation of the CSDS. Industries such as energy, manufacturing, and technology have unique sustainability challenges and disclosure needs. By providing detailed, tailored guidelines for each sector, the CSDS ensures that companies report on the most relevant and material sustainability factors.

Alignment with National and International Policy Goals

The CSDS framework is strategically aligned with China’s national sustainability objectives, such as the “dual-carbon” goals aimed at achieving peak emissions by 2030 and carbon neutrality by 2060. Additionally, by mirroring ISSB Standards and the European Union’s Corporate Sustainability Reporting Directive (CSRD), CSDS positions Chinese firms to meet both domestic and international expectations.

Future Outlook and Global Implications

The CSDS is likely to have a ripple effect on global sustainability reporting practices. By establishing stringent disclosure standards, China sets a benchmark that could influence other emerging markets. Moreover, as Chinese companies enhance their sustainability reporting practices, they contribute to a more transparent and environmentally responsible global market.

China’s Application Guide for ESG Disclosure Standards

China’s new Application Guide ESG disclosure standards sets out how companies should apply the Basic Standards in practice. The Application Guide makes clear that sustainability risks and opportunities cannot be assessed in isolation from a company’s broader value chain.

Companies should establish a structured process for mapping their value chain, identifying where the most significant risks and impacts occur, and setting clear criteria for reassessment. Sustainability information should be closely integrated with a company’s financial reporting. To meet these requirements, companies should foster strong collaboration between finance and sustainability teams.

Companies should also report on the resilience of strategies and business models, explaining how they are designed to withstand or adapt to sustainability-related risks. Beyond financial considerations, companies should disclose significant positive and negative impacts on society, the economy, and the environment.

Importantly, the scope is not static. Companies are required to reassess their value chain boundaries in response to major developments, such as changes in business models, significant restructuring, the emergence of new sustainability risks, or shifts in regulatory requirements.

Conclusion

The 2024 Exposure Draft for the Chinese Sustainability Disclosure Standards marks a significant step in China’s regulatory landscape, reinforcing its commitment to sustainability. The CSDS establishes a comprehensive framework based on basic standards, thematic disclosures, and double materiality, ensuring Chinese companies provide high-quality, relevant, and globally comparable sustainability information. With sector-specific guidelines and alignment with global standards like the ISSB, CSDS is set to enhance the transparency and accountability of Chinese companies, promoting sustainable growth. By encouraging high-quality sustainability reporting, the Ministry of Finance fosters a more resilient and responsible corporate sector, aligned with both national priorities and international standards.

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