The increasing relevance of ESG guidelines (Environmental, Social, Governance) is shaping the global business sector. In the EU, the CSRD Directive obliges companies to report on sustainability. ESG issues are now also becoming increasingly important in China and are becoming an indispensable element of corporate activity. This article examines the first ESG guidelines for Chinese companies and their impact on sustainable business practices.
What has changed for Chinese companies in the first half of 2024?
In the first half of the year, various ESG guidelines were published in China. Until 2024, the introduction and disclosure of ESG reporting was not required for all companies, but only for the major Chinese market indices such as SSE 180, Kechuang 50, SZSE 100 and GEM Index, as well as companies listed both domestically and overseas. SSE 180, Kechuang 50, SZSE 100 and GEM Index are classifications of Chinese listed companies in the local stock market.
All other companies were not obliged to prepare such a report, but were recommended to do so.
At the beginning of 2024, this process accelerated with the introduction of key rules and guidelines for the standardization of sustainability reporting:
In April 2024, the major stock exchanges in Shanghai, Shenzhen and North China introduced the first “Sustainability Reporting Guidelines for Listed Companies”. These guidelines closed a significant gap in the requirements for sustainability reporting on China's capital markets and clarified the requirements framework.
Shortly afterwards, in May 2024, the Chinese Ministry of Finance published the “Corporate Sustainability Disclosure Guidelines - Basic Guidelines (Draft for Public Comments)”. These guidelines, based on international standards such as IFRS and ISSB, serve as a blueprint for the disclosure of sustainability information and are intended to help companies prepare consistent, transparent and comparable sustainability reports.
Future plans for sustainability reporting in China
By 2027, China plans to introduce the “Basic Guidelines on Corporate Sustainability” (corresponding to S1 of the ISSB) and the “Guidelines on Climate-Related Disclosure” (corresponding to S2 of the ISSB). The aim is to establish a standardized national system for sustainability disclosure guidelines by 2030 in order to ensure consistent and comprehensive reporting on corporate sustainability practices.
Regional initiatives for ESG guidelines in China
Various government departments in China, particularly in Shanghai, Beijing and Suzhou, have been working intensively on ESG issues and have introduced the first relevant guidelines. These guidelines aim to encourage companies to actively implement ESG practices. The cities of Shanghai, Beijing and Suzhou have developed specific guidelines to support companies in developing strategies and formulating disclosure guidelines in the area of ESG.
- Shanghai issued an action plan in March to improve the ESG capabilities of foreign-related enterprises based there, which is the first ESG ecosystem program of the province and the city and aims to build an ESG ecosystem for foreign-related enterprises by 2026.
- Beijing released an implementation plan in June 2024 to promote high-quality ESG development, aiming to make Beijing an internationally representative city for ESG development, and by 2027, the ESG disclosure rate of listed companies in Beijing will reach about 70%.
- Suzhou has launched the first ESG program for an industrial park in China. The Suzhou government will promote the implementation of ESG concepts by private enterprises in phases and gradually build an ESG ecosystem, including the development of ESG-related standards for new energy in Suzhou and the establishment of a digital ecological ESG platform for private enterprises. It will help enterprises manage and report ESG-related information, improve transparency and efficiency, and promote the disclosure of corporate information to support industrial development through subsidies or incentives.
Conclusion and outlook
These measures taken by local governments show that the influence of ESG in China is rapidly expanding from the capital market to local provinces and municipalities, and is gradually being integrated into the actual operation and management of enterprises. This makes the path for companies to actively develop ESG clearer.
The Chinese government has already announced that it is very likely that ESG reporting requirements will be extended to foreign companies. We will be following further developments in this area over the coming weeks and months and will keep you informed of any changes that are relevant to you in our blog posts.
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