Under the unified deployment of the China Securities Regulatory Commission, on February 8, 2024, the Shanghai Stock Exchange, the Shenzhen Stock Exchange and the Beijing Stock Exchange respectively issued the Self-Regulatory Guidelines for Listed Companies on the Shanghai ** Stock Exchange No. 14 - Sustainability Report (Trial) (Consultation Draft), the Self-Regulatory Guidelines for Listed Companies on the Shenzhen ** Stock Exchange No. 17 - Sustainability Report (Trial) (Consultation Draft), and the Beijing ** Stock Exchange Continuing Supervision Guidelines for Listed Companies No. 11 - Sustainability Report (Trial) (Draft for Comments). This is the first time that the three major exchanges have drafted guidelines for sustainability information disclosure, and it is a milestone event for the sustainability information disclosure of listed companies in China. The overall structure and content of the three documents are largely the same, with slight differences in wording.
This article is represented by the Self-Regulatory Guidelines for Listed Companies on the Shanghai ** Stock Exchange No. 14 – Sustainability Reports (Trial) (Consultation Paper) (hereinafter referred to as the "SSE Sustainability Reporting Guidelines"), which are combined with the Environmental, Social and Governance Reporting Guidelines and the Corporate Governance Code (hereinafter collectively referred to as the "HKEX ESG Reporting Guidelines") in the Main Board Listing Rules of the Hong Kong Stock Exchange. and two international financial reporting sustainability disclosure standards (IFRS S1 and IFRS S2, collectively referred to as the "ISSB Standards") developed by the International Sustainability Standards Board (ISSB) to help readers understand the similarities and differences between different disclosure frameworks.
There are 58 articles in 6 chapters of the SSE Sustainability Reporting Guidelines, of which Chapter 1 (General Provisions) and Chapter 2 (Sustainability Information Disclosure Framework) are general requirements, Chapters 3, 4 and 5 are specific disclosure requirements in the three dimensions of environmental, social and corporate governance, respectively, and Chapter 6 is supplementary provisions and interpretations.
We will compare the above three sets of standards from the main aspects of reporting subjects, disclosure time requirements, materiality principles, disclosure topics, etc., as shown in the following table. It should be noted that this comparison is not an article-by-article comparison, but a general comparison on the basis of specific provisions.
Note: The Exchange published a consultation paper in April 2023 to seek market views on the proposed enhancements to climate disclosures under the Environmental, Social and Governance (ESG) framework, which are scheduled to come into effect on 1 January 2025. The revised contents of the consultation paper are compared here.
Based on the above comparison, (1) in terms of reporting entities, the SSE adopts a partial mandatory + partial voluntary model, with the HKEX delineating the reporting entities as all listed companies, and the scope of application of the ISSB standards is limited by the adoption of each jurisdiction; (2) in terms of disclosure time requirements, the requirements of the three sets of standards are the same; (3) In terms of disclosure location, the SSE Sustainability Reporting Guidelines do not contain clear requirements, and the HKEX ESG Reporting Guidelines are similar to the requirements of the ISSB Standards; (4) In terms of materiality principles, unlike the single materiality principle of the other two sets of standards, the SSE Sustainability Reporting Guidelines adopt the dual materiality principle (i.e., the issues set out in the guidelines identify whether each issue has a significant impact on the value of the enterprise (financial materiality), and whether the performance of the enterprise on the corresponding issues will have a significant impact on the economy, society and environment (impact materiality)); 5) In terms of material issue disclosure framework, the SSE Sustainability Reporting Guidelines are similar to the requirements of the ISSB Standards; (6) In terms of specific dimensions of disclosure, the three sets of standards all adopt the disclosure framework of four core contents: "governance-strategy-impact, risk and opportunity management-indicators and targets", and at the same time, the SSE sustainability reporting guidelines also include topics that reflect Chinese characteristics, such as rural revitalization and innovation-driven; (7) In terms of the effective date, the SSE requires listed companies that are required to disclose the Sustainability Report to publish the 2025 Sustainability Report prepared in accordance with the Guidelines before April 30, 2026; (8) In terms of mitigation measures, the SSE Sustainability Reporting Guidelines stipulate that listed companies are not required to disclose the year-on-year changes in relevant indicators in the first reporting period, and can make qualitative disclosures and explain the reasons why quantitative disclosure is not possible for indicators that are difficult to disclose quantitatively. In the 2025 and 2026 reporting periods, if it is difficult for a listed company to quantitatively disclose the impact of sustainability-related risks and opportunities on its current financial position, it may only make qualitative disclosure. Where it is difficult to disclose the impact of sustainability-related risks and opportunities on the future financial position, information and explanations that are helpful for investors to understand the relevant impact should be provided within a reasonable range, and the work plan, progress and timetable for relevant disclosures should be clarified.
In general, these three sets of standards emphasize the importance of sustainable development, aiming to guide enterprises to integrate the concept of sustainable development into the company's development strategy, operation and management activities, and promote enterprises to pay attention to environmental and social responsibility. Enterprises are required to establish effective governance structures and risk management mechanisms to meet the challenges of sustainable development. In this context, it is recommended that relevant enterprises take precautions, assess the impact of the new policies on their development strategies, governance structure, operating performance, reporting, etc., study countermeasures in a timely manner, and do a good job in information communication and exchange with external investors.