Overview China is tightening expectations for sustainability disclosure by listed companies. Draft national sustainability standards aligned with international frameworks and enhanced guidance from the Shanghai and Shenzhen stock exchanges signal a shift from largely voluntary narrative reports to decision-useful, comparable data. The emphasis is on governance, climate-related risks and opportunities, environmental factors, workforce metrics, and financially material impacts.

Who is likely in scope first - Large-cap and state-influenced issuers on main boards - Companies in resource- and energy-intensive industries - Dual-listed firms and those with significant international investor bases - Entities already publishing CSR or sustainability reports but lacking standardized metrics

Core reporting architecture to expect - Governance: board oversight, management responsibilities, internal controls, and incentive alignment for sustainability objectives - Strategy: identification of material ESG risks and opportunities across short, medium, and long term - Risk management: processes to identify, assess, and manage ESG and climate risks, integrated with enterprise risk management - Metrics and targets: decision-useful indicators with clear methodologies, baselines, and progress tracking

Key metrics to prepare now Climate and energy - Greenhouse gas emissions: Scope 1 and Scope 2, with Scope 3 where material; intensity per unit revenue or output - Energy consumption: total, intensity, and share of renewable energy - Climate risk: scenario analysis assumptions, internal carbon price (if used), transition and physical risk indicators

Environment and resources - Water: withdrawal, consumption, discharge and intensity; water-stressed location exposure - Pollution: key air pollutants such as NOx and SO2; wastewater chemical oxygen demand; waste and hazardous waste generation and treatment - Materials and circularity: raw material use, recycled content, product end-of-life recovery - Land and biodiversity: footprint, rehabilitation and remediation where relevant

Workforce and safety - Headcount, new hires and turnover, diversity representation, training hours per employee - Health and safety: total recordable incident rate, lost-time incident rate, fatalities - Labor practices: collective bargaining coverage, supplier labor audits and corrective actions

Conduct and data - Anti-bribery and anti-corruption incidents, whistleblowing cases and resolution times - Data security: material cybersecurity incidents, remediation actions, downtime impacts

Financial effects and allocation - Green or transition capex and opex, R&D supporting decarbonization - Revenue share from environmentally aligned products and services referencing domestic green classification catalogues - Government incentives linked to environmental performance and related dependencies

Data quality and controls - Reporting boundary and consolidation approach consistent with financial statements - Methodologies: emission factors, estimation techniques, and changes to methods year over year - Controls: data ownership, system logs, segregation of duties, and internal audit testing - Assurance readiness: documentation that enables limited assurance on selected metrics - Digital reporting: structured, machine-readable submissions where required by exchanges

Implementation timeline and milestones Note: exact dates and scope will depend on the final rules issued by national authorities and stock exchanges. The sequence below reflects market signals and current drafts.

Phase 0: Foundation building (ongoing through 2024) - Map existing disclosures to emerging Chinese sustainability standards and major international baselines - Approve board-level oversight structure and define management accountability - Select calculation methodologies for emissions, energy, water and safety; establish a 2023 or 2024 baseline - Deploy data collection templates across subsidiaries and key suppliers

Phase 1: Pilot reporting for large issuers (expected starting 2025) - Publish a sustainability or climate report aligned to core governance, strategy, risk, and metrics disclosures - Report Scope 1 and Scope 2 with intensity; pilot material Scope 3 categories - Begin limited assurance planning on selected indicators such as emissions and safety

Phase 2: Initial mandatory cohorts (anticipated from 2026 as rules finalize) - Largest cohorts likely to provide standardized sustainability information with exchange submission formats - Expand metrics coverage, climate scenario analysis transparency, and supply chain indicators - Initiate limited assurance where required

Phase 3: Broader adoption and deepening (2027–2028) - Progressive expansion to additional issuers and sectors - Strengthen quantitative targets, year-over-year comparability, and controls - Consider reasonable assurance readiness on high-impact metrics

Sector notes - High emitters: prioritize accurate fuel data, metering, and reconciliation for Scope 1; site-level energy intensity; pollution controls performance - Consumer and retail: supplier screening and audit results, product packaging, waste reduction, and workforce metrics - Financials: climate risk governance, exposure to carbon-intensive sectors, green financing allocation, and client engagement processes

Practical checklist for the next 12 months - Confirm governance: board committee charter updates and management KPIs - Build inventory: emissions, energy, water, waste and safety data with clear boundaries - Set targets: multi-year goals for emissions and energy intensity with interim milestones - Choose tools: calculation engines, workflow systems, and document repositories - Prepare assurance: evidence trail, change logs, and management review controls - Engage suppliers: high-impact categories, contract clauses, data templates and training - Draft narrative: materiality determination, risk integration, and forward-looking statements

Common pitfalls to avoid - Inconsistent organizational boundaries between financial and sustainability reports - Unreconciled activity data and emission factors, especially for Scope 2 location vs market methods - Omitting methodologies and assumptions, hindering investor comparability - Overreliance on qualitative statements without quantitative baselines or targets

Outcome Companies that invest early in governance, data systems, and targeted metrics will reduce compliance risk, improve investor communication, and shorten the path to assured, comparable disclosures once final rules take effect.