ESG Reporting – Delays in Europe and Mandatory in China
Just as lawmakers in the European Union announced a delay in the adoption of standards for the Corporate Sustainability Reporting Directive (CSRD), China’s leading stock exchanges introduced new sustainability reporting guidelines.
In the EU, European Sustainability Reporting Standards (ESRS) set out sector-specific reporting by the end of June 2024. Not only that, but the CSRD also required large non-EU companies that operate in the EU to also provide sustainability reporting, to begin in 2028.
The Commission has now recommended delaying these standards by two years to allow companies more time to focus on delivering ESRS.
While this will be frustrating for many people pushing the need for more transparency, there is better news emerging from an unlikely source.
China’s announcement of new ESG reporting standards means companies listed on the Shanghai Stock Exchange (SSE), Shenzhen Stock Exchange (SZSE), and the Science and Technology Innovation Board (STAR Market), as well as those with dual listings overseas, have to disclose ESG information, including Scope 3 emissions.
The deadline for meeting these new standards is as early as April 2026.
The new guidelines include disclosures on biodiversity, climate impact, corporate governance, and sustainability practices. The concept of 'double materiality’' considers the financial impact of ESG on the company and the company's impact on society and the environment.
Including Scope 3 emissions, the indirect emissions in a company's value chain, is a significant move as these have previously been overlooked.
Global CEOs Struggle to Deliver Profits and ESG
ESG reporting has become an integral part of financial reporting over the past two decades, driven by demand from stakeholders and investors.
According to KPMG’s 2023 Global CEO Outlook, with CEOs sharing their 3-year perspectives, showed that 69% have fully embedded ESG into their business as a means to create value.
Global CEOs say a return on their ESG investments is still a few years down the line, but they also recognise the significance to their customers. In fact, 24% believe that ESG will have the greatest impact on their customer relationships over the next three years, while 16% believe it will help build their brand reputation.
Interestingly, that same KPMG survey showed that while CEOs are up to speed with new regulations, more than two thirds (68%) said their current ESG progress is not strong enough to meet expectations from stakeholders or shareholders.
As always, it’s a fine balancing act delivering business growth and shareholder value while supporting ESG efforts.
The new reporting standards in China could have a significant impact globally. If already competitive Chinese companies are also seen to be ESG champions, their fortunes could be set to rise even further.
More than 450 listed companies will be affected by this change in China, and will be required to release a 2025 sustainability report before 30 April, 2026.
Other countries are also introducing ESG-related disclosure laws, including the UK, Japan, Singapore, and Australia.
