General Standards for Corporate Sustainable Disclosure
The Ministry of Finance of China releases draft of general standards for corporate sustainable disclosure, aiming to establish a sustainable disclosure standards system for enterprises and solicit opinions from stakeholders.
The general standards for corporate sustainable disclosure are based on the General Requirements for Disclosure of Sustainability-related Financial Information (IFRS S1) previously issued by the International Sustainability Standards Board (ISSB), and are adjusted in light of the current situation of China’s corporate sustainable information disclosure.
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Corporate Sustainable Disclosure System
China’s corporate sustainable disclosure system will include three parts, namely general standards, specific standards and application guidelines. The general standards will standardize the concepts, principles, methods, objectives of corporate sustainable information disclosure, and provide guidance for the formulation of other standards. Specific standards will propose disclosure requirements for specific environmental, social and governance topics, such as climate, water resources, biodiversity, supply chain management, business behavior. The application guidelines will include industrial application guidelines and standard application guidelines, providing explanations for sustainable information disclosure and disclosure practices in specific industries.
China plans to issue basic sustainable disclosure standards and climate-related disclosure standards in 2027, and establish a complete sustainable disclosure standards system in 2030. This draft of general standards for corporate sustainable disclosure provides one month for feedback.
Background of General Standards for Corporate Sustainable Disclosure
The general standards for corporate sustainable disclosure believe that corporate information disclosure needs to meet the information needs of other stakeholders such as investors, creditors, and regulators, and comply with the principle of double materiality, taking into account the impact of sustainable risks and opportunities on the company, as well as the impact of the company on the environment and society. The general standards introduce the governance, strategy, risk management, indicators and target frameworks developed by the Task Force on Climate-related Financial Disclosures (TCFD) to reduce the burden of sustainable disclosure on companies and align with international standards.
Considering the current development of sustainable disclosure of Chinese companies, the general standards will first be applied as voluntary standards and gradually expand to mandatory disclosure in the future. The initial scope of application is qualitative requirements for listed companies and large companies, and will develop into quantitative requirements for non-listed companies and small and medium-sized enterprises in the future. The standards believe that companies should use methods that match their capabilities and resources, consider cost-effectiveness and operability issues, and ensure the quality of sustainable information.
Contents of General Standards for Corporate Sustainable Disclosure
The general standards for corporate sustainable disclosure put forward some requirements for the quality of sustainable information, such as the reliability, relevance, comparability, verifiability, comprehensibility and timeliness of information. The reporting period of sustainable information disclosure should be consistent with the reporting period of the financial statements, and sustainable information should be disclosed at least on an annual basis. Interim disclosure is also encouraged for simplified sustainable information. In addition to the initial disclosure, companies should include comparable values in the disclosure.
The general standards also make requirements for the form of corporate sustainable information disclosure. Before the release of the standards, there are two forms of corporate sustainable development reports: one is a separate release and the other is a release as part of the financial report. The general standards require that companies should publish separate sustainable development reports, which can be disclosed to the public at the same time as the financial statements, or disclosed before the specified date. Companies need to publish sustainable development reports on their official websites or in other public ways.
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