China: Sustainability Disclosure Guidelines

The Guidelines are a critical component of China’s broader initiative to establish a unified sustainability disclosure standards system.

The Guidelines aim to clarify key concepts in the Basic Standards, including:

• requiring enterprises to consider their full value chain, including upstream and downstream activities
• promoting integration of sustainability data with financial statements and other corporate reports
• establishing a structured materiality assessment framework
• introducing the principle of proportionality, allowing tailored disclosures based on accessible, supportable and credible information
• offering guidance on disclosing current and expected financial impacts of sustainability risks

Impacts and actions

China’s Sustainability Disclosure Standards are being developed in line with the International Sustainability Standards Board’s IFRS S1 and S2. China aims to establish a unified sustainability disclosure standards system, with alignment to global standards, by 2030. The mandatory sustainability disclosure is expected to be implemented in phases, while the detailed implementation plan has not yet been released.

To prepare, businesses should:

• apply the principle of proportionality when determining how far upstream and downstream to go in the value chain
• establish collaborative relationships with key suppliers and partners to improve data sharing
• develop a structured materiality assessment process, as outlined in the Guidelines
• establish internal governance structures to better integrate sustainability data with financial statements

Co-authored by Nathan Handoll