含羞草社区

Twenty years later, last December, 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 this year, 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.

Into the market

The Shanghai, Shenzhen and Beijing stock exchanges have followed suit, issuing clear guidelines for ESG-related disclosures by listed companies. Under the supervision of the China Securities Regulatory Commission, the three exchanges formally issued respective Guidelines on the Sustainable Development Reporting of Listed Companies on 12 April this year, with effect from 1 May.

Certain listed companies fall under the exchanges’ guidelines and are mandatorily required to issue sustainable development reports:

1. Companies listed on the Shenzhen Stock Exchange and included in the Shenzhen 100 Index or the ChiNext Index;
2. Companies listed on the Shanghai Stock Exchange and included in the SSE 180 Index or the Star 50 Index; and
3. Companies dual-listed domestically and abroad.

The Beijing Stock Exchange, however, does not mandate such a disclosures requirement but listed companies may disclose voluntarily.

In terms of disclosure principles, the guidelines set a dual importance principle by giving equal weight to financial importance and impact importance. Based on the features of their own industries and business operations, listed companies should identify whether each topic in the guidelines has a significant impact (financial significance) on their business model, business operations, development strategy, financial status, operating results, profits, financial methods and costs in the short, medium and long term.

Companies must also identify whether their performance under each topic has a significant impact on the economy, society and environment itself (impact significance). Companies must explain their procedures for analysing the intensity of impacts.

In terms of timetable, company sustainable development reports must be prepared and approved by each company’s board of directors within four months of the end of each fiscal year and disclosed no earlier than the annual report. The reporting company and reporting period should be identical to the annual report.

As for the framework, companies are required to analyse and disclose sustainable development topics with financial significance, focusing on four core areas: governance, strategy, risk and opportunity management. For issues of impact significance only, companies must make disclosures against the specific provisions of the guidelines, ensuring that stakeholders can fully understand the context.

Since Chinese listed companies are still in the early stages of ESG disclosure from a regulatory standpoint, both the Shanghai and Shenzhen exchanges have set up transitional arrangements. Listed companies that fall under the disclosure requirements must release their 2025 sustainable development report by 30 April 2026. The Beijing Stock Exchange, however, has not specified the initial reporting period or made such transitional arrangements.

In terms of legal liability, the guidelines provide that, “if the disclosing company violates these guidelines, the exchange will take disciplinary measures or impose sanctions on a case-by-case basis”. This strengthens regulatory pressure on companies to a certain extent and provides a primary legal basis for the regulatory and disciplinary measures taken by regulatory authorities.

Nevertheless, since the guidelines do not prescribe exact legal consequences, requirements on the mandatory disclosure of sustainable development reports by Chinese listed companies are primarily declarative, rather than regulatory, in nature.

In practice, regulatory authorities lack a directly applicable legal basis to supervise and punish listed companies on grounds of violating mandatory disclosure obligations. The authorities can only regulate them by referring to the general rules of listed company information disclosure – namely, the Measures for the Administration of Information Disclosure of Listed Companies.

As the guidelines have just been implemented, there have so far been no applicable cases of penalties being imposed for violating disclosure provisions. Therefore, the regulatory regime needs to be furthered by the introduction of new rules of implementation.

Nevertheless, as the development of the regulatory regime is picking up pace, listed companies that are required to disclose should focus on their legal compliance under applicable disclosure rules.

Disclosing such information comprehensively, truthfully and accurately is not only an inevitable choice for companies in the context of preventing legal risks, but also a favourable method of demonstrating the potential value of the company.

Conclusion

To sum up, although the central government has yet to establish a unified or overarching regulatory regime on ESG matters, the promulgation of ESG policies is being driven as a top-down reform. There is growing attention being paid to corporate governance and sustainable development aspects at higher levels, especially concerning ESG issues.

At this stage, the guidelines issued by the three exchanges have endorsed leading international disclosure standards and can be considered in line with the regulations of major countries or regions, such as with the EU’s corporate sustainability reporting directive.

The guidelines will not impose additional compliance burdens on companies that are required to disclose sustainable development information. ESG reporting by mainland listed companies will gradually become a mainstream activity. This trend not only helps to regulate corporate governance and sustainable development responsibilities but also raises awareness of ESG issues across more industries in China.