CHINA Law and Practice Contributed by: Rongliang Wu, Mei Wan, Qirong Huang and Xueqi Huang, Jin Mao Law Firm
• Central SOEs and key local SOEs must submit annual social responsibility reports covering ESG performance. In terms of voluntary reporting, non-listed enterprises can refer to the Guidelines for Social Responsibility of Enterprises or international frameworks (GRI Stand- ards) to disclose ESG information, thus enhancing brand reputation. Reports must include specific indi- cators. Monitoring: Multi-Party Supervision Government monitoring • The MEE uses national real-time networks to monitor pollutant emissions and conducts central ecological inspections. • The Ministry of Human Resources supervises labour law compliance. • The China Securities Regulatory Commission over- sees listed companies’ governance and disclosure. Monitoring by third parties and the public • Qualified institutions (environmental monitoring firms, ESG rating agencies) verify carbon data and evaluate ESG performance. • Citizens and organisations supervise via the MEE’s 12369 hotline or online platforms, with legal rights to access ESG information and file complaints. Enforcement: Penalties and Incentives In China’s ESG enforcement framework, a dual mech- anism of penalties for non-compliance and incentives for good performance is implemented to ensure adher- ence to ESG requirements. (For more details, please refer to 5.1 Key Types of Liability and 6.3 Incentives, Regular inspections are conducted by environmental authorities such as the MEE and local EEBs to check compliance with environmental laws, such as adher- ence to pollutant discharge standards and permit requirements. Cleaner Production Audit Cleaner production audits assess a company’s envi- ronmental performance in reducing pollution and Exemptions and Penalties .) 6.6 Environmental Audits Regular Inspection
resource waste, split into mandatory and voluntary types: • Mandatory audits: Required by the government or relevant organisations (per Interim Measures on Cleaner Production Audits), with standards and participation rules set by authorities – typically applied to high-pollution, high-energy-consuming enterprises. • Voluntary audits: Initiated by companies them- selves, with self-determined participation scope and criteria. Carbon Verification (Carbon Audit) Carbon verification is a key requirement for enterpris- es covered by national or local carbon markets (eg, power, steel, cement industries) which follows national standards to confirm emission sources, calculation methods and data validity – ensuring compliance with carbon quota allocation and emission reduction targets. It focuses on verifying the accuracy and com- pleteness of a company’s carbon emission data. It is implemented by third-party institutions accredited by the MEE or local carbon management departments. According to the Criminal Law and relevant provisions, if the environmental pollution crimes are unit crimes, the directly responsible persons in charge and other responsible persons should be fined and punished. The “directly responsible persons in charge” include the actual controller of the unit, the principal person in charge or the authorised person in charge, and senior management personnel. In environmental administrative liability, administrative detention measures are targeted at company execu- tives and other directly responsible persons. The detention is less than 15 days for the following acts: • refusing to stop construction when there is no EIA; • refusing to stop discharging even though there is no valid discharge permit; • dishonesty with regard to discharging and data; or • producing or using forbidden pesticide. 7. Personal Liability 7.1 Directors and Other Officers
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