China goes for double materiality
China is going for double materiality - launching new sustainability standards with Chinese characteristics.
The big revelation from new reporting guidance recently launched is the impact focus. Listed companies in Shanghai, Shenzhen and Beijing will need to disclose not just those topics that affect financial value, but any which “have a significant impact on the economy, society and environment” too.
That’s significant because the flagship global standards from IRFS are all about capital market needs. China’s regulators are taking a broader view - the state’s priorities matter too. That wider demand looks more in line with the EU’s double materiality approach.
But what really caught my eye was the topics themselves. For all the talk of global convergence, these are sustainability standards with some distinctly Chinese characteristics.
From 2026, firms listed on the main stock exchanges in China will need to report on their “support for rural revitalization”, “science and technology ethics” and “social welfare undertakings". Those aren’t words you’ll find in any other standard I know of.
There’s also a delicate balance when it comes to transparency. Many firms listed in China are (partly) state-owned. Some are vital to China’s national agenda. So reporting firms are cautioned that they must consider the need to protect “national security” and whether they guard “state secrets” before disclosing too much.
In China, the private sector is expected to serve national interests. Hence a big role for climate, technology and innovation. The standards are big on emissions, governance, anti-bribery and the circular economy. Unsurprisingly, they are silent on human rights - although I did spot a reference to “protecting employees' rights and interests”. That points to a very limited view of rights, ignoring wider value chains.
What’s most intriguing is the language. The text is peppered with references to “ethics”, “fairness” and “principles” - words which are often absent from major standards developed in the West.
But will they make a difference? Time will tell. But the draft guidance, now out for consultation, is a timely reminder that there is no global language for sustainability. Our expectations of what companies should report on is a social construct. Culture, context and politics matter. Whilst we are seeing strong convergence on some topics, the world of sustainable business is set to remain a bumpy place.
