For years, environmental, social and governance (“ESG”) related matters globally have been a hot topic. Also in the People’s Republic of China (the “PRC”), ESG considerations play an increasingly important role.
In light of the increased global focus on ESG related matters, also stakeholders in the PRC, such as investors, creditors and regulatory authorities, show a growing interest in the disclosure of ESG related information.
As a consequence, on 20 November 2024, the PRC Ministry of Finance (“MOF”) and 8 other authorities jointly released the Sustainability Disclosure Standards for Enterprises Basic Standards (Trial) (the “Trial Standards”). The Trial Standards are based on relevant standards of the International Sustainability Standards Board (“ISSB”) and entered into effect on 20 November 2024.
Recently, on 27 April and 17 June 2025, the MOF further released the draft Application Guidelines for Sustainability Disclosure Standards for Enterprises — Basic Standards (Trial) (the “Draft Application Guidelines”) and the draft Corporate Sustainability Disclosure Standards No. 1 — Climate (Trial) (the “Draft Climate Standards”) for public comments.
As of now, although the Trial Standards are effective, they are not mandatory so far. The newly released Draft Application Guidelines and the Draft Climate Standards are drafts for comments only and have not entered into effect yet. Therefore, companies are currently not yet mandatorily obliged to comply with the above standards. Nonetheless, they show a clear focus of the PRC lawmakers on ESG, and it is expected that the mentioned standards will gradually shift to become mandatory and binding standards in the foreseeable future. Please note that mandatory disclosure obligations already exist for certain companies listed on the stock exchanges according to the Administrative Measures for Information Disclosure by Listed Companies and the ESG Disclosure Guidelines.
This newsletter provides an overview on the key content of the Trial Standards and the current efforts in the PRC to establish unified ESG disclosure standards and their potential impact on companies.
1. Significance of the Trial Standards in ESG Legal Framework
Since 2020 when China announced its carbon peaking and neutrality goals, China has subsequently released numerous policies and voluntary guidelines to facilitate ESG related considerations. For example, the Work Plan to Improve the Quality of Listed Companies Controlled by Central State-Owned Enterprises issued by the State-owned Assets Supervision and Administration Commission in May 2022, requires all stock listed central State-owned enterprises to improve their ESG work mechanisms and to publish ESG reports since 2023. On 12 April 2024, under the guidance of the China Security Regulation Commission (the “CSRC”), China’s 3 main stock exchanges (i.e., the stock exchanges in Shanghai, Shenzhen and Beijing) released ESG Disclosure Guidelines. These guidelines feature detailed reporting topics, structures and content and apply to SSE 180, STAR 50, SZSE 100, ChiNext Index, and dual-listed firms, with mandatory ESG disclosure obligations starting from 2026 onwards. The CSRC’s Administrative Measures for Information Disclosure by Listed Companies amended on 26 March 2025 further provide that “listed companies shall issue sustainability reports in accordance with the regulations set by stock exchanges”. This shows that the ESG regulatory framework is shifting towards more structured and mandatory reporting obligations.
So far, no unified standards existed for non-listed companies. With the promulgation of the Trial Standards this has now changed. The Trial Standards incorporated fundamental principles and the main framework of the ISSB’s General Requirements for Disclosure of Sustainability-related Financial Information (“IFRS S1”), while also making tailor-made adjustments to account for the PRC’s specific circumstances.
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