China’s financial authorities have jointly released finalised standards outlining general sustainability disclosure requirements for companies. The ‘Sustainability Disclosure Standards for Enterprises — Basic Standards’ are designed to align with IFRS S1, seeking to promote disclosures of information on risks, opportunities and impacts related to sustainability issues in the environment, society and governance. Formally issued by the International Sustainability Standards Board in June 2023, IFRS S1 sets out the requirements for disclosing information about an entity’s sustainability-related risks and opportunities. This includes governance processes used to monitor, manage and oversee sustainability-related risks and opportunities, as well as strategies for managing such risks and opportunities. The standards were proposed in May as part of establishing a national unified standards system for sustainability disclosures by 2030. Under the basic standards, disclosure should comply with the principle of materiality. This means enterprises must conduct materiality assessments to evaluate whether sustainability risk and opportunity information would reasonably affect the decision-making of basic users such as investors and creditors. They also need to consider the scale, scope, and irreparability of potential negative impacts, and the scale, scope, and likelihood of potential positive impacts. Like IFRS S1, the disclosure elements in China’s basic standards include governance, strategy, risk and opportunity management, and metrics and targets. The final version of the standards adds ‘scenario analysis’ as an assessment method enterprises should consider when evaluating the resilience of corporate strategies and business models to sustainability risks. It also expands the definition of ‘value chain’ to cover the entire life cycle of an enterprise’s products or services, along with the interactions, resources and relationships related to its business model and its external environment. The basic standards will initially be implemented by enterprises on a voluntary basis.
