Introduction

China’s ongoing “dual carbon” drive and the rapid expansion of its green finance framework have elevated Environmental, Social, and Governance (ESG) considerations from a voluntary practice to a strategic necessity for listed companies.

In recent years, the Shanghai Stock Exchange (SSE), Shenzhen Stock Exchange (SZSE), and Beijing Stock Exchange (BSE) have each introduced the Guidelines for the Preparation of Sustainability Reports for Listed Companies and complementary self-regulatory rules. This culminated on July 1, 2025, when the China Securities Regulatory Commission (CSRC) implemented the revised Measures for the Administration of Information Disclosure by Listed Companies. Together, these initiatives form a three-tier system of departmental regulations, exchange-level rules, and practical guidelines — officially moving China’s ESG disclosure regime into the mandatory era for selected companies.

What’s Different Under the New Framework?

1. A tiered, company-specific disclosure approach

• Mandatory reporters include companies listed in major benchmark indexes such as the SSE 180 Index, SSE STAR 50 Index, SZSE 100 Index, and SZSE ChiNext Index, as well as firms with both domestic and overseas listings. Collectively, these represent more than half of the A-share market’s total capitalization.

• SMEs on the BSE are encouraged — but not obliged — to publish ESG reports, enabling gradual adoption without imposing excessive costs.

• Transition period: The first set of mandatory ESG reports must be submitted by April 30, 2026, with initial flexibility on certain data points to ease companies into compliance.

2. The “Double Materiality” lens

Listed companies are expected to assess and report on:

• Financial Materiality — how ESG factors influence the company’s strategy, business model, financial health, and cost of capital.

• Impact Materiality — the company’s footprint on environmental and social systems.
  When an issue is financially material, it must be disclosed following the Four-Element Framework — Governance, Strategy, Risk and Opportunity Management, Metrics & Targets — aligned with the Task Force on Climate-related Financial Disclosures (TCFD) and International Sustainability Standards Board (ISSB) standards (IFRS S1/S2).

3. Topics rooted in China’s context, aligned with global norms

The framework outlines 21 ESG topics:

• Environmental: Climate change, pollution control, waste management, biodiversity, environmental compliance, energy, water, circular economy.

• Social: Rural revitalization, innovation, technology ethics, supply chain security, equal opportunities for SMEs.

• Governance: Due diligence, stakeholder engagement, anti-bribery, anti-unfair competition.

4. More data, more precision

Companies must disclose Greenhouse Gas (GHG) Scope 1 and Scope 2 emissions, with Scope 3 encouraged where possible, reported in CO₂e (carbon dioxide equivalent). Environmental metrics like energy usage and water consumption must also be tracked, with third-party verification strongly recommended to boost credibility.

Why This Matters for Listed Companies

• Regulatory risk: Failure to comply could lead to penalties under the Securities Law and Company Law, damage corporate reputation, and result in exclusion from ESG-related indexes.

• Capital market benefits: Strong ESG credentials can attract green finance under the Guiding Opinions on Further Strengthening Financial Support for Green and Low-Carbon Development, improve credit standing, and secure better market valuations.

• Operational demands: Meeting the new standards will require companies to strengthen governance, build robust ESG data systems, and tailor metrics to their specific industries.

How Companies Can Prepare

1. Upgrade ESG governance — Create or empower ESG-focused board committees with clear oversight responsibilities.

2. Invest in data infrastructure — Deploy tools like Energy Management Systems (EMS) and carbon management platforms to collect, track, and audit ESG data.

3. Embed the double materiality mindset — Evaluate both the financial implications and societal/environmental impacts of ESG issues.

4. Prioritize transparency — Avoid greenwashing by ensuring all reported information is factual, verifiable, and aligned with global standards such as the Empowering Consumers for the Green Transition (ECGT) Regulation (EU).

Conclusion

China’s new ESG disclosure regime is more than a compliance obligation — it’s an opportunity for companies to enhance market trust, attract sustainable investment, and strengthen their competitive positioning.

Ascendia Partners supports A-share listed companies through every stage of ESG reporting — from governance frameworks and compliance strategies to data management and full report preparation — turning regulatory requirements into strategic advantages.