Speaking of reporting frameworks… amidst the chaos and ESG backlash in Western society, China’s Ministry of Finance issued its Chinese Sustainability Disclosure Standards (CSDS), marking a major development for ESG. The CSDS constitutes China’s efforts to develop a comparable and compatible sustainability disclosure framework that aligns Chinese ESG reporting with both the ISSB standards and the EU’s CSRD standards. Notably, these standards mark the first government-mandated disclosures outside the EU to adopt a double materiality standard. The ESG Institute writes about double materiality under the CSDS:
“One of the key differentiators of CSDS is the adoption of the double materiality principle, similar to CSRD. This means companies must disclose both:
- Financial materiality – How sustainability risks impact corporate financial performance.
- Impact materiality – How a company’s operations affect society and the environment.
This dual approach ensures that Chinese businesses align with international sustainability expectations while considering China’s unique regulatory and economic landscape.”
The CSDS comes in phases, with the government encouraging voluntary reporting up to 2026. In 2027, reporting will become mandatory for large listed companies before expanding out to non-listed companies and smaller enterprises in 2030. The CSDS are generally more similar to CSRD than to ISSB and there is a certain irony to China pushing ahead with CSDS while the EU debates scaling back the CSRD. China is a major global economy that carries serious political and economic sway. Their endorsement of a double materiality standard could cause more jurisdictions to look beyond ISSB and align more heavily with the CSRD and CSDS. Additionally, this shows that while ESG reporting may be under scrutiny in the US and EU, the rest of the world isn’t waiting for us and is continuing to advance reporting and compliance. Sooner or later we’ll be expected to catch back up.
Our members can learn more about global disclosure frameworks here.
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