As the European Union lowers its sustainability ambitions, China is seizing its principles to structure its own regulatory framework. A situation that could weaken the competitiveness of European companies, reports Future of Sustainability in an article by Thomas Guyot.
A Chinese model inspired by… Europe
For several months, debates surrounding the Green Deal and the CSRD (Corporate Sustainability Reporting Directive) have stirred European political circles. The initial goal was to impose stricter non-financial reporting on companies, but in the face of economic and industrial pressures, Brussels seems to want to ease its requirements. Meanwhile, Beijing is moving forward quietly but surely.
As Future of Sustainability points out, China has launched its own sustainability standards, the China Sustainability Disclosure Standards (CSDS). After an initial consultation in May 2024, the basic standards were published last December. Their adoption will initially be voluntary before becoming mandatory between 2026 and 2030, depending on the size of the companies.
Notably, these standards are largely inspired by international models, particularly the European CSRD and the recommendations of the ISSB (International Sustainability Standards Board). One of the key principles adopted by China is that of double materiality, a concept that requires companies to assess both the impact of ESG issues on their financial performance and the influence of their activities on the environment and society. Ironically, this notion is currently being questioned by the European Union itself.
Europe retreats, China prepares
According to Future of Sustainability, Beijing justifies this initiative with a dual objective: to meet growing transparency expectations and to strengthen the competitiveness of its companies. Far from being a constraint, these new standards are seen as a strategic asset allowing Chinese companies to anticipate the requirements of international markets and to attract foreign funding more easily.
On their part, European companies may see the CSRD relaxed, but this does not necessarily mean a competitive advantage. They will need to quickly adapt to the most demanding international standards if they want to remain competitive internationally. Moreover, those wishing to trade with China will have to comply with the CSDS requirements, or risk having their access to the Chinese market severely restricted.
A déjà vu scenario
The article from Future of Sustainability warns against a repetition of past mistakes. Europe, which had opened the way in green industries such as photovoltaics or electric cars, has already found itself marginalized in the face of the rise of its competitors. Today, by relaxing its environmental rules, it risks self-sabotaging once again, leaving China the opportunity to establish itself as the leader in sustainable reporting.