China has released its Basic Standards for corporate sustainability disclosures, an important move toward compliance with ESG (Environmental, Social, and Governance) regimes across the world. As an initiative led by the Ministry of Finance (MOF) in coordination with nine other departments, ESG reporting is expected to become standardized throughout the nation. The framework was rolled out on December 17, 2024 and will be fully implemented before 2030.
This has been developed to provide comprehensive structuring for businesses to disclose ESG performance. The basic standards have been designed by taking into account a phased approach so that the initial implementation would be voluntary but mandatory from 2026 for large listed companies, thereby providing flexibility to adopt the standards at their discretion before they become mandatory for all companies.
These last standards focus on transparency and credibility, particularly for investors and creditors. The emphasis on data accuracy, relevance, and timeliness of the framework seeks to foster greater confidence in the information that companies present. Investor-centric, these standards follow global best practices, with China’s ESG disclosures in line with international expectations but also attuned to unique domestic concerns such as climate change and rural development.
The Basic Standards are anchored on three pillars: disclosure objectives and principles that overarch; specific standards directed at critical ESG themes such as climate change and corporate governance; and application guidelines offering practical tools to facilitate compliance. In so doing, the guidelines also ensure that businesses of any size are able to gain access to case studies and methodologies on how to respond to the reporting requirements efficiently.
China’s journey toward mandatory ESG reporting started with a draft framework in May 2024. After incorporating feedback from this extensive process, the final standards bring several key changes, including an enhanced level of flexibility to allow companies to adapt their reporting methodologies according to their available resources. This easing of the compliance burden would be greatly beneficial for smaller enterprises without compromising on stringent standards on data integrity and materiality.
This shift toward comprehensive ESG reporting is a testament to China’s increasing acknowledgment of sustainability as a key enabler of long-term economic growth and global competitiveness. By integrating ESG practices into their corporate strategies, Chinese companies are positioning themselves to attract international capital and strengthen their market positions. However, challenges remain in terms of data accuracy and balancing local requirements with global standards.
Such commitments to sustainability by China can be seen through initiatives like the Belt and Road Initiative, which includes ESG principles in infrastructure and development projects. It shows how the nation is committed to transparency, corporate responsibility, and sustainable growth.
With ESG reporting becoming mandatory for large companies from 2026, the Basic Standards framework will be instrumental in the future of corporate sustainability in China. By 2030, the nation should have a fully operational ESG reporting system that meets global expectations and also responds to domestic priorities, becoming a benchmark for corporate responsibility worldwide.