By Dr. Daoning Zhang and Dr. Min Yan
Sustainability and ESG considerations have become increasingly prominent in global regulatory and policy discourse. At the macro level, governments, international organisations and financial regulators routinely emphasise sustainable development, climate transition and responsible corporate conduct. At the firm level, however, companies do not necessarily internalise these objectives merely because they are normatively appealing. Behavioural change is more likely to occur where sustainability goals are supported by concrete incentives or credible sanctions. In the absence of such mechanisms, sustainability commitments risk remaining largely symbolic.
Directors occupy a pivotal position in this context. As the primary decision-makers responsible for corporate strategy and oversight, they shape the company’s long-term direction. If sustainability and ESG considerations are to influence corporate conduct in a meaningful way, directors must face institutional reasons to take them seriously.
Regulatory intervention provides one such mechanism. A recent example is the Measures for the Administration of Information Disclosure by Listed Companies 2025 (the “Measures”), issued by the China Securities Regulatory Commission (CSRC) and effective from 1 July 2025. Although many of their features are not entirely novel, their cumulative significance should not be understated. Formally concerned with information disclosure, the Measures nonetheless reshape the legal understanding of directors’ duties and create new pathways through which sustainability-related considerations may enter corporate decision-making.
A notable feature of the Measures is the explicit linkage between disclosure obligations and directors’ fiduciary duties. Article 4 requires directors and senior management to perform their duties loyally and diligently, and to ensure that disclosed information is truthful, accurate, complete, timely and fair. This formulation is significant in that it treats disclosure quality as an element of fiduciary performance. Failures in disclosure may therefore constitute breaches of the duty of loyalty or the duty of care. Traditionally, the duty of loyalty under Chinese company law (Article 180 of the Company Law, as amended in 2023) has focused on conflicts of interest and self-dealing, while the duty of care has centred on prudence and diligence in decision-making. By integrating disclosure obligations into these duties, the Measures expand their practical scope. Deficient disclosure is no longer merely a regulatory infraction but may also attract fiduciary liability.
The Measures further give the duty of care a distinctly procedural dimension. Article 17 requires periodic reports to be reviewed and approved by the board prior to disclosure. Directors who are unable to confirm the truthfulness, accuracy or completeness of a report must vote against it or abstain and state their reasons. This emphasis suggests that compliance with the duty of care will be assessed not only by reference to outcomes but also by reference to decision-making processes. Whether directors reviewed draft disclosures in a timely manner, raised questions, requested additional information or engaged in verification becomes legally relevant. This procedural orientation is reinforced by Articles 32 and 36, which require directors to pay attention to disclosure documents and to actively obtain materials necessary for informed decision-making.
Although the Measures are administrative in nature, they closely align with the misstatement liability framework under the Securities Law. Core concepts such as false records, misleading statements and material omissions are embedded in the disclosure standards they articulate. Article 52 is particularly important in allocating primary responsibility for certain disclosures to specified roles, including the chair of the board, the general manager, the board secretary and the financial officer. This allocation facilitates the identification of potential defendants in enforcement actions and private litigation. Even where claims are brought directly by investors, directors may face personal liability depending on their involvement in the disclosure process.
The enforcement mechanisms set out in Chapter Five further enhance the Measures’ practical significance. The CSRC is empowered to impose corrective measures, issue warnings and, in serious cases, restrict market access. These administrative sanctions may generate spillover effects beyond the regulatory sphere. Financial penalties, trading restrictions and reputational harm may result in losses to the company, thereby providing a basis for subsequent civil claims against directors for breach of duty.
The relevance of the Measures to sustainability and ESG issues is particularly evident in the context of non-financial disclosure. Article 65 requires listed companies to publish sustainability reports in accordance with stock exchange rules. Even where disclosure remains formally voluntary, Article 5 requires that voluntarily disclosed information be truthful, accurate, complete and non-misleading, and that it not be selectively presented. This requirement reduces the scope for symbolic or strategic disclosure and increases the legal salience of sustainability-related statements.
In sum, the Measures do not impose substantive sustainability obligations on directors in a direct sense. Nonetheless, by strengthening disclosure requirements, linking them to fiduciary duties and reinforcing enforcement mechanisms, they create institutional conditions under which sustainability and ESG considerations may acquire practical significance at board level. In this respect, the Measures represent a measured but meaningful step in the gradual development of sustainable corporate governance in China.
* This blog post forms part of a broader research project on directors’ climate-related obligations in ESG disclosure, supported by the Sino-British Fellowship Trust through the British Academy/Leverhulme Small Research Grants Scheme
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