What China’s actions tell us about a new era of global corporate reporting

The idea only European companies are going to be subject to strict corporate due diligence rules is dangerously misleading

Developments in corporate reporting initiatives in Asia signify more than a fleeting change, they mark a profound transformation in the business environment. However, as the EU proceeds with the implementation of its Corporate Sustainability Reporting Directive, and the US looks to advance the Securities and Exchange Commission’s climate disclosure rules, there is a perception that the only significant discussions on corporate reporting are taking place within the EU and the US.

This misconception is often compounded by the fact the EU’s main standard setter, the European Financial Reporting Advisory Group, is based in Brussels and its global counterpart, the International Sustainability Standards Board, sits just down the road in Frankfurt.

While they are close in distance, they are far apart in terms of methodology, with Efrag favouring the so-called “double materiality” approach, while the ISSB has been pushing to maintain the classic financial reporting method. Focusing on this debate alone, however, is a very narrow-minded approach that ignores the significant developments elsewhere in the world.

In recent years, there has been a significant shift in Asia in how companies report on sustainability-related issues. This change is not just about adhering to new regulations or meeting the expectations of investors, it is about acknowledging the critical role of transparency in building a sustainable future.

There is now widespread agreement that corporate reporting on sustainability issues is needed to better understand how companies identify and address their impacts on environmental, social and governance matters. While the need for ESG reporting was initially driven by investors, pressure for this information today comes from a cross-section of stakeholders, including governments, workers, consumers and civil society.

The Asian corporate landscape exhibits remarkable diversity. From Singapore to China, the push for enhanced corporate reporting initiatives throughout Asia signals a transition towards more accountable business operations, reflecting the region’s growing commitment to addressing global challenges such as climate change, social inequality and economic disparity.

Despite this diversity, a common thread is uniting the various capital markets, namely an increasing recognition of the importance of sustainable practices.

Draft reporting guidelines

China is at the forefront of these changes, with its major stock exchanges in Shanghai, Shenzhen and Beijing proposing draft guidelines for corporate sustainability reporting.

These guidelines, if implemented, would bring forward a corporate sustainability reporting framework to advance transparency and accountability in key sustainability matters. They target larger companies listed and traded on these exchanges for mandatory disclosures from 2026, focusing on a wide array of sustainability topics, including climate change and energy consumption.

What is significant about these guidelines is that they propose introducing the much-debated double materiality approach, requiring companies to evaluate the financial effects of sustainability issues on their operations and their impact on the broader economy, society and the environment. This approach aligns with that used by the EU.

This is a critical point, as our research shows more than two-third of the Chinese companies World Benchmarking Alliance assesses are likely to be in scope of the EU’s CSRD. Coupled with other efforts to enhance sustainability reporting, as seen in other emerging markets, including Hong Kong, Singapore and Malaysia, it creates a persuasive global narrative in favour of double materiality.

These regulatory changes are a result of growing investor demand for sustainable investment opportunities. The rise of ESG investing in Asia highlights the financial community’s recognition of the long-term value created by sustainable business practices.

Investors are more inclined to allocate capital to companies that deliver financial returns and contribute positively to society and the environment. This trend has spurred companies to improve their ESG disclosures, as they aim to attract investment and improve their competitiveness in the market.

As Asia continues to grow economically, its commitment to transparency and sustainability will be crucial in ensuring that this growth is inclusive, equitable and environmentally sustainable. Navigating towards greater corporate openness is challenging, but it is a necessary step towards achieving a sustainable future for Asia and the rest of the world.

Through collaborative efforts and a shared vision, we can create a corporate ecosystem that values and prioritises the well-being of our planet and its inhabitants.

Dio Herdiawan Tobing is head of public policy Asia at the World Benchmarking Alliance