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While the EU is continuously developing its sustainability agenda, the People’s Republic of China is sending a clear signal for more transparency and reporting in the ESG area with a binding regulatory framework.
On December 17, 2024, the Ministry of Finance of the People’s Republic of China (MOF), together with eight other authorities, published a first set of standards for corporate sustainability information – “Corporate Sustainability Disclosure Standards (CSDS) - Basic Standards”. These new standards mark a significant step towards a uniform national ESG reporting framework that is based on international standards and is to be fully implemented by 2030.
The CSDS - Basic Standards (Trial) consist of six chapters and 31 articles that define the key principles of sustainability reporting. They are based on established frameworks such as the ISSB standards and the European CSRD, but also take into account the specific circumstances of the People’s Republic of China. The People’s Republic is thus positioning itself as a player that not only adapts global sustainability standards, but also actively shapes its own regulatory landscape.
A particularly noteworthy principle of the CSDS is the emphasis on so-called dual materiality – a principle that is also incorporated in the European CSRD. According to this principle, companies must analyze and assess both the financial impact of ESG factors on their business (financial materiality) and their own impact on the environment and society (impact materiality).
The People’s Republic of China relies on a four-pillar approach based on proven international standards:
The core content of the CSDS closely follows the ISSB S1 General Requirements and is designed to be functionally aligned with them. It is therefore to be expected that the new Chinese ESG reporting requirements will fit seamlessly into global ESG reporting.
However, for sustainability information to offer real added value, companies must meet high data quality standards. In this respect, the CSDS define six key requirements:
The roadmap for the full implementation of the CSDS is designed for the medium to long term:
It can be assumed that the People’s Republic of China’s commitment will have a significant impact on the global sustainability agenda. As the world’s second largest economy and one of the largest CO2 emitters, regulatory changes in the People’s Republic have far-reaching effects on global markets. The country’s comprehensive standards and sector-specific approaches are setting new benchmarks and will have to be taken into account by companies worldwide. Global supply chains and investment strategies in particular will have to adapt to the new requirements.
Developments in the People’s Republic of China underline the fact that sustainability standards are increasingly on the global agenda. Sustainability has become a central component of economic policy and an instrument of global competitiveness.
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