China: Climate Disclosure Implementation Framework Takes Shape

China’s proposed application guides clarify how its climate disclosure standard may operate in practice, including value-chain disclosures relevant to multinational businesses operating in or connected to China.

Why should I read this?

China’s Ministry of Finance launched a consultation on draft application guides for its Standard for Corporate Sustainability Disclosure No. 1 - Climate (Trial). It also published sector-specific guides (draft for comments) for the power, steel, coal, oil, fertiliser, aluminium, hydrogen, cement and automotive industries. Comments were due by 26 October 2026. The publication of detailed sector-specific guidance provides a clearer indication of regulators' expectations regarding emissions measurement, sector risks and transition-related disclosures. The proposals remain voluntary and are not yet legally binding.

The consultation marks an important step in China's effort to develop a unified sustainability disclosure standards system. It provides the clearest indication yet of how future climate-related reporting may operate in practice. China’s Sustainability Disclosure Standards are being developed with reference to the International Sustainability Standards Board’s (ISSB) IFRS S1 and IFRS S2. China aims to establish a unified sustainability disclosure standards system, aligned to ISSB Standards by 2030. For clarification, this target refers to structural alignment and interoperability, not full equivalence. Mandatory sustainability disclosures are expected to be introduced in phases. However, the detailed implementation plan has not yet been released.

For multinational businesses, the implications may extend beyond future reporting obligations. The framework places significant emphasis on value chains. As such, Chinese businesses may increasingly request sustainability data from multinational suppliers, customers and joint-venture partners. As a result, businesses could experience the effects of the framework through commercial relationships, even if they are not directly in scope.

What should I do?

The proposed guidelines provide detailed guidance on climate risks, opportunities and transition plans. They also address scenario analysis, climate-related financial impacts and Scope 1, 2 and 3 emissions reporting. The guides also emphasise value chains and climate-related risks connected with them. The sector guides identify industry-specific risks, emissions sources, metrics and disclosure expectations.

Businesses operating within the relevant sectors should assess whether existing reporting processes can support the proposed disclosures. Particular attention should be given to climate risk assessments, transition planning and scenario analysis. The proposals suggest closer integration between sustainability reporting, risk management, strategy and financial reporting. 

In practice, businesses may need closer coordination between sustainability, finance, risk and strategy teams. Governance and internal controls may also require review, particularly around data quality, emissions methodologies and management oversight. These capabilities could become increasingly important as further reporting requirements and guidelines are published. 

Implications for multinational businesses

Even though the framework remains voluntary, multinational businesses may encounter its effects indirectly through customer, supplier and financing relationships before any mandatory reporting requirements emerge.

The guidance generally prefers primary Scope 3 data obtained directly from suppliers and other value chain partners. It also recognises that primary data may not always be available and allow for estimation approaches under defined conditions. This could make supplier engagement an important reporting dependency. Businesses may need stronger processes for requesting, validating and managing supplier emissions data. Commercial contracts may also require provisions supporting emissions-data sharing, verification and assurance.

There may also be benefits for multinational groups already operating in jurisdictions utilising ISSB Standards. These businesses may benefit from improved interoperability and reduced reporting duplications. To support this, the IFRS Foundation reports that 37 jurisdictions are using, or moving towards adopting, ISSB Standards. For multinational businesses, greater alignment may reduce reporting complexity and improve comparability across jurisdictions. However, businesses should not assume complete alignment. China’s framework also requires reporting on business and value-chain impacts on climate change, adding a China-specific reporting dimension.

Although the proposals remain voluntary, they provide the clearest indication yet of how China's climate disclosure regime may operate in practice. Businesses with operations, supply chains or customers connected to China should monitor developments closely and assess whether existing climate-reporting processes can support future information requests.

Co-authored by Nathan Handoll (Knowledge)

Further reading

• Hong Kong: Business implications of the first Five-Year Plan
• China: Counter-sanctions and EU due diligence obligations
• China: What the Five-Year Plan means for business
• New Hong Kong Sustainability Disclosure Standards