Sustainable Pathways: ESG Disclosure Performance and Optimization in China

Abstract

Environmental, Social, and Governance (ESG) disclosures are pivotal in steering listed companies toward a balanced trajectory of economic efficiency and environmental/social accountability. Disclosure of ESG information can enhance consumer confidence, create shareholder value, and promote sustainable corporate development. Based on the ESG information disclosure data of Chinese listed companies, this study investigates and empirically analyzes the frequency, content, and quality of ESG information disclosure by Chinese listed companies using a mixed-methodological research approach combining qualitative and quantitative approaches. The findings indicate a low and unreliable frequency of ESG disclosure among Chinese listed companies, with a predominant focus on descriptive content primarily in the “E” and “G” dimensions, while neglecting information disclosure in the “S” dimension. The results of subgroup analyses show that industry classification and the regional economic development level do not increase the disclosure rate. Although the nature of ownership, industry classification, and the level of regional economic development can contribute to improving the overall quality of disclosure, there are differences in the “E”, “S”, and “G” dimensions. In addition, mandatory disclosure requirements can improve disclosure quality, but some differences in the “G” dimension are not significant. The findings provide empirical support for improving the ESG disclosure performance of Chinese listed companies to achieve the “dual-carbon” goal.

1. Introduction

Sustainability constitutes a paramount objective for companies as enduring entities [1], contributing to a strong brand image, enhanced resource efficiency, and heightened market competitiveness. Both the Sustainable Development Goals (SDGs) and Environmental, Social, and Governance (ESG) criteria strive to propel sustainable economic, environmental, and societal progress [2]. ESG performance has emerged as a pivotal means and pathway for corporations to achieve sustainability objectives [2,3]. As an important extension of corporate transparency, ESG disclosure diminishes information asymmetry and enables the market to grasp a company’s ESG performance [4,5,6]. It encourages stakeholder protection and social responsibility [7] and gains reputational benefits [8,9,10,11]. In addition, it helps reduce market risk and supports society in addressing pressing challenges, such as climate change and income inequality [12,13,14,15,16].

In today’s era, where we are grappling with challenges, such as climate change and energy crises, exacerbated by the COVID-19 pandemic’s profound impact on the global economy and financial markets, ESG disclosure has gained heightened prominence [17]. However, ESG information disclosure quality remains inadequate in several countries and regions [18,19], particularly in emerging markets, where either no disclosure occurs or it is unreliable, non-standardized, and of little worth [20,21,22,23,24], hindering stakeholders from accessing meaningful ESG data. To enhance ESG disclosure quality, numerous nations and regions have started implementing mandatory disclosure requirements. Countries like Singapore and South Africa are transitioning to semi-mandatory regimes [25,26], while the European Union (EU) has moved from semi-mandatory to outright mandatory ESG disclosure. In the U.S., there was a contentious debate over whether climate disclosure should be mandatory or voluntary [27,28,29]. Ultimately, the decision was made to compel listed companies to reveal climate risk data via the Rules to Enhance and Standardize Climate-Related Disclosures for Investors. However, amidst growing contention that the United States Securities and Exchange Commission (SEC) had exceeded its jurisdiction by mandating greenhouse gas emission and climate risk reporting, the agency announced in early April 2024 the suspension of this new regulation [30].

In this paper, we examine ESG disclosure in China. We choose this particular context for several reasons. First, China’s ESG practice started late, and the disclosure of ESG reports by Chinese listed companies does not fully follow international standards. Domestic ESG disclosure standards differ from international standards in terms of disclosure requirements and disclosure content. Second, the quality of China’s ESG disclosure is currently inadequate. The majority of companies only disclose information to fulfill limited official disclosure requirements or market requirements, rather than providing comprehensive disclosure. Third, regulators are increasingly emphasizing ESG disclosure, and there is an urgent need to improve ESG disclosure rules to guide companies in disclosing ESG reports. Finally, to the best of the authors’ knowledge, few Chinese ESG disclosure rules have been described in the international literature. With China officially implementing the Sustainability Reporting Guidelines (SRGs) on 1 May 2024, our study introduces China’s latest ESG disclosure policy to the international community, which will help the international community understand China’s attitude toward and the future direction of ESG disclosure.

Previous studies have mainly focused on how companies disclose ESG information to gain and ensure legitimacy [31,32]. Empirical studies have concentrated on the factors influencing the extent of ESG reporting and the economic consequences, such as increased enterprise value and reduced enterprise risk [33,34,35,36,37,38,39]. The impact of ESG disclosure on stakeholders, such as investors and analysts, has been a particular focus [23,40,41]. However, there has been little attention paid to optimizing the ESG disclosure system from a legal perspective. In the academic literature on the performance of ESG disclosure, the ratings and scores of third-party rating agencies are most commonly used to assess corporate ESG disclosure performance [42,43,44]. Nevertheless, ESG ratings vary widely [45,46,47], and a single metric does not present the full picture of corporate ESG disclosure. In the global literature on the global aspects of the ESG disclosure system, the main focus has been on ESG disclosure rules in mature capital markets [29,48,49,50], with less attention paid to ESG disclosure rules in emerging capital markets, such as China. Domestic studies on ESG disclosure rules focus on theoretical debates on disclosure models [51,52,53,54,55], with a lack of empirical evidence.

This study aims to empirically analyze the current situation of ESG disclosure in China and to compare the differences in the performance of corporate ESG disclosure quality under the following factors: nature of ownership, industry factors, level of regional economic development, and mandatory disclosure and/or voluntary disclosure modes. In addition, the study will explore suggestions for optimizing ESG disclosure rules. Our analyses indicate that the nature of ownership, industry factors, and the level of regional economic development have a positive effect on the quality of ESG disclosure. The disclosure quality of mandatory disclosure companies exhibits only a marginal superiority compared to that of voluntary disclosure companies. However, the statistical insignificance of industry factors and regional economic development in disclosure rates persists.

Our findings make three contributions: (1) This study expands the discussion of corporate ESG disclosure performance from a comprehensive perspective. Through textual and quantitative analyses of ESG-related special reports of all listed companies, this study provides a comprehensive observation of the current status of ESG disclosure in China in terms of disclosure rate, disclosure content, and disclosure score. The analysis not only helps to gain insights into the impact of ESG disclosure policies but also provides valuable insights for policymakers and guidance for listed companies to enhance ESG disclosure. (2) This study observes companies’ willingness to disclose and disclosure quality in terms of three subgroups (nature of ownership, industry classification, and regional level of economic development_ and compares the difference in disclosure quality between mandatory and voluntary disclosure. This complements the literature on the impact of the nature of ownership, industry classification, and regional distribution on ESG disclosure. (3) This study reflects on the existence of problems in ESG disclosure from the perspective of the legal discipline based on the findings and proposes relevant rules for optimization. This complements the research literature on ESG multidisciplinary cross-fertilization.

The paper’s structure is outlined as follows: Section 2 presents a concise review and summary of the evolving legal frameworks governing ESG disclosure by Chinese listed companies, offering insights from the pertinent literature on ESG performance and sustainable development. Section 3 details the research methodology, sample selection, and data collection process. Section 4 delves into the empirical analysis findings regarding the current state of ESG disclosure in China. Section 5 discusses the results of the study. The paper concludes with final remarks, acknowledges research limitations, and outlines future research avenues in Section 6.

2. Institutional and Literature Review

2.1. Institutional and Legal Framework of China’s ESG Disclosure Policy

China’s present ESG disclosure regulations are primarily dispersed across departmental rules, normative documents, and self-regulatory guidelines issued by the China Securities Regulatory Commission (CSRC) and stock exchanges. With the escalating importance of ESG data, these rules have evolved from a fragmented to a more integrated approach, witnessing a transition from purely voluntary to partially mandatory disclosure. During the fragmented period, separate policies governed the disclosure of environmental, social responsibility, and corporate governance information, with environmental disclosure moving from optional to mandatory for select listed companies. Meanwhile, social responsibility disclosure remained voluntary, and corporate governance disclosure was semi-mandatory. In the integrated phase, efforts have been directed toward developing a unified ESG disclosure framework and refining its specific contents, which has culminated in the recent formulation of the Sustainability Reporting Guidelines (SRGs).

Under the guidelines, the scope of mandatory ESG report disclosure encompasses sample companies from the Shanghai Securities Composite Index (SSEC 180 Index), the SSE Science and Technology Innovation Board 50 Index (STAR 50 Index), the Shenzhen 100 index return (SZSE 100 Index), and the ChiNext Index, as well as those listed both domestically and abroad. Regarding detailed disclosure, the environmental section emphasizes three main themes: climate change response, pollution prevention and ecosystem preservation, and resource use and circular economy. Key components include climate resilience strategies, climate transition plans, carbon footprint calculation, emission reduction initiatives, biodiversity protection, circular economy practices, and energy and water consumption efficiency. The social information disclosure segment encompasses multiple facets, such as rural rejuvenation and community involvement, innovation promotion, supply chain relationships, and employee welfare. Notable disclosures include contributions to rural development projects, advancements in farmer livelihoods, research and experimental development (R&D) activities and ethics, supply chain security, fair dealings with small and medium enterprises (SMEs), product/service safety and quality control, customer data security and privacy protection, and employee rights and well-being. Finally, the sustainability-related governance disclosure (Sustainability Reporting Guidelines (SRGs) have changed the term "corporate governance disclosure" to "sustainability-related governance disclosure" to distinguish it from the broader concept of corporate governance, which is more in line with the reality of ESG reporting information) part zeroes in on mechanisms tied to sustainable development governance and business conduct. Essential disclosures involve due diligence, stakeholder communication, anti-bribery and anti-corruption measures, and safeguards against unfair business practices.

2.2. The Relationship between ESG Disclosure and Sustainable Development

The ESG concept swiftly garnered significant attention from the capital markets upon its introduction, leading to a proliferation of ESG-related policies, disclosure standards, and evaluation/rating methodologies across numerous countries and international bodies [56]. Sustainable development constitutes the overarching objective of ESG, serving as the macro blueprint for its ultimate realization and attainment. ESG performance embodies the endpoint and practical instrument for sustainable development, functioning essentially as a subset of sustainability tenets tailored specifically to the financial and corporate realms [26].

Amidst the global push for sustainable development, listed companies are increasingly disclosing ESG data through corporate social responsibility (CSR) and ESG reports to meet legal obligations and cultivate a favorable image to attract investors. ESG reporting plays a pivotal role in realizing corporate sustainability, with many existing frameworks integrating sustainable development principles into their indicator designs, particularly in social and environmental metrics. Some studies intertwine or equate ESG disclosure with ESG performance, CSR, and sustainability [25,26,57].

Stakeholder theory posits that addressing stakeholder needs and showcasing corporate commitment to environmental and social matters bolster customer loyalty [58], confer a competitive edge [59], and enhance corporate value [34,35,60]. Drawing from information asymmetry theory, ESG disclosure supplements traditional corporate reporting, filling gaps by providing insight into strategic direction, operations, management, culture, and brand reputation, thereby objectively portraying a firm’s long-term sustainability potential. Comprehensive ESG disclosure highlights responsible business practices, improves external stakeholders’ comprehension of corporate strategy, reduces capital costs, and controls risk exposure [36,37,61,62,63]. Reputation theory suggests that ESG disclosure functions as a reputational management tool [64,65,66], enhancing and preserving corporate standing. By communicating a commitment to sustainability, ESG disclosure shapes a positive investor perception [67] and subsequently mitigates post-listing-specific risks enterprises may face [33].

In essence, ESG disclosure drives corporate value, lowers capital costs, boosts competitiveness, and mitigates legal risks, thereby propelling corporate sustainability, while steering the broader industry toward more sustainable growth. This is achieved through various mechanisms, including fostering strong stakeholder relationships, alleviating information asymmetry, and cultivating a reputable and favorable corporate image (Figure 1).

2.3. Factors Influencing ESG Disclosure Performance

The factors that influence the performance of ESG disclosure can be divided into two categories: external pressure and internal motivation. In accordance with legitimacy theory, the policies of disclosure and the regulatory penalties of regulators serve to promote the disclosure of ESG information by listed companies [68,69]. At the national level, the political system (laws and level of corruption) exerts a significant influence on firms’ ESG disclosure [31]. Industry factors play a crucial role in influencing the disclosure of ESG information by listed companies [70,71]. Companies listed in industries that are particularly sensitive to environmental issues, such as tobacco and alcohol, as well as those engaged in polluting activities that can potentially damage the environment, have strong incentives to enhance their ESG performance due to stricter monitoring and discipline [72,73]. The level of regional economic development has a comprehensive impact on various aspects of ESG activities undertaken by listed companies, including ESG disclosure [74]. Stakeholders residing in regions with higher levels of economic development exhibit greater concern for ESG matters and are more inclined to support companies demonstrating superior ESG performance [75]. Furthermore, based on social movement theory [76], companies operating within regions characterized by higher levels of economic development actively engage in ESG practices under pressure from both stakeholders and governmental entities’ regulatory frameworks, while continuously enhancing the quality of their disclosed ESG information [77].

At the firm level, firm size and corporate governance structure are the key internal factors affecting ESG disclosure, and most studies have focused on these two aspects [42,78,79,80,81]. The nature of ownership also plays a pivotal role in influencing the disclosure of ESG factors. Due to the special nature of state-owned ownership, state-controlled listed companies need to stand at the national level to assume the corresponding social responsibility, and their ESG performance will be based on strong policy and follow quality CSR reporting practices. Conversely, the ESG practice of non-state-owned listed companies aims to safeguard their own interests and enhance corporate competitiveness. However, it has been found that equity concentration has no significant effect on the overall environmental accounting information quality of firms [82], and foreign ownership affects overall sustainability disclosure [83].

2.4. Optimization of ESG Disclosure Performance

The quality of ESG disclosure is primarily manifested in four key dimensions: comprehensiveness, materiality, reliability, and comparability. However, the current state of corporate ESG disclosures generally exhibits suboptimal performance across these aforementioned areas [21,23,84,85].

Global ESG disclosure practices fall under three primary models: voluntary, semi-mandatory, and mandatory. Voluntary disclosure encourages companies to develop effective ESG reporting, minimizes disclosure costs, and curbs ESG rating discrepancies [45]. Yet, it might result in incomplete, non-comparable, and unreliable data [86,87]. Conversely, mandatory ESG disclosure ensures accuracy and reliability [40,51,88], enhances corporate information environments [89], and reduces costs for information users. Yet, strict mandatory requirements might stifle flexibility, hike compliance expenses, and dampen innovation incentives [90]. The semi-mandatory model, featuring comply or explanation rules, caters to diverse disclosure needs [91,92], lightening the load for some companies by allowing them to avoid over-disclosure. Firms’ explanatory statements can foster reflexive regulation, enabling regulators to pinpoint shortcomings in disclosure standards and refine them accordingly [51,93]. Nevertheless, this model also suffers from under-interpretation and template interpretation [92,94]. Therefore, Fairfax (2022) proposed to use a hybrid disclosure model that combines mandatory and voluntary disclosure [95].

In reality, companies often resort to ESG disclosure as a tool for “greenwashing”, aiming to secure higher ESG ratings [96]. Greenwashing represents a deceptive form of CSR, where firms tout environmentally friendly claims without substantive action [97,98]. Auditing plays a pivotal role in ensuring the credibility and transparency of ESG disclosure, making it one of the foremost methodologies in this domain [99]. However, under private ordering theory, mandatory ESG disclosure audits hike compliance costs for listed companies, dampening their enthusiasm for voluntary audits [100]. Given the absence of a mandatory requirement for third-party auditing and attestation of ESG disclosure, coupled with the intricate, ambiguous, and discrete nature of ESG data, verifying ESG reports becomes more challenging [101]. In the future, companies may opt for ESG report audits to substantiate their ESG claims [86,102].

3. Methodology

This study used a mixed-methodological approach to scrutinize ESG disclosure practices in China, blending qualitative and quantitative research to impartially and accurately depict the volume, substance, and caliber of ESG disclosures made by Chinese listed companies.

3.1. Sample Selection and Data Sources

This study selected A-share and B-share listed companies from 2006 to 2022 as the preliminary dataset. Given that China began officially encouraging the disclosure of social responsibility information in 2006, this period encapsulates a mix of mandatory and voluntary ESG disclosures by listed firms. To thoroughly examine the evolving trends and features in ESG disclosures and contrast the disclosure quality between mandatory and voluntary companies, we included all entities that disclosed ESG information in our sample. The study’s time frame spanned 2006 to 2022, yielding a total of 49,509 company-year observations. Of these, 12,131 company-year instances involved the release of ESG-related reports.

Listed companies disclose ESG information primarily through various formats, such as CSR reports, ESG reports, sustainability reports, and environmental reports. For the purpose of this study, we placed these under the collective term “ESG-related reports”. It is important to note that while ESG information does appear in annual reports, the content tends to be limited and mostly narrative. As current regulations increasingly mandate separate ESG reports that offer a more comprehensive reflection of a company’s ESG performance compared to annual reports, the latter were excluded from our sample scope in this research.

The growing social recognition of sustainable development and ESG principles has spurred China’s progression toward a more robust ESG disclosure framework. Regulatory bodies have incrementally widened the ambit of compulsory disclosure and enhanced the depth of reported content. By 2022, the State-owned Assets Supervision and Administration Commission (SASAC) released the Work Plan for Improving the Quality of Listed Companies Controlled by Central Enterprises, mandating ESG-specific reports from such enterprises (State-owned Assets Supervision and Administration Commission (SASAC). Work Plan for Improving the Quality of Listed Companies Controlled by Central Enterprises. http://www.sasac.gov.cn/n2588035/n2588320/n2588335/c24789613/content.html (accessed on 23 March 2024)). Consequently, 2022 witnessed the highest number of disclosing companies and disclosure rates within the sample period. This paper aimed at a comprehensive and comparative assessment of the disparities in both the willingness of listed companies to disclose ESG information and the quality of ESG information disclosure by the listed companies. Therefore, focusing on ESG disclosure patterns in 2022, this paper compared the voluntary disclosure frequency and mandatory disclosure compliance rates of different companies. Furthermore, institutional factors and industry are important factors that affect the quality of reporting [103]. In this study, the nature of ownership, industry classification, and the level of regional economic development were selected as subgroups for comparative analyses. We also compared the difference in disclosure quality between mandatory and voluntary disclosures.

In this study, ESG-related reports and associated scoring data were primarily derived from the Wind database, while company sample data, equity attributes, industry classifications, and domicile details were collected from the China Stock Market & Accounting Research (CSMAR) database.

3.2. Research Methodology

Mixed-methodological research refers to an approach that integrates both quantitative and qualitative data to address problems using diverse analytical techniques [104,105]. Using mixed-methodological research methods offers a more balanced, exhaustive, and precise insight into the current state of ESG disclosure and its attendant issues. In this study, the mixed-methodological research method combined elements of qualitative and quantitative research methodologies.

Qualitative methods primarily facilitated a “qualitative” examination of the ESG disclosure content. In this study, we applied a combination of inductive, deductive, analytical, and synthetic approaches to decipher and compare the ESG-related reports’ contents. Notably, content analysis served as an objective and systematic method to dissect ESG reports’ contents, aiming to illuminate the overall characteristics of ESG disclosures. Comparative analysis revealed differences in the disclosure priorities of listed companies.

Quantitative analyses were used to analyze the form of ESG disclosures, disclosure rates, and the quality of disclosures. Quantitative disclosure can reduce rating differences and improve the comparability of disclosure [106]. In terms of disclosure forms, this study investigated four different types of reports (CSR reports, ESG reports, sustainability reports, and environmental reports) to comprehensively monitor the evolutionary patterns and development trends of ESG disclosure by Chinese listed companies. In terms of disclosure rates, the study compared disclosure differences among listed companies grouped by nature of ownership, industry classification, and regional economic development level. In terms of disclosure quality, ESG scores are the main indicator for assessing ESG disclosure performance. This study used ESG scores and ratings from recognized institutions to quantify and compare the differences in ESG disclosure performance between companies grouped by nature of ownership, industry classification, the level of regional economic development, and mandatory and voluntary reporting obligations.

This study used a triangulated mixed-methodological approach involving three core phases: First, this entailed the systematic collection and organization of ESG-related reports and a representative sample of firms. Second, a data-driven analysis was conducted using descriptive statistics and comparative techniques to scrutinize differences in ESG disclosure performance. Lastly, analytical findings were consolidated to formulate comprehensive conclusions.

3.3. Data Collection

ESG-related report data were systematically compiled primarily from the Wind database and augmented with information from official sources, such as the Shanghai Stock Exchange (SSE), the Shenzhen Stock Exchange (SZSE), the Beijing Stock Exchange (BSE), and cninfo.com.cn, resulting in a total collection of 10,778 report samples. Notably, in cases where companies issued both Chinese and English versions of their ESG reports in the same year, only one instance was considered per company. When a company released concurrent environmental, social responsibility, ESG, and sustainability reports during the same period, all these reports were integrated into the dataset. The ESG score data were sourced from Wind’s ESG ratings, encompassing overall ESG composite scores and individual dimension scores for environment, social, and governance aspects.

In this study, when contrasting mandatory and voluntary disclosure rates, companies required by legislation to divulge ESG information in any of its components were classified as mandatory disclosure entities in accordance with prevailing regulations. All other disclosing companies were deemed voluntary. It should be noted that the SDR were only released in April 2024, the scope of mandatory disclosure is not much different from the previous rules, and the sample interval of this study was 2006–2022; thus this study mainly relied on previous rules to determine the scope of the mandatory disclosure subject. Regarding environmental information disclosure, mandatory reporting is imposed on heavily polluting listed companies and special companies with greater environmental impact. Companies other than key pollutant discharge units follow a semi-mandatory disclosure framework, expected to disclose essential environmental data akin to key polluters, with a complete rationale provided for any omissions. Regarding social responsibility disclosure, the mandate extends to listed science and technology companies, companies listed on the BSE, “SZSE 100” sample companies, “SSE Corporate Governance Sector” sample companies, domestic and foreign listed companies, and financial companies. Corporate governance information disclosure is consistently mandatory for all listed companies. Nonetheless, exemptions are granted based on “materiality considerations”.

Table 1. Scope of companies with mandatory ESG disclosure.

Disclosure Information	Mandatory Disclosure	Semi-Mandatory
Environment	Heavily polluting listed companies and special companies with greater environmental impact	Companies other than key pollutant discharge units
Social	Listed science and technology companies Companies listed on the BSE “SZSE 100” sample companies “SSE Corporate Governance Sector” sample companies Domestic and foreign listed companies Financial companies
Corporate governance		All listed companies

presents the scope of entities subject to mandatory ESG disclosure for each pillar.

The database’s equity nature data exhibit substantial inconsistencies; e.g., categories like “state-owned enterprises (SOEs), private,” “SOEs, private, foreign,” and “SOEs, foreign” fail to specify unambiguously whether the entity is indeed an SOE. This study scrutinized these ambiguous entries to ascertain their true status as either SOEs or privately owned companies. Based on the collected data, the hierarchical classifications within SOEs consist of various designations, such as “state”, “state, municipal”, “state, municipal SOEs”, “state, central enterprises”, “other, provincial SOEs, central enterprises”, “provincial, central enterprises”, “municipal, central enterprises”, and “municipal SOEs, central enterprises”. This study meticulously organized and rectified ambiguous data, while filling gaps through the identification of actual controllers’ information within annual reports, thereby ensuring the comprehensiveness of the dataset. Data adjustments and enhancements were performed using references from the official websites of the SASAC, the SSE, the SZSE, and Qcc.com. If a listed company’s actual controller is attributed to (or includes) central state organs, the SASAC, the Ministry of Finance, or other central agencies and directly administered central-government-owned enterprises, it is classified as a central state-owned enterprise. Conversely, if the attributes of the actual controller pertain to (or include) local governments, the regional SASAC, locally owned state enterprises, collective enterprises, state-owned enterprises under universities, or other types of state-owned enterprises, it is categorized as a local state-owned enterprise.

This study used the Guidelines on Industry Classification of Listed Companies (2012 Revision) to classify listed companies into 19 sectors (China Securities Regulatory Commission (CSRC). Guidelines on Industry Classification of Listed Companies (Revised 2012). http://www.csrc.gov.cn/csrc/c101864/c1024632/content.shtml?eqid=e9be3930000071db00000004643e64b2&wd=&eqid=b67ff6c5005a5d8b00000005655cd221 (accessed on 15 April 2024)): agriculture, forestry, livestock, and fisheries; mining; manufacturing; electricity, heat, gas, and water production and supply industry; construction; wholesale and retail trade; transport, storage, and postal services; accommodation and catering; information transmission, software, and information technology services; finance; real estate industry; leasing and business services; scientific research and technology services industry; water conservancy, environment, and public facilities management industry; residential services, repair, and other services; education; health and social work; culture, sports, and recreation; and other comprehensive sectors (

Table 2. Industry classification of listed companies and number of companies.

Industry Classification	Industry Code	Numbers
Agriculture, forestry, livestock, and fisheries	A	49
Mining	B	81
Manufacturing	C	3414
Electricity, heat, gas, and water production and supply industry	D	131
Construction	E	110
Wholesale and retail trade	F	193
Transport, storage, and postal services	G	113
Accommodation and catering	H	8
Information transmission, software, and information technology services	I	428
Finance	J	128
Real estate industry	K	113
Leasing and business services	L	66
Scientific research and technology services industry	M	110
Water conservancy, environment, and public facilities management industry	N	99
Residential services, repair, and other services	O	12
Education	P	1
Health and social work	Q	15
Culture, sports, and recreation	R	63
Comprehensive	S	13

). In order to comprehensively compare the industry differences in the ESG disclosure performance of listed companies, this study, based on the “Management Directory of Industry Classification for Environmental Protection Verification of Listed Companies”, identified 14 industries (thermal power, iron and steel, cement, aluminum cathode, coal, metallurgy, building materials, mining, chemicals, petrochemical, pharmaceuticals, light industry, textile, and tannery) (Ministry of Ecological Environment of the People’s Republic of China. Circular on the Issuance of the List of Listed Companies on the Categorization and Management of Industries for Environmental Verification. https://www.mee.gov.cn/gkml/hbb/bgth/200910/t20091022_174891.htm (accessed on 18 May 2024)) listed in the management directory and classified the listed companies as those under heavily polluting industries and under non-heavily polluting industries.

In collecting data on the incorporation locations of companies, this study categorized them into eastern, central, western, and northeastern regions according to the economic zone divisions set forth by the National Bureau of Statistics. The eastern region consists of ten provinces and cities: Beijing, Tianjin, Hebei, Shanghai, Jiangsu, Zhejiang, Fujian, Shandong, Guangdong, and Hainan. The central region includes six provinces: Shanxi, Anhui, Jiangxi, Henan, Hubei, and Hunan. The western region encompasses twelve provinces, autonomous regions, and municipalities: Inner Mongolia, Guangxi, Chongqing, Sichuan, Guizhou, Yunnan, Tibet, Shaanxi, Gansu, Qinghai, Ningxia, and Xinjiang. The northeastern region contains three provinces: Liaoning, Jilin, and Heilongjiang. Notably, two samples in the dataset are registered in Hong Kong. For these cases, this study replaced their registration location with their mainland office location, classifying both as being based in Beijing. In order to comprehensively compare the regional differences in the ESG disclosure performance of listed companies, we borrowed from Zhang et al. (2024) and further classified the eastern region as one with a high level of regional economic development and the central, western, and northeastern regions as regions with a low level of economic development [44].

4. Research Findings

4.1. Disclosure Rate of ESG-Related Reports of Listed Companies

In practice, ESG disclosures are delivered through various formats, including CSR reports, ESG reports, environmental reports, and sustainability development reports. Statistical evidence indicates that from 2006 to 2022, Chinese listed companies released a cumulative total of 195 environmental reports, 9895 CSR reports, 438 dedicated ESG reports, and 250 sustainability development reports (Figure 2). These figures reveal that CSR reports remained the prevailing medium for ESG disclosures during this period.

Between 2006 and 2022, the number of listed firms disclosing ESG information surged from 18 to 1843, leading to an overall disclosure rate of 35.86% (Figure 3). Within this group, in 2022, 608 companies voluntarily disclosed ESG data, contributing to a voluntary disclosure rate of 32.99%, whereas 1235 companies were subject to mandatory regulations, constituting a regulated disclosure rate of 67.01%.

Comparatively, among SOEs and non-state-owned listed companies, SOEs exhibited a higher ESG disclosure rate (

Table 3. Differences in disclosure rates based on the nature of ownership of listed companies in 2022.

Nature of Ownership		Number of Disclosures	Disclosure Rate
State-owned listed companies		937	61.81%
	Central enterprises	384	78.69%
	Local state-owned enterprises	553	53.79%
Non-state-owned listed companies		906	24.95%

). Both listed companies controlled by central enterprises and locally owned SOEs demonstrated significant emphasis on ESG disclosure. Notably, following heightened ESG reporting requirements by the SASAC for listed companies controlled by central enterprises, their disclosure rate notably escalated, reaching up to 78.69%.

Regarding industry distribution, in the 2022 listings, the financial sector boasted the highest ESG disclosure level, at 90.63%. Next was the health and social work sector, with a 73.33% disclosure rate. A variety of other industries had disclosure rates ranging between 20% and 63%. At the lower end, the integrated industry displayed the least ESG disclosure, at 23.08%. The manufacturing industry, despite having the largest number of listed companies, maintained a relatively lower disclosure rate of 31.49% (Figure 4).

In terms of industry grouping, although the listed companies in the heavy pollution industry disclosed more, their disclosure rate was overtaken by listed companies in the non-heavily polluting industries. Specifically, the disclosure rates of the two groups were 32.99% and 42.23%, respectively (

Table 4. Differences in disclosure rates by industry classification of listed companies in 2022.

Industry Grouping	Number of Disclosures	Disclosure Rate
Heavily polluting industries	1180	32.99%
Non-heavily polluting industries	663	42.23%

).

The rate of ESG disclosure by listed companies varied across regions in terms of differences in the levels of regional economic development. Although regions with high levels of economic development had the highest number of companies disclosing ESG data, their disclosure rates were surpassed by regions with low levels of economic development. Specifically, the disclosure rates of the two groups were 35.15% and 37.47%, respectively (

Table 5. Differences in disclosure rates of listed companies by level of regional economic development in 2022.

Level of Regional Economic Development	Number of Disclosures	Disclosure Rate
High level of regional economic development	1300	35.15%
Low level of regional economic development	543	37.47%

).

4.2. Disclosure Content of ESG-Related Reports

ESG disclosure encompasses both qualitative and quantitative data. Qualitative information pertains to descriptive details about the three core ESG dimensions (

Table 6. Material topics disclosed in ESG-related reports.

Disclosure Pillars	Material Topics
Environment	Environmental management policy Ecological protection of the environment Pollutant emissions Responding to climate change Waste disposal Green products and services Resource use and recycling Energy management Water management Green operations Environmental protection program construction Environmental emergency management Conservation of biodiversity
Society	■ Employee rights protection ■ Safety education and training ■ Science and technology innovation ■ Intellectual property protection ■ Digital construction and services ■ Rural revitalization ■ Industry cooperation and progress ■ Product quality and safety ■ Customer service and experience ■ Supply chain management ■ Public charity ■ Community development ■ Information security and privacy protection
Corporate governance	◆ Corporate governance ◆ Investor relations management ◆ Anti-corruption and integrity measures ◆ Party-building leadership ◆ Compliance management ◆ Internal control and risk management ◆ Business ethics

). Key themes in the Environmental (E) dimension cover areas such as environmental management strategies, eco-protection measures, pollution discharge, climate change response, waste management, green products and services, resource use and recycling, energy management, water resource stewardship, green operations, biodiversity conservation, environmental project development, and emergency response management. In the Social (S) dimension, substantive issues largely focus on employee rights and welfare, safety education and training, technological innovation, intellectual property protection, digital infrastructure and services, rural revitalization, industry collaboration and advancement, product quality and safety, customer service and experiences, supply chain oversight, philanthropy and charitable activities, community development, information security, and privacy protection. Finally, material topics in the Governance (G) dimension center around corporate governance structures, investor relations, anti-corruption and integrity measures, party leadership, regulatory compliance, internal controls and risk management, and ethical business conduct.

Quantitative ESG metrics form the essential performance indicators in the reports. Practically, key performance disclosures typically encompass four main domains: economic performance, governance performance, environmental performance, and social performance. However, not all companies divulge such key metrics, and even among those that do, not all present data across these four dimensions, resulting in numerous combinations. A greater prevalence of environmental and social data is observed in the performance tables, where environmental data primarily concern emissions and emission reductions, while social responsibility information mostly relates to employee matters.

4.3. ESG Disclosure Quality

Independent rating agencies evaluate and grade companies based on their ESG disclosures and corresponding performance. The ESG disclosure score serves as a crucial metric for gauging corporate sustainability [107]. The Wind database is rated on a 10-point scale; the higher the score, the higher the rating.

In terms of ESG disclosure scores (out of 10), the average ESG disclosure score of listed companies was 6.08. The average ESG disclosure score for the E dimension was 1.98, for the S dimension was 3.92, and for the G dimension was 6.74. This indicates that the ESG disclosure scores of listed companies are generally low, and the scores of the pillars vary greatly, with ESG disclosure for the G dimension having the highest overall average score.

In terms of ownership grouping, although the average composite ESG disclosure score of non-state-owned listed companies was slightly higher than that of state-owned listed companies, it remained statistically meaningful (p < 0.01). Specifically, within these categories, non-state-owned listed companies exhibited superior ESG disclosure performance in the S dimension of disclosure compared to their state-owned counterparts (p < 0.01). However, the performance gap between state-owned listed and non-state-owned listed companies was not statistically significant in terms of the E and G dimensions (

Table 7. Differences in the ESG disclosure qualities of the listed companies grouped by the nature of ownership in 2022.

Nature of Ownership	Composite Average Score	E Average Score	S Average Score	G Average Score
State-owned listed companies	6.28	2.86	4.15	6.93
Non-state-owned listed companies	6.46	2.89	4.60	6.94

).

In terms of industry categorization, although the disparity between the average ESG disclosure composite scores of listed companies in heavily polluting industries and those in non-heavily polluting industries was marginal, it remained statistically significant (p < 0.01). Specifically, among these categories, listed companies in heavily polluting industries exhibited superior ESG disclosure performance in both the E and S dimensions compared to their counterparts in non-heavily polluting industries (p < 0.01, p < 0.01). However, when considering the G dimension, listed companies in non-heavily polluting industries performed better (p < 0.1) (

Table 8. Differences in the disclosure qualities of the listed companies grouped by industry classification in 2022.

Industry Grouping	Composite Average Score	E Average Score	S Average Score	G Average Score
Heavily polluting industries	6.49	3.15	4.72	6.91
Non-heavily polluting industries	6.16	2.39	3.75	6.99

).

From the perspective of grouping based on the regional economic development level, although the average ESG disclosure composite scores of listed companies in regions with high economic development levels were slightly higher than the average ESG disclosure composite scores of listed companies in regions with low economic development levels, they remained statistically significant (p < 0.01). Specifically, in terms of the E, S, and G dimensions, the ESG disclosure performance of listed companies in regions with a high level of economic development was significantly better than that of listed companies in regions with a lower level of economic development (p < 0.05, p < 0.01, p < 0.05) (

Table 9. Differences in disclosure quality among listed companies grouped by regional economic development level in 2022.

Level of Regional Economic Development	Composite Average Score	E Average Score	S Average Score	G Average Score
High level of regional economic development	6.44	2.95	4.52	6.97
Low level of regional economic development	6.20	2.69	4.01	6.87

).

In terms of mandatory or voluntary disclosure grouping, regarding both average ESG disclosure composite scores and average scores for the E, S and G dimensions, mandatory disclosure listed companies had significantly higher disclosure quality than voluntary disclosure listed companies (p < 0.01). However, the difference between the two groups was the largest in the E dimension and the smallest in the G dimension (

Table 10. Differences in disclosure quality among listed companies grouped by mandatory or voluntary disclosure in 2022.

Disclosure Requirements	Composite Average Score	E Average Score	S Average Score	G Average Score
Mandatory disclosure	6.46	3.33	4.52	6.99
Voluntary disclosure	6.17	1.93	4.05	6.83

).

5. Discussion

ESG disclosure information serves as a prevailing assessment tool for evaluating corporate non-financial performance, while also serving as a fundamental framework and systematic methodology for advancing corporate sustainability. Given China’s status as one of the largest emerging capital markets, it is imperative to ensure comprehensive and standardized disclosure of ESG disclosure information in order to strive toward achieving more Sustainable Development Goals.

In this study, we attempted to observe the ESG disclosure performance of Chinese listed companies and explored how to optimize ESG disclosure performance. We found that current listed companies have a low willingness to disclose ESG information, uneven disclosure content, and low disclosure quality. This confirms the existing findings [108,109,110,111]. Such challenges are indeed prevalent in global capital markets [21,22,23,24,56,112]. However, in the subgroup analyses, our findings are somewhat different from the results of other studies that also differ from each other. First, in terms of ownership grouping, Shahab et al. [113] and Voinea et al. [114] found that state-owned listed companies perform better in ESG disclosure. However, this study found that non-state-owned listed companies outperform state-owned listed companies only in the S dimension of disclosure, and there is no significant difference in performance in the E and G dimensions. Second, in terms of industry grouping, studies such as Dyduch and Krasodomska [70], Salem et al. [115], Gamerschlag et al. [116], Reverte [117], and Ho and Taylor [72] have shown that listed companies in environmentally sensitive industries have a higher quality of CSR disclosure. However, the results of this study show that the disclosure rate of listed companies in heavily polluting industries is lower than that of listed companies in non-heavily polluting industries, although listed companies in heavily polluting industries perform better in terms of disclosure quality. This better performance is mainly reflected in the ESG disclosure on the E and S dimensions. Third, Baron et al. [75] found that the level of regional economic development has a positive impact on the ESG disclosure performance of companies. However, this study found that this positive effect is only reflected in the quality of disclosure, and listed companies in regions with low levels of regional economic development perform better in terms of the ESG disclosure rate. Finally, this study found that mandatory disclosure improves the corporate disclosure environment and disclosure quality. This is similar to the findings of Schwartz [88] and Seligman [51]. However, this study further found that the difference in ESG disclosure quality between mandatory and voluntary disclosure is the largest in dimension E and the smallest in dimension G.

Another unique contribution of this study is that it explored the quality and effectiveness of ESG disclosure and the direction of optimization of ESG disclosure for Chinese listed companies by analyzing Chinese ESG disclosure data and introducing the latest ESG disclosure rules, the Sustainability Reporting Guidelines (officially implemented on 1 May 2024). This study extended the global understanding of ESG disclosure in emerging markets. Based on the recommendations of Fairfax [95] and Ho [118], it broke through the traditional dichotomy of mandatory and voluntary disclosure choices and proposed a dynamic hybrid disclosure model that includes mandatory, semi-mandatory, and voluntary disclosure as a whole.

5.1. Overall Quality and Effectiveness of ESG Disclosure by Chinese Listed Companies

According to instrumental rationality, ESG disclosure should be able to deliver value gain or matching benefits to firms, whether based on gaining internal legitimacy or catalyzing firms’ motivation to implement ESG or with an eye to promoting sustainability of ESG development. Although most of the research findings are presented as positive, there are some negative and unrelated findings [119]. Listed companies incur a cost for disclosing ESG information but do not receive much direct financial returns from disclosing ESG information. As a result, although the rate of ESG disclosure has been increasing year by year, listed companies have little willingness to disclose it voluntarily, and many of them disclose it only to fulfill regulatory requirements.

In the analysis of the ownership subgroups, Chinese state-owned listed companies are responsible for assuming social responsibility, promoting environmental protection [120], and taking other stakeholders into account in their business activities [121], which makes them an important subject of ESG responsibility [122]. The SASAC issued the Work Program for Improving the Quality of Listed Companies Held by Central Enterprises (Work Program) on the disclosure of ESG-specific reports by central enterprise holding companies to put forward the requirement of full coverage in 2023. The number of state-owned listed companies disclosing ESG reports has increased significantly, and the disclosure rate is higher than that of non-state-owned listed companies. In the industry grouping, some companies listed under heavily polluting industries are mandated to disclose environmental information and will disclose ESG reports due to environmental regulatory pressure. However, as 62.44% of the disclosed non-heavily polluting industry listed companies are state-controlled listed companies and 75.26% of the companies are distributed in regions with high regional economic development levels, the disclosure rate of listed companies in the non-heavy pollution industry is higher. The level of regional economic regional development has a positive effect on the level of ESG disclosure [74,75]. However, 61.14% of the disclosed companies in regions with low regional economic development level are listed companies controlled by SOEs and 69.80% are listed companies in heavy pollution industries. Therefore, the disclosure rates of regions with high levels of economic development are poor.

Inadequate disclosure remains a prominent issue in ESG reporting [21,84], characterized by the selective dissemination of ESG information by firms. Currently, China’s ESG disclosure is predominantly voluntary and lacks universally accepted principles and standards. Firms possess significant discretion in measuring and reporting their ESG performance [101]. Driven by self-interest, they tend to selectively disclose favorable non-financial information, while intentionally under-disclosing or avoiding unfavorable data, thereby neglecting deteriorating ESG metrics [123]. Furthermore, companies may have varying interpretations and priorities regarding ESG concepts. Some prioritize environmental protection performance, while others emphasize social responsibility. These divergent focuses result in differences in disclosure content. Given that environmental and governance aspects entail more mandatory disclosure requirements compared to social aspects, which are primarily voluntary, listed companies tend to provide more extensive disclosures on environmental and governance matters, while allocating less attention to social disclosures.

Lack of materiality and poor reliability are important manifestations of the poor quality of ESG disclosures [23], and while corporate firms provide excessively lengthy narrative information, most are merely tokenistic in their approach [21,84] and do not accurately disclose substantive sustainability impact topics. Pinnuck et al. [102] examined the frequency and magnitude of restatements in the ESG reports of Global Fortune 250 (G250) companies and found that 39% of the reports had one or more sub-items restated and the magnitude of the restatement was large. ESG disclosure is sometimes perceived as self-aggrandizing and lacking credibility [101]. The absence of a mandatory requirement for third-party auditing and attestation in China’s ESG disclosure has led to a lack of overall high-quality disclosure.

In subgroup analysis, the ESG operational practices of non-state-owned listed companies were typically driven by self-interest and had a utilitarian nature [124]. ESG disclosure serves as a crucial signaling tool [125] for these companies to communicate their ESG performance to external stakeholders. According to resource dependence theory, non-SOE listed companies can attract more attention from stakeholders and obtain additional resources by disclosing high-quality ESG reports. Moreover, among the disclosed non-SOE listed companies, 72.52% belong to heavy pollution industries and provide high-quality ESG disclosure in order to comply with regulatory requirements. SOEs, due to their political and social attributes, exhibit a stronger willingness to practice ESG disclosure and are more inclined toward compliance with relevant laws and regulations in their production and operation activities. Numerous studies have demonstrated that institutional investors often consider environmental factors as important decision-making criteria for long-term investment decisions [126]. Environmental regulations can incentivize listed companies to disclose ESG information. Heavily polluting industries face greater environmental pressures from government authorities, media outlets, and other stakeholders [127], making them less likely to engage in greenwashing due to regulatory or environmental performance pressures. Consequently, the quality of their disclosures tends to be higher. China is a vast country, with significant regional disparities in economic development levels. The eastern region exhibits higher economic development levels, along with greater financial resources and awareness of environmental protection concerns among both the government and the public. Therefore, the quality of ESG disclosure is enhanced.

China’s disclosure model encompasses both mandatory and voluntary disclosure, which facilitates the assessment of its implementation effectiveness. However, the voluntary disclosure approach has limitations, such as information selectivity [128,129], whereas companies subject to mandatory disclosure exhibit higher quality in their disclosures. It is noteworthy that when considering specific ESG dimensions, the most significant disparities between the two groups of companies are observed in the environmental (E) dimension, while differences in social (S) and governance (G) dimensions are relatively minor. This discrepancy may be attributed to China’s comprehensive design for disclosing E-related information, with only certain companies mandated to disclose such data. The variations observed in the S dimension primarily stem from China’s reliance on voluntary rather than compulsory disclosure practices in this area. Conversely, semi-mandatory requirements apply to all listed companies concerning G-related aspects; hence, discrepancies between these two groups of companies on these dimensions are comparatively insignificant, particularly within a few subgroups.

5.2. Recommendations for Optimizing Corporate ESG Disclosure Performance

In order to increase the rate of ESG disclosure, the subject of disclosure should be gradually expanded. At present, full inclusion of listed companies has not been achieved. Moving forward, a phased, incremental, and differentiated strategy should be implemented to ensure the comprehensive adoption of sustainable information disclosure. When broadening the range of mandatory disclosure subjects, a transitional phase should be introduced to systematically achieve full transparency. Drawing from international precedents, a gradual disclosure process is commonly adopted, starting with listed companies and subsequently extending to larger enterprises (inclusive of both listed and unlisted firms), before reaching SMEs. Building on the current foundation, China could initially mandate ESG information disclosure for listed companies on the main board. Following this, a transition period (of 3 to 5 years) could be instituted to steadily expand the requirement to smaller and medium-size boards, venture capital markets, and sci-tech innovation boards. Ultimately, the practice would be extended to non-listed companies over time.

In order to achieve a balanced and comprehensive ESG disclosure content, the disclosure model and the criteria for disclosure content should be optimized. First, a dynamic hybrid disclosure model incorporating mandatory, voluntary, and semi-mandatory disclosure is deemed the optimal choice. Given the disparate nature of ESG disclosure topics, low rates of voluntary disclosure, and varying levels of disclosure quality, mandating ESG disclosure can yield significant advantages. However, the CSRC has not entirely forsaken the voluntary disclosure model (During his appearance at the Boao Forum for Asia on 20 April 2022, Xinghai, Fang, who was the vice chairman of the China Securities Regulatory Commission (CSRC), noted that while guidelines mandating disclosure might be introduced in the future, the CSRC would maintain its commitment to voluntary disclosure principles for now). The semi-mandatory approach exemplified by the “comply or explain” rule acknowledges companies’ diverse ESG practices and allows for deviations from standards in response to material changes. Regulators can also adapt ESG disclosure standards based on a company’s explanation for non-disclosure to better align with an ever-evolving market landscape. Within this dynamic hybrid framework, mandatory disclosures are used to compel certain listed companies to disclose crucial ESG information as per regulations. The semi-mandatory approach makes it necessary for listed companies to disclose limited yet material ESG information, while granting them the option to abstain or deviate from standard disclosures if accompanied by sufficient explanatory notes. As a supplementary extension of mandatory and semi-mandatory models [95], the voluntary disclosure model is applied to incentivize key ESG information dissemination among companies not encompassed within mandatory requirements. Second, according to the “dual materiality” standard, substantive issues are identified and disclosed in three dimensions: E, S, and G. Based on summarizing the content of previous policies and practical experience, the Sustainability Reporting Guidelines have identified 21 material issues for ESG reporting/sustainability reporting (Figure 5). In the future, during the disclosure process, companies should also be encouraged to disclose more ESG information, for example, on topics such as employees’ right to rest and vacation, protection of the rights and interests of people with disabilities, and protection of women’s rights and interests in the social category. After determining the ESG disclosure list, regulators should divide it into two categories: mandatory disclosure content and voluntary disclosure content. The disclosure list should be dynamically adjusted on an ongoing and regular basis at a later stage, and the voluntary disclosure content should be adjusted to the semi-mandatory disclosure or the mandatory disclosure category at an appropriate time. In addition, industry disclosure standards should be developed separately for different industries.

Finally, to improve the quality of ESG disclosure by listed companies, third-party assurance should be introduced. Alongside standardizing disclosure criteria and contents, implementing third-party assurance is essential to enhance the quality of ESG disclosures by Chinese listed companies. A phased-in approach can be considered to allow ample time for adjustment. Initially, a 2–3-year transition period could be granted to listed companies, mandating assurance professionals to provide limited assurance for ESG disclosures. Gradually, the assurance level could be elevated to require reasonable assurance. The benchmark for specific assurance procedures can reference the internationally recognized standards.

Listed companies should anchor their sustainable development strategies, incorporate ESG concepts throughout the whole process of production and operation, and disclose ESG information in a true, complete, and effective manner. Additionally, regulators should pay attention to the construction of a supervision mechanism for the fulfillment of corporate ESG responsibilities and force enterprises to actively fulfill their ESG responsibilities from the level of institutional supervision, which can be achieved by formulating ESG disclosure standards in different industries and mandatorily or semi-mandatorily requiring enterprises to disclose ESG-related information, so as to prompt enterprises to make efforts in fulfilling their ESG responsibilities, and to promote the realization of sustainable development of the enterprises.

6. Conclusions and Remarks

6.1. Conclusions

ESG concepts are increasingly becoming mainstream in global capital markets. This paper attempted to analyze the quality of ESG disclosure by looking at the current status of ESG disclosure by Chinese listed companies and discussed how to improve ESG disclosure rules from the perspective of regulators to promote sustainable development.

First, on the whole, Chinese listed companies are still mainly in the voluntary disclosure category at present, with a low willingness to disclose, uneven disclosure content, and low disclosure quality.

Second, the grouping results of the disclosure rate and disclosure quality are as follows: (1) The findings indicate that state-owned listed companies exhibit a higher level of ESG information disclosure compared to non-state-owned listed companies in terms of ownership grouping. However, they demonstrate a lower quality of information disclosure than their non-state-owned counterparts. However, when examining specific dimensions of information disclosure, non-state-owned listed companies outperform state-owned listed companies solely in the S dimension. In contrast, there is no significant difference between the two groups regarding performance in the E and G dimensions. (2) In terms of industry classification, the ESG disclosure rate of listed companies in non-heavily polluting industries surpasses that of listed companies in heavily polluting industries. However, the quality of disclosure by listed companies in heavily polluting industries is superior. This advantage is primarily evident in the E and S dimensions of ESG information disclosure, with the smallest disparity observed in the G dimension. (3) Regarding grouping by the regional economic development level, it was found that listed companies in regions with higher levels of economic development have lower ESG disclosure rates, but the quality of disclosure in both the overall and ESG dimensions is significantly better than that of listed companies in less economically developed regions. (4) China’s current regulatory framework for ESG disclosures encompasses both mandatory and voluntary requirements. From a perspective focused on these requirements, it was observed that listed companies subject to mandatory disclosures demonstrate significantly higher levels of overall ESG disclosure composite scores as well as average scores for each dimension (E, S, and G) compared to those relying solely on voluntary disclosures. Notably, the largest difference between these two groups lies in the E dimension, while being the smallest in the G dimension.

Finally, the content of ESG disclosure by Chinese listed companies is not balanced, with the disclosure predominantly focusing on disclosure in the E and G dimensions and less on disclosure in the S dimension.

6.2. Limitations

Despite shedding light on the current state of and challenges in ESG disclosure in China, this study has certain limitations. First, the low enthusiasm for ESG disclosure among listed companies currently restricts the availability of ESG data. Consequently, this study encountered a dearth of quantitative metrics, limiting the extent of quantitative analysis. Second, due to variations in economic development levels, cultural contexts, and legal frameworks, the findings of this study should be cautiously extrapolated to other capital markets.

6.3. Future Research Directions

First, in the future, renewed attention can be directed toward voluntary ESG disclosure practices. Analyzing the driving forces behind and the outcomes of voluntarily disclosed ESG information will furnish regulators with additional angles and empirical support to refine ESG disclosure guidelines and effectively enforce ESG regulatory measures.

Second, international comparative studies on ESG reporting are essential. Comparisons of ESG reporting practices and standards in China with those in diverse countries and regions can shed light on their differences and similarities. Such comparisons can foster an international exchange of experiences and dissemination of the best practices. These research directions can significantly advance the evolution and implementation of ESG reporting, contribute to realizing sustainable development, and deliver enhanced decision-making support to investors, businesses, and policymakers alike. With a particular emphasis on climate change, researchers can explore China’s climate change disclosure regulations and contrast them with the differing disclosure norms in the U.S., the EU, and other regions.

Third, addressing the improvement of ESG disclosure and creating an efficient ESG evaluation system are crucial. Given the prevalent issues of “greenwashing”, along with the emerging phenomena of “brown-washing” and “green silence”, it is vital to enhance ESG disclosure to mitigate the risks of greenwashing, while concurrently addressing brown-washing and green silence. These improvements are pivotal to ensuring the long-term sustainability of corporations.