China’s journey toward corporate sustainability reporting has gained momentum in recent years. The Ministry of Finance (MOF), collaborating with nine other departments, unveiled the Basic Standards on December 17, 2024, aiming to standardize ESG disclosures nationwide.
China began this process with a draft released in May 2024, incorporating feedback to finalize the standards. Starting in 2026, ESG reporting will become mandatory for large listed companies, with the full framework operational by 2030. The initiative balances global ESG integration with local priorities such as climate change and rural development.
Structure of the Basic Standards for ESG Disclosure
The framework is built on three key components:
- Basic Standards: Establish overarching ESG disclosure objectives, principles, and requirements for consistent reporting.
- Specific Standards: Address detailed ESG themes like climate change and corporate governance.
- Application Guidelines: Offer practical tools, including case studies, to help businesses meet reporting requirements effectively.
Key sections include disclosure objectives, emphasizing materiality and reliability; information quality focused on accuracy, relevance, and timeliness; and compliance measures, allowing phased adoption for businesses to adapt gradually.
Differences Between Draft and Final Standards
The final standards shift focus toward investors and creditors, enhancing market-driven accountability. They introduce greater compliance flexibility, enabling companies to tailor methodologies to their resources, easing the burden on smaller firms. The standards also integrate with policies mandating large companies to report ESG metrics starting in 2026.
Navigating ESG Reporting in China
Chinese companies are increasingly integrating ESG practices, recognizing sustainability’s value in attracting global capital and driving long-term growth. Challenges include data accuracy and balancing local needs with international ESG standards.
China’s efforts, including collaborations like the Belt and Road Initiative, highlight its commitment to transparency, corporate responsibility, and global competitiveness in sustainability reporting. This framework marks a critical step in advancing corporate sustainability practices nationwide.
