China ESG reporting: Guidelines for international companies.

As environmental, social and governance (ESG) considerations become more prominent in global business practices, China is actively reshaping its regulatory landscape to align with these shifting standards. The country’s approach to ESG reporting is undergoing notable changes, reflecting its commitment to sustainable development and its influence.

This guide will explore the key developments in China’s ESG regulations, focusing on reporting frameworks, global standards, challenges and future trends.

Growing importance of ESG in global business

ESG has transitioned from a niche concern to a mainstream business imperative globally. Investors, consumers and regulators increasingly demand transparency in how companies manage ESG-related issues, recognising that these factors can materially affect a company’s performance and long-term value. In China, this global shift is supported by government policies promoting sustainable development and the country’s pivotal role in global supply chains.

Key ESG reporting areas and factors for international firms in China

International firms operating in China must navigate an ESG reporting framework that aligns with global standards and local expectations. The primary focus areas include:

Core elements of effective ESG reporting

Underpinning these areas, effective ESG reporting relies on several core operational elements:

Governance

Risk management, business ethics and leadership structure to maintain transparency in how a company is managed.

ESG reporting framework

Standards and frameworks to maintain consistency and comparability across industries, guiding how information is collected, analysed and presented.

Strategy

A well-defined ESG strategy articulating the company’s plan to address sustainability-related risks and opportunities, considering long-term goals, action plans and initiatives.

Risk and opportunity management

Documented processes to identify, assess, prioritise and monitor both risks and opportunities associated with sustainability.

Metrics and targets

Performance indicators and benchmarks to measure how well a company manages sustainable risks and opportunities and evaluates alignment with national laws, regulations and strategic objectives.

International ESG reporting frameworks

Several internationally recognised frameworks guide how companies approach ESG reporting. While no single framework is mandatory, China’s national standards are increasingly aligned with International Sustainability Standards Board (ISSB), making familiarity with global frameworks important for managing cross-border reporting obligations.

What are the ESG disclosure requirements in China?

In 2024, three Chinese stock exchanges, Shanghai (SSE), Shenzhen (SZSE) and Beijing (BSE), introduced guidelines that require listed companies to disclose sustainability information. These guidelines cover ESG topics, including greenhouse emissions, climate change impact, circular economy practices, pollution prevention, ecosystem protection and contributions to national development. For a broader overview of ongoing obligations, see key compliance requirements for companies in China.

Mandatory disclosure for specific indices

The regulations mandate ESG disclosures for companies listed on specific indices, including:

• Shanghai (SSE):SSE 180 Index and STAR 50 Index
• Shenzhen (SZSE): Shenzhen 100 Index and ChiNext Index

Companies dual-listed on Chinese and international stock exchanges must also comply with these disclosure requirements. Those not included in these categories are encouraged to disclose this information voluntarily. The first mandatory disclosures, covering the 2025 financial year, were due by 30 April 2026. The requirement is annual, with reports submitted alongside annual company reports each April.

CSDS Basic Standards

In December 2024, the Ministry of Finance, together with eight other government departments, released the Corporate Sustainability Disclosure Standards (CSDS) Basic Standards, a national framework for corporate sustainability disclosure aligned with the ISSB’s IFRS S1 standards.

The CSDS adopts a double materiality approach, requiring companies to assess how sustainability factors affect their own financial performance and how their operations affect people, communities and the environment. It is the framework around which broader national mandatory requirements will be built, with full implementation targeted by 2030.

Voluntary disclosure for SMEs on the BSE

The BSE primarily focuses on small and medium-sized enterprises (SMEs). Given their developmental stage and limited capacity for disclosure, the BSE has adopted a voluntary disclosure policy. SMEs are encouraged to voluntarily report their ESG practices, setting benchmarks for sustainable development.

Challenges faced by international firms in China’s ESG compliance

International firms operating in China often face difficulties applying ESG reporting requirements. These include:

Rapidly evolving regulatory landscape

China’s ESG regulations are continuously developing, with new standards and guidelines being introduced at a fast pace. Exchange guidelines, the CSDS Basic Standards and sector-specific guidance have progressed in parallel, making it difficult for foreign companies to stay current and ensure full compliance, particularly for companies managing ESG obligations across multiple jurisdictions.

Data collection and management

Collecting and managing ESG data across diverse regions in China remains a significant challenge.The variability in data sources, the need to maintain consistency across different geographic locations and the difficulty of capturing Scope 3 supply chain data add to the difficulty of producing reliable ESG reports. Where local operations have not historically tracked ESG metrics, establishing reliable baselines takes time before meaningful year-on-year reporting is possible.

Resource constraints

Resource constraints are a major concern, particularly for smaller enterprises. Smaller firms may lack the internal expertise required for thorough ESG reporting, while larger multinationals face a different challenge: their group-level ESG frameworks do not always map cleanly to China-specific requirements, particularly around double materiality assessments and national development strategy contributions. Effective compliance demands investment in systems, training and personnel to manage the process.

Upcoming changes and future trends in China’s ESG regulations

China’s regulatory landscape for ESG reporting is undergoing significant changes and advancements, reflecting a growing commitment to sustainability and transparency.

Enhanced regulatory frameworks

China’s ESG reporting standards are becoming more rigorous. The CSDS Basic Standards provide more detailed guidelines on disclosure requirements and are expected to expand in scope through 2030. Climate-related disclosure standards under the CSDS framework are targeted for 2027, likely requiring quantitative emissions targets and evidence of progress.

Focus on carbon neutrality

With China’s target of achieving carbon neutrality by 2060, regulations are placing increasing emphasis on carbon emissions reporting and reduction strategies. Companies are expected to set ambitious environmental targets and demonstrate progress towards achieving these goals.

Increased transparency and accountability

Third-party verification of ESG disclosures was previously a differentiating practice among leading companies but is becoming a more standard expectation as regulators place greater weight on disclosure credibility. Stricter accountability for non-compliance is also anticipated as the framework matures. Companies should consider how ESG verification fits within their existing audit cycle, our guide on annual audit, tax reconciliation and inspection in China provides relevant context.

Digital transformation

Digital tools are increasingly central to ESG reporting in China. Blockchain traceability, AI-assisted data analysis and the Internet of Things (IoT) environmental monitoring are being adopted by large listed companies to improve the accuracy and efficiency of ESG data collection and reporting. As these technologies become more established, they are likely to shape what regulators consider achievable disclosure standards.

Real-world examples of impactful ESG practices

Several international firms have successfully implemented ESG practices that demonstrate how compliance and operational value can go hand in hand.

Nike has pursued ambitious sustainability targets across its supply chain, committing to significant reductions in greenhouse gas emissions and freshwater usage while diverting waste from landfills, all supported by tracking systems that generate operational as well as reporting benefits.

Alibaba has taken a similar integrated approach, using its cloud infrastructure to help clients reduce emissions while advancing its own carbon footprint reduction commitments across its logistics and digital ecosystem.

Both cases illustrate that ESG systems built for disclosure purposes tend to surface operational improvements and accountability benefits that extend well beyond the annual report.

Conclusion

ESG reporting has become an essential aspect of business operations in China, particularly for international firms. As the country aligns its standards with global frameworks, companies face opportunities and challenges in meeting these evolving requirements. The focus on environmental impact, social responsibility and governance practices reflects China’s commitment to sustainable development and its role in global supply chains.

While managing compliance can be demanding, companies that invest early in the right systems and internal expertise are better positioned as requirements expand towards 2030. Embracing ESG principles supports compliance efforts and contributes to long-term business sustainability and value creation in the Chinese market. For a broader look at the operating environment, six challenges of doing business in China covers additional considerations relevant to international firms.

How Acclime can help with ESG compliance in China

Acclime China offers complete support in navigating ESG compliance and reporting standards. From adapting to new regulatory frameworks to meeting specific industry requirements, our team of experts can assist with everything from data collection and analysis to ensuring adherence to local and international ESG guidelines. Contact us to learn how we can support your ESG compliance strategy and drive sustainable growth in China.