Voluntary ESG Reporting Program Introduced in China

The new program was launched on June 1^st, and generally aligns to the International Sustainability Standards Board with certain Chinese nuances and simplifications.

The new guidelines (known as The Guidance for Enterprise ESG Disclosure) address 118 metrics within the three key sections of Environmental, Social and Governance.   Almost half of the 32 Social metrics are related to Employee Labour Rights and highlight adherence to Chinese laws such as participation in workers’ conferences, housing provident funds and social security provisions.  The guidelines also have a strong emphasis on compliance with local laws, including the Personal Information Protection Law. Unlike other international standards, the guidelines also include unique Chinese elements, such as a company’s contribution to disaster recovery, actions during public crises, and rural revitalisation.

With more Chinese companies listing on international stock exchanges, an adherence to ESG standards is becoming an essential requirement for businesses seeking international investment.  While an increasing number of Chinese companies are making ESG disclosures, there has – until now - been no consistent reporting standard.  However, observers have highlighted the new program still lacks clear methodologies to quantify measurements.

Outlook for employers: While the new program is voluntary, it is a strong indication of future compulsory and more stringent reporting requirements.   Companies are encouraged to review the indicators relevant to labour management and compliance to understand the potential scope of measurement and reporting in the future.