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Ministry of Finance issued the exposure draft of Chinese Sustainability Disclosure Standards for Business Enterprises – Basic Standard and explanation of the drafting
Publication date: 30 May 2024
gx In brief INT2024-13
Key points
- On 27 May 2024, the Ministry of Finance of the People’s Republic of China issued an exposure draft for the Sustainability Disclosure Standard for Business Enterprises – Basic Standard.
- Sustainability Disclosure Standards for Business Enterprises for the People’s Republic of China will be made up of the basic standard, specific (thematic) standards and application guidance.
- Although the draft is structured differently, it is clear that it was developed using the ISSB standards as a base.
- By 2027, China will have issued the climate-related disclosure standard and all of its accompanying guidance. By 2030, the entire suite of Sustainability Disclosure Standards for Business Enterprises for the People’s Republic of China (CSDS) and its accompanying guidance will have been issued.
- A phased-in approach will be applied and all companies (listed and non-listed, large companies and small and medium-sized companies) will eventually be required to adopt the standard.
What is the issue?
On 27 May 2024, the Ministry of Finance of the People’s Republic of China issued an exposure draft to the Sustainability Disclosure Standard for Business Enterprises – Basic Standard (ED). There was an explanatory note to the drafting of the ED. This specified the structure of the CSDS and provided the blueprint for building a comprehensive sustainability disclosure framework.
CSDS will be made up of the basic standard, specific (thematic) standards and application guidance. Along with a standard on climate-related disclosures, a number of thematic standards in the plan cut across each of the streams within environment, social and governance topics (see chart below). A set of application guidance will interpret and provide guidance on both the application and industry-specific perspectives. Other supporting guidance may be issued as and when needed to support application.
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CSDS uses a double materiality lens. In addition, it has adopted the four pillar approach used by most major frameworks and standards globally.
Although the draft CSDS is structured differently it was developed using the ISSB Standards as a base. The draft drew on the core positioning and advantages of the ISSB Standards and also reflect China’s context and Chinese characteristics. Its core contents are aligned to those of IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information. It is anticipated that it will interoperate well with ISSB Standards and provide functionally aligned outcomes.
View image
CSDS uses a double materiality lens. In addition, it has adopted the four pillar approach used by most major frameworks and standards globally.
Although the draft CSDS is structured differently it was developed using the ISSB Standards as a base. The draft drew on the core positioning and advantages of the ISSB Standards and also reflect China’s context and Chinese characteristics. Its core contents are aligned to those of IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information. It is anticipated that it will interoperate well with ISSB Standards and provide functionally aligned outcomes.
What are the next steps?
According to the announcement, China will have issued the climate-related disclosure standard as well as all of its accompanying guidance by 2027. By 2030, the entire suite of CSDS and its accompanying guidance will have been issued.
The pace of adoption will not be ‘one size fits all’ where all entities in China adopt CSDS at once. The adoption process will be phased in and cascade from: listed companies to non-listed companies; from large companies to small and medium-sized companies; from qualitative disclosures to quantitative disclosures; and from a voluntary basis to a mandatory basis. During the interim period as the suite of CSDS is being developed, other regulatory departments can issue their respective disclosure guidance as deemed necessary.
Where do I get more details?
For more information, please contact Yvonne Kam (CN).
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