China’s first policy on environmental, social and governance (ESG) performance reporting – the Announcement on Corporate Environmental Information Disclosure – was issued by China’s State Environmental Protection Administration in 2003. It encouraged and supported enterprises to disclose environment-related information.
Twenty years later, in December 2023, the State Council released its Opinions on Comprehensively Promoting the Construction of a Beautiful China. In article 24, section 9, the council explicitly called for an exploration of the evaluation of environmental, social and governance. The opinion marks the first appearance of the ESG concept in a central government-level document, which provides a clear indication that China supports the development of ESG.
Last year’s opinion endorsed ESG topics such as ecological environmental governance and green economic development into the Beautiful China initiative, which is helpful for clarifying ESG at a regulatory level in China. In turn, this effectively promotes the future implementation of ESG in China.
In May 2024, the Ministry of Finance issued its draft Corporate Sustainability Disclosure Standards – General Guidelines for comment, symbolising the gradual establishment of a unified ESG disclosure standards regulatory regime in China.
The guidelines clearly define aspects such as scope of application, disclosure objectives, disclosure elements, and requirements on disclosure quality. They expand the application scope of ESG disclosure requirements from listed companies to non-listed companies, and from large enterprises to small/medium-sized enterprises.
The guidelines mandate enterprises adhere to the principles of reliability, relevance, comparability, verifiability, understandability and timeliness when making ESG-related disclosures. Additionally, they detail the definition, disclosure objectives and specific content requirements for four disclosure elements (governance, strategy, risk and opportunity management), as well as metrics and goals.
The guidelines address reporting periods, compliance statements, decisions on significant uncertainties, corrections of prior errors, and reporting format.
The release of the guidelines not only provides clear regulatory and institutional guidance for corporate ESG disclosure but also brings a comprehensive Chinese ESG disclosure framework aligned with international standards.
Source: Extract from Asia Business Law Journal, 4 October 2024.
https://law.asia/china-esg-regulations-maturity/
- Author: Dora Hu, Partner; Grandall Law Firm, Beijing