China has taken a big step toward standardizing sustainability reporting with the Corporate Sustainability Disclosure Standards (CSDS), the “Chinese variant” of the CSRD.
The CSDS was officially announced in December 2024 by China’s Ministry of Finance in cooperation with nine other government departments. The Chinese government envisions a five-year implementation period, which will make the CSDS fully operational by 2030, with mandatory reporting by all relevant companies.
What does it entail?
The CSDS consists of 3 standards:
Basic Standard – Establishes basic reporting requirements for business operations, environmental impact, social policy and risk management. This standard defines general principles, reporting requirements and reporting frameworks applicable to all sectors.
Thematic standards – describes sector-specific guidelines on topics such as carbon emissions, water management and labor practices, for example. These are being introduced incrementally so that sectors can tailor their reporting practices to their unique sustainability challenges.
Application Standards – Practical support for companies in implementing the standards. This includes best practices for data collection, reporting methodologies and verification processes, encouraging use of digital reporting tools.
What stands out about the CSDS as opposed to the CSRD?
- Connection to International Standards
The CSDS is well aligned with IFRS S1 and S2. This facilitates implementation by companies and promotes international consistency of sustainability disclosures.
→ The CSRD is also aligned with international guidelines but has strong European emphases such as a prominent role for dual materiality analysis. The CSDS is more pragmatic for internationally operating companies and reduces double reporting.
- Strategic alignment with national goals
In addition to connecting to international standards, the CSDS is designed to contribute to China’s sustainability goals.This concrete linkage contributes greatly to achieving China’s sustainability goals, such as carbon neutrality by 2060.
→ In the CSRD, this linkage is less tight so the actual impact of the standard on sustainability issues remains smaller.
- Focus on investors
The CSDS focuses on investor interests. This makes the reporting accessible to the capital market and provides investors with comparable data. This makes sustainable investments more attractive and transparent, further promoting sustainability.
→ The CSRD targets a broader group of stakeholders, making reporting more complex and potentially less effective.
- Industry-specific adaptation
To ensure relevance across sectors, sectors such as energy, industry and technology are given tailored sustainability reporting requirements. This ensures that their ESG reports contribute to national goals and are in line with global expectations**.
→ The CSRD applies a more uniform set of reporting requirements which can lead to irrelevant reporting requirements for different sectors. Tailored standards such as those from the CSDS reduce unnecessary regulatory burden and make reporting more relevant.
- Phased implementation
Like the CSRD, the CSDS is being implemented in phases. Sustainability reporting will be voluntary at first, after which listed companies will have initial obligations. But the phasing also applies to the content of reporting:
- Basic standards (as of 2024)
- Thematic standards (start with climate themes in 2027, after which expansion to water, biodiversity, social themes and the like will take place)
- Sector standards (gradual implementation, no later than 2030)
This ensures that companies learn by doing and are given time to gradually move toward full compliance.
→ The CSRD came as a “big bang” to many, making it difficult for companies to manage.
- Rapid development and implementation
Development of the CSDS began in 2023 and it was published in 2024. Immediate implementation followed and completed implementation is expected in 2030. The CSDS shows that with central control, clarity and results can be achieved more quickly.
→ The CSRD took almost 10 years from concept to mandatory implementation and experienced many political and technical delays.
The CSDS has many similarities with the CSRD, but also differs significantly in some respects. This makes implementation easier and the information reported more relevant. As a result, the standard promises to make more impact, which is ultimately what it’s all about. Whether the CSDS can actually bring about this impact? The next few years will have to tell.