China aims to establish a national standard for corporate sustainability disclosure by 2030 as part of efforts to improve economic sustainability, tackle climate change and catch up with its global peers when it comes to environmental, social and governance (ESG) reporting.
The Ministry of Finance has started seeking public opinion on a set of draft guidelines that aims to monitor such disclosures by companies and push ESG development in China, according to a notice on its website.
“At present, most disclosures of sustainable information by Chinese enterprises are voluntary, and they rely on inconsistent standards, which is not conducive to the verification, rating and supervision process, and for the supporting role sustainability disclosures play in investment decision-making and economic development,” the ministry wrote in a statement published on Monday that explains the background to the draft guidelines.
According to the proposal, China will introduce basic regulations for corporate sustainability disclosure and climate-related disclosure by 2027, with the aim of establishing a nationwide standard by 2030.
The release of the draft measures during the International Organization of Securities Commissions’ annual meeting taking place in Greece this week sends a strong message to global investors that China is committed to aligning with international reporting standards and taking ESG issues seriously, according to Bon Cheung, assistant manager of Civic Exchange, a Hong Kong public policy think tank.
In February, the Beijing, Shanghai and Shenzhen stock exchanges published their first climate and sustainability disclosure guidelines. These mandate that some 400 listed companies, which account for more than half of the market value of China’s bourses, must publish sustainability reports covering their emissions and decarbonisation plans by 2026.
The companies must report on the impact their activities have on the environment as well as the risks and effects of environmental factors on their business, the so-called double materiality. They are also encouraged to disclose the indirect carbon emissions in their value chains, known as scope 3 emissions.
Although aimed at listed companies, these guidelines could have a knock-on effect on the country’s privately owned companies as well, prompting them to make decarbonisation plans and improve their ESG efforts, according to analysts.
The guidelines targeted at introducing unified disclosure standards in China will be a “game-changer”, said Yuan Yuan, a Beijing-based climate and energy campaigner at Greenpeace East Asia.