A NEW set of voluntary guidelines for Chinese companies to report environmental, social and governance (ESG) metrics took effect yesterday, offering a glimpse of what mandatory disclosures might eventually look like in the country.

Developed by China’s biggest companies and think tanks, the standards list more than 100 metrics that generally align with the global benchmark of draft rules issued by the International Sustainability Standards Board. The differences are they’re more simplistic and add “Chinese characteristics” that measure things like corporate charity.

The guidance “encourages companies to consider their responsibility as a corporate citizen” rather than looking at ESG from a pure “compliance or risk management perspective,” Jia Jingwei, an ESG analyst at Fitch Ratings Co., said in an interview. “It’s a more comprehensive and holistic view of ESG.”

China is improving its reporting standards as part of its push to reduce emissions and meet a net-zero target by 2060. As exchanges around the world make sustainability reporting mandatory for targeted sectors, China’s regulators have encouraged listed companies to report ESG information with an eye toward mandatory disclosure down the road.

With some Chinese companies listed abroad, they will have to meet global reporting standards eventually, so coming up with a mandatory requirement is the “next step,” Fang Xinhai, vice chairman of the China Securities Regulatory Commission, said at a conference in April.

“If you don’t disclose, you can’t go public, and you can’t get international capital,” he said.

A quarter of publicly traded Chinese companies already makes these disclosures and more are following each year. The number of Shanghai-listed firms issuing ESG reports grew 20% last year, while Shenzhen firms grew 13%, the fastest pace in a decade, according to Bloomberg Intelligence.

(SD-Agencies)