New research shows that China's sustainability reporting regulations call for more substantive practices and strong enforcement

In her dissertation, Qinglan Huang examines the economic implications and the effectiveness of this reporting mandate.  

“While this regulation aims to promote environmental and social outcomes, I found that it falls short of its goals and leads to unintended consequences for firms and capital markets”, says Huang. 

China's sustainability reporting regulation was designed to address environmental and social issues stemming from rapid industrialisation and align with the country’s long-term development goals.  

“The sustainability reporting regulation published by SSE has good intentions, but the reporting requirements are at the minimum level compared to globally accepted reporting frameworks, and there is no requirement on assurance,” Huang says. In Huang’s opinion, these raise concerns about the effectiveness of the reporting regulation. 

In her research, Huang shows that mandatory sustainability reporting, on the one hand, improves transparency by providing sustainability-related information previously undisclosed, enhancing the information environment and reducing market risks. On the other hand, it increases costs for firms, potentially reducing profitability. Moreover, it does not necessarily drive firms toward sustainable investments or practices. 

“My research highlights that sustainability reporting is likely to be more ceremonial than substantive even when mandated. Weak reporting framework and insufficient enforcement make it challenging to drive changes in corporate behaviour toward greater social responsibility,” Huang points out. 

According to Huang, her research offers insights for regulators who are considering sustainability reporting mandates, for standard setters establishing related reporting framework, and for companies likely to face upcoming regulations. 

More information: 

Qinglan Huang 
Phone: 040 648 6378 
Email: qinglan.huang@hanken.fi 

You can read the whole thesis online: 
Exploring Mandatory Sustainability Reporting in China: Economic Implications and Regulatory Effectiveness

Qinglan Huang will defend her thesis on 7 January at 12.00 at Hanken School of Economics, Arkadiankatu 22, Helsinki. 

The doctoral defence will be held as hybrid. Participants can attend on site or via video conference. Access the video conference via https://go.hanken.fi/qinglanhuang 

Opponent: Professor Gunnar Rimmel, Aalborg University Business School
Custos: Associate Professor Hanna Silvola, Hanken School of Economics